CONSHOHOCKEN, Pa., May 1 /PRNewswire-FirstCall/ -- Quaker Chemical
Corporation (NYSE:KWR) today announced record first quarter 2006
sales of $109.8 million and net income of $2.5 million, compared to
first quarter 2005 sales of $104.2 million and net income of $3.1
million. Core earnings improved significantly, as the prior year
quarter included a $4.2 million pre- tax gain from the sale of
property by the Company's real estate joint venture, as well as
$1.2 million of charges for restructuring and related activities,
contributing $3.0 million pre-tax to the result in the first
quarter, 2005. The first quarter of 2006 included a pension gain of
$0.9 million. Diluted earnings per share for the first quarter were
$0.26, as compared to $0.32 for the first quarter of last year with
those aforementioned non-recurring items included. First Quarter
2006 Summary Net sales for the first quarter of 2006 were $109.8
million, up 5.4% from $104.2 million for the first quarter of 2005.
The increase in net sales was attributable to higher sales prices
and volume growth of 6.6% offset by foreign exchange rate
translation, which negatively impacted net sales by approximately
1.2%. Volume growth was mainly attributable to market share growth
and increased demand in China. Selling price increases were
implemented across all regions and market segments to offset
significantly higher raw material costs. Gross margin as a
percentage of sales was 29.6% for the first quarter of 2006, as
compared to 29.7% for the first quarter of 2005, and 30.2% for the
fourth quarter of 2005. Higher selling prices and a stronger
performance from the Company's CMS business helped maintain margins
notwithstanding continued increases in raw material prices,
particularly crude oil derivatives. Selling, general and
administrative expenses for the quarter decreased $0.9 million.
Cost savings from restructuring efforts completed in 2005 were
partially offset by increased spending in higher growth areas,
higher variable compensation, and inflationary and other increases.
In addition, due to a legislative change, effective January 1,
2006, the Company recorded a pension gain of $0.9 million relating
to one of its European pension plans. The decrease in other income
is largely due to $4.2 million of pre-tax gain in the first quarter
of 2005 received from the Company's real estate joint venture. The
remainder of the decrease was the result of foreign exchange losses
in the first quarter of 2006 compared to gains in the first quarter
of 2005. The increase in net interest expense is attributable to
higher average borrowings and higher interest rates. The decrease
in minority interest expense from the first quarter of 2005 is
primarily due to the acquisition of the remaining 40% interest in
the Company's Brazilian affiliate in March of 2005. Balance Sheet
and Cash Flow Items The Company's net debt has increased from
December 2005, primarily to fund working capital needs, as well as
the restructuring actions taken in the fourth quarter of 2005. The
Company's net debt-to-total capital ratio was 40% at March 31,
2006, compared to 35% at December 31, 2005. Ronald J. Naples,
Chairman and Chief Executive Officer, commented, "We are pleased
with continued solid revenue growth flowing from our pricing
actions and business building initiatives. Our core earnings,
before considering such prior year items as real estate gains and
restructuring costs, show a marked improvement over our last
several quarters. Our restructuring efforts of 2005 are positively
impacting bottom line results in accordance with expectations.
While we have achieved some gross margin improvement in dollar
terms, our significant efforts to improve gross margin percentage
have been mitigated by yet another spike in our raw material costs.
With crude prices recently moving past $70 a barrel, we will
necessarily continue the pricing dialog with our customers. We are
shooting for gross margin percentage recovery upon a sustained
period of stable or, better yet, declining raw material costs."
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 first quarter results is scheduled for May 2,
2006 at 2:30 p.m. (EDT). 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)
Three Months Ended March 31, 2006 2005 Net sales $109,816 $104,161
Cost of goods sold 77,331 73,234 Gross margin 32,485 30,927 % 29.6%
29.7% Selling, general and administrative 27,362 28,217
Restructuring and related activities, net - 1,232 Operating income
5,123 1,478 % 4.7% 1.4% Other income, net 128 4,868 Interest
expense, net (965) (434) Income before taxes 4,286 5,912 Taxes on
income 1,553 1,921 2,733 3,991 Equity in net income of associated
companies 113 53 Minority interest in net income of subsidiaries
(304) (918) Net income $2,542 $3,126 % 2.3% 3.0% Per share data:
Net income - basic $0.26 $0.32 Net income - diluted $0.26 $0.32
Shares Outstanding: Basic 9,723,432 9,643,681 Diluted 9,816,149
9,883,727 Quaker Chemical Corporation Condensed Consolidated
Balance Sheet (Dollars in thousands, except par value and share
amounts) (Unaudited) March 31, December 31, 2006 2005* ASSETS
Current assets Cash and cash equivalents $9,605 $16,121 Accounts
receivable, net 101,524 93,943 Inventories, net 50,185 45,818
Prepaid expenses and other current assets 12,541 10,111 Total
current assets 173,855 165,993 Property, plant and equipment
144,367 140,903 Less accumulated depreciation 87,414 84,006 Net
property, plant and equipment 56,953 56,897 Goodwill 37,237 35,418
Other intangible assets, net 8,494 8,703 Investments in associated
companies 6,472 6,624 Deferred income taxes 24,856 24,385 Other
assets 34,588 33,975 Total assets $342,455 $331,995 LIABILITIES AND
SHAREHOLDERS' EQUITY Current liabilities Short-term borrowings and
current portion of long-term debt $2,643 $5,094 Accounts and other
payables 53,546 52,923 Accrued compensation 9,068 9,818 Other
current liabilities 17,332 19,053 Total current liabilities 82,589
86,888 Long-term debt 79,989 67,410 Deferred income taxes 4,792
4,608 Other non-current liabilities 58,740 60,573 Total liabilities
226,110 219,479 Minority interest in equity of subsidiaries 6,636
6,609 Shareholders' equity Common stock, $1 par value; authorized
30,000,000 shares; issued 2006 - 9,804,154, 2005 - 9,726,385 9,804
9,726 Capital in excess of par value 3,768 3,574 Retained earnings
111,752 111,317 Accumulated other comprehensive loss (15,615)
(18,710) Total shareholders' equity 109,709 105,907 Total
liabilities and shareholders' equity $342,455 $331,995 * Condensed
from audited financial statements. Quaker Chemical Corporation
Condensed Consolidated Statement of Cash Flows For the three months
ended March 31, (Dollars in thousands) (Unaudited) 2006 2005 Cash
flows from operating activities Net income $2,542 $3,126
Adjustments to reconcile net income to net cash used in operating
activities: Depreciation 2,495 2,268 Amortization 351 306 Equity in
net income of associated companies (113) (53) Minority interest in
earnings of subsidiaries 304 918 Deferred income taxes (361) -
Deferred compensation and other, net (184) 388 Restructuring and
related activities - 1,232 Gain on sale of partnership assets -
(2,989) Insurance settlement realized (72) - Pension and other
postretirement benefits (1,865) (207) Increase (decrease) in cash
from changes in current assets and current liabilities, net of
acquisitions: Accounts receivable (6,425) (3,751) Inventories
(3,696) 1,599 Prepaid expenses and other current assets (2,330) 391
Accounts payable and accrued liabilities 245 (5,395) Change in
restructuring liabilities (2,912) (640) Net cash used in operating
activities (12,021) (2,807) Cash flows from investing activities
Capital expenditures (1,655) (1,628) Dividends and distributions
from associated companies 205 - Payments related to acquisitions
(1,000) (6,700) Proceeds from partnership disposition of assets -
2,989 Proceeds from disposition of assets - 647 Interest earned on
insurance settlement 75 - Change in restricted cash, net (3) - Net
cash used in investing activities (2,378) (4,692) Cash flows from
financing activities Net (decrease) increase in short-term
borrowings (2,504) 2,064 Long-term debt borrowings 12,340 -
Repayments of long-term debt (233) (282) Dividends paid (2,090)
(2,079) Stock options exercised, other 272 - Distributions to
minority shareholders (350) (2,204) Other, net - (9) Net cash
provided by (used in) financing activities 7,435 (2,510) Effect of
exchange rate changes on cash 448 (971) Net decrease in cash and
cash equivalents (6,516) (10,980) Cash and cash equivalents at the
beginning of the period 16,121 29,078 Cash and cash equivalents at
the end of the period $9,605 $18,098 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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