CONSHOHOCKEN, Pa., May 6, 2021 /PRNewswire/ -- Quaker Houghton
("the Company") (NYSE: KWR), a global leader in industrial process
fluids, today announced its first quarter of 2021
results.
|
Three Months Ended
March 31,
|
($ in millions,
except per share data)
|
2021
|
|
2020
|
Net sales
|
$
429.8
|
|
$
378.6
|
Net income (loss)
attributable to Quaker Chemical Corporation
|
38.6
|
|
(28.4)
|
Earnings (loss) per
diluted share attributable to Quaker Chemical
Corporation
|
2.15
|
|
(1.60)
|
Non-GAAP net income
*
|
37.9
|
|
24.4
|
Non-GAAP earnings per
diluted share *
|
2.11
|
|
1.38
|
Adjusted EBITDA
*
|
77.1
|
|
60.5
|
|
* Refer to the
Non-GAAP Measures and Reconciliations section below for additional
information
|
|
|
|
|
First Quarter of 2021 Consolidated Results
First quarter of 2021 net sales of $429.8
million increased 14% compared to $378.6 million in the prior year primarily due to
higher volumes, which included additional net sales from
acquisitions of 3%, and the positive impact from foreign currency
translation of 3%. The increase in sales volumes compared to
the first quarter of 2020 was primarily due to improved end market
conditions and continued market share gains. Additional net
sales from acquisitions were primarily attributable to Coral
Chemical ("Coral"), which the Company acquired in December
2020. The positive net impact from foreign currency
translation was primarily due to the strengthening of the euro and
Chinese renminbi against the U.S. dollar quarter-over-quarter,
partially offset by the ongoing weakening of the Brazilian
real.
The Company had net income in the first quarter of 2021 of
$38.6 million, or $2.15 per diluted share, compared to a first
quarter of 2020 net loss of $28.4
million, or $1.60 per diluted
share. The Company's prior year first quarter net loss was
primarily driven by a non-cash impairment charge of $38.0 million for certain indefinite-lived
intangible assets and a non-cash $22.7
million settlement charge related to the termination of a
U.S. defined benefit pension plan. Excluding these
non-recurring items as well as costs associated with the
combination with Houghton International, Inc. (the "Combination")
and other non-core items in each period, the Company's first
quarter of 2021 non-GAAP earnings per diluted share were
$2.11 compared to $1.38 in the prior year first quarter. The
Company's current quarter adjusted EBITDA of $77.1 million increased 28% compared to
$60.5 million in the first quarter of
2020 primarily due to the significant increase in net sales
quarter-over-quarter and higher realized cost synergies from the
Combination. The Company estimates that it realized cost
synergies associated with the Combination of approximately
$18 million during the first quarter
of 2021 compared to approximately $10
million during the first quarter of 2020.
Michael F. Barry, Chairman, Chief
Executive Officer and President, commented, "We had a very strong
first quarter as we saw significant sequential and prior year
improvement in all our segments and regions. The volume
increases were driven by strong demand in our end markets as well
as market share gains. We believe our first quarter volumes
included some higher than expected purchases as customers
replenished their supply chains, but the amount of these purchases
is hard to quantify. Raw material prices continued to
increase in the first quarter and we expect them to continue to
increase in the second quarter as well. The magnitude of our
raw material cost increases are considerably higher than previously
expected due to stress on global supply chains, weather related
shutdowns and unexpected supplier shutdowns. While we expect
to achieve additional price increases to offset these raw material
cost increases, our lowest gross margins of the year are expected
in the second quarter as there will be a lag between the
implementation of price increases and raw material cost
changes. While we are encouraged by the strength and
breadth of the first quarter results, we believe the second quarter
results will be lower than the first quarter due to the lag effect
on our gross margin and potentially lower volumes. However,
we do expect our gross margins to sequentially improve in the third
and fourth quarters as our pricing initiatives catch up to
increases in our raw material costs. Overall, we still
believe our previous guidance is an appropriate floor for our full
year adjusted EBITDA, although we do feel better about the year
given the higher than expected demand we experienced in the first
quarter. However, the magnitude and duration of increasing
raw material costs make it hard to predict how much of this will
offset the positives we are seeing in demand. Nevertheless,
we continue to believe 2021 will be a very good year for us as we
expect we will take a step change in our profitability, complete
our integration cost synergies, continue to take share in the
market place, achieve positive impacts from our recent
acquisitions, and get to our targeted leverage ratio."
First Quarter of 2021 Segment Results
The Company's first quarter of 2021 operating performance in
each of its four reportable segments: (i) Americas; (ii)
Europe, Middle East and Africa ("EMEA"); (iii) Asia/Pacific; and (iv) Global Specialty
Businesses, reflect similar drivers to that of its consolidated
performance.
($ in
millions)
|
Three Months Ended
March 31,
|
Net sales
*
|
2021
|
|
2020
|
Americas
|
$
134.9
|
|
$
129.9
|
EMEA
|
119.8
|
|
104.8
|
Asia/Pacific
|
96.7
|
|
73.6
|
Global Specialty
Businesses
|
78.4
|
|
70.3
|
Segment operating
earnings *
|
|
|
|
Americas
|
$
32.2
|
|
$
29.2
|
EMEA
|
25.2
|
|
18.4
|
Asia/Pacific
|
27.5
|
|
19.5
|
Global Specialty
Businesses
|
24.2
|
|
20.6
|
|
* Refer to the
Segment Measures and Reconciliations section below for additional
information
|
All four segments had higher net sales compared to the first
quarter of 2020. EMEA and Asia/Pacific benefited from higher sales
volumes and the positive impact of foreign exchange translation,
while additional net sales from Coral benefited the Americas and
Global Specialty Businesses. The growth in Asia/Pacific's volumes compared to the prior
year were partially due to the initial impacts of COVID-19 in
China during the first quarter of
2020, whereas all of the remaining segments weren't impacted as
severely until the second quarter of 2020. The benefit of
higher selling price and product mix positively impacted most of
the segments, and foreign currency translation benefited all
segments except the Americas which was driven by the ongoing
weakening of the Brazilian real quarter-over-quarter. As
reported, all of the Company's segment operating earnings were
higher compared to the first quarter of 2020 which reflects higher
current quarter net sales coupled with a higher gross margin in all
segments as compared to the prior year first quarter. While
the Company has experienced higher raw material costs beginning in
the fourth quarter of 2020 and continuing into 2021, the higher
gross margin as compared to the prior year first quarter was
primarily driven by the Company's continued execution of Quaker
Houghton combination-related logistics, procurement and
manufacturing cost savings initiatives as well as the benefit of
higher volumes in the current quarter and the related impact from
fixed manufacturing costs. Direct Selling, general and
administrative expenses ("SG&A") of each segment were
relatively consistent with the first quarter of 2020 with only
Asia/Pacific up as a result of the
segments strong current quarter performance compared to the prior
year which was negatively impacted by the initial COVID-19
conditions in China. Overall, the Company and all of its
segments continued to maintain strong cost control and benefit from
COVID-19 cost savings actions, including lower travel expenses, as
well as the benefits of realized cost savings associated with the
Combination.
Cash Flow and Liquidity Highlights
The Company has no material debt maturities until August 1, 2024. As of March 31, 2021, the Company's total gross debt
was $913.1 million and its cash on
hand was $163.5 million. The
Company's net debt was $749.6
million, and its net debt divided by its trailing twelve
months adjusted EBITDA was approximately 3.1 to 1 as of
March 31, 2021. The Company's
consolidated net leverage ratio, as defined under its bank
agreement, was approximately 2.8 to 1 as of March 31, 2021 compared to a maximum permitted
leverage of 4.0 to 1. Based on current projections of future
liquidity and leverage, the Company does not expect any compliance
issues with its bank covenants.
The Company had a net operating cash outflow of $12.6 million during the first quarter of 2021 as
compared to a net operating cash inflow of $20.2 million in the first quarter of 2020.
The $32.8 million decrease in net
operating cash flow quarter-over-quarter was primarily driven by a
significant change in working capital, as the Company's strong net
sales and volumes resulted in a large increase in accounts
receivable in the first quarter of 2021.
In February 2021, the Company
acquired a tin-plating solutions business for the steel end markets
for approximately $25 million, which
the Company estimates will add full year net sales of approximately
$8 million and approximately
$4 million of full year adjusted
EBITDA going forward.
Non-GAAP Measures and Reconciliations
The information included in this press release includes non-GAAP
(unaudited) financial information that includes EBITDA, adjusted
EBITDA, adjusted EBITDA margin, non-GAAP operating income, non-GAAP
operating margin, non-GAAP net income and non-GAAP earnings per
diluted share. The Company believes these non-GAAP financial
measures provide meaningful supplemental information as they
enhance a reader's understanding of the financial performance of
the Company, are indicative of future operating performance of the
Company, and facilitate a comparison among fiscal periods, as the
non-GAAP financial measures exclude items that are not indicative
of future operating performance or not considered core to the
Company's operations. Non-GAAP results are presented for
supplemental informational purposes only and should not be
considered a substitute for the financial information presented in
accordance with GAAP.
The Company presents EBITDA which is calculated as net income
(loss) attributable to the Company before depreciation and
amortization, interest expense, net, and taxes on income (loss)
before equity in net income of associated companies. The
Company also presents adjusted EBITDA which is calculated as EBITDA
plus or minus certain items that are not indicative of future
operating performance or not considered core to the Company's
operations. In addition, the Company presents non-GAAP
operating income which is calculated as operating income (loss)
plus or minus certain items that are not indicative of future
operating performance or not considered core to the Company's
operations. Adjusted EBITDA margin and non-GAAP operating
margin are calculated as the percentage of adjusted EBITDA and
non-GAAP operating income to consolidated net sales,
respectively. The Company believes these non-GAAP measures
provide transparent and useful information and are widely used by
analysts, investors, and competitors in our industry as well as by
management in assessing the operating performance of the Company on
a consistent basis.
Additionally, the Company presents non-GAAP net income and
non-GAAP earnings per diluted share as additional performance
measures. Non-GAAP net income is calculated as adjusted
EBITDA, defined above, less depreciation and amortization, interest
expense, net, and taxes on income before equity in net income of
associated companies, in each case adjusted, as applicable, for any
depreciation, amortization, interest or tax impacts resulting from
the non-core items identified in the reconciliation of net
income attributable to the Company to adjusted EBITDA.
Non-GAAP earnings per diluted share is calculated as non-GAAP net
income per diluted share as accounted for under the "two-class
share method." The Company believes that non-GAAP net income
and non-GAAP earnings per diluted share provide transparent and
useful information and are widely used by analysts, investors, and
competitors in our industry as well as by management in assessing
the operating performance of the Company on a consistent
basis.
As it relates to 2021 projected adjusted EBITDA growth for the
Company, including as a result of our recent acquisitions, as well
as other forward-looking information described further above, the
Company has not provided guidance for comparable GAAP measures or a
quantitative reconciliation of forward-looking non-GAAP financial
measures to the most directly comparable U.S. GAAP measure because
it is unable to determine with reasonable certainty the ultimate
outcome of certain significant items necessary to calculate such
measures without unreasonable effort. These items include,
but are not limited to, certain non-recurring or non-core items the
Company may record that could materially impact net income, as well
as the impact of COVID-19. These items are uncertain, depend
on various factors, and could have a material impact on the U.S.
GAAP reported results for the guidance period.
The Company's reference to trailing twelve months adjusted
EBITDA within this press release refers to the twelve month period
ended March 31, 2021 adjusted EBITDA
of $238.6 million, which includes (i)
the three months ended March 31, 2021
adjusted EBITDA of $77.1 million, as
presented in the non-GAAP reconciliations below, and (ii) the
twelve months ended December 31, 2020
adjusted EBITDA of $222.0 million, as
presented in the non-GAAP reconciliations included in the Company's
fourth quarter and full year 2020 results press release dated
February 25, 2021, less (iii) the
three months ended March 31, 2020
adjusted EBITDA of $60.5 million, as
presented in the non-GAAP reconciliations below.
The following tables reconcile the Company's non-GAAP financial
measures (unaudited) to their most directly comparable GAAP
(unaudited) financial measures (dollars in thousands unless
otherwise noted, except per share amounts):
Non-GAAP Operating Income and Margin Reconciliations
|
Three Months Ended
March 31,
|
|
|
2021
|
|
2020
|
|
Operating income
(loss)
|
$
44,894
|
|
$
(12,444)
|
|
Houghton combination,
integration and other acquisition-related
expenses (a)
|
6,230
|
|
8,276
|
|
Restructuring and
related charges
|
1,175
|
|
1,716
|
|
Fair value step up of
acquired inventory sold
|
801
|
|
—
|
|
CEO transition
costs
|
504
|
|
—
|
|
Inactive subsidiary's
non-operating litigation costs
|
51
|
|
—
|
|
Customer bankruptcy
costs
|
—
|
|
463
|
|
Indefinite-lived
intangible asset impairment
|
—
|
|
38,000
|
|
Non-GAAP operating
income
|
$
53,655
|
|
$
36,011
|
|
Non-GAAP operating
margin (%)
|
12.5%
|
|
9.5%
|
|
|
|
EBITDA, Adjusted
EBITDA, Adjusted EBITDA Margin and Non-GAAP Net Income
Reconciliations
|
Three Months Ended
March 31,
|
|
2021
|
|
2020
|
Net income (loss)
attributable to Quaker Chemical Corporation
|
$
38,615
|
|
$
(28,381)
|
Depreciation and
amortization (a)(b)
|
22,448
|
|
21,584
|
Interest expense,
net
|
5,470
|
|
8,461
|
Taxes on income (loss)
before equity in net income of associated companies (c)
|
10,689
|
|
(13,070)
|
EBITDA
|
$
77,222
|
|
$
(11,406)
|
Equity (income) loss
in a captive insurance company
|
(3,080)
|
|
327
|
Houghton combination,
integration and other acquisition-related
expenses ( a)
|
427
|
|
7,803
|
Restructuring and
related charges
|
1,175
|
|
1,716
|
Fair value step up of
acquired inventory sold
|
801
|
|
—
|
CEO transition
costs
|
504
|
|
—
|
Inactive subsidiary's
non-operating litigation costs
|
51
|
|
—
|
Customer bankruptcy
costs
|
—
|
|
463
|
Indefinite-lived
intangible asset impairment
|
—
|
|
38,000
|
Pension and
postretirement benefit costs, non-service components
|
(124)
|
|
23,525
|
Currency conversion
impacts of hyper- inflationary economies
|
172
|
|
51
|
Adjusted
EBITDA
|
$
77,148
|
|
$
60,479
|
Adjusted EBITDA
margin (%)
|
18.0%
|
|
16.0%
|
Adjusted
EBITDA
|
$
77,148
|
|
$
60,479
|
Less: Depreciation and
amortization – adjusted (a)(b)
|
22,033
|
|
21,111
|
Less: Interest
expense, net
|
5,470
|
|
8,461
|
Less: Taxes on income
before equity in net income of associated companies – adjusted
(c)
|
11,739
|
|
6,463
|
Non-GAAP net
income
|
$
37,906
|
|
$
24,444
|
|
|
|
|
|
|
|
|
Non-GAAP Earnings
Per Diluted Share Reconciliations
|
Three Months Ended
March 31,
|
|
2021
|
|
2020
|
GAAP earnings (loss)
per diluted share attributable to Quaker Chemical Corporation
common shareholders
|
$
2.15
|
|
$
(1.60)
|
Equity (income) loss
in a captive insurance company per diluted share
|
(0.17)
|
|
0.02
|
Houghton combination,
integration and other acquisition-related expenses per diluted
share (a)
|
0.04
|
|
0.36
|
Restructuring and
related charges per diluted share
|
0.05
|
|
0.07
|
Fair value step up of
acquired inventory sold per diluted share
|
0.03
|
|
—
|
CEO transition costs
per diluted share
|
0.02
|
|
—
|
Inactive subsidiary's
non-operating litigation costs per diluted share
|
0.00
|
|
—
|
Customer bankruptcy
costs per diluted share
|
—
|
|
0.02
|
Indefinite-lived
intangible asset impairment per diluted share
|
—
|
|
1.65
|
Pension and
postretirement benefit costs, non-service components per diluted
share
|
(0.00)
|
|
0.88
|
Currency conversion
impacts of hyper-inflationary economies per diluted
share
|
0.01
|
|
0.00
|
Impact of certain
discrete tax items per diluted share
|
(0.02)
|
|
(0.02)
|
Non-GAAP earnings per
diluted share
|
$
2.11
|
|
$
1.38
|
|
|
(a)
|
The Company recorded
$0.4 million and $0.5 million of accelerated depreciation expense
related to the Combination during the three months ended March 31,
2021 and 2020, respectively. In the three months ended March
31, 2021 all $0.4 million was recorded in cost of goods sold
("COGS"), while in the three months ended March 31, 2020, $0.4
million was recorded in COGS and $0.1 million was recorded in
Combination, integration and other acquisition-related expenses.
The amounts recorded within COGS are included in the caption
Houghton combination, integration and other acquisition-related
expenses in the reconciliation of Operating income (loss) to
Non-GAAP operating income and GAAP earnings (loss) per diluted
share attributable to Quaker Chemical Corporation common
shareholders to Non-GAAP earnings per diluted share. In
addition, the total amounts are included within the caption
Depreciation and amortization in the reconciliation of Net income
(loss) attributable to Quaker Chemical Corporation to Adjusted
EBITDA; however, they are excluded in the reconciliation of
Adjusted EBITDA to Non-GAAP net income. In addition, during
the three months ended March 31, 2021, the Company recognized a
gain of $5.4 million associated with the sale of certain
held-for-sale real property assets which was the result of the
Company's manufacturing footprint integration plans. This
gain was recorded within Other income (expense), net and therefore
is included in the caption Houghton combination, integration and
other acquisition-related expenses in the reconciliation of Net
income (loss) attributable to Quaker Chemical Corporation to
Adjusted EBITDA and GAAP earnings (loss) per diluted share
attributable to Quaker Chemical Corporation common shareholders to
Non-GAAP earnings per diluted share, however it is excluded in the
reconciliation of Operating income (loss) to Non-GAAP operating
income.
|
|
|
(b)
|
Depreciation and
amortization for the three months ended March 31, 2021 and 2020,
includes $0.3 million and $0.4 million, respectively, of
amortization expense recorded within equity in net income of
associated companies in the Statement of Operations, attributable
to the amortization of the fair value step up for Houghton's 50%
interest in a joint venture in Korea as a result of required
purchase accounting.
|
|
|
(c)
|
Taxes on income
before equity in net income of associated companies – adjusted
includes the Company's tax expense adjusted for the impact of any
current and deferred income tax expense (benefit), as applicable,
of the reconciling items presented in the reconciliation of Net
income (loss) attributable to Quaker Chemical Corporation to
adjusted EBITDA, above, determined utilizing the applicable rates
in the taxing jurisdictions in which these adjustments occurred,
subject to deductibility. This caption also includes the
impact of certain specific tax charges and benefits in the first
quarters of 2021 and 2020, respectively, which the Company does not
consider core or indicative of future performance.
|
Segment Measures and Reconciliations
The Company's operating segments, which are consistent with its
reportable segments, reflect the structure of the Company's
internal organization, the method by which the Company's resources
are allocated and the manner by which the chief operating decision
maker assesses the Company's performance. The Company has
four reportable segments: (i) Americas; (ii) EMEA; (iii)
Asia/Pacific; and (iv) Global
Specialty Businesses. The three geographic segments are
composed of the net sales and operations in each respective region,
excluding net sales and operations managed globally by the Global
Specialty Businesses segment, which includes the Company's
container, metal finishing, mining, offshore, specialty coatings,
specialty grease and Norman Hay
businesses. Segment operating earnings for each of the
Company's reportable segments are comprised of the segment's net
sales less directly related COGS and SG&A. Operating
expenses not directly attributable to the net sales of each
respective segment, such as certain corporate and administrative
costs, Combination, integration and other acquisition-related
expenses, and Restructuring and related charges, are not included
in segment operating earnings. Other items not specifically
identified with the Company's reportable segments include interest
expense, net and other income (expense), net.
The following tables reconcile the Company's reportable segments
performance to that of the Company's (dollars in thousands):
|
Three Months Ended
March 31,
|
Net
sales
|
2021
|
|
2020
|
Americas
|
$
134,871
|
|
$
129,896
|
EMEA
|
119,814
|
|
104,839
|
Asia/Pacific
|
96,706
|
|
73,552
|
Global Specialty
Businesses
|
78,392
|
|
70,274
|
Total Net
sales
|
$
429,783
|
|
$
378,561
|
|
|
|
|
Segment operating
earnings
|
|
|
|
Americas
|
$
32,234
|
|
$
29,188
|
EMEA
|
25,244
|
|
18,359
|
Asia/Pacific
|
27,478
|
|
19,541
|
Global Specialty
Businesses
|
24,169
|
|
20,560
|
Total Segment
operating earnings
|
109,125
|
|
87,648
|
Combination,
integration and other acquisition-related expenses
|
(5,815)
|
|
(7,878)
|
Restructuring and
related charges
|
(1,175)
|
|
(1,716)
|
Fair value step up of
acquired inventory sold
|
(801)
|
|
—
|
Indefinite-lived
intangible asset impairment
|
—
|
|
(38,000)
|
Non-operating and
administrative expenses
|
(40,992)
|
|
(38,451)
|
Depreciation of
corporate assets and amortization
|
(15,448)
|
|
(14,047)
|
Operating income
(loss)
|
44,894
|
|
(12,444)
|
Other income
(expense), net
|
4,687
|
|
(21,175)
|
Interest expense,
net
|
(5,470)
|
|
(8,461)
|
Income (loss)
before taxes and equity in net income of associated
companies
|
$
44,111
|
|
$
(42,080)
|
Forward-Looking Statements
This press release contains "forward-looking statements" within
the meaning of Section 27A of the Securities Act of 1933, as
amended, and Section 21E of the Securities Exchange Act of 1934, as
amended. These statements can be identified by the fact that
they do not relate strictly to historical or current facts.
We have based these forward-looking statements, including
statements regarding the potential effects of the COVID-19 pandemic
on the Company's business, results of operations, and financial
condition, our expectations that we will maintain sufficient
liquidity and remain in compliance with the terms of the Company's
credit facility, statements regarding remediation of our material
weaknesses in internal control over financial reporting on our
current expectations about future events, and statements regarding
the impact of increased raw material costs and pricing initiatives.
These forward-looking statements include statements with
respect to our beliefs, plans, objectives, goals, expectations,
anticipations, intentions, financial condition, results of
operations, future performance, and business, including but not
limited to the potential benefits of the Combination and other
acquisitions, the impacts on our business as a result of the
COVID-19 pandemic and any projected global economic rebound or
anticipated positive results due to Company actions taken in
response to the pandemic, and our current and future results and
plans and statements that include the words "may," "could,"
"should," "would," "believe," "expect," "anticipate," "estimate,"
"intend," "plan" or similar expressions. These
forward-looking statements are subject to certain risks and
uncertainties that could cause actual results to differ materially
from those projected in such statements. A major risk is that
demand for the Company's products and services is largely derived
from the demand for its customers' products, which subjects the
Company to uncertainties related to downturns in a customer's
business and unanticipated customer production shutdowns, including
as is currently being experienced by many automotive industry
companies. Other major risks and uncertainties include, but
are not limited to, the primary and secondary impacts of the
COVID-19 pandemic, including actions taken in response to the
pandemic by various governments, which could exacerbate some or all
of the other risks and uncertainties faced by the Company,
including the potential for significant increases in raw material
costs, supply chain disruptions, customer financial instability,
worldwide economic and political disruptions, foreign currency
fluctuations, significant changes in applicable tax rates and
regulations, future terrorist attacks and other acts of violence.
Furthermore, the Company is subject to the same business
cycles as those experienced by our customers in the steel,
automobile, aircraft, industrial equipment, and durable goods
industries. The ultimate impact of COVID-19 on our business
will depend on, among other things, the extent and duration of the
pandemic, the severity of the disease and the number of people
infected with the virus, the continued uncertainty regarding global
availability, administration, acceptance and long-term efficacy of
vaccines, or other treatments, for COVID-19 or its variants, the
longer-term effects on the economy by the pandemic, including the
resulting market volatility, and by the measures taken by
governmental authorities and other third parties restricting
day-to-day life and business operations and the length of time that
such measures remain in place, as well as laws and other
governmental programs implemented to address the pandemic or assist
impacted businesses, such as fiscal stimulus and other legislation
designed to deliver monetary aid and other relief. Other
factors could also adversely affect us, including those related to
the Combination and other acquisitions and the integration of
acquired businesses. Our forward-looking statements are
subject to risks, uncertainties and assumptions about the Company
and its operations that are subject to change based on various
important factors, some of which are beyond our control.
These risks, uncertainties, and possible inaccurate assumptions
relevant to our business could cause our actual results to differ
materially from expected and historical results. All
forward-looking statements included in this press release,
including expectations about the improvements in business
conditions during 2021 and future periods, are based upon
information available to the Company as of the date of this press
release, which may change. Therefore, we caution you not to
place undue reliance on our forward-looking statements. For
more information regarding these risks and uncertainties as well as
certain additional risks that we face, refer to the Risk Factors
section, which appears in Item 1A of our Annual Report on Form 10-K
for the year ended December 31, 2020,
our Quarterly Report on Form 10-Q for the quarter ended
March 31, 2021, and in subsequent
reports filed from time to time with the Securities and Exchange
Commission. We do not intend to, and we disclaim any duty or
obligation to, update or revise any forward-looking statements to
reflect new information or future events or for any other
reason. This discussion is provided as permitted by the
Private Securities Litigation Reform Act of 1995.
Conference Call
As previously announced, the Company's investor conference call
to discuss its first quarter performance is scheduled for
May 7, 2021 at 8:30 a.m. (ET). A live webcast of the
conference call, together with supplemental information, can be
accessed through the Company's Investor Relations website at
investors.quakerhoughton.com. You can also access the
conference call by dialing 877-269-7756.
About Quaker Houghton
Quaker Chemical Corporation (doing business as "Quaker
Houghton") is a global leader in industrial process fluids.
With a presence around the world, including operations in
over 25 countries, our customers include thousands of the world's
most advanced and specialized steel, aluminum, automotive,
aerospace, offshore, can, mining, and metalworking companies.
Our high-performing, innovative and sustainable solutions are
backed by best-in-class technology, deep process knowledge and
customized services. With approximately 4,200 employees,
including chemists, engineers and industry experts, we partner with
our customers to improve their operations so they can run even more
efficiently, even more effectively, whatever comes next.
Quaker Houghton is headquartered in Conshohocken, Pennsylvania, located near
Philadelphia in the United
States. Visit quakerhoughton.com to learn more.
Quaker Chemical
Corporation
|
Condensed
Consolidated Statements of Operations
|
(Dollars in
thousands, except share and per share amounts)
|
|
|
|
|
|
(Unaudited)
|
|
Three Months
Ended
March 31,
|
|
2021
|
|
2020
|
|
|
|
|
|
|
|
|
Net
sales
|
$
429,783
|
|
$
378,561
|
|
|
|
|
Cost of goods
sold
|
273,589
|
|
244,710
|
|
|
|
|
Gross
profit
|
156,194
|
|
133,851
|
%
|
36.3%
|
|
35.4%
|
|
|
|
|
Selling, general and
administrative expenses
|
104,310
|
|
98,701
|
Indefinite-lived
intangible asset impairment
|
-
|
|
38,000
|
Restructuring and
related charges
|
1,175
|
|
1,716
|
Combination,
integration and other acquisition-related expenses
|
5,815
|
|
7,878
|
|
|
|
|
Operating income
(loss)
|
44,894
|
|
(12,444)
|
%
|
10.4%
|
|
-3.3%
|
|
|
|
|
Other income
(expense), net
|
4,687
|
|
(21,175)
|
Interest expense,
net
|
(5,470)
|
|
(8,461)
|
Income (loss) before
taxes and equity in net income of associated companies
|
44,111
|
|
(42,080)
|
|
|
|
|
Taxes on income
(loss) before equity in net income of associated
companies
|
10,689
|
|
(13,070)
|
Income (loss) before
equity in net income of associated companies
|
33,422
|
|
(29,010)
|
|
|
|
|
Equity in net income
of associated companies
|
5,210
|
|
666
|
|
|
|
|
Net income
(loss)
|
38,632
|
|
(28,344)
|
|
|
|
|
Less: Net income
attributable to noncontrolling interest
|
17
|
|
37
|
|
|
|
|
Net income (loss)
attributable to Quaker Chemical Corporation
|
$
38,615
|
|
$
(28,381)
|
%
|
9.0%
|
|
-7.5%
|
|
|
|
|
Share and per
share data:
|
|
|
|
Basic weighted
average common shares outstanding
|
17,785,370
|
|
17,672,525
|
Diluted weighted
average common shares outstanding
|
17,855,977
|
|
17,672,525
|
|
|
|
|
Net income (loss)
attributable to Quaker Chemical Corporation common shareholders -
basic
|
$
2.16
|
|
$
(1.60)
|
Net income (loss)
attributable to Quaker Chemical Corporation common shareholders -
diluted
|
$
2.15
|
|
$
(1.60)
|
Quaker Chemical
Corporation
|
Condensed
Consolidated Balance Sheets
|
(Dollars in
thousands, except par value and share amounts)
|
|
|
|
|
|
(Unaudited)
|
|
March 31,
2021
|
|
December 31,
2020
|
ASSETS
|
|
|
|
|
|
|
|
Current
assets
|
|
|
|
Cash and cash
equivalents
|
$
163,455
|
|
$
181,833
|
Accounts receivable,
net
|
411,523
|
|
372,974
|
Inventories,
net
|
207,778
|
|
187,764
|
Prepaid expenses and
other current assets
|
48,285
|
|
50,156
|
Total current
assets
|
831,041
|
|
792,727
|
|
|
|
|
Property, plant and
equipment, net
|
195,790
|
|
203,883
|
Right of use lease
assets
|
38,027
|
|
38,507
|
Goodwill
|
627,574
|
|
631,212
|
Other intangible
assets, net
|
1,075,343
|
|
1,081,358
|
Investments in
associated companies
|
96,213
|
|
95,785
|
Deferred tax
assets
|
17,057
|
|
16,566
|
Other non-current
assets
|
31,906
|
|
31,796
|
Total
assets
|
$
2,912,951
|
|
$
2,891,834
|
|
|
|
|
LIABILITIES AND
EQUITY
|
|
|
|
|
|
|
|
Current
liabilities
|
|
|
|
Short-term borrowings
and current portion of long-term debt
|
$
43,330
|
|
$
38,967
|
Accounts and other
payables
|
214,015
|
|
198,872
|
Accrued
compensation
|
29,091
|
|
43,300
|
Accrued
restructuring
|
5,970
|
|
8,248
|
Other current
liabilities
|
104,029
|
|
93,573
|
Total current
liabilities
|
396,435
|
|
382,960
|
|
|
|
|
Long-term
debt
|
859,433
|
|
849,068
|
Long-term lease
liabilities
|
27,050
|
|
27,070
|
Deferred tax
liabilities
|
186,031
|
|
192,763
|
Other non-current
liabilities
|
114,549
|
|
119,059
|
Total
liabilities
|
1,583,498
|
|
1,570,920
|
|
|
|
|
Equity
|
|
|
|
Common stock, $1 par
value; authorized 30,000,000 shares; issued and outstanding 2021 -
17,875,076 shares; 2020 - 17,850,616 shares
|
17,875
|
|
17,851
|
Capital in excess of
par value
|
908,748
|
|
905,171
|
Retained
earnings
|
455,493
|
|
423,940
|
Accumulated other
comprehensive loss
|
(53,228)
|
|
(26,598)
|
Total Quaker
shareholders' equity
|
1,328,888
|
|
1,320,364
|
Noncontrolling
interest
|
565
|
|
550
|
Total
equity
|
1,329,453
|
|
1,320,914
|
Total liabilities and
equity
|
$
2,912,951
|
|
$
2,891,834
|
Quaker Chemical
Corporation
|
Condensed
Consolidated Statements of Cash Flows
|
(Dollars in
thousands)
|
|
|
|
|
|
(Unaudited)
|
|
Three Months
Ended
March 31,
|
|
2021
|
|
2020
|
Cash flows from
operating activities
|
|
|
|
Net income
(loss)
|
$
38,632
|
|
$
(28,344)
|
Adjustments to
reconcile net income (loss) to net cash (used in) provided by
operating activities:
|
|
|
|
Amortization of debt
issuance costs
|
1,187
|
|
1,187
|
Depreciation and
amortization
|
22,145
|
|
21,197
|
Equity in
undistributed earnings of associated companies, net of
dividends
|
(5,105)
|
|
4,285
|
Acquisition-related
fair value adjustments related to inventory
|
801
|
|
-
|
Deferred
compensation, deferred taxes and other, net
|
(9,888)
|
|
(22,988)
|
Share-based
compensation
|
3,779
|
|
4,682
|
Gain on disposal of
property, plant, equipment and other assets
|
(5,410)
|
|
(2)
|
Insurance settlement
realized
|
-
|
|
(229)
|
Indefinite-lived
intangible asset impairment
|
-
|
|
38,000
|
Combination and other
acquisition-related expenses, net of payments
|
(2,884)
|
|
(519)
|
Restructuring and
related charges
|
1,175
|
|
1,716
|
Pension and other
postretirement benefits
|
(1,034)
|
|
22,453
|
(Decrease) increase
in cash from changes in current assets and current liabilities, net
of acquisitions:
|
|
|
|
Accounts
receivable
|
(46,270)
|
|
2,322
|
Inventories
|
(24,994)
|
|
(10,162)
|
Prepaid expenses and
other current assets
|
(8,315)
|
|
(3,263)
|
Change in
restructuring liabilities
|
(3,034)
|
|
(4,841)
|
Accounts payable and
accrued liabilities
|
26,597
|
|
(5,275)
|
Net cash (used in)
provided by operating activities
|
(12,618)
|
|
20,219
|
|
|
|
|
Cash flows from
investing activities
|
|
|
|
Investments in
property, plant and equipment
|
(3,934)
|
|
(4,892)
|
Payments related to
acquisitions, net of cash acquired
|
(26,655)
|
|
(3,160)
|
Proceeds from
disposition of assets
|
14,744
|
|
-
|
Insurance settlement
interest earned
|
-
|
|
31
|
Net cash used in
investing activities
|
(15,845)
|
|
(8,021)
|
|
|
|
|
Cash flows from
financing activities
|
|
|
|
Payments of term loan
debt
|
(9,551)
|
|
(9,371)
|
Borrowings on
revolving credit facilities, net
|
30,000
|
|
205,500
|
Repayments on other
debt, net
|
(188)
|
|
(185)
|
Dividends
paid
|
(7,052)
|
|
(6,828)
|
Stock options
exercised, other
|
(178)
|
|
(696)
|
Purchase of
noncontrolling interest in affiliates
|
-
|
|
(1,047)
|
Distributions to
noncontrolling affiliate shareholders
|
-
|
|
(751)
|
Net cash provided by
financing activities
|
13,031
|
|
186,622
|
|
|
|
|
Effect of foreign
exchange rate changes on cash
|
(3,008)
|
|
(6,424)
|
|
|
|
|
Net (decrease)
increase in cash, cash equivalents and restricted cash
|
(18,440)
|
|
192,396
|
Cash, cash
equivalents and restricted cash at the beginning of the
period
|
181,895
|
|
143,555
|
Cash, cash
equivalents and restricted cash at the end of the
period
|
$
163,455
|
|
$
335,951
|
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SOURCE Quaker Houghton