04/26/2022 | Press release | Distributed by Public on 04/26/2022 05:01
NORTHBROOK, Ill., April 26, 2022/PRNewswire/ -- Stepan Company (NYSE: SCL) today reported:
First Quarter Highlights
* |
Adjusted net income is a non-GAAP measure which excludes deferred compensation income/expense, cash-settled stock appreciation rights (SARs) income/expense, legacy 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 share. |
|
|
"The Company had a solid start to the year despite the power outage at the Company's Millsdale, IL plant site and ongoing global supply chain challenges. Reported net income was up 10% versus the prior year first quarter while adjusted net income declined 4%" said Scott Behrens, President and Chief Executive Officer. "Surfactant operating income was up 1% largely due to improved product and customer mix, driven by growth in our functional products business as a result of higher commodity prices and continued growth in the construction industry, that offset a 1% decline in sales volume and ongoing supply chain challenges. Our Polymer operating income was down 21% primarily due to the Millsdale power outage and related production disruptions. Global Polymer sales volume was up 2% year-over-year. Our Specialty Product business results were up primarily due to order timing differences."
Financial Summary
|
|
Three Months Ended March 31 |
|
|||||||||
($ in thousands, except per share data) |
|
2022 |
|
|
2021 |
|
|
% Change |
|
|||
Net Sales |
|
$ |
675,276 |
|
|
$ |
537,740 |
|
|
|
26 |
% |
Operating Income |
|
$ |
63,346 |
|
|
$ |
53,914 |
|
|
|
17 |
% |
Net Income Attributable to Stepan |
|
$ |
44,809 |
|
|
$ |
40,611 |
|
|
|
10 |
% |
Earnings per Diluted Share |
|
$ |
1.93 |
|
|
$ |
1.74 |
|
|
|
11 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted Net Income * |
|
$ |
40,728 |
|
|
$ |
42,372 |
|
|
|
(4) |
% |
Adjusted Earnings per Diluted Share * |
|
$ |
1.76 |
|
|
$ |
1.82 |
|
|
|
(3) |
% |
* See Table II for reconciliations of non-GAAP adjusted net income and earnings per diluted share. * * Net Income Attributable to Stepan = Net Income - Net Loss Attributable to Noncontrolling Interests. |
|
Summary of First Quarter Adjusted Net Income Items
Adjusted net income excludes non-operational deferred compensation income/expense, cash-settled SARs income/expense, legacy environmental remediation-related costs and other significant and infrequent or non-recurring items.
Percentage Change in Net Sales
Net sales in the first quarter increased 26% year-over-year primarily due to higher selling prices that were mainly attributable to the pass-through of higher raw material costs and improved product and customer mix. These higher average selling prices were slightly offset by the unfavorable impact of foreign currency translation. Consolidated sales volume was flat year-over-year.
|
|
Three Months Ended March 31, 2022 |
|
|
Volume |
|
|
- |
|
Selling Price & Mix |
|
|
28 |
% |
Foreign Currency Translation |
|
|
(2) |
% |
Total |
|
|
26 |
% |
Segment Results
|
|
Three Months Ended March 31 |
|
|||||||||
($ in thousands) |
|
2022 |
|
|
2021 |
|
|
% Change |
|
|||
Net Sales |
|
|
|
|
|
|
|
|
|
|
|
|
Surfactants |
|
$ |
468,266 |
|
|
$ |
370,936 |
|
|
|
26 |
% |
Polymers |
|
$ |
187,079 |
|
|
$ |
150,385 |
|
|
|
24 |
% |
Specialty Products |
|
$ |
19,931 |
|
|
$ |
16,419 |
|
|
|
21 |
% |
Total Net Sales |
|
$ |
675,276 |
|
|
$ |
537,740 |
|
|
|
26 |
% |
|
|
|||||||||||
|
|
Three Months Ended March 31 |
|
|||||||||
($ in thousands, all amounts pre-tax) |
|
2022 |
|
|
2021 |
|
|
% Change |
|
|||
Operating Income |
|
|
|
|
|
|
|
|
|
|
|
|
Surfactants |
|
$ |
53,769 |
|
|
$ |
53,210 |
|
|
|
1 |
% |
Polymers |
|
$ |
14,129 |
|
|
$ |
17,951 |
|
|
|
(21) |
% |
Specialty Products |
|
$ |
3,695 |
|
|
$ |
2,633 |
|
|
|
40 |
% |
Segment Operating Income |
|
$ |
71,593 |
|
|
$ |
73,794 |
|
|
|
(3) |
% |
Corporate Expenses |
|
$ |
(8,247) |
|
|
$ |
(19,880) |
|
|
|
(59) |
% |
Consolidated Operating Income |
|
$ |
63,346 |
|
|
$ |
53,914 |
|
|
|
17 |
% |
Total segment operating income for the first quarter of 2022 decreased $2.2 million, or 3%, versus the prior year quarter.
Corporate Expenses
|
|
Three Months Ended March 31 |
|
|||||||||
($ in thousands) |
|
2022 |
|
|
2021 |
|
|
% Change |
|
|||
Total - Corporate Expenses |
|
$ |
8,247 |
|
|
$ |
19,880 |
|
|
|
(59) |
% |
Less: |
|
|
|
|
|
|
|
|
|
|
|
|
Deferred Compensation Expense/(Income) |
|
$ |
(7,501) |
|
|
$ |
2,694 |
|
|
NM |
|
|
Business Restructuring Expense |
|
$ |
52 |
|
|
$ |
81 |
|
|
|
(36) |
% |
Adjusted Corporate Expenses |
|
$ |
15,696 |
|
|
$ |
17,105 |
|
|
|
(8) |
% |
* See Table III for a discussion of deferred compensation plan accounting. |
Income Taxes
The Company's effective tax rate was 24.6% in the first quarter of 2022 versus 23.6% in the first quarter of 2021. This increase was primarily attributable to less favorable tax benefits derived from stock-based compensation awards exercised or distributed in the first quarter of 2022 versus the first quarter of 2021 and a less favorable geographical mix of income in the current year quarter.
Shareholder Return
The Company paid $7.5 million of dividends to shareholders and repurchased $9.9 million of Company stock in the first quarter of 2022. The Company has $140.1 million remaining under the share repurchase program authorized by its Board of Directors. The Company has increased its dividend on the Company's common stock for 54 consecutive years.
Selected Balance Sheet Information
The Company's total debt increased by $173.5 million and cash increased by $76.8 million versus year-end 2021. The increase in debt reflects borrowings against the Company's $350MM revolving credit agreement and the previously disclosed issuance of $75.0 million of senior notes during March 2022. The increase in cash primarily reflects the above debt borrowings, partially offset by higher working capital requirements and capital expenditures. The Company's net debt level increased $96.7 million versus year-end 2021 and the net debt ratio increased from 16% to 21% (net debt and net debt ratios are non-GAAP measures).
($ in millions) |
|
March 31, 2022 |
|
|
December 31, 2021 |
|
||
Net Debt |
|
|
|
|
|
|
|
|
Total Debt |
|
$ |
537.1 |
|
|
$ |
363.6 |
|
Cash |
|
|
236.0 |
|
|
|
159.2 |
|
Net Debt |
|
$ |
301.1 |
|
|
$ |
204.4 |
|
Equity |
|
|
1,116.7 |
|
|
|
1,074.2 |
|
Net Debt + Equity |
|
$ |
1,417.8 |
|
|
$ |
1,278.6 |
|
Net Debt / (Net Debt + Equity) |
|
|
21 |
% |
|
|
16 |
% |
The major working capital components were:
($ in millions) |
|
March 31, 2022 |
|
|
December 31, 2021 |
|
|
|
||
Net Receivables |
|
$ |
504.5 |
|
|
$ |
419.5 |
|
|
|
Inventories |
|
|
308.4 |
|
|
|
305.5 |
|
|
|
Accounts Payable |
|
|
(350.8) |
|
|
|
(323.4) |
|
|
|
Net Total |
|
$ |
462.1 |
|
|
$ |
401.6 |
|
|
|
Capital spending was $60.3 million versus $37.6 million in the prior year quarter. The increase was primarily due to increased expenditures in the U.S. for the advancement of the Company's new alkoxylation production facility in Pasadena, TX, which is expected to provide flexible capacity of 75,000 metric tons per year, and new capability and capacity to produce ether sulfates that will meet future regulatory limits on 1,4 dioxane. For the full year, capital expenditures are expected to be in the range of $350 million to $375 million.
Outlook
"Looking forward, we believe that demand across our business will remain strong but the Company will continue to be challenged by external supply chain issues, including raw material availability and transportation constraints that impacted us in 2021 and during the first quarter of 2022," said Scott Behrens, President and Chief Executive Officer. "From a segment perspective, we believe that Surfactant volumes within the functional product end-markets, inclusive of agricultural and oilfield, will improve versus 2021 driven by a favorable commodity pricing environment. We believe our Polymer business will deliver growth versus the prior year and we continue to believe the long-term prospects for rigid polyols remain attractive as energy conservation efforts and more stringent building codes should increase demand. We anticipate our Specialty Product business results will improve slightly year-over-year. We are cautiously optimistic about the remainder of the year despite the current inflationary environment and ongoing supply chain challenges."
Conference Call
Stepan Company will host a conference call to discuss its first quarter results at 8:00 a.m. ET (7:00 a.m. CT) on April 26, 2022. The call can be accessed by phone and webcast. Telephone access will be available by dialing +1 (800) 734-8592, and 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.
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 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.
* * * * *
Tables follow
Table I |
|
|||||||
STEPAN COMPANY |
|
|||||||
|
|
|||||||
|
|
Three Months Ended March 31 |
|
|||||
|
|
2022 |
|
|
2021 |
|
||
Net Sales |
|
$ |
675,276 |
|
|
$ |
537,740 |
|
Cost of Sales |
|
|
566,057 |
|
|
|
428,760 |
|
Gross Profit |
|
|
109,219 |
|
|
|
108,980 |
|
Operating Expenses: |
|
|
|
|
|
|
|
|
Selling |
|
|
15,277 |
|
|
|
14,504 |
|
Administrative |
|
|
21,572 |
|
|
|
22,638 |
|
Research, Development and Technical Services |
|
|
16,473 |
|
|
|
15,149 |
|
Deferred Compensation (Income) Expense |
|
|
(7,501) |
|
|
|
2,694 |
|
|
|
|
45,821 |
|
|
|
54,985 |
|
|
|
|
|
|
|
|
|
|
Business Restructuring |
|
|
52 |
|
|
|
81 |
|
Operating Income |
|
|
63,346 |
|
|
|
53,914 |
|
|
|
|
|
|
|
|
|
|
Other Income (Expense): |
|
|
|
|
|
|
|
|
Interest, Net |
|
|
(2,306) |
|
|
|
(1,524) |
|
Other, Net |
|
|
(1,650) |
|
|
|
746 |
|
|
|
|
(3,956) |
|
|
|
(778) |
|
|
|
|
|
|
|
|
|
|
Income Before Income Taxes |
|
|
59,390 |
|
|
|
53,136 |
|
Provision for Income Taxes |
|
|
14,581 |
|
|
|
12,525 |
|
Net Income |
|
|
44,809 |
|
|
|
40,611 |
|
Net Loss Attributable to Noncontrolling Interests |
|
|
|
|
|
|
|
|
Net Income Attributable to Stepan Company |
|
$ |
44,809 |
|
|
$ |
40,611 |
|
Net Income Per Common Share Attributable to Stepan Company |
|
|
|
|
|
|
|
|
Basic |
|
$ |
1.96 |
|
|
$ |
1.77 |
|
Diluted |
|
$ |
1.93 |
|
|
$ |
1.74 |
|
Shares Used to Compute Net Income Per Common Share Attributable to Stepan Company |
|
|
|
|
|
|
|
|
Basic |
|
|
22,896 |
|
|
|
22,974 |
|
Diluted |
|
|
23,167 |
|
|
|
23,330 |
|
Table II |
|
|||||||||||||||
|
|
|||||||||||||||
Reconciliations of Non-GAAP Net Income and Earnings per Diluted Share* |
|
|||||||||||||||
|
|
|||||||||||||||
|
|
Three Months Ended March 31 |
|
|||||||||||||
($ in thousands, except per share amounts) |
|
2022 |
|
|
EPS |
|
|
2021 |
|
|
EPS |
|
||||
Net Income Reported |
|
$ |
44,809 |
|
|
$ |
1.93 |
|
|
$ |
40,611 |
|
|
$ |
1.74 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deferred Compensation (Income) Expense |
|
$ |
(3,948) |
|
|
$ |
(0.17) |
|
|
$ |
1,501 |
|
|
$ |
0.07 |
|
Business Restructuring |
|
|
39 |
|
|
$ |
0.00 |
|
|
|
61 |
|
|
$ |
0.00 |
|
Cash Settled Stock Appreciation Rights |
|
|
(402) |
|
|
$ |
(0.01) |
|
|
|
199 |
|
|
$ |
0.01 |
|
Environmental Remediation |
|
|
230 |
|
|
$ |
0.01 |
|
|
- |
|
|
- |
|
||
Adjusted Net Income |
|
$ |
40,728 |
|
|
$ |
1.76 |
|
|
$ |
42,372 |
|
|
$ |
1.82 |
|
* 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.
Reconciliations of Pre-Tax to After-Tax Adjustments |
|
|
|||||||||||||||
|
|
|
|||||||||||||||
|
|
Three Months Ended March 31 |
|
|
|||||||||||||
($ in thousands, except per share amounts) |
|
2022 |
|
|
EPS |
|
|
2021 |
|
|
EPS |
|
|
||||
Pre-Tax Adjustments |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deferred Compensation (Income) Expense |
|
$ |
(5,195) |
|
|
|
|
|
|
$ |
1,975 |
|
|
|
|
|
|
Business Restructuring |
|
|
52 |
|
|
|
|
|
|
|
81 |
|
|
|
|
|
|
Cash Settled Stock Appreciation Rights |
|
|
(529) |
|
|
|
|
|
|
|
261 |
|
|
|
|
|
|
Environmental Remediation |
|
|
303 |
|
|
|
|
|
|
|
- |
|
|
|
|
|
|
Total Pre-Tax Adjustments |
|
$ |
(5,369) |
|
|
|
|
|
|
$ |
2,317 |
|
|
|
|
|
|
Cumulative Tax Effect on Adjustments |
|
$ |
1,288 |
|
|
|
|
|
|
$ |
(556) |
|
|
|
|
|
|
After-Tax Adjustments |
|
$ |
(4,081) |
|
|
$ |
(0.17) |
|
|
$ |
1,761 |
|
|
$ |
0.08 |
|
|
Table III |
|
|||||||||||||||||||
|
|
|||||||||||||||||||
Deferred Compensation Plan |
|
|||||||||||||||||||
|
|
|||||||||||||||||||
The full effect of the deferred compensation plans on quarterly pre-tax income was $5.2 million of income versus $2.0 million of expense in the prior year. The accounting for the deferred compensation plans results in operating income when the price of StepanCompany 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: |
|
|||||||||||||||||||
|
|
|||||||||||||||||||
|
|
2022 |
|
|
2021 |
|
||||||||||||||
|
|
3/31 |
|
|
12/31 |
|
|
9/30 |
|
|
6/30 |
|
|
3/31 |
|
|||||
Stepan Company |
|
$ |
98.81 |
|
|
$ |
124.29 |
|
|
$ |
112.94 |
|
|
$ |
120.27 |
|
|
$ |
127.11 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The deferred compensation income statement impact is summarized below:
|
|
Three Months Ended March 31 |
|
|||||
($ in thousands) |
|
2022 |
|
|
2021 |
|
||
Deferred Compensation |
|
|
|
|
|
|
|
|
Operating Income (Expense) |
|
$ |
7,501 |
|
|
$ |
(2,694) |
|
Other, net - Mutual Fund Gain (Loss) |
|
|
(2,306) |
|
|
|
719 |
|
Total Pre-Tax Income (Expense) |
|
$ |
5,195 |
|
|
$ |
(1,975) |
|
Total After Tax Income (Expense) |
|
$ |
3,948 |
|
|
$ |
(1,501) |
|
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 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 three-month period ending March 31, 2022 as compared to 2021: |
||||||||||||||||
|
||||||||||||||||
($ in millions) |
|
Three Months Ended March 31 |
|
|
Increase |
|
|
Change Currency Translation |
|
|||||||
|
|
2022 |
|
|
2021 |
|
|
|
|
|
|
|
|
|
||
Net Sales |
|
$ |
675.3 |
|
|
$ |
537.7 |
|
|
$ |
137.6 |
|
|
$ |
(11.6) |
|
Gross Profit |
|
|
109.2 |
|
|
|
109.0 |
|
|
|
0.2 |
|
|
|
(1.7) |
|
Operating Income |
|
|
63.3 |
|
|
|
53.9 |
|
|
|
9.4 |
|
|
|
(1.1) |
|
Pretax Income |
|
|
59.4 |
|
|
|
53.1 |
|
|
|
6.3 |
|
|
|
(1.1) |
|
Table V |
|
|||||||
|
|
|||||||
Stepan Company Consolidated Balance Sheets March 31, 2022 and December 31, 2021 |
|
|||||||
|
|
|||||||
|
|
March 31, 2022 |
|
|
December 31, 2021 |
|
||
ASSETS |
|
|
|
|
|
|
|
|
Current Assets |
|
$ |
1,081,871 |
|
|
$ |
913,368 |
|
Property, Plant & Equipment, Net |
|
|
892,581 |
|
|
|
850,604 |
|
Other Assets |
|
|
298,144 |
|
|
|
301,640 |
|
Total Assets |
|
$ |
2,272,596 |
|
|
$ |
2,065,612 |
|
LIABILITIES AND STOCKHOLDERS' EQUITY |
|
|
|
|
|
|
|
|
Current Liabilities |
|
$ |
611,062 |
|
|
$ |
500,476 |
|
Deferred Income Taxes |
|
|
10,963 |
|
|
|
12,491 |
|
Long-term Debt |
|
|
397,760 |
|
|
|
322,862 |
|
Other Non-current Liabilities |
|
|
136,073 |
|
|
|
155,590 |
|
Total Stepan Company Stockholders' Equity |
|
|
1,116,738 |
|
|
|
1,074,193 |
|
Noncontrolling Interest |
|
|
- |
|
|
|
- |
|
Total Liabilities and Stockholders' Equity |
|
$ |
2,272,596 |
|
|
$ |
2,065,612 |
|
SOURCE Stepan Company