Stepan Co (SCL) 2002 Q1 法說會逐字稿

Thank you for standing by. Welcome to the quarter 2002 earnings conference call. During this presentation all participants will be in a listen only mode. Afterwards, we will conduct a question and answer session. Have any questions please press the one followed by the four on your telephone.

As a reminder this conference is being recorded Wednesday, April 24th, 2002. I would now like to turn the conference over to Mr. Walter Klein, Vice President of Finance for Stepan. Please go ahead, sir.

Good afternoon, thank you for joining us on our conference call. Before I begin, I would like to comment briefly on forward looking statements. Please note that information in this conference call contains forward looking statements which are not historical facts. These statements involve risks and uncertainties that could cause actual results to differ materially including but not limited to profits for our German and Philippine operations and certain global and regional economic conditions and factors detailed in the company's Security And Exchange Commission filings.

I will now take a few minutes to review our operating results. Net earnings for the first quarter were $4,577,000 or 45 cents per diluted share. This represents an increase of 26 percent on $3,628,000 or 36 cents per diluted share for the year ago period. Included in the quarter results were enterprise resource planning systems implementation costs of $1,153,000 after tax, or 11 cents per diluted share.

The impact of FAS 142 in respect to discontinued goodwill amortization was negligible, approximately 1 cent per diluted share. Net sales for the quarter of 2002 increased by five percent to $181,156,000 from $176,857,000 reported one year ago. Also the acquisition of in September 2001. Our improved net earnings were helped by better than expected in North America, although our sales volume is slightly lower. This improvement was due to improved product in favorable utility and raw material costs due to lower economic levels.

represents 81 percent of company revenues. Our European earnings have begun to benefit from the acquisition of which is exceeding our forecasts. Latin America also showed improvement, improved earnings in Mexico and Columbia. But these improvements were slightly offset by the result. But now I'd like to highlight the reforms in our other two segments. Earnings for the polymer group also improved as experienced significant improves sales volume, which increased by 24 percent.

Our reported higher earnings at improved margins by . Polyurethane system sales volume declined resulted in weaker earnings. Polymers represent 16 percent of revenues. Our specialty products segment continues to be a solid performer. Earnings from the segment improved at continued strong volume into the pharmaceutical industry. Specialty products represent three percent of company revenues.

Additionally, the first quarter results were positively impacted due to our joint venture equity income from our in Philippines. Which experienced strong sales volume during the quarter. Operating expenses increased by 12 percent for the quarter as a result of our continuing implementation cost. We expect that these costs will continue to impact results for the balance of the year by an additional 10 to 15 cents per dilute share, primarily in the second and third quarters.

Interest expense declined seven percent as a result of lower interest rates. Total debt on March 31 was $127 million, as compared to $128.3 million at the end of 2001. The increase was primarily related to increased working capital requirements. Capital expenditure to the quarter was $6.5 million, which includes $1.5 million for our ERP project. Capital expenditure for the year will be in the range of $38 to 40 million. Our debt to total capitalization at the end of the quarter as 42 percent.

We are pleased with our first quarter result because we feel that it is evidence that initiatives we have taken are beginning to show results. Even in the face of the continued difficult economic environment. However, utility and raw material cost, even with recent improvements are still volatile, and economic recovery is not yet driving the demand higher. We continue to strive towards higher margin product portfolio that maximizes the return of the currently deployed around the world.

As previously reported, we are building a polyester, polyal production facility within our planned site in Germany. By eliminating out sourcing of these polyals, we expect to reverse the projected 2002 loss of 16 to 20 centers per diluted share, generated by our polyal and German businesses. The polyal reactor will be operational by the end of the first quarter of 2003. We expect these operations to be profitable in 2003. We expect 2002, full year results, to be in the range of one dollar and sixty to one dollar and ninety cents per diluted share.

This concludes my prepared remarks. At this time I'd like to turn the call over for questions. Operator, please

Thank you. Ladies and gentlemen. If you wish to register a question, please press the one, followed by the four on your telephone. if the question has been answered, and you would like to withdraw your registration, please press the one followed by the three. If you're using a speaker phone, please lift your hand set before entering your request. One moment please, for the first question. of please state your question.

Good afternoon Walter. Can you tell us what were total sales in the quarter? And did you break it up by region?

We don't break it up by region. And I don't look to him as a fact, and say we'll file that with our 10Q Gary. I apologize for that.

That's okay. The tax provision at 30 percent, is that a good number for the balance of the year?

It might be a slightly lower at the end of the year.

Okay. And do you expect the joint venture income to be somewhat close for the little you reported in the third quarter in the .

Well, I don't have a crystal ball. The first quarter was very, very strong. I would not want to forecast that part of the world in the next two or three quarters.

lindhoff. Thank you.

Ladies and gentlemen, if there is any more questions, please press the one followed by the four at this time. Mr. Klein, I'm showing no further questions at this time.

Since there are no more questions I'd like to thank all of you for taking the time out of your busy day to participate in our call. I look forward to speaking with you again in the future. Thank you.

Ladies and gentlemen, we thank you for our participation. And ask that you please disconnect your lines.

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