The Urethane Blog

Stepan Q1 Results

Stepan Reports First Quarter Earnings Growth of 63% to $21.3 Million

NORTHFIELD, Ill., April 28, 2015 /PRNewswire/ — Stepan Company (NYSE: SCL) today reported:

First Quarter Highlights

  • Reported net income was $21.3 million or $0.93 per diluted share versus $13.0 million or $0.57 per diluted share in the prior year. 
  • Surfactant and Polymer volume increased 2% and 5%, respectively. Net sales declined 4% to $460.5 million versus $477.4 million in the prior year due to a 6% decline in foreign currency translation.
  • Surfactants delivered record quarterly operating income of $33.8 million.
  • Polymer operating income was $14.8 million including a $2.9 million gain on the sale of the Company's Specialty Polyurethane System business. Excluding the gain, Polymer operating income was up 10%.
  • Adjusted net income* was $20.4 million or $0.90 per diluted share versus $12.8 million or $0.56 per diluted share in the prior year.

Adjusted net income is a non-GAAP measure which excludes Deferred Compensation income/ expense as well as other infrequent/non-recurring items.  See Table II for this non-GAAP reconciliation.

"Our first quarter results benefited from actions taken in 2014 to improve product mix, to reduce cost and to improve efficiency," said F. Quinn Stepan, Jr., President and Chief Executive Officer.  "Slightly higher volumes and margins offset the negative impacts of a stronger U.S. dollar."

"While we are pleased with the year over year improvement in the first quarter, our focus remains on delivering meaningful growth during the remainder of this year and beyond.  In 2015, we expect continued profit gains from improved operations, increased geographic presence particularly in the functional markets for Surfactants and higher rigid polyol volumes for the insulation market."


Financial Summary


Three Months Ended


March 31

($ in thousands, except per share data)








Net Sales  

$  460,451


$ 477,442



Operating Income






Net Income






Earnings per Diluted Share

$       0.93


$       0.57




Adjusted Net Income *






Adjusted Earnings per  


   Diluted Share

$       0.90


$       0.56



* See Table II for a reconciliation of non-GAAP Adjusted Net Income and Earnings per Diluted Share.

Summary of First Quarter Adjusted Net Income Items

Adjusted net income excludes non-operational deferred compensation income/expense as well as certain other infrequent or non-recurring items.

  • Gain on sale of the Specialty Polyurethane System Business:  The current year quarter includes a $1.8 million after-tax gain ($2.9 million pre-tax) recognized from the divestiture of the Company's Specialty Polyurethane System business which was announced on January 20, 2015.
  • Deferred Compensation:  The current year quarter includes $0.6 million of after-tax expense versus $0.3 million of after-tax income in the prior year.
  • Environmental Reserve:  The current year quarter includes $0.3 million of after-tax environmental reserve expense associated with the Company's Maywood, New Jersey site. 

Percentage Change in Net Sales

The decrease in quarterly net sales was primarily due to the negative impact of foreign currency translations due to the strengthening of the U.S. dollar.  This decrease was partially offset by volume growth in both the Surfactant and Polymer segments.


Three Months Ended

March 31, 2015



Selling Price

Foreign CurrencyTranslation





Segment Results

Segment Net Sales


Three Months Ended 

March 31

($ in thousands)









$ 330,551


$ 335,710









Specialty Products






    Total Net Sales

$ 460,451


$ 477,442




Segment Operating Income 


Three Months Ended

March 31

(All amounts are pre-tax and $  in thousands)









$ 33,764


$ 18,338









Specialty Products






   Total Segment Op. Inc

$ 50,793


$ 33,185



Total segment operating income increased $17.6 million or 53% versus the prior year.

  • Surfactant sales were $330.6 million, $5.2 million less than last year.  The translation impact of a stronger U.S. dollar decreased sales by $21.2 million.  Sales volume was 2% higher.   Strong volume growth outside of North America was partially offset by lower North American commodity laundry volumes previously reported.  The quarter benefited from higher sales through our distribution partners, an enhanced oil recovery pilot and growing volumes of our environmentally advantaged solvent for the Agricultural market. Surfactant operating income increased $15.4 million or 84% versus the prior year.  All regions were higher.  Income in all four regions benefited from operational improvements, an improved product and end-market mix, as well as falling raw material costs. 
  • Polymers sales declined by $9.7 million to $109.4 million. $7.8 million of this decline was from the negative impact of foreign currency.  Sales volume was up 5%. Phthalic Anhydride prices fell with lower cost raw material orthoxylene.  Polymer operating income increased $4.0 million versus the prior year.  Excluding the gain on the sale of the Specialty Polyurethane Systems product line, operating income increased $1.1 million or 10% versus the prior year.  Most of this increase was attributable to higher volumes and margins in Rigid Polyols. Income on Phthalic Anhydride sold to the merchant market was down due to seasonally high raw material inventory, as petroleum based products declined in price.
  • Specialty Products operating income declined $1.8 million or 44% versus the prior year.  This decline was primarily due to lower volumes within the Lipid Nutrition business.


"Coming into the year, we stated our belief that the Company was well positioned to re-establish earnings momentum in 2015.  After the first quarter, we are on track.   We believe continued income growth in Polymers, an improved surfactant mix of end-use markets and products, successful execution of our efficiency initiative and benefits from falling petroleum-based raw material prices will have a favorable impact on full year results."

"Underutilization of North American anionic capacity remains an opportunity and a vulnerability which will be addressed in 2015.  We expect consumer product volumes in Latin America should increase, supported by our planned plant acquisition in Brazil now anticipated to close in the second quarter.  Polymers income should grow from continued global conservation efforts and the introduction of new specialty CASE resins and polyols.  Additional polyol capacity is planned for 2016 in China, Poland and the United States."