CONSHOHOCKEN, Pa., April 27, 2016 /PRNewswire/ -- Quaker
Chemical Corporation (NYSE: KWR) today announced net sales of
$178.1 million in the first quarter
of 2016 compared to $181.3 million in
the first quarter of 2015, as acquisition and base volume-related
growth in each of the Company's largest regions was more than
offset by negative impacts from foreign currency translation and
declines in selling price. While the Company's net sales were
negatively impacted by price adjustments due to lower raw material
costs, these cost decreases also allowed the Company to further
expand its gross margin in the first quarter of 2016, which, along
with stable selling, general and administrative expenses, drove an
8% increase in operating income to $19.2
million in the first quarter of 2016 compared to
$17.9 million in the first quarter of
2015.
The Company's strong operating performance contributed to
earnings per diluted share of $0.98
in the first quarter of 2016 compared to $0.78 in the first quarter of 2015, with non-GAAP
earnings per diluted share increasing 4% to $0.98 in the first quarter of 2016 compared to
$0.94 in the first quarter of
2015. The Company's adjusted EBITDA increased 8% to
$25.0 million in the first quarter of
2016 compared to $23.2 million in the
first quarter of 2015. The Company was able to achieve these
reported and non-GAAP results in the first quarter of 2016 despite
negative impacts from foreign exchange of $0.02 per diluted share, or 2%, and continued
weakness in global steel production. Driven by this earnings
growth, the Company's net operating cash flow increased
approximately 34% to $10.9 million in
the first quarter of 2016 compared to $8.1
million in the first quarter of 2015.
Michael F. Barry, Chairman, Chief
Executive Officer and President commented, "We are pleased with our
solid first quarter results, despite continued market
challenges. Specifically, we were able to grow our volumes
both organically by 1% and from acquisitions by 4%, as well as
expand our margins, which enabled us to generate strong increases
in adjusted EBITDA and operating cash flow from the first quarter
of 2015. This performance was achieved despite foreign
exchange rate headwinds, which negatively impacted our top and
bottom line by 5% and 2%, respectively, and, also, declines in
global steel production of approximately 3.5% compared to the first
quarter of 2015. As our year progresses, we expect to see
some decline in gross margin due to timing differences between raw
material price changes and our product pricing adjustments.
However, we also expect to realize benefits from our previously
announced restructuring program. In addition, we continue to
believe in our ability to take market share and leverage our
acquisitions to help offset these market challenges. In
summary, our 2016 forecast continues to indicate growth in both the
top and bottom lines and we still expect to increase non-GAAP
earnings and adjusted EBITDA for the seventh consecutive year."
First Quarter of 2016 Summary
Net sales in the first quarter of 2016 were $178.1 million compared to $181.3 million in the first quarter of
2015. The 2% decrease in net sales was primarily due to the
negative impact of foreign currency translation of $8.0 million, or approximately 5%, and declines
in selling price and product mix of 2%, which collectively offset a
5% increase in product volume, including sales from
acquisitions.
Gross profit in the first quarter of 2016 increased $1.5 million from the first quarter of 2015,
primarily driven by an expansion of gross margin to 38.1% in the
first quarter of 2016 compared to 36.6% in the first quarter of
2015. The Company's first quarter of 2016 gross margin
continued to benefit from the timing of raw material cost
decreases.
Selling, general and administrative expenses ("SG&A")
increased $0.2 million during the
first quarter of 2016, primarily due to incremental costs
associated with the Company's July
2015 acquisition of Verkol S.A. and higher overall
labor-related costs, which were partially offset by decreases from
foreign currency translation.
Related to its 2015 global restructuring program announced in
the fourth quarter of 2015, the Company did not incur additional
restructuring expenses in the first quarter of 2016 and continues
to execute the program as planned. Given the program is in
the early stages of implementation, the Company has not realized
material cost savings to date, but continues to project 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. In addition, the Company still expects to
substantially complete this program during 2016.
Operating income in the first quarter of 2016 was $19.2 million, which increased approximately 8%
compared to $17.9 million in the
first quarter of 2015. The increase in operating income was
primarily due to the expansion of gross margin in the first quarter
of 2016 noted above, as well as the relatively consistent level of
SG&A quarter-over-quarter.
Other income was $0.7 million in
the first quarter of 2016 compared to other expense of $0.2 million in the first quarter of 2015.
The increase in other income was primarily driven by foreign
exchange transaction gains realized in the first quarter of 2016
compared to foreign exchange transaction losses in the first
quarter of 2015.
Interest expense was $0.2 million
higher in the first quarter of 2016 compared to the first quarter
of 2015, primarily due to increased average borrowings outstanding
in the first quarter of 2016. Interest income was relatively
flat in the first quarter of 2016 compared to the first quarter of
2015.
The Company's effective tax rates for the first quarters of 2016
and 2015 were 32.3% and 30.8%, respectively. The increase in
the first quarter of 2016 effective tax rate was primarily due to
the Company recording earnings in one of its subsidiaries at a
statutory tax rate of 25% while it awaits recertification of a
concessionary 15% tax rate, which was available to the Company
during the first quarter of 2015. For the same reason, the
Company currently estimates its second quarter of 2016 effective
tax rate will also be between 31% and 33%. However, the
Company still estimates its full year 2016 effective tax rate will
approximate 28% to 30%.
Equity in net income of associated companies ("equity income")
increased $1.5 million in the first
quarter of 2016 compared to the first quarter of 2015. The
increase in equity income was primarily due to a smaller currency
conversion charge recorded at the Company's Venezuela affiliate during the first quarter
of 2016, compared to the first quarter of 2015, due to changes in
Venezuela's foreign exchange
markets and currency controls in both periods. In addition,
equity income includes earnings from the Company's interest in a
captive insurance company, which was lower in the first quarter of
2016 compared to the first quarter of 2015.
The Company had a $0.2 million
increase in net income attributable to noncontrolling interest in
the first quarter of 2016 compared to the first quarter of 2015,
primarily due to stronger performance at its India affiliate.
Changes in foreign exchange rates, excluding the currency
conversion impacts of the Venezuelan bolivar fuerte noted above,
negatively impacted the Company's first quarter of 2016 net income
by approximately 2%, or $0.02 per
diluted share.
Balance Sheet and Cash Flow Items
The Company's net operating cash flow increased $2.8 million, or approximately 34%, to
$10.9 million in the first quarter of
2016 compared to $8.1 million in the
first quarter of 2015, driven by its improved operating performance
and lower cash invested in the Company's working capital. In
addition, the Company repurchased 83,879 shares of its common stock
for $5.9 million during the first
quarter of 2016, pursuant to the Company's share repurchase
program, and also paid a $4.2 million
cash dividend during the first quarter of 2016. Overall, the
Company's liquidity remains strong, with net debt of $3.9 million and a consolidated leverage ratio of
less than one times EBITDA.
Non-GAAP Measures
Included in this public release are two non-GAAP (unaudited)
financial measures: 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
tables reconcile non-GAAP earnings per diluted share (unaudited)
and adjusted EBITDA (unaudited) to their most directly comparable
GAAP (unaudited) financial measures:
|
Three Months
Ended
March
31,
|
|
2016
|
|
2015
|
GAAP earnings per
diluted share attributable to Quaker Chemical Corporation
common shareholders
|
$ 0.98
|
|
$ 0.78
|
Equity income in a
captive insurance company per diluted share
|
(0.01)
|
|
(0.06)
|
Cost streamlining
initiative per diluted share
|
—
|
|
0.01
|
Currency conversion
impact of the Venezuelan bolivar fuerte per diluted
share
|
0.01
|
|
0.21
|
Non-GAAP earnings per
diluted share
|
$ 0.98
|
|
$ 0.94
|
|
|
|
|
|
Three Months
Ended
March
31,
|
|
2016
|
|
2015
|
Net income
attributable to Quaker Chemical Corporation
|
$ 12,946
|
|
$ 10,378
|
Depreciation and
amortization
|
4,934
|
|
4,698
|
Interest
expense
|
741
|
|
587
|
Taxes on income
before equity in net income of associated companies
|
6,305
|
|
5,359
|
Equity income in a
captive insurance company
|
(52)
|
|
(795)
|
Cost streamlining
initiative
|
—
|
|
173
|
Currency conversion
impact of the Venezuelan bolivar fuerte
|
88
|
|
2,806
|
Adjusted
EBITDA
|
$ 24,962
|
|
$ 23,206
|
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 first quarter of 2016 results is scheduled for
April 28, 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.
Quaker Chemical
Corporation
|
Condensed
Consolidated Statements of Income
|
(Dollars in
thousands, except share and per share data)
|
|
|
|
|
|
|
(Unaudited)
|
|
Three Months Ended
March 31,
|
|
|
2016
|
|
2015
|
|
|
|
|
|
|
Net
sales
|
$
178,077
|
|
$
181,330
|
|
|
|
|
|
|
Cost of goods
sold
|
110,202
|
|
115,002
|
|
|
|
|
|
|
Gross
profit
|
67,875
|
|
66,328
|
|
%
|
38.1%
|
|
36.6%
|
|
|
|
|
|
|
Selling, general and
administrative expenses
|
48,641
|
|
48,464
|
|
|
|
|
|
|
Operating
income
|
19,234
|
|
17,864
|
|
%
|
10.8%
|
|
9.9%
|
|
|
|
|
|
|
Other income
(expense), net
|
706
|
|
(194)
|
|
Interest
expense
|
(741)
|
|
(587)
|
|
Interest
income
|
348
|
|
320
|
|
Income before taxes
and equity in net income of associated companies
|
19,547
|
|
17,403
|
|
|
|
|
|
|
Taxes on income
before equity in net income of associated companies
|
6,305
|
|
5,359
|
|
Income before equity
in net income of associated companies
|
13,242
|
|
12,044
|
|
|
|
|
|
|
Equity in net income
of associated companies
|
102
|
|
(1,437)
|
|
|
|
|
|
|
Net income
|
13,344
|
|
10,607
|
|
|
|
|
|
|
Less: Net income
attributable to noncontrolling interest
|
398
|
|
229
|
|
|
|
|
|
|
Net income
attributable to Quaker Chemical Corporation
|
$
12,946
|
|
$
10,378
|
|
%
|
7.3%
|
|
5.7%
|
|
|
|
|
|
|
Share and per
share data:
|
|
|
|
|
Basic weighted
average common shares outstanding
|
13,116,807
|
|
13,188,761
|
|
Diluted weighted
average common shares outstanding
|
13,129,394
|
|
13,208,657
|
|
|
|
|
|
|
Net income
attributable to Quaker Chemical Corporation Common Shareholders -
basic
|
$
0.98
|
|
$
0.78
|
|
Net income
attributable to Quaker Chemical Corporation Common Shareholders -
diluted
|
$
0.98
|
|
$
0.78
|
|
Quaker Chemical
Corporation
|
Condensed
Consolidated Balance Sheets
|
(Dollars in
thousands, except par value and share amounts)
|
|
|
|
|
|
(Unaudited)
|
|
March
31,
|
|
December
31,
|
|
2016
|
|
2015
|
ASSETS
|
|
|
|
|
|
|
|
Current
assets
|
|
|
|
Cash and cash
equivalents
|
$
94,374
|
|
$
81,053
|
Accounts receivable,
net
|
188,218
|
|
188,297
|
Inventories,
net
|
78,220
|
|
75,099
|
Prepaid expenses and
other current assets
|
20,537
|
|
21,404
|
Total current
assets
|
381,349
|
|
365,853
|
|
|
|
|
Property, plant and
equipment, net
|
87,235
|
|
87,619
|
Goodwill
|
80,003
|
|
79,111
|
Other intangible
assets, net
|
72,464
|
|
73,287
|
Investments in
associated companies
|
21,194
|
|
20,354
|
Non-current deferred
tax assets
|
19,916
|
|
23,468
|
Other
assets
|
32,405
|
|
32,218
|
Total
assets
|
$
694,566
|
|
$
681,910
|
|
|
|
|
LIABILITIES AND
EQUITY
|
|
|
|
|
|
|
|
Current
liabilities
|
|
|
|
Short-term borrowings
and current portion of long-term debt
|
$
645
|
|
$
662
|
Accounts and other
payables
|
69,748
|
|
71,543
|
Accrued
compensation
|
13,626
|
|
19,166
|
Accrued
restructuring
|
5,969
|
|
6,303
|
Other current
liabilities
|
25,397
|
|
26,881
|
Total current
liabilities
|
115,385
|
|
124,555
|
Long-term
debt
|
97,620
|
|
81,439
|
Non-current deferred
tax liabilities
|
11,071
|
|
11,400
|
Other non-current
liabilities
|
78,964
|
|
83,273
|
Total
liabilities
|
303,040
|
|
300,667
|
|
|
|
|
Equity
|
|
|
|
|
|
|
|
Common stock, $1 par
value; authorized 30,000,000 shares; issued and
outstanding 2016 - 13,236,040 shares; 2015 - 13,288,113
shares
|
13,236
|
|
13,288
|
Capital in excess of
par value
|
107,950
|
|
106,333
|
Retained
earnings
|
329,684
|
|
326,740
|
Accumulated other
comprehensive loss
|
(68,002)
|
|
(73,316)
|
Total Quaker
shareholders' equity
|
382,868
|
|
373,045
|
Noncontrolling
interest
|
8,658
|
|
8,198
|
Total
equity
|
391,526
|
|
381,243
|
Total liabilities and
equity
|
$
694,566
|
|
$
681,910
|
Quaker Chemical
Corporation
|
Condensed
Consolidated Statements of Cash Flows
|
(Dollars in
thousands)
|
|
|
|
|
|
(Unaudited)
|
|
Three Months Ended
March 31,
|
|
2016
|
|
2015
|
Cash flows from
operating activities
|
|
|
|
Net income
|
$
13,344
|
|
$
10,607
|
Adjustments to
reconcile net income to net cash provided by operating
activities:
|
|
|
|
Depreciation
|
3,157
|
|
3,071
|
Amortization
|
1,777
|
|
1,627
|
Equity in
undistributed earnings of associated companies, net of
dividends
|
(27)
|
|
1,437
|
Deferred compensation
and other, net
|
980
|
|
1,091
|
Stock-based
compensation
|
1,798
|
|
1,685
|
Gain on disposal of
property, plant and equipment and other assets
|
(20)
|
|
(21)
|
Insurance settlement
realized
|
(279)
|
|
(115)
|
Pension and other
postretirement benefits
|
(2,685)
|
|
10
|
Increase (decrease)
in cash from changes in current assets and current
liabilities, net of acquisitions:
|
|
|
|
Accounts
receivable
|
2,602
|
|
3,428
|
Inventories
|
(1,800)
|
|
(2,584)
|
Prepaid expenses and
other current assets
|
1,183
|
|
(2,634)
|
Accounts payable and
accrued liabilities
|
(8,647)
|
|
(9,516)
|
Change in
restructuring liabilities
|
(509)
|
|
-
|
Net cash provided by
operating activities
|
10,874
|
|
8,086
|
|
|
|
|
Cash flows from
investing activities
|
|
|
|
Investments in
property, plant and equipment
|
(2,172)
|
|
(2,414)
|
Payments related to
acquisitions, net of cash acquired
|
(1,384)
|
|
528
|
Proceeds from
disposition of assets
|
26
|
|
80
|
Insurance settlement
interest earned
|
8
|
|
10
|
Change in restricted
cash, net
|
271
|
|
105
|
Net cash used in
investing activities
|
(3,251)
|
|
(1,691)
|
|
|
|
|
Cash flows from
financing activities
|
|
|
|
Proceeds from
long-term debt
|
14,687
|
|
-
|
Repayment of
long-term debt
|
(159)
|
|
(1,327)
|
Dividends
paid
|
(4,243)
|
|
(3,990)
|
Stock options
exercised, other
|
(253)
|
|
(50)
|
Payments for
repurchase of common stock
|
(5,859)
|
|
-
|
Excess tax benefit
related to stock option exercises
|
104
|
|
287
|
Net cash provided by
(used in) financing activities
|
4,277
|
|
(5,080)
|
|
|
|
|
Effect of exchange
rate changes on cash
|
1,421
|
|
(1,708)
|
Net increase
(decrease) in cash and cash equivalents
|
13,321
|
|
(393)
|
Cash and cash
equivalents at the beginning of the period
|
81,053
|
|
64,731
|
Cash and cash
equivalents at the end of the period
|
$
94,374
|
|
$
64,338
|
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