UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT PURSUANT TO SECTION
13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
February 25, 2016
Date of Report (Date of earliest event
reported)
QUAKER CHEMICAL CORPORATION
(Exact name of Registrant as specified in
its charter)
Commission File Number 001-12019
PENNSYLVANIA |
|
No. 23-0993790 |
(State or other jurisdiction of
incorporation or organization) |
|
(I.R.S. Employer
Identification No.) |
One Quaker Park |
901 E. Hector Street |
Conshohocken, Pennsylvania 19428 |
(Address of principal executive offices) |
(Zip Code) |
(610) 832-4000 |
(Registrant’s telephone number, including area code) |
Not Applicable
(Former name or former address, if changed since
last report)
Check the appropriate box below if the Form 8-K filing is intended
to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
¨
Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
¨
Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
¨
Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
¨
Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
INFORMATION TO BE INCLUDED IN THE REPORT
| Item 2.02. | Results of Operations and Financial Condition. |
On February 25, 2016, Quaker Chemical Corporation
announced its results of operations for the fourth quarter and full year ended December 31, 2015 in a press release, the text of
which is included as Exhibit 99.1 hereto. Supplemental information related to the same period is also included as Exhibit 99.2
hereto.
| Item 9.01. | Financial Statements and Exhibits. |
The following exhibits are included as part
of this report:
Exhibit No. |
|
|
99.1 |
|
Press Release of Quaker Chemical Corporation dated February 25, 2016. |
|
|
|
99.2 |
|
Supplemental Information related to fourth quarter and full year ended December 31, 2015. |
SIGNATURE
Pursuant to the requirements of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
|
|
QUAKER CHEMICAL CORPORATION |
|
|
Registrant |
|
|
|
|
Date: February 25, 2016 |
|
By: |
/s/ Mary Dean Hall |
|
|
|
Mary Dean Hall |
|
|
|
Vice President, Chief Financial |
|
|
|
Officer and Treasurer |
Exhibit 99.1
NEWS
Contact: Mary Dean Hall Vice President, Chief Financial Officer and Treasurer
Hallm@quakerchem.com
T. 610.832.4160
|
|
QUAKER CHEMICAL ANNOUNCES FOURTH QUARTER AND FULL
YEAR 2015 RESULTS
| · | Operating results drive quarterly increase of 6% in adjusted EBITDA despite negative impacts of
foreign exchange and lower global steel production |
| · | Fourth quarter restructuring program expected to deliver meaningful savings beginning in 2016 |
| · | Strong quarterly cash flow leads to a 34% increase in full year operating cash flow to $73 million |
February 25, 2016
CONSHOHOCKEN, PA – Quaker Chemical Corporation
(NYSE: KWR) today announced net sales of $183.3 million for the fourth quarter of 2015 compared to $194.0 million for the fourth
quarter of 2014 and full year net sales of $737.6 million for 2015 compared to $765.9 million for 2014. The decreases in net sales
for the fourth quarter and full year 2015 were both driven by the negative impact of foreign currency translation of $12.4
million, or approximately 7%, and $53.6 million, or 7%, respectively, which more than offset volume and acquisition-related
growth that the Company achieved despite challenging market conditions.
Earnings per diluted share decreased from $0.95
in the fourth quarter of 2014 to $0.86 for the fourth quarter of 2015, primarily due to restructuring expenses of $6.8 million,
or $0.36 per diluted share, related to a global restructuring program that the Company initiated in the fourth quarter of 2015.
Excluding these restructuring expenses and other uncommon items, the Company’s non-GAAP earnings per diluted share increased
16% to $1.16 for the fourth quarter of 2015 compared to $1.00 for the fourth quarter of 2014, despite the negative impact of foreign
exchange of $0.05 per diluted share, or 5%, and lower global steel production. The Company’s
adjusted EBITDA increased 6% to $25.3 million for the fourth quarter of 2015 from $23.8 million in the fourth quarter of 2014.
Full year 2015 earnings per diluted share were $3.84 compared to $4.26 for 2014, with non-GAAP earnings per diluted share increasing
4% to $4.43 for 2015 compared to $4.26 for 2014. The Company was able to achieve this full year non-GAAP earnings growth despite
the negative impact of foreign exchange of $0.31 per diluted share, or 7%, and a decline in full
year global steel production. As a result of this non-GAAP earnings growth, the Company’s adjusted EBITDA increased 2% to
$101.6 million for 2015 compared to $99.8 million in 2014.
Michael F. Barry, Chairman, Chief Executive
Officer and President commented, “We are pleased to have delivered another quarter of solid earnings and strong cash flow
despite a variety of market challenges. Foreign exchange headwinds continued to have the most significant negative impact on our
sales and earnings and we were also challenged by global steel industry production being down over 4%. In addition, we are seeing
continued weak economic conditions in several regions, especially in South America. Our sales also continued to be impacted by
downward price adjustments due to lower raw material costs. Despite these market challenges, we were able to increase our non-GAAP
earnings and adjusted EBITDA through additional market share gains and margin expansion.”
Quaker Chemical Corporation
One Quaker Park, 901 E. Hector
Street, Conshohocken, PA 19428-2380 USA
P: 610.832.4000 F: 610.832.8682
quakerchem.com
Mr. Barry continued, “2015 was the sixth
consecutive year of non-GAAP earnings and adjusted EBITDA growth. Looking forward, we see various headwinds that include continued
uncertain economic conditions in South America and China, a strong U.S. dollar and further pricing impacts to adjust to a lower
raw material cost environment. However, we remain committed to our strategy and believe our ability to continue to take market
share and leverage our acquisitions will help offset these market challenges. In addition, the restructuring program we implemented
in late 2015 stands to improve our SG&A leverage and yield meaningful savings, as early as the middle of 2016. Our 2016 plans
indicate growth in both the top and bottom lines despite currency headwinds. Overall, I continue to remain confident in our future
and expect 2016 to be another good year for Quaker, as we expect to increase non-GAAP earnings and adjusted EBITDA for the seventh
consecutive year.”
Fourth Quarter of 2015 Summary
Net sales for the fourth quarter of 2015 were
$183.3 million compared to net sales of $194.0 million for the fourth quarter of 2014. The decrease
in net sales was primarily due to the negative impact of foreign currency translation of $12.4 million,
or approximately 7%, and declines in selling price and product mix of 3%, which collectively offset a 4% increase in product volume,
including sales from acquisitions.
Gross profit for the fourth quarter of 2015
decreased $0.8 million from the fourth quarter of 2014 due to the decrease in net sales noted above.
This decrease was partially offset by an expansion of gross margin to 37.5% for the fourth quarter of 2015 compared to 35.9% for
the fourth quarter of 2014, mainly due to the timing of certain raw material cost decreases in the fourth quarter of 2015 compared
to the fourth quarter of 2014.
Selling, general and administrative expenses
(“SG&A”) decreased $4.3 million in the fourth quarter of 2015 as compared to the fourth quarter of 2014 due to
the net impact of several factors, including the impact of foreign currency translation, lower labor-related costs, a decrease
in professional fees, and a fourth quarter of 2014 charge for a cost streamlining initiative in South America. These decreases
to SG&A were partially offset by incremental costs associated with the Company’s recent acquisitions.
The Company had restructuring expenses of $6.8
million related to a global restructuring program initiated during the fourth quarter of 2015. Specifically, this program includes
restructuring and associated costs to reduce total headcount by approximately 65 people globally and to close certain non-manufacturing
locations. The Company expects to substantially complete this program in 2016, and currently projects pre-tax cost savings as a
result of this program to be approximately $3 million in 2016 and approximately $6 million annually in subsequent years.
Other income, interest expense and interest
income were relatively flat in the fourth quarter of 2015 compared to the fourth quarter of 2014. The Company had slightly higher
interest expense on increased average borrowings outstanding and slightly lower third party license fees in the fourth quarter
of 2015 as compared to the fourth quarter of 2014.
The Company’s effective tax rates for
the fourth quarters of 2015 and 2014 were 16.5% and 28.5%, respectively. The primary contributors to the decrease in the fourth
quarter of 2015 effective tax rate were accelerated recognition of certain tax-related credits in 2015 due to changes in local
tax regulations, adjustments in the fourth quarter of 2015 related to previous years’ tax estimates, and the mix of earnings
between higher and lower tax jurisdictions.
Equity in net income of associated companies
(“equity income”) was relatively consistent in the fourth quarter of 2015 compared to the fourth quarter of 2014. The
Company had lower equity income from its Venezuela affiliate in the fourth quarter of 2015 due to a first quarter of 2015 currency
devaluation, which was partially offset by higher equity income from the Company’s interest in a captive insurance company.
The Company had a $0.2
million increase in net income attributable to noncontrolling interest in the fourth quarter of 2015 compared to the fourth
quarter of 2014, primarily due to improved performance at its India affiliate.
During the fourth quarter of 2015, the Company
recognized $0.2 million of earnings, or $0.02 per diluted share, related to its July 2015 acquisition of Verkol S.A. (“Verkol”),
which was net of initial adjustments related to fair value accounting and diligence-related costs.
Changes in foreign exchange rates negatively impacted the Company’s
fourth quarter of 2015 net income by approximately 5%, or $0.05 per diluted share.
- more-
Year-to-Date 2015 Summary
Net sales for 2015 were $737.6
million compared to net sales of $765.9 million for 2014. The decrease in net sales was primarily due to the negative impact
of foreign currency translation of $53.6 million, or 7%, and declines in selling price and product
mix of 1%, which collectively offset a 4% increase in product volume, including sales from acquisitions.
Gross profit for 2015 increased $3.8 million,
or 1%, compared to 2014, driven by an expansion of gross margin to 37.6% for 2015 compared to 35.7% for 2014, partially offset
by the negative impact of foreign currency translation. The increase in gross margin was mainly due to the timing of certain raw
material cost decreases in 2015 compared to 2014.
The increase in SG&A for 2015 of $3.1 million
from 2014 was due to the net impact of several factors, including higher overall labor-related costs and incremental costs associated
with the Company’s recent acquisitions, including $2.8 million of one-time transaction-related expenses incurred with the
Company’s third quarter of 2015 Verkol acquisition. These increases to SG&A were partially offset by decreases from foreign
currency translation, a first quarter of 2014 cost related to an amendment to the Company’s pension plan in the United Kingdom
(“U.K.”), and lower year-over-year charges related to cost streamlining initiatives in South America.
The Company had restructuring expenses of $6.8
million in 2015, noted above, related to a global restructuring program initiated in the fourth quarter of 2015. There were no
analogous restructuring expenses incurred in the prior year.
Other income for 2015 decreased $0.8 million
compared to 2014. The decrease was primarily due to lower receipts of annual government-related grants in one of the Company’s
regions, higher foreign exchange transaction losses, and lower third party license fees during 2015 compared to 2014.
Interest expense was $0.2 million higher in
2015 compared to 2014, primarily due to higher average borrowings outstanding during 2015 due to the Company’s recent acquisition
activity. Interest income was $0.9 million lower in 2015 compared to 2014, primarily due to a decrease in the level of the Company’s
invested cash in certain regions with higher returns and interest received on certain tax-related credits in 2014.
The Company’s effective tax rates for
2015 and 2014 were 25.3% and 30.1%, respectively. The primary contributors to the decrease in the 2015 effective tax rate were
the mix of earnings between higher and lower tax jurisdictions in 2015, accelerated recognition of certain tax-related credits
in 2015 due to changes in local tax regulations, adjustments in 2015 related to previous years’ tax estimates, and certain
one-time items that inflated the 2014 effective tax rate. Going into 2016, we expect the full year effective tax rate will increase
to between 28% and 30%. In addition, the Company expects its quarterly effective tax rates will be higher in the first three quarters
of 2016, similar to the 2013 quarterly effective tax rate trend, as the Company will book earnings in one of its subsidiaries at
the statutory tax rate of 25% while it awaits recertification of a concessionary 15% tax rate. We currently estimate our first
quarter of 2016 effective tax rate will be between 31% and 33%.
Equity income for 2015 decreased $3.3 million
compared to 2014. The decrease was primarily due to a first quarter of 2015 currency conversion charge recorded at the Company’s
Venezuela affiliate. Due to changes in Venezuela’s foreign exchange markets and currency controls, the Company re-assessed
its Venezuela affiliate’s access to U.S. dollars and its ability to import or trade under the existing foreign exchange markets
in the first quarter of 2015, which resulted in the 2015 charge. This was partially offset by a similar currency charge related
to the conversion of Venezuelan bolivar fuerte to the U.S. dollar recorded during the second quarter of 2014. In addition, the
Company had lower equity income from its interest in a captive insurance company during 2015 compared to 2014.
The $0.3 million decrease in net
income attributable to noncontrolling interest in 2015 compared to 2014 was primarily due to the Company’s June 2014 acquisition
of the noncontrolling interest in its Australia affiliate.
Excluding the one-time transaction-related
expenses mentioned above, the Company recognized a minimal impact to net income from its 2015 Verkol acquisition, as its operating
results were offset by normal acquisition-related costs and initial adjustments related to fair value accounting.
- more-
Changes in foreign exchange rates, excluding
the currency conversion impacts of the Venezuelan bolivar fuerte noted above, negatively impacted the Company’s 2015 net
income by approximately 7%, or $0.31 per diluted share.
Balance Sheet and Cash Flow Items
The Company’s net operating cash flow
of $22.6 million for the fourth quarter of 2015 increased its full year net operating cash flow to $73.4 million compared to $54.7
million for 2014. The full year increase of $18.7 million, or 34%, in net operating cash flow was driven by strong operating performance
and lower cash invested in the Company’s working capital during 2015. Most notably, changes in accounts receivables improved
year-over-year due to the levels of sales at each year-end and improvements in timing of cash receipts. During 2015, the Company
repurchased approximately 87,000 shares of its common stock for $7.3 million, pursuant to the share repurchase program announced
in May of 2015. The Company has continued these share repurchases during the first quarter of 2016, with repurchases of approximately
84,000 shares at an average price of $69.8 per share for approximately $5.9 million to date. Overall, the Company’s liquidity
remains strong, with net debt of $1.0 million and a consolidated leverage ratio of less than one times EBITDA.
Non-GAAP Measures
Included in this public release are non-GAAP
(unaudited) 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, | |
| |
2015 | | |
2014 | | |
2015 | | |
2014 | |
GAAP earnings per diluted share attributable to Quaker Chemical Corporation common shareholders | |
$ | 0.86 | | |
$ | 0.95 | | |
$ | 3.84 | | |
$ | 4.26 | |
Equity income in a captive insurance company per diluted share | |
| (0.07 | ) | |
| (0.02 | ) | |
| (0.16 | ) | |
| (0.18 | ) |
Restructuring expenses per diluted share | |
| 0.36 | | |
| — | | |
| 0.36 | | |
| — | |
Verkol transaction-related expenses per diluted share | |
| — | | |
| — | | |
| 0.15 | | |
| — | |
U.K. pension plan amendment per diluted share | |
| — | | |
| — | | |
| — | | |
| 0.05 | |
Customer bankruptcy costs per diluted share | |
| 0.01 | | |
| 0.03 | | |
| 0.02 | | |
| 0.05 | |
Cost streamlining initiatives per diluted share | |
| — | | |
| 0.04 | | |
| 0.01 | | |
| 0.06 | |
Currency conversion impact of the Venezuelan bolivar fuerte per diluted share | |
| — | | |
| — | | |
| 0.21 | | |
| 0.02 | |
Non-GAAP earnings per diluted share | |
$ | 1.16 | | |
$ | 1.00 | | |
$ | 4.43 | | |
$ | 4.26 | |
- more-
| |
Three Months Ended December 31, | | |
Twelve Months Ended December 31, | |
| |
2015 | | |
2014 | | |
2015 | | |
2014 | |
Net income attributable to Quaker Chemical Corporation | |
$ | 11,393 | | |
$ | 12,639 | | |
$ | 51,180 | | |
$ | 56,492 | |
Depreciation and amortization | |
| 4,979 | | |
| 4,723 | | |
| 19,206 | | |
| 16,631 | |
Interest expense | |
| 694 | | |
| 624 | | |
| 2,585 | | |
| 2,371 | |
Taxes on income before equity in net income of associated companies | |
| 2,161 | | |
| 4,731 | | |
| 17,785 | | |
| 23,539 | |
Equity income in a captive insurance company | |
| (857 | ) | |
| (270 | ) | |
| (2,078 | ) | |
| (2,412 | ) |
Restructuring expenses | |
| 6,790 | | |
| — | | |
| 6,790 | | |
| — | |
Verkol transaction-related expenses | |
| — | | |
| — | | |
| 2,813 | | |
| — | |
U.K. pension plan amendment | |
| — | | |
| — | | |
| — | | |
| 902 | |
Customer bankruptcy costs | |
| 149 | | |
| 515 | | |
| 328 | | |
| 825 | |
Cost streamlining initiatives | |
| — | | |
| 818 | | |
| 173 | | |
| 1,166 | |
Currency conversion impact of the Venezuelan bolivar fuerte | |
| — | | |
| — | | |
| 2,806 | | |
| 321 | |
Adjusted EBITDA | |
$ | 25,309 | | |
$ | 23,780 | | |
$ | 101,588 | | |
$ | 99,835 | |
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 demand for the Company’s products and services is largely derived from the demand
for its customers’ products, which subjects the Company to uncertainties related 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 and full year 2015 results is scheduled for February 26, 2016 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.
- more-
Quaker Chemical Corporation
Consolidated Statements of Income
(Dollars in thousands, except per share
data)
| |
Three Months Ended December 31, | | |
Twelve Months Ended December 31, | |
| |
2015 | | |
2014 | | |
2015 | | |
2014 | |
| |
| | |
| | |
| | |
| |
Net sales | |
$ | 183,275 | | |
$ | 194,033 | | |
$ | 737,555 | | |
$ | 765,860 | |
| |
| | | |
| | | |
| | | |
| | |
Cost of goods sold | |
| 114,509 | | |
| 124,457 | | |
| 460,515 | | |
| 492,654 | |
| |
| | | |
| | | |
| | | |
| | |
Gross profit | |
| 68,766 | | |
| 69,576 | | |
| 277,040 | | |
| 273,206 | |
% | |
| 37.5 | % | |
| 35.9 | % | |
| 37.6 | % | |
| 35.7 | % |
| |
| | | |
| | | |
| | | |
| | |
Selling, general and administrative expenses | |
| 48,753 | | |
| 53,091 | | |
| 198,990 | | |
| 195,850 | |
Restructuring and related activities | |
| 6,790 | | |
| - | | |
| 6,790 | | |
| - | |
| |
| | | |
| | | |
| | | |
| | |
Operating income | |
| 13,223 | | |
| 16,485 | | |
| 71,260 | | |
| 77,356 | |
% | |
| 7.2 | % | |
| 8.5 | % | |
| 9.7 | % | |
| 10.1 | % |
| |
| | | |
| | | |
| | | |
| | |
Other income (expense), net | |
| 28 | | |
| 209 | | |
| (69 | ) | |
| 767 | |
Interest expense | |
| (694 | ) | |
| (624 | ) | |
| (2,585 | ) | |
| (2,371 | ) |
Interest income | |
| 507 | | |
| 551 | | |
| 1,624 | | |
| 2,541 | |
Income before taxes and equity in net income of associated companies | |
| 13,064 | | |
| 16,621 | | |
| 70,230 | | |
| 78,293 | |
| |
| | | |
| | | |
| | | |
| | |
Taxes on income before equity in net income of associated companies | |
| 2,161 | | |
| 4,731 | | |
| 17,785 | | |
| 23,539 | |
Income before equity in net income of associated companies | |
| 10,903 | | |
| 11,890 | | |
| 52,445 | | |
| 54,754 | |
| |
| | | |
| | | |
| | | |
| | |
Equity in net income of associated companies | |
| 949 | | |
| 1,037 | | |
| 261 | | |
| 3,543 | |
| |
| | | |
| | | |
| | | |
| | |
Net income | |
| 11,852 | | |
| 12,927 | | |
| 52,706 | | |
| 58,297 | |
| |
| | | |
| | | |
| | | |
| | |
Less: Net income attributable to noncontrolling interest | |
| 459 | | |
| 288 | | |
| 1,526 | | |
| 1,805 | |
| |
| | | |
| | | |
| | | |
| | |
Net income attributable to Quaker Chemical Corporation | |
$ | 11,393 | | |
$ | 12,639 | | |
$ | 51,180 | | |
$ | 56,492 | |
% | |
| 6.2 | % | |
| 6.5 | % | |
| 6.9 | % | |
| 7.4 | % |
| |
| | | |
| | | |
| | | |
| | |
Per share data: | |
| | | |
| | | |
| | | |
| | |
Net income attributable to Quaker Chemical Corporation Common Shareholders - basic | |
$ | 0.86 | | |
$ | 0.95 | | |
$ | 3.84 | | |
$ | 4.27 | |
Net income attributable to Quaker Chemical Corporation Common Shareholders - diluted | |
$ | 0.86 | | |
$ | 0.95 | | |
$ | 3.84 | | |
$ | 4.26 | |
- more-
Quaker Chemical Corporation
Consolidated Balance Sheets
(Dollars in thousands, except par value
and share amounts)
| |
December 31, | |
| |
2015 | | |
2014 | |
ASSETS | |
| | | |
| | |
| |
| | | |
| | |
Current assets | |
| | | |
| | |
Cash and cash equivalents | |
$ | 81,053 | | |
$ | 64,731 | |
Accounts receivable, net | |
| 188,297 | | |
| 189,484 | |
Inventories, net | |
| 75,099 | | |
| 77,708 | |
Current deferred tax assets | |
| 7,822 | | |
| 8,367 | |
Prepaid expenses and other current assets | |
| 13,582 | | |
| 11,228 | |
Total current assets | |
| 365,853 | | |
| 351,518 | |
| |
| | | |
| | |
Property, plant and equipment, net | |
| 87,619 | | |
| 85,763 | |
Goodwill | |
| 79,111 | | |
| 77,933 | |
Other intangible assets, net | |
| 73,287 | | |
| 70,408 | |
Investments in associated companies | |
| 20,354 | | |
| 21,751 | |
Non-current deferred tax assets | |
| 27,071 | | |
| 24,411 | |
Other assets | |
| 32,218 | | |
| 33,742 | |
Total assets | |
$ | 685,513 | | |
$ | 665,526 | |
| |
| | | |
| | |
LIABILITIES AND EQUITY | |
| | | |
| | |
| |
| | | |
| | |
Current liabilities | |
| | | |
| | |
Short-term borrowings and current portion of long-term debt | |
$ | 662 | | |
$ | 403 | |
Accounts payable | |
| 67,291 | | |
| 74,987 | |
Dividends payable | |
| 4,252 | | |
| 3,990 | |
Accrued compensation | |
| 19,166 | | |
| 19,853 | |
Accrued restructuring | |
| 6,303 | | |
| - | |
Accrued pension and postretirement benefits | |
| 1,144 | | |
| 1,239 | |
Current deferred tax liabilities | |
| 41 | | |
| 732 | |
Other current liabilities | |
| 25,696 | | |
| 23,697 | |
Total current liabilities | |
| 124,555 | | |
| 124,901 | |
Long-term debt | |
| 81,439 | | |
| 75,328 | |
Non-current deferred tax liabilities | |
| 15,003 | | |
| 8,584 | |
Non-current accrued pension and postretirement benefits | |
| 40,689 | | |
| 46,088 | |
Other non-current liabilities | |
| 42,584 | | |
| 45,490 | |
Total liabilities | |
| 304,270 | | |
| 300,391 | |
| |
| | | |
| | |
Equity | |
| | | |
| | |
Common stock, $1 par value; authorized 30,000,000 shares; issued and outstanding 2015 - 13,288,113 shares; 2014 - 13,300,891 shares | |
| 13,288 | | |
| 13,301 | |
Capital in excess of par value | |
| 106,333 | | |
| 99,056 | |
Retained earnings | |
| 326,740 | | |
| 299,524 | |
Accumulated other comprehensive loss | |
| (73,316 | ) | |
| (54,406 | ) |
Total Quaker shareholders' equity | |
| 373,045 | | |
| 357,475 | |
Noncontrolling interest | |
| 8,198 | | |
| 7,660 | |
Total equity | |
| 381,243 | | |
| 365,135 | |
Total liabilities and equity | |
$ | 685,513 | | |
$ | 665,526 | |
- more-
Quaker Chemical Corporation
Consolidated Statements of Cash Flows
(Dollars in thousands)
| |
Twelve Months Ended December 31, | |
| |
2015 | | |
2014 | |
Cash flows from operating activities | |
| | | |
| | |
Net income | |
$ | 52,706 | | |
$ | 58,297 | |
Adjustments to reconcile net income to net cash provided by operating activities: | |
| | | |
| | |
Depreciation | |
| 12,395 | | |
| 12,306 | |
Amortization | |
| 6,811 | | |
| 4,325 | |
Equity in undistributed earnings of associated companies, net of dividends | |
| 578 | | |
| (3,180 | ) |
Deferred income taxes | |
| (2,401 | ) | |
| 1,007 | |
Uncertain tax positions (non-deferred portion) | |
| (1,122 | ) | |
| (1,256 | ) |
Deferred compensation and other, net | |
| 14 | | |
| 3,174 | |
Stock-based compensation | |
| 5,919 | | |
| 5,309 | |
Restructuring and related activities | |
| 6,790 | | |
| - | |
Gain on disposal of property, plant and equipment and other assets | |
| (12 | ) | |
| (86 | ) |
Insurance settlement realized | |
| (760 | ) | |
| (1,907 | ) |
Pension and other postretirement benefits | |
| 2,591 | | |
| 1,265 | |
(Decrease) increase in cash from changes in current assets and current liabilities, net of acquisitions: | |
| | | |
| | |
Accounts receivable | |
| (188 | ) | |
| (24,944 | ) |
Inventories | |
| 1,292 | | |
| (5,484 | ) |
Prepaid expenses and other current assets | |
| (721 | ) | |
| 2,003 | |
Accounts payable and accrued liabilities | |
| (9,040 | ) | |
| 2,999 | |
Change in restructuring liabilities | |
| (490 | ) | |
| - | |
Estimated taxes on income | |
| (930 | ) | |
| 862 | |
Net cash provided by operating activities | |
| 73,432 | | |
| 54,690 | |
| |
| | | |
| | |
Cash flows from investing activities | |
| | | |
| | |
Investments in property, plant and equipment | |
| (11,033 | ) | |
| (13,052 | ) |
Payments related to acquisitions, net of cash acquired | |
| (24,058 | ) | |
| (73,527 | ) |
Proceeds from disposition of assets | |
| 135 | | |
| 201 | |
Insurance settlement interest earned | |
| 35 | | |
| 44 | |
Change in restricted cash, net | |
| 725 | | |
| 1,863 | |
Net cash used in investing activities | |
| (34,196 | ) | |
| (84,471 | ) |
| |
| | | |
| | |
Cash flows from financing activities | |
| | | |
| | |
Proceeds from long-term debt | |
| 6,163 | | |
| 58,771 | |
Repayment of long-term debt | |
| (477 | ) | |
| (1,368 | ) |
Dividends paid | |
| (16,513 | ) | |
| (14,562 | ) |
Stock options exercised, other | |
| 1,048 | | |
| 804 | |
Payments for repurchase of common stock | |
| (7,276 | ) | |
| - | |
Excess tax benefit related to stock option exercises | |
| 384 | | |
| 453 | |
Purchase of noncontrolling interest in affiliates, net | |
| - | | |
| (7,422 | ) |
Payment of acquisition-related liabilities | |
| (226 | ) | |
| (4,709 | ) |
Distributions to noncontrolling affiliate shareholders | |
| - | | |
| (1,806 | ) |
Net cash (used in) provided by financing activities | |
| (16,897 | ) | |
| 30,161 | |
| |
| | | |
| | |
Effect of exchange rate changes on cash | |
| (6,017 | ) | |
| (4,141 | ) |
Net increase (decrease) in cash and cash equivalents | |
| 16,322 | | |
| (3,761 | ) |
Cash and cash equivalents at the beginning of the period | |
| 64,731 | | |
| 68,492 | |
Cash and cash equivalents at the end of the period | |
$ | 81,053 | | |
$ | 64,731 | |
- more-
Exhibit 99.2
Fourth Quarter and Full Year 2015 Results Investor Conference Call February 26, 2016 Quaker Chemical Corporation
Regulation G The attached charts include Company information that does not conform to generally accepted
accounting principles (“GAAP”). Management believes that an analysis of this data is meaningful to investors because
it provides insight with respect to ongoing operating results of the Company and allows investors to better evaluate the financial
results of the Company. These measures should not be viewed as an alternative to GAAP measures of performance. Furthermore, these
measures may not be consistent with similar measures provided by other companies. This data should be read in conjunction with
the Company’s fourth quarter and full year earnings news release dated February 25, 2016, which has been furnished to the
SEC on Form 8-K and the Company’s Form 10-K for the year ended December 31, 2015, which has been filed with the SEC. Forward-Looking
Statements This presentation may contain 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 demand for the Company’s
products and services is largely derived from the demand for its customers’ products, which subjects the Company to uncertainties
related 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. Risks and Uncertainties Statement
Speakers Michael F. Barry Chairman of the Board, Chief Executive Officer & President Mary Dean Hall
Vice President, Chief Financial Officer & Treasurer Robert T. Traub Vice President, General Counsel & Corporate Secretary
Chart #1
Fourth Quarter 2015 Headlines Operating results drive quarterly increase of 6% in adjusted EBITDA despite
negative impacts of foreign exchange and lower global steel production Fourth quarter restructuring program expected to deliver
meaningful savings beginning in 2016 Strong quarterly cash flow leads to a 34% increase in full year operating cash flow to $73
million Chart #2
Chairman Comments Fourth Quarter and Full Year 2015 Fourth Quarter / Full Year 2015 Strong margins and
market share gains drive earnings and cash flow growth in the fourth quarter and full year 2015 Fourth quarter and full year results
impacted by various market challenges, including foreign exchange, a decline in global steel production and weak global economic
conditions, especially in South America Fourth quarter restructuring program initiated to enhance future SG&A leverage 2016
Outlook Anticipate continued uncertain economic conditions, especially in South America and China, a strong U.S. dollar, and further
pricing impacts to adjust to a lower raw material cost environment Ability to take market share and leverage our acquisitions will
continue to help offset these market challenges Restructuring program to yield meaningful savings as early as middle of 2016 Expect
growth in both the top and bottom lines despite currency headwinds Overall, we remain confident in our future and expect 2016 to
be another good year for Quaker, as we expect to increase non-GAAP earnings and adjusted EBITDA for the seventh consecutive year.
Chart #3
1) Solid operating results, coupled with a low tax rate, drive fourth quarter and fullyear 2015 non-GAAP
earnings per diluted share of $1.16 and $4.43 2) Fourth quarter 2015 includes restructuring expenses of $6.8 million, or $0.36
per diluted share, related to a global program to enhance SG&A leverage 3) Fourth quarter and full year 2015 net sales decreased
year-over-year on negative impacts from foreign currency translation and declines in selling price and product mix, offset by volume
and acquisition-related growth 4) Expansion of gross margin in the fourth quarter and full year 2015 drive improved operating performance
5) Lower fourth quarter and year-over year effective tax rates 6) Strong quarterly operating cash flows of $22.6 million drives
$73.4 million for full year 2015 on operating performance and lower cash invested in working capital 7) Strong balance sheet will
continue to support future growth, including acquisitions Chart #4 Financial Highlights Fourth Quarter and Full Year 2015
Financial Snapshot ($ Millions unless otherwise noted) Q4 2015 Q4 2014 FY 2015 FY 2014 Net Sales 183.3
194.0 737.6 765.9 Gross Margin 37.5 % 35.9 % 37.6 % 35.7 % Operating Margin 7.2 % 8.5 % 9.7 % 10.1 % Net Income attributable to
Quaker Chemical Corporation 11.4 12.6 51.2 56.5 Earnings Per Diluted Share 0.86 0.95 3.84 4.26 Non-GAAP Earnings Per Diluted Share
1.16 1.00 4.43 4.26 Adjusted EBITDA 25.3 23.8 101.6 99.8 Adjusted EBITDA Margin 13.8 % 12.3 % 13.8 % 13.0 % Net Debt 1.0 11.0 --
-- Net Operating Cash Flow 22.6 16.7 73.4 54.7 Effective Tax Rate 16.5 % 28.5 % 25.3 % 30.1 % Chart #5
Product Volume by Quarter and Year Thousand Kilograms Chart #6 Six consecutive years of organic and acquisition-related
volume growth 115,000 135,000 155,000 175,000 195,000 215,000 235,000 25,000 31,000 37,000 43,000 49,000 55,000 61,000 Full Year
Volume Quarter Volume Quarter Volume Full Year Volume
Gross Margin Percentage 28.0% 34.7% 35.4% 32.6% 33.7% 35.8% 35.7% 37.6% 20.0% 25.0% 30.0% 35.0% 40.0%
2008 2009 2010 2011 2012 2013 2014 2015 Gross Margin Percentage 35.9% 36.6% 38.4% 37.7% 37.5% 20.0% 25.0% 30.0% 35.0% 40.0% Q4
2014 Q1 2015 Q2 2015 Q3 2015 Q4 2015 Gross Margin Percentage Chart #7 Improvement in 2015 driven by timing of raw material cost
decreases
Adjusted EBITDA Baseline Historical Performance $40.1 $66.8 $73.0 $80.9 $89.6 $99.8 $101.6 $44.2 11. 4%
13 . 0% 12 . 3% 9 . 8% 10 . 7% 12 . 3% 6 . 9% 13 . 8% 2008 2009 2010 2011 2012 2013 2014 2015 Adjusted EBITDA ($ Mi l s. ) Adjusted
EBITDA Margin (%) 2008 – 2015 CAGR: 14.2% +690 Margin bps Chart #8
Balance Sheet Cash and Debt -$120 -$80 -$40 $0 $40 $80 $120 2008 2009 2010 2011 2012 2013 2014 2015 $
Millions Cash ST/LT Debt Net Debt Chart #9 Strong cash flow improves Net Debt to $1 million. Balance Sheet strength supports growth.
APPENDIX
Non-GAAP Earnings Per Diluted Share Reconciliation Chart #10 Q4 2015 Q4 2014 Full Year 2015 Full Year
2014 GAAP earnings per diluted share $ 0.86 $ 0.95 $ 3.84 $ 4.26 Equity income in a captive insurance company per diluted share
$ (0.07) $ (0.02) $ (0.16) $ (0.18) Restructuring expenses per diluted share $ 0.36 $ - $ 0.36 $ - Verkol transaction-related expenses
per diluted share $ - $ - $ 0.15 $ - U.K. pension plan amendment per diluted share $ - $ - $ - $ 0.05 Customer bankruptcy costs
per diluted share $ 0.01 $ 0.03 $ 0.02 $ 0.05 Cost streamlining initiatives per diluted share $ - $ 0.04 $ 0.01 $ 0.06 Currency
conversion impact of the Venezuelan bolivar fuerte per diluted share $ - $ - $ 0.21 $ 0.02 Non-GAAP earnings per diluted share
$ 1.16 $ 1.00 $ 4.43 $ 4.26
Adjusted EBITDA Reconciliation Chart #11 2008 2009 2010 2011 2012 2013 2014 2015 Net income 9,833 16,058
32,120 45,892 47,405 56,339 56,492 51,180 Depreciation 10,879 9,525 9,867 11,455 12,252 12,339 12,306 12,395 Amortization 1,177
1,078 988 2,338 3,106 3,445 4,325 6,811 Interest expense 5,509 5,533 5,225 4,666 4,283 2,922 2,371 2,585 Taxes on income 4,977
7,065 12,616 14,256 15,575 20,489 23,539 17,785 Equity loss (income) from a captive insurance company 1,299 1 62 (313) ( 2,323)
( 1,812) (5,451) (2,412) (2,078) Non-cash gain from the purchase of an equity affiliate - - - (2,718) - - - - Equity affiliate
out of period charge - - 5 64 - - - - - Restructuring expenses 2,916 2,289 - - - - - 6,790 Transition costs related to key employees
3,505 2,443 1,317 - 6 09 - - - Verkol transaction-related expenses - - - - - - - 2,813 U.K. pension plan amendment - - - - - -
902 - Customer bankruptcy costs - - - - 1,254 - 825 328 Cost streamlining initiatives - - - - - 1,419 1,166 1 73 Non-income tax
contingency charges - - 4,132 - - 796 - - Change in acquisition-related earnout liability - - - (595) ( 1,737) (497) - - Mineral
oil excise tax refund - - - - - (2,540) - - Currency conversion impacts of the Venezuelan bolivar fuerte - - 3 22 - - 357 321 2,806
Adjusted EBITDA 40,095 44,153 66,838 72,971 80,935 89,618 99,835 101,588 Adjusted EBITDA Margin 6.9% 9.8% 12.3% 10.7% 11.4% 12.3%
13.0% 13.8%
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