- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
----------------
FORM 10-K
(Mark
One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934 [FEE REQUIRED]
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1993
OR
[_] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
FOR THE TRANSITION PERIOD FROM TO
COMMISSION FILE NUMBER 1-4462
----------------
STEPAN COMPANY
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
Delaware 36-1823834
- -------------------------------------- --------------------------------------
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
Northfield, Illinois 60093
- -------------------------------------- --------------------------------------
(Address of principal executive (Zip Code)
offices)
Registrant's telephone number including area code: 708-446-7500
Securities registered pursuant to Section 12(b) of the Act:
TITLE OF EACH CLASS NAME OF EACH EXCHANGE ON WHICH
REGISTERED
----------- --------------
Common Stock, $1 par value American Stock Exchange
Chicago Stock Exchange
5 1/2% Convertible Preferred Stock, no Chicago Stock Exchange
par value
Securities registered pursuant to Section 12 (g) of the Act:
None
-----------
(Title of Class)
INDICATE BY CHECK MARK IF DISCLOSURE OF DELINQUENT FILERS PURSUANT TO ITEM
405 OF REGULATION S-K IS NOT CONTAINED HEREIN, AND WILL NOT BE CONTAINED, TO
THE BEST OF REGISTRANT'S KNOWLEDGE, IN DEFINITIVE PROXY OR INFORMATION
STATEMENTS INCORPORATED BY REFERENCE IN PART III OF THIS FORM 10-K OR ANY
AMENDMENT TO THIS FORM 10-K. [ ]
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, AND (2) HAS BEEN SUBJECT TO SUCH FILING
REQUIREMENTS FOR THE PAST 90 DAYS. YES X NO
AGGREGATE MARKET VALUE AT FEBRUARY 28, 1994, OF VOTING STOCK HELD BY
NONAFFILIATES OF THE REGISTRANT: $97,673,000.*
NUMBER OF SHARES OUTSTANDING OF EACH OF THE ISSUER'S CLASSES OF COMMON STOCK
AS OF FEBRUARY 28, 1994:
CLASS OUTSTANDING AT FEBRUARY 28, 1994
----- --------------------------------
Common Stock, $1 par value 4,953,000 shares
DOCUMENTS INCORPORATED BY REFERENCE
PART OF FORM 10-K DOCUMENT INCORPORATED
----------------- ---------------------
Part I, Item 1 1993 Annual Report to Stockholders
Part II, Items 5-8 1993 Annual Report to Stockholders
Part III, Items 10-12 Proxy Statement dated March 29, 1994
*Based on reported ownership by all directors, officers and beneficial owners
of more than 5% of registrant's voting stock. However, this determination does
not constitute an admission of affiliate status for any of these holders.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
PART I
ITEM 1. BUSINESS
Stepan Company and its subsidiaries (the "Company") produce basic and
intermediate chemicals which are sold to other manufacturers and then made into
a variety of end products. The Company sells three groups of products:
surfactants, polymers and specialty products. Surfactants refer to chemical
agents which affect the interaction between two surfaces; they can provide
actions such as detergency (i.e., the ability of water to remove soil from
another surface), wetting and foaming, dispersing, emulsification (aiding two
dissimilar liquids to mix), demulsification and viscosity modifications.
Surfactants are the basic cleaning agent in detergents for washing clothes,
dishes, carpets, fine fabrics, floors and walls. Surfactants are also used for
the same purpose in shampoos and conditioners, toothpaste, cosmetics and other
personal care products. Commercial and industrial applications include
emulsifiers for agricultural pesticides, emulsion polymers such as floor
polishes and latex foams and coatings, wetting and foaming agents for wallboard
manufacturing and surfactants for enhanced oil recovery. Polymers refer to
intermediate chemicals including phthalic anhydride, polyols and urethane foam
systems used in plastics, building materials and refrigeration industries.
Specialty products consist of flavor and pharmaceutical intermediates, fine
chemicals, esters, synthetic lubricants and other specialty products.
During 1989, Stepan Company expanded its Canadian operation with the purchase
of two surfactant businesses. In June, the Company purchased the Canada Packers
business and in November, the surfactant business of Domtar, Inc. These
acquisitions increased the Company's capacity and market share in North
America.
In February, 1990, Stepan Company sold its paper chemical business which
reported moderate losses since its purchase in 1985.
In the first quarter of 1990, Stepan Company capitalized $1.6 million of
loans to Stepan Mexico, increasing Stepan Company's ownership from 40% to 98%.
Stepan Mexico S.A. de C.V. is a manufacturer of surfactant chemicals.
In 1991, Stepan Company purchased the ACCOSOFT(R) line of fabric softeners
from Karlshamns U.S.A., Inc. The Company also purchased from ICI Americas, Inc.
the U.S. portion of sulfonate and sulfonate blend line used in agricultural
products and industrial coatings.
In 1993, Stepan Company entered into a 50 percent joint venture with
Coldequim, S.A., called Stepan Colombiana de Quimicos, Ltda, in Colombia, South
America. Under the agreement, Stepan Colombiana will manufacture selected
surfactants and market the Company's complete line of surfactants in the Andean
Pact countries of Colombia, Venezuela, Peru, Bolivia and Ecuador.
Marketing and Competition
Principal markets for all products are manufacturers of cleaning or washing
compounds (including detergents, shampoos, toothpaste and household cleaners),
paints, cosmetics, beverages, agricultural pesticides and herbicides, plastics,
furniture, building materials and automotive and refrigeration equipment. Sales
of the Company tend not to be seasonal.
The Company does not sell directly to the retail market, but sells to a wide
range of manufacturers in many industries and has many competitors. The
principal methods of competition are product performance, price and
adaptability to the specific needs of individual customers. These factors allow
the Company to compete on a basis other than solely price, reducing the
severity of competition as experienced in the sale of commodity chemicals
having identical performance characteristics. The Company is one of the largest
merchant producers of surfactants in the United States. In the case of
surfactants, much of the Company's competition comes from the internal
divisions of larger companies, as well as several large national and regional
producers. In the manufacture of polymers, the Company competes with the
chemical divisions of several large companies, as well as with other small
specialty chemical manufacturers. In recent years, the Company also faces some
competition from foreign imports of phthalic anhydride. In specialty products,
the Company competes with several large firms plus numerous small companies.
The Company does not expect any significant changes in the competitive
environment in the foreseeable future.
1
Major Customer and Backlog
The Company does not have any one single customer whose business represents
more than 10% of the Company's consolidated revenue. Most of the Company's
business is essentially on a "spot delivery basis" and does not involve a
significant backlog. The Company does have some contract arrangements with
certain customers but, in most cases, purchases are contingent on purchaser
requirements.
Energy Sources
Substantially all of the Company's manufacturing plants operate on
electricity and interruptable gas purchased from local utilities. During peak
heating demand periods, gas service to all plants may be temporarily
interrupted for varying periods ranging from a few days to several months. The
plants operate on fuel oil during these gas interruption periods. The Company
has not experienced any plant shutdowns or adverse effects upon its business in
recent years that were caused by a lack of available energy sources.
Raw Materials
The most important raw materials used by the Company are of a petroleum or
vegetable nature. For 1994, the Company has commitments from suppliers to cover
its forecasted requirements and is not substantially dependent upon any one
supplier.
Research and Development
The Company maintains an active research and development program to assist in
the discovery and commercialization of new knowledge with the intent that such
effort will be useful in developing a new product or in bringing about a
significant improvement to an existing product or process. Total expenses for
research and development during 1993, 1992 and 1991 were $12,613,000,
$11,320,000 and $11,558,000, respectively. During 1993 and 1992, the research
and development staff consisted of 162 and 142 employees, respectively. The
balance of expenses reflected on the Consolidated Statements of Income relates
to technical services which include routine product testing, quality control
and sales support service.
Environmental Compliance
Compliance with applicable Federal, state and local regulations regarding the
discharge of materials into the environment, or otherwise relating to the
protection of the environment, resulted in capital expenditures by the Company
of approximately $4,076,000 during 1993. Such capital expenditures in 1994
should approximate $6,464,000. These expenditures represented approximately 24%
of the Company's capital expenditures in 1993 and are expected to be 18% of
such expenditures in 1994. These expenditures, when incurred, are depreciated
and charged on a straight-line basis to pre-tax earnings over their respective
useful lives which are typically 10 years. Compliance with such regulations is
not expected to have a material adverse effect on the Company's earnings and
competitive position in the foreseeable future.
Employment
At December 31, 1993 and 1992, the Company employed worldwide 1,302 and 1,317
persons, respectively.
Foreign Operations
See Note 12, Geographic Data, on page 29 of the Company's 1993 Annual Report
to Stockholders.
2
Product Groups
The manufacture of basic and intermediate chemicals constitutes the Company's
only industry segment. The Company's three groups of products and their
contribution to sales for the three years ended December 31, 1993, were:
SPECIALTY
SURFACTANTS POLYMERS PRODUCTS
----------- -------- ---------
1993....................................... 74% 18% 8%
1992....................................... 73% 20% 7%
1991....................................... 71% 22% 7%
ITEM 2. PROPERTIES
The Company's corporate headquarters and central research laboratories are
located in Northfield, Illinois. The Northfield facilities contain
approximately 70,000 square feet on an 8 acre site. In addition, the Company
leases 49,000 square feet of office space in a nearby office complex.
The Canadian sales office is located in Mississagua, Canada and is
approximately 2,300 square feet of leased space. Stepan Mexico maintains a
leased sales office in Mexico City, Mexico.
Surfactants are produced at four plants in the United States, and three
wholly owned subsidiaries; one in France, Canada and Mexico. The principal
plant is located on a 626 acre site at Millsdale (Joliet), Illinois. A second
plant is located on a 39 acre tract in Fieldsboro, New Jersey. West Coast
operations are conducted on an 8 acre site in Anaheim, California. A fourth
plant is located on a 162 acre site in Winder, Georgia. The plant, laboratory
and office of Stepan Europe are located on a 20 acre site near Grenoble,
France. Stepan Canada, Inc. is located on a 70 acre leased, with an option to
purchase, site in Longford Mills, Ontario, Canada. Stepan Mexico is located on
a 13 acre site in Matamoros, Mexico. The phthalic anhydride plant is also
located at Millsdale, as is the plant for polyurethane systems and polyurethane
polyols. Specialty products are mainly produced at a plant located on a 19 acre
site in Maywood, New Jersey.
The Company owns all of the foregoing facilities except the leased office
space and Canadian plant site mentioned above. The Company believes these
properties are adequate for its operations.
ITEM 3. LEGAL PROCEEDINGS
Reference is made to the Company's Form 10-Q for the quarter ended September
30, 1993 regarding an Administrative Complaint (TSCA 09-93-0011) seeking
approximately $4.8 million in fines. On March 1, 1994, the Company announced
that it had reached an agreement with Region IX of the United States
Environmental Protection Agency ("USEPA") to pay $75,000 for an alleged
violation of the Toxic Substances Control Act. The USEPA had originally been
seeking fines of approximately $4.8 million on account of allegedly
manufacturing a certain product without a premanufacturing notice or which was
not on the Toxic Substances Control List.
As previously reported, the Company was named as a potentially responsible
party ("PRP") for its Maywood, New Jersey property and property adjacent
thereto ("sites"). The Company filed its Remedial Investigation Study on
February 11, 1994 and has until March 16, 1994 to file its draft Feasibility
Study with the USEPA Region II. The Company expended and charged against its
environmental reserve $3,476,000 during the last three years. While it is
probable that the Company will incur some site cleanup costs, until the
Feasibility Study is completed, it is not possible to estimate what the
Company's future liability, if any, would be.
As previously reported, the Company encountered xylene contamination at its
Fieldsboro, New Jersey location. The Company plans to expend approximately
$220,000 to perform capping activities at this site. The Company is awaiting
reapproval from the New Jersey Environmental Protection department. In
addition, the Company may spend up to $70,000 per year to perform well
monitoring activities.
3
As previously reported, the Company was named as a PRP with regard to the
D'Imperio site located in Hamilton Township, New Jersey. Also, as previously
reported, the USEPA, by the United States Justice Department, filed an action
against the Company and twenty other PRPs entitled United States of America v.
Jerome Lightman et. al. (92 CV 4710 [JBS]) requesting approximately $6,000,000
from twenty companies for USEPA past costs at this site. The court ordered non-
binding mediation in this matter which concluded February 17, 1994. The Company
did not agree with the mediators' results and conclusions, which in the
Company's opinion, were arbitrary and inconsistent. As a result, the Company
made a separate offer to pay for what the Company believes to be its share of
past costs, or $638,000. The twenty other PRPs have submitted their own
proposal to the government. The government has 45 days from February 17, 1994
to accept or reject the Company's offer. If no resolution is reached, the
matter will be tried. At this time, the Company cannot estimate what its future
potential liability might be at this site.
Reference is made to the Company's Form 10-Q for the quarter ended March 31,
1993 and the Form 10-K/A for the year ended December 31, 1992 regarding an
action entitled Alvear et. al. v. Leonard Electronics Product Co. et. al. The
Company lost its motion to have its Mexican subsidiary dismissed from the
action for lack of jurisdiction. The Company may appeal at the end of this
litigation, but under the current court ruling, the Company's Mexican
subsidiary will be a party in this action. In addition, the Company's motion
for more specificity in the plaintiff's complaint was granted.
The Company was named as a PRP at the Chemical Control Site, Elizabeth, New
Jersey. The only manifest linking the Company to this site clearly showed that
the waste shipment in question was rejected. The PRP group for Chemical Control
has reviewed this evidence and has determined that this shipment was, in fact,
rejected. Thus, while the Company technically remains a PRP at this site, the
Company believes it has no exposure at this site based upon the PRP group
ruling.
As previously reported in the Company's Form 10-Q for the quarter ended
September 30, 1991, the Company was named as a defendant in an action entitled
D'Imperio et. al. v. Lightman Drum Company, et. al., New Jersey Superior Court,
Camden County (No. L-01791-91). This private suit alleges various defendants
improperly disposed of hazardous materials at property owned by D'Imperio
resulting in damage to D'Imperio's property, as well as tortious interference
with a real estate purchase contract. On February 19, 1994, the Court granted
the defendants' motions, including the Company's, for Summary Judgement. Unless
the plaintiff files an appeal within forty-five days from February 11, 1994,
this case is dismissed. The Company does not anticipate an appeal at this time.
ITEM 4. RESULTS OF VOTES OF SECURITY HOLDERS
No matters were submitted to stockholders during the fourth quarter of the
fiscal year ended December 31, 1993.
EXECUTIVE OFFICERS OF THE REGISTRANT
Executive Officers are elected annually by the Board of Directors at the
first meeting following the Annual Meeting of Stockholders, to serve until the
next annual meeting of the Board and until their respective successors are duly
elected and qualified. Charles W. Given, formerly Vice President--Marketing was
appointed Vice President and General Manager--Surfactants, effective April 28,
1992. Ronald L. Siemon, formerly Vice President--Polyurethanes, was appointed
Vice President and General Manager--Polymers, effective April 28, 1992. Walter
J. Klein, formerly the Corporate Controller, was appointed Vice President and
Corporate Controller in May, 1990 and Vice President--Finance effective January
1, 1992. Also effective January 1, 1992, Charles P. Riley, Jr. assumed the
position of Vice President--Administration and Regulatory Affairs and
previously held the position of Vice President--Manufacturing and Engineering.
Mickey Mirghanbari assumed the position of Vice President--Manufacturing and
Engineering. Mickey Mirghanbari previously served in the capacity of Vice
President for Plant Operations. In February, 1992,
4
James A. Hartlage who was formerly Vice President--Technology for over five
years, was appointed Senior Vice President--Technology. As of October 29, 1992,
pursuant to Section 3(b) Rule 3b-7 of the Securities Exchange Act of 1934, Mark
S. Barg is deemed an executive officer of the Company. Mark Barg has served in
the capacity of Vice President--Logistics for the last five years. All other
executive officers have remained in their current capacity for over five years.
The Executive Officers of the Company, their ages as of February 28, 1994 and
certain other information are as follows:
YEAR FIRST
ELECTED
NAME AGE TITLE OFFICER
- ---- --- ----- --------------
F. Quinn Stepan......... 56 Chairman, President and 1967
Chief Executive Officer
James A. Hartlage....... 56 Senior Vice President--Technology 1980
Charles W. Given........ 57 Vice President and General Manager-- 1992
Surfactants
Ronald L. Siemon........ 56 Vice President and General Manager-- 1992
Polymers
Charles P. Riley, Jr. .. 61 Vice President--Administration 1980
and Regulatory Affairs
Jeffrey W. Bartlett..... 50 Vice President, General Counsel 1983
and Corporate Secretary
Walter J. Klein......... 47 Vice President--Finance 1985
Mickey Mirghanbari...... 56 Vice President--Manufacturing 1992
and Engineering
Mark S. Barg............ 52 Vice President--Logistics Not applicable
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON STOCK AND RELATED SECURITY HOLDER
MATTERS
(a) The Company's common stock is listed and traded on both the American
Stock Exchange and the Chicago Stock Exchange. See page 30 of the Company's
1993 Annual Report to Stockholders for market price information which is
incorporated by reference herein.
The Company's 5 1/2 percent convertible preferred stock is listed and traded
on the Chicago Stock Exchange. See Note 6 on page 27 of the Company's 1993
Annual Report to Stockholders for the description of the preferred
stockholders' rights which is incorporated by reference herein.
From time to time the Company purchases shares of its common stock in the
open market and in block transactions from dealers for the purpose of funding
option grants under its stock option plans and deferred compensation plans for
directors and officers.
(b) On February 28, 1994, there were 1,783 holders of common stock of the
Company.
(c) See page 30 of the Company's 1993 Annual Report to Stockholders for
dividend information which is incorporated by reference herein. Also see Note 3
on page 25 of the Company's 1993 Annual Report to Stockholders which sets forth
the restrictive covenants covering dividends.
5
ITEM 6. SELECTED FINANCIAL DATA
See pages 30 and 31 of the Company's 1993 Annual Report to Stockholders for a
ten year summary of selected financial information which is incorporated by
reference herein.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
See pages 14 through 18 of the Company's 1993 Annual Report to Stockholders
which is incorporated by reference herein.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
See pages 19 through 29 of the Company's 1993 Annual Report to Stockholders
for the Company's consolidated financial statements, notes to the consolidated
financial statements and auditors' report which are incorporated by reference
herein.
See page 31 of the Company's 1993 Annual Report to Stockholders for selected
quarterly financial data which is incorporated by reference herein.
ITEM 9. DISAGREEMENTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
None
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
(a)Directors
See pages 3 through 5 of the Company's Proxy Statement dated March 29,
1994, for the Annual Meeting of Stockholders which are incorporated by
reference herein.
(b)Executive Officers
See Executive Officers of the Registrant in Part I above.
ITEM 11. EXECUTIVE COMPENSATION
See page 7 of the Company's Proxy Statement dated March 29, 1994, for the
Annual Meeting of Stockholders which are incorporated by reference herein.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
See pages 1 through 6 of the Company's Proxy Statement dated March 29, 1994,
for the Annual Meeting of Stockholders which are incorporated by reference
herein.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
None
6
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a) & (d) Financial Statements and Schedules
See the Index to the Consolidated Financial Statements and Supplemental
Schedules filed herewith.
(b) Reports on Form 8-K
None
(c) Exhibits
See Exhibit Index filed herewith.
7
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF SECTION 13 OR 15(D) 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
By: Jeffrey W.
Bartlett
Vice President,
General Counsel
and
Corporate
Secretary
March 24, 1994
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES EXCHANGE ACT OF 1934, THIS
REPORT HAS BEEN SIGNED BELOW BY THE FOLLOWING PERSONS ON BEHALF OF THE
REGISTRANT AND IN THE CAPACITIES AND ON THE DATES INDICATED.
F. Quinn Stepan
------------------------------------
F. Quinn Stepan Chairman, President, March 24, 1994
Chief Executive Officer
and Director
James J. Gavin, Jr.
------------------------------------
James J. Gavin, Jr. Director March 24, 1994
Thomas F. Grojean
------------------------------------
Thomas F. Grojean Director March 24, 1994
James A. Hartlage
------------------------------------
James A. Hartlage Senior Vice President-- March 24, 1994
Technology and Director
Walter J. Klein
------------------------------------
Walter J. Klein Vice President--Finance, March 24, 1994
Principal Financial and
Accounting Officer
Paul H. Stepan
------------------------------------
Paul H. Stepan Director March 24, 1994
Robert D. Cadieux
------------------------------------
Robert D. Cadieux Director March 24, 1994
JEFFREY W. BARTLETT, PURSUANT TO POWERS OF ATTORNEY EXECUTED BY EACH OF THE
DIRECTORS AND OFFICERS LISTED ABOVE, DOES HEREBY EXECUTE THIS REPORT ON BEHALF
OF EACH OF SUCH DIRECTORS AND OFFICERS IN THE CAPACITY IN WHICH THE NAME OF
EACH APPEARS ABOVE.
JEFFREY W. BARTLETT
March 24, 1994
8
INDEX TO THE
CONSOLIDATED FINANCIAL STATEMENTS
AND
SUPPLEMENTAL SCHEDULES
A copy of Stepan Company's Annual Report to Stockholders for the year ended
December 31, 1993 has been filed as an exhibit to this Annual Report on Form
10-K. Pages 19 through 29 of such Annual Report to Stockholders contain the
Consolidated Balance Sheets as of December 31, 1993 and 1992, the Consolidated
Statements of Income, Stockholders' Equity and Cash Flows and Notes to
Consolidated Financial Statements for the three years ended December 31, 1993,
and the Auditors' Report covering the aforementioned financial statements.
These consolidated financial statements and the Auditors' Report thereon are
incorporated herein by reference.
Supplemental Schedules to Consolidated Financial Statements and the Auditors'
Report on such Supplemental Schedules on pages 10 through 12 of this 10-K,
including Schedules V and VI--Property, Plant and Equipment and Related
Accumulated Depreciation, Schedule VIII--Allowance for Doubtful Accounts and
Schedule IX--Short-term Borrowings, which are required to comply with
Regulation S-X, are included herein.
The individual financial statements of the Registrant have been omitted
because the Registrant is primarily an operating company and all subsidiaries
included in the consolidated financial statements being filed, in the
aggregate, do not have minority equity interests and/or indebtedness to any
person other than the parent in amounts which together exceed 5% of the total
consolidated assets at the date of the latest balance sheet filed.
Certain supplemental schedules are not submitted because they are not
applicable or not required, or because the required information is included in
the financial statements or notes thereto.
9
STEPAN COMPANY
SUPPLEMENTAL SCHEDULES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED DECEMBER 31, 1993
AS REQUIRED TO COMPLY WITH REGULATION S-X
SCHEDULES V AND VI--PROPERTY, PLANT AND EQUIPMENT AND RELATED ACCUMULATED
DEPRECIATION:
Analyses of property, plant and equipment and the related accumulated
depreciation for the three years ended December 31, 1993 are as follows:
PROPERTY, PLANT AND EQUIPMENT
(IN THOUSANDS)
BALANCE BALANCE
AT DEC. ADDITIONS RETIREMENTS AT DEC.
CLASSIFICATION 31, 1992 AT COST AND SALES OTHER (A) 31, 1993
-------------- -------- --------- ----------- -------- --------
Land.......................... $ 4,533 $ -- $ -- $ -- $ 4,533
Buildings and improvements.... 42,781 8,217 (386) (469) 50,143
Machinery and equipment....... 290,866 24,152 (2,524) (873) 311,621
Construction in progress...... 15,819 (4,555) (117) (5) 11,142
-------- -------- -------- -------- --------
$353,999 $ 27,814 $ (3,027) $ (1,347) $377,439
======== ======== ======== ======== ========
BALANCE BALANCE
AT DEC. ADDITIONS RETIREMENTS AT DEC.
CLASSIFICATION 31, 1991 AT COST AND SALES OTHER (A) 31, 1992
-------------- -------- --------- ----------- -------- --------
Land.......................... $ 3,996 $ 735 $ -- $ (198) $ 4,533
Buildings and improvements.... 37,393 5,559 (66) (105) 42,781
Machinery and equipment....... 257,404 35,629 (639) (1,528) 290,866
Construction in progress...... 23,467 (7,483) -- (165) 15,819
-------- -------- -------- -------- --------
$322,260 $ 34,440 $ (705) $ (1,996) $353,999
======== ======== ======== ======== ========
BALANCE BALANCE
AT DEC. ADDITIONS RETIREMENTS AT DEC.
CLASSIFICATION 31, 1990 AT COST AND SALES OTHER (A) 31, 1991
-------------- -------- --------- ----------- -------- --------
Land.......................... $ 4,006 $ -- $ -- $ (10) $ 3,996
Buildings and improvements.... 35,181 2,247 (18) (17) 37,393
Machinery and equipment....... 228,681 28,904 (254) 73 257,404
Construction in progress...... 20,896 2,577 -- (6) 23,467
-------- -------- -------- -------- --------
$288,764 $ 33,728 $ (272) $ 40 $322,260
======== ======== ======== ======== ========
10
ACCUMULATED DEPRECIATION OF PLANT AND EQUIPMENT
(IN THOUSANDS)
BALANCE ADDITIONS BALANCE
AT CHARGED TO AT
DEC. 31, COSTS AND RETIREMENTS OTHER DEC. 31,
DESCRIPTION 1992 EXPENSES AND SALES (A) 1993
----------- -------- ---------- ----------- ----- --------
Buildings and improvements..... $ 18,763 $ 1,906 $ (362) $ (26) $ 20,281
Machinery and equipment........ 167,306 23,804 (2,207) (626) 188,277
-------- ------- ------- ----- --------
$186,069 $25,710 $(2,569) $(652) $208,558
======== ======= ======= ===== ========
BALANCE ADDITIONS BALANCE
AT CHARGED TO AT
DEC. 31, COSTS AND RETIREMENTS OTHER DEC. 31,
DESCRIPTION 1991 EXPENSES AND SALES (A) 1992
----------- -------- ---------- ----------- ----- --------
Buildings and improvements..... $ 17,287 $ 1,573 $ (64) $ (33) $ 18,763
Machinery and equipment........ 147,910 20,863 (520) (947) 167,306
-------- ------- ------- ----- --------
$165,197 $22,436 $ (584) $(980) $186,069
======== ======= ======= ===== ========
BALANCE ADDITIONS BALANCE
AT CHARGED TO AT
DEC. 31, COSTS AND RETIREMENTS OTHER DEC. 31,
DESCRIPTION 1990 EXPENSES AND SALES (A) 1991
----------- -------- ---------- ----------- ----- --------
Buildings and improvements..... $ 15,908 $ 1,401 $ (18) $ (4) $ 17,287
Machinery and equipment........ 129,514 18,715 (187) (132) 147,910
-------- ------- ------- ----- --------
$145,422 $20,116 $ (205) $(136) $165,197
======== ======= ======= ===== ========
- --------
(A) Primarily relates to impact of foreign currency translation adjustments in
accordance with Statement of Financial Accounting Standards No. 52.
SCHEDULE VIII--ALLOWANCE FOR DOUBTFUL ACCOUNTS:
An analysis of the allowance for doubtful accounts for the three years ended
December 31, 1993 is summarized as follows:
(IN THOUSANDS)
1993 1992 1991
------ ------ ------
Balance, Beginning of Year.............................. $1,444 $1,592 $1,482
Provision charged to income........................... 621 119 213
Accounts written off, net of recoveries............... (326) (267) (103)
------ ------ ------
Balance, End of Year.................................... $1,739 $1,444 $1,592
====== ====== ======
SCHEDULE IX--SHORT-TERM BORROWINGS
An analysis of the short-term borrowings for the three years ended December
31, 1993 is summarized as follows:
(IN THOUSANDS, EXCEPT
INTEREST RATE AMOUNTS)
MAXIMUM
WEIGHTED AMOUNT WEIGHTED
AVERAGE OUTSTANDING AVERAGE
BALANCE INTEREST AT ANY AVERAGE AMOUNT INTEREST
CATEGORY END OF YEAR RATE MONTH-END OUTSTANDING(1) RATE(2)
-------- ----------- -------- ----------- -------------- --------
1993 Notes Payable to
Banks.................. -- -- $16,300 $ 4,713 3.97%
======= ====== ======= ======= ====
1992 Notes Payable to
Banks.................. -- -- $ 8,300 $ 5,401 4.51%
======= ====== ======= ======= ====
1991 Notes Payable to
Banks.................. -- -- $36,200 $20,230 6.90%
======= ====== ======= ======= ====
- --------
(1) Average is computed using daily balances.
(2) Weighted average interest rate is computed by dividing interest expense
applicable to short-term borrowings by the average amount outstanding
during the year.
11
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
ON SUPPLEMENTAL SCHEDULES
To Stepan Company:
We have audited in accordance with generally accepted auditing standards, the
financial statements included in Stepan Company's Annual Report to Stockholders
incorporated by reference in this Form 10-K, and have issued our report thereon
dated February 11, 1994. Our audit was made for the purpose of forming an
opinion on those statements taken as a whole. The supplemental schedules listed
in the index of financial statements are the responsibility of the Company's
management and are presented for purposes of complying with the Securities and
Exchange Commission's rules and are not part of the basic financial statements.
These schedules have been subjected to the auditing procedures applied in the
audit of the basic financial statements and, in our opinion, fairly state in
all material respects the financial data required to be set forth therein in
relation to the basic financial statements taken as a whole.
ARTHUR ANDERSEN & CO.
Chicago, Illinois,
February 11, 1994
12
EXHIBIT INDEX
EXHIBIT
NO. DESCRIPTION
------- -----------
(3)a Copy of the Certificate of Incorporation, and the Certificates of
Amendment of Certificate of Incorporation dated May 6, 1968, April 20,
1972, April 16, 1973, December 2, 1983. Filed with the Company's Annual
Report on Form 10-K for the year ended December 31, 1983, and incorporated
herein by reference.
(3)b Copy of the Bylaws of the Company as amended through May 6, 1987.*
(3)c Copy of Certificate of Amendment, dated April 28, 1993, to Article IV of
Certificate of Incorporation.##
(3)d Copy of Certificate of Amendment, dated May 5, 1987, to Article X of
Certificate of Incorporation.*
(4)i Copy of Revolving Credit and Term Loan Agreement dated February 20, 1990,
with The First National Bank of Chicago and the amendment dated March 21,
1990.****
(4)m Copy of Second Amendment dated September 20, 1991, amending Revolving
Credit and Term Loan Agreement dated February 20, 1990 (see (4)i
above).******
(4)m(1) Copy of Third Amendment dated December 29, 1992, amending Revolving Credit
and Term Loan Agreement dated February 20, 1990 (see (4)i and (4)m
above).###
(4)n(1) Copy of Certificate of Designation, Preferences and Rights of the 5 1/2%
Convertible Preferred Stock, without Par Value and the Amended Certificate
dated August 12, 1992 and April 28, 1993.##
(4)n(2) Copy of Issuer Tender Offer Statement on Schedule 13E-4 dated August 13,
1992.#
(4)n(3) Copy of Amendment No. 1 to Schedule 13E-4 (see also (4)n(2) above) dated
September 23, 1992.#
(4)n(4) Copy of the Company's Form 8-A dated August 13, 1992.#
In accordance with 601 (b)(4)(iii) of Regulation S-K, certain debt
instruments are omitted, where the amount of securities authorized under
such instruments does not exceed 10% of the total consolidated assets of
the Registrant. Copies of such instruments will be furnished to the
Commission upon request.
(10)a Description of the 1965 Directors Deferred Compensation Plan.***
(10)b Copy of the 1969 Management Incentive Compensation Plan as amended and
restated as of January 1, 1992.*******
(10)d Copy of the 1982 Stock Option Plan.***
(10)e Copy of Leveraged Employee Stock Ownership Plan.****
(10)f Copy of the Company's 1992 Stock Option Plan.*******
(11) Statement re computation of per share earnings.
(13) Copy of the Company's 1993 Annual Report to Stockholders.
(18) Letter re change in accounting principle for the year ended December 31,
1992.###
(21) Subsidiaries of Registrant at December 31, 1993.
(23) Consent of Independent Public Accountants.
(24) Power of Attorney
13
- --------
* Filed with the Company's Annual Report on Form 10-K for the year ended
December 31, 1987, and incorporated herein by reference.
*** Filed with the Company's Annual Report on Form 10-K for the year ended
December 31, 1988, and incorporated herein by reference.
**** Filed with the Company's Annual Report on Form 10-K for the year ended
December 31, 1989, and incorporated herein by reference.
****** Filed with the Company's Quarterly Report on Form 10-Q for the quarter
ended September 30, 1991, and incorporated herein by reference.
******* Filed with the Company's Quarterly Report on Form 10-Q for the quarter
ended March 31, 1992, and incorporated herein by reference.
# Filed with the Company's Quarterly Report on Form 10-Q for the quarter
ended September 30, 1992, and incorporated herein by reference.
## Filed with the Company's Current Report on Form 8-K filed on April 28,
1993, and incorporated herein by reference.
### Filed with the Company's Annual Report on Form 10-K for the year ended
December 31, 1992, and incorporated herein by reference.
14