CONSHOHOCKEN, Pa., July 28 /PRNewswire-FirstCall/ -- Quaker Chemical
Corporation (NYSE: KWR) today announced second quarter 2010 net
sales of $136.0 million and earnings
per diluted share of $0.80, compared
to net sales of $102.3 million and
earnings per diluted share of $0.29
for the second quarter of 2009. For the first half of 2010,
the Company reported net sales of $264.3
million and earnings per diluted share of $1.64, compared to net sales of $200.8 million and earnings per diluted share of
$0.29 for the first half of 2009.
Michael F. Barry, Chairman, Chief
Executive Officer and President, commented, "Our strong second
quarter earnings and EBITDA generation were driven by high steel
industry shipments in China,
Brazil, India and Russia and continued recovery of industrial
demand in North America and
Europe. Our balance sheet
was also strengthened as we reduced our net debt-to-capital ratio
to its lowest point since 2003."
Mr. Barry added, "We are on track to generate record earnings
for 2010. Our expectations for the second half are that our
earnings will continue to be strong but will be below the first
half due to a softening in demand and the lag effect on margins as
we recover higher raw material costs."
Mr. Barry continued, "We are pleased with our progress in 2010
in a number of ways. Besides our strong results, we lowered
our debt, raised our dividend, made a small, but strategic,
acquisition, and amended our credit facility for lower interest
costs, an extended maturity date and greater borrowing capacity.
Over the next few years, we believe Quaker is positioned well
for solid growth. Our strong positions in the fastest growing
countries like China, Brazil and India, as well as the gradual rebound in the
more mature markets such as the U.S. and Europe, is expected to provide us with
broad-based organic growth in all regions and businesses. In
addition, our strong balance sheet will allow us to invest in our
key growth initiatives and grow via acquisition for the right
opportunities."
Second Quarter 2010 Summary
Net sales for the second quarter were $136.0 million, up 33% from $102.3 million for the second quarter of 2009.
The increase in net sales was a result of double-digit volume
increases across the globe as the Company continues to recover from
the economic downturn. Product volumes increased 42%,
partially offset by a 5% decline in selling price and mix, as well
as lower automotive chemical management services ("CMS") revenue
due to lower revenue reported on a gross basis. On a
sequential quarterly basis, product volumes increased by
approximately 7%.
Gross margin was up $12.5 million,
or 35%, compared to the second quarter of 2009 as a result of
increased volumes. The gross margin percentage increased
slightly compared to the second quarter of 2009, but decreased 1.2
percentage points from the first quarter of 2010. The Company
is implementing price increases to help offset higher raw material
costs where necessary.
Selling, general and administrative expenses ("SG&A")
increased $6.1 million, or 21%,
compared to the second quarter of 2009. Higher selling costs
with increased business activity, as well as increased incentive
compensation and professional fees, were the primary drivers,
representing 70% of the increase. Inflationary and other
costs accounted for the remainder of the increase.
The Company incurred charges related to the former CEO's
supplemental retirement plan of approximately $1.2 million in the second quarter of 2009 and
expects to incur a final charge of $1.3
million later in 2010.
The increase in other income is due to higher license fees from
increased business activities, as well as foreign exchange rate
gains in the second quarter of 2010 versus losses in the second
quarter of 2009. The decrease in net interest expense is due
to lower average debt balances as well as higher interest income.
Year-to-Date Summary
Net sales for the first half of 2010 were $264.3 million, up 32% from $200.8 million for the first half of 2009.
As with the quarterly comparison, the increase in net sales
was a result of higher volumes across the globe as the Company
continues to recover from the economic downturn. Product
volumes increased 39%, partially offset by a 5% decline in selling
price and mix. Foreign exchange rates increased revenues by
approximately 4%, which were more than offset by lower automotive
CMS revenue due to lower revenue reported on a gross basis.
Gross margin increased $31.1
million, or 48%, compared to the first half of 2009 largely
as a result of increased volumes. The gross margin percentage
of 36.3% represents considerable improvement over the first half of
2009 percentage of 32.2%. The margin expansion was the result
of cost reduction actions taken, a more favorable year-to-date raw
material cost environment and reduced automotive CMS revenues
reported on a gross basis.
SG&A increased $13.0 million,
or 23%, compared to the first half of 2009. Higher selling
costs with increased business activity, as well as increased
incentive compensation and professional fees, were the primary
drivers, representing 74% of the increase. Inflationary and
other costs as well as foreign exchange rates accounted for the
remainder of the increase.
In the first quarter of 2009, the Company implemented a
restructuring program totaling $2.3
million or approximately $0.14
per diluted share. The Company completed the initiatives
under this program during 2009.
Other income for the 2010 period includes higher license fees
from increased business activities as well as foreign exchange rate
gains versus losses in the 2009 period, which offset a gain related
to the disposition of land in Europe of approximately $0.11 per diluted share in 2009. The
decrease in net interest expense is due to lower average debt
balances as well as higher interest income.
Equity in net income of associated companies includes a charge
of approximately $0.03 per diluted
share related to the first quarter 2010 devaluation of the
Venezuelan Bolivar Fuerte.
Balance Sheet and Cash Flow Items
The Company's net debt-to-total-capital ratio decreased to 19%
as of June 30, 2010, compared to 24%
at March 31, 2010. Operating
cash flow improved $15.1 million from
the first quarter of 2010, as a result of strong earnings which in
turn allowed the Company to reduce its debt levels during the
second quarter.
Forward-Looking Statements
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.
Conference Call
As previously announced, Quaker Chemical's investor conference
call to discuss second quarter results is scheduled for
July 29, 2010 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 Web site at
http://www.quakerchem.com. You can also access the conference
call by dialing 877-269-7756.
About Quaker
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.
Quaker Chemical
Corporation
|
|
Condensed Consolidated Statement
of Income
|
|
(Dollars in thousands, except
per share data)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended June
30,
|
|
Six Months Ended June
30,
|
|
|
|
2010
|
|
2009
|
|
2010
|
|
2009
|
|
|
|
|
|
|
|
|
|
|
|
Net sales
|
|
$
135,991
|
|
$
102,335
|
|
$
264,311
|
|
$
200,842
|
|
|
|
|
|
|
|
|
|
|
|
Cost of goods sold
|
|
87,460
|
|
66,298
|
|
168,440
|
|
136,091
|
|
|
|
|
|
|
|
|
|
|
|
Gross margin
|
|
48,531
|
|
36,037
|
|
95,871
|
|
64,751
|
|
%
|
|
35.7%
|
|
35.2%
|
|
36.3%
|
|
32.2%
|
|
|
|
|
|
|
|
|
|
|
|
Selling, general and
administrative expenses
|
|
35,118
|
|
29,050
|
|
68,787
|
|
55,747
|
|
Restructuring and related
charges
|
|
-
|
|
-
|
|
-
|
|
2,289
|
|
CEO transition costs
|
|
-
|
|
1,193
|
|
-
|
|
1,193
|
|
|
|
|
|
|
|
|
|
|
|
Operating income
|
|
13,413
|
|
5,794
|
|
27,084
|
|
5,522
|
|
%
|
|
9.9%
|
|
5.7%
|
|
10.2%
|
|
2.7%
|
|
|
|
|
|
|
|
|
|
|
|
Other income, net
|
|
1,123
|
|
356
|
|
1,886
|
|
1,810
|
|
Interest expense, net
|
|
(1,043)
|
|
(1,318)
|
|
(2,170)
|
|
(2,407)
|
|
Income before taxes and equity
in net income of associated companies
|
|
13,493
|
|
4,832
|
|
26,800
|
|
4,925
|
|
|
|
|
|
|
|
|
|
|
|
Taxes on income before equity in
net income of associated companies
|
|
4,143
|
|
1,567
|
|
7,324
|
|
1,316
|
|
Income before equity in net
income of associated companies
|
|
9,350
|
|
3,265
|
|
19,476
|
|
3,609
|
|
|
|
|
|
|
|
|
|
|
|
Equity in net income of
associated companies
|
|
384
|
|
227
|
|
295
|
|
85
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
9,734
|
|
3,492
|
|
19,771
|
|
3,694
|
|
|
|
|
|
|
|
|
|
|
|
Less: Net income attributable to
noncontrolling interest
|
|
581
|
|
258
|
|
1,199
|
|
458
|
|
|
|
|
|
|
|
|
|
|
|
Net income attributable to
Quaker Chemical Corporation
|
|
$
9,153
|
|
$
3,234
|
|
$
18,572
|
|
$
3,236
|
|
%
|
|
6.7%
|
|
3.2%
|
|
7.0%
|
|
1.6%
|
|
|
|
|
|
|
|
|
|
|
|
Per share data:
|
|
|
|
|
|
|
|
|
|
Net income attributable to
Quaker Chemical Corporation Common Shareholders - basic
|
|
$
0.82
|
|
$
0.29
|
|
$
1.66
|
|
$
0.29
|
|
Net income attributable to
Quaker Chemical Corporation Common Shareholders- diluted
|
|
$
0.80
|
|
$
0.29
|
|
$
1.64
|
|
$
0.29
|
|
|
|
|
|
|
|
|
|
|
Quaker Chemical
Corporation
|
|
Condensed Consolidated Balance
Sheet
|
|
(Dollars in thousands, except
par value and share amounts)
|
|
|
|
|
|
|
|
|
|
(Unaudited)
|
|
|
|
|
|
|
|
|
|
June 30,
|
|
December 31,
|
|
|
|
2010
|
|
2009
|
|
ASSETS
|
|
|
|
|
|
|
|
|
|
|
|
Current assets
|
|
|
|
|
|
Cash and cash
equivalents
|
|
$
27,606
|
|
$
25,051
|
|
Construction fund (restricted
cash)
|
|
-
|
|
2,358
|
|
Accounts receivable,
net
|
|
114,595
|
|
108,793
|
|
Inventories, net
|
|
54,844
|
|
50,040
|
|
Prepaid expenses and other
current assets
|
|
13,149
|
|
12,656
|
|
Total current assets
|
|
210,194
|
|
198,898
|
|
|
|
|
|
|
|
Property, plant and equipment,
net
|
|
62,859
|
|
67,426
|
|
Goodwill
|
|
44,452
|
|
46,515
|
|
Other intangible assets,
net
|
|
5,012
|
|
5,579
|
|
Investments in associated
companies
|
|
9,317
|
|
8,824
|
|
Deferred income taxes
|
|
31,210
|
|
31,692
|
|
Other assets
|
|
46,282
|
|
39,537
|
|
Total assets
|
|
$
409,326
|
|
$
398,471
|
|
|
|
|
|
|
|
LIABILITIES AND
EQUITY
|
|
|
|
|
|
|
|
|
|
|
|
Current liabilities
|
|
|
|
|
|
Short-term borrowings and
current portion of long-term debt
|
|
$
3,596
|
|
$
2,431
|
|
Accounts and other
payables
|
|
62,200
|
|
60,939
|
|
Accrued compensation
|
|
13,012
|
|
16,656
|
|
Accrued pension and
postretirement benefits
|
|
4,682
|
|
4,717
|
|
Other current
liabilities
|
|
18,174
|
|
15,224
|
|
Total current
liabilities
|
|
101,664
|
|
99,967
|
|
Long-term debt
|
|
60,975
|
|
63,685
|
|
Deferred income taxes
|
|
8,443
|
|
8,605
|
|
Accrued pension and
postretirement benefits
|
|
26,235
|
|
27,602
|
|
Other non-current
liabilities
|
|
45,462
|
|
42,317
|
|
Total liabilities
|
|
242,779
|
|
242,176
|
|
|
|
|
|
|
|
Equity
|
|
|
|
|
|
Common stock, $1 par value;
authorized 30,000,000 shares; issued 11,258,582 shares
|
|
11,259
|
|
11,086
|
|
Capital in excess of par
value
|
|
32,798
|
|
27,527
|
|
Retained earnings
|
|
136,497
|
|
123,140
|
|
Accumulated other comprehensive
loss
|
|
(20,070)
|
|
(10,439)
|
|
Total Quaker shareholders'
equity
|
|
160,484
|
|
151,314
|
|
Noncontrolling
interest
|
|
6,063
|
|
4,981
|
|
Total equity
|
|
166,547
|
|
156,295
|
|
Total liabilities and
equity
|
|
$
409,326
|
|
$
398,471
|
|
|
|
|
|
|
|
|
|
|
|
|
Quaker Chemical
Corporation
|
|
Condensed Consolidated Statement
of Cash Flows
|
|
For the six months ended June
30,
|
|
(Dollars in
thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Unaudited)
|
|
|
|
2010
|
|
2009
|
|
Cash flows from operating
activities
|
|
|
|
|
|
Net income
|
|
$
19,771
|
|
$
3,694
|
|
Adjustments to reconcile net
income to net cash provided by operating activities:
|
|
|
|
|
|
Depreciation
|
|
5,068
|
|
4,801
|
|
Amortization
|
|
462
|
|
522
|
|
Equity in net income of
associated companies, net of dividends
|
|
(233)
|
|
(85)
|
|
Deferred compensation and other,
net
|
|
(357)
|
|
(1,521)
|
|
Stock-based
compensation
|
|
1,663
|
|
927
|
|
Restructuring and related
charges
|
|
-
|
|
2,289
|
|
Gain on disposal of property,
plant and equipment
|
|
(22)
|
|
(1,193)
|
|
Insurance settlement
realized
|
|
(772)
|
|
(610)
|
|
Pension and other postretirement
benefits
|
|
(2,227)
|
|
(3,799)
|
|
Increase (decrease) in cash from
changes in current assets and current liabilities, net of
acquisitions:
|
|
|
|
|
|
Accounts receivable
|
|
(10,645)
|
|
13,498
|
|
Inventories
|
|
(7,181)
|
|
15,022
|
|
Prepaid expenses and other
current assets
|
|
(1,641)
|
|
3,481
|
|
Accounts payable and accrued
liabilities
|
|
6,409
|
|
(6,354)
|
|
Change in restructuring
liabilities
|
|
-
|
|
(3,885)
|
|
Net cash provided by operating
activities
|
|
10,295
|
|
26,787
|
|
|
|
|
|
|
|
Cash flows from investing
activities
|
|
|
|
|
|
Capital expenditures
|
|
(3,468)
|
|
(5,078)
|
|
Payments related to
acquisitions
|
|
-
|
|
(1,000)
|
|
Proceeds from disposition of
assets
|
|
59
|
|
1,617
|
|
Insurance settlement received
and interest earned
|
|
5,070
|
|
5,100
|
|
Change in restricted cash,
net
|
|
(1,940)
|
|
(2,593)
|
|
Net cash used in investing
activities
|
|
(279)
|
|
(1,954)
|
|
|
|
|
|
|
|
Cash flows from financing
activities
|
|
|
|
|
|
Net increase (decrease) in
short-term borrowings
|
|
1,263
|
|
(1,716)
|
|
Proceeds from long-term
debt
|
|
-
|
|
1,584
|
|
Repayments of long-term
debt
|
|
(2,614)
|
|
(17,252)
|
|
Dividends paid
|
|
(5,119)
|
|
(5,022)
|
|
Stock options exercised,
other
|
|
1,663
|
|
262
|
|
Excess tax benefit related to
stock option exercises
|
|
1,236
|
|
-
|
|
Distributions to noncontrolling
shareholders
|
|
-
|
|
(90)
|
|
Net cash used in financing
activities
|
|
(3,571)
|
|
(22,234)
|
|
|
|
|
|
|
|
Effect of exchange rate changes
on cash
|
|
(3,890)
|
|
1,114
|
|
Net increase in cash and cash
equivalents
|
|
2,555
|
|
3,713
|
|
Cash and cash equivalents at the
beginning of the period
|
|
25,051
|
|
20,892
|
|
Cash and cash equivalents at the
end of the period
|
|
$
27,606
|
|
$
24,605
|
|
|
|
|
|
|
|
|
|
|
|
|
SOURCE Quaker Chemical Corporation