Print Page  Print Page | E-mail Alerts  E-mail Alerts | IR Contacts  IR Contact
<< Back

News Release

Quaker Chemical Announces Record Quarterly Sales and a 44% Increase in First Quarter Earnings

CONSHOHOCKEN, Pa., April 29 /PRNewswire-FirstCall/ -- Quaker Chemical Corporation (NYSE: KWR) today announced sales for the first quarter 2008 of $147.7 million, a quarterly record, and net income of $5.1 million, increases of 18.3% and 44.0%, respectively, compared to the first quarter of 2007. Earnings per share increased to $0.50 per diluted share from $0.35 per diluted share for the first quarter of 2007.

"We're very pleased with our start in 2008, particularly given today's world," commented Ronald J. Naples, Chairman and Chief Executive Officer. "We achieved improvement in operating income as a percentage of sales to over 6%, despite the headwinds of rapidly escalating raw material costs. We did see a decrease in our sequential gross margin percentage from the fourth quarter of 2007, but were able to maintain our margins in dollar terms, and continue to work with our customers to recognize the value we deliver and our cost realities. With our future in mind, we remain committed to invest in key growth initiatives, while at the same time being mindful of today's challenges and limited visibility of the current economic environment and commodity price trends. As suggested by our recent dividend increase, we have confidence about our long-term future and the prospects of earnings improvement for 2008."

First Quarter 2008 Summary

Net sales for the first quarter were $147.7 million, up 18.3% from $124.9 million for the first quarter 2007. The increase in net sales was attributable to volume growth, higher sales prices and foreign exchange rate translation. Volume growth was realized in virtually all the Company's regions, including higher revenue related to the Company's Chemical Management Services ("CMS") channel. Foreign exchange rate translation increased revenues by approximately 8% for the first quarter of 2008, compared to the same period in 2007. Selling price increases were realized, in part, as a result of an ongoing effort to offset higher raw material costs. CMS revenues were higher due to the full year impact of additional CMS accounts gained in 2007, as well as the renewal and restructuring of several of the Company's CMS contracts.

Gross margin dollars were up more than $5.0 million, or 13.2% for the first quarter of 2008, compared to the same period in 2007. However, the gross margin percentage was 29.5% for the first quarter of 2008, compared to 30.9% for the first quarter of 2007. The Company's larger mix of CMS contracts reported on a gross versus pass-through basis decreased gross margin as a percentage of sales by approximately 0.5 percentage points. The remaining decline in gross margin as a percentage of sales is due to increased raw material costs in excess of price increases, as well as product and regional sales mix. The Company has announced and implemented a number of further price increases to aid in offsetting unprecedented levels in the Company's key raw material costs.

Selling, general and administrative expenses for the quarter increased $2.6 million, compared to the first quarter of 2007. Foreign exchange rate translation accounted for the majority of the increase over the prior year period. Inflationary increases were largely offset by lower legal and environmental costs and lower incentive compensation expense.

The decrease in other income was primarily due to foreign exchange rate losses in 2008 compared to gains in 2007. Net interest expense was lower due to lower average borrowings as well as lower interest rates.

Balance Sheet and Cash Flow Items

The Company's net debt increased from December 31, 2007, primarily to fund working capital needs driven by higher quarterly sales and scheduled first quarter payments, including the payment of incentive compensation. The Company's net debt-to-total-capital ratio was 34% at March 31, 2008, compared to 43% at March 31, 2007 and 32% at December 31, 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 April 30, 2008 at 2:30 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 Income
         (Dollars in thousands, except per share data and share amounts)

                                                  Three Months Ended March 31,
                                                        2008           2007

    Net sales                                         $147,718        124,891

    Cost of goods sold                                 104,083         86,345

    Gross margin                                        43,635         38,546
      %                                                  29.5%          30.9%

    Selling, general and administrative expenses        34,504         31,919

    Operating income                                     9,131          6,627
      %                                                   6.2%           5.3%

    Other income, net                                      161            327
    Interest expense, net                               (1,182)        (1,350)
    Income before taxes                                  8,110          5,604

    Taxes on income                                      2,765          1,844
                                                         5,345          3,760

    Equity in net income of associated companies           112            125
    Minority interest in net income of subsidiaries       (364)          (348)
    Net income                                          $5,093         $3,537
      %                                                   3.4%           2.8%

    Per share data:
        Net income - basic                               $0.50          $0.36
        Net income - diluted                             $0.50          $0.35

    Shares Outstanding:
        Basic                                       10,085,859      9,907,683
        Diluted                                     10,179,539     10,024,905

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

                                                       March 31,  December 31,
                                                         2008        2007

    Current assets
      Cash and cash equivalents                         $20,527      $20,195
      Accounts receivable, net                          120,273      118,135
      Inventories, net                                   64,559       60,738
      Prepaid expenses and other
       current assets                                    16,057       14,433
        Total current assets                            221,416      213,501

    Property, plant and equipment, net                   63,707       62,287
    Goodwill                                             45,799       43,789
    Other intangible assets, net                          7,668        7,873
    Investments in associated companies                   7,959        7,323
    Deferred income taxes                                32,018       30,257
    Other assets                                         40,476       34,019
        Total assets                                   $419,043     $399,049


    Current liabilities
      Short-term borrowings and current portion of
       long-term debt                                    $3,875       $4,288
      Accounts and other payables                        68,519       67,380
      Accrued compensation                                9,730       17,287
      Other current liabilities                          17,701       17,396
        Total current liabilities                        99,825      106,351
    Long-term debt                                       89,235       78,487
    Deferred income taxes                                 8,209        7,583
    Other non-current liabilities                        77,557       71,722
        Total liabilities                               274,826      264,143

    Minority interest in equity of subsidiaries           4,750        4,513

    Shareholders' equity
      Common stock, $1 par value;
       authorized 30,000,000 shares;
       issued 10,268,988 shares                          10,269       10,147
      Capital in excess of par value                     11,844       10,104
      Retained earnings                                 118,506      115,767
      Accumulated other comprehensive loss               (1,152)      (5,625)
        Total shareholders' equity                      139,467      130,393
          Total liabilities and shareholders' equity    419,043     $399,049

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

                                                             2008        2007
    Cash flows from operating activities
      Net income                                           $5,093      $3,537
      Adjustments to reconcile net income
       to net cash used in operating activities:
        Depreciation                                        2,680       2,719
        Amortization                                          300         339
        Equity in net income of associated companies,
         net of dividends                                    (112)         44
        Minority interest in earnings of subsidiaries         364         348
        Deferred income tax                                 1,246         361
        Deferred compensation and other, net                   22         267
        Stock-based compensation                              376         262
        (Gain) Loss on disposal of property, plant
         and equipment                                        (35)          5
        Insurance settlement realized                        (136)       (265)
        Pension and other postretirement benefits          (2,458)       (869)
      Increase (decrease) in cash from changes in
       current assets and current liabilities, net of
        Accounts receivable                                 1,159     (10,633)
        Inventories                                        (2,374)     (3,019)
        Prepaid expenses and other current assets          (3,037)       (873)
        Accounts payable and accrued liabilities           (9,280)      2,749
          Net cash used in operating activities            (6,192)     (5,028)

    Cash flows from investing activities
      Capital expenditures                                 (1,949)     (2,721)
      Payments related to acquisitions                     (1,000)     (1,000)
      Proceeds from disposition of assets                      65           -
      Insurance settlement received and interest
       earned                                               5,112         143
      Change in restricted cash, net                       (4,976)        122
          Net cash used in investing activities            (2,748)     (3,456)

    Cash flows from financing activities
      Net decrease in short-term borrowings                  (378)     (1,262)
      Proceeds from long-term debt                          9,844       5,277
      Repayments of long-term debt                           (251)       (225)
      Dividends paid                                       (2,181)     (2,137)
      Stock options exercised, other                        1,486       1,809
      Distributions to minority shareholders                    -        (270)
          Net cash provided by financing activities         8,520       3,192

      Effect of exchange rate changes on cash                 752          17
        Net increase (decrease) in cash and cash
         equivalents                                          332      (5,275)
        Cash and cash equivalents at the beginning
         of the period                                     20,195      16,062
        Cash and cash equivalents at the end of the
         period                                           $20,527     $10,787

SOURCE  Quaker Chemical Corporation
    -0-                             04/29/2008
    /CONTACT:  Mark A. Featherstone, Vice President and Chief Financial
Officer of Quaker Chemical Corporation, +1-610-832-4160/
    /Web site: /

CO:  Quaker Chemical Corporation
ST:  Pennsylvania

-- NETU122 --
4106 04/29/2008 17:00 EDT