CONSHOHOCKEN, Pa., Feb. 27, 2014 /PRNewswire/ -- Quaker Chemical
Corporation (NYSE: KWR) today announced net sales of $184.3 million for the fourth quarter of 2013, up
approximately 7% compared to the fourth quarter of 2012 net sales
of $172.9 million. Earnings per
diluted share for the fourth quarter of 2013 were $1.07 compared to $0.99 for the fourth quarter of 2012, with
non-GAAP earnings per diluted share increasing approximately 13% to
$0.98 for the fourth quarter of 2013
from $0.87 for the fourth quarter of
2012 and adjusted EBITDA increasing 11% to $21.0 million for the fourth quarter of 2013 from
$18.9 million for the fourth quarter
of 2012. See Non-GAAP Measures section below. Net sales
for the full year of 2013 were $729.4
million compared to $708.2
million for 2012. Earnings per diluted share for 2013
were $4.27 compared to earnings per
diluted share of $3.63 for 2012, with
non-GAAP earnings per diluted share increasing approximately 10% to
$3.84 in 2013 compared to
$3.49 in 2012 and adjusted EBITDA
increasing 11% to $89.6 million for
2013 from $80.9 million for
2012. See Non-GAAP Measures section below.
Michael F. Barry, Chairman, Chief
Executive Officer and President, commented, "We are pleased to
close out 2013 with a strong fourth quarter and report a 7% growth
in net sales. We are continuing to more than offset the
challenging market conditions, including foreign exchange, and to
grow our business profitably through taking market share and
leveraging our recent acquisitions. In addition, we
experienced gross margin improvement as raw material prices have
finally stabilized over the last few quarters."
Mr. Barry continued, "2013 was another very good year for Quaker
in terms of revenue, net income, net operating cash flow, and
adjusted EBITDA despite a challenging global economy. Also,
our shareholder value creation was 45% as we continued with both
dividend and share price appreciation. We closed the quarter
with a positive net cash/debt position and successfully upsized our
bank facility to $300 million earlier
this year. Our strong balance sheet position provides us the
financial flexibility to pursue our strategic initiatives and
acquisitions, which we believe can create significant value for our
shareholders."
Mr. Barry also noted, "Going into 2014, we expect to see modest
market growth in all regions of the world which is a change
considering that the global markets have been uneven for the past
few years. However, we continue to operate in a competitive
environment with some challenging economic conditions and also
could incur some increases in raw material costs from current
levels. On the other hand, I continue to expect market share
gains from our strategic initiatives and recent acquisitions which
will build upon the anticipated end market growth. On balance, I
remain confident in our future and expect 2014 to be another good
year for Quaker as we strive to increase revenue and earnings for
the fifth consecutive year."
Fourth Quarter of 2013 Summary
Net sales for the fourth quarter of 2013 of $184.3 million increased approximately 7% from
net sales of $172.9 million in the
fourth quarter of 2012, primarily due to an increase in product
volumes across all regions.
Gross profit increased approximately $6.0
million, or approximately 10%, from the fourth quarter of
2012, which was primarily driven by an improvement in gross margin
to 35.4% for the fourth quarter of 2013 from 34.2% in the fourth
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 $4.5 million from the
fourth quarter of 2012, which was primarily driven by higher labor
related costs on general year-over-year merit increases, increased
selling and other related costs on improved Company performance and
a non-income tax contingency charge.
The decrease in other income of $1.3
million was primarily the result of lower income in the
fourth quarter of 2013 compared to the fourth quarter of 2012 from
changes in the fair value of certain contingent consideration
liabilities that related to past acquisitions.
Interest expense was lower in the fourth quarter of 2013
compared to the fourth quarter of 2012, primarily due to decreases
in average borrowings and interest rates. Interest income was
higher in the fourth quarter of 2013 compared to the fourth quarter
of 2012, primarily due to an increase in the level of the Company's
cash on hand.
The Company's effective tax rates for the fourth quarters of
2013 and 2012 were 21.7% and 18.2%, respectively. The primary
contributors to the increase in the current quarter's effective tax
rate were lower changes in reserves related to uncertain tax
positions and certain one-time discrete items that decreased the
fourth quarter of 2012 effective tax rate, partially offset by a
change in the mix of income to lower tax jurisdictions in the
fourth quarter of 2013.
The increase in equity in net income of associated companies
from the fourth quarter of 2012 was primarily due to higher
earnings related to the Company's equity interest in a captive
insurance company.
Year-to-Date Summary
Net sales for 2013 of $729.4
million increased approximately 3% from $708.2 million in 2012. The increase in the
Company's net sales from the prior year was primarily due to an
increase in product volumes generally across all regions, partially
offset by a decrease due to foreign exchange rate
translation.
Gross profit increased by approximately $22.4 million, or approximately 9%, from 2012,
which was primarily driven by an improvement in gross margin to
35.8% in 2013 from 33.7% in 2012. The increase in gross
margin reflects the return of the Company's product margins to more
acceptable levels.
SG&A increased approximately $14.3
million from 2012, which was primarily driven by higher
labor related costs on general year-over-year merit increases,
increased selling and other related costs on improved Company
performance and costs added with our recent
acquisitions. In addition, non-operating SG&A
expenses increased due to certain uncommon costs. For
instance, 2013 SG&A includes the non-income tax contingency
charge noted above and, also, costs related to streamlining certain
operations in the Company's Europe, Middle
East and Africa and
South America segments. Partially
offsetting these increases to SG&A were the prior year costs
associated with the bankruptcies of certain U.S customers, the
prior year costs associated with the Company's CFO transition and
lower translation due to changes in foreign exchange rates.
Other income in 2013 was generally consistent with 2012.
In 2013, the Company recorded other income from a refund related to
past excise taxes paid on certain mineral oil sales, which was
offset by higher other income in 2012 from changes in the fair
value of certain contingent consideration liabilities related to
past acquisitions.
The decrease in interest expense from 2012 to 2013 was primarily
due to lower average borrowings and lower interest rates in
2013. The increase in interest income from 2012 to 2013 was
primarily due to a higher level of the Company's cash on hand.
The Company's effective tax rates for 2013 and 2012 were 28.1%
and 24.7%, respectively. The primary contributors to the
increase in the current year's effective tax rate were lower
changes in reserves related to uncertain tax positions and certain
one-time discrete items that decreased the 2012 effective tax rate,
partially offset by a change in the mix of income to lower tax
jurisdictions during 2013.
The increase in equity in net income of associated companies
from 2012 was primarily due to higher earnings related to the
Company's equity interest in a captive insurance company during
2013, including a non-cash out-of-period adjustment recorded in
2013. Partially offsetting this increase in equity in net
income of associated companies was a charge recorded in 2013 due to
the devaluation of the Venezuelan Bolivar Fuerte.
Changes in foreign exchange rates negatively impacted 2013 net
income by approximately $0.7 million,
or $0.05 per diluted share.
Balance Sheet and Cash Flow Items
The Company's net operating cash flow for the fourth quarter of
2013 was $21.8 million, which
increased its full year 2013 net operating cash flow to
$73.8 million as compared to
$62.9 million for 2012. The
improvement in the Company's net operating cash flow during 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
December 31, 2013 and its
consolidated leverage ratio continued to be less than one times
EBITDA.
Non-GAAP Measures
Included in this public release are non-GAAP financial measures
of non-GAAP earnings per diluted share and adjusted EBITDA.
The Company believes these non-GAAP financial measures provide
meaningful supplemental information as they enhance a reader's
understanding of the financial performance of the Company, are more
indicative of future operating performance of the Company, and
facilitate a better comparison among fiscal periods, as the
non-GAAP financial measures exclude 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 are
reconciliations between the non-GAAP (unaudited) financial measures
of non-GAAP earnings per diluted share and adjusted EBITDA to their
most directly comparable GAAP financial measures:
|
|
Three Months
Ended
December
31,
|
|
Twelve Months
Ended
December
31,
|
|
|
2013
|
|
2012
|
|
2013
|
|
2012
|
GAAP earnings per
diluted share attributable to Quaker Chemical Corporation Common
Shareholders
|
|
$
1.07
|
|
$
0.99
|
|
$
4.27
|
|
$
3.63
|
|
|
|
|
|
|
|
|
|
Equity income in a
captive insurance company per diluted share
|
|
(0.08)
|
|
(0.03)
|
|
(0.41)
|
|
(0.14)
|
|
|
|
|
|
|
|
|
|
Mineral oil excise
tax refund per diluted share
|
|
—
|
|
—
|
|
(0.14)
|
|
—
|
|
|
|
|
|
|
|
|
|
Change in
acquisition-related earnout liability per diluted share
|
|
(0.06)
|
|
(0.09)
|
|
(0.03)
|
|
(0.09)
|
|
|
|
|
|
|
|
|
|
Cost streamlining
initiatives per diluted share
|
|
0.01
|
|
—
|
|
0.08
|
|
—
|
|
|
|
|
|
|
|
|
|
Devaluation of the
Venezuelan Bolivar Fuerte per diluted share
|
|
—
|
|
—
|
|
0.03
|
|
—
|
|
|
|
|
|
|
|
|
|
Non-income tax
contingency charge per diluted share
|
|
0.04
|
|
—
|
|
0.04
|
|
—
|
|
|
|
|
|
|
|
|
|
Customer bankruptcy
costs per diluted share
|
|
—
|
|
—
|
|
—
|
|
0.06
|
|
|
|
|
|
|
|
|
|
CFO transition costs
per diluted share
|
|
—
|
|
—
|
|
—
|
|
0.03
|
|
|
|
|
|
|
|
|
|
Non-GAAP earnings per
diluted share
|
|
$
0.98
|
|
$
0.87
|
|
$
3.84
|
|
$
3.49
|
|
|
Three Months
Ended
December
31,
|
|
Twelve Months
Ended
December
31,
|
|
|
2013
|
|
2012
|
|
2013
|
|
2012
|
Net income
attributable to Quaker Chemical Corporation
|
|
$
14,086
|
|
$
13,007
|
|
$
56,339
|
|
$
47,405
|
|
|
|
|
|
|
|
|
|
Depreciation and
amortization
|
|
3,944
|
|
4,074
|
|
15,784
|
|
15,358
|
|
|
|
|
|
|
|
|
|
Interest
expense
|
|
699
|
|
924
|
|
2,922
|
|
4,283
|
|
|
|
|
|
|
|
|
|
Tax
expense
|
|
3,556
|
|
2,883
|
|
20,489
|
|
15,575
|
|
|
|
|
|
|
|
|
|
Equity income in a
captive insurance company
|
|
(1,073)
|
|
(386)
|
|
(5,451)
|
|
(1,812)
|
|
|
|
|
|
|
|
|
|
Mineral oil excise
tax refund
|
|
—
|
|
—
|
|
(2,540)
|
|
—
|
|
|
|
|
|
|
|
|
|
Change in
acquisition-related earnout liability
|
|
(1,172)
|
|
(1,737)
|
|
(497)
|
|
(1,737)
|
|
|
|
|
|
|
|
|
|
Cost streamlining
initiatives
|
|
142
|
|
—
|
|
1,419
|
|
—
|
|
|
|
|
|
|
|
|
|
Devaluation of the
Venezuelan Bolivar Fuerte
|
|
—
|
|
—
|
|
357
|
|
—
|
|
|
|
|
|
|
|
|
|
Non-income tax
contingency charge
|
|
796
|
|
—
|
|
796
|
|
—
|
|
|
|
|
|
|
|
|
|
Customer bankruptcy
costs
|
|
—
|
|
98
|
|
—
|
|
1,254
|
|
|
|
|
|
|
|
|
|
CFO transition
costs
|
|
—
|
|
—
|
|
—
|
|
609
|
|
|
|
|
|
|
|
|
|
Adjusted
EBITDA
|
|
$
20,978
|
|
$
18,863
|
|
$
89,618
|
|
$
80,935
|
Forward-Looking Statements
This release contains "forward-looking statements" within the
meaning of Section 27A of the Securities Act of 1933 and Section
21E of the Securities Exchange Act of 1934. These forward
looking statements 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 fourth quarter of 2013 results is scheduled for
February 28, 2014 at 8:00 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
|
Consolidated
Statement of Income
|
(In thousands,
except per share data)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
Three Months
Ended
December 31,
|
|
Twelve Months
Ended
December 31,
|
|
|
2013
|
|
2012
|
|
2013
|
|
2012
|
|
|
|
|
|
|
|
|
|
Net
sales
|
|
$
184,297
|
|
$
172,868
|
|
$
729,395
|
|
$
708,226
|
|
|
|
|
|
|
|
|
|
Cost of goods
sold
|
|
119,134
|
|
113,714
|
|
468,320
|
|
469,515
|
|
|
|
|
|
|
|
|
|
Gross
profit
|
|
65,163
|
|
59,154
|
|
261,075
|
|
238,711
|
%
|
|
35.4%
|
|
34.2%
|
|
35.8%
|
|
33.7%
|
|
|
|
|
|
|
|
|
|
Selling, general and
administrative expenses
|
|
49,931
|
|
45,478
|
|
189,832
|
|
175,487
|
|
|
|
|
|
|
|
|
|
Operating
income
|
|
15,232
|
|
13,676
|
|
71,243
|
|
63,224
|
%
|
|
8.3%
|
|
7.9%
|
|
9.8%
|
|
8.9%
|
|
|
|
|
|
|
|
|
|
Other income,
net
|
|
1,557
|
|
2,886
|
|
3,519
|
|
3,415
|
Interest
expense
|
|
(699)
|
|
(924)
|
|
(2,922)
|
|
(4,283)
|
Interest
income
|
|
321
|
|
183
|
|
986
|
|
592
|
Income before taxes
and equity in net income of associated companies
|
|
16,411
|
|
15,821
|
|
72,826
|
|
62,948
|
|
|
|
|
|
|
|
|
|
Taxes on income
before equity in net income of associated companies
|
|
3,556
|
|
2,883
|
|
20,489
|
|
15,575
|
|
|
12,855
|
|
12,938
|
|
52,337
|
|
47,373
|
|
|
|
|
|
|
|
|
|
Equity in net income
of associated companies
|
|
1,825
|
|
829
|
|
6,514
|
|
2,867
|
|
|
|
|
|
|
|
|
|
Net income
|
|
14,680
|
|
13,767
|
|
58,851
|
|
50,240
|
|
|
|
|
|
|
|
|
|
Less: Net income
attributable to noncontrolling interest
|
|
594
|
|
760
|
|
2,512
|
|
2,835
|
|
|
|
|
|
|
|
|
|
Net income
attributable to Quaker Chemical Corporation
|
|
$
14,086
|
|
$
13,007
|
|
$
56,339
|
|
$
47,405
|
%
|
|
7.6%
|
|
7.5%
|
|
7.7%
|
|
6.7%
|
|
|
|
|
|
|
|
|
|
Per share
data:
|
|
|
|
|
|
|
|
|
Net income
attributable to Quaker Chemical Corporation Common Shareholders -
basic
|
|
$
1.07
|
|
$
0.99
|
|
$
4.28
|
|
$
3.64
|
Net income
attributable to Quaker Chemical Corporation Common Shareholders -
diluted
|
|
$
1.07
|
|
$
0.99
|
|
$
4.27
|
|
$
3.63
|
Quaker Chemical
Corporation
|
Consolidated
Balance Sheet
|
(In thousands,
except par value and share amounts)
|
|
|
|
|
|
|
|
(Unaudited)
|
|
|
|
|
|
|
|
December
31,
|
|
December
31,
|
|
|
2013
|
|
2012
|
ASSETS
|
|
|
|
|
|
|
|
|
|
Current
assets
|
|
|
|
|
Cash and cash
equivalents
|
|
$
68,492
|
|
$
32,547
|
Accounts receivable,
net
|
|
165,629
|
|
154,197
|
Inventories,
net
|
|
71,557
|
|
72,471
|
Current deferred tax
assets
|
|
7,826
|
|
6,401
|
Prepaid expenses and
other current assets
|
|
15,343
|
|
12,194
|
Total current
assets
|
|
328,847
|
|
277,810
|
|
|
|
|
|
Property, plant and
equipment, net
|
|
85,488
|
|
85,112
|
Goodwill
|
|
58,151
|
|
59,169
|
Other intangible
assets, net
|
|
31,272
|
|
32,809
|
Investments in
associated companies
|
|
19,397
|
|
16,603
|
Non-current deferred
income taxes
|
|
24,724
|
|
30,673
|
Other
assets
|
|
36,267
|
|
34,458
|
Total
assets
|
|
$
584,146
|
|
$
536,634
|
|
|
|
|
|
LIABILITIES AND
EQUITY
|
|
|
|
|
|
|
|
|
|
Current
liabilities
|
|
|
|
|
Short-term borrowings
and current portion of long-term debt
|
|
$
1,395
|
|
$
1,468
|
Accounts
payable
|
|
72,281
|
|
67,586
|
Dividends
payable
|
|
3,299
|
|
3,208
|
Accrued
compensation
|
|
20,801
|
|
16,842
|
Accrued pension and
postretirement benefits
|
|
1,438
|
|
2,188
|
Current deferred tax
liabilities
|
|
1,057
|
|
253
|
Other current
liabilities
|
|
30,585
|
|
16,247
|
Total current
liabilities
|
|
130,856
|
|
107,792
|
Long-term
debt
|
|
17,321
|
|
30,000
|
Non-current deferred
income taxes
|
|
6,394
|
|
6,383
|
Non-current accrued
pension and postretirement benefits
|
|
37,006
|
|
49,916
|
Other non-current
liabilities
|
|
47,538
|
|
52,867
|
Total
liabilities
|
|
239,115
|
|
246,958
|
|
|
|
|
|
Equity
|
|
|
|
|
Common stock, $1 par
value; authorized 30,000,000 shares; issued 2013 - 13,196,140
shares
|
|
13,196
|
|
13,095
|
Capital in excess of
par value
|
|
99,038
|
|
94,470
|
Retained
earnings
|
|
258,620
|
|
215,390
|
Accumulated other
comprehensive loss
|
|
(34,700)
|
|
(41,855)
|
Total Quaker
shareholders' equity
|
|
336,154
|
|
281,100
|
Noncontrolling
interest
|
|
8,877
|
|
8,576
|
Total
equity
|
|
345,031
|
|
289,676
|
Total liabilities and
equity
|
|
$
584,146
|
|
$
536,634
|
|
|
|
|
|
|
|
|
|
|
Quaker Chemical
Corporation
|
Consolidated
Statement of Cash Flows
|
For the twelve
months ended December 31,
|
(In
thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
(Unaudited)
|
|
|
2013
|
|
2012
|
|
|
|
|
|
Cash flows from
operating activities
|
|
|
|
|
Net
income
|
|
$
58,851
|
|
$
50,240
|
Adjustments to
reconcile net income to net cash provided by operating
activities:
|
|
|
|
|
Depreciation
|
|
12,339
|
|
12,252
|
Amortization
|
|
3,445
|
|
3,106
|
Equity in
undistributed earnings of associated companies, net of
dividends
|
|
(4,162)
|
|
(2,350)
|
Deferred income
taxes
|
|
(30)
|
|
2,354
|
Uncertain tax
positions (non-deferred portion)
|
|
(1,826)
|
|
(1,407)
|
Acquisition-related
fair value adjustments
|
|
200
|
|
(1,909)
|
Deferred compensation
and other, net
|
|
(259)
|
|
(156)
|
Stock-based
compensation
|
|
4,161
|
|
3,807
|
Loss (gain) on
disposal of property, plant and equipment
|
|
200
|
|
(108)
|
Insurance settlements
realized
|
|
(988)
|
|
(1,391)
|
Pension and other
postretirement benefits
|
|
862
|
|
(1,427)
|
(Decrease) increase
in cash from changes in current assets and current liabilities, net
of acquisitions:
|
|
|
|
|
Accounts
receivable
|
|
(11,837)
|
|
779
|
Inventories
|
|
406
|
|
3,228
|
Prepaid expenses and
other current assets
|
|
(743)
|
|
504
|
Accounts payable and
accrued liabilities
|
|
11,301
|
|
(2,562)
|
Estimated taxes on
income
|
|
1,881
|
|
(2,067)
|
Net cash provided by
operating activities
|
|
73,801
|
|
62,893
|
|
|
|
|
|
Cash flows from
investing activities
|
|
|
|
|
Investments in
property, plant and equipment
|
|
(11,439)
|
|
(12,735)
|
Payments related to
acquisitions, net of cash acquired
|
|
(2,478)
|
|
(5,635)
|
Proceeds from
disposition of assets
|
|
513
|
|
245
|
Interest earned on an
Insurance settlement
|
|
52
|
|
69
|
Change in restricted
cash, net
|
|
936
|
|
1,322
|
Net cash used in
investing activities
|
|
(12,416)
|
|
(16,734)
|
|
|
|
|
|
Cash flows from
financing activities
|
|
|
|
|
Net decrease in
short-term borrowings
|
|
-
|
|
(315)
|
Repayments of
long-term debt
|
|
(12,791)
|
|
(17,632)
|
Dividends
paid
|
|
(13,018)
|
|
(12,616)
|
Stock options
exercised, other
|
|
(307)
|
|
(924)
|
Excess tax benefit
related to stock option exercises
|
|
815
|
|
2,045
|
Distributions to
noncontrolling shareholders
|
|
(905)
|
|
(1,099)
|
Net cash used in
financing activities
|
|
(26,206)
|
|
(30,541)
|
|
|
|
|
|
Effect of exchange
rate changes on cash
|
|
766
|
|
20
|
Net increase in cash
and cash equivalents
|
|
35,945
|
|
15,638
|
Cash and cash
equivalents at the beginning of the period
|
|
32,547
|
|
16,909
|
Cash and cash
equivalents at the end of the period
|
|
$
68,492
|
|
$
32,547
|
|
|
|
|
|
SOURCE Quaker Chemical Corporation