CONSHOHOCKEN, Pa., Oct. 25, 2011 /PRNewswire/ --
- Higher sales and net income
- Strong volume with market share gain
- Gross margin improvement from Q2 2011
- Two strategic acquisitions since July
Quaker Chemical Corporation (NYSE: KWR) today announced net
sales of $182.3 million for the third
quarter of 2011, compared to net sales of $137.7 million for the third quarter of 2010.
Net income was $13.4 million in
the third quarter of 2011, or earnings per diluted share of
$1.03, compared to net income of
$6.3 million, or earnings per diluted
share of $0.55 for the third quarter
of 2010. For the first nine months of 2011, the Company
reported net sales of $510.0 million
and net income of $33.8 million,
compared to net sales of $402.0
million and net income of $24.9
million in the first nine months of 2010. The third
quarter 2011 results include a $0.22
per diluted share non-cash gain related to the Company's purchase
of the remaining interest in its Mexican affiliate, while the third
quarter 2010 results included a $0.21
per diluted share charge related to a non-income tax contingency
and an $0.08 per diluted share charge
related to the retirement of the Company's former CEO.
Michael F. Barry, Chairman, Chief
Executive Officer and President, commented, "We are pleased with
our third quarter results, especially in light of the challenging
global environment. Our product volumes were an all-time
record even excluding our 2011 acquisitions. While demand in
some countries has softened, our overall volumes have grown as we
have increased our market share. In addition, we are making
progress in restoring our margins. While our raw material
costs remain at or near record levels, we implemented additional
price increases in the third quarter and are finally seeing
sequential improvement in our gross margin. Looking ahead to
the fourth quarter, we expect good volumes, with some seasonality
impact around the holidays. There is also a greater amount of
uncertainty in the world economies, especially in Europe, but so far this has not significantly
impacted us."
Mr. Barry continued, "In addition to the expansion of our base
business through market share gain, I am also pleased with our
growth via acquisitions. Over the past 16 months, we have
made four strategic acquisitions. Three of the acquisitions
were U.S. companies, providing us with adjacent product line
opportunities (aluminum hot rolling products, specialty greases and
die casting lubricants) that we can grow through leveraging our
global platform. The other acquisition provides us with 100%
ownership in our former joint venture business in the fast-growing
market of Mexico. While each
acquisition is relatively small, we are excited about the
shareholder value that can be created with each of them. In
addition, our balance sheet remains very strong which gives us the
financial flexibility to take advantage of other growth
opportunities as they arise."
Third Quarter 2011 Summary
Net sales for the third quarter of 2011 were $182.3 million, an increase of 32% from the third
quarter of 2010. Product volumes were higher by approximately
16%, including acquisitions. Selling prices and mix increased
revenues by approximately 11%, as the Company implemented price
increases across the globe to help offset higher raw material
costs. Foreign exchange rates also increased revenues by
approximately 5%.
Gross profit increased by $10.5
million, or 21%, from the third quarter of 2010, but gross
margin decreased from 35.6% to 32.6%. Overall raw material
costs were significantly higher than the previous year, and the
Company has implemented selling price increases to help restore
margins. On a sequential quarterly basis, the Company's gross
margin increased from the second quarter of 2011.
Selling, general and administrative expenses ("SG&A")
increased approximately $7.3 million
compared to the third quarter of 2010. Higher selling costs
on increased business activity, acquisition-related activity and
foreign exchange rate translation accounted for the majority of the
increase. In addition, higher inflationary and other costs
were partially offset by lower incentive compensation.
SG&A as a percentage of sales decreased to 23.0% in the
third quarter of 2011 from 25.2% in the third quarter of 2010, and
was consistent with the second quarter of 2011.
Net interest expense decreased due to lower interest rates and
lower average borrowings. Other income includes a
$2.7 million, or $0.22 per diluted share, non-cash gain
representing the revaluation of the Company's previously held
ownership interest in its Mexican equity affiliate to its fair
value related to the July 2011
purchase of the remaining interest in this entity. Equity in
net income of associated companies decreased compared to the third
quarter of 2010, as a result of the Company's acquisition of the
remaining ownership interest in its Mexican equity affiliate.
Year-to-Date Summary
Net sales for the first nine months of 2011 were $510.0 million, an increase of 27% from
$402.0 million in the first nine
months of 2010. Product volumes were higher by approximately
12%, including the effects of acquisitions. Selling prices
and mix increased revenues by approximately 10%, as the Company
implemented price increases across the globe to help offset higher
raw material costs. Foreign exchange rates also increased
revenues by approximately 5%.
Gross profit increased by approximately $21.1 million, or 15%, from the first nine months
of 2010, but gross margin decreased from 36.0% in the first nine
months of 2010 to 32.5% in the first nine months of 2011, as raw
material costs continued to escalate.
SG&A increased approximately $16.0
million compared to the first nine months of 2010.
Higher selling costs on increased business activity,
acquisition-related activity and foreign exchange rate translation
accounted for approximately 62% of the increase. Higher
inflationary and other costs, partially offset by lower incentive
compensation, accounted for the remainder of the increase.
SG&A as a percentage of sales decreased to 23.4% in the
first nine months of 2011 from 25.7% in the first nine months of
2010.
Net interest expense decreased due to lower average interest
rates and lower average borrowings. Other income reflects the
revaluation to fair value of the Company's previously held
ownership interest in its Mexican equity affiliate, as discussed
above.
The Company's year-to-date 2011 effective tax rate of 27.1% was
higher than the year-to-date 2010 effective tax rate of 25.8%.
The year-to-date effective tax rates for 2011 and 2010
reflect a decrease in reserves for uncertain tax positions due to
the expiration of applicable statutes of limitations for certain
tax years of approximately $0.14 and
$0.15 per diluted share,
respectively. The most significant other item affecting the
comparison in the year-to-date effective tax rates is a change in
the mix of income from lower tax rate jurisdictions to higher tax
rate jurisdictions.
Balance Sheet and Cash Flow Items
The Company completed an equity offering of approximately 1.3
million shares in the second quarter of 2011, resulting in
approximately $48.1 million of net
cash proceeds, which were used to repay a portion of its revolving
credit line. The third quarter 2011 and year-to-date 2011
earnings per diluted share of $1.03
and $2.73 reflect an approximate
$0.09 and $0.13 dilutive effect, respectively, as a result
of this equity offering. Operating cash flow of $4.4 million was generated in the third quarter
of 2011, led by the Company's third quarter net income, which was
partially offset by higher working capital investment and other
items. In July 2011, the
Company purchased the remaining ownership interest in its Mexican
equity affiliate. Cash consideration of $10.5 million was paid for the 60% interest not
previously owned by Quaker, with an additional $2.0 million payable in July 2012, subject to certain conditions.
Recent Developments
In October 2011, the Company
acquired G.W. Smith & Sons,
Inc., a leading North American manufacturer and distributor of die
cast lubricants, metalworking lubricants, and machining fluids.
The acquired business has annual net sales of approximately
$14 million.
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 third quarter results is scheduled for October 26, 2011 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,
aluminum, 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.
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Quaker
Chemical Corporation
|
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Condensed
Consolidated Statement of Income
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(Dollars in
thousands, except per share data)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months
Ended September 30,
|
|
Nine Months
Ended September 30,
|
|
|
|
2011
|
|
2010
|
|
2011
|
|
2010
|
|
|
|
|
|
|
|
|
|
|
|
Net sales
|
|
$
182,313
|
|
$
137,669
|
|
$
509,970
|
|
$
401,980
|
|
|
|
|
|
|
|
|
|
|
|
Cost of goods sold
|
|
122,827
|
|
88,641
|
|
343,984
|
|
257,081
|
|
|
|
|
|
|
|
|
|
|
|
Gross profit
|
|
59,486
|
|
49,028
|
|
165,986
|
|
144,899
|
|
%
|
|
32.6%
|
|
35.6%
|
|
32.5%
|
|
36.0%
|
|
|
|
|
|
|
|
|
|
|
|
Selling, general and
administrative expenses
|
|
41,982
|
|
34,699
|
|
119,441
|
|
103,486
|
|
Non-income tax contingency
charge
|
|
-
|
|
3,581
|
|
-
|
|
3,581
|
|
CEO transition costs
|
|
-
|
|
1,317
|
|
-
|
|
1,317
|
|
|
|
|
|
|
|
|
|
|
|
Operating income
|
|
17,504
|
|
9,431
|
|
46,545
|
|
36,515
|
|
%
|
|
9.6%
|
|
6.9%
|
|
9.1%
|
|
9.1%
|
|
|
|
|
|
|
|
|
|
|
|
Other income, (expense)
net
|
|
2,740
|
|
(320)
|
|
4,070
|
|
1,566
|
|
Interest expense, net
|
|
(904)
|
|
(1,032)
|
|
(2,779)
|
|
(3,202)
|
|
Income before taxes and equity
in net income of associated companies
|
|
19,340
|
|
8,079
|
|
47,836
|
|
34,879
|
|
|
|
|
|
|
|
|
|
|
|
Taxes on income before equity
in net income of associated companies
|
|
5,640
|
|
1,661
|
|
12,961
|
|
8,985
|
|
|
|
13,700
|
|
6,418
|
|
34,875
|
|
25,894
|
|
|
|
|
|
|
|
|
|
|
|
Equity in net income of
associated companies
|
|
105
|
|
439
|
|
715
|
|
734
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
13,805
|
|
6,857
|
|
35,590
|
|
26,628
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|
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|
|
|
|
|
|
|
|
|
Less: Net income attributable to
noncontrolling interest
|
|
447
|
|
517
|
|
1,791
|
|
1,716
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|
|
|
|
|
|
|
|
|
|
|
Net income attributable to
Quaker Chemical Corporation
|
|
$
13,358
|
|
$
6,340
|
|
$
33,799
|
|
$
24,912
|
|
%
|
|
7.3%
|
|
4.6%
|
|
6.6%
|
|
6.2%
|
|
|
|
|
|
|
|
|
|
|
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Per share data:
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|
|
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|
|
|
|
Net income attributable to
Quaker Chemical Corporation Common Shareholders - basic
|
|
$
1.04
|
|
$
0.56
|
|
$
2.77
|
|
$
2.22
|
|
Net income attributable to
Quaker Chemical Corporation Common Shareholders -
diluted
|
|
$
1.03
|
|
$
0.55
|
|
$
2.73
|
|
$
2.19
|
|
|
|
|
|
|
|
|
|
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|
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|
|
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|
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Quaker
Chemical Corporation
|
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Condensed
Consolidated Balance Sheet
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|
(Dollars in
thousands, except par value and share amounts)
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|
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|
|
(Unaudited)
|
|
|
|
|
|
|
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|
|
September
30,
|
|
December
31,
|
|
|
|
2011
|
|
2010
|
|
ASSETS
|
|
|
|
|
|
|
|
|
|
|
|
Current assets
|
|
|
|
|
|
Cash and cash
equivalents
|
|
$
20,579
|
|
$
25,766
|
|
Accounts receivable,
net
|
|
147,414
|
|
116,266
|
|
Inventories,
net
|
|
78,868
|
|
60,841
|
|
Prepaid expenses and other
current assets
|
|
15,744
|
|
12,609
|
|
Total current
assets
|
|
262,605
|
|
215,482
|
|
|
|
|
|
|
|
Property, plant and equipment,
net
|
|
80,191
|
|
76,535
|
|
Goodwill
|
|
57,764
|
|
52,758
|
|
Other intangible assets,
net
|
|
26,315
|
|
24,030
|
|
Investments in associated
companies
|
|
7,937
|
|
9,218
|
|
Deferred income taxes
|
|
22,862
|
|
28,846
|
|
Other assets
|
|
42,159
|
|
42,561
|
|
Total assets
|
|
$
499,833
|
|
$
449,430
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LIABILITIES AND
EQUITY
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Current liabilities
|
|
|
|
|
|
Short-term borrowings and
current portion of long-term debt
|
|
$
754
|
|
$
890
|
|
Accounts and other
payables
|
|
73,616
|
|
63,893
|
|
Accrued
compensation
|
|
13,997
|
|
17,140
|
|
Other current
liabilities
|
|
23,314
|
|
19,268
|
|
Total current
liabilities
|
|
111,681
|
|
101,191
|
|
Long-term debt
|
|
43,397
|
|
73,855
|
|
Deferred income taxes
|
|
7,492
|
|
6,108
|
|
Other non-current
liabilities
|
|
78,033
|
|
81,177
|
|
Total
liabilities
|
|
240,603
|
|
262,331
|
|
|
|
|
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|
|
Equity
|
|
|
|
|
|
Common stock, $1 par
value; authorized 30,000,000 shares; issued 12,875,113
shares
|
|
12,875
|
|
11,492
|
|
Capital in excess of par
value
|
|
88,492
|
|
38,275
|
|
Retained
earnings
|
|
169,265
|
|
144,347
|
|
Accumulated other
comprehensive loss
|
|
(19,097)
|
|
(13,736)
|
|
Total Quaker shareholders'
equity
|
|
251,535
|
|
180,378
|
|
Noncontrolling
interest
|
|
7,695
|
|
6,721
|
|
Total shareholders'
equity
|
|
259,230
|
|
187,099
|
|
Total liabilities and
equity
|
|
$
499,833
|
|
$
449,430
|
|
|
|
|
|
|
|
|
|
|
|
|
Quaker
Chemical Corporation
|
|
Condensed
Consolidated Statement of Cash Flows
|
|
For the nine
months ended September 30,
|
|
(Dollars in
thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Unaudited)
|
|
|
|
2011
|
|
2010
|
|
Cash flows from operating
activities
|
|
|
|
|
|
Net income
|
|
$
35,590
|
|
$
26,628
|
|
Adjustments to reconcile
net income to net cash provided by operating activities:
|
|
|
|
|
|
Depreciation
|
|
8,527
|
|
7,448
|
|
Amortization
|
|
1,596
|
|
736
|
|
Equity in undistributed
earnings of associated companies, net of dividends
|
|
(136)
|
|
(523)
|
|
Deferred compensation and
other, net
|
|
6,987
|
|
1,559
|
|
Stock-based
compensation
|
|
2,675
|
|
2,371
|
|
Non-cash gain from
purchase of equity affiliate
|
|
(2,718)
|
|
-
|
|
Gain on disposal of
property, plant and equipment
|
|
(61)
|
|
(24)
|
|
Insurance settlement
realized
|
|
(1,242)
|
|
(1,225)
|
|
Pension and other
postretirement benefits
|
|
(4,099)
|
|
(3,184)
|
|
(Decrease) increase in
cash from changes in current assets and current liabilities, net of
acquisitions:
|
|
|
|
|
|
Accounts
receivable
|
|
(29,390)
|
|
(7,982)
|
|
Inventories
|
|
(16,334)
|
|
(8,645)
|
|
Prepaid expenses and other
current assets
|
|
(3,061)
|
|
(2,656)
|
|
Accounts payable and
accrued liabilities
|
|
6,196
|
|
5,007
|
|
Net cash provided by
operating activities
|
|
4,530
|
|
19,510
|
|
|
|
|
|
|
|
Cash flows from investing
activities
|
|
|
|
|
|
Investments in property,
plant and equipment
|
|
(8,914)
|
|
(6,259)
|
|
Payments related to
acquisitions
|
|
(10,981)
|
|
(6,862)
|
|
Proceeds from disposition
of assets
|
|
221
|
|
147
|
|
Insurance settlement
received and interest earned
|
|
61
|
|
5,099
|
|
Change in restricted cash,
net
|
|
1,181
|
|
(1,516)
|
|
Net cash used in investing
activities
|
|
(18,432)
|
|
(9,391)
|
|
|
|
|
|
|
|
Cash flows from financing
activities
|
|
|
|
|
|
Net decrease in short-term
borrowings
|
|
(185)
|
|
(1,394)
|
|
Proceeds from long-term
debt
|
|
-
|
|
29
|
|
Repayments of long-term
debt
|
|
(30,613)
|
|
(5,367)
|
|
Dividends paid
|
|
(8,492)
|
|
(7,768)
|
|
Stock options exercised,
other
|
|
629
|
|
3,829
|
|
Excess tax benefit related
to stock option exercises
|
|
153
|
|
2,294
|
|
Proceeds from sale of
common stock, net of related expenses
|
|
48,143
|
|
-
|
|
Net cash provided by (used
in) financing activities
|
|
9,635
|
|
(8,377)
|
|
|
|
|
|
|
|
Effect of exchange rate changes
on cash
|
|
(920)
|
|
356
|
|
Net (decrease) increase in
cash and cash equivalents
|
|
(5,187)
|
|
2,098
|
|
Cash and cash equivalents
at the beginning of the period
|
|
25,766
|
|
25,051
|
|
Cash and cash equivalents
at the end of the period
|
|
$
20,579
|
|
$
27,149
|
|
|
|
|
|
|
|
|
|
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SOURCE Quaker Chemical Corporation