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News Release


Quaker Chemical Announces First Quarter 2015 Results

  • Volume gains and gross margin drive good results despite foreign exchange impact
  • Foreign currency exchange negatively impacts sales by 7% and EPS by $0.08 per share
  • Strong operating cash flow generation, up $10 million from the prior year period

CONSHOHOCKEN, Pa., April 29, 2015 /PRNewswire/ -- Quaker Chemical Corporation (NYSE: KWR) today announced net sales of $181.3 million for the first quarter of 2015 compared to the first quarter of 2014 net sales of $181.7 million.  Despite year-over-year volume growth in the first quarter of 2015, these gains were offset by $12.1 million, or 7%, of lower net sales due to foreign currency exchange.  Earnings per diluted share for the first quarter of 2015 were $0.78 compared to $0.96 for the first quarter of 2014, with non-GAAP earnings per diluted share for the first quarter of 2015 of $0.94 compared to $0.95 for the first quarter of 2014.  The key driver in the decrease in reported earnings per diluted share compared to the first quarter of 2014 was a $2.8 million, or $0.21 per diluted share, charge related to the Company's Venezuelan affiliate, noted below.  The Company's adjusted EBITDA was $23.2 million in the first quarter of 2015 compared to $23.7 million in the first quarter of 2014.  Overall, changes in foreign exchange rates significantly impacted the Company's first quarter of 2015 reported and non-GAAP results, decreasing net income approximately $1.1 million, or $0.08 per diluted share. 

Michael F. Barry, Chairman, Chief Executive Officer and President commented, "We are pleased with our results this quarter in spite of a difficult global market with significant foreign exchange headwinds.  Lower oil prices and a stronger U.S. Dollar have changed the dynamics of our customers' markets and have negatively impacted both our top and bottom lines.  However, our continued market share gains and recent acquisitions have helped us achieve stable sales and earnings despite these extreme changes in our environment." 

Mr. Barry continued, "Looking forward, we expect a challenging, but stable, market environment in many of the countries in which we operate, along with a continued strong U.S. Dollar.  However, we remain committed to our strategy and believe our ability to increase market share and leverage our acquisitions will more than offset these market and exchange rate challenges.  In addition, our strong cash flow and balance sheet will allow us to continue to pursue our key strategic initiatives and future acquisitions, which we believe will add significant shareholder value.  Overall, I remain confident in our future and expect 2015 to be another good year for Quaker with increased earnings for the sixth consecutive year."

First Quarter of 2015 Summary

Net sales for the first quarter of 2015 of $181.3 million were generally consistent with net sales for the first quarter of 2014 of $181.7 million.  Increases in product volume, including additional sales from acquisitions, were offset by a decrease of $12.1 million, or 7%, due to the negative impacts of foreign currency exchange rate translation.

Gross profit increased $1.2 million, or 2%, compared to the first quarter of 2014, which was primarily driven by the higher product volume, noted above, and increased gross margin of 36.6% for the first quarter of 2015 compared to 35.8% for the first quarter of 2014. 

Selling, general and administrative expenses ("SG&A") increased $2.7 million compared to the first quarter of 2014, which was driven by the net impact of several factors.  Specifically, SG&A increased due to additional costs acquired with the Company's prior year acquisitions, higher labor-related costs, and a first quarter of 2015 charge related to a cost streamlining initiative in South America.  These SG&A increases were partially offset by decreases from foreign currency exchange rate translation and a first quarter of 2014 cost related to an amendment to the Company's pension plan in the United Kingdom ("U.K.").   

Other expense was approximately $0.2 million in the first quarter of 2015 compared to $0.5 million in the first quarter of 2014.  In both quarters, the Company's other expense was primarily driven by foreign exchange transactional losses, with a lower net loss in the first quarter of 2015 driving the year-over-year comparison.

Interest expense was $0.1 million higher in the first quarter of 2015 compared to the first quarter of 2014, primarily due to higher average borrowings outstanding in the current quarter to fund the Company's recent acquisition activity.  Interest income was $0.1 million lower in the first quarter of 2015 compared to the first quarter of 2014, primarily due to interest received on a non-income tax credit in the first quarter of 2014.

The Company's effective tax rates for the first quarters of 2015 and 2014 were 30.8% and 34.8%, respectively.  The primary contributors to the decrease in the current quarter's effective tax rate were lower changes in reserves related to uncertain tax positions in the first quarter of 2015 and certain one-time items that increased the first quarter of 2014's effective tax rate.  We currently estimate the full year 2015 effective tax rate will approximate 30%.

Equity in net income of associated companies ("equity income") decreased by $2.5 million in the first quarter of 2015 compared to the first quarter of 2014, which was primarily due to the current quarter's currency conversion charge recorded at the Company's Venezuelan affiliate.  Due to recent changes in Venezuela's foreign exchange markets and controls, the Company re-assessed its Venezuelan affiliate's access to U.S. Dollars and its ability to import or trade under the existing exchange markets as of March 31, 2015, which resulted in the first quarter of 2015 charge, noted above.  In addition, equity income includes the Company's interest in a captive insurance company, which was consistent in the current and prior year quarters.

The $0.4 million decrease in net income attributable to noncontrolling interest in the first quarter of 2015 compared to the first quarter of 2014 was primarily due to the Company's second quarter of 2014 acquisition of the noncontrolling interest in its Australian affiliate.

Changes in foreign exchange rates negatively impacted the first quarter of 2015 net income by approximately $1.1 million, or $0.08 per diluted share.

Balance Sheet and Cash Flow Items

The Company had net operating cash flows of approximately $8.1 million for the first quarter of 2015, a $9.9 million increase compared to cash outflows of $1.8 million in the first quarter of 2014.  The increase in net operating cash flows primarily relates to lower cash invested in the Company's working capital during the first quarter of 2015 due to improved working capital management.  Overall, the Company's liquidity remains strong, with net debt of $8.8 million as of March 31, 2015 and a consolidated leverage ratio that continues to be 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 (unaudited) financial measures:


Three Months Ended

March 31,


2015


2014

GAAP earnings per diluted share attributable to Quaker Chemical Corporation common shareholders

$   0.78


$   0.96

Equity income in a captive insurance company per diluted share

(0.06)


(0.06)

U.K. pension plan amendment per diluted share


0.05

Cost streamlining initiatives per diluted share

0.01


Currency conversion impact of the Venezuelan Bolivar Fuerte per diluted share

0.21


Non-GAAP earnings per diluted share

$   0.94


$   0.95

 


Three Months Ended

March 31,


2015


2014

Net income attributable to Quaker Chemical Corporation

$   10,378


$   12,730

Depreciation and amortization

4,698


3,888

Interest expense

587


525

Taxes on income before equity in net income of associated companies

5,359


6,546

Equity income in a captive insurance company

(795)


(846)

U.K. pension plan amendment


902

Cost streamlining initiatives

173


Currency conversion impact of the Venezuelan Bolivar Fuerte

2,806


Adjusted EBITDA

$   23,206


$   23,745

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 first quarter of 2015 results is scheduled for April 30, 2015 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 per share data)






(Unaudited) 


Three Months Ended March 31, 


2015


2014





Net sales 

$        181,330


$        181,674





Cost of goods sold 

115,002


116,560





Gross profit

66,328


65,114

%

36.6%


35.8%





Selling, general and administrative expenses

48,464


45,741





Operating income

17,864


19,373

%

9.9%


10.7%





Other expense, net 

(194)


(473)

Interest expense

(587)


(525)

Interest income

320


453

Income before taxes and equity in net income of associated companies

17,403


18,828





Taxes on income before equity in net income of associated companies

5,359


6,546

Income before equity in net income of associated companies

12,044


12,282





Equity in net (loss) income of associated companies

(1,437)


1,027





Net income

10,607


13,309





Less: Net income attributable to noncontrolling interest

229


579





Net income attributable to Quaker Chemical Corporation

$           10,378


$           12,730

%

5.7%


7.0%





Per share data:




Net income attributable to Quaker Chemical Corporation Common Shareholders - basic

$               0.78


$               0.96

Net income attributable to Quaker Chemical Corporation Common Shareholders - diluted

$               0.78


$               0.96

 

 

 

Quaker Chemical Corporation 

Condensed Consolidated Balance Sheets

(Dollars in thousands, except par value and share amounts)






(Unaudited)


March 31, 


December 31, 


2015


2014

ASSETS








Current assets 




Cash and cash equivalents 

$           64,338


$           64,731

Accounts receivable, net 

180,402


189,484

Inventories, net

77,176


77,708

Prepaid expenses and other current assets 

18,282


19,595

Total current assets 

340,198


351,518





Property, plant and equipment, net

81,865


85,763

Goodwill 

75,169


77,933

Other intangible assets, net 

67,153


70,408

Investments in associated companies 

20,536


21,751

Deferred income taxes 

21,770


24,411

Other assets 

33,586


33,742

Total assets 

$        640,277


$        665,526





LIABILITIES AND EQUITY








Current liabilities 




Short-term borrowings and current portion of long-term debt 

$                401


$                403

Accounts and other payables 

71,718


78,977

Accrued compensation 

11,954


19,853

Other current liabilities 

24,711


25,668

Total current liabilities 

108,784


124,901

Long-term debt 

72,698


75,328

Deferred income taxes 

7,558


8,584

Other non-current liabilities 

86,108


91,578

Total liabilities 

275,148


300,391





Equity




Common stock, $1 par value; authorized 30,000,000 shares; issued and outstanding 2015 - 13,332,472 shares; 2014 - 13,300,891 shares

13,332


13,301

Capital in excess of par value 

100,947


99,056

Retained earnings 

305,902


299,524

Accumulated other comprehensive loss 

(62,971)


(54,406)

Total Quaker shareholders' equity 

357,210


357,475

Noncontrolling interest

7,919


7,660

Total equity 

365,129


365,135

Total liabilities and equity 

$        640,277


$        665,526





 

 

Quaker Chemical Corporation 

Condensed Consolidated Statements of Cash Flows 

(Dollars in thousands)






(Unaudited) 


Three Months Ended March 31, 


2015


2014

Cash flows from operating activities 




Net income

$           10,607


$           13,309

Adjustments to reconcile net income to net cash provided by (used in) operating activities: 




Depreciation 

3,071


3,075

Amortization 

1,627


813

Equity in undistributed earnings of associated companies, net of dividends 

1,437


(927)

Deferred compensation and other, net 

1,091


2,944

Stock-based compensation 

1,685


1,388

Gain on disposal of property, plant and equipment

(21)


(48)

Insurance settlements realized 

(115)


(337)

Pension and other postretirement benefits

10


(1,665)

Increase (decrease) in cash from changes in current assets and current liabilities, net of acquisitions: 




Accounts receivable

3,428


(13,387)

Inventories 

(2,584)


(6,389)

Prepaid expenses and other current assets 

(2,634)


(29)

Accounts payable and accrued liabilities 

(9,516)


(544)

Net cash provided by (used in) operating activities 

8,086


(1,797)





Cash flows from investing activities 




Investments in property, plant and equipment

(2,414)


(3,057)

Payments related to acquisitions, net of cash acquired

528


-

Proceeds from disposition of assets

80


58

Interest earned on insurance settlements

10


11

Change in restricted cash, net 

105


326

Net cash used in investing activities 

(1,691)


(2,662)





Cash flows from financing activities 




Repayment of long-term debt 

(1,327)


(232)

Dividends paid 

(3,990)


(3,300)

Stock options exercised, other

(50)


(205)

Excess tax benefit related to stock option exercises

287


239

Net cash used in financing activities 

(5,080)


(3,498)





Effect of exchange rate changes on cash 

(1,708)


(85)

Net decrease in cash and cash equivalents 

(393)


(8,042)

Cash and cash equivalents at the beginning of the period 

64,731


68,492

Cash and cash equivalents at the end of the period

$           64,338


$           60,450





 

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To view the original version on PR Newswire, visit:http://www.prnewswire.com/news-releases/quaker-chemical-announces-first-quarter-2015-results-300074497.html

SOURCE Quaker Chemical Corporation

Margaret M. Loebl, Vice President, Chief Financial Officer and Treasurer, loeblm@quakerchem.com, T. 610.832.4160