Ladies and gentlemen, thank you for standing by. Welcome to the Stepan Company's Third Quarter 2013 Earnings Conference Call. During the presentation, all participants will be in a listen-only mode. Afterwards, we’ll conduct a question-and-answer session. (Operator Instructions) And as a reminder, this conference is being recorded, Monday, October 21, 2013. I would now like to turn the conference over to Scott Beamer, Chief Financial Officer. Please go ahead. Go ahead, Sir. You may proceed with your presentation.

Good afternoon. Thank you for joining Stepan Company's third quarter 2013 financial review. It's my pleasure to join you. I am Scott Beamer. It's my pleasure to join you for the first time on this call. I am very excited to be part of Stepan Company and extremely optimistic about our company's strategy and the opportunities that lie ahead. Before we begin, 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 prospects of our foreign operations, global and regional economic conditions and factors detailed in the company's Securities and Exchange Commission's filings. That being said, I would like to turn the call over to F. Quinn Stepan, Jr., President and Chief Executive Officer of Stepan.

Thank you, Scott, and thank you all for joining us today. Looking at our third quarter 2013 performance, despite the challenging operating environment, we delivered improved earnings. Net income of $20.4 million, rose 1% from the prior year, with net sales and volume up 8% and 9% respectively. Excluding deferred compensation, net income was $21.1 million, up 2%. Surfactants, Polymers and Specialty Products, all delivered net sales growth versus the prior period -- prior year. Within our core business lines, higher raw material cost inventory in our Surfactant business build to support our Singapore plant start-up and the subsequent decline in commodity prices, negatively impacted our Surfactant business by $1 million in the quarter and $4 million year-to-date. Our Singapore methyl ester plant is operating well and contributed to our profitability in the quarter, and the remaining negative impact of this inventory will not carry beyond 2013. The Polymer segment delivered strong quarterly results despite lower global economic growth and the negative year-over-year impact of our China operations. Operating cost increased versus last year, as we continue to invest our long term growth and expand our research and develop capabilities and built our organization in Latin America and Asia. I am pleased to report that on October 18, our Board of Directors declared a 6% increase in the company's quarterly cash dividend. The increase brings Stepan's annual dividend rate to $0.68 per share and marks the 46th consecutive year in which Stepan has increased its quarterly dividend rate on its common stock. Dividends are a key component of our comprehensive and ongoing commitment to generating shareholder value. In the first three quarters, Stepan has paid out cash dividend distributions to common and preferred shareholders, totaling $10.7 million. Overall, we delivered slightly improved results in the third quarter and we remain optimistic about our long term growth. At this point, I would like Scott to walk through Stepan's third quarter results.

Thanks Quinn. Total sales for the third quarter were $475.5 million, up 8% versus prior year. The net income -- the net increase in the third quarter sales was primarily related to higher volumes, which accounted for 9%. This was partially offset by 1% lower selling prices. The decline in selling prices was brought on by lower commodity raw material cost and increased competitive activity. Net income attributable to Stepan Company on a GAAP basis, totaled $20.4 million, up 1% from prior year. GAAP EPS was $0.89 per diluted share in both periods. The impact of deferred compensation reduced GAAP diluted earnings per share by $0.03 in the third quarter. The deferred compensation expense was largely attributable to a 4% increase in the company's share price during the quarter. The third quarter non-GAAP net income, which excludes approximately $696,000 in deferred comp expense, increased 2% to $21.1 million versus prior year. Non-GAAP EPS was $0.92 per diluted share, up 1% from prior year. A detailed table outlining the financial effect of the deferred comp plan expense has been provided in the earnings table as Table 2 for your reference. Also please see Table 3 in our earnings release for a summary of the effects of the foreign currency translation on sales and the key income line items. Third quarter gross profit rose four percentage points over prior year to $74.3 million. Gross profit benefitted from a $3.7 million business interruption insurance recovery related to a 2011 fire in our Germany polyol plant, partially offset by the $1 million higher price to methyl ester inventories build up in prior periods to support the Singapore plant start-up. Surfactant margins were down slightly as the slow global economy and select customer de-formulations reduced demand and increased competitive activity. Quarterly operating expenses excluding deferred…

Thanks, Scott. While our performance in the first three quarters has made achieving full year earnings growth difficult, we continue to pursue investments that will accelerate our growth. In 2014, we realized the benefits of our recent acquisition and other capacity expansions. Surfactant consumer product volumes will benefit from continued growth in Brazil. As previously noted, our Singapore methyl ester plant is operating well and is now contributing to our profitability and the remaining negative impact of this inventory will not carry beyond 2013. Surfactant sold for used and enhanced oil recovery are expected to improve compared to the slow year-to-date results. Demand for agricultural surfactants should remain strong. The second quarter acquisition of the North American polyester resin business from Bayer should be slightly accretive to earnings in 2013 and more so as capacity has increased to manufacture additional polyol products for the coatings, adhesives, sealants and elastomers, CASE applications. Early fourth quarter polyol orders are strong in both North America and Europe as it appears we are getting some business not shipped earlier in the year due to poor weather. We continue to have a healthy balance sheet and we increased dividends for the 46th consecutive year, reflecting our continued commitment to generating shareholder value. This concludes our prepared remarks. At this time, we would like to turn the call over for questions. Chris, please review the instructions for the question portion of today's call.

Thank you very much. (Operator Instruction) One moment please for our first question.

This is Scott and Quinn. We did not hear any question.

And we do now have a question in the queue. It’s from the line of Jason Rogers with Great Lake Review. Please proceed with your question.

Hello. This is Greg Halter on for Jason. He's actually on as well.

Okay.

Hello, hello. And welcome Scott to your first call. I wanted to ask about the oil field area. I think in the last quarter you’d mentioned you have I think greater than 30 projects in the portfolio, but they've come across slower than what you would like so far. Just wanted to delve in that a little more, whether or not there’s been any change in the thinking of the users of the product or maybe you can just help us understand what's going on in that particular area?

Yeah. I think we are seeing some delay in project implementation. There is some increased activity by several of the customers, but not all of the customers, where they're having investment opportunities in the oil shale regions of the United States in particular. So some of those companies that have the opportunities to do both have delayed their implementation of some of the EOR projects in the field. Order of magnitude, we still have approximately 30 opportunities that we’re actively resourcing with our TIORCO joint venture and the projects continue to move forward but at a much slower pace than we anticipated. With this point in time we anticipate improved performance in 2014, but not significant volumes.

Okay. And relative to the move in China, if you could maybe elaborate on where you stand in regards to that move, the planned move, I guess.

We mentioned in the conference call that our performance is down year-over-year. We’re down approximately $3 million. We made income last year. We had some write-offs and accelerated depreciation this year. So we’re down significantly from a operating income perspective year-over-year in China. We continually -- we continue to discuss compensation for our move with the Chinese government. We are not currently satisfied with the status of those conversations and it remains work in progress.

Okay. And that’s all I have at this point. Thanks.

Thank you.

(Operator Instructions) And our next question comes from the line of Jeff Hershey with Columbia Management. Please, proceed with your question.

Hi. Just following up on that last question. How long do you anticipate the drag in China to last?

Let me provide an update at our next earnings call release. The timeframe is undefined at this point in time. We are trying to resolve that in the current fourth quarter. We don’t have a specific answer yet.

Okay. Maybe then you could provide some commentary on some of the capital projects that you’re working on and what you expect they would contribute going forward.

If we look at the projects that we have recently just completed, one of the largest ones is the expansion of our polyol business in Germany. We added a second reactor and recently added additional infrastructure surrounding that reactor to support our growth in Europe. We take a look at our base German business today. We said our polyol business was up 29%. Most of that growth is coming from our German facility. Some incremental progress at our Polish facility, but most of that’s coming from Germany. So we anticipate as the market has moved from buying urethane systems to self formulation and once those customers go, that we think there is an opportunity that they'll continue to stay with us and that niche particularly in the metal panel market is growing nicely for us. So that's a recent example of significant capital expenditure that is benefiting us as we go forward. Certainly, we have built neutralizer associated with our surfactant business that's allowed us to sell more value-added products down into the Brazilian market. So that plant is currently up and running at full capacity and has contributed to our performance growth in Latin America. We will look to make additional investments in Latin America to support the projected growth that we see in that market, both from a consumer product perspective as the market moves particularly in [laundry] [ph] products from laundry bars to powders to liquids, but also the agricultural and the oil field markets that we see continuing to grow in that region of the world. Those are two examples.

Thanks very much.

And we do have a follow-up question from the line of Jason Rogers with Great Lakes Review. Please, go ahead with your question.

Hello, it’s Greg again. Now that the Bayer has been on board for a while, I just wonder what your thoughts are on any acquisitions pipeline that you may see out there and any opportunities?

We will continue to look at opportunities particularly in our two core markets both surfactants and from polyester polyols. So, our focus is pretty narrow. We’re looking at surfactants. Geographical expansion is something that we’re continuing to look at and evaluate in a number of different regions in the world. There are assets that are available today. Whether or not, we choose to do one or more, remains to be seen. But we’ll continue to look at bolt-on acquisitions as a core part of how we want to grow the business. Within the polymer space, we'll continue to look at polyol acquisitions that are focused in the -- either in the CASE or the lamination or PUSH market places. But right now, our priority is digest the Columbus acquisition we have and expand the capabilities of that site and we're excited about the opportunity to do that.

Okay. And you tax rate, should that remain relatively around 31% or so for the fourth quarter and any early indication of what you expect for 2014?

Well, full year, Greg, we're at 28% now and I think that’s a good metric to use for the full year of '13. Then for '14, I think we can expect it to be between say, 29% and 31%.

Okay.

We expect it to be up slightly next year. As we continue to sell more products from Singapore somewhat offset by the acquisition that Columbus and Georgia’s facility…

Yeah. Because there’s a shift of some -- there’s some shift of some income coming back to the U.S., Greg, with the Columbus acquisition, with that being the highest tax rate, that’s how you can think of the rate trending back up slightly for next year.

Okay. And I am somewhat intrigued by the commentary about the de-formulation that's continuing. Just wonder if you could provide a little more color around that if you expect that to continue? What kind of impact that may have on your volumes plus or minus, I guess if it were to change at some point?

I think most of the de-formulation impact is behind us. But as we look at trying to discuss year-over-year performance, it is a factor in our business today. So, but I think as we look at our customer base, most of them have said, that they are -- they are done with that activity at this point in time. They'll always be looking at reformulating -- de-formulating, but at this point in time, we appear to have reached a steady state. But customers in the laundry market particularly in North America do consider -- continuingly look at trading down from premium products to more value products and that shift is well effectively is the de-formulation as well.

Okay. And on the debt side, you have the $100 million private placement in late June. Is there anything else that will be done there in terms of debt refinance? And I just wonder what your overall interest rate is on all the debt currently?

I think our overall rate Greg, I think is 3, 3.8 something blended. It may be a little bit higher than that. I think that was the rate at the current business. The most recent, but we’re pretty -- we can get back to you with the exact weighted average cost of our debt today, but it’s probably in the 4.5% range I would guess off the top of my head. The -- we look at refinancing that and currently it's really not economical to do that based on some of the rates that we have outstanding and the prepayment penalties associated with that. So, virtually all of our debt today is fixed rate today. We are effectively not in our revolver, $125 million.

Okay.

But we can get back to you. It’s actually in the published document.

Yeah. So I’ve just run the weighted average on our debt footnote and I think Quinn's point that he made about the fixed rate, we feel really good about where we are from a debt perspective and where our REIT's are locked in and how these things are layered out into the future. We feel very good and confident as we look at the future in terms of paybacks as well.

Okay. And I heard some discussion about the inventory, but nothing on receivables, just wonder if you either have the balance, the number there as of September 30th and/or what the days look like or what you may be seeing in terms of customer payments?

Yeah sure. The receivables is $293 million and that’s a difference from about $256 million last year same time. So that's up less than $30 million. Some of that is -- and there are two [big] pieces. Some of that -- the growth of the business related to Columbus and some of that is also the volume that we've experienced in the total company. So there is no change as far as our terms are concerned. We feel again really good about our risk profile as well and there has been no significant change to terms or the risk profile in terms of bad debts or anything like that.

Okay.

The growth is related to volume and some from the acquisition.

And one last one for you. Out of the cash that you have, how much is in the States versus outside of the U.S.?

We go back and looked -- virtually all of it is in the United States.

Okay. All right. Thank you.

So the money that we have overseas we are spending.

Okay.

And we are using a tax holding company in Canada to facilitate that.

All right. Thank you.

[Even] there are no further questions on the lines at this time. I will turn the presentation back to you.

I would like to thank everyone for joining Scott and I on the call today as well as the entire Stepan team for their continued dedication to serving our customers worldwide and their valuable contributions that allow us to generate value for you, our shareholders. We look forward to reporting back to you all on our fourth quarter and full year 2013 results call. Have a great day. Thank you.

Ladies and gentlemen, that does conclude the conference call for today. We thank you for your participation and ask that you please disconnect your lines.