Ladies and gentlemen, thank you for standing by and welcome to the Third Quarter Earnings Conference Call. During the presentation, all participants will be in a listen-only mode. Afterwards, we will conduct a question-and-answer session. [Operator Instructions] As a reminder, this conference is being recorded today Tuesday, October 18, 2016. I would now like to turn the conference over to Mr. Scott Beamer, Vice President and Chief Financial Officer. Please go ahead, sir.

Hello and thank you for joining Stepan Company's third quarter 2016 financial review. Please note before we begin 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 those identified in our earnings press release in our Securities and Exchange Commission filings. Whether you're 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 Web site. We make these slides available at approximately the same time as when the earnings release is issued and we hope that you find the information and prospectus helpful. Now with that, I'd like to turn the call over to F. Quinn Stepan Jr.., our President and Chief Executive Officer.

Thank you, Scott, and good morning, and thank you all for joining us on our call today. The Company had a very good third quarter driven by strong polymer volumes globally, increased asset utilization and enhanced internal efficiencies. Reported third quarter net income was $20.4 million or $0.80 per diluted share compared to $24.9 million or $1.09 per diluted share in the same quarter last year. Adjusted net income was $24.5 million or $1.06 per diluted share a record third quarter and a 16% increase compared to the $21.1 million or $0.92 per diluted share in the third quarter of 2015. Net sales for the quarter increased slightly from last year to $445 million as higher volumes were offset by lower selling prices related to lower raw material cost and the negative impact of foreign currency. Surfactant operating income was $20.7 million, down $1.1 million or 5% versus the prior year. Higher results in North America were more than offset by declines in Europe and Latin America. On October 3rd, we closed the previously announced acquisition of Tebras and PBC in Brazil which have combined 25,000 metric tons of sulfonation capacity and have annual sales of $32 million. The acquisition expands and diversifies our customer base in Brazil and provides an opportunity to sell our broader Surfactant portfolio to over 1200 customers. This transaction will have minimal impact on 2016 results but should be slightly accretive to earnings in 2017. Polymer operating income was $27.1 million a record third quarter and an increase of $2.5 million or 10% compared to the third quarter of 2015. Our Polyol plant in Germany completed its mandatory maintenance and safety inspection by the German authorities and is now running at full rate. Our Board of Directors declared a quarterly cash dividend of Stepan's common stock of $0.205 per share payable on December 15, 2016. This represents $0.015 per share or a 7.9% increase over the prior quarterly dividend and marks the 49th consecutive year that the Company has increased its cash dividend to shareholders. At this point, I'd like Scott to walk through a few more details about our third quarter results.

Thank you, Quinn. My comments will generally follow the slide presentation and we'll start with slide number three to recap the quarter. As mentioned adjusted net income of $24.5 million represented a record third quarter. Since adjusted net income is a non-GAAP measure, we provide full reconciliations to the reported figures and these can be found in Appendix 2 of the presentation and Table 2 of our press release. Specifically regarding adjustments to reported net income, this quarter included only deferred compensation expense of $4.1 million or $0.17 per diluted share whereas the same period of the prior year had $3.8 million of income or $0.17 per diluted share. The expense for the current quarter was due to a 22% increase in Stepan's stock from the end of the second quarter of 2016 to the end of the third quarter of 2016. Naturally all employee compensation expenses reflected in our normal operating income; however, we also allow employees the opportunity to defer their payouts until some future date and the future payment changes based on the Company's stock price. When the stock price increases expense is generated. Since the future liability of employee compensation only changes consistently with the change in the stock price, we exclude this item from our operational discussion discussions. Surfactant income was $20.7 million down $1.1 million or 5% versus the third quarter of 2015, due to lower results in Europe and Latin America partially offset by North America lower raw material cost and higher volumes as well as operational improvements. North America was negatively impacted by cost related to the Canadian plant shutdown, which was previously reported. Polymer operating income was $27.1 million, up $2.5 million or 10% versus the third quarter of 2015. This increase was due to volume growth within the Global Rigid…

Thank you, Scott, after a record nine months we cautiously approach the fourth quarter. It is important to note that the fourth quarter of 2015 presents a challenging comparable. We expect raw material cost in the upcoming quarter to be higher than the fourth quarter of 2015. More specifically the lower raw material cost in the fourth quarter of 2015 generated LIFO income which is not expected to repeat and could become an expense in this year's fourth quarter. This may result in a $4 million to $6 million swing from last year's fourth quarter. Additionally, we have scheduled the maintenance shutdown of our sales anhydride unit and accelerated depreciation related to our Canadian plant closure, combined these two are expected to negatively impact fourth quarter 2016 results by approximately $3 million. On the positive side, higher polyol volumes increased asset utilization and enhanced internal efficiencies should partially offset these known headwinds. We expect to deliver record consolidated adjusted net income for the year. Polymer volumes are expected to remain strong for the balance of the year. Although Surfactants will be faced with challenges in the fourth quarter, we expect to deliver strong full year results. Within Surfactants, we are executing on key strategic actions to enable long-term earnings growth. Closure of our Canadian facility will allow us to improve asset utilization in North America and reduce our fixed cost base. The acquisition of Tebras and PBC is expected to expand and diversify our customer base in Brazil and provide an opportunity to sell our broader surfactant portfolio. Our internal efficiency initiative is expected to deliver $12 million of pre-tax savings for the full year. Finally, the actions taken in the fourth quarter of 2015 to lower costs and enhanced supply chain efficiencies related to our Lipid Nutrition and enhanced oil recovery businesses had delivered earnings growth this year. After a record first nine months, we continue to believe earnings per share should grow in 2016. We're optimistic about the Company's continued growth in 2017. With the strong balance sheet, we're positioned well to fund opportunities to support continued profit growth in 2017 and beyond. This concludes our prepared remarks, at this time we would like to turn the call over for questions. Cowen, please review the instructions for the question portion of today's call.

Thank you, very much sir. [Operator Instructions] And our first question comes from the line of Eugene Fedotoff with KeyBanc Capital Markets. Your line is open. Please go ahead.

A few questions from surfactants first I guess this all price positive in the quarter, so, has price bottomed basically and your down pacing through the lower raw material costs and actually starting to raise prices as raw material costs going up? And also if you can mention or comment on what trends did you see in during the quarter in your raw material costs?

So, specifically, we have seen announced price increases on the oleochemical raw materials that we buy, fairly dramatic price increases for coconut oil, palm oil and lauryl alcohol themselves and derivates. We've announced price increases in the effective October 1st to cover and maintain our current margins. So from a petroleum perspective, we haven't started to see dramatic movement in those prices at this point in time, but we would anticipate that they would start to move up during the quarter.

And as far as volumes in Latin America, they're soft in the quarter after going strong in the first half, anything changing in the region?

Procter & Gamble has announced that they're planning on exiting the powdered laundry market in Brazil. So, that's a macro change in that marketplace and other customers that we're currently supplying are beginning to pick up some of that volume in the marketplace. So, overall that's a macro trend. We also saw a little de-formulation in the region with the substitute surfactants by some enzyme technology.

And as far as strategic initiatives that you're working on to support the earnings growth very referring to the dry program or there're other options to improve earnings since surfactants?

There are always other options to increase profitability of our business. We're focusing on our drive initiative but also looking at other opportunities to improve our effectiveness and efficiency.

Switching to polyol, sorry --

I am not prepared to comment on any of those further at this time.

I see. Thanks. Switching to polyols, do you expect, obviously you said that you expect volumes to remain strong in fourth quarter '16, any reasons this growth may not continue into '17 and also whether you expect that contribution from the new capacity in Poland will be?

I don't anticipate the magnitude of the growth that we anticipated in or received in 2016 carrying over into 2017. As we look at our projections, consistently over a period we have been getting kind of on average about 8% market growth for polyol. But the market growth is somewhat up and down a little bit, so we're looking at '17 as more modest growth in this area rather than the dramatic growth that we experienced in 2016. From a polyol perspective and a specialty perspective from the new assets that we're starting up in Poland, we do expect increased volumes and improved margins coming from that reactor in 2017.

Got it. Just to follow up on the volume growth in 2016, it seems like you were growing faster than the market, the roofing market, insulation market. Were you taking share from someone, was that the part of the growth?

Our share is probably increased slightly on a global basis, in terms of competitive aromatic polyester polyol. But I think the real growth that we've seen is kind of increased opportunities versus other insulation materials in the marketplace.

And just the last question on Phthalic Anhydride, I was surprised that volumes declined in the quarter. Did you start lapping the market share gain in that business?

The volumes were down just slightly. So, I don't anticipate that we've lost significant market share in that space, and it could be more order patterned than anything else. We did lose a customer early in the year and pick up some others that were approximately the same volumes.

And our next question comes from the line of David Stratton with Great Lakes Review. Your line is open. Please go ahead.

When we look at Latin America, Brazil and the softness there, can you talk a little bit about how that impacts your recent acquisitions? And does that change anything or was this expected and just business as usual?

So, we're obviously aware of the slowdown in Brazil as we were working on and went to close on the acquisition. The customer base that Tebras/PBC has generally participates in the lower, the economy part of the Brazilian market. So, a slowdown in the Brazilian economy for us with the new customers will provide somewhat of the hedge versus the larger middleclass premium products that are sold in the market place today. So, we’re optimistic and have already increased some volumes of complementary products being sold to current Tebras/PBC customers. So, we remain very optimistic about the acquisition and anticipate that will see some significant growth over the next two to three years.

And then the Global Rigid Polyol, can you break that out into geographic growth, so you’re saying that uniformly or were there any geographies that kind of let that 40% growth?

All regions were up and so, China was up but on a much smaller -- it was up significantly higher but on a much smaller base to begin with, but significant growth in both Europe and United States.

And then one final, the tax rate lowering and new changes your expectations there, can you talk about what drove that? And how we should look at the reminder of the year and the 2017 going forward?

Yes, sure David. Really in the U.S., the big impact is our earnings in the U.S., which we know on an operational basis is up pretty significantly. But there is the offsetting expense of the differed compensation which is a U.S. item. So, as we’ve seen the large increase in differed compensation expense in the quarter, that's the US only item reducing the U.S. income which makes the tax rates slightly favorable. So, that’s why we've gone ahead and adjusted our expectation right now.

[Operator Instructions] And there appeared to be no further questions on the phone line at this time.

Okay, thank you for your interest in and your ownership of Stepan Company. Have a great day.