Stepan(US:SCL)2025-05-07 14:15Part I - FINANCIAL INFORMATION Item 1 - Financial Statements Presents unaudited condensed consolidated financial statements for Q1 2025 and 2024, detailing financial position and performance Condensed Consolidated Statements of Income Stepan Company reported increased Q1 2025 net sales to $593.3 million and net income to $19.7 million, reflecting improved operating performance Q1 2025 vs Q1 2024 Income Statement Highlights | Metric (In thousands, except per share) | Q1 2025 | Q1 2024 | Change | | :--- | :--- | :--- | :--- | | Net Sales | $593,255 | $551,418 | +7.6% | | Gross Profit | $75,463 | $70,281 | +7.4% | | Operating Income | $28,288 | $20,169 | +40.3% | | Net Income | $19,711 | $13,893 | +41.9% | | Diluted EPS | $0.86 | $0.61 | +41.0% | Condensed Consolidated Balance Sheets As of March 31, 2025, total assets increased to $2.39 billion, with total equity rising to $1.20 billion, primarily due to retained earnings Balance Sheet Summary | Metric (In thousands) | March 31, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Total Current Assets | $897,156 | $810,429 | | Total Assets | $2,389,683 | $2,304,648 | | Total Current Liabilities | $739,480 | $669,034 | | Total Liabilities | $1,189,145 | $1,134,714 | | Total Equity | $1,200,538 | $1,169,934 | Condensed Consolidated Statements of Cash Flows Net cash from operating activities sharply declined to $6.9 million in Q1 2025 from $41.6 million in Q1 2024, primarily due to increased working capital use Q1 2025 vs Q1 2024 Cash Flow Summary | Cash Flow Activity (In thousands) | Q1 2025 | Q1 2024 | | :--- | :--- | :--- | | Net Cash Provided By Operating Activities | $6,942 | $41,554 | | Net Cash Used In Investing Activities | ($26,411) | ($24,415) | | Net Cash Provided By (Used In) Financing Activities | $22,761 | ($19,984) | | Net Increase (Decrease) in Cash | $7,827 | ($4,048) | Notes to Condensed Consolidated Financial Statements Detailed notes explain financial statement preparation, segment performance, debt structure, and environmental contingencies, with Surfactants as the dominant segment - The company has three reportable segments: Surfactants, Polymers, and Specialty Products, with Surfactants accounting for 72% of consolidated net sales for the first three months of 20255883 - As of March 31, 2025, the company estimated a range of possible environmental and legal losses from $17.9 million to $42.4 million and has accrued the minimum amount of $17.9 million37 - Total debt increased from $625.4 million at year-end 2024 to $659.3 million as of March 31, 2025, primarily due to higher borrowings under the revolving credit facility67125 - North America is the company's largest geographic market, with net sales of $338.0 million in Q1 2025, an increase from $312.6 million in Q1 202466 Management's Discussion and Analysis of Financial Condition and Results of Operations (MD&A) Management analyzes Q1 2025 financial results, highlighting an 8% sales increase to $593.3 million and a 40% operating income rise, driven by higher prices and volume Results of Operations Q1 2025 net income rose to $19.7 million, driven by an 8% increase in consolidated net sales from higher prices and 4% volume growth, and reduced corporate expenses - Consolidated net sales increased by $41.8 million (8%) year-over-year, primarily due to higher average selling prices and a 4% increase in sales volume89 - Operating income increased by $8.1 million (40%) year-over-year, driven by higher income in the Surfactants and Specialty Products segments and a 24% decrease in corporate expenses90 - The effective tax rate decreased to 20.1% in Q1 2025 from 28.6% in Q1 2024, mainly due to the settlement of an audit in one jurisdiction94 Segment Results Segment performance shows Surfactants leading with sales and operating income growth, Polymers with flat sales and declining income, and Specialty Products with increased sales and operating income Q1 2025 vs Q1 2024 Segment Operating Income | Segment (In thousands) | Q1 2025 Operating Income | Q1 2024 Operating Income | % Change | | :--- | :--- | :--- | :--- | | Surfactants | $28,930 | $26,079 | +11% | | Polymers | $8,018 | $8,382 | -4% | | Specialty Products | $5,508 | $4,268 | +29% | | Total Segment | $42,456 | $38,729 | +10% | - Surfactant sales volume grew 3%, with strong demand in agricultural end markets, though North American gross profit decreased 16% due to higher expenses at the new Pasadena facility, offset by strong performance in other regions96100101 - Polymer sales volume increased 7%, but operating income fell 4% due to lower average selling prices and reduced margins, particularly in Europe106109 Liquidity and Capital Resources Liquidity remains solid despite Q1 2025 operating cash flow decreasing to $6.9 million due to higher working capital, with total debt increasing and 2025 capital expenditures projected at $125-135 million - Cash from operating activities decreased from $41.6 million in Q1 2024 to $6.9 million in Q1 2025, primarily due to a $40.9 million use of cash for working capital117119 - The company estimates total capital expenditures for 2025 will be in the range of $125.0 million to $135.0 million122 - Net debt (Total Debt minus Cash) increased to $551.8 million on March 31, 2025, from $525.7 million at December 31, 2024125146 Non-GAAP Reconciliations This section reconciles GAAP figures to non-GAAP measures, showing Q1 2025 Adjusted Net Income of $19.3 million and Adjusted EBITDA of $57.5 million, up 12% YoY Reconciliation of GAAP to Non-GAAP Adjusted Net Income | (In millions, except per share) | Q1 2025 | Q1 2024 | | :--- | :--- | :--- | | Net Income (GAAP) | $19.7 | $13.9 | | Adjusted Net Income (Non-GAAP) | $19.3 | $14.7 | | Diluted EPS (GAAP) | $0.86 | $0.61 | | Adjusted Diluted EPS (Non-GAAP) | $0.84 | $0.64 | Reconciliation of Operating Income to Adjusted EBITDA | ($ in millions) | Q1 2025 | Q1 2024 | | :--- | :--- | :--- | | Operating Income | $28.2 | $20.2 | | EBITDA | $58.0 | $50.2 | | Adjusted EBITDA | $57.5 | $51.2 | Quantitative and Qualitative Disclosures about Market Risk No material changes to market risks were reported compared to the 2024 Annual Report on Form 10-K - There have been no material changes to the market risks disclosed in the Company's 2024 Annual Report on Form 10-K147 Controls and Procedures Disclosure controls and procedures were effective as of March 31, 2025, with no material changes in internal control over financial reporting during the quarter - The CEO and CFO concluded that the company's disclosure controls and procedures were effective as of March 31, 2025148 - No changes occurred during Q1 2025 that have materially affected, or are reasonably likely to materially affect, the company's internal control over financial reporting148 Part II - OTHER INFORMATION Legal Proceedings The company received a USEPA pre-filing notice regarding alleged FIFRA violations and intends to seek indemnification from the licensed distributor - The company received a pre-filing notice from the USEPA on March 19, 2025, for alleged violations of FIFRA related to biocide products sold by a licensed distributor149 - The company expects to pursue indemnification claims against the licensed distributor in this matter149 Risk Factors No material changes to the risk factors disclosed in the 2024 Annual Report on Form 10-K were reported - There have been no material changes to the risk factors disclosed in the Company's 2024 Annual Report on Form 10-K152 Unregistered Sales of Equity Securities and Use of Proceeds No shares were repurchased under the public program in Q1 2025, with $125.1 million remaining authorized for future repurchases - No shares were purchased as part of the publicly announced repurchase program during Q1 2025154 - As of March 31, 2025, the company had $125.1 million remaining under its authorized share repurchase program124154