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News Release


Quaker Chemical Announces Record Quarterly Revenues and a 67% Increase in Net Income

CONSHOHOCKEN, Pa., Aug 02, 2006 /PRNewswire-FirstCall via COMTEX News Network/ -- Quaker Chemical Corporation (NYSE: KWR) today announced record quarterly sales of $118.7 million in the second quarter of 2006 and a 67% improvement in net income to $3.0 million, compared to second quarter 2005 sales of $107.0 million and net income of $1.8 million. Diluted earnings per share increased to $0.30 for the second quarter of 2006 versus $0.18 in the second quarter of last year.

Second Quarter 2006 Summary

Net sales for the second quarter of 2006 were $118.7 million, up 10.9% from $107.0 million for the second quarter of 2005. The increase in net sales was driven by a combination of higher selling prices and volume growth. Volume growth was mainly attributable to market share growth and increased demand in both the U.S. and China. Selling price increases continue to be broadly implemented across all regions and market segments to offset significantly higher raw material costs.

Gross margin as a percentage of sales was 30.4% for the second quarter of 2006 compared to 30.6% for the second quarter of 2005. Higher selling prices and a stronger performance from the Company's CMS business helped maintain margins notwithstanding continued increases in raw material prices, as crude oil prices have spiked from the low fifty dollar per barrel range in the second quarter of 2005 to the low seventy dollar per barrel range in the second quarter of 2006. Sequentially, the second quarter 2006 gross margin as a percentage of sales represents an improvement over the first quarter 2006 gross margin percentage of 29.6%.

Selling, general and administrative expenses for the quarter increased $0.7 million compared to the second quarter of 2005. Cost savings from restructuring efforts completed in 2005 substantially offset increased spending in higher growth areas, higher variable compensation, higher professional fees and inflationary increases.

The increase in net interest expense is attributable to higher average borrowings and higher interest rates. The decrease in minority interest expense is due to lower financial performance from the Company's minority affiliates.

Year-to-Date Summary

Net sales for the first half of 2006 were $228.5 million, up 8.2% from $211.2 million for the first half of 2005. The same factors discussed above, volume growth in U.S. and China and selling price increases implemented across all regions and market segments, were the primary reasons for the increase in net sales.

Net income for the first half of 2006 was $5.5 million compared to $4.9 million for the first half of 2005, which included a $4.2 million pre-tax gain from the Company's real estate joint venture, partially offset by a $1.2 million pre-tax restructuring charge. Gross margin as a percentage of sales was 30.0% for the first half of 2006 compared to 30.1% for the first half of 2005. Higher selling prices and a stronger performance from the Company's CMS business helped maintain margin percentage despite continued increases in raw material prices, particularly crude oil derivatives.

Selling, general and administrative expenses for the first half of 2006 decreased $0.2 million compared to the first half of 2005. Cost savings from restructuring efforts completed in 2005 substantially offset increased spending in higher growth areas, higher variable compensation, higher professional fees and inflationary increases. The Company recorded a pension gain in the first quarter of 2006 of $0.9 million relating to legislative changes to one of its European pension plans. During the first quarter of 2005, the Company took a net pre-tax charge of $1.2 million related to a reduction in its workforce.

The decrease in other income is largely due to $4.2 million of pre-tax gain relating to the Company's real estate joint venture recorded in 2005. The remainder of the decrease was the result of foreign exchange losses in the first half of 2006 compared to gains in the first half of 2005.

The increase in net interest expense is attributable to higher average borrowings and higher interest rates. The decease in minority interest expense for the year is due to the acquisition of the remaining 40% interest in the Company's Brazilian affiliate in March of 2005 and lower financial performance from the Company's minority affiliates.

Balance Sheet and Cash Flow Items

The Company's net debt increased from December 2005, primarily to fund working capital needs, as well as the restructuring actions taken in the fourth quarter of 2005. The Company's net debt-to-total capital ratio was 39% at June 30, 2006, compared to 40% at March 31, 2006 and 35% at December 31, 2005.

Ronald J. Naples, Chairman and Chief Executive Officer, commented, "We continue to make solid progress towards restoring our profitability to historical levels. On sequential and prior year comparisons, we had a fine second quarter. Our earnings momentum is driven by persistent pricing actions, firming of steel demand, and strong progress in such key initiatives as Asia/Pacific growth and chemical management services. While gross margin percentage improvement remains elusive due to higher raw material costs, higher revenues are driving absolute dollar improvement in gross margin. Further, the restructuring actions taken in 2005 have enabled this gross margin improvement to substantially flow to net income while allowing for continued investment in business building initiatives. For the remainder of 2006, we are cautiously optimistic that we will continue to generate year- over-year improvement in core earnings, although, of course, we are concerned about the recent events in the Middle East and the unpredictable impact they may have on our business environment and costs."

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. 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 second quarter results is scheduled for August 3, 2006 at 2:30 p.m. (EDT). Access the conference by calling 877-269-7756 or visit Quaker's Web site at http://www.quakerchem.com for a live webcast.



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

                                       (Unaudited)           (Unaudited)

                                    Three Months Ended    Six Months Ended
                                         June 30,              June 30,
                                     2006       2005       2006       2005

    Net sales                       $118,683   $107,042   $228,499   $211,203

    Cost of goods sold                82,618     74,333    159,949    147,567

    Gross margin                      36,065     32,709     68,550     63,636
      %                                30.4%      30.6%      30.0%      30.1%

    Selling, general and
     administrative                   29,789     29,120     57,151     57,337

    Restructuring and related
     activities, net                     -          -          -        1,232

    Operating income                   6,276      3,589     11,399      5,067
     %                                  5.3%       3.4%       5.0%       2.4%

    Other income, net                    387        648        515      5,516
    Interest expense, net             (1,252)      (740)    (2,217)    (1,174)
    Income before taxes                5,411      3,497      9,697      9,409

    Taxes on income                    2,127      1,136      3,680      3,057
                                       3,284      2,361      6,017      6,352

    Equity in net income of
     associated companies                125        153        238        206
    Minority interest in net
     income of subsidiaries             (417)      (719)      (721)    (1,637)

    Net income                        $2,992     $1,795     $5,534     $4,921
      %                                 2.5%       1.7%       2.4%       2.3%

    Per share data:
       Net income - basic              $0.31      $0.19      $0.57      $0.51
       Net income - diluted            $0.30      $0.18      $0.56      $0.50

    Shares Outstanding:
       Basic                       9,769,682  9,676,463  9,746,685  9,660,163
       Diluted                     9,833,117  9,795,798  9,824,968  9,826,166



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

                                                         (Unaudited)

                                                  June 30,        December 31,
                                                    2006              2005*
    ASSETS

    Current assets
       Cash and cash equivalents                    $12,111           $16,121
       Accounts receivable, net                     105,341            93,943
       Inventories, net                              48,934            45,818
       Prepaid expenses and other current
        assets                                       12,775            10,111
          Total current assets                      179,161           165,993

    Property, plant and equipment                   150,400           140,903
       Less accumulated depreciation                 91,623            84,006
          Net property, plant and
           equipment                                 58,777            56,897
    Goodwill                                         37,999            35,418
    Other intangible assets, net                      8,192             8,703
    Investments in associated companies               6,607             6,624
    Deferred income taxes                            24,284            24,385
    Other assets                                     35,564            33,975
          Total assets                             $350,584          $331,995

    LIABILITIES AND SHAREHOLDERS' EQUITY

    Current liabilities
       Short-term borrowings and current
        portion of long-term debt                    $2,393            $5,094
       Accounts and other payables                   55,917            52,923
       Accrued compensation                           8,964             9,818
       Other current liabilities                     16,944            19,053
          Total current liabilities                  84,218            86,888
    Long-term debt                                   82,684            67,410
    Deferred income taxes                             4,930             4,608
    Other non-current liabilities                    58,274            60,573
          Total liabilities                         230,106           219,479

    Minority interest in equity of
     subsidiaries                                     7,201             6,609

    Shareholders' equity
       Common stock, $1 par value;
        authorized 30,000,000 shares;
        issued 2006 - 9,866,005, 2005 -
        9,726,385 shares                              9,866             9,726
       Capital in excess of par value                 4,154             3,574
       Retained earnings                            112,622           111,317
       Accumulated other comprehensive loss         (13,365)          (18,710)
          Total shareholders' equity                113,277           105,907
             Total liabilities and
              shareholders' equity                 $350,584          $331,995


    *  Condensed from audited financial statements.



                           Quaker Chemical Corporation
                 Condensed Consolidated Statement of Cash Flows
                        For the six months ended June 30,
                              (Dollars in thousands)

                                                           (Unaudited)

                                                      2006             2005*
    Cash flows from operating activities
      Net income                                     $5,534            $4,921
      Adjustments to reconcile net income
       to net cash (used in) provided by
       operating activities:
        Depreciation                                  4,893             4,548
        Amortization                                    708               646
        Equity in undistributed earnings
         of associated companies, net of
         dividends                                      (33)               28
        Minority interest in earnings of
         subsidiaries                                   721             1,637
        Deferred income taxes                           334               -
        Deferred compensation and other, net             61                27
        Stock-based compensation                        385               271
        Restructuring and related
         activities, net                                -               1,232
        Gain on sale of partnership assets              -              (2,989)
        Gain on disposal of property,
         plant and equipment                             (8)              -
        Insurance settlement realized                  (157)              -
        Pension and other postretirement
         benefits                                    (2,752)             (368)
      Increase (decrease) in cash from
       changes in current assets and
       current liabilities, net of
       acquisitions:
        Accounts receivable                          (8,746)           (2,481)
        Inventories                                  (2,011)             (721)
        Prepaid expenses and other current
         assets                                      (2,449)             (171)
        Accounts payable and accrued
         liabilities                                  1,475             2,718
        Change in restructuring
         liabilities                                 (3,411)           (1,382)
          Net cash (used in) provided by
           operating activities                      (5,456)            7,916

    Cash flows from investing activities
      Capital expenditures                           (4,863)           (3,196)
      Payments related to acquisitions               (1,069)           (6,700)
      Proceeds from partnership
       disposition of assets                            -               2,989
      Proceeds from disposition of assets                46               670
      Interest received on insurance
       settlement                                       154               -
      Change in restricted cash, net                      3               -
          Net cash used in investing
           activities                                (5,729)           (6,237)

    Cash flows from financing activities
      Net decrease in short-term
       borrowings                                    (2,813)           (5,217)
      Long-term debt borrowings                      14,340               -
      Repayments of long-term debt                     (474)             (518)
      Dividends paid                                 (4,199)           (4,163)
      Issuance of common stock                          335               181
      Distributions to minority
       shareholders                                    (350)           (2,205)
          Net cash provided by (used in)
           financing activities                       6,839           (11,922)

      Effect of exchange rate changes on cash           336            (1,728)
        Net decrease in cash and cash
         equivalents                                 (4,010)          (11,971)
        Cash and cash equivalents at the
         beginning of the period                     16,121            29,078
        Cash and cash equivalents at the
         end of the period                          $12,111           $17,107


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

SOURCE Quaker Chemical Corporation

Neal E. Murphy, Vice President and Chief Financial Officer, Quaker Chemical
Corporation, +1-610-832-4189
http://www.prnewswire.com