SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of report (Date of earliest event reported) August 1, 2002
STEPAN COMPANY
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(Exact Name of Registrant as Specified in its Charter)
Delaware
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(State or Other Jurisdiction of Incorporation)
1-4462 36-1823834
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(Commission File Number) (I.R.S. Employer Identification No.)
Edens and Winnetka Road,
Northfield, Illinois 60093
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(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number, including area code: (847) 446-7500
Item 5. Other Events and Regulation FD Disclosure.
Stepan Company (the "Company" or "Stepan") reported on August 1, 2002,
the effects of a change in accounting for its deferred compensation plan. The
impact of the change will be to include the assets, consisting of mutual funds
and Stepan treasury shares, and the related deferred compensation liability on
the balance sheet. Historically, the Company has accounted for the fully funded
plan by netting both the invested assets and related deferred compensation
liability, thereby omitting these items from its balance sheet presentation. The
new approach will conform to the Financial Accounting Standards Board's Emerging
Issues Task Force 97-14 consensus opinion on accounting for similar plans. The
net impact on stockholders' equity at June 30, 2002 will be a reduction of
$10,364,000. Fluctuations in asset values will result in compensation expense or
income. Investment income and expense will be recorded in the income statement
and unrealized mutual fund market appreciation or depreciation will be charged
to balance sheet equity as other comprehensive income or loss. Treasury shares
will remain recorded at cost.
The accounting change will be recorded as a correction of an error with
effect given to the three prior year's financial statements in a restated and
amended SEC Form 10-K/A to be filed after the financial statements for those
years are audited by the Company's recently appointed auditors, Deloitte &
Touche. The change will increase reported net income in 1999 and 2000 and
decrease 2001 and year-to-date 2002 earnings as disclosed below. Shares
outstanding will decline due to the increase in reported treasury shares,
resulting in higher earnings per share ("EPS") in 1999, 2000 and 2001 and a
decline in the first quarter 2002 EPS.
The decision to record this accounting change was reached after the
Company internally reviewed its accounting policy and recommended the change be
implemented within the second quarter of 2002. The accounting change was based
on the similarity of the fact pattern in Emerging Issues Task Force 97-14 to the
Company's deferred compensation plan and was discussed with the audit committee
members and the Company's independent auditors prior to implementation.
Exhibit 99.1 to this Form 8-K sets forth restated net income, diluted
earnings per share and the effect on the June 30, 2002 balance sheet, computed
in a manner that gives effect to the Company's deferred compensation
arrangements in accordance with these accounting principles.
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 hereunto duly authorized.
STEPAN COMPANY
By: /s/ Kathleen M. Owens
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Kathleen M. Owens
Assistant Secretary
Date: August 1, 2002
EXHIBIT INDEX
Exhibit
Number Description
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99.1 Effect of Accounting Change and Impact on Balance Sheet, Unaudited