CONSHOHOCKEN, Pa., Aug. 1 /PRNewswire-FirstCall/ -- Quaker Chemical
Corporation (NYSE:KWR) today announced record quarterly sales for
the second quarter of $137.6 million and net income of $4.2
million, increases of 15.9%, and 38.7%, respectively, compared to
the second quarter of 2006. Earnings per diluted share increased to
$0.41 from $0.30 for the second quarter of 2006. Second Quarter
2007 Summary Net sales for the second quarter were $137.6 million,
compared to $118.7 million for the second quarter of 2006. The
increase in net sales was primarily attributable to a combination
of volume growth and higher sales prices. Volume growth was mainly
attributable to strong sales growth in Asia/Pacific, South America
and Europe, as well as higher revenue related to the Company's CMS
channel. Foreign exchange rate translation also increased revenues
by approximately 4% for the second 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 first quarter 2007 renewal and
restructuring of several of the Company's CMS contracts. Gross
margin as a percentage of sales was 31.0% for the second quarter of
2007, compared to 30.4% for the second quarter of 2006. Higher
selling prices and additional contribution from the Company's CMS
channel helped improve margins. On a sequential basis, the second
quarter 2007 gross margin percentage was in line with the first
quarter 2007 gross margin percentage of 30.9%. Selling, general and
administrative expenses ("SG&A") for the quarter increased $5.6
million, compared to the second quarter of 2006. Foreign exchange
rate translation accounted for approximately $1.1 million of the
increase. The remainder of the increase was due to continued
planned spending in higher growth areas, primarily China, higher
legal and environmental costs, increased incentive compensation as
a result of higher earnings, as well as higher commissions as a
result of higher sales. The increase in other income was the result
of foreign exchange gains recorded in the current year. The
increase in net interest expense was attributable to higher average
borrowings and higher interest rates. The increase in equity income
was due to improved financial performance from the Company's
Mexican and Venezuelan affiliates. Year-to-Date Summary Net sales
for the first half of 2007 were $262.5 million, up 14.9% from
$228.5 million for the first half of 2006. Double-digit volume
increases in China and selling price increases realized across all
regions and market segments were the primary reasons for the
increase in net sales. Foreign exchange rate translation also
increased revenues by approximately 4% for the first half of 2007,
compared to the same period in 2006. Gross margin as a percentage
of sales was 30.9% for the first half of 2007, compared to 30.0%
for the first half of 2006. Higher selling prices and a stronger
performance from the Company's CMS business helped improve margin
percentage despite continued increases in raw material prices.
Selling, general and administrative expenses for the first half of
2007 increased $10.2 million, compared to the first half of 2006.
Foreign exchange rate translation accounted for approximately $2.0
million of the increases over the first half of 2006. Also
negatively affecting the comparison with the prior year was 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 incentive compensation as a result of higher
earnings, higher commissions as a result of higher sales, higher
legal and environmental costs, as well as inflationary increases.
The increase in other income was due to foreign exchange gains
recorded in the first half of 2007, compared to losses in 2006. The
increase in net interest expense was attributable to higher average
borrowings and higher interest rates. The Company's effective tax
rate was 33.9% for the first half of 2007, compared to 37.9% for
the first half of 2006. The decrease in the effective tax rate was
primarily attributable to a changing mix of income among 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"). The increase in equity
income was due to improved financial performance from all of the
Company's equity affiliates. 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 business volume, as
well as the start-up of a new operation in China. The Company's net
debt-to-total-capital ratio was 42% at June 30, 2007, compared to
40% at December 31, 2006. Operating cash flow improved $2.2 million
during the second quarter of 2007, compared to the first quarter of
2007. In connection with the first quarter 2007 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 strong second quarter that showed not only impressive
performance improvement over last year's second quarter, but also
progress up and down the income statement compared to the first
quarter. Particularly encouraging was the volume growth we achieved
in a number of geographies and markets, not just China where we've
seen strong real growth for some time. The quarter was led by this
growth combined with our efforts to improve gross margins even in
the face of raw material prices that have continued to escalate.
Indeed, raw material costs impose an ongoing challenge, as
vegetable oils and animal fats demand grows with bio-diesel
activity, even as mineral oil prices have been largely stable. But
demand appears solid in most of our markets, and we continue to
invest where we see opportunity, both of which suggest promise for
our long-term future." 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 second
quarter results is scheduled for August 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 Six Months Ended June 30, June 30,
2007 2006 2007 2006 Net sales $137,598 $118,683 $262,489 $228,499
Cost of goods sold 94,986 82,618 181,331 159,949 Gross margin
42,612 36,065 81,158 68,550 % 31.0% 30.4% 30.9% 30.0% Selling,
general and administrative expenses 35,409 29,789 67,328 57,151
Operating income 7,203 6,276 13,830 11,399 % 5.2% 5.3% 5.3% 5.0%
Other income, net 909 387 1,236 515 Interest expense, net (1,501)
(1,252) (2,851) (2,217) Income before taxes 6,611 5,411 12,215
9,697 Taxes on income 2,298 2,127 4,142 3,680 4,313 3,284 8,073
6,017 Equity in net income of associated companies 266 125 391 238
Minority interest in net income of subsidiaries (428) (417) (776)
(721) Net income $4,151 $2,992 $7,688 $5,534 % 3.0% 2.5% 2.9% 2.4%
Per share data: Net income - basic $0.42 $0.31 $0.77 $0.57 Net
income - diluted $0.41 $0.30 $0.76 $0.56 Shares Outstanding: Basic
9,983,535 9,769,682 9,945,819 9,746,685 Diluted 10,118,653
9,833,117 10,074,060 9,824,968 Quaker Chemical Corporation
Condensed Consolidated Balance Sheet (Dollars in thousands, except
par value and share amounts) (Unaudited) June 30, December 31, 2007
2006 ASSETS Current assets Cash and cash equivalents $14,517
$16,062 Accounts receivable, net 124,652 107,340 Inventories, net
57,379 51,984 Prepaid expenses and other current assets 13,204
10,855 Total current assets 209,752 186,241 Property, plant and
equipment, net 60,890 60,927 Goodwill 41,108 38,740 Other
intangible assets, net 8,270 8,330 Investments in associated
companies 6,786 7,044 Deferred income taxes 32,517 28,573 Other
assets 31,941 27,527 Total assets $391,264 $357,382 LIABILITIES AND
SHAREHOLDERS' EQUITY Current liabilities Short-term borrowings and
current portion of long-term debt $2,147 $4,950 Accounts and other
payables 64,159 56,345 Accrued compensation 11,661 15,225 Other
current liabilities 15,212 13,659 Total current liabilities 93,179
90,179 Long-term debt 96,247 85,237 Deferred income taxes 5,761
5,317 Other non-current liabilities 74,409 61,783 Total liabilities
269,596 242,516 Minority interest in equity of subsidiaries 4,807
4,035 Shareholders' equity Common stock, $1 par value; authorized
30,000,000 shares; issued 10,106,214 shares 10,106 9,926 Capital in
excess of par value 8,452 5,466 Retained earnings 112,342 114,498
Accumulated other comprehensive loss (14,039) (19,059) Total
shareholders' equity 116,861 110,831 Total liabilities and
shareholders' equity $391,264 $357,382 Quaker Chemical Corporation
Condensed Consolidated Statement of Cash Flows For the Six Months
Ended June 30, (Dollars in thousands) (Unaudited) 2007 2006 Cash
flows from operating activities Net income $7,688 $5,534
Adjustments to reconcile net income to net cash used in operating
activities: Depreciation 5,500 4,893 Amortization 611 708 Equity in
net income of associated companies, net of dividends (26) (33)
Minority interest in earnings of subsidiaries 776 721 Deferred
income tax 452 334 Deferred compensation and other, net 824 61
Stock-based compensation 561 385 (Gain) loss on disposal of
property, plant and equipment 6 (8) Insurance settlement realized
(913) (157) Pension and other postretirement benefits (1,773)
(2,752) Increase (decrease) in cash from changes in current assets
and current liabilities, net of acquisitions: Accounts receivable
(14,785) (8,746) Inventories (3,921) (2,011) Prepaid expenses and
other current assets (989) (2,449) Accounts payable and accrued
liabilities 3,123 1,475 Change in restructuring liabilities -
(3,411) Net cash used in operating activities (2,866) (5,456) Cash
flows from investing activities Capital expenditures (4,180)
(4,863) Payments related to acquisitions (1,527) (1,069) Proceeds
from disposition of assets 106 46 Insurance settlement received and
interest earned 5,326 154 Change in restricted cash, net (4,413) 3
Net cash used in investing activities (4,688) (5,729) Cash flows
from financing activities Net decrease in short-term borrowings
(2,841) (2,813) Proceeds from long-term debt 10,921 14,340
Repayments of long-term debt (448) (474) Dividends paid (4,304)
(4,199) Stock options exercised, other 2,605 335 Distributions to
minority shareholders (270) (350) Net cash provided by financing
activities 5,663 6,839 Effect of exchange rate changes on cash 346
336 Net decrease in cash and cash equivalents (1,545) (4,010) Cash
and cash equivalents at the beginning of the period 16,062 16,121
Cash and cash equivalents at the end of the period $14,517 $12,111
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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