NORTHFIELD, Ill., Feb. 10 /PRNewswire-FirstCall/ -- Stepan Company
(NYSE: SCL) today reported record earnings for the full year ended
December 31, 2008. SUMMARY Three Months Ended Twelve Months Ended
December 31 December 31 ------------------ ------------------- ($in
thousands) % % 2008 2007 Change 2008 2007 Change ---- ----- ------
---- ---- ------ Net Sales $365,333 $342,343 + 7 $1,600,130
$1,329,901 + 20 Net Income 1,664 1,608 + 3 37,172 15,118 + 146
Earnings per Diluted Share $0.15 $0.15 --- $3.52 $1.50 + 135 FULL
YEAR RESULTS Net income for the year rose to a record $37.2
million, or $3.52 per diluted share, from $15.1 million, or $1.50
per diluted share, a year ago. "Our performance in 2008 was the
result of our strategy to diversify our customer and product mix
within our core markets combined with a disciplined approach to our
cost structure," said F. Quinn Stepan, Jr., President and Chief
Executive Officer. Gross profit grew by $28.1 million (20 percent)
on improved surfactant segment profitability. -- Surfactant gross
profit improved by $30.1 million, or 33 percent, due to a more
favorable customer and product mix and the partial recovery of past
margin erosion. -- Polymer gross profit declined by $1.6 million,
or four percent, on a two percent decline in volume, higher raw
material costs and higher freight and maintenance costs related to
a fourth quarter scheduled maintenance shutdown. -- Specialty
products gross profit reached $9.1 million, up $0.2 million, or two
percent. Operating expenses rose by $10.2 million, or 10 percent.
Over $3.7 million, or 36 percent, of the increase was due to higher
provisions for performance based incentive compensation as a result
of the record earnings. Higher bad debt charges, pension expense
and the effect of foreign currency translation also contributed to
higher level of operating expenses. Included in the current year's
operating income were a $9.9 million pretax gain on the sale of a
urethane system product line and an $8.5 million pretax gain on the
sale of farmland, which was used to acquire an office building in a
tax deferred like kind exchange. The full effect of the deferred
compensation plan on pretax income was $4.9 million of expense
versus expense of $1.0 million in the prior year. The accounting
for the Company deferred compensation plan results in expense when
the price of Stepan Company stock or mutual funds held in the plan
rise and income when they decline. The Company also recognizes the
change in value of the mutual funds as investment income or loss.
The income statement classification is summarized below: ($in
thousands) Three Months Ended Twelve Months Ended December 31
December 31 ------------------ ------------------- 2008 2007 2008
2007 Deferred Compensation Administrative Expense (Income) $(4,174)
$734 $211 $2,253 Other, net - Mutual Fund (Gain) Loss 2,142 (880)
4,661 (1,243) ----- ------ ----- ------- Total $(2,032) $(146)
$4,872 $1,010 ========= ====== ====== ======== Year-to-date net
sales increased 20 percent due to higher selling prices (21 percent
increase) and foreign translation impact (one percent) offset by a
two percent decline in sales volume. FOURTH QUARTER RESULTS Net
income for the quarter was $1.7 million, or $0.15 per diluted
share, compared to $1.6 million, or $0.15 per diluted share, a year
ago. Gross profit declined by $2.6 million, or eight percent, as
volume declined seven percent. -- Surfactant gross profit declined
by $1.2 million, or five percent, on a three percent decline in
volume. Volume declined as customers reduced inventories in
anticipation of lower pricing in 2009 brought about by falling
commodity raw material costs. The biodiesel product line reported a
$2.5 million negative gross profit for the quarter due to lower
selling prices brought on by falling crude oil and diesel prices.
High priced soybean oil inventory, the feedstock for biodiesel, was
consumed during the quarter resulting in the loss. The remainder of
the surfactant segment continued the year long trend of improved
customer and product mix and recovery of past margin erosion. --
Polymer gross profit declined by $2.1 million, or 22 percent, as
volume declined. Sales of phthalic anhydride (PA) led the volume
and gross profit decline due to weakness in the end use markets of
automotive, boating, housing and appliances. PA profitability
declined due to the lower sales volume and higher maintenance cost.
A planned triennial maintenance shutdown led to the higher
maintenance costs. -- Administrative expense declined by $4.5
million, or 44 percent. Deferred compensation plan income of $4.2
million was recorded in administrative expense, while related
mutual fund losses of $2.1 million were recorded in other income.
SEGMENT RESULTS Three Months Ended Twelve Months Ended December 31
December 31 ----------------------- ------------------------ ($in
thousands) % % 2008 2007 Change 2008 2007 Change ------ ------
------ ------ ------ ------ Net Sales Surfactants $282,714 $253,289
+12 $1,199,438 $975,726 +23 Polymers 71,572 81,353 -12 359,014
321,228 +12 Specialty Products 11,047 7,701 +43 41,678 32,947 +27
-------- -------- ---------- ---------- Total Net Sales $365,333
$342,343 + 7 $1,600,130 $1,329,901 +20 ======== ======== ==========
========== Surfactant gross profit increased $30.1 million, or 33
percent, for the full year, but declined by $1.2 million, or five
percent, for the quarter. The full year improvement was driven by
improved customer and product mix, coupled with recovery of higher
raw material costs in selling prices. Full year gross profit on
sales of higher value added surfactants in the laundry, personal
care, agricultural and oilfield markets more than offset weakness
in biodiesel and building product applications. Sales volume
declined one percent for the year and three percent during the
fourth quarter. The decline was largely attributable to lower
biodiesel sales volume. Excluding biodiesel, sales volume was
relatively flat for the year. Improved laundry and cleaning volume
in North America was partially offset by lower European volume.
Polymer gross profit declined $1.6 million, or four percent, for
the year and $2.1 million, or 22 percent, for the quarter. The
decline was due to lower PA sales volume, which fell 22 percent for
the year and 46 percent for the fourth quarter, which included the
previously discussed maintenance turnaround. Demand for PA in the
automotive, boating and housing industries remains extremely weak.
PA sales represent less than five percent of total Company sales.
Polyol gross profit grew by three percent on volume growth of 10
percent for the full year. The majority of the polyol is sold into
the commercial flat roof insulation market for replacement roofs
versus new construction. Demand for greater energy efficiency is
continuing to drive growth in this market. During the fourth
quarter, polyol sales volume declined by eight percent as the
global recession worsened and customers delayed purchases in
anticipation of lower announced pricing for January of 2009, as raw
material feedstock prices declined rapidly. OPERATING EXPENSES
Three Months Ended Twelve Months Ended December 31 December 31
----------------------- ----------------------- ($in thousands) % %
2008 2007 Change 2008 2007 Change ------ ------ ------ ------
------ ------ Marketing $9,748 $9,225 + 6 $41,218 $36,165 +14
Administrative - General 10,058 9,689 + 5 41,389 37,149 +12
Administrative - Deferred Compensation Obligations (4,174) 734 NM
211 2,253 NM Research, development and technical service 7,870
7,891 -- 34,437 31,457 + 9 ------- ------- -------- -------- Total
$23,502 $27,539 -15 $117,255 $107,024 +10 ======= ======= ========
======== Excluding deferred compensation expense, the remaining
operating expense increases were attributable to higher performance
based incentive compensation, bad debt provisions and the effect of
foreign currency translation. OTHER INCOME AND EXPENSE Interest
expense declined 15 percent and two percent for quarter and
year-to-date periods, respectively. Lower interest rates offset the
effect of higher average debt levels during the year. Higher
working capital requirements, due to rising raw material costs
during the year, have started to decline during the fourth quarter.
The loss from our equity in the Philippine joint venture was $2.3
million versus $0.4 million in the prior year. The increase was
attributable to higher foreign exchange losses and bad debt
provisions. Included in other, net expense on the income statement
is a $2.1 million loss for the quarter and $4.7 million loss for
the year in mutual fund investments held for our deferred
compensation plans. Partially offsetting this expense is foreign
exchange gains of $0.5 million for the quarter and $1.1 million for
the year attributable to the strengthening U.S. dollar. PROVISION
FOR INCOME TAXES The effective tax rate declined to 32.1 percent
for the year compared to 36.6 percent a year ago. The prior year
rate was unusually high due to the recording in 2007 of UK goodwill
impairment for which no tax benefit was realized. OUTLOOK Our
record performance in 2008 was the result of our strategy to
diversify our customer and product mix within our core markets
combined with a disciplined approach to our cost structure. The
depth of the recession in 2009 will affect our sales volume,
particularly in the polymer end-markets. Our surfactant business,
particularly the volumes associated with consumer laundry and
personal care applications, has historically been relatively
resistant to a recession. Our business should fair better than most
in these difficult times. In 2009, we will continue to stay close
to our customers within our core markets while we focus on
innovation and cost reduction opportunities. CONFERENCE CALL Stepan
Company will host a conference call to discuss the fourth quarter
and year end results at 2 p.m. Eastern Time on February 11, 2009.
To listen to a live webcast of this call, please go to our Internet
website at: http://www.stepan.com/, click on investor relations,
next click on conference calls and follow the directions on the
screen. Stepan Company, headquartered in Northfield, Illinois, is a
leading producer of specialty and intermediate chemicals used in
household, industrial, personal care, agricultural, food and
insulation related products. The common and the convertible
preferred stocks are traded on the New York and Chicago Stock
Exchanges under the symbols SCL and SCLPR. table follows 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 Company's Form 10-K, Form 8-K
and Form 10-Q reports and exhibits to those reports, and include
(but are not limited to), 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, 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. STEPAN
COMPANY Statements of Income For the Three and Twelve Months Ended
December 31, 2008 and 2007 (Unaudited - 000's Omitted) Three Months
Ended Twelve Months Ended December 31 December 31
----------------------- ------------------------- % % 2008 2007
Change 2008 2007 Change ------ ------ ------ ------ ------ ------
Net Sales $365,333 $342,343 + 7 $1,600,130 $1,329,901 + 20 Cost of
Sales 334,440 308,898 + 8 1,430,593 1,188,505 + 20 ------- -------
--------- --------- Gross Profit 30,893 33,445 - 8 169,537 141,396
+ 20 Operating Expenses: Marketing 9,748 9,225 + 6 41,218 36,165 +
14 Administrative 5,884 10,423 - 44 41,600 39,402 + 6 Research,
Development and Technical Services 7,870 7,891 - - 34,437 31,457 +
9 ----- ----- ------ ------ 23,502 27,539 - 15 117,255 107,024 + 10
Sale of Product Line - 65 NM (9,929) (4,190) NM Sale of Land - - -
(8,469) - NM Goodwill Impairment Charge - - - - 3,467 NM Operating
Income 7,391 5,841 + 27 70,680 35,095 +101 Other Income (Expense):
Interest, Net (2,147) (2,512) - 15 (9,514) (9,730) - 2 Loss from
equity in joint venture (452) (214) +111 (2,697) (416) NM
Investment income (loss) (2,143) 880 NM (4,661) 1,243 NM Foreign
Exchange gain (loss) 512 (374) NM 1,070 (2,477) NM --- ---- -----
------ (4,230) (2,220) + 91 (15,802) (11,380) + 39 Income Before
Income Taxes and Minority Interest 3,161 3,621 - 13 54,878 23,715
+131 Provision for Income Taxes 1,410 2,031 - 31 17,615 8,687 +103
Minority Interest 87 (18) NM 91 (90) NM -- --- -- --- Net Income
$1,664 $1,608 + 3 $37,172 $15,118 +146 ====== ====== =======
======= Net Income Per Common Share Basic $0.15 $0.15 - $3.81 $1.54
+147 ===== ===== ===== ===== Diluted $0.15 $0.15 - $3.52 $1.50 +135
===== ===== ===== ===== Shares used to Compute Net Income Per
Common Share: Basic 9,699 9,345 + 4 9,566 9,316 + 3 ===== =====
===== ===== Diluted 10,166 9,192 + 11 10,549 10,113 + 4 ======
===== ====== ====== CONTACT: James E. Hurlbutt 847-446-7500
DATASOURCE: Stepan Company CONTACT: James E. Hurlbutt of Stepan
Company, +1-847-446-7500 Web Site: http://www.stepan.com/en/
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