Stepan Company (NYSE:SCL) Q3 2018 Earnings Conference Call - Final Transcript

Jul 25, 2018 • 10:00 am ET

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Stepan Company (NYSE:SCL) Q3 2018 Earnings Conference Call - Final Transcript

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Presentation
Operator
Operator

Ladies and gentlemen, thank you for standing-by. Welcome to the second quarter 2018 earnings call. During the presentation, all participants will be in listen-only mode. Afterwards we will conduct a question-and-answer session. (Operator Instructions) As a reminder, this conference is being recorded, Wednesday, July 25, 2018.

I will now turn the conference over to Luis Rojo, Vice President and Chief Financial Officer. Please go ahead, sir.

Executive
Luis Rojo

Good morning and thank you for joining Stepan Company's second quarter 2018 financial review. )Forward-Looking Cautionary Statements) Whether you are joining us online or over the phone, we encourage you to review the investor slide presentation, which we have made available at www.stepan.com under the Investor Relations section of our website. We make these slides available at approximately the same time as when the earnings release is issued and we hope that you find information and perspectives helpful.

Now with that, I would now like to turn the call over to Quinn Stepan Jr., our Chairman, President, and Chief Executive Officer.

Executive
Quinn Stepan

Thank you, Luis, and welcome to your first Stepan Company earnings call. And good morning to you all and thank you for joining us today. Stepan Company had a good second quarter delivering record reported and adjusted net income for both the quarter and the first half of 2018. Second quarter and first half adjusted net income were $32.1 million and $64.1 million respectively, up 4% and 2% from the prior year period. These results were driven by record first half Surfactant earnings and a lower 2018 effective tax rate. For the quarter, Surfactant operating income increased 10% over the prior year due to strong North American demand within both the consumer and functional end markets.

The Polymer business improved versus first quarter results despite margin and shared challenges in our North American Polyol business, which we have previously communicated. European polyol volumes matched prior year levels while both global specialty polyols and China delivered earnings growth. Our Specialty Product business results were down partially due to changing order patterns, but we still anticipate full-year income improvement from this segment. Our Board of Directors declared a quarterly cash dividend on Stepan's common stock of $0.225 per share payable on September 14, 2018.

At this point, I would like Luis to walk through a few more details about our second quarter results.

Executive
Luis Rojo

Thank you, Quinn. My comments will generally follow the slide presentation. Let's start with Slide 4 to recap the quarter. As Quinn has stated, adjusted net income for the second quarter 2018 was $32.1 million or $1.38 per diluted share, a 4% increase versus $30.9 million or $1.32 per diluted share in the second quarter of 2017. Because adjusted net income is a non-GAAP measure, we provide full reconciliations to the comparable GAAP measures and this can be found in Appendix 2 of the presentation and Table 2 of the press release. Specifically, adjustments to reported net income this quarter consists of adjustment for deferred compensation income and restructuring expenses. Adjusted net income