CONSHOHOCKEN, Pa., Oct. 29, 2013 /PRNewswire/ -- Quaker
Chemical Corporation (NYSE: KWR) today announced net sales of
$184.1 million for the third quarter
of 2013, compared to the third quarter of 2012 net sales of
$180.9 million. Earnings per
diluted share for the third quarter of 2013 were $0.95 compared to $0.83 for the third quarter of 2012. The
Company had expected to receive recertification of a prior
concessionary tax rate in Asia
Pacific, which would have increased earnings an additional
$0.08 per share in the third quarter,
but the approval was delayed until earlier this month and is
expected to be recognized in the fourth quarter. For the
first nine months of 2013, the Company reported net sales of
$545.1 million, compared to the first
nine months of 2012 net sales of $535.4
million. Earnings per diluted share for the first nine
months of 2013 were $3.21 compared to
earnings per diluted share of $2.63
for the first nine months of 2012. For Non-GAAP results, see
the Non-GAAP Measures section below.
(Logo: http://photos.prnewswire.com/prnh/20120910/PH70044LOGO
)
Michael F. Barry, Chairman, Chief
Executive Officer and President, commented, "We are pleased to
announce another quarter of strong earnings and cash flow
generation given a relatively mixed global economic
environment. Despite the weak market conditions in various
parts of the world, we continue to produce solid operating results
by growing our market share and leveraging our recent acquisitions
as well as continuing to align our cost structure to market
realities."
Mr. Barry continued, "In the fourth quarter, we expect to
continue to produce good operating results, subject to typical
negative seasonality impacts around the holidays at year end.
In summary, I remain confident in our future and I expect 2013 to
be another strong year for Quaker in terms of earnings, cash flow
generation, EBITDA growth and shareholder value creation."
Third Quarter of 2013 Summary
Net sales for the third quarter of 2013 of $184.1 million increased approximately 2% from
net sales of $180.9 million in the
third quarter of 2012, which primarily related to an increase in
product volumes.
Gross profit increased approximately $6.9
million, or approximately 12%, from the third quarter of
2012. The increase in gross profit was primarily driven by an
improvement in gross margin to 35.9% from 32.7% in the third
quarter of 2012. The increase in gross margin reflects the
return of the Company's product margins to more acceptable
levels.
Selling, general and administrative expenses ("SG&A")
increased $3.9 million from the third
quarter of 2012, which was primarily driven by higher selling
related costs on improved Company performance and higher labor
related costs on general year-over-year merit increases. In
addition, non-operating related SG&A expenses increased due to
certain uncommon costs. For instance, the third quarter of
2013 SG&A includes approximately $0.7
million, or $0.04 per diluted
share, of costs related to streamlining certain operations in the
Company's Europe, Middle East and Africa ("EMEA") region.
The increase in other expense in the third quarter of 2013 was
primarily driven by foreign exchange transaction losses of
approximately $0.6 million and a
charge of approximately $0.2 million,
or $0.01 per diluted share, related
to the cost streamlining initiative, noted above, compared to
foreign exchange transaction losses of $0.2
million in the third quarter of 2012.
The decrease in interest expense was primarily due to lower
average borrowings and lower interest rates experienced in the
third quarter of 2013 as compared to the third quarter of 2012.
The increase in equity in net income of associated companies
from the third quarter of 2012 was primarily due to higher earnings
related to the Company's equity interest in a captive insurance
company. Earnings from this affiliate were $1.2 million, or $0.09 per diluted share, in the third quarter of
2013 compared to $0.4 million, or
$0.03 per diluted share, in the third
quarter of 2012.
The Company's effective tax rates for the third quarters of 2013
and 2012 were 33.8% and 28.6%, respectively. The primary
contributor to the higher effective tax rate in the current quarter
was an increase in Asia Pacific's
effective tax rate. While recertification of a prior
concessionary tax rate in Asia
Pacific was pending renewal, the Company recorded tax
expense at its statutory tax rate of 25% in the third quarter of
2013 compared to the concessionary tax rate of 15% in the prior
year. (See the Recent Developments section below).
Year-to-Date Summary
Net sales for the first nine months of 2013 of $545.1 million increased approximately 2% from
$535.4 million in the first nine
months of 2012, which primarily related to an increase in product
volumes.
Gross profit increased by approximately $16.4 million, or approximately 9%, from the
first nine months of 2012. The increase in gross profit was
driven by an improvement in gross margin to 35.9% from 33.5% in the
first nine months of 2012, reflective of the return of the
Company's product margins to more acceptable levels.
SG&A increased approximately $9.9
million from the first nine months of 2012, which was
primarily driven by higher selling related costs on improved
Company performance, higher labor related costs on general
year-over-year merit increases and costs added with our recent
acquisitions. In addition, non-operating SG&A expenses
increased due to certain uncommon costs. For instance, the
nine months of 2013 SG&A includes approximately $1.1 million, or $0.06 per diluted share, of costs related to
streamlining certain operations in the Company's EMEA and
South America regions.
Partially offsetting these increases to SG&A were the prior
year costs associated with the bankruptcies of certain U.S
customers of $1.2 million, or
$0.06 per diluted share, the prior
year costs associated with the Company's CFO transition of
$0.6 million, or $0.03 per diluted share, and lower translation
due to changes in foreign exchange rates.
Other income for the first nine months of 2013 was $2.0 million, which was primarily driven by a
refund of $2.5 million, or
$0.14 per diluted share, related to
past excise taxes paid on certain mineral oil sales and, also,
earnings from third party license fees. Partially offsetting
these contributors to other income were expenses related to an
increase in the fair value of an acquisition earnout liability of
$0.7 million, or $0.03 per diluted share, the cost streamlining
initiative, noted above, and foreign exchange transaction losses of
$0.8 million. Comparatively,
other income for the first nine months of 2012 was $0.5 million, which relates primarily to third
party license fees, net of foreign exchange transaction losses of
$0.8 million.
Interest expense was lower in the first nine months of 2013
compared to the first nine months of 2012 primarily due to lower
interest rates and lower average borrowings.
The Company's effective tax rates for the first nine months of
2013 and 2012 were 30.0% and 26.9%, respectively. The primary
contributor to the higher effective tax rate in the current year
was an increase in Asia Pacific's
effective tax rate, noted above.
Equity in net income of associated companies increased due to
higher earnings related to the Company's equity interest in a
captive insurance company in the first nine months of 2013 compared
to the first nine months of 2012. Earnings attributable to
this equity interest increased from approximately $1.4 million, or $0.11 per diluted share, for the first nine
months of 2012 to approximately $4.4
million, or $0.33 per diluted
share, for the first nine months of 2013, which includes a non-cash
out-of-period adjustment of approximately $1.0 million recorded in 2013. Partially
offsetting this increase in equity in net income of associated
companies was a charge of approximately $0.4
million, or $0.03 per diluted
share, related to the devaluation of the Venezuelan Bolivar Fuerte
during 2013.
Balance Sheet and Cash Flow Items
The Company's net operating cash flow for the third quarter of
2013 was $24.5 million, which
increased its year-to-date 2013 net operating cash flow to
$51.9 million as compared to
$41.8 million for the first nine
months of 2012. The improvement in the Company's net
operating cash flow during the first nine months of 2013 was
primarily driven by increased net income and better working capital
management. During 2013, the Company revised its credit
facility, expanding the amount available for borrowings under this
facility from $175.0 million to $300.0
million, which provides the Company further financial
flexibility for potential future initiatives. In addition to
the revised facility, the Company's current liquidity remains
strong, as its cash position continued to exceed its debt at
September 30, 2013 and its
consolidated leverage ratio continued to be less than one times
EBITDA.
Non-GAAP Measures
Included in this public release is a non-GAAP financial measure
of non-GAAP earnings per diluted share. The Company believes
this non-GAAP financial measure provides meaningful supplemental
information as it enhances a reader's understanding of the
financial performance of the Company, is more indicative of future
operating performance of the Company, and facilitates a better
comparison among fiscal periods, as the non-GAAP financial measure
excludes items that are not considered core to the Company's
operations. Non-GAAP results are presented for supplemental
informational purposes only and should not be considered a
substitute for the financial information presented in accordance
with GAAP. The following is a reconciliation between the
non-GAAP (unaudited) financial measure of non-GAAP earnings per
diluted share to its most directly comparable GAAP (unaudited)
financial measure:
|
|
Three Months
Ended
September
30,
|
|
Nine Months
Ended
September
30,
|
|
|
2013
|
|
2012
|
|
2013
|
|
2012
|
GAAP earnings per
diluted share attributable to Quaker Chemical Corporation Common
Shareholders
|
|
$
0.95
|
|
$
0.83
|
|
$
3.21
|
|
$
2.63
|
|
|
|
|
|
|
|
|
|
CFO transition costs
per diluted share
|
|
—
|
|
—
|
|
—
|
|
0.03
|
|
|
|
|
|
|
|
|
|
Customer bankruptcy
costs per diluted share
|
|
—
|
|
—
|
|
—
|
|
0.06
|
|
|
|
|
|
|
|
|
|
Mineral oil excise
tax refund per diluted share
|
|
—
|
|
—
|
|
(0.14)
|
|
—
|
|
|
|
|
|
|
|
|
|
Change in
acquisition-related earnout liability per diluted share
|
|
—
|
|
—
|
|
0.03
|
|
—
|
|
|
|
|
|
|
|
|
|
Cost streamlining
initiatives per diluted share
|
|
0.05
|
|
—
|
|
0.07
|
|
—
|
|
|
|
|
|
|
|
|
|
Devaluation of the
Venezuelan Bolivar Fuerte per diluted share
|
|
—
|
|
—
|
|
0.03
|
|
—
|
|
|
|
|
|
|
|
|
|
Equity income in a
captive insurance company per diluted share
|
|
(0.09)
|
|
(0.03)
|
|
(0.33)
|
|
(0.11)
|
|
|
|
|
|
|
|
|
|
Non-GAAP earnings per
diluted share
|
|
$
0.91
|
|
$
0.80
|
|
$
2.87
|
|
$
2.61
|
Recent Developments
For the third quarter of 2013, the Company expected to receive
recertification of a prior concessionary tax rate in Asia Pacific, which would have increased
earnings an additional $0.08 per
share, but was delayed until earlier this month due to a period of
public notice and comment. As of the date of this release,
the period for comment has expired and the Company has not received
a notice or comment challenging its approval status, so the change
in the Company's effective tax rate is expected to be recognized in
its financial statements in the fourth quarter of 2013, pending no
other significant developments. See Note 6 to Notes to Condensed
Consolidated Financial Statements in the Company's Form 10-Q for
the quarterly period ended September 30,
2013.
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, future terrorist attacks and other acts of
violence. 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 the third quarter of 2013 results is scheduled for
October 30, 2013 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 website at
http://www.quakerchem.com. You can also access the conference
call by dialing 877-269-7756.
About Quaker
Quaker Chemical is a leading global provider of
process fluids, chemical specialties, and technical expertise
to a wide range of industries, including steel, aluminum,
automotive, mining, aerospace, tube and pipe, cans, and
others. For nearly 100 years, Quaker has helped customers
around the world achieve production efficiency, improve product
quality, and lower costs through a combination of innovative
technology, process knowledge, and customized services.
Headquartered in Conshohocken,
Pennsylvania USA, Quaker serves businesses worldwide with
a network of dedicated and experienced professionals
whose mission is to make a difference.
Quaker Chemical
Corporation
|
Condensed
Consolidated Statement of Income
|
(Dollars in
thousands, except per share data)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
Three Months
Ended September
30,
|
|
Nine Months
Ended September
30,
|
|
|
2013
|
|
2012
|
|
2013
|
|
2012
|
|
|
|
|
|
|
|
|
|
Net
sales
|
|
$
184,059
|
|
$
180,923
|
|
$
545,098
|
|
$
535,358
|
|
|
|
|
|
|
|
|
|
Cost of goods
sold
|
|
118,069
|
|
121,797
|
|
349,186
|
|
355,801
|
|
|
|
|
|
|
|
|
|
Gross
profit
|
|
65,990
|
|
59,126
|
|
195,912
|
|
179,557
|
%
|
|
35.9%
|
|
32.7%
|
|
35.9%
|
|
33.5%
|
|
|
|
|
|
|
|
|
|
Selling, general and
administrative expenses
|
|
47,183
|
|
43,263
|
|
139,901
|
|
130,009
|
|
|
|
|
|
|
|
|
|
Operating
income
|
|
18,807
|
|
15,863
|
|
56,011
|
|
49,548
|
%
|
|
10.2%
|
|
8.8%
|
|
10.3%
|
|
9.3%
|
|
|
|
|
|
|
|
|
|
Other (expense)
income, net
|
|
(685)
|
|
322
|
|
1,962
|
|
529
|
Interest
expense
|
|
(717)
|
|
(1,034)
|
|
(2,223)
|
|
(3,359)
|
Interest
income
|
|
267
|
|
149
|
|
665
|
|
409
|
Income before taxes
and equity in net income of associated companies
|
|
17,672
|
|
15,300
|
|
56,415
|
|
47,127
|
|
|
|
|
|
|
|
|
|
Taxes on income
before equity in net income of associated companies
|
|
5,972
|
|
4,373
|
|
16,933
|
|
12,692
|
Income before equity
in net income of associated companies
|
|
11,700
|
|
10,927
|
|
39,482
|
|
34,435
|
|
|
|
|
|
|
|
|
|
Equity in net income
of associated companies
|
|
1,605
|
|
696
|
|
4,689
|
|
2,038
|
|
|
|
|
|
|
|
|
|
Net income
|
|
13,305
|
|
11,623
|
|
44,171
|
|
36,473
|
|
|
|
|
|
|
|
|
|
Less: Net income
attributable to noncontrolling interest
|
|
754
|
|
698
|
|
1,918
|
|
2,075
|
|
|
|
|
|
|
|
|
|
Net income
attributable to Quaker Chemical Corporation
|
|
$
12,551
|
|
$
10,925
|
|
$
42,253
|
|
$
34,398
|
%
|
|
6.8%
|
|
6.0%
|
|
7.8%
|
|
6.4%
|
|
|
|
|
|
|
|
|
|
Per share
data:
|
|
|
|
|
|
|
|
|
Net income
attributable to Quaker Chemical Corporation Common Shareholders -
basic
|
|
$
0.95
|
|
$
0.84
|
|
$
3.21
|
|
$
2.65
|
Net income
attributable to Quaker Chemical Corporation Common Shareholders -
diluted
|
|
$
0.95
|
|
$
0.83
|
|
$
3.21
|
|
$
2.63
|
Quaker Chemical
Corporation
|
Condensed
Consolidated Balance Sheet
|
(Dollars in
thousands, except par value and share amounts)
|
|
|
|
|
|
|
|
(Unaudited)
|
|
|
|
|
|
|
|
September
30,
|
|
December
31,
|
|
|
2013
|
|
2012
|
ASSETS
|
|
|
|
|
|
|
|
|
|
Current
assets
|
|
|
|
|
Cash and cash
equivalents
|
|
$
53,945
|
|
$
32,547
|
Accounts receivable,
net
|
|
166,584
|
|
154,197
|
Inventories,
net
|
|
76,670
|
|
72,471
|
Prepaid expenses and
other current assets
|
|
16,870
|
|
18,595
|
Total current
assets
|
|
314,069
|
|
277,810
|
|
|
|
|
|
Property, plant and
equipment, net
|
|
84,268
|
|
85,112
|
Goodwill
|
|
58,511
|
|
59,169
|
Other intangible
assets, net
|
|
32,028
|
|
32,809
|
Investments in
associated companies
|
|
17,789
|
|
16,603
|
Deferred income
taxes
|
|
27,284
|
|
30,673
|
Other
assets
|
|
36,038
|
|
34,458
|
Total
assets
|
|
$
569,987
|
|
$
536,634
|
|
|
|
|
|
LIABILITIES AND
EQUITY
|
|
|
|
|
|
|
|
|
|
Current
liabilities
|
|
|
|
|
Short-term borrowings
and current portion of long-term debt
|
|
$
1,432
|
|
$
1,468
|
Accounts and other
payables
|
|
81,289
|
|
70,794
|
Accrued
compensation
|
|
17,027
|
|
16,842
|
Other current
liabilities
|
|
27,399
|
|
18,688
|
Total current
liabilities
|
|
127,147
|
|
107,792
|
Long-term
debt
|
|
17,765
|
|
30,000
|
Deferred income
taxes
|
|
6,127
|
|
6,383
|
Other non-current
liabilities
|
|
94,105
|
|
102,783
|
Total
liabilities
|
|
245,144
|
|
246,958
|
|
|
|
|
|
Equity
|
|
|
|
|
Common stock, $1 par
value; authorized 30,000,000 shares;
issued 13,187,320
shares
|
|
13,187
|
|
13,095
|
Capital in excess of
par value
|
|
97,816
|
|
94,470
|
Retained
earnings
|
|
247,833
|
|
215,390
|
Accumulated other
comprehensive loss
|
|
(43,238)
|
|
(41,855)
|
Total Quaker
shareholders' equity
|
|
315,598
|
|
281,100
|
Noncontrolling
interest
|
|
9,245
|
|
8,576
|
Total
equity
|
|
324,843
|
|
289,676
|
Total liabilities and
equity
|
|
$
569,987
|
|
$
536,634
|
|
|
|
|
|
Quaker Chemical
Corporation
|
Condensed
Consolidated Statement of Cash Flows
|
For the nine
months ended September 30,
|
(Dollars in
thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
(Unaudited)
|
|
|
2013
|
|
2012
|
Cash flows from
operating activities
|
|
|
|
|
Net
income
|
|
$
44,171
|
|
$
36,473
|
Adjustments to
reconcile net income to net cash provided by operating
activities:
|
|
|
|
|
Depreciation
|
|
9,219
|
|
9,001
|
Amortization
|
|
2,621
|
|
2,283
|
Equity in undistributed earnings of
associated companies, net of dividends
|
|
(2,525)
|
|
(1,854)
|
Deferred compensation and other,
net
|
|
(50)
|
|
1,848
|
Stock-based
compensation
|
|
3,133
|
|
2,954
|
Loss (gain) on disposal of
property, plant and equipment
|
|
193
|
|
(75)
|
Insurance settlement
realized
|
|
(731)
|
|
(1,074)
|
Pension and other postretirement
benefits
|
|
(561)
|
|
(1,823)
|
(Decrease) increase
in cash from changes in current assets and current
liabilities, net of
acquisitions:
|
|
|
|
|
Accounts receivable
|
|
(13,222)
|
|
(1,381)
|
Inventories
|
|
(4,569)
|
|
(875)
|
Prepaid expenses and other current
assets
|
|
1,017
|
|
(1,976)
|
Accounts payable and accrued
liabilities
|
|
13,256
|
|
(1,731)
|
Net
cash provided by operating activities
|
|
51,952
|
|
41,770
|
|
|
|
|
|
Cash flows from
investing activities
|
|
|
|
|
Capital
expenditures
|
|
(7,330)
|
|
(8,757)
|
Payments related to
acquisitions , net of cash acquired
|
|
(2,478)
|
|
(2,635)
|
Proceeds from disposition of
assets
|
|
391
|
|
193
|
Insurance settlement interest
earned
|
|
40
|
|
53
|
Change in restricted cash,
net
|
|
691
|
|
1,021
|
Net cash
used in investing activities
|
|
(8,686)
|
|
(10,125)
|
|
|
|
|
|
Cash flows from
financing activities
|
|
|
|
|
Repayments of long-term
debt
|
|
(12,289)
|
|
(9,672)
|
Dividends paid
|
|
(9,721)
|
|
(9,410)
|
Stock options exercised,
other
|
|
(510)
|
|
(828)
|
Excess tax benefit related to stock
option exercises
|
|
815
|
|
2,164
|
Distributions to noncontrolling
shareholders
|
|
(30)
|
|
(30)
|
Net cash used in
financing activities
|
|
(21,735)
|
|
(17,776)
|
|
|
|
|
|
Effect of exchange
rate changes on cash
|
|
(133)
|
|
(606)
|
Net
increase in cash and cash equivalents
|
|
21,398
|
|
13,263
|
Cash and cash equivalents at the
beginning of the period
|
|
32,547
|
|
16,909
|
Cash and cash equivalents at the
end of the period
|
|
$
53,945
|
|
$
30,172
|
|
|
|
|
|
SOURCE Quaker Chemical Corporation