CONSHOHOCKEN, Pa., Nov. 1 /PRNewswire-FirstCall/ -- Quaker Chemical
Corporation (NYSE:KWR) today announced third quarter 2005 diluted
earnings per share were $0.23 compared to $0.12 for the third
quarter of 2004. Third quarter 2005 net sales were $105.8 million,
up 6% from $99.7 million for the third quarter of 2004. Third
Quarter 2005 Summary Net income for the third quarter was $2.2
million compared to $1.2 million for the third quarter of 2004 with
the improvement primarily driven by higher sales and moderate
improvement in gross margins. The Company's 2005 acquisition of the
remaining 40% interest in its Brazilian affiliate also contributed
to the improvement. Net sales for the third quarter were $105.8
million, up 6% from $99.7 million for the third quarter of 2004.
Approximately 4% of the sales increase was due to higher selling
prices, while foreign exchange rate translation favorably impacted
net sales by approximately 2%. Volume increases in Asia/Pacific
were offset by softer demand in the Company's other regions. Gross
margin as a percentage of sales for the third quarter of 2005 was
32.0% compared to 31.8% for the third quarter of 2004. The third
quarter 2005 gross margin percentage represents a continuation of
margin restoration as the margins in the 2005 first and second
quarters were 29.7% and 30.6%, respectively. The Company's pricing
actions are driving this sequential quarterly improvement which has
occurred despite significant upward movement in raw material costs.
Increased sales combined with margin percentage improvement
resulted in $2.2 million higher gross margin than the third quarter
of 2004. Selling, general and administrative expenses for the
quarter increased $0.7 million compared to the third quarter of
2004. Foreign exchange rate translation accounted for approximately
three-fourths of the increase. The remaining increase was due
primarily to a charge of $0.2 million related to the Company's
early repayment of its senior unsecured notes due in 2007, an
additional provision for doubtful accounts in connection with a
customer bankruptcy, and inflationary increases. These increases
were partially mitigated by continued cost reduction efforts.
Interest expense for the quarter was $0.4 million higher than the
third quarter of 2004 due to higher average borrowings and interest
rates on the Company's short-term debt. A decrease in minority
interest is primarily attributable to the Company's first quarter
2005 acquisition of the remaining 40% interest in its Brazilian
affiliate, as previously announced on March 7, 2005. Year-to-Date
Summary Net income for the first nine months of 2005 was $7.1
million compared to $7.3 million for the first nine months of 2004.
Contributing to the 2005 earnings were the $4.2 million of pre-tax
proceeds received in the first quarter from the Company's real
estate joint venture, which were partially offset by a net $1.2
million of pre-tax restructuring costs. Net sales for the first
nine months increased 7% to $317.0 million from $296.5 million for
the first nine months of 2004. Approximately 4% of the sales
increase was attributable to higher sales prices, while foreign
exchange rate translation favorably impacted net sales by
approximately 3%. Volume increases in Asia/Pacific were offset by
softer demand in the Company's other regions. Gross margin as a
percentage of sales declined from 32.6% in 2004 to 30.8% in 2005.
Higher prices for the Company's raw materials, particularly crude
oil derivatives, and higher third-party product purchase costs with
respect to its CMS contracts, outpaced the Company's price
increases. Selling, general and administrative expenses for the
first nine months increased $4.2 million, or 5%, compared to the
first nine months of 2004. Foreign exchange rate translation
accounted for approximately half of the increase with the remainder
primarily attributable to higher professional fees, pension costs,
investments in higher growth areas, an additional provision for
doubtful accounts related to a customer bankruptcy and other
inflationary increases. These increases were partially offset by
reduced incentive compensation expense and reduced spending related
to the Company's global ERP implementation and other cost reduction
efforts. During the first quarter of 2005, the Company took a net
pre-tax charge of $1.2 million related to a reduction in its
workforce. The increase in other income is reflective of $4.2
million of proceeds received from the Company's real estate joint
venture, previously announced on February 17, 2005, as well as
foreign exchange gains. Net interest expense was $0.9 million
higher than the first nine months of 2004 due to higher average
borrowings and interest rates on the Company's short-term debt. A
decrease in minority interest was primarily attributable to the
Company's first quarter 2005 acquisition of the remaining 40%
interest in its Brazilian affiliate, as previously announced on
March 7, 2005. Balance Sheet and Cash Flow Items The Company's net
debt has increased from December 2004, primarily to fund the
Brazilian acquisition noted above, as well as to fund working
capital needs associated with growth initiatives. The Company's net
debt-to-total- capital ratio was 33% at September 2005 compared to
28% at the end of 2004. In September 2005, the Company repaid its
senior unsecured notes due in 2007. On October 14, 2005, the
Company entered into a $100 million, five-year, unsecured,
syndicated multi-currency revolving credit facility. This facility
will enable consolidation of short-term debt into a longer-term
facility and ensure liquidity to support future growth. Ronald J.
Naples, Chairman and Chief Executive Officer, commented, "We are
pleased with the progress that we made in the third quarter in the
areas of revenue growth, margin restoration, and cost control in
the face of a still very difficult market environment. We are
cautiously optimistic that we have begun the climb back after the
lows of the last half of 2004 and the beginning of 2005. Throughout
this difficult period we have continued to build our position as a
market leader and believe we are in an excellent position to
benefit from improved market dynamics." Mr. Naples continued,
"Notwithstanding the improved results in the third quarter, we are
mindful that demand currently remains sluggish and the future
direction of raw material pricing is uncertain. We also believe
that we cannot rely solely on our strong competitive positioning
and external market improvements to drive earnings growth. Over the
past several months, we have reviewed a broad spectrum of potential
actions to respond to our changed business environment. As part of
this, we're concluding a major effort to evaluate all aspects of
our cost structure with a view to more effectively aligning
resources with our strategic priorities and achieving greater
effectiveness through a much reinforced local execution capability.
We will undertake a restructuring in the fourth quarter, across
essentially all functions in the U.S. and Europe and with an
expected $8 to $10 million of annual savings in these regions. We
expect the one time cost of this restructuring to be of a similar
magnitude to the annual savings. Through this restructuring we will
maintain our commitment to our global approach and strategic
initiatives such as growth in Asia/Pacific, market penetration and
product conversions in chemical management services, and
development of complementary businesses. We will continue on the
strategic track of selling value rather than simply fluids and
collaborating as a globally integrated organization that offers the
best of Quaker to all regions of the world." Quaker Chemical
Corporation, headquartered in Conshohocken, Pennsylvania, is a
worldwide developer, producer, and marketer of custom-formulated
chemical specialty products and a provider of chemical management
services for manufacturers around the globe, primarily in the steel
and automotive industries. This release contains forward-looking
statements that 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 the Company's
demand is largely derived from the demand for its customers'
products, which subjects the Company to downturns in a customer's
business and unanticipated customer production shutdowns. Other
major risks and uncertainties include, but are not limited to,
significant increases in raw material costs, customer financial
stability, worldwide economic and political conditions, foreign
currency fluctuations, and future terrorist attacks such as those
that occurred on September 11, 2001. Other factors could also
adversely affect us. Therefore, we caution you not to place undue
reliance on our forward-looking statements. This discussion is
provided as permitted by the Private Securities Litigation Reform
Act of 1995. As previously announced, Quaker Chemical's investor
conference to discuss third quarter results is scheduled for
November 2, 2005 at 2:30 p.m. (ET). Access the conference by
calling 877-269-7756 (toll-free) or visit Quaker's Web site at
http://www.quakerchem.com/ for a live webcast. Quaker Chemical
Corporation Condensed Consolidated Statement of Income (Dollars in
thousands, except per share data and share amounts) (Unaudited)
(Unaudited) Three Months Nine Months Ended Ended September 30,
September 30, 2005 2004 2005 2004 Net sales $105,751 $99,667
$316,954 $296,481 Cost of goods sold 71,874 67,976 219,441 199,791
Gross margin 33,877 31,691 97,513 96,690 % 32.0% 31.8% 30.8% 32.6%
Selling, general and administrative 29,937 29,249 87,274 83,056
Restructuring and related activities, net - - 1,232 - Operating
income 3,940 2,442 9,007 13,634 % 3.7% 2.5% 2.8% 4.6% Other income,
net 353 422 5,869 1,189 Interest expense, net (670) (302) (1,844)
(966) Income before taxes 3,623 2,562 13,032 13,857 Taxes on income
1,178 807 4,235 4,365 2,445 1,755 8,797 9,492 Equity in net income
of associated companies 208 264 414 599 Minority interest in net
income of subsidiaries (441) (865) (2,078) (2,781) Net income
$2,212 $1,154 $7,133 $7,310 % 2.1% 1.2% 2.3% 2.5% Per share data:
Net income - basic $0.23 $0.12 $0.74 $0.76 Net income - diluted
$0.23 $0.12 $0.73 $0.73 Shares Outstanding: Basic 9,693,851
9,621,746 9,671,516 9,598,928 Diluted 9,801,893 9,973,920 9,816,006
9,978,583 Quaker Chemical Corporation Condensed Consolidated
Balance Sheet (Dollars in thousands, except par value and share
amounts) (Unaudited) September 30, December 31, 2005 2004* ASSETS
Current assets Cash and cash equivalents $13,109 $29,078 Accounts
receivable, net 93,030 87,527 Inventories, net 43,406 41,298
Prepaid expenses and other current assets 14,846 13,284 Total
current assets 164,391 171,187 Property, plant and equipment
140,482 146,900 Less accumulated depreciation 82,737 84,012 Net
property, plant and equipment 57,745 62,888 Goodwill 35,811 34,853
Other intangible assets, net 9,162 8,574 Investments in associated
companies 6,536 6,718 Deferred income taxes 18,701 18,825 Other
assets 21,004 21,848 Total assets $313,350 $324,893 LIABILITIES AND
SHAREHOLDERS' EQUITY Current liabilities Short-term borrowings and
current portion of long-term debt $65,163 $60,695 Accounts and
other payables 43,730 42,262 Accrued compensation 7,640 8,692 Other
current liabilities 16,078 13,969 Total current liabilities 132,611
125,618 Long-term debt 8,173 14,848 Deferred income taxes 5,906
5,588 Other non-current liabilities 39,556 43,828 Total liabilities
186,246 189,882 Minority interest in equity of subsidiaries 7,277
12,424 Shareholders' equity Common stock, $1 par value; authorized
30,000,000 shares; issued 9,717,817 shares 9,718 9,669 Capital in
excess of par value 3,165 2,632 Retained earnings 118,858 117,981
Unearned compensation (89) (355) Accumulated other comprehensive
loss (11,825) (7,340) Total shareholders' equity 119,827 122,587
Total liabilities and shareholders' equity $313,350 $324,893 *
Condensed from audited financial statements. Quaker Chemical
Corporation Condensed Consolidated Statement of Cash Flows For the
nine months ended September 30, (Dollars in thousands) (Unaudited)
2005 2004 Cash flows from operating activities Net income $7,133
$7,310 Adjustments to reconcile net income to net cash provided by
operating activities: Depreciation 6,731 6,272 Amortization 1,014
863 Equity in net income of associated companies (414) (599)
Minority interest in earnings of subsidiaries 2,078 2,781 Deferred
compensation and other, net 1,089 1,003 Restructuring and related
activities 1,232 - Gain on sale of partnership assets (2,989) -
Pension and other postretirement benefits (3,905) 653 Increase
(decrease) in cash from changes in current assets and current
liabilities, net of acquisitions: Accounts receivable (8,635)
(7,315) Inventories (2,920) (5,390) Prepaid expenses and other
current assets (2,063) (4,059) Accounts payable and accrued
liabilities 5,349 1,796 Change in restructuring liabilities (1,636)
(480) Net cash provided by operating activities 2,064 2,835 Cash
flows from investing activities Capital expenditures (5,142)
(6,810) Dividends and distributions from associated companies 234
288 Payments related to acquisitions (6,700) - Proceeds from
partnership disposition of assets 2,989 - Proceeds from disposition
of assets 1,894 - Other, net - 38 Net cash used in investing
activities (6,725) (6,484) Cash flows from financing activities Net
increase in short-term borrowings 7,815 15,616 Proceeds from
long-term debt - 2,463 Repayments of long-term debt (9,328) (299)
Dividends paid (6,251) (6,170) Stock options exercised, other 294
818 Distributions to minority shareholders (3,163) (245) Net cash
(used in) provided by financing activities (10,633) 12,183 Effect
of exchange rate changes on cash (675) (501) Net (decrease)
increase in cash and cash equivalents (15,969) 8,033 Cash and cash
equivalents at the beginning of the period 29,078 21,915 Cash and
cash equivalents at the end of the period $13,109 $29,948
DATASOURCE: Quaker Chemical Corporation CONTACT: Neal E. Murphy,
Vice President and Chief Financial Officer, Quaker Chemical
Corporation, +1-610-832-4189 Web site: http://www.quakerchem.com/
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