Stepan Reports Record Third Quarter Results and Record Nine Month Earnings
Third Quarter Highlights
- Reported net income was a record
$39.4 million , or$1.71 per diluted share versus$36.9 million , or$1.59 per diluted share, in the prior year. Adjusted net income* was a record$46.3 million , or$2.01 per diluted share, versus$36.4 million , or$1.57 per diluted share, in the prior year.Total Company sales volume decreased 8% versus the prior year. - Surfactant operating income was
$39.0 million versus$34.5 million in the prior year. This increase was primarily driven by improved product and customer mix that was partially offset by an 8% decline in global sales volume. The sales volume decline was primarily due to lower global commodity laundry demand and raw material constraints inNorth America . Higher demand in the Functional Products and Institutional Cleaning end markets partially offset the above. - Polymer operating income was
$31.9 million versus$19.8 million in the prior year. This increase was primarily attributable to margin recovery and improved mix that was partially offset by a 10% decrease in global sales volume. The volume decrease was primarily due to an 8% decline in global Rigid Polyol demand driven by double digit declines inEurope andAsia . - Specialty Product operating income was
$9.7 million versus$2.4 million in the prior year. This increase was primarily attributable to improved margins and customer mix within the medium chain triglycerides (MCTs) product line. - The Company increased its pre-tax environmental reserve from
$23.2 million to$33.5 million in the current year quarter. This increase was primarily due to revised environmental remediation cost estimates for the Company'sMaywood, New Jersey site. - The effect of foreign currency translation negatively impacted net income by
$2.4 million , or$0.11 per diluted share, versus the prior year. - The Company increased its quarterly cash dividend in the fourth quarter of 2022 by
$0.03 per share, or 9.0%, marking the 55th consecutive year that the Company has increased its cash dividend to stockholders.
YTD Highlights
- Reported net income for the first nine months of 2022 was a record
$136.3 million , or$5.90 per diluted share, versus$120.8 million , or$5.19 per diluted share, in the prior year. Adjusted net income* was a record$140.0 million , or$6.06 per diluted share, versus$121.0 million , or$5.20 per diluted share, in the prior year.Total Company sales volume was down 3% compared to the first nine months of 2021.
* Adjusted net income is a non-GAAP measure which excludes deferred compensation income/expense, cash-settled stock appreciation rights (SARs) income/expense, certain environmental remediation-related costs as well as other significant and infrequent/non-recurring items. See Table II for reconciliations of non-GAAP adjusted net income and earnings per diluted share.
"The Company had strong performance for the first nine months of 2022 and delivered record results, despite ongoing supply chain challenges. Reported net income was up 13% versus the first nine months of 2021 while adjusted net income was up 16%," said
Financial Summary
Three Months Ended |
Nine Months Ended |
|||||||||||||||||||||||
($ in thousands, except per share data) |
2022 |
2021 |
% |
2022 |
2021 |
% |
||||||||||||||||||
|
$ |
719,185 |
$ |
602,688 |
19 |
% |
$ |
2,146,094 |
$ |
1,735,939 |
24 |
% |
||||||||||||
Operating Income |
$ |
54,659 |
$ |
40,213 |
36 |
% |
$ |
195,645 |
$ |
150,784 |
30 |
% |
||||||||||||
Net Income Attributable to |
$ |
39,384 |
$ |
36,920 |
7 |
% |
$ |
136,319 |
$ |
120,809 |
13 |
% |
||||||||||||
Earnings per Diluted Share |
$ |
1.71 |
$ |
1.59 |
8 |
% |
$ |
5.90 |
$ |
5.19 |
14 |
% |
||||||||||||
Adjusted Net Income * |
$ |
46,281 |
$ |
36,417 |
27 |
% |
$ |
140,017 |
$ |
121,005 |
16 |
% |
||||||||||||
Adjusted Earnings per Diluted |
$ |
2.01 |
$ |
1.57 |
28 |
% |
$ |
6.06 |
$ |
5.20 |
17 |
% |
Summary of Third Quarter Adjusted Net Income Items
Adjusted net income excludes non-operational deferred compensation income/expense, cash-settled SARs income/expense, certain environmental remediation costs and other significant and infrequent or non-recurring items.
- Deferred Compensation: The current year third quarter reported net income includes
$0.9 million of after-tax income versus$1.1 million of after-tax income in the prior year. - Cash-Settled SARs: These management incentive instruments provide cash to participants equal to the appreciation on the price of specified shares of Company stock over a specified period of time. Because income or expense is recognized merely on the movement in the price of Company stock it has been excluded, similar to deferred compensation, to arrive at adjusted net income. Reported net income in both the current and prior year third quarters includes
$0.1 million of after-tax income. - Business Restructuring: Reported net income in both the current and prior year third quarters includes
$0.1 million of after-tax decommissioning expense related to the Company's Canadian plant closure. - Environmental Remediation: The third quarter 2022 adjusted net income excludes
$7.9 million of after-tax expense versus$0.7 million of after after-tax expense excluded in the prior year. The Company increased its environmental reserve from$23.2 million to$33.5 million , or 46%, during the quarter primarily due to revised environmental remediation cost estimates for the Company'sMaywood, New Jersey site.
Percentage Change in
Net sales in the third quarter of 2022 increased 19% year-over-year primarily due to higher selling prices that were mainly attributable to the pass-through of higher raw material and logistics costs and improved product and customer mix. These higher average selling prices were partially offset by an 8% decrease in global sales volume and the unfavorable impact of foreign currency translation.
Three Months Ended |
Nine Months Ended |
|||||||
Volume |
(8) |
% |
(3) |
% |
||||
Selling Price & Mix |
33 |
% |
31 |
% |
||||
Foreign Translation |
(6) |
% |
(4) |
% |
||||
Total |
19 |
% |
24 |
% |
Reported Segment Results
Three Months Ended |
Nine Months Ended |
|||||||||||||||||||||||
($ in thousands) |
2022 |
2021 |
% |
2022 |
2021 |
% |
||||||||||||||||||
|
||||||||||||||||||||||||
Surfactants |
$ |
474,861 |
$ |
387,734 |
22 |
% |
$ |
1,428,211 |
$ |
1,142,672 |
25 |
% |
||||||||||||
Polymers |
$ |
214,807 |
$ |
198,841 |
8 |
% |
$ |
640,771 |
$ |
539,764 |
19 |
% |
||||||||||||
Specialty Products |
$ |
29,517 |
$ |
16,113 |
83 |
% |
$ |
77,112 |
$ |
53,503 |
44 |
% |
||||||||||||
Total |
$ |
719,185 |
$ |
602,688 |
19 |
% |
$ |
2,146,094 |
$ |
1,735,939 |
24 |
% |
Three Months Ended |
Nine Months Ended |
|||||||||||||||||||||||
($ in thousands, all amounts pre-tax) |
2022 |
2021 |
% |
2022 |
2021 |
% |
||||||||||||||||||
Operating Income |
||||||||||||||||||||||||
Surfactants |
$ |
38,976 |
$ |
34,452 |
13 |
% |
$ |
140,994 |
$ |
133,558 |
6 |
% |
||||||||||||
Polymers |
$ |
31,864 |
$ |
19,753 |
61 |
% |
$ |
79,905 |
$ |
60,729 |
32 |
% |
||||||||||||
Specialty Products |
$ |
9,685 |
$ |
2,442 |
297 |
% |
$ |
23,246 |
$ |
12,052 |
93 |
% |
||||||||||||
Total Segment Operating |
$ |
80,525 |
$ |
56,647 |
42 |
% |
$ |
244,145 |
$ |
206,339 |
18 |
% |
||||||||||||
Corporate Expenses |
$ |
(25,866) |
$ |
(16,434) |
57 |
% |
$ |
(48,500) |
$ |
(55,555) |
(13) |
% |
||||||||||||
Consolidated Operating |
$ |
54,659 |
$ |
40,213 |
36 |
% |
$ |
195,645 |
$ |
150,784 |
30 |
% |
Total segment operating income for the third quarter of 2022 increased
- Surfactant net sales were
$474.9 million for the quarter, a 22% increase versus the prior year. Selling prices were up 35% primarily due to the pass-through of higher raw material and logistics costs as well as improved product and customer mix. The unfavorable impact of foreign currency translation negatively impacted net sales by 5%. Sales volume decreased 8% year-over-year primarily due to lower global commodity laundry demand and raw material constraints inNorth America . Higher global demand for products sold into the Functional Products and Institutional Cleaning end markets partially offset the above. Surfactant operating income for the quarter increased$4.5 million , or 13%, versus the prior year primarily due to improved product and customer mix that was partially offset by supply chain challenges and an 8% decline in sales volume. - Polymer net sales were
$214.8 million for the quarter, an 8% increase versus the prior year. Selling prices increased 26% primarily due to the pass through of higher raw material and logistics costs. Sales volume decreased 10% in the quarter primarily due to an 8% decline in Rigid Polyol demand driven by double digit declines inEurope andAsia . The translation impact of a strongerU.S. dollar negatively impacted net sales by 8%. Polymer operating income for the quarter increased$12.1 million , or 61%, versus the prior year primarily due to margin recovery and improved mix that was partially offset by the 10% decrease in global sales volume. - Specialty Product net sales were
$29.5 million for the quarter, an 83% increase versus the prior year. Sales volume was up 10% year-over-year and operating income increased$7.2 million , or 297%. The operating income increase was primarily attributable to improved margins within the MCTs product line and more favorable customer mix.
Corporate Expenses
Three Months Ended |
Nine Months Ended |
|||||||||||||||||||||||
($ in thousands) |
2022 |
2021 |
% |
2022 |
2021 |
% |
||||||||||||||||||
Total Corporate Expenses |
$ |
25,866 |
$ |
16,434 |
57 |
% |
$ |
48,500 |
$ |
55,555 |
(13) |
% |
||||||||||||
Less: |
||||||||||||||||||||||||
Deferred Compensation Expense |
$ |
(2,131) |
$ |
(1,504) |
42 |
% |
$ |
(13,038) |
$ |
2,148 |
NM |
|||||||||||||
Business Restructuring Expense |
$ |
92 |
$ |
72 |
28 |
% |
$ |
225 |
$ |
267 |
(16) |
% |
||||||||||||
Environmental Remediation |
$ |
10,372 |
$ |
946 |
NM |
$ |
11,002 |
$ |
946 |
NM |
||||||||||||||
Adjusted Corporate Expenses |
$ |
17,533 |
$ |
16,920 |
4 |
% |
$ |
50,311 |
$ |
52,194 |
(4) |
% |
* See Table III for a discussion of deferred compensation plan accounting. |
- Corporate expenses, excluding deferred compensation, business restructuring and environmental costs increased 4% versus the prior year quarter. This increase was primarily due to higher incentive-based compensation expenses .
Income Taxes and Net Interest
The Company's effective tax rate was 24.0% for the first nine months of 2022 versus 19.6% for the first nine months of 2021. This year-over-year increase was primarily due to a non-recurring favorable tax benefit recognized in the third quarter of 2021 related to the merger of the Company's three Brazilian entities into a single entity.
Shareholder Return
The Company paid
Selected Balance Sheet Information
The Company's total debt increased by
($ in millions) |
|
|
|
|
||||||||||||
Net Debt |
||||||||||||||||
Total Debt |
$ |
564.9 |
$ |
526.0 |
$ |
537.1 |
$ |
363.6 |
||||||||
Cash |
165.7 |
194.6 |
236.0 |
159.2 |
||||||||||||
Net Debt |
$ |
399.2 |
$ |
331.4 |
$ |
301.1 |
$ |
204.4 |
||||||||
Equity |
1,130.2 |
1,125.7 |
1,116.7 |
1,074.2 |
||||||||||||
Net Debt + Equity |
$ |
1,529.4 |
$ |
1,457.1 |
$ |
1,417.8 |
$ |
1,278.6 |
||||||||
Net Debt / (Net Debt + Equity) |
26 |
% |
23 |
% |
21 |
% |
16 |
% |
The major working capital components were:
($ in millions) |
|
|
|
|
||||||||||||
Net Receivables |
$ |
476.2 |
$ |
518.8 |
$ |
504.5 |
$ |
419.5 |
||||||||
Inventories |
397.6 |
340.7 |
308.4 |
305.5 |
||||||||||||
Accounts Payable |
(350.1) |
(366.2) |
(350.8) |
(323.4) |
||||||||||||
$ |
523.7 |
$ |
493.3 |
$ |
462.1 |
$ |
401.6 |
Capital spending was
Outlook
"The Company delivered record third quarter and nine-month results and we expect to deliver record full year earnings again in 2022. For the fourth quarter we anticipate approximately
Conference Call
Supporting Slides
Slides supporting this press release will be made available at www.stepan.com through the Investors/Presentations page at approximately the same time as this press release is issued.
Corporate Profile
Headquartered in
The Company's common stock is traded on the
More information about Stepan's sustainability program can be found on the Sustainability page at www.stepan.com
Contact:
Certain information in this news release 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. These statements include statements about
There are a number of risks, uncertainties and other important factors, many of which are beyond
These forward-looking statements are made only as of the date hereof, and
Table I |
||||||||||||||||
STEPAN COMPANY For the Three and Nine Months Ended (Unaudited – 000's Omitted) |
||||||||||||||||
Three Months Ended |
Nine Months Ended |
|||||||||||||||
2022 |
2021 |
2022 |
2021 |
|||||||||||||
|
$ |
719,185 |
$ |
602,688 |
$ |
2,146,094 |
$ |
1,735,939 |
||||||||
Cost of Sales |
600,709 |
510,792 |
1,786,785 |
1,423,382 |
||||||||||||
Gross Profit |
118,476 |
91,896 |
359,309 |
312,557 |
||||||||||||
Operating Expenses: |
||||||||||||||||
Selling |
15,079 |
14,786 |
45,908 |
44,280 |
||||||||||||
Administrative |
33,848 |
22,828 |
79,499 |
69,440 |
||||||||||||
Research, Development and Technical Services |
16,929 |
15,501 |
50,092 |
45,638 |
||||||||||||
Deferred Compensation Expense (Income) |
(2,131) |
(1,504) |
(13,038) |
2,148 |
||||||||||||
63,725 |
51,611 |
162,461 |
161,506 |
|||||||||||||
Goodwill Impairment |
- |
- |
978 |
- |
||||||||||||
Business Restructuring |
92 |
72 |
225 |
267 |
||||||||||||
Operating Income |
54,659 |
40,213 |
195,645 |
150,784 |
||||||||||||
Other Income (Expense): |
||||||||||||||||
Interest, Net |
(2,221) |
(1,599) |
(7,254) |
(4,690) |
||||||||||||
Other, Net |
(1,980) |
702 |
(8,999) |
4,206 |
||||||||||||
(4,201) |
(897) |
(16,253) |
(484) |
|||||||||||||
Income Before Income Taxes |
50,458 |
39,316 |
179,392 |
150,300 |
||||||||||||
Provision for Income Taxes |
11,074 |
2,393 |
43,073 |
29,463 |
||||||||||||
Net Income |
39,384 |
36,923 |
136,319 |
120,837 |
||||||||||||
Net Income Attributable to Noncontrolling Interests |
(3) |
(28) |
||||||||||||||
Net Income Attributable to |
$ |
39,384 |
$ |
36,920 |
$ |
136,319 |
$ |
120,809 |
||||||||
Net Income Per Common Share Attributable to |
||||||||||||||||
Basic |
$ |
1.73 |
$ |
1.61 |
$ |
5.98 |
$ |
5.27 |
||||||||
Diluted |
$ |
1.71 |
$ |
1.59 |
$ |
5.90 |
$ |
5.19 |
||||||||
Shares Used to Compute Net Income Per Common |
||||||||||||||||
Basic |
22,753 |
22,898 |
22,813 |
22,941 |
||||||||||||
Diluted |
23,034 |
23,219 |
23,089 |
23,299 |
||||||||||||
Table II |
||||||||||||||||||||||||||||||||
Reconciliation of Non-GAAP Net Income and Earnings per Diluted Share * |
||||||||||||||||||||||||||||||||
Three Months Ended |
Nine Months Ended |
|||||||||||||||||||||||||||||||
($ in thousands, except per share |
2022 |
EPS |
2021 |
EPS |
2022 |
EPS |
2021 |
EPS |
||||||||||||||||||||||||
Net Income Reported |
$ |
39,384 |
$ |
1.71 |
$ |
36,920 |
$ |
1.59 |
$ |
136,319 |
$ |
5.90 |
$ |
120,809 |
$ |
5.19 |
||||||||||||||||
Deferred Compensation (Income) |
$ |
(938) |
$ |
(0.04) |
$ |
(1,135) |
$ |
(0.05) |
$ |
(4,369) |
$ |
(0.19) |
$ |
(685) |
$ |
(0.03) |
||||||||||||||||
Business Restructuring Expense |
$ |
69 |
$ |
- |
$ |
54 |
$ |
- |
$ |
169 |
$ |
0.01 |
$ |
200 |
$ |
0.01 |
||||||||||||||||
Cash-Settled SARs (Income) Expense |
$ |
(117) |
$ |
- |
$ |
(141) |
$ |
- |
$ |
(464) |
$ |
(0.02) |
$ |
(38) |
$ |
- |
||||||||||||||||
Environmental Remediation Expense |
$ |
7,883 |
$ |
0.34 |
$ |
719 |
$ |
0.03 |
$ |
8,362 |
$ |
0.36 |
$ |
719 |
$ |
0.03 |
||||||||||||||||
Adjusted Net Income |
$ |
46,281 |
$ |
2.01 |
$ |
36,417 |
$ |
1.57 |
$ |
140,017 |
$ |
6.06 |
$ |
121,005 |
$ |
5.20 |
* All amounts in this table are presented after-tax
The Company believes that certain measures that are not in accordance with generally accepted accounting principles (GAAP), when presented in conjunction with comparable GAAP measures, are useful for evaluating the Company's operating performance and provide better clarity on the impact of non-operational items. Internally, the Company uses this non-GAAP information as an indicator of business performance and evaluates management's effectiveness with specific reference to these indicators. These measures should be considered in addition to, neither a substitute for, nor superior to, measures of financial performance prepared in accordance with GAAP.
Reconciliation of Pre-Tax to After-Tax Adjustments |
||||||||||||||||||||||||||||||||
Three Months Ended |
Nine Months Ended |
|||||||||||||||||||||||||||||||
($ in thousands, except per share |
2022 |
EPS |
2021 |
EPS |
2022 |
EPS |
2021 |
EPS |
||||||||||||||||||||||||
Pre-Tax Adjustments |
||||||||||||||||||||||||||||||||
Deferred Compensation |
$ |
(1,234) |
$ |
(1,494) |
$ |
(5,748) |
$ |
(901) |
||||||||||||||||||||||||
Business Restructuring |
$ |
92 |
$ |
72 |
$ |
225 |
$ |
267 |
||||||||||||||||||||||||
Cash-Settled SARs (Income) |
$ |
(154) |
$ |
(186) |
$ |
(609) |
$ |
(50) |
||||||||||||||||||||||||
Environmental Remediation |
$ |
10,372 |
$ |
946 |
$ |
11,002 |
$ |
946 |
||||||||||||||||||||||||
Total Pre-Tax Adjustments |
$ |
9,076 |
$ |
(662) |
$ |
4,870 |
$ |
262 |
||||||||||||||||||||||||
Cumulative Tax Effect on |
$ |
(2,179) |
$ |
159 |
$ |
(1,172) |
$ |
(66) |
||||||||||||||||||||||||
After-Tax Adjustments |
$ |
6,897 |
$ |
0.30 |
$ |
(503) |
$ |
(0.02) |
$ |
3,698 |
$ |
0.16 |
$ |
196 |
$ |
0.01 |
||||||||||||||||
Table III |
||||||||||||||||||||||||||||||
Deferred Compensation Plans |
||||||||||||||||||||||||||||||
The full effect of deferred compensation plans on quarterly pre-tax income was |
||||||||||||||||||||||||||||||
2022 |
2021 |
|||||||||||||||||||||||||||||
12/31 |
9/30 |
6/30 |
3/31 |
12/31 |
9/30 |
6/30 |
3/31 |
|||||||||||||||||||||||
|
N/A |
$ |
93.67 |
$ |
101.35 |
$ |
98.81 |
$ |
124.29 |
$ |
112.94 |
$ |
120.27 |
$ |
127.11 |
|||||||||||||||
The deferred compensation income statement impact is summarized below:
Three Months Ended |
Nine Months Ended |
|||||||||||||||
($ in thousands) |
2022 |
2021 |
2022 |
2021 |
||||||||||||
Deferred Compensation |
||||||||||||||||
Operating Income (Expense) |
$ |
2,131 |
$ |
1,504 |
$ |
13,038 |
$ |
(2,148) |
||||||||
Other, net – Mutual Fund Gain (Loss) |
(897) |
(10) |
(7,290) |
3,049 |
||||||||||||
Total Pre-Tax |
$ |
1,234 |
$ |
1,494 |
$ |
5,748 |
$ |
901 |
||||||||
Total After-Tax |
$ |
938 |
$ |
1,135 |
$ |
4,368 |
$ |
685 |
Table IV |
||||||||||||||||||||||||||||||||
Effects of Foreign Currency Translation |
||||||||||||||||||||||||||||||||
The Company's foreign subsidiaries transact business and report financial results in their respective local currencies. As a result, foreign subsidiary income statements are translated into |
||||||||||||||||||||||||||||||||
($ in millions) |
Three Months Ended |
Increase |
Change |
Nine Months Ended |
Increase |
Change |
||||||||||||||||||||||||||
2022 |
2021 |
2022 |
2021 |
|||||||||||||||||||||||||||||
|
$ |
719.2 |
$ |
602.7 |
$ |
116.5 |
$ |
(35.7) |
$ |
2,146.1 |
$ |
1,735.9 |
$ |
410.2 |
$ |
(72.9) |
||||||||||||||||
Gross Profit |
118.5 |
91.9 |
26.6 |
(4.5) |
359.3 |
312.6 |
46.7 |
(9.7) |
||||||||||||||||||||||||
Operating Income |
54.7 |
40.2 |
14.5 |
(3.1) |
195.6 |
150.8 |
44.8 |
(6.7) |
||||||||||||||||||||||||
Pretax Income |
50.5 |
39.3 |
11.2 |
(3.1) |
179.4 |
150.3 |
29.1 |
(6.8) |
Table V |
||||||||
Stepan Company Consolidated Balance Sheets |
||||||||
|
|
|||||||
ASSETS |
||||||||
Current Assets |
$ |
1,072,747 |
$ |
913,368 |
||||
Property, Plant & Equipment, Net |
977,600 |
850,604 |
||||||
Other Assets |
286,423 |
301,640 |
||||||
Total Assets |
$ |
2,336,770 |
$ |
2,065,612 |
||||
LIABILITIES AND STOCKHOLDERS' EQUITY |
||||||||
Current Liabilities |
$ |
603,245 |
$ |
500,476 |
||||
Deferred Income Taxes |
11,111 |
12,491 |
||||||
Long-term Debt |
466,766 |
322,862 |
||||||
Other Non-current Liabilities |
125,409 |
155,590 |
||||||
Total Stepan Company Stockholders' Equity |
1,130,239 |
1,074,193 |
||||||
Noncontrolling Interest |
- |
- |
||||||
Total Liabilities and Stockholders' Equity |
$ |
2,336,770 |
$ |
2,065,612 |
View original content:https://www.prnewswire.com/news-releases/stepan-reports-record-third-quarter-results-and-record-nine-month-earnings-301652934.html
SOURCE