NORTHFIELD, Ill., April 25, 2017 /PRNewswire/ -- Stepan Company (NYSE: SCL) today reported:

First Quarter Highlights

• Reported net income was a record $31.9 million, or $1.37 per diluted share versus $27.9 million, or $1.22 per diluted share, in the prior year. Adjusted net income* was a record $31.7 million, or $1.36 per diluted share versus $29.7 million, or $1.30 per diluted share, in the prior year.
• Surfactant operating income was a record $38.2 million versus $37.2 million in the prior year. This increase was primarily attributable to lower manufacturing costs, mostly resulting from previous actions taken to close plants in Canada and Brazil. Surfactant sales volume was down 7% from the prior year.
• Polymer operating income was $21.4 million versus $22.2 million in the prior year. This decrease was mostly attributable to higher costs associated with the new production facility in China and higher raw material costs. Polymer sales volume was up 8% versus prior year.
• Specialty Product operating income was $1.3 million versus $2.3 million in the prior year. This decrease was primarily attributable to order timing differences within our pharmaceutical and flavor business.

*  Adjusted net income is a non-GAAP measure which excludes deferred compensation income/ expense as well as other significant and infrequent/non-recurring items. See Table II for reconciliations of non-GAAP adjusted net income and adjusted earnings per share.

"The Company had a good start to the year and delivered record quarterly results," said F. Quinn Stepan, Jr., Chairman, President and Chief Executive Officer. "The quarter benefited from structurally lower manufacturing costs, enhanced internal efficiencies and higher Polymer volumes."

Financial Summary

 

Summary of First Quarter Adjusted Net Income Items

Adjusted net income excludes deferred compensation income/expense, which is a non-operational item, and other significant and infrequent or non-recurring items.

• Deferred Compensation: The current year quarter includes $0.8 million of after-tax income versus $1.8 million of after-tax expense in the prior year.
• Business Restructuring: The current year quarter includes $0.6 million of after-tax expense attributable to decommissioning costs related to the Canadian plant closure announced in 2016.

Percentage Change in Net Sales

The 5% increase in quarterly net sales was primarily due to higher selling prices, which were attributable to the pass-through of higher raw material costs.  These higher selling prices were partially offset by a 4% decline in sales volume and the negative impact of foreign currency translation.

 

Segment Results

 

 

Total segment operating income decreased $0.9 million or 1% versus the prior year.  

• Surfactant net sales were $322.6 million, a 4% increase versus prior year. Selling prices were up 12% primarily due to the pass-through of higher raw material costs. Sales volume was down 7% mostly due to lower North American and European consumer product and agricultural volumes. The translation impact of a stronger U.S. dollar decreased net sales by 1%. Surfactant operating income increased $1.0 million versus the prior year, primarily driven by lower manufacturing costs that were mostly attributable to the plant closures in Canada and Brazil.
• Polymer net sales were $126.6 million in the first quarter, an 11% increase versus prior year. Sales volume increased 8% in the quarter primarily due to continued growth in polyols used in rigid foam insulation and insulated metal panels. Increased selling prices partially offset higher raw material costs. Polymer operating income decreased $0.8 million versus the prior year. This decrease was attributable to higher costs associated with the Company's new production facility in China and slightly lower unit margins, partially offset by higher global Rigid Polyol sales volume.
• Specialty Products net sales were $19.1 million, $3.0 million lower than prior year. Operating income decreased $1.1 million versus the prior year. The quarterly decline reflects a combination of lower volume and lower margins. A significant portion of the lower volume is due to the timing of orders in our pharmaceutical and flavor businesses.

 

Corporate Expenses

 

• Corporate expenses, excluding deferred compensation and business restructuring expense, decreased $0.8 million, or 5%, for the quarter.  This decrease was mostly attributable to environmental remediation expense recognized in the first quarter of 2016 that did not recur in 2017.   

Income Taxes

The Company's effective tax rate was 28% for the first quarter of 2017 versus 31% for the first quarter of 2016.  The decrease was primarily attributable to higher excess tax benefits derived from stock based compensation awards exercised or distributed in the first quarter of 2017 versus 2016.  The lower tax rate was also driven by an unfavorable tax settlement related to a foreign income tax audit recorded in the first quarter of 2016 that did not recur in 2017.    

Selected Balance Sheet Information

The Company's net debt level increased $27.6 million versus prior year-end and the net debt ratio increased from 13% to 15%.  The $27.9 million decrase in cash was primarily attributable to higher working capital requirements, which are typical for the Company in the first quarter.    

The major working capital components were:

Capital spending was $20.4 million versus $19.3 million in the prior year quarter. For the full year, the Company expects capital spending to be between $100 million and $120 million.

Outlook

"After a record first quarter, we remain optimistic about the balance of the year.  We believe that benefits from our enhanced internal efficiencies, continued growth in our core polymer markets and our product and end-market diversification efforts should positively impact 2017.  Conversely, higher raw material costs may pressure margins.  Overall, we believe earnings for the year should grow," said F. Quinn Stepan, Jr., Chairman, President and Chief Executive Officer.

Conference Call

Stepan Company will host a conference call to discuss the first quarter results at 8:00 a.m. ET (7:00 a.m. CT) on April 25, 2017. The call can be accessed by phone and webcast. Telephone access will be available by dialing +1 888-224-3719, and the webcast can be accessed through the Investor Relations/Conference Calls page at www.stepan.com. A webcast replay of the conference call will be available at the same location shortly after the call.

Supporting Slides

Slides supporting this press release will be made available at www.stepan.com under the Investor Relations center at approximately the same time as this press release is issued.

Corporate Profile

Stepan Company is a major manufacturer of specialty and intermediate chemicals used in a broad range of industries.  Stepan is a leading merchant producer of surfactants, which are the key ingredients in consumer and industrial cleaning compounds.  The Company is also a leading supplier of Polyurethane polyols used in the expanding thermal insulation market, and CASE (Coatings, Adhesives, Sealants, and Elastomers) industries.

Headquartered in Northfield, Illinois, Stepan utilizes a network of modern production facilities located in North and South America, Europe and Asia.

The Company's common stock is traded on the New York Stock Exchange (NYSE) under the symbol SCL.  For more information about Stepan Company please visit the Company online at www.stepan.com

Contact: Scott D. Beamer           (847) 446-7500

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Tables follow

Certain information in this presentation consists of forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended (the Exchange Act). These statements include statements about Stepan Company's plans, objectives, strategies, financial performance and outlook, trends, the amount and timing of future cash distributions, prospects or future events and involve known and unknown risks that are difficult to predict. As a result, the Stepan Company's actual financial results, performance, achievements or prospects may differ materially from those expressed or implied by these forward-looking statements. In some cases, you can identify forward-looking statements by the use of words such as "may," "could," "expect," "intend," "plan," "seek," "anticipate," "believe," "estimate," "guidance," "predict," "potential," "continue," "likely," "will," "would," "illustrative" and variations of these terms and similar expressions, or the negative of these terms or similar expressions. Such forward-looking statements are necessarily based upon estimates and assumptions that, while considered reasonable by Stepan Company and its management based on their knowledge and understanding of the business and industry, are inherently uncertain. These statements are not guarantees of future performance, and stockholders should not place undue reliance on forward-looking statements.

There are a number of risks, uncertainties and other important factors, many of which are beyond Stepan Company's control, that could cause actual results to differ materially from the forward-looking statements contained in this news release. Such risks, uncertainties and other important factors include, among other factors, the risks, uncertainties and factors described in Stepan Company's Form 10-K, Form 8-K and Form 10-Q reports and exhibits to those reports, and include (but are not limited to) risks and uncertainties related to disruptions in production or accidents at manufacturing facilities, global competition, volatility of raw material and energy costs, disruptions in transportation or significant changes in transportation costs, reduced demand due to customer product reformulations or new technologies, the probability of future acquisitions and the uncertainties related to the integration of acquired businesses, maintaining and protecting intellectual property rights, international business risks, including currency exchange rate fluctuations, legal restrictions and taxes, our ability to estimate and maintain appropriate levels of recorded liabilities, our debt covenants, our ability to access capital markets, downturns in certain industries and general economic downturns, global political, military, security or other instability, costs related to expansion or other capital projects, interruption or breaches of information technology systems, the costs and other effects of governmental regulation and legal and administrative proceedings and our ability to retain executive management and key personnel.

These forward-looking statements are made only as of the date hereof, and Stepan Company undertakes no obligation to update or revise these forward-looking statements, whether as a result of new information, future events or otherwise.

 

 

 

 

 

 

 

 

 

 

 

 

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SOURCE Stepan Company