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News Release


Quaker Chemical Announces Earnings Growth and Record Sales For Full Year and Fourth Quarter 2002

CONSHOHOCKEN, Pa., Feb 20, 2003 /PRNewswire-FirstCall via COMTEX/ -- Quaker Chemical Corporation (NYSE: KWR) today announced record annual and fourth quarter sales and improved earnings for both periods ending December 31, 2002. Net sales for 2002 were $274.5 million, up 9% from the prior year, and for the fourth quarter were $71.9 million, up 23% from the fourth quarter of 2001. For the year 2002, earnings were $1.51 per diluted share compared to $0.84 per diluted share in 2001. Earnings for the fourth quarter of 2002 were $0.46 per diluted share compared to a loss of $0.17 per diluted share in the fourth quarter of 2001. Results for the fourth quarter and full year 2001 included special items relating primarily to restructuring charges and an additional provision for doubtful accounts. Excluding the special items, 2001 earnings for the fourth quarter and full year were $0.20 per diluted share and $1.49 per diluted share, respectively. The 2002 full year and fourth quarter earnings were consistent with previous Company guidance.

Ronald J. Naples, Chairman and Chief Executive Officer, stated, "All things considered, we feel good about 2002. In a continued difficult worldwide economic environment, our earnings were up, albeit at a rate below our long-term goals, and we continued to position and prepare the Company for industry leadership in an integrated global world. We delivered on the sequential quarterly earnings improvements we projected through the year and reached record sales; we maintained our strong balance sheet; we made a couple of accretive acquisitions. Earnings in 2002 showed growth over the prior year not only on a reported basis, but even with the effect of the 2001 special items stripped out. This is important because one of our primary goals is consistent year-over-year earnings growth, something we've achieved over the past seven years with the sole exception of an extraordinary 2001."

Full Year 2002

Net sales for 2002 were a record $274.5 million, or 9% over 2001 net sales of $251.1 million. The United Lubricants and Epmar acquisitions, as well as the purchase of a controlling interest in the Company's South African joint venture, provided a year-over-year increase in net sales of approximately $20 million. Currency fluctuations negatively impacted net sales by 2%. Absent the acquisitions and currency fluctuations, net sales increased by 3% with all four regions of the world showing growth. SG&A expenses (excluding the 2001 special items) increased primarily due to the noted acquisitions, as well as higher pension, insurance, and other administrative expenses.

Earnings for 2002 were $14.3 million, or $1.51 per diluted share, up 80% over 2001 earnings of $7.7 million, or $0.84 per diluted share. Results in 2001 were negatively impacted by $8.6 million in special items primarily related to two plant closings in Europe and an additional provision for doubtful accounts. Absent the special items, 2001 earnings would have been $1.49 per diluted share. Acquisitions in 2002 were accretive to earnings by approximately $0.06 per diluted share.

Fourth Quarter 2002

Fourth quarter 2002 net sales were a record $71.9 million, up 23% from the fourth quarter of 2001. Approximately one-half of this increase was due to the 2002 United Lubricants and Epmar acquisitions, as well as the purchase of a controlling interest in the Company's South African joint venture. Net sales in all four regions of the world showed 9% or higher increases on a local currency basis. However, currency fluctuations negatively impacted consolidated U.S. dollar sales by 1%. SG&A expenses (excluding the 2001 special items) increased primarily due to the noted acquisitions, as well as higher pension, insurance, and other administrative expenses such as the Company's ERP implementation.

Earnings for the fourth quarter of 2002 were $4.4 million or $0.46 per diluted share. This represents a 130% increase over fourth quarter 2001 earnings of $0.20 per diluted share, excluding special items. In the fourth quarter of 2001, special items of $4.9 million were made relating primarily to restructuring charges and an additional provision for doubtful accounts. Including the special items, the Company incurred a loss of $0.17 per diluted share for the fourth quarter of 2001.

Balance Sheet and Cash Flow Items

In the fourth quarter of 2002, debt levels were reduced 37% to $28.8 million. The debt-to-total capital ratio as of December 31, 2002, was 25%, down from 35% at September 30, 2002.

Working capital reduction was a major initiative in 2002. The Company measures working capital as a percent of sales. At December 31, 2002, this ratio was 17.8% compared to 20.1% at the end of 2001. The working capital reduction initiatives generated approximately $6 million of cash in 2002 on a constant sales level basis.

In 2002, capital expenditures were $10.8 million, and spending on acquisitions was $21.3 million.

Shareholders' equity increased $2.3 million and $7.2 million from September 30, 2002, and December 31, 2001, respectively, despite a non-cash charge to equity of $4.3 million due to declines in the asset value of the Company's defined benefit pension plans.

2003 Outlook

In 2003, net sales are projected to continue to grow. The Company expects to see higher raw material prices and higher SG&A expenses related to pension, insurance, and its ERP implementation. These items alone are expected to reduce diluted earnings per share by approximately $0.35, despite which the Company projects earnings growth in 2003.

Mr. Naples stated, "The global business environment as we enter 2003 is still uncertain, which puts pressure on industrial production demand. In addition, the rise in crude oil prices is expected to negatively impact our raw materials prices, especially in the short term. These factors and geopolitical risk make forecasting more difficult than usual. Our 2003 plans call for solid year-over-year earnings improvement versus 2002. For the first quarter of 2003, we expect earnings to be higher than the first quarter 2002, but below our fourth quarter 2002 due to the increased costs previously noted, as well as seasonal demand factors."

Mr. Naples continued, "Our management team remains convinced that our key strategic imperatives of selling value rather than simply fluids, operating as a globally integrated enterprise, and harnessing our global knowledge will bring unique value to our customers and continue to increase our differentiation from competitors. Our 2003 plans project continued penetration in our core steel and metalworking markets to help overcome higher costs and generate earnings growth. Also, it is our expectation that our strong balance sheet and good cash flow generation will enable us to continue to grow the Company through acquisitions and still maintain our record of annual dividend increases, which is now at 30 years."

Quaker Chemical Corporation, headquartered in Conshohocken, Pennsylvania, is a worldwide developer, producer, and marketer of custom-formulated chemical specialty products and a provider of chemical management services for manufacturers around the globe, primarily in the steel and automotive industries.

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. Such risks and uncertainties include, but are not limited to, further downturns in our customers' businesses, significant increases in raw material costs, worldwide economic and political conditions, foreign currency fluctuations, a conflict in Iraq, and future terrorist attacks such as those that occurred on September 11, 2001.

As previously announced, Quaker Chemical's investor conference to discuss fourth quarter and full year 2002 earnings results is scheduled for February 21, 2003, at 2:30 p.m. (ET). Access the conference by calling 800-922-0755 or visit Quaker's Web site at http://www.quakerchem.comfor a live webcast.


                         Quaker Chemical Corporation
                Condensed Consolidated Statement of Operations
                      For the period ended December 31,

                                 Dollars in thousands, except per share data

                                     (Unaudited)
                                  Three Months ended         Twelve Months
                                     December 31,          ended December 31,
                                   2002       2001          2002        2001

    Net sales                   $71,869    $58,272      $274,521    $251,074
    Cost of goods sold           43,010     35,293       162,944     150,045
    Gross                        28,859     22,979       111,577     101,029
    %                              40.2%      39.4%         40.6%       40.2%
    Selling, general and
     administrative - Note A     21,604     21,803        87,604      80,984
    Restructuring - Note B           --      2,896            --       5,854
    Operating income              7,255     (1,720)       23,973      14,191
    %                              10.1%      (3.0%)         8.7%        5.7%
    Other income (expense), net     (59)       399         1,135       1,089
    Interest expense, net           (43)      (131)         (790)       (850)
    Income (loss) before taxes    7,153     (1,452)       24,318      14,430
    Taxes on income (loss)        2,289       (450)        7,782       4,473
                                  4,864     (1,002)       16,536       9,957
    Equity in net income (loss)
    of associated companies         (19)      (127)          295         613
    Minority interest in net
     income of subsidiaries        (431)      (449)       (2,534)     (2,905)

    Net income (loss)            $4,414    $(1,578)      $14,297      $7,665
     %                              6.1%      (2.7%)         5.2%        3.1%
    Per share data:
     Net income (loss) - basic    $0.48     ($0.17)        $1.56       $0.85
     Net income (loss) - diluted  $0.46     ($0.17)        $1.51       $0.84

    Shares Outstanding:
      Basic                   9,238,138  9,129,566     9,171,720   9,053,672
      Diluted
                              9,503,266  9,129,566     9,473,914   9,113,689

     A - 2001 includes an additional provision for doubtful accounts primarily
         related to the poor financial condition of certain U.S. steel
         customers which filed for bankruptcy protection, an additional
         environmental reserve, and other organizational structure costs
         totaling $2,050 and $2,767 for the fourth quarter and full year,
         respectively.  Upon adopting SFAS No. 142, "Goodwill and Other
         Intangible Assets," effective January 1, 2002, the Company no longer
         amortizes goodwill.  The Company recorded goodwill amortization of
         $244 or $0.02 per diluted share and $1,004 or $0.08 per diluted share
         for the three and twelve months ended December 31, 2001,
         respectively.

     B - Includes facility rationalization, severance, and abandoned
         acquisition-related costs totaling $2,896 and $5,854 for the fourth
         quarter and full year 2001, respectively.


                           Quaker Chemical Corporation
              Operating Income (Loss) and Earnings (Loss) Per Share
                                  Reconciliation
                        For the period ended December 31,


                                                       Unaudited
                                              Dollars in thousands except
                                                     per share data

                                           Fourth Quarter      Twelve Months

                                            2002     2001      2002     2001

    Operating Income (Loss)

    Operating income (loss),
     as reported                          $7,255  $(1,720)  $23,973  $14,191

    Special items:
    Restructuring
     Facility rationalization                 --      575        --    2,613
     Severance                                --    2,124        --    2,644
     Costs related to abandoned
      acquisitions                            --      197        --      597
    Additional provision for doubtful
     accounts - Note A                        --    1,550        --    2,000
    Organization structure                    --       --        --      267
    Environmental reserve                     --      500        --      500
                                              --    4,946        --    8,621
    Operating income, excluding
     special items                        $7,255   $3,226   $23,973  $22,812

    Earnings (Loss) Per Share - Diluted

    Earnings (loss) per share, as
     reported                              $0.46   $(0.17)    $1.51    $0.84

    Special items:
    Restructuring
       Facility rationalization               --     0.04        --     0.20
       Severance                              --     0.16        --     0.20
       Costs related to
        abandoned acquisitions                --     0.01        --     0.04
     Additional provision for
      doubtful accounts - Note A              --     0.12        --     0.15
    Organization structure                    --       --        --     0.02
    Environmental reserve                     --     0.04        --     0.04
                                              --     0.37        --     0.65
    Operating income,
     excluding special items               $0.46    $0.20     $1.51    $1.49

    A - Primarily related to the poor financial condition of certain U.S.
        steel customers which filed for bankruptcy protection.


                           Quaker Chemical Corporation
                      Condensed Consolidated Balance Sheet

                                              December 31,       December 31,
                                                     2002               2001*

    ASSETS

    Current assets
       Cash and cash equivalents                  $13,857            $20,549
       Accounts receivable, net                    53,353             44,787
       Inventories, net                            23,636             18,785
       Deferred income taxes                        5,874              4,031
       Prepaid expenses and
        other current assets                        6,953              4,778
           Total current assets                   103,673             92,930

    Property, plant and equipment, net             48,512             38,244
    Goodwill                                       21,927             14,960
    Other intangible assets                         5,852              1,442
    Investments in associated companies             9,060              9,839
    Deferred income taxes                          10,609              9,085
    Other assets                                   14,225             13,166
       Total Assets                              $213,858           $179,666

    LIABILITIES  AND SHAREHOLDERS' EQUITY
    Current liabilities
       Short-term borrowings and current
        portion of long-term debt                 $12,205             $2,858
       Accounts payable                            27,461             18,323
       Dividends payable                            1,962              1,873
       Accrued compensation                        10,254              8,109
       Other current liabilities                   14,262             14,343
           Total current liabilities               66,144             45,506
    Long-term debt                                 16,590             19,380
    Deferred income taxes                           1,518              1,233
    Accrued pension and postretirement
     benefits                                      28,723             19,239
    Other noncurrent liabilities                    5,166              4,973
           Total liabilities                      118,141             90,331

    Minority interest in equity of subsidiaries     7,662              8,436
    Commitments and contingencies                      --                 --

    Shareholders' Equity
       Common stock $1 par value; authorized
        30,000,000 shares; issued (including
        treasury shares) 9,664,009 shares           9,664              9,664
       Capital in excess of par value                 626                357
       Retained earnings                          110,448            103,953
       Unearned compensation                       (1,245)            (1,597)
       Accumulated other comprehensive (loss)     (27,078)           (24,075)
                                                   92,415             88,302
       Treasury stock, shares held at cost:
        2002 - 324,109,  2001 - 526,865            (4,360)            (7,403)
           Total shareholders' equity              88,055             80,899
                                                 $213,858           $179,666

       * Certain reclassifications of prior year data have been made to
         improve comparability.


                           Quaker Chemical Corporation
                 Condensed Consolidated Statement of Cash Flows

                                                      (Dollars in thousands)
                                                         2002         2001

    Cash flows from operating activities
      Net income                                      $14,297       $7,665
      Adjustments to reconcile net income to net
       cash provided by  operating activities:
        Depreciation                                    5,432        4,913
        Amortization                                      805        1,467
        Equity in net income of
         associated companies                            (295)        (613)
        Minority interest in earnings of subsidiaries   2,534        2,905
        Deferred income taxes                             328         (627)
        Deferred compensation and
         other postretirement benefits                     35          201
        Environmental charge                               --          500
        Restructuring charge                               --        5,854
        Pension and other, net                          1,524         (695)
      Increase (decrease) in cash from changes
       in current assets and current liabilities:
        Accounts receivable, net                         (657)       7,573
        Inventories                                    (3,101)       2,762
        Prepaid expenses and other current assets        (194)          39
        Accounts payable and accrued liabilities        7,107       (6,603)
        Change in restructuring liabilities            (2,156)      (1,123)
        Estimated taxes on income                      (1,261)      (1,614)
         Net cash provided by operating activities     24,398       22,604

    Cash flows from investing activities
        Capital expenditures                          (10,837)      (8,036)
        Dividends from associated companies               515        1,208
        Investments in and advances to
         associated companies                              --           95
        Payments related to acquisitions              (21,285)      (1,718)
        Proceeds from disposition of assets             1,682          259
        Other, net                                       (326)         165
         Net cash (used in) investing activities      (30,251)      (8,027)

    Cash flows from financing activities
        Dividends paid                                 (7,714)      (7,410)
        Net increase (decrease) in
         short-term borrowings                          9,026          (56)
        Repayment of long-term debt                    (2,853)      (2,891)
        Treasury stock issued                           2,951        2,902
        Distributions to minority shareholders         (2,673)      (2,335)
        Other, net                                         --          234
          Net cash (used in) financing activities      (1,263)      (9,556)

    Effect of exchange rate changes on cash               424       (1,024)
      Net (decrease) increase in cash
       and cash equivalents                            (6,692)       3,997
      Cash and cash equivalents at
       beginning of period                             20,549       16,552
      Cash and cash equivalents at end of period      $13,857      $20,549

    Supplemental cash flow disclosures
    Cash paid during the year for:
     Income taxes                                      $7,787       $7,550
     Interest                                           1,897        1,876

    Noncash investing activities:
     Contribution of property, plant & equipment
      to real estate joint venture                       $ --       $4,358
SOURCE Quaker Chemical Corporation

CONTACT:          Michael F. Barry, Vice President and Chief Financial Officer of
                  Quaker Chemical Corporation, +1-610-832-8500

URL:              http://www.quakerchem.com 
                  http://www.prnewswire.com