1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(MARK ONE)
( X ) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED JUNE 30, 1995
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM ______________ TO __________
1-4462
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Commission File Number
STEPAN COMPANY
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(Exact name of registrant as specified in its charter)
Delaware 36 1823834
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
Edens and Winnetka Road Northfield, Illinois 60093
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(Address of principal executive offices)
Registrant's telephone number (708) 446-7500
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Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes __X__ No _____
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Class Outstanding at July 31, 1995
-------------------------------------- ------------------------------------
Common Stock, $1 par value 9,985,381 Shares
2
Part I FINANCIAL INFORMATION
Item 1 - Financial Statements
STEPAN COMPANY
CONDENSED CONSOLIDATED BALANCE SHEETS
June 30, 1995 and December 31, 1994
Unaudited
(Dollars in Thousands) 6/30/95 12/31/94
------- --------
ASSETS
------
CURRENT ASSETS:
Cash and cash equivalents $ 1,702 $ 2,452
Receivables, net 81,979 70,385
Inventories (Note 2) 44,806 45,464
Other current assets 10,672 11,070
---------- ----------
Total current assets 139,159 129,371
---------- ---------
PROPERTY, PLANT AND EQUIPMENT:
Cost 432,567 417,654
Less accumulated depreciation 249,014 233,997
---------- ----------
183,553 183,657
---------- ----------
OTHER ASSETS 15,882 11,920
---------- ----------
Total assets $ 338,594 $ 324,948
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
CURRENT LIABILITIES:
Current maturities of long-term debt $ 7,901 $ 8,043
Accounts payable 31,576 37,904
Accrued liabilities 31,841 34,509
---------- ----------
Total current liabilities 71,318 80,456
---------- ----------
DEFERRED INCOME TAXES 33,850 32,976
---------- ----------
LONG-TERM DEBT, less current maturities (Note 3) 102,530 89,795
---------- ----------
DEFERRED REVENUE (Note 6) 9,235 10,419
---------- ----------
STOCKHOLDERS' EQUITY:
5-1/2% convertible preferred stock, cumulative, voting without par value;
authorized 2,000,000 shares; issued 797,400 shares in 1995 and 799,196
shares in 1994 19,935 19,980
Common stock, $1 par value; authorized 15,000,000 shares;
issued 10,046,194 shares in 1995 and 10,028,544 shares in 1994 10,046 10,029
Additional paid-in capital 4,191 3,983
Cumulative translation adjustments (2,692) (3,491)
Retained earnings (approximately $42,692 unrestricted in 1995 and $36,336 in 1994) 91,511 82,445
---------- ----------
122,991 112,946
Less - Treasury stock, at cost (Note 5) 1,330 1,644
---------- ----------
Stockholders' equity 121,661 111,302
---------- ----------
Total liabilities and stockholders' equity $ 338,594 $ 324,948
========== ==========
The accompanying Notes to Condensed Consolidated Financial Statements are an
integral part of these condensed consolidated balance sheets.
3
STEPAN COMPANY
CONSOLIDATED STATEMENTS OF INCOME
For the Three and Six Months Ended June 30, 1995 and 1994
Unaudited
(In Thousands, Three Months Ended Six Months Ended
except per share amounts) June 30 June 30
-------------------- --------------------
1995 1994 1995 1994
---- ---- ---- ----
NET SALES $ 136,258 $ 112,305 $ 271,044 $ 219,584
---------- ---------- ----------- ------------
COSTS AND EXPENSES:
Cost of Sales 110,451 91,648 218,582 179,784
General and Administrative 5,919 3,301 11,723 8,238
Marketing 4,670 4,118 9,222 8,339
Research, Development 4,584 4,523 9,083 9,163
and Technical Services
Interest, net (Note 3) 2,128 1,803 3,992 3,721
---------- ---------- ----------- ------------
127,752 105,393 252,602 209,245
---------- ---------- ----------- ------------
PRE-TAX INCOME 8,506 6,912 18,442 10,339
PROVISION FOR INCOME TAXES 3,088 2,834 6,915 4,239
---------- ----------- ----------- ------------
NET INCOME $ 5,418 $ 4,078 $ 11,527 $ 6,100
========== =========== =========== =============
NET INCOME PER
COMMON SHARE (Note 4)
Primary $0.52 $0.38 $1.10 $0.56
===== ===== ===== =====
Fully Diluted $0.49 $0.37 $1.05 $0.55
===== ===== ===== =====
DIVIDENDS PER COMMON SHARE $0.110 $0.105 $0.220 $ 0.210
====== ====== ====== =======
AVERAGE COMMON SHARES
OUTSTANDING 9,977 9,914 9,965 9,906
===== ===== ===== =====
All 1994 share and per share data have been retroactively adjusted for the
stock split effective December 15, 1994.
The accompanying Notes to Condensed Consolidated Financial Statements are an
integral part of these statements.
4
STEPAN COMPANY
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Six Months Ended June 30, 1995 and 1994
Unaudited
(Dollars In Thousands) 6/30/95 6/30/94
------- -------
NET CASH FLOW FROM OPERATING ACTIVITIES
Net income $ 11,527 $ 6,100
Depreciation and amortization 15,360 15,117
Deferred income taxes 857 419
Prepaid pension cost (307) (147)
Other non-cash items (150) 365
Deferred revenue (Note 6) (1,184) 5,808
Changes in Working Capital:
Receivables, net (11,594) (9,523)
Inventories 658 6,425
Accounts payable and accrued liabilities (8,728) (5,040)
Other 398 105
-------- ---------
Net Cash Provided by Operating Activities 6,837 19,629
-------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES
Expenditures for property, plant and equipment (14,304) (20,797)
Investment in joint venture (3,750) (1,000)
Other non-current assets 40 (416)
-------- ---------
Net Cash Used for Investing Activities (18,014) (22,213)
-------- ---------
CASH FLOWS FROM FINANCING AND OTHER RELATED ACTIVITIES
Revolving debt and notes payable to banks, net (18,395) 13,147
Other debt borrowings 40,000 -
Other debt repayments (9,062) (7,349)
Sales (Purchases) of treasury stock, net 314 (108)
Dividends paid (2,729) (2,620)
Other non-cash items 299 456
-------- ---------
Net Cash Provided by Financing and Other Related Activities 10,427 3,526
-------- ---------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (750) 942
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR $ 2,452 $ 1,515
-------- ---------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 1,702 $ 2,457
======== =========
CASH PAID DURING THE PERIOD FOR:
Interest $ 4,650 $ 4,234
Income taxes $ 8,440 $ 4,202
The accompanying Notes to Condensed Consolidated Financial Statements are an
integral part of these statements.
5
STEPAN COMPANY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
June 30, 1995 and December 31, 1994
Unaudited
1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
The condensed consolidated financial statements included herein have been
prepared by the company, without audit, pursuant to the rules and
regulations of the Securities and Exchange Commission. Certain information
and footnote disclosures normally included in financial statements
prepared in accordance with generally accepted accounting principles have
been condensed or omitted pursuant to such rules and regulations, although
management believes that the disclosures are adequate and make the
information presented not misleading. It is suggested that these condensed
consolidated financial statements be read in conjunction with the financial
statements and the notes thereto included in the company's latest Annual
Report to Stockholders and the Annual Report to the Securities and Exchange
Commission on Form 10-K for the year ended December 31, 1994. In the
opinion of management all adjustments, consisting only of normal recurring
adjustments, necessary to present fairly the consolidated financial position
of Stepan Company as of June 30, 1995, and the consolidated results of
operations for the three and six months then ended, and cash flows for the
six months then ended, have been included.
Because the inventory determination under the LIFO method can only be made
at the end of each year based on the inventory levels and costs at that
point, interim LIFO determinations must necessarily be based upon
management's estimates of expected year-end inventory levels and costs.
Since future estimates of inventory levels and prices are subject to many
forces beyond the control of management, interim financial results are
subject to final year-end LIFO inventory amounts.
2. INVENTORIES
Inventories include the following amounts:
(Dollars in Thousands) 6/30/95 12/31/94
------- --------
Inventories valued primarily on LIFO basis -
Finished products $ 27,650 $ 27,632
Raw materials 17,156 17,832
-------- --------
Total inventories $ 44,806 $ 45,464
======== ========
If the first-in, first-out (FIFO) inventory valuation method had been used for
all inventories, inventory balances would have been approximately $14,500,000
and $13,200,000 higher than reported at June 30, 1995, and December 31, 1994,
respectively.
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3. DEBT
During June, 1995, the company entered into unsecured long-term loan
agreements totaling $40 million with interest rates of 7.69 to 7.77 percent
per annum and maturities of 10 to 15 years. The proceeds of the new loans
were used to reduce unsecured bank debt. The terms and conditions of the
new loan agreements are essentially the same as those of previously
existing agreements.
Long-term debt includes unsecured bank debt of $3.8 million and $21.8
million at June 30, 1995, and December 31, 1994, respectively. The
unsecured bank debt is available to the company under a line of credit
based on rates that fluctuate daily. The average interest rate on
unsecured bank debt for the three month period ended June 30 was 6.74
percent and 4.78 percent for 1995 and 1994, respectively. For the six
month period ended June 30, 1995 and 1994, the average interest rate was
6.71 percent and 4.56 percent, respectively.
4. NET INCOME PER COMMON SHARE
Primary net income per common share amounts are computed by dividing net
income less the convertible preferred stock dividend requirement by the
weighted average number of common shares outstanding. Fully diluted net
income per share amounts are based on an increased number of common shares
that would be outstanding assuming the exercise of certain outstanding
stock options and the conversion of the convertible preferred stock, when
such conversion would have the effect of reducing net income per share.
For computation of earnings per share, reference should be made to Exhibit
11.
5. TREASURY STOCK
At June 30, 1995, treasury stock consists of 20,208 shares of preferred
stock and 62,607 shares of common stock. At December 31, 1994, treasury
stock consisted of 20,208 shares of preferred stock and 84,280 shares of
common stock.
6. DEFERRED REVENUE
During 1994, the company received $12.9 million of prepayments on certain
multi-year commitments for future shipments of products. As the
commitments are fulfilled, a proportionate share of the deferred revenue is
taken into income. Deferred revenue of $.6 million and $1.2 million were
recognized as income during the three month and six month periods ended
June 30, 1995, respectively. Related deferred revenue at June 30, 1995, is
$11.6 million of which $2.4 million is included in the "Accrued
liabilities" caption of the Condensed Consolidated Balance Sheets.
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7. CONTINGENCIES
There are a variety of legal proceedings pending or threatened against the
company. Some of these proceedings may result in fines, penalties,
judgments or costs being assessed against the company at some future time.
The company's operations are subject to extensive local, state and federal
regulations, including the federal Comprehensive Environmental Response,
Compensation and Liability Act of 1980 ("Superfund") and the Superfund
amendments of 1986. The company and others, have been named as potentially
responsible parties at affected geographic sites. As discussed in
Management's Discussion and Analysis of Financial Condition and Results of
Operations included in this filing, the company believes that it has made
adequate provisions for the costs it may incur with respect to these sites.
The company has estimated a range of possible environmental and legal
losses from $6.5 million to $21.3 million at June 30, 1995. At June 30,
1995, the company's reserve was $6.6 million for legal and environmental
matters compared to $6.9 million at December 31, 1994. While the company
has insurance policies that may cover some of its environmental costs, it
does not record those claims until such time as they become probable.
The company has received some insurance recoveries in the past, primarily
related to indemnification of legal costs. Currently, the company has not
recorded any outstanding insurance claims.
At certain of the sites, estimates cannot be made of the total costs of
compliance, or the company's share of such costs; accordingly, the company
is unable to predict the effect thereof on future results of operations.
In the event of one or more adverse determinations in any annual or interim
period, the impact on results of operations for those periods could be
material. However, based upon the company's present belief as to its
relative involvement at these sites, other viable entities'
responsibilities for cleanup and the extended period over which any costs
would be incurred, the company believes that these matters will not have a
material effect on the company's financial position. Certain of these
matters are discussed in Item 3, Legal Proceedings, in the 1994 Form 10-K
Annual Report and in other filings of the company with the Securities and
Exchange Commission, which filings are available upon request from the
company.
8
STEPAN COMPANY
Management's Discussion and Analysis of
Financial Condition and Results of Operations
The following is management's discussion and analysis of certain significant
factors which have affected the company's financial condition and results of
operations during the interim period included in the accompanying condensed
consolidated financial statements.
LIQUIDITY AND CAPITAL RESOURCES
For the first half of 1995, cash from operations has totaled $6.8 million,
compared to $19.6 million for the same period in 1994. Cash from operations in
1994 included $5.8 million in customer advances. Increased working capital
requirements accounted for essentially all of the remaining difference in
operating cash flows from year to year.
Increased demands for working capital have totaled $19.3 million for the first
half of 1995 compared to $8.0 million during 1994, an increase of $11.3
million. During 1994, inventories fell by $6.4 million for the first six
months, compared to a decrease of $.6 million for this year. Higher sales
drove receivables up by $11.6 million for the first half of 1995, compared to
$9.5 million for the same period last year.
Capital expenditures have totaled $14.3 million for the first six months of
1995, down from $20.8 million for the same period last year. Capital
expenditures are projected to total $38.4 million for the current year,
compared to $42.9 million during 1994. Included in current year investing
activities is a $3.8 million capital contribution to joint venture operation.
Since December 31, 1994, total company debt has increased by $12.6 million to
close the second quarter at $110.4 million. Since year-end, the ratio of
long-term debt to long-term debt plus shareholders' equity has increased from
44.7 percent to 45.7 percent. For the balance of 1995, total company debt is
expected to decline modestly due primarily to projected decreases in working
capital requirements.
During June, 1995, the company entered into unsecured long-term loan agreements
totaling $40 million with maturities of 10 to 15 years. The proceeds of the
new loans were used to reduce domestic bank debt, which totaled $3.8 million as
of June 30, 1995. The terms and conditions of the new loan agreements are
essentially the same as those of previously existing agreements.
The company maintains contractual relationships with its domestic banks which
provide for $45 million of revolving credit which may be drawn upon as needed
for general corporate purposes. The company also meets short-term liquidity
requirements through uncommitted bank lines of credit and bankers' acceptances.
The company's foreign subsidiaries maintain committed and uncommitted bank
lines of credit in their respective countries to meet working capital
requirements as well as to fund capital expenditure programs.
9
The company anticipates that cash from operations and from committed credit
facilities will be sufficient to meet anticipated capital expenditure programs,
dividend requirements and other planned financial commitments in 1995 and for
the foreseeable future.
RESULTS OF OPERATIONS
Three Months Ended June 30, 1995 and 1994
Net income for the second quarter ended June 30, 1995 was $5.4 million, or $.52
per share, up 33 percent from $4.1 million, or $.38 per share recorded for the
same quarter a year earlier. Net sales grew 21 percent to $136.3 million, up
from $112.3 million reported last year. Net sales by product group were
(Dollars in Millions) Three Months
Ended June 30
---------------------------------
1995 1994 % Change
----- ---- --------
Net Sales:
Surfactants $ 95.5 $ 83.7 + 14
Polymers 33.5 18.6 + 80
Specialty Products 7.3 10.0 - 27
------ --------
Total $136.3 $112.3 + 21
====== ========
Surfactants increase in net sales was due mainly to an 18 percent increase in
sales volume. A large part of the volume gain stemmed from domestic shipments
of concentrated products manufactured utilizing the recent neutralization
capacity expansion. From the broad commercial customer base, higher selling
prices resulting from raw material cost increases also contributed to higher
net sales. Mexico reported higher sales on higher volume and selling prices
which more than offset the impact of the devalued peso. European sales were up
due to a stronger french franc and a pass through of higher raw material costs.
Surfactants gross profit increased 14 percent from $16.2 million to $18.5
million for the second quarter of 1995. Gross profit rose primarily on higher
sales from the larger national customers. The broad commercial customer base
reported a relatively flat gross profit between years. Mexican gross profit
was up on higher sales volume and a better sales mix. European gross profit
declined due to competitive price pressures in the European fabric softener
market which limited our ability to pass along raw material cost increases.
Canadian gross profit declined slightly from a year ago on relatively unchanged
sales volume.
10
Polymers net sales were up due to significantly higher sales volumes and
selling prices of phthalic anhydride (PA) and polyurethane polyols. Higher
selling prices were triggered by significant raw material price increases.
Shipments of PA are expected to be down due to a planned maintenance shut down
in the third quarter. Sales of polyurethane systems declined on lower sales
volume.
Polymers gross profit for the quarter rose 138 percent to $6.2 million from
$2.6 million in the prior year. Higher PA sales volume and margins generated
the increase. Partially offsetting the increase was the lower polyurethane
polyols gross profit despite higher sales volume due to the inability to pass
along all the material cost increases. Polyurethane systems gross profit
declined on lower sales volume.
Specialty products net sales were down because sales of some lower margin
products were discontinued in the current year. Gross profit for specialty
products decreased by $.7 million to $1.1 million as a result of the
discontinued products and increased manufacturing costs between years.
Operating expenses for the second quarter increased 27 percent over the same
quarter in 1994. Administrative expenses increased 79 percent representing a
majority of the operating expense increase as a result of higher legal and
environmental expenses. The prior year's quarter legal and environmental
expenses included the favorable impact of insurance recoveries related to
previously incurred legal and environmental costs. Marketing expenses rose 13
percent primarily due to higher salaries. Research and development expenses
increased a slight one percent.
Interest expense for the quarter increased 18 percent primarily as a result of
higher borrowings and higher short-term borrowing rates.
Six Months Ended June 30, 1995 and 1994
Net income for the six months ended June 30, 1995 was $11.5 million, or $1.10
per share, up 89 percent from $6.1 million, or $.56 per share recorded for the
same period a year ago. Net sales grew 23 percent to $271.1 million, up from
$219.6 million reported last year. Net sales by product group were
(Dollars in Millions) Six Months
Ended June 30
-------------------------------
1995 1994 % Change
----- ---- --------
Net Sales:
Surfactants $ 194.3 $ 166.9 + 16
Polymers 60.8 34.9 + 74
Specialty Products 16.0 17.8 - 10
------- -------
Total $ 271.1 $ 219.6 + 23
======= =======
11
Surfactants increase in net sales was due in large part to a 14 percent
increase in sales volume. Higher average selling prices resulting from raw
material cost increases also contributed to higher net sales. A large part of
the volume gain was from shipments of new concentrated products this year.
Strong domestic sales volume was also supported by volume increase in Europe,
Canada, and Mexico. Reported sales in Mexico were down despite higher volume
due to the negative impact of the devalued peso.
Surfactants gross profit increased 19 percent from $32.4 million to $38.6
million for the first half of 1995. Gross profit rose sharply on higher
domestic sales volume and favorable mix of higher margin products. Mexico's
gross profit was up because of higher sales volume. Canadian and European
gross profit was relatively unchanged from a year ago.
Polymers net sales were up due to higher sales volumes of phthalic anhydride
(PA) and polyurethane polyols. Higher selling prices also contributed to the
increased sales reflecting the pass through of rising raw material costs along
with some margin improvement for PA. Shipments for P.A. will be down for the
second half due to a planned third quarter maintenance shutdown. Sales of
polyurethane systems declined on lower sales volume.
Polymers gross profit for the first half of 1995 rose 133 percent to $11.5
million from $4.9 million in the prior year. Higher PA sales volume and margins
generated all of the increase. Polyurethane polyols gross profit was relatively
unchanged despite higher selling prices which were offset by the raw material
cost increases. Polyurethane systems gross profit declined on lower sales
volume.
Specialty products net sales were down on reduced volume. Sales of some lower
margin products were discontinued in the current year. Gross profit reported a
slight decline of $.1 million to $2.4 million from $2.5 million recorded a year
ago.
Operating expenses for the first half increased 17 percent over the same period
in 1994. Administrative expenses increased 42 percent representing a majority
of the operating expense increase as a result of higher legal and environmental
expenses. Prior year's first half included the favorable impact of insurance
recoveries related to previously incurred legal and environmental costs.
Marketing expenses rose 11 percent primarily due to higher salaries. Research
and development expenses declined one percent.
Interest expense increased seven percent primarily as a result of higher
short-term borrowing rates.
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ENVIRONMENTAL AND LEGAL MATTERS
The company is subject to extensive federal, state and local environmental laws
and regulations. Although the company's environmental policies and practices
are designed to ensure compliance with these laws and regulations, future
developments and increasingly stringent environmental regulation could require
the company to make additional unforeseen environmental expenditures. The
company will continue to invest in the equipment and facilities necessary to
comply with existing and future regulations. During the first six months of
1995, company expenditures for capital projects related to the environment were
$2.4 million and should approximate $9 million to $10 million for the full year
1995. These projects are capitalized and typically depreciated over 10 years.
Capital spending on such projects is likely to be somewhat lower in future
years as 1995 includes some larger projects. Recurring costs associated with
the operation and maintenance of environmental protection facilities in ongoing
operations were $3.4 million for the first six months of 1995. While difficult
to project, it is not anticipated that these recurring expenses will increase
significantly in the future.
The company has been named by the government as a potentially responsible party
at 17 waste disposal sites where cleanup costs have been or may be incurred
under the federal Comprehensive Environmental Response, Compensation and
Liability Act and similar state statutes. In addition, damages are being
claimed against the company in general liability actions for alleged personal
injury or property damage in the case of some disposal and plant sites. The
company believes that it has made adequate provisions for the costs it may
incur with respect to these sites. The company has estimated a range of
possible environmental and legal losses from $6.5 million to $21.3 million at
June 30, 1995. At June 30, 1995 the company's reserve was $6.6 million for
legal and environmental matters compared to $6.9 million at December 31, 1994.
During the first six months of 1995, expenditures related to legal and
environmental matters approximated $3.1 million. The company expects to
receive reimbursement of environmental defense costs from insurers. However,
currently the company has no receivable recorded for such claims. At certain
of the sites, estimates cannot be made of the total costs of compliance or the
company's share of such costs; accordingly, the company is unable to predict
the effect thereof on future results of operations. In the event of one or
more adverse determinations in any annual or interim period, the impact on
results of operations for those periods could be material. However, based upon
the company's present belief as to its relative involvement at these sites,
other viable entities' responsibilities for cleanup and the extended period
over which any costs would be incurred, the company believes that these matters
will not have a material effect on the company's financial position. Certain
of these matters are discussed in Item 3, Legal Proceedings, in the 1994 Form
10-K Annual Report and in other filings of the company with the Securities and
Exchange Commission, which filings are available upon request from the company.
13
ACCOUNTING STANDARD
In March, 1995, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 121-Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to Be Disposed Of ("SFAS No. 121").
This standard must be adopted no later than the 1996 reporting year, but can be
adopted early. SFAS No. 121 requires that operating assets and associated
goodwill be written down to fair value whenever an impairment review indicates
that the carrying value cannot be recovered on an undiscounted cash flow basis.
After any such noncash write-down, results of operations would be favorably
affected by reduced depreciation, depletion and amortization charges. The
Company has initiated a review of SFAS No. 121 and, at this time, cannot
provide an assessment of the impact of adoption. Adoption of the accounting
standard most likely will occur in 1996.
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Part II OTHER INFORMATION
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Item 1 - Legal Proceedings
Reference is made to the Company's Report on Form 10-K for the year ended
December 31, 1994 concerning the Alvear v. Leonard Electronics Products Co. et.
al., Brownsville, Texas case. The Company has reached a settlement in this
matter and has fully provided reserves to cover the terms of the settlement.
Reference is made to the Company's Report Form 10-K for the year ended
December 31, 1994, regarding the site United States of American v. Jerome
Lightman, et. al. (92 CV 4710 [JBS]). The Company has been informed that the
United State's Government's estimate of past cost has now risen to
approximately $9.1 million from approximately $7.4 million. The Company's
liability, if any, for this amount will depend on what the final determination
of the Company's allocated share is, which is the subject matter of this
lawsuit.
On May 30, 1995, the Company received notification that it might be a
potentially responsible party at a site entitled Batavia Landfill located in
Batavia, New York. The Company has responded that it has no knowledge of this
site or use of the site by the Company. The Company, at this time, does not
believe it has any liability with regard to this site.
On June 13, 1995, the Company's wholly-owned Canadian subsidiary received
notification that Canada Development Corporation, a Canadian entity from which
the Company's Canadian subsidiary had purchased assets, might be a potentially
responsible party at the Chem-Trol Pollution Services Inc. Site, located in
Hamburg, New York. The alleged activities at this site apparently occurred
between 1971 and 1972 which pre- dates the incorporation of the Company's
Canadian subsidiary by approximately twelve years. The Company does not
believe at this time, that it or its wholly-owned Canadian subsidiary has any
liability with regard to this site.
15
Item 6 - Exhibits and Reports on Form 8-K
(A) Exhibits
(4)h Copy of Loan Agreement dated June 15, 1995, with Aid
Association for Lutherans, the Northwestern Mutual Life
Insurance Company and The Mutual Life Insurance Company
of New York
(11) Statement re computation of Per Share Earnings
(27) Financial Data Schedule
(B) Reports on Form 8-K
None
16
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
STEPAN COMPANY
/s/ Walter J. Klein
Walter J. Klein
Vice President - Finance
Principal Financial and Accounting Officer
Date: 8/11/95