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News Release


Quaker Chemical Announces Record Quarterly Sales and Significantly Improved Earnings For First Quarter 2007

CONSHOHOCKEN, Pa., May 1 /PRNewswire-FirstCall/ -- Quaker Chemical Corporation (NYSE: KWR) today announced record quarterly sales for the first quarter 2007 of $124.9 million and net income of $3.5 million, a sales increase of 13.7%, and a net income increase of 39%, compared to the first quarter 2006. Earnings per share increased to $0.35 per diluted share from $0.26 per diluted share for the first quarter 2006.

First Quarter 2007 Summary

Net sales for the first quarter were $124.9 million, compared to $109.8 for the first quarter of 2006. The increase in net sales was primarily attributable to a combination of higher sales prices and volume growth. Volume growth was mainly attributable to double digit sales growth in China and higher revenue related to the Company's CMS channel. Foreign exchange rate translation also increased revenues by approximately 4% for the first quarter of 2007, compared to the same period in 2006. Selling price increases were realized across all regions and market segments, in part, as an ongoing effort to offset higher raw material costs. CMS revenues were higher due to additional CMS accounts and the renewal and restructuring of several of the Company's CMS contracts.

Gross margin as a percentage of sales was 30.9% for the first quarter of 2007, compared to 29.6% for the first quarter of 2006. Higher selling prices and additional contribution from the Company's CMS channel helped improve margins. On a sequential basis, however, the first quarter 2007 gross margin percentage was below the fourth quarter 2006 gross margin percentage of 32.3%, as higher CMS service revenues, which include revenues from third-party product sales to CMS accounts, have lower gross margin percentages than traditional product sales. This change in sales mix decreased gross margin as a percentage of sales by approximately 1.5 percentage points compared to the fourth quarter of 2006.

Selling, general and administrative expenses for the quarter increased $4.6 million, as compared to the first quarter of 2006. Foreign exchange rate translation accounted for approximately $1.0 million of the increase over the first quarter of 2006. Also negatively affecting the comparison with the prior year is a pension gain of $0.9 million recorded in the first quarter of 2006 due to a legislative change. The remainder of the increase was due to continued planned spending in higher growth areas, primarily China, higher commissions as a result of higher sales, and increased incentive compensation as a result of higher earnings.

The increase in other income was the result of higher foreign exchange rate losses recorded in the prior year. The increase in net interest expense is attributable to higher average borrowings and higher interest rates.

The Company's effective tax rate was 32.9% for the first quarter of 2007, compared to 36.2% for the first quarter of 2006. The decrease in the effective tax rate was primarily attributable to a shifting of income to lower rate tax jurisdictions, which was offset in part by the Company's first quarter 2007 adoption of FASB Interpretation No. 48, "Accounting for Uncertainty in Income Taxes" ("FIN 48").

Balance Sheet and Cash Flow Items

The Company's net debt has increased from December 31, 2006, primarily to fund working capital needs driven by higher sales late in the quarter and the start-up of a new operation in China. The Company's net debt-to-total capital ratio was 43% at March 31, 2007, compared to 40% at December 31, 2006.

In connection with the adoption of FIN 48, the Company recorded a non-cash charge to shareholders' equity of $5.5 million, which negatively impacted the Company's net debt-to-total capital ratio by approximately 1 percentage point.

Ronald J. Naples, Chairman and Chief Executive Officer, commented, "We had a fine first quarter resulting from increased contributions from strategic initiatives such as Asia/Pacific growth and CMS, as well as our continued actions on the pricing front. Virtually worldwide, we had solid results in the first quarter. Even though sequential quarterly gross margin percentage slipped a bit, due primarily to sales mix, we were able to achieve higher gross margin in dollar terms even as raw material costs ran considerably ahead of last year. This flowed from business expansion efforts and, importantly, from our work with customers to recognize the value we deliver as well as our cost realities. We continue to invest where we think we can get growth and feel good about our long-term future and the prospects of continuing earnings improvement in 2007."

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 product 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 first quarter results is scheduled for May 2, 2007 at 2:30 p.m. (ET). 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)

                                                 Three Months ended March 31,
                                                    2007             2006

    Net sales                                      $124,891        $109,816

    Cost of goods sold                               86,345          77,331

    Gross margin                                     38,546          32,485
      %                                               30.9%           29.6%

    Selling, general and administrative              31,919          27,362

    Operating income                                  6,627           5,123
      %                                                5.3%            4.7%

    Other income, net                                   327             128
    Interest expense, net                            (1,350)           (965)
    Income before taxes                               5,604           4,286

    Taxes on income                                   1,844           1,553
                                                      3,760           2,733

    Equity in net income of associated companies        125             113
    Minority interest in net income of subsidiaries    (348)           (304)

    Net income (loss)                                $3,537          $2,542
      %                                                2.8%            2.3%

    Per share data:
      Net income - basic                             $0.36           $0.26
      Net income - diluted                           $0.35           $0.26

    Shares Outstanding:
      Basic                                      9,907,683       9,723,432
      Diluted                                   10,024,905       9,816,149


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

                                                         (Unaudited)

                                                  March 31,       December 31,
                                                     2007            2006
    ASSETS

    Current assets
      Cash and cash equivalents                     $10,787         $16,062
      Accounts receivable, net                      118,834         107,340
      Inventories, net                               55,420          51,984
      Prepaid expenses and other current
        assets                                       12,213          10,855
        Total current assets                        197,254         186,241

    Property, plant and equipment, net               61,464          60,927
    Goodwill                                         40,235          38,740
    Other intangible assets, net                      8,046           8,330
    Investments in associated companies               6,840           7,044
    Deferred income taxes                            33,197          28,573
    Other assets                                     27,083          27,527
        Total assets                               $374,119        $357,382

    LIABILITIES AND SHAREHOLDERS' EQUITY

    Current liabilities
      Short-term borrowings and current
        portion of long-term debt                    $3,702          $4,950
      Accounts and other payables                    64,404          56,345
      Accrued compensation                            8,987          15,225
      Other current liabilities                      15,480          13,659
        Total current liabilities                    92,573          90,179
    Long-term debt                                   90,535          85,237
    Deferred income taxes                             5,493           5,317
    Other non-current liabilities                    71,139          61,783
        Total liabilities                           259,740         242,516

    Minority interest in equity of subsidiaries       4,154           4,035

    Shareholders' equity
      Common stock, $1 par value; authorized
        30,000,000 shares; issued
        10,083,434 shares                            10,083           9,926
      Capital in excess of par value                  7,380           5,466
      Retained earnings                             110,365         114,498
      Accumulated other comprehensive loss          (17,603)        (19,059)
        Total shareholders' equity                  110,225         110,831
          Total liabilities and shareholders'
            equity                                 $374,119        $357,382


                           Quaker Chemical Corporation
                 Condensed Consolidated Statement of Cash Flows
                       For the Three Months ended March 31,
                              (Dollars in thousands)

                                                           (Unaudited)
                                                       2007           2006
    Cash flows from operating activities
      Net income                                      $3,537          2,542
      Adjustments to reconcile net income to net
        cash used in operating activities:
        Depreciation                                   2,719          2,495
        Amortization                                     339            351
        Equity in net income of associated companies,
          net of dividends                                44             92
        Minority interest in earnings of subsidiaries    348            304
        Deferred income tax                              361           (361)
        Deferred compensation and other, net             267           (184)
        Stock-based compensation                         262            171
        (Gain) Loss on disposal of property, plant
          and equipment                                    5              -
        Insurance settlement realized                   (265)           (72)
        Pension and other postretirement benefits       (869)        (1,865)
      Increase (decrease) in cash from changes in
        current assets and current liabilities,
        net of acquisitions:
        Accounts receivable                          (10,633)        (6,425)
        Inventories                                   (3,019)        (3,696)
        Prepaid expenses and other current assets       (873)        (2,330)
        Accounts payable and accrued liabilities       2,749            245
        Change in restructuring liabilities                -         (2,912)
          Net cash used in operating activities       (5,028)       (11,645)

    Cash flows from investing activities
      Capital expenditures                            (2,721)        (1,655)
      Payments related to acquisitions                (1,000)        (1,000)
      Insurance settlement received and interest
        earned                                           143             75
      Change in restricted cash, net                     122             (3)
          Net cash used in investing activities       (3,456)        (2,583)

    Cash flows from financing activities
      Net (decrease) increase in short-term
        borrowings                                    (1,262)        (2,504)
      Proceeds from long-term debt                     5,277         12,340
      Repayments of long-term debt                      (225)          (233)
      Dividends paid                                  (2,137)        (2,090)
      Stock options exercised, other                   1,809            101
      Distributions to minority shareholders            (270)          (350)
          Net cash provided by financing activities    3,192          7,264

      Effect of exchange rate changes on cash             17            448
        Net decrease in cash and cash equivalents     (5,275)        (6,516)
        Cash and cash equivalents at the beginning
          of the period                               16,062         16,121
        Cash and cash equivalents at the end of
          the period                                 $10,787         $9,605
SOURCE  Quaker Chemical Corporation
    -0-                             05/01/2007
    /CONTACT:  Mark A. Featherstone, Vice President and Chief Financial
Officer of Quaker Chemical Corporation, +1-610-832-4160/
    /Web site:  www.quakerchem.com/
    (KWR)

CO:  Quaker Chemical Corporation
ST:  Pennsylvania
IN:  CHM
SU:  ERN CCA

CS
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9718 05/01/2007 17:04 EDT http://www.prnewswire.com