CONSHOHOCKEN, Pa., May 1 /PRNewswire-FirstCall/ -- Quaker Chemical
Corporation (NYSE:KWR) today announced record quarterly sales for
the first quarter 2007 of $124.9 million and net income of $3.5
million, a sales increase of 13.7%, and a net income increase of
39%, compared to the first quarter 2006. Earnings per share
increased to $0.35 per diluted share from $0.26 per diluted share
for the first quarter 2006. First Quarter 2007 Summary Net sales
for the first quarter were $124.9 million, compared to $109.8 for
the first quarter of 2006. The increase in net sales was primarily
attributable to a combination of higher sales prices and volume
growth. Volume growth was mainly attributable to double digit sales
growth in China and higher revenue related to the Company's CMS
channel. Foreign exchange rate translation also increased revenues
by approximately 4% for the first quarter of 2007, compared to the
same period in 2006. Selling price increases were realized across
all regions and market segments, in part, as an ongoing effort to
offset higher raw material costs. CMS revenues were higher due to
additional CMS accounts and the renewal and restructuring of
several of the Company's CMS contracts. Gross margin as a
percentage of sales was 30.9% for the first quarter of 2007,
compared to 29.6% for the first quarter of 2006. Higher selling
prices and additional contribution from the Company's CMS channel
helped improve margins. On a sequential basis, however, the first
quarter 2007 gross margin percentage was below the fourth quarter
2006 gross margin percentage of 32.3%, as higher CMS service
revenues, which include revenues from third-party product sales to
CMS accounts, have lower gross margin percentages than traditional
product sales. This change in sales mix decreased gross margin as a
percentage of sales by approximately 1.5 percentage points compared
to the fourth quarter of 2006. Selling, general and administrative
expenses for the quarter increased $4.6 million, as compared to the
first quarter of 2006. Foreign exchange rate translation accounted
for approximately $1.0 million of the increase over the first
quarter of 2006. Also negatively affecting the comparison with the
prior year is a pension gain of $0.9 million recorded in the first
quarter of 2006 due to a legislative change. The remainder of the
increase was due to continued planned spending in higher growth
areas, primarily China, higher commissions as a result of higher
sales, and increased incentive compensation as a result of higher
earnings. The increase in other income was the result of higher
foreign exchange rate losses recorded in the prior year. The
increase in net interest expense is attributable to higher average
borrowings and higher interest rates. The Company's effective tax
rate was 32.9% for the first quarter of 2007, compared to 36.2% for
the first quarter of 2006. The decrease in the effective tax rate
was primarily attributable to a shifting of income to lower rate
tax jurisdictions, which was offset in part by the Company's first
quarter 2007 adoption of FASB Interpretation No. 48, "Accounting
for Uncertainty in Income Taxes" ("FIN 48"). Balance Sheet and Cash
Flow Items The Company's net debt has increased from December 31,
2006, primarily to fund working capital needs driven by higher
sales late in the quarter and the start-up of a new operation in
China. The Company's net debt-to-total capital ratio was 43% at
March 31, 2007, compared to 40% at December 31, 2006. In connection
with the adoption of FIN 48, the Company recorded a non-cash charge
to shareholders' equity of $5.5 million, which negatively impacted
the Company's net debt-to-total capital ratio by approximately 1
percentage point. Ronald J. Naples, Chairman and Chief Executive
Officer, commented, "We had a fine first quarter resulting from
increased contributions from strategic initiatives such as
Asia/Pacific growth and CMS, as well as our continued actions on
the pricing front. Virtually worldwide, we had solid results in the
first quarter. Even though sequential quarterly gross margin
percentage slipped a bit, due primarily to sales mix, we were able
to achieve higher gross margin in dollar terms even as raw material
costs ran considerably ahead of last year. This flowed from
business expansion efforts and, importantly, from our work with
customers to recognize the value we deliver as well as our cost
realities. We continue to invest where we think we can get growth
and feel good about our long-term future and the prospects of
continuing earnings improvement in 2007." Quaker Chemical
Corporation is a leading global provider of process chemicals,
chemical specialties, services, and technical expertise to a wide
range of industries - including steel, automotive, mining,
aerospace, tube and pipe, coatings, and construction materials. Our
products, technical solutions, and chemical management services
enhance our customers' processes, improve their product quality,
and lower their costs. Quaker's headquarters is located near
Philadelphia in Conshohocken, Pennsylvania. 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 call to discuss first quarter results is scheduled for
May 2, 2007 at 2:30 p.m. (ET). Access the conference by calling
877-269-7756 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, 2007 2006 Net sales $124,891 $109,816
Cost of goods sold 86,345 77,331 Gross margin 38,546 32,485 % 30.9%
29.6% Selling, general and administrative 31,919 27,362 Operating
income 6,627 5,123 % 5.3% 4.7% Other income, net 327 128 Interest
expense, net (1,350) (965) Income before taxes 5,604 4,286 Taxes on
income 1,844 1,553 3,760 2,733 Equity in net income of associated
companies 125 113 Minority interest in net income of subsidiaries
(348) (304) Net income (loss) $3,537 $2,542 % 2.8% 2.3% Per share
data: Net income - basic $0.36 $0.26 Net income - diluted $0.35
$0.26 Shares Outstanding: Basic 9,907,683 9,723,432 Diluted
10,024,905 9,816,149 Quaker Chemical Corporation Condensed
Consolidated Balance Sheet (Dollars in thousands, except par value
and share amounts) (Unaudited) March 31, December 31, 2007 2006
ASSETS Current assets Cash and cash equivalents $10,787 $16,062
Accounts receivable, net 118,834 107,340 Inventories, net 55,420
51,984 Prepaid expenses and other current assets 12,213 10,855
Total current assets 197,254 186,241 Property, plant and equipment,
net 61,464 60,927 Goodwill 40,235 38,740 Other intangible assets,
net 8,046 8,330 Investments in associated companies 6,840 7,044
Deferred income taxes 33,197 28,573 Other assets 27,083 27,527
Total assets $374,119 $357,382 LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities Short-term borrowings and current portion of
long-term debt $3,702 $4,950 Accounts and other payables 64,404
56,345 Accrued compensation 8,987 15,225 Other current liabilities
15,480 13,659 Total current liabilities 92,573 90,179 Long-term
debt 90,535 85,237 Deferred income taxes 5,493 5,317 Other
non-current liabilities 71,139 61,783 Total liabilities 259,740
242,516 Minority interest in equity of subsidiaries 4,154 4,035
Shareholders' equity Common stock, $1 par value; authorized
30,000,000 shares; issued 10,083,434 shares 10,083 9,926 Capital in
excess of par value 7,380 5,466 Retained earnings 110,365 114,498
Accumulated other comprehensive loss (17,603) (19,059) Total
shareholders' equity 110,225 110,831 Total liabilities and
shareholders' equity $374,119 $357,382 Quaker Chemical Corporation
Condensed Consolidated Statement of Cash Flows For the Three Months
ended March 31, (Dollars in thousands) (Unaudited) 2007 2006 Cash
flows from operating activities Net income $3,537 2,542 Adjustments
to reconcile net income to net cash used in operating activities:
Depreciation 2,719 2,495 Amortization 339 351 Equity in net income
of associated companies, net of dividends 44 92 Minority interest
in earnings of subsidiaries 348 304 Deferred income tax 361 (361)
Deferred compensation and other, net 267 (184) Stock-based
compensation 262 171 (Gain) Loss on disposal of property, plant and
equipment 5 - Insurance settlement realized (265) (72) Pension and
other postretirement benefits (869) (1,865) Increase (decrease) in
cash from changes in current assets and current liabilities, net of
acquisitions: Accounts receivable (10,633) (6,425) Inventories
(3,019) (3,696) Prepaid expenses and other current assets (873)
(2,330) Accounts payable and accrued liabilities 2,749 245 Change
in restructuring liabilities - (2,912) Net cash used in operating
activities (5,028) (11,645) Cash flows from investing activities
Capital expenditures (2,721) (1,655) Payments related to
acquisitions (1,000) (1,000) Insurance settlement received and
interest earned 143 75 Change in restricted cash, net 122 (3) Net
cash used in investing activities (3,456) (2,583) Cash flows from
financing activities Net (decrease) increase in short-term
borrowings (1,262) (2,504) Proceeds from long-term debt 5,277
12,340 Repayments of long-term debt (225) (233) Dividends paid
(2,137) (2,090) Stock options exercised, other 1,809 101
Distributions to minority shareholders (270) (350) Net cash
provided by financing activities 3,192 7,264 Effect of exchange
rate changes on cash 17 448 Net decrease in cash and cash
equivalents (5,275) (6,516) Cash and cash equivalents at the
beginning of the period 16,062 16,121 Cash and cash equivalents at
the end of the period $10,787 $9,605 DATASOURCE: Quaker Chemical
Corporation CONTACT: Mark A. Featherstone, Vice President and Chief
Financial Officer of Quaker Chemical Corporation, +1-610-832-4160
Web site: http://www.quakerchem.com/
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