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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form
CURRENT REPORT
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Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§ 230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§ 240.12b-2 of this chapter).
Emerging growth company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Item 2.02. Results of Operations and Financial Condition
On October 18, 2023, Stepan Company (“Stepan”) issued a press release providing its financial results for the quarter ended September 30, 2023. A copy of the press release is attached as Exhibit 99.1 hereto and incorporated herein by reference.
Item 8.01. Other Events
On October 18, 2023, Stepan issued a press release announcing that its Board of Directors declared a quarterly cash dividend on its common stock of $0.375 per share. The dividend will be paid on December15, 2023, to common stockholders of record as of November 30, 2023. A copy of the press release is attached as Exhibit 99.2 hereto and incorporated herein by reference.
Item 9.01. Financial Statements and Exhibits
(d) Exhibits
Exhibit Number: 99.1
Description: Press Release of Stepan Company dated October 18, 2023
Exhibit Number: 99.2
Description: Press Release of Stepan Company dated October 18, 2023
Exhibit Number: 104
Description: Cover Page Interactive Data File (embedded within the Inline XBRL document)
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
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STEPAN COMPANY |
Date: October 18, 2023 |
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By: |
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/s/ David G. Kabbes |
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David G. Kabbes |
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Vice President, General Counsel and Secretary |
Exhibit 99.1
Stepan Reports Third Quarter Results
Northbrook, Illinois, October 18, 2023 -- Stepan Company (NYSE: SCL) today reported:
Third Quarter Highlights
1
* Adjusted net income and adjusted earnings per share are non-GAAP measures which exclude 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 adjusted earnings per diluted share.
** EBITDA and adjusted EBITDA are non-GAAP measures. See Table VI for calculations and GAAP reconciliations of EBITDA and adjusted EBITDA.
YTD Highlights
“The Company's third quarter results delivered gradual volume, adjusted EBITDA and adjusted net income growth versus the second quarter of 2023. The sequential volume growth was led by higher Rigid Polyols demand and new contracted volume for low 1,4 dioxane products in our Personal Care business. This was partially offset by continued customer and channel destocking within our agricultural business," said Scott Behrens, President and Chief Executive Officer. "Specific to the third quarter, Surfactant unit margins were lower versus the prior year due to less favorable product mix, high-cost raw material inventory carryover, and pricing pressure in Latin America from imported products. Specialty Product unit margins were significantly lower due to high-cost inventory and pricing pressure related to increased MCT import activity. Expenses were slightly lower versus prior year due to proactive headcount and discretionary expense controls implemented earlier in the year and lower incentive-based compensation accruals. We recorded a $5.5 million pre-tax restructuring reserve to manage the transition of employees participating in our voluntary early retirement program. We continue to make significant progress on our cash objectives, delivering another $55 million reduction in our inventory levels. Finally, we completed our low 1,4 dioxane capital investments and we are executing the last phase of our Pasadena, TX alkoxylation investment which is expected to be operational mid-year 2024.”
Financial Summary
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Three Months Ended |
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Nine Months Ended |
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($ in thousands, except per share data) |
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2023 |
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2022 |
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% |
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2023 |
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2022 |
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% |
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Net Sales |
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$ |
562,226 |
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$ |
719,185 |
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(22 |
)% |
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$ |
1,793,637 |
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$ |
2,146,094 |
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(16 |
)% |
Operating Income |
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$ |
19,517 |
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$ |
54,659 |
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(64 |
)% |
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$ |
58,383 |
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$ |
195,645 |
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(70 |
)% |
Net Income |
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$ |
12,571 |
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$ |
39,384 |
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(68 |
)% |
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$ |
41,397 |
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$ |
136,319 |
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(70 |
)% |
Earnings per Diluted Share |
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$ |
0.55 |
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$ |
1.71 |
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(68 |
)% |
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$ |
1.80 |
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$ |
5.90 |
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(69 |
)% |
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Adjusted Net Income * |
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$ |
14,730 |
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$ |
46,281 |
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(68 |
)% |
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$ |
43,206 |
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$ |
140,017 |
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(69 |
)% |
Adjusted Earnings per Diluted Share * |
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$ |
0.64 |
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$ |
2.01 |
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(68 |
)% |
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$ |
1.88 |
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$ |
6.06 |
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(69 |
)% |
2
* See Table II for reconciliations of non-GAAP adjusted net income and earnings per diluted share. |
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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.
Percentage Change in Net Sales
Net sales in the third quarter of 2023 decreased 22% year-over-year primarily due to lower selling prices and a 9% decrease in global sales volume. The lower selling prices were mainly attributable to the pass-through of lower raw material costs, less favorable product/customer mix and competitive pressures.
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Three Months Ended |
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Nine Months Ended |
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Volume |
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(9 |
)% |
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(14 |
)% |
Selling Price & Mix |
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(16 |
)% |
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(3 |
)% |
Foreign Translation |
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3 |
% |
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1 |
% |
Total |
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(22 |
)% |
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(16 |
)% |
3
Segment Results
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Three Months Ended |
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Nine Months Ended |
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($ in thousands) |
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2023 |
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2022 |
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% |
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2023 |
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2022 |
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% |
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Net Sales |
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Surfactants |
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$ |
373,836 |
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$ |
474,861 |
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(21 |
)% |
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$ |
1,233,351 |
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$ |
1,428,211 |
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(14 |
)% |
Polymers |
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$ |
169,559 |
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$ |
214,807 |
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(21 |
)% |
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$ |
495,200 |
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$ |
640,771 |
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(23 |
)% |
Specialty Products |
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$ |
18,831 |
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$ |
29,517 |
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(36 |
)% |
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$ |
65,086 |
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$ |
77,112 |
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(16 |
)% |
Total Net Sales |
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$ |
562,226 |
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$ |
719,185 |
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(22 |
)% |
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$ |
1,793,637 |
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$ |
2,146,094 |
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(16 |
)% |
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Three Months Ended |
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Nine Months Ended |
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($ in thousands, all amounts pre-tax) |
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2023 |
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2022 |
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% |
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2023 |
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2022 |
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% |
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Operating Income |
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Surfactants |
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$ |
15,373 |
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$ |
38,976 |
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(61 |
)% |
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$ |
57,570 |
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$ |
140,994 |
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(59 |
)% |
Polymers |
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$ |
21,813 |
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$ |
31,864 |
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(32 |
)% |
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$ |
48,137 |
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$ |
79,905 |
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(40 |
)% |
Specialty Products |
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$ |
2,402 |
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$ |
9,685 |
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(75 |
)% |
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$ |
8,704 |
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$ |
23,246 |
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(63 |
)% |
Total Segment Operating Income |
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$ |
39,588 |
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$ |
80,525 |
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(51 |
)% |
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$ |
114,411 |
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$ |
244,145 |
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(53 |
)% |
Corporate Expenses |
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$ |
(20,071 |
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$ |
(25,866 |
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(22 |
)% |
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$ |
(56,028 |
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$ |
(48,500 |
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16 |
% |
Consolidated Operating Income |
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$ |
19,517 |
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$ |
54,659 |
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(64 |
)% |
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$ |
58,383 |
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$ |
195,645 |
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(70 |
)% |
Total segment operating income for the third quarter of 2023 decreased $40.9 million, or 51%, versus the prior year quarter. Total segment operating income for the first nine months of 2023 was down $129.7 million, or 53%, versus the prior year.
4
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Three Months Ended |
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% |
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Nine Months Ended |
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% |
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($ in millions) |
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2023 |
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2022 |
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2023 |
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2022 |
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EBITDA |
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Surfactants |
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$ |
31.7 |
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$ |
52.8 |
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(40 |
)% |
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$ |
105.3 |
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$ |
181.4 |
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(42 |
)% |
Polymers |
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$ |
29.7 |
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$ |
39.8 |
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(25 |
)% |
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$ |
72.6 |
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$ |
103.4 |
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(30 |
)% |
Specialty Products |
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$ |
3.9 |
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$ |
11.2 |
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(65 |
)% |
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$ |
13.0 |
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$ |
27.6 |
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(53 |
)% |
Unallocated Corporate |
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$ |
(20.2 |
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$ |
(27.4 |
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(26 |
)% |
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$ |
(50.8 |
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$ |
(55.8 |
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(9 |
)% |
Consolidated EBITDA |
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$ |
45.1 |
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$ |
76.4 |
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(41 |
)% |
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$ |
140.1 |
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$ |
256.6 |
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(45 |
)% |
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Adjusted EBITDA |
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Surfactants |
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$ |
31.6 |
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$ |
52.7 |
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(40 |
)% |
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$ |
105.1 |
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$ |
181.0 |
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(42 |
)% |
Polymers |
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$ |
29.7 |
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$ |
39.8 |
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(25 |
)% |
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$ |
72.6 |
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$ |
103.3 |
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(30 |
)% |
Specialty Products |
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$ |
3.9 |
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$ |
11.2 |
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(65 |
)% |
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$ |
13.0 |
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$ |
27.6 |
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(53 |
)% |
Unallocated Corporate |
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$ |
(17.2 |
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$ |
(18.2 |
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(5 |
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$ |
(48.2 |
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$ |
(50.4 |
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(4 |
)% |
Consolidated Adjusted EBITDA |
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$ |
48.0 |
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$ |
85.5 |
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(44 |
)% |
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$ |
142.5 |
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$ |
261.5 |
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(46 |
)% |
Corporate Expenses
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Three Months Ended |
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Nine Months Ended |
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($ in thousands) |
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2023 |
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2022 |
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% |
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2023 |
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2022 |
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% |
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Total Corporate Expenses |
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$ |
20,071 |
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$ |
25,866 |
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(22 |
)% |
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$ |
56,028 |
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$ |
48,500 |
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16 |
% |
Less: |
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Deferred Compensation Expense (Income) |
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$ |
(3,101 |
) |
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$ |
(2,131 |
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46 |
% |
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$ |
(856 |
) |
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$ |
(13,038 |
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NM |
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Business Restructuring Expense |
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$ |
5,628 |
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$ |
92 |
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NM |
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$ |
5,827 |
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$ |
225 |
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NM |
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Environmental Remediation Expense |
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$ |
52 |
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$ |
10,372 |
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NM |
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$ |
513 |
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$ |
11,002 |
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NM |
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Adjusted Corporate Expenses |
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$ |
17,492 |
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$ |
17,533 |
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(0 |
)% |
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$ |
50,544 |
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$ |
50,311 |
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0 |
% |
* See Table III for a discussion of deferred compensation plan accounting. |
5
Income Taxes
The Company’s effective tax rate was 20.5% for the first nine months of 2023 versus 24.0% for the first nine months of 2022. This year-over-year decrease was primarily attributable to more favorable tax benefits derived from stock-based compensation awards exercised or distributed during the first nine months of 2023.
Shareholder Return
The Company paid $8.2 million of dividends to shareholders in the third quarter of 2023 and $24.5 million of dividends to shareholders during the first nine months of 2023. The Company has not repurchased any Company stock during the first nine months 2023 and has $125.1 million remaining under the share repurchase program authorized by its Board of Directors. With the cash dividend increase in the fourth quarter of 2023, the Company has increased its dividend on the Company’s common stock for 56 consecutive years.
Selected Balance Sheet Information
The Company’s total debt decreased by $33.2 million and cash decreased by $28.4 million versus June 30, 2023. The decrease in debt primarily reflects scheduled debt repayments in July 2023 and lower borrowings against the Company's revolving credit facility. The Company’s net debt level decreased $4.8 million versus June 30, 2023 and the net debt ratio remained flat at 31% (Net Debt and Net Debt Ratio are non-GAAP measures).
($ in millions) |
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9/30/23 |
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6/30/23 |
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3/31/23 |
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12/31/22 |
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Net Debt |
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Total Debt |
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$ |
649.4 |
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$ |
682.6 |
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$ |
711.0 |
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$ |
587.1 |
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Cash |
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105.5 |
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133.9 |
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127.0 |
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173.8 |
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Net Debt |
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$ |
543.9 |
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$ |
548.7 |
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$ |
584.0 |
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$ |
413.3 |
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Equity |
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1,202.8 |
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1,215.1 |
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1,189.9 |
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1,166.1 |
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Net Debt + Equity |
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$ |
1,746.7 |
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$ |
1,763.8 |
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$ |
1,773.9 |
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$ |
1,579.4 |
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Net Debt / (Net Debt + Equity) |
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31 |
% |
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31 |
% |
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|
33 |
% |
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|
26 |
% |
The major working capital components were:
($ in millions) |
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9/30/23 |
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6/30/23 |
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3/31/23 |
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12/31/22 |
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Net Receivables |
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$ |
418.2 |
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$ |
423.4 |
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$ |
470.3 |
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$ |
436.9 |
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Inventories |
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284.5 |
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340.0 |
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368.4 |
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|
402.5 |
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Accounts Payable |
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(242.6 |
) |
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|
(287.6 |
) |
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|
(289.1 |
) |
|
|
(375.7 |
) |
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|
$ |
460.1 |
|
|
$ |
475.8 |
|
|
$ |
549.6 |
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|
$ |
463.7 |
|
Capital spending was $53.7 million during the quarter and $213.6 million during the first nine months of 2023. This compares to $75.9 million and $205.3 million, respectively, in the prior year. The nine month year-over-year increase is primarily due to increased expenditures in the U.S. for the advancement of the Company’s new alkoxylation facility in Pasadena, Texas. Capital spending in the fourth quarter of 2023 is expected to be in the
6
range of $41 million to $46 million, down versus the first three quarters of 2023, as spending on the low 1,4 dioxane investments is now complete and lower remaining capital outlays are anticipated to complete the new alkoxylation facility. For the full year, capital expenditures are expected to be in the range of $255 million to $260 million.
Outlook
“Looking forward, we believe the fourth quarter of 2023 will face challenges similar to those experienced during the first nine months, including continued destocking within the agricultural end market, and the normal low seasonal demand for Rigid Polyols. We expect to reduce inventory levels further by year-end and we are nearing the end of our high capital spending phase. As we look toward 2024, we believe volumes and margins will improve due to continued recovery in Rigid Polyols demand, growth in Surfactant volume driven by new contracted business and lower raw material costs," said Scott Behrens, President and Chief Executive Officer. "Given the continued challenging market conditions, we are expanding our cost reduction activities and expect to deliver $50 million in pre-tax savings in 2024, which will help offset future inflation and increased expenses associated with the planned commissioning of our new Pasadena alkoxylation assets. Our cost reduction activities are centered around workforce productivity and improved operational performance across our manufacturing network. A combination of anticipated market recovery, executing our strategic initiatives, and the aforementioned cost reductions, should position us to deliver earnings growth and positive free cash flow in 2024. We remain confident in our long-term growth and innovation initiatives."
Conference Call
Stepan Company will host a conference call to discuss its second quarter results at 10:00 a.m. ET (9:00 a.m. CT) on October 18, 2023. The call can be accessed by phone and webcast. To access the call by phone, please click on this Registration Link, complete the form and you will be provided with dial in details and a PIN. To avoid delays, we encourage participants to dial into the conference call ten minutes ahead of the scheduled start time. The webcast can be accessed through the Investors/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 through the Investors/Presentations page 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 and disinfection compounds and in agricultural and oilfield solutions. 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.
7
Headquartered in Northbrook, 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
More information about Stepan’s sustainability program can be found on the Sustainability page at www.stepan.com
Contact: Luis E. Rojo 847-446-7500
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 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, 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,” “should,” “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 10-Q and Form 8-K reports and exhibits to those reports, and include (but are not limited to) risks and uncertainties related to accidents, unplanned production shutdowns or disruptions in manufacturing facilities; reduced demand due to customer product reformulations or new technologies; our inability to successfully develop or introduce new products; compliance with laws; our ability to identify suitable acquisition candidates and successfully complete and integrate acquisitions; global competition; volatility of raw material and energy costs and supply; disruptions in transportation or significant changes in transportation costs; downturns in certain industries and general economic downturns; international business risks, including currency exchange rate fluctuations, legal restrictions and taxes; unfavorable resolution of litigation against us; maintaining and protecting intellectual property rights; our ability to access capital markets; global political, military, security or other instability; costs related to expansion or other capital projects; interruption or breaches of information technology systems; our ability to retain executive management and key personnel; and our debt covenants.
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.
* * * * *
Tables follow
8
Table I
STEPAN COMPANY
For the Three and Nine Months Ended September 30, 2023 and 2022
(Unaudited – in 000's, except per share data)
|
|
Three Months Ended |
|
|
Nine Months Ended |
|
||||||||||
|
|
2023 |
|
|
2022 |
|
|
2023 |
|
|
2022 |
|
||||
Net Sales |
|
$ |
562,226 |
|
|
$ |
719,185 |
|
|
$ |
1,793,637 |
|
|
$ |
2,146,094 |
|
Cost of Sales |
|
|
490,990 |
|
|
|
600,709 |
|
|
|
1,582,444 |
|
|
|
1,786,785 |
|
Gross Profit |
|
|
71,236 |
|
|
|
118,476 |
|
|
|
211,193 |
|
|
|
359,309 |
|
Operating Expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Selling |
|
|
11,811 |
|
|
|
15,079 |
|
|
|
35,987 |
|
|
|
45,908 |
|
Administrative |
|
|
22,904 |
|
|
|
33,848 |
|
|
|
68,132 |
|
|
|
79,499 |
|
Research, Development and Technical Services |
|
|
14,477 |
|
|
|
16,929 |
|
|
|
43,720 |
|
|
|
50,092 |
|
Deferred Compensation Expense (Income) |
|
|
(3,101 |
) |
|
|
(2,131 |
) |
|
|
(856 |
) |
|
|
(13,038 |
) |
|
|
|
46,091 |
|
|
|
63,725 |
|
|
|
146,983 |
|
|
|
162,461 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Goodwill Impairment |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
978 |
|
Business Restructuring |
|
|
5,628 |
|
|
|
92 |
|
|
|
5,827 |
|
|
|
225 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Operating Income |
|
|
19,517 |
|
|
|
54,659 |
|
|
|
58,383 |
|
|
|
195,645 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Other Income (Expense): |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Interest, Net |
|
|
(2,987 |
) |
|
|
(2,221 |
) |
|
|
(9,674 |
) |
|
|
(7,254 |
) |
Other, Net |
|
|
(690 |
) |
|
|
(1,980 |
) |
|
|
3,348 |
|
|
|
(8,999 |
) |
|
|
|
(3,677 |
) |
|
|
(4,201 |
) |
|
|
(6,326 |
) |
|
|
(16,253 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Income Before Income Taxes |
|
|
15,840 |
|
|
|
50,458 |
|
|
|
52,057 |
|
|
|
179,392 |
|
Provision for Income Taxes |
|
|
3,269 |
|
|
|
11,074 |
|
|
|
10,660 |
|
|
|
43,073 |
|
Net Income |
|
|
12,571 |
|
|
|
39,384 |
|
|
|
41,397 |
|
|
|
136,319 |
|
Net Income Per Common Share |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Basic |
|
$ |
0.55 |
|
|
$ |
1.73 |
|
|
$ |
1.82 |
|
|
$ |
5.98 |
|
Diluted |
|
$ |
0.55 |
|
|
$ |
1.71 |
|
|
$ |
1.80 |
|
|
$ |
5.90 |
|
Shares Used to Compute Net Income Per Common |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Basic |
|
|
22,786 |
|
|
|
22,753 |
|
|
|
22,770 |
|
|
|
22,813 |
|
Diluted |
|
|
22,930 |
|
|
|
23,034 |
|
|
|
22,956 |
|
|
|
23,089 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
9
Table II
Reconciliation of Non-GAAP Net Income and Earnings per Diluted Share*
|
|
Three Months Ended |
|
|
Nine Months Ended |
|
|
||||||||||||||||||||||||||
($ in thousands, except per share amounts) |
|
2023 |
|
|
EPS |
|
|
2022 |
|
|
EPS |
|
|
2023 |
|
|
EPS |
|
|
2022 |
|
|
EPS |
|
|
||||||||
Net Income Reported |
|
$ |
12,571 |
|
|
$ |
0.55 |
|
|
$ |
39,384 |
|
|
$ |
1.71 |
|
|
$ |
41,397 |
|
|
$ |
1.80 |
|
|
$ |
136,319 |
|
|
$ |
5.90 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Deferred Compensation (Income) Expense |
|
$ |
(2,038 |
) |
|
$ |
(0.09 |
) |
|
$ |
(938 |
) |
|
$ |
(0.04 |
) |
|
$ |
(2,795 |
) |
|
$ |
(0.12 |
) |
|
$ |
(4,369 |
) |
|
$ |
(0.19 |
) |
|
Business Restructuring Expense |
|
$ |
4,219 |
|
|
$ |
0.18 |
|
|
$ |
69 |
|
|
$ |
- |
|
|
$ |
4,365 |
|
|
$ |
0.19 |
|
|
$ |
169 |
|
|
$ |
0.01 |
|
|
Cash-Settled SARs (Income) Expense |
|
$ |
(61 |
) |
|
$ |
- |
|
|
$ |
(117 |
) |
|
$ |
- |
|
|
$ |
(145 |
) |
|
$ |
(0.01 |
) |
|
$ |
(464 |
) |
|
$ |
(0.02 |
) |
|
Environmental Remediation Expense |
|
$ |
39 |
|
|
$ |
- |
|
|
$ |
7,883 |
|
|
$ |
0.34 |
|
|
$ |
384 |
|
|
$ |
0.02 |
|
|
$ |
8,362 |
|
|
$ |
0.36 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Adjusted Net Income |
|
$ |
14,730 |
|
|
$ |
0.64 |
|
|
$ |
46,281 |
|
|
$ |
2.01 |
|
|
$ |
43,206 |
|
|
$ |
1.88 |
|
|
$ |
140,017 |
|
|
$ |
6.06 |
|
|
* 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, and are 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 amounts) |
|
2023 |
|
|
EPS |
|
|
2022 |
|
|
EPS |
|
|
2023 |
|
|
EPS |
|
|
2022 |
|
|
EPS |
|
|
||||||||
Pre-Tax Adjustments |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Deferred Compensation (Income) Expense |
|
$ |
(2,717 |
) |
|
|
|
|
$ |
(1,234 |
) |
|
|
|
|
$ |
(3,726 |
) |
|
|
|
|
$ |
(5,748 |
) |
|
|
|
|
||||
Business Restructuring Expense |
|
$ |
5,628 |
|
|
|
|
|
$ |
92 |
|
|
|
|
|
$ |
5,827 |
|
|
|
|
|
$ |
225 |
|
|
|
|
|
||||
Cash-Settled SARs (Income) Expense |
|
$ |
(82 |
) |
|
|
|
|
$ |
(154 |
) |
|
|
|
|
$ |
(193 |
) |
|
|
|
|
$ |
(609 |
) |
|
|
|
|
||||
Environmental Remediation Expense |
|
$ |
52 |
|
|
|
|
|
$ |
10,372 |
|
|
|
|
|
$ |
513 |
|
|
|
|
|
$ |
11,002 |
|
|
|
|
|
||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Total Pre-Tax Adjustments |
|
$ |
2,881 |
|
|
|
|
|
$ |
9,076 |
|
|
|
|
|
$ |
2,421 |
|
|
|
|
|
$ |
4,870 |
|
|
|
|
|
||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Cumulative Tax Effect on Adjustments |
|
$ |
(722 |
) |
|
|
|
|
$ |
(2,179 |
) |
|
|
|
|
$ |
(612 |
) |
|
|
|
|
$ |
(1,172 |
) |
|
|
|
|
||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
After-Tax Adjustments |
|
$ |
2,159 |
|
|
$ |
0.09 |
|
|
$ |
6,897 |
|
|
$ |
0.30 |
|
|
$ |
1,809 |
|
|
$ |
0.08 |
|
|
$ |
3,698 |
|
|
$ |
0.16 |
|
|
Table III
10
Deferred Compensation Plans
The full effect of the deferred compensation plans on quarterly pre-tax income was $2.7 million of income versus $1.2 million of income in the prior year. The year-to-date impact was $3.7 million of income versus $5.7 million of income in the prior year. The accounting for the deferred compensation plans results in operating income when the price of Stepan Company common stock or mutual funds held in the plans fall and expense when they rise. The Company also recognizes the change in value of mutual funds as investment income or loss. The quarter end market prices of Company common stock were as follows:
|
|
2023 |
|
|
2022 |
|
||||||||||||||||||||||||
|
|
12/31 |
|
9/30 |
|
|
6/30 |
|
|
3/31 |
|
|
12/31 |
|
|
9/30 |
|
|
6/30 |
|
|
3/31 |
|
|||||||
Stepan Company |
|
N/A |
|
$ |
74.97 |
|
|
$ |
95.56 |
|
|
$ |
103.03 |
|
|
$ |
106.46 |
|
|
$ |
93.67 |
|
|
$ |
101.35 |
|
|
$ |
98.81 |
|
The deferred compensation income statement impact is summarized below:
|
|
Three Months Ended |
|
|
Nine Months Ended |
|
||||||||||
($ in thousands) |
|
2023 |
|
|
2022 |
|
|
2023 |
|
|
2022 |
|
||||
Deferred Compensation |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Operating Income (Expense) |
|
$ |
3,101 |
|
|
$ |
2,131 |
|
|
$ |
856 |
|
|
$ |
13,038 |
|
Other, net – Mutual Fund Gain (Loss) |
|
|
(384 |
) |
|
|
(897 |
) |
|
|
2,870 |
|
|
|
(7,290 |
) |
Total Pre-Tax |
|
$ |
2,717 |
|
|
$ |
1,234 |
|
|
$ |
3,726 |
|
|
$ |
5,748 |
|
Total After-Tax |
|
$ |
2,038 |
|
|
$ |
938 |
|
|
$ |
2,795 |
|
|
$ |
4,368 |
|
11
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 U.S. dollars at average foreign exchange rates appropriate for the reporting period. Because foreign currency exchange rates fluctuate against the U.S. dollar over time, foreign currency translation affects period-to-period comparisons of financial statement items (i.e., because foreign exchange rates fluctuate, similar period-to-period local currency results for a foreign subsidiary may translate into different U.S. dollar results). Below is a table that presents the impact that foreign currency translation had on the changes in consolidated net sales and various income statement line items for the three and nine month periods ending September 30, 2023 as compared to 2022:
($ in millions) |
|
Three Months Ended |
|
|
Decrease |
|
|
Change |
|
|
Nine Months Ended |
|
|
Decrease |
|
|
Change |
|
||||||||||||||
|
|
2023 |
|
|
2022 |
|
|
|
|
|
|
|
|
2023 |
|
|
2022 |
|
|
|
|
|
|
|
||||||||
Net Sales |
|
$ |
562.2 |
|
|
$ |
719.2 |
|
|
$ |
(157.0 |
) |
|
$ |
19.1 |
|
|
$ |
1,793.6 |
|
|
$ |
2,146.1 |
|
|
$ |
(352.5 |
) |
|
$ |
11.1 |
|
Gross Profit |
|
|
71.2 |
|
|
|
118.5 |
|
|
|
(47.3 |
) |
|
|
1.8 |
|
|
|
211.2 |
|
|
|
359.3 |
|
|
$ |
(148.1 |
) |
|
|
0.7 |
|
Operating Income |
|
|
19.5 |
|
|
|
54.7 |
|
|
|
(35.2 |
) |
|
|
0.9 |
|
|
|
58.4 |
|
|
|
195.6 |
|
|
$ |
(137.2 |
) |
|
|
0.1 |
|
Pretax Income |
|
|
15.8 |
|
|
|
50.5 |
|
|
|
(34.7 |
) |
|
|
0.9 |
|
|
|
52.1 |
|
|
|
179.4 |
|
|
$ |
(127.3 |
) |
|
|
0.0 |
|
12
Table V
Stepan Company
Consolidated Balance Sheets
September 30, 2023 and December 31, 2022
|
|
September 30, 2023 |
|
|
December 31, 2022 |
|
||
ASSETS |
|
|
|
|
|
|
||
Current Assets |
|
$ |
849,436 |
|
|
$ |
1,044,802 |
|
Property, Plant & Equipment, Net |
|
|
1,179,972 |
|
|
|
1,073,297 |
|
Other Assets |
|
|
304,121 |
|
|
|
315,073 |
|
Total Assets |
|
$ |
2,333,529 |
|
|
$ |
2,433,172 |
|
LIABILITIES AND STOCKHOLDERS’ EQUITY |
|
|
|
|
|
|
||
Current Liabilities |
|
$ |
582,077 |
|
|
$ |
670,649 |
|
Deferred Income Taxes |
|
|
9,149 |
|
|
|
10,179 |
|
Long-term Debt |
|
|
422,375 |
|
|
|
455,029 |
|
Other Non-current Liabilities |
|
|
117,157 |
|
|
|
131,250 |
|
Total Stepan Company Stockholders’ Equity |
|
|
1,202,771 |
|
|
|
1,166,065 |
|
Total Liabilities and Stockholders’ Equity |
|
$ |
2,333,529 |
|
|
$ |
2,433,172 |
|
13
Table VI
Reconciliations of Non-GAAP EBITDA and Adjusted EBITDA to Operating Income
|
|
Three Months Ended |
|
|||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
($ in millions) |
|
Surfactants |
|
|
Polymers |
|
|
Specialty Products |
|
|
Unallocated Corporate |
|
|
Consolidated |
|
|||||
Operating Income |
|
$ |
15.4 |
|
|
$ |
21.8 |
|
|
$ |
2.4 |
|
|
$ |
(20.1 |
) |
|
$ |
19.5 |
|
Depreciation and Amortization |
|
$ |
16.3 |
|
|
$ |
7.9 |
|
|
$ |
1.5 |
|
|
$ |
0.6 |
|
|
$ |
26.3 |
|
Other, Net Income (Expense) |
|
$ |
- |
|
|
$ |
- |
|
|
$ |
- |
|
|
$ |
(0.7 |
) |
|
$ |
(0.7 |
) |
EBITDA |
|
$ |
31.7 |
|
|
$ |
29.7 |
|
|
$ |
3.9 |
|
|
$ |
(20.2 |
) |
|
$ |
45.1 |
|
Deferred Compensation |
|
$ |
- |
|
|
$ |
- |
|
|
$ |
- |
|
|
$ |
(2.7 |
) |
|
$ |
(2.7 |
) |
Cash Settled SARs |
|
$ |
(0.1 |
) |
|
$ |
- |
|
|
$ |
- |
|
|
$ |
- |
|
|
$ |
(0.1 |
) |
Business Restructuring |
|
$ |
- |
|
|
$ |
- |
|
|
$ |
- |
|
|
$ |
5.6 |
|
|
$ |
5.6 |
|
Environmental Remediation |
|
$ |
- |
|
|
$ |
- |
|
|
$ |
- |
|
|
$ |
0.1 |
|
|
$ |
0.1 |
|
Adjusted EBITDA |
|
$ |
31.6 |
|
|
$ |
29.7 |
|
|
$ |
3.9 |
|
|
$ |
(17.2 |
) |
|
$ |
48.0 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
|
|
Three Months Ended |
|
|||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
($ in millions) |
|
Surfactants |
|
|
Polymers |
|
|
Specialty Products |
|
|
Unallocated Corporate |
|
|
Consolidated |
|
|||||
Operating Income |
|
$ |
39.0 |
|
|
$ |
31.9 |
|
|
$ |
9.7 |
|
|
$ |
(25.9 |
) |
|
$ |
54.7 |
|
Depreciation and Amortization |
|
$ |
13.8 |
|
|
$ |
7.9 |
|
|
$ |
1.5 |
|
|
$ |
0.5 |
|
|
$ |
23.7 |
|
Other, Net Income (Expense) |
|
$ |
- |
|
|
$ |
- |
|
|
$ |
- |
|
|
$ |
(2.0 |
) |
|
$ |
(2.0 |
) |
EBITDA |
|
$ |
52.8 |
|
|
$ |
39.8 |
|
|
$ |
11.2 |
|
|
$ |
(27.4 |
) |
|
$ |
76.4 |
|
Deferred Compensation |
|
$ |
- |
|
|
$ |
- |
|
|
$ |
- |
|
|
$ |
(1.2 |
) |
|
$ |
(1.2 |
) |
Cash Settled SARs |
|
$ |
(0.1 |
) |
|
$ |
- |
|
|
$ |
- |
|
|
$ |
(0.1 |
) |
|
$ |
(0.2 |
) |
Business Restructuring |
|
$ |
- |
|
|
$ |
- |
|
|
$ |
- |
|
|
$ |
0.1 |
|
|
$ |
0.1 |
|
Environmental Remediation |
|
$ |
- |
|
|
$ |
- |
|
|
$ |
- |
|
|
$ |
10.4 |
|
|
$ |
10.4 |
|
Adjusted EBITDA |
|
$ |
52.7 |
|
|
$ |
39.8 |
|
|
$ |
11.2 |
|
|
$ |
(18.2 |
) |
|
$ |
85.5 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
|
|
Nine Months Ended |
|
|||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
($ in millions) |
|
Surfactants |
|
|
Polymers |
|
|
Specialty Products |
|
|
Unallocated Corporate |
|
|
Consolidated |
|
|||||
Operating Income |
|
$ |
57.6 |
|
|
$ |
48.1 |
|
|
$ |
8.7 |
|
|
$ |
(56.0 |
) |
|
$ |
58.4 |
|
Depreciation and Amortization |
|
$ |
47.7 |
|
|
$ |
24.5 |
|
|
$ |
4.3 |
|
|
$ |
1.9 |
|
|
$ |
78.4 |
|
Other, Net Income (Expense) |
|
$ |
- |
|
|
$ |
- |
|
|
$ |
- |
|
|
$ |
3.3 |
|
|
$ |
3.3 |
|
EBITDA |
|
$ |
105.3 |
|
|
$ |
72.6 |
|
|
$ |
13.0 |
|
|
$ |
(50.8 |
) |
|
$ |
140.1 |
|
Deferred Compensation |
|
$ |
- |
|
|
$ |
- |
|
|
$ |
- |
|
|
$ |
(3.7 |
) |
|
$ |
(3.7 |
) |
Cash Settled SARs |
|
$ |
(0.2 |
) |
|
$ |
- |
|
|
$ |
- |
|
|
$ |
- |
|
|
$ |
(0.2 |
) |
Business Restructuring |
|
$ |
- |
|
|
$ |
- |
|
|
$ |
- |
|
|
$ |
5.8 |
|
|
$ |
5.8 |
|
Environmental Remediation |
|
$ |
- |
|
|
$ |
- |
|
|
$ |
- |
|
|
$ |
0.5 |
|
|
$ |
0.5 |
|
Adjusted EBITDA |
|
$ |
105.1 |
|
|
$ |
72.6 |
|
|
$ |
13.0 |
|
|
$ |
(48.2 |
) |
|
$ |
142.5 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
|
|
Nine Months Ended |
|
|||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
($ in millions) |
|
Surfactants |
|
|
Polymers |
|
|
Specialty Products |
|
|
Unallocated Corporate |
|
|
Consolidated |
|
|||||
Operating Income |
|
$ |
141.0 |
|
|
$ |
79.9 |
|
|
$ |
23.2 |
|
|
$ |
(48.5 |
) |
|
$ |
195.6 |
|
Depreciation and Amortization |
|
$ |
40.4 |
|
|
$ |
23.5 |
|
|
$ |
4.4 |
|
|
$ |
1.7 |
|
|
$ |
70.0 |
|
Other, Net Income (Expense) |
|
$ |
- |
|
|
$ |
- |
|
|
$ |
- |
|
|
$ |
(9.0 |
) |
|
$ |
(9.0 |
) |
EBITDA |
|
$ |
181.4 |
|
|
$ |
103.4 |
|
|
$ |
27.6 |
|
|
$ |
(55.8 |
) |
|
$ |
256.6 |
|
Deferred Compensation |
|
$ |
- |
|
|
$ |
- |
|
|
$ |
- |
|
|
$ |
(5.7 |
) |
|
$ |
(5.7 |
) |
Cash Settled SARs |
|
$ |
(0.4 |
) |
|
$ |
(0.1 |
) |
|
$ |
- |
|
|
$ |
(0.1 |
) |
|
$ |
(0.6 |
) |
Business Restructuring |
|
$ |
- |
|
|
$ |
- |
|
|
$ |
- |
|
|
$ |
0.2 |
|
|
$ |
0.2 |
|
Environmental Remediation |
|
$ |
- |
|
|
$ |
- |
|
|
$ |
- |
|
|
$ |
11.0 |
|
|
$ |
11.0 |
|
Adjusted EBITDA |
|
$ |
181.0 |
|
|
$ |
103.3 |
|
|
$ |
27.6 |
|
|
$ |
(50.4 |
) |
|
$ |
261.5 |
|
14
Stepan Increases Quarterly Cash Dividend,
Marking the 56th Consecutive Year of Increases
Northbrook, Illinois, October 18, 2023 -- Stepan Company (NYSE:SCL) today reported:
On October 17, 2023, the Board of Directors of Stepan Company approved an increase of $0.010 per share, or 2.7%, on its quarterly cash dividend on its common stock. The dividend of $0.375 per share is payable on December 15, 2023, to common stockholders of record on November 30, 2023. The increase marks the 56th consecutive year in which the quarterly dividend rate on the Company’s common stock has increased.
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 and disinfection products and in agricultural and oilfield solutions. 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 Northbrook, 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.
More information about Stepan’s sustainability program can be found on the Sustainability page at www.stepan.com.
Contact: Luis E. Rojo 847-446-7500
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 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, 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,” “should,” “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 10-Q and Form 8-K reports and exhibits to those reports, and include (but are not limited to) risks and uncertainties related to accidents, unplanned production shutdowns or disruptions in manufacturing facilities; reduced demand due to customer product reformulations or new technologies; our inability to successfully develop or introduce new products; compliance with laws; our ability to identify suitable acquisition candidates and successfully complete and integrate acquisitions; global competition; volatility of raw material and energy costs and supply; disruptions in transportation or significant changes in transportation costs; downturns in certain industries and general economic downturns; international business risks, including currency exchange rate fluctuations, legal restrictions and taxes; unfavorable resolution of litigation against us; maintaining and protecting intellectual property rights; our ability to access capital markets; global political, military, security or other instability; costs related to expansion or other capital projects; interruption or breaches of information technology systems; our ability to retain executive management and key personnel; and our debt covenants.
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.
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 10-Q and Form 8-K reports and exhibits to those reports, and include (but are not limited to) risks and uncertainties related to the impact of the COVID-19 pandemic; accidents, unplanned production shutdowns or disruptions in manufacturing facilities; reduced demand due to customer product reformulations or new technologies; our inability to
successfully develop or introduce new products; compliance with laws; our ability to identify suitable acquisition candidates and successfully complete and integrate acquisitions; global competition; volatility of raw material and energy costs and supply; disruptions in transportation or significant changes in transportation costs; downturns in certain industries and general economic downturns; international business risks, including currency exchange rate fluctuations, legal restrictions and taxes; unfavorable resolution of litigation against us; maintaining and protecting intellectual property rights; our ability to access capital markets; global political, military, security or other instability; costs related to expansion or other capital projects; interruption or breaches of information technology systems; our ability to retain executive management and key personnel; and our debt covenants.
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.