Delaware
|
36-1823834
|
|
(State or other jurisdiction of
|
(IRS Employer
|
|
incorporation)
|
Identification No.)
|
Set forth below are the matters acted upon at the Annual Meeting and final voting results on each such matter as reported by Stepan's inspector of elections.
Proposal 1: Election of Directors
NAME FOR WITHHELD BROKER NON-VOTES
Joaquin Delgado 17,972,874 54,529 2,040,429
F. Quinn Stepan, Jr. 17,961,774 65,629 2,040,429
FOR AGAINST ABSTAIN BROKER NON-VOTES
17,830,631 110,166 86,606 2,040,429
Proposal 3: Ratification of Appointment of Deloitte as Independent Registered Public Accounting Firm for Fiscal Year 2014
FOR AGAINST ABSTAIN BROKER NON-VOTES
19,964,335 73,528 29,969 0
STEPAN COMPANY
|
||||||||
Date: May 01, 2014
|
By:
|
/s/ Kathleen Sherlock
|
||||||
Kathleen Sherlock
|
||||||||
Assistant Secretary
|
||||||||
Exhibit No.
|
Description
|
|
EX-99.1
|
Press Release of Stepan Company dated April 29, 2014
|
Exhibit 99.1 |
For Release: Immediately CONTACT: Scott D. Beamer (847) 446-7500
Stepan Reports Lower First Quarter Results and Announces Dividend
· | Net Sales increased 5% to $477.4 million versus $456.5 million in the prior year. |
· | Net Income was $13.0 million versus $19.0 million in the prior year. Net Income, excluding deferred compensation, was $12.8 million versus $21.5 million in the prior year. |
· | Diluted EPS was $0.57 versus $0.83 in the prior year. Diluted EPS, excluding deferred compensation, was $0.56 versus $0.94 in the prior year. |
· | Lower earnings were directly attributable to higher maintenance, energy and freight costs from the adverse weather in North America and lower North American surfactant demand. |
· | Progress on strategic objectives remain on track. |
NORTHFIELD, Illinois, April 29, 2014 -- Stepan Company (NYSE: SCL) today reported:
Despite first quarter net income being $6 million less than prior year, we expect earnings from operations to improve versus prior year for the remaining nine months. We mentioned in our fourth quarter earnings conference call on February 19th that we were experiencing a slow start to the year with severe weather impacting customer locations, transportation and logistics, and some of our own facilities in North America. Unfortunately, the weather did not improve until mid-March. We also specifically noted that Surfactant earnings were expected to be down in the first quarter due to the extreme weather and high maintenance expenses, said F. Quinn Stepan, Jr., President and Chief Executive Officer. He continued, Surfactants volumes were challenged in the first quarter which more than offset higher selling prices. March was much better than January and February and April should be another good month.
Despite the disappointing first quarter results, we continue to make progress on our strategic initiatives. Specifically, recent investments in Brazil, Singapore and Europe Polymers, along with our 2013 polyester resin acquisition in Columbus GA, all delivered growth. Our balance sheet remains solid, and we continue our pursuit of further investments and opportunities to improve efficiency, accelerate our earnings growth, and deliver greater returns to our shareholders.
1
Summary | ||||||||||
($ in thousands, except per share data) | Three Months Ended March 31 | |||||||||
|
||||||||||
% | ||||||||||
2014 | 2013 | Change | ||||||||
Net Sales | $ 477,442 | $ 456,546 | + 5 | |||||||
Operating Income | $22,523 | $28,294 | - 20 | |||||||
Net Income | 13,018 | 19,034 | - 32 | |||||||
Net Income Excluding | ||||||||||
Deferred Compensation * | 12,767 | 21,516 | - 41 | |||||||
Earnings per Diluted Share | $ | 0.57 | $ | 0.83 | - 31 | |||||
Earnings per Diluted Share Excluding | ||||||||||
Deferred Compensation * | $ | 0.56 | $ | 0.94 | - 40 | |||||
* See Table II for a discussion of deferred compensation plan accounting. | ||||||||||
Segment Net Sales | ||||||||||
($ in thousands) | Three Months Ended March 31 | |||||||||
|
||||||||||
2014 | 2013 | % Change | ||||||||
Net Sales | ||||||||||
Surfactants | $ 335,710 | $ 339,973 | -1 | |||||||
Polymers | 119,107 | 95,998 | +24 | |||||||
Specialty Products | 22,625 | 20,575 | +10 | |||||||
|
|
|
||||||||
$ 477,442 | $ 456,546 | +5 |
Percentage Change in Net Sales |
The increase in net sales was primarily due to higher average selling prices across all three segments partially offset by lower sales volume. This shortfall was predominantly related to the Surfactant segments North American operations, the region which was significantly impacted by the severe and prolonged winter weather. The shortfall was partially offset by the volume growth in global Polyols and from the incremental volume from the second quarter 2013 acquisition from Bayer MaterialScience LLC.
2
Three Months Ended March 31 | ||||
Selling Price | + | 7 | ||
Volume | - | 2 | ||
Foreign Translation | - | |||
Total | + | 5 |
Segment Sales Volume
Total Company sales volume decreased 2% in the first quarter versus prior year.
Segment Gross Profit
Total Company gross profit declined 13% to $63.0 million in the first quarter.
3
Operating Expenses | ||||||
($ in thousands) | Three Months Ended March 31 | |||||
|
||||||
2014 | 2013 | % Change | ||||
Selling | $ 14,146 | $ 13,728 | +3 | |||
Administrative - General | 14,679 | 14,418 | +2 | |||
Administrative - Deferred | ||||||
Compensation | (248) | 4,933 | - | |||
(Income)/Expense* | ||||||
Research, development | ||||||
and technical service | 11,924 | 11,327 | +5 | |||
|
|
|||||
Total | $ 40,501 | $ 44,406 | -9 | |||
* See Table II for a discussion of deferred compensation plan accounting. |
· | Operating expenses, excluding the impact of Administrative Deferred Compensation Expense, increased 3% for the quarter. The increase was primarily due to costs associated with the new acquisition, increased R&D resources and a higher bad debt provision for a Latin American customer, partially offset by lower bonus expense. |
Income Taxes |
The effective tax rate increased to 28% for the quarter compared to 25% for the first quarter of 2013. First quarter 2013 was favorably impacted by a number of special one-time credits which did not recur in the current quarter. Specifically, first quarter 2013 benefited from
4
recognizing the retroactive impact of the U.S. research and development credit and other U.S. tax credits. This change was partially offset by the favorable impact of earning a greater percentage of consolidated income outside the U.S. where tax rates remain generally lower than in the U.S.
Selected Balance Sheet Information |
The Companys net debt level increased by $36 million versus prior year end and was predominately due to a $37 million decrease in cash. The decline in cash was primarily due to an increase in working capital requirements.
($ in millions) | 3/31/14 | 12/31/13 | 3/31/13 | |||||||||||||||
Net Debt | ||||||||||||||||||
Total Debt | $ | 269.6 | $ | 270.6 | $ | 193.9 | ||||||||||||
Cash | 96.7 | 133.3 | 54.8 | |||||||||||||||
|
|
|
|
|
|
|||||||||||||
Net Debt | $ | 172.9 | $ | 137.3 | $ | 139.1 | ||||||||||||
Equity | 564.3 | 553.7 | 494.9 | |||||||||||||||
|
|
|
|
|
|
|||||||||||||
Net Debt + Equity | $ | 737.2 | $ | 691.0 | $ | 634.0 | ||||||||||||
Net Debt / (Net Debt + Equity) | 23.5% | 19.9% | 21.9% | |||||||||||||||
The major working capital components are: | ||||||||||||||||||
($ in millions) | 3/31/14 | 12/31/13 | 3/31/13 | |||||||||||||||
Net Receivables | $ | 296.3 | $ | 265.7 | $ | 281.5 | ||||||||||||
Inventories | 185.6 | 172.4 | 177.4 | |||||||||||||||
Accounts Payable | (167.8) | (157.3) | (150.7) | |||||||||||||||
|
|
|
|
|
|
|
|
|
||||||||||
Total | $ | 314.1 | $ | 280.8 | $ | 308.2 |
Capital expenditures during the quarter were $21 million which is equal to the $21 million spent in the prior year.
Stockholders equity grew to $564 million, or 14%, from $495 million at the end of the 2013 first quarter.
Outlook |
Lower first quarter earnings were largely due to the adverse winter weather in North America and other issues which generally should not recur. In March and April our business seems back on track; however lower first quarter earnings will make it a challenge to exceed 2013 full year earnings from operations.
5
Despite this setback, we remain on track in delivering our strategic objectives. We continue to recognize earnings growth from our 2013 acquisition from Bayer and previous capacity expansions in Brazil, Europe and Singapore. We have a healthy balance sheet and we will continue to pursue investments that will accelerate our growth.
Surfactant earnings should improve as the year progresses driven by greater Agricultural sales, continued consumer product growth in Brazil, projected demand for enhanced oil recovery surfactants as well as gains from operational efficiencies.
Polymers should continue grow. Improving economies in the U.S. and Europe, as well as the recent conversions of insulated metal panel and new C.A.S.E. customers, should contribute to full year organic earnings growth. The North American polyester resin business purchased from Bayer is now fully integrated and is delivering the benefits previously projected.
Dividend Declaration |
The Board of Directors of Stepan Company declared a quarterly cash dividend on its common stock of $0.17 per share. The dividend is payable on June 13, 2014, to common stockholders of record on May 30, 2014. In the fourth quarter of 2013, the Company increased its quarterly cash dividend by $0.01 per share, marking the 46th consecutive year of paying increased dividends.
Conference Call |
Stepan Company will host a conference call to discuss the first quarter results at 8:00 A.M. Eastern Daylight Time (7:00 A.M. CDT) on April 30, 2014. Telephone access to the live conference call will be available by dialing +1 (800) 708-6791. To listen to a live webcast of this call, please go to our Internet website at: www.stepan.com, click on investor relations, next click on conference calls and follow the directions on the screen.
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 C.A.S.E. (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.
6
The 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
* * * * * Tables follow |
Except for historical information, all other information in this news release consists of forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements are subject to risks and uncertainties that could cause actual results to differ materially from those projected, anticipated or implied. The most significant of these uncertainties are described in Stepan Companys Form 10-K, Form 8-K and Form 10-Q reports and exhibits to those reports, and include (but are not limited to), prospects for our foreign operations, foreign currency fluctuations, certain global and regional economic conditions, the probability of future acquisitions and the uncertainties related to the integration of acquired businesses, the probability of new products, the loss of one or more key customer or supplier relationships, the costs and other effects of governmental regulation and legal and administrative proceedings, including the expenditures necessary to address and resolve environmental claims and proceedings, disruptions in production at manufacturing facilities, volatility of raw material and energy costs, maintaining and protecting intellectual property rights, interruption or breaches of information technology systems, disruptions in transportation or significant changes in transportation costs, and general economic conditions. These forward-looking statements are made only as of the date hereof, and Stepan Company undertakes no obligation to update or revise the forward-looking statements, whether as a result of new information, future events or otherwise.
7
Table I | ||||||||||||
STEPAN COMPANY | ||||||||||||
Statements of Income | ||||||||||||
For the Three Months Ended March 31, 2014 and 2013 | ||||||||||||
(Unaudited 000s Omitted) | ||||||||||||
Three Months Ended | ||||||||||||
March 31 | ||||||||||||
|
|
|
|
|
|
|
||||||
% | ||||||||||||
2014 | 2013 | Change | ||||||||||
Net Sales | $ 477,442 | $ 456,546 | + | 5 | ||||||||
Cost of Sales | 414,418 | 383,846 | + | 8 | ||||||||
|
|
|
|
|||||||||
Gross Profit | 63,024 | 72,700 | - | 13 | ||||||||
Operating Expenses: | ||||||||||||
Selling | 14,146 | 13,728 | + | 3 | ||||||||
Administrative | 14,431 | 19,351 | - | 25 | ||||||||
Research, development and technical services | 11,924 | 11,327 | + | 5 | ||||||||
|
|
|
|
|||||||||
40,501 | 44,406 | - | 9 | |||||||||
Operating Income | 22,523 | 28,294 | - | 20 | ||||||||
Other Income (Expense): | ||||||||||||
Interest, net | (2,957) | (2,179) | + | 36 | ||||||||
Loss from equity in joint venture | (1,451) | (1,413) | + | 3 | ||||||||
Other, net | (26) | 571 | NM | |||||||||
|
|
|
|
|||||||||
(4,434) | (3,021) | + | 47 | |||||||||
Income Before Provision for Income Taxes | 18,089 | 25,273 | - | 28 | ||||||||
Provision for Income Taxes | 5,081 | 6,276 | - | 19 | ||||||||
|
|
|
|
|||||||||
Net Income | $ | 13,008 | $ | 18,997 | - | 32 | ||||||
Net Loss Attributable to | ||||||||||||
Noncontrolling interests | 10 | 37 | - | 73 | ||||||||
|
|
|
|
|||||||||
Net Income Attributable to Stepan Company | $ | 13,018 | $ | 19,034 | - | 32 | ||||||
|
|
|
|
|||||||||
Net Income Per Common Share | ||||||||||||
Attributable to Stepan Company | ||||||||||||
Basic | $ | 0.57 | $ | 0.85 | - | 33 | ||||||
|
|
|
|
|||||||||
Diluted | $ | 0.57 | $ | 0.83 | - | 31 | ||||||
|
|
|
|
|||||||||
Shares Used to Compute Net Income Per | ||||||||||||
Common Share Attributable to Stepan | ||||||||||||
Company | ||||||||||||
Basic | 22,773 | 22,464 | + | 1 | ||||||||
|
|
|
|
|||||||||
Diluted | 22,964 | 22,887 | + | - | ||||||||
|
|
|
|
8
Table II |
Deferred Compensation Plan |
The full effect of the deferred compensation plan on quarterly net income was $2.5 million of expense versus $1.3 million of expense last year. The accounting for the deferred compensation plan results in operating income when the price of Stepan Company common stock or mutual funds held in the plan 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 Stepan Company common stock are as follows:
2014 | 2013 | 2012 | ||||||||||
|
|
|
|
|
|
|
||||||
3/31 | 12/31 | 9/30 | 6/30 | 3/31 | 12/31 | |||||||
64.56 | $65.63 | $57.73 | $55.61 | $63.10 | $55.54 |
The deferred compensation income statement impact is summarized below:
($ in thousands) | Three Months Ended March 31 | |||||||
|
||||||||
2014 | 2013 | |||||||
Deferred Compensation | ||||||||
Administrative Income/(Expense) | $ | 248 | $ | (4,933) | ||||
Other, net Mutual Fund Income | 157 | 930 | ||||||
|
||||||||
Total Pretax | 405 | (4,003) | ||||||
|
|
|||||||
Total After Tax | $ | 251 | $ | (2,482) |
Reconciliation of non-GAAP net income: | ||||||||
($ in thousands) | Three Months Ended March 31 | |||||||
|
||||||||
2014 | 2013 | |||||||
Net income excluding deferred compensation | $ | 12,767 | $ | 21,516 | ||||
Deferred compensation plan Income/(Expense) | 251 | (2,482) | ||||||
Net income as reported | $ | 13,018 | $ | 19,034 | ||||
Reconciliation of non-GAAP EPS: | ||||||||
Three Months Ended March 31 | ||||||||
|
||||||||
2014 | 2013 | |||||||
Earnings per diluted share excluding deferred | ||||||||
Compensation | $ | 0.56 | $ | 0.94 | ||||
Deferred compensation plan income/(expense) | 0.01 | (0.11) | ||||||
|
|
|
|
|||||
Earnings per diluted share | $ | 0.57 | $ | 0.83 | ||||
|
|
|
|
The Company believes that certain non-GAAP measures, when presented in conjunction with comparable GAAP (Generally Accepted Accounting Principles) measures, are useful because that information is an appropriate measure for evaluating the Companys operating performance. Internally, the Company uses this non-GAAP information as an indicator of business performance, and evaluates managements effectiveness with specific reference to these indicators. These measures should be considered in addition to, not a substitute for, or superior to, measures of financial performance prepared in accordance with GAAP.
9
Table III |
Effects of Foreign Currency Translation |
The Companys 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 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 line items for the first quarter:
Three Months Ended | Increase | (Decrease) Due to | ||||||
March 31 | (Decrease) | Foreign Translation | ||||||
|
||||||||
(In millions) | 2014 | 2013 | ||||||
Net Sales | 477.4 | 456.5 | 20.9 | (1.7) | ||||
Gross Profit | 63.0 | 72.7 | (9.7) | (0.4) | ||||
Operating Income | 22.5 | 28.3 | (5.8) | (0.3) | ||||
Pretax Income | 18.1 | 25.3 | (7.2) | - |
10
Table IV |
Stepan Company Consolidated Balance Sheets March 31, 2014 and December 31, 2013 |
2014 | 2013 | |||||||
March 31 | December 31 | |||||||
ASSETS | ||||||||
Current Assets | $ | 613,485 | $ | 608,550 | ||||
Property, Plant & Equipment, Net | 495,123 | 494,042 | ||||||
Other Assets | 65,925 | 64,610 | ||||||
Total Assets | $ | 1,174,533 | $ | 1,167,202 | ||||
LIABILITIES AND STOCKHOLDERS EQUITY | ||||||||
Current Liabilities | $ | 269,162 | $ | 268,993 | ||||
Deferred Income Taxes | 18,935 | 20,616 | ||||||
Long-term Debt | 234,565 | 235,246 | ||||||
Other Non-current Liabilities | 87,576 | 88,606 | ||||||
Total Stepan Company Stockholders Equity | 562,873 | 552,286 | ||||||
Noncontrolling Interest | 1,422 | 1,455 | ||||||
Total Liabilities and Stockholders Equity | $ | 1,174,533 | $ | 1,167,202 |
11