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News Release

Quaker Chemical Announces Fourth Quarter and Full Year Results

CONSHOHOCKEN, Pa., Feb. 25 /PRNewswire-FirstCall/ -- Quaker Chemical Corporation (NYSE: KWR) today announced net sales for the fourth quarter 2008 of $116.2 million, and a net loss of $2.7 million, or $0.25 per diluted share. Included in fourth quarter 2008 results is a pre-tax restructuring charge of $2.9 million, or approximately $0.18 per diluted share.

Michael F. Barry, Chief Executive Officer and President, commented, "After starting the year with three strong quarters of sales and profits, 2008 finished with disappointing results due to a dramatic falloff in customer demand around the globe and continued raw material price escalation in certain regions. However, we have taken aggressive actions to reduce our cost structure given the market realities we are facing. In addition, we have recently amended our credit facility to provide more financial flexibility during this uncertain period."

Mr. Barry continued, "We expect our overall demand for products to be lower in 2009 as a result of the global recession with gradual improvement in our volumes as the year progresses. Fortunately, we entered this significant downturn at the end of the third quarter with a strong balance sheet position as our net debt level was at the lowest point since 2005. While 2009 will be a challenging year for Quaker and our customers, we remain confident that our business model, strong associate base, key growth initiatives and solid balance sheet will get us through this difficult period in a profitable manner and position us well for the future."

Fourth Quarter Summary

Net sales for the fourth quarter were $116.2 million, down 18% compared to $142.4 million for the fourth quarter of 2007. The decrease in net sales was primarily due to volume declines in all of the Company's regions, as the global economic downturn began to impact the Company. Volumes were down approximately 25%, which were partially offset by a favorable 11% in selling price and mix. Selling price increases were realized, in part, as a result of an ongoing effort to offset higher raw material costs. Foreign exchange rate translation also decreased revenues by approximately 4%.

Gross margins were down approximately $15.5 million, or 36%, compared to the fourth quarter of 2007, reflective of the above-noted volume declines. The gross margin percentage of 24.2% was also lower than the fourth quarter 2007 gross margin percentage of 30.6%. The decline in gross margin was primarily related to continued high raw material costs which were only partially offset by higher selling prices. The remaining decline in gross margin percentage was due to the impact of manufacturing and other costs being spread over reduced volumes, as well as product and regional sales mix.

Selling, general and administrative expenses ("SG&A") decreased $8.7 million, compared to the fourth quarter of 2007. Investments in higher growth areas were more than offset by significantly lower incentive compensation, lower commissions on lower sales, as well as favorable foreign exchange rate translation. SG&A as a percentage of sales decreased to 23% compared to 25% in the fourth quarter of 2007.

In response to the significant volume declines, Quaker implemented a restructuring program in the fourth quarter of 2008, which eliminated more than 80 positions and included provisions for severance for 57 employees totaling $2.9 million. In a further effort to reduce operating costs, as volume declines continued in the U.S. and Europe and extended to other regions, Quaker implemented an additional restructuring program in the first quarter of 2009, which is expected to include provisions for severance for approximately 50 employees totaling approximately $2.5 to $3 million.

The decrease in other income was primarily the result of foreign exchange losses recorded in the fourth quarter of 2008, compared to gains in the same period of the prior year. The higher net interest expense was due to higher average borrowings and lower interest income.

Full Year Summary

Net sales for 2008 were $581.6 million, up 7% from $545.6 million for 2007. Foreign exchange rate translation increased revenues by approximately 4%. Selling price increases realized across all regions and market segments were partially offset by the fourth quarter volume declines noted above.

Gross margins were down approximately $4.9 million, or 3%, compared to 2007. The gross margin percentage of 28% was also lower than the 2007 gross margin percentage 30.8%. The decline in gross margin percentage was due to increased raw material costs partially offset by price increases, as well as product and regional sales mix.

SG&A for 2008 decreased $2.7 million compared to 2007. Investments in higher growth areas, inflationary increases and unfavorable foreign exchange rate translation were more than offset by lower incentive compensation and lower legal and environmental costs.

Effective October 3, 2008, Ronald J. Naples, Chairman, retired as Quaker's Chief Executive Officer. As further discussed in the Company's Form 8-K filed on May 13, 2008, the Company is recognizing certain accelerated and other costs, in accordance with Mr. Naples' Employment, Transition and Consulting Agreement, which are expected to total $5.8 million over the 2008-2010 period. Incremental costs incurred in 2008 totaled $3.5 million, or approximately $0.22 per diluted share.

In 2007, the Company recorded environmental charges of $3.3 million. The charges consisted of $2.0 million related to the settlement of environmental litigation involving AC Products, Inc., a wholly owned subsidiary, as well as an additional $1.3 million charge for the estimated remaining remediation costs.

The decrease in other income was primarily the result of foreign exchange losses recorded in 2008, compared to gains in the prior year. Other income for 2008 also includes a net arbitration award of approximately $1.0 million, or approximately $0.04 per diluted share, related to litigation with one of the former owners of the Company's Italian subsidiary.

The Company's effective tax rate was 29.9% for 2008, compared to 29.3% in the prior year. The 2008 effective tax rate was affected by a changing mix of income among jurisdictions, as well as the derecognition of several uncertain tax positions due to the expiration of applicable statutes of limitations for certain tax years. The effective tax rate for 2007 includes an out of period non-cash tax benefit adjustment of $1.0 million related to the deferred tax accounting for the Company's foreign pension plans and intangible assets regarding one of the Company's acquisitions.

Balance Sheet and Cash Flow Items

The Company's net debt-to-total-capital ratio remained strong at 32% at both December 31, 2008 and 2007, respectively. As discussed in the Form 8-K filed on February 20, 2009, the Company has also amended its credit facility to provide covenant relief related to the 2008 and 2009 restructuring programs and the CEO transition costs. In addition, the amendment temporarily increases the maximum permitted leverage ratio from 3.5 to 4.0 from June 30, 2009 to September 30, 2009, and to 3.75 from December 31, 2009 to March 31, 2010. In February 2009, the Company also amended two Industrial Revenue Bonds totaling $15.0 million to allow for the same changes in terms as the credit facility. On a pro-forma basis, the estimated consolidated leverage ratio as of December 31, 2008 is approximately 2.2.

Quaker Chemical Corporation is a leading global provider of process chemicals, chemical specialties, services, and technical expertise to a wide range of industries - including steel, automotive, mining, aerospace, tube and pipe, coatings and construction materials. Our products, technical solutions, and chemical management services enhance our customers' processes, improve their quality, and lower their costs. Quaker's headquarters is located near Philadelphia in Conshohocken, Pennsylvania.

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. 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, and future terrorist attacks such as those that occurred on September 11, 2001. 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.

As previously announced, Quaker Chemical's investor conference call to discuss fourth quarter and full year results is scheduled for February 26, 2009 at 3:30 p.m. (ET). Access the conference by calling 877-269-7756 or visit Quaker's Web site at for a live webcast.

                                  Quaker Chemical Corporation
                        Condensed Consolidated Statement of Operations
              (Dollars in thousands, except per share data and share amounts)


                                   Three Months Ended     Twelve Months Ended
                                      December 31,            December 31,
                                    2008        2007       2008        2007

        Net sales                 $116,229   $142,393    $581,641   $545,597

        Cost of goods sold          88,114     98,783     418,580    377,661

        Gross margin                28,115     43,610     163,061    167,936
         %                            24.2%      30.6%       28.0%      30.8%

        Selling, general and
         administrative expenses    26,762     35,499     136,697    139,429
        Restructuring and related
         charges                     2,916        -         2,916        -
        CEO transition costs           -          -         3,505        -
        Environmental charges          -          -           -        3,300

        Operating (loss) income     (1,563)     8,111      19,943     25,207
        %                             -1.3%       5.7%        3.4%       4.6%

        Other income, net             (657)       960       1,095      2,578
        Interest expense, net       (1,204)      (829)     (4,409)    (5,050)
        (Loss) income before taxes  (3,424)     8,242      16,629     22,735

        Taxes on income               (871)     3,592       4,977      6,668
                                    (2,553)     4,650      11,652     16,067

        Equity in net (loss)
         income of associated
         companies                    (102)       226         388        783
        Minority interest in net
         income of subsidiaries        (67)      (253)       (908)    (1,379)

        Net (loss) income          $(2,722)    $4,623     $11,132    $15,471
         %                            -2.3%       3.2%        1.9%       2.8%

        Per share data:
          Net (loss) income -
           basic                    $(0.25)     $0.46       $1.07      $1.55
          Net (loss) income -
           diluted                  $(0.25)     $0.46       $1.05      $1.53

        Shares Outstanding:
          Basic                 10,729,049 10,035,630  10,419,654  9,986,347
          Diluted               10,729,049 10,154,388  10,553,325 10,106,918

                             Quaker Chemical Corporation
                        Condensed Consolidated Balance Sheet
            (Dollars in thousands, except par value and share amounts)


                                               December 31,   December 31,
                                                    2008         2007

        Current assets
          Cash and cash equivalents                $20,892     $20,195
          Construction fund (restricted cash)        8,281         -
          Accounts receivable, net                  98,702     118,135
          Inventories, net                          57,419      60,738
          Deferred income taxes                      4,948       4,042
          Prepaid expenses and other current assets 10,584      10,391
            Total current assets                   200,826     213,501

        Property, plant and equipment, net          60,945      62,287
        Goodwill                                    40,997      43,789
        Other intangible assets, net                 6,417       7,873
        Investments in associated companies          7,987       7,323
        Deferred income taxes                       34,179      30,257
        Other assets                                34,088      34,019
            Total assets                          $385,439    $399,049


        Current liabilities
          Short-term borrowings and current
           portion of long-term debt                $4,631      $4,288
          Accounts payable                          48,849      65,202
          Dividends payable                          2,492       2,178
          Accrued compensation                       7,741      17,287
          Accrued pension and
           postretirement benefits                   7,380       1,726
          Other current liabilities                 12,771      15,670
            Total current liabilities               83,864     106,351
        Long-term debt                              84,236      78,487
        Deferred income taxes                        7,156       7,583
        Accrued pension and
         postretirement benefits                    37,638      30,699
        Other non-current liabilities               42,670      41,023
            Total liabilities                      255,564     264,143

        Minority interest in equity of
         subsidiaries                                3,952       4,513

        Shareholders' equity
          Common stock, $1 par value;
           authorized 30,000,000
           shares; issued 2008 -
           10,833,325 shares                        10,833      10,147
          Capital in excess of par value            25,238      10,104
          Retained earnings                        117,089     115,767
          Accumulated other comprehensive loss     (27,237)     (5,625)
            Total shareholders' equity             125,923     130,393
              Total liabilities and
               shareholders' equity               $385,439    $399,049

                             Quaker Chemical Corporation
                   Condensed Consolidated Statement of Cash Flows
                        For the twelve months ended December 31,
                                (Dollars in thousands)

                                                        2008           2007
        Cash flows from operating activities
          Net income                                   $11,132       $15,471
          Adjustments to reconcile net income
           to net cash provided by operating activities:
            Depreciation                                10,879        11,686
            Amortization                                 1,177         1,197
            Equity in net income of associated
             companies, net of dividends                  (275)         (219)
            Minority interest in earnings of
             subsidiaries                                  908         1,379
            Deferred income tax                          1,014          (354)
            Uncertain tax positions (non-
             deferred portion)                             211         1,577
            Deferred compensation and other, net           819           (85)
            Stock-based compensation                     3,901         1,550
            Restructuring and related charges            2,916           -
            Environmental charges                          -           3,300
            (Gain) loss on disposal of
             property, plant and equipment                 (10)          (40)
            Insurance settlement realized               (1,556)       (1,854)
            Pension and other postretirement benefits   (3,527)       (3,596)
          Increase (decrease) in cash from
           changes in current assets and
           current liabilities, net of acquisitions:
            Accounts receivable                         15,582        (4,093)
            Inventories                                    (73)       (5,182)
            Prepaid expenses and other current assets     (181)          122
            Accounts payable and accrued liabilities   (27,892)        7,612
            Change in restructuring liabilities           (749)          -
            Estimated taxes on income                     (885)         (970)
              Net cash provided by operating
               activities                               13,391        27,501

        Cash flows from investing activities
          Capital expenditures                         (11,742)       (9,165)
          Payments related to acquisitions              (1,859)       (2,373)
          Proceeds from disposition of assets              177           259
          Insurance settlement received and
           interest earned                               5,306         5,705
          Change in restricted cash, net               (12,031)       (3,851)
              Net cash used in investing activities    (20,149)       (9,425)

        Cash flows from financing activities
          Proceeds from short-term debt                    -           2,250
          Net increase (decrease) in short-term
           borrowings                                      743        (3,198)
          Proceeds from long-term debt                  10,000           -
          Repayments of long-term debt                  (3,401)       (8,345)
          Dividends paid                                (9,503)       (8,654)
          Stock options exercised, other                11,919         3,309
          Distributions to minority shareholders          (404)       (1,265)
              Net cash provided by (used in)
               financing activities                      9,354       (15,903)

          Effect of exchange rate changes on cash       (1,899)        1,960
            Net increase in cash and cash equivalents      697         4,133
            Cash and cash equivalents at the
             beginning of the period                    20,195        16,062
            Cash and cash equivalents at the
             end of the period                         $20,892       $20,195

SOURCE  Quaker Chemical Corporation

    -0-                           02/25/2009
    /CONTACT:  Mark A. Featherstone, Vice President and Chief Financial
Officer, +1-610-832-4160/
    /Web Site: /

CO:  Quaker Chemical Corporation

ST:  Pennsylvania

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