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News Release


Quaker Chemical Announces Record Quarterly Sales and Higher Earnings

CONSHOHOCKEN, Pa., Oct. 28 /PRNewswire-FirstCall/ -- Quaker Chemical Corporation (NYSE: KWR) today announced net sales for the third quarter 2008 of $159.5 million, a quarterly record, and net income of $4.4 million, increases of 13% and 40%, respectively, compared to the third quarter of 2007. Earnings per diluted share were $0.41 for the third quarter of 2008, an increase of $0.10 per diluted share, compared to the third quarter of 2007. Included in third quarter 2008 results is a charge of approximately $1.6 million of incremental expense, or approximately $0.10 per diluted share, related to the retirement of the Company's former chief executive officer. Included in third quarter 2007 results is a charge of $3.3 million related to an environmental litigation settlement, or approximately $0.21 per diluted share.

Michael F. Barry, Chief Executive Officer and President, commented, "We had a strong third quarter in sales and profits, despite lower volume. Raw material costs were higher in the quarter as many of our raw material suppliers put in place large price increases. While crude prices declined throughout the third quarter, our raw material costs did not show a significant improvement due to lag effects and other factors. Despite the increase in our raw material costs, we did make progress with margin recovery during the quarter and we expect this improvement to continue into the fourth quarter."

Mr. Barry continued, "We are certainly mindful of the challenges of the current economic environment as many of our steel and automotive customers in the U.S. and Europe have announced significant production reductions for the fourth quarter. Given what we know today, our fourth quarter results are expected to be the lowest quarterly earnings of the year. However, we will continue to manage Quaker for the long term, while managing the short-term realities that we are facing. Nothing that has happened over the past few weeks has changed our commitment to our key growth initiatives, and we continue to be confident in our future."

Third Quarter Summary

Net sales for the third quarter were $159.5 million, up 13% compared to $140.7 million for the third quarter of 2007. The increase in net sales was primarily due to higher sales prices and foreign exchange rate translation. Volume growth in Asia/Pacific and South America was more than offset by volume declines in the Company's other regions. Foreign exchange rate translation increased revenues by approximately 5%. Selling price increases were realized, in part, as a result of an ongoing effort to offset higher raw material costs.

Gross margin dollars were up by approximately $3.4 million or 8% over the third quarter of 2007. The gross margin percentage of 29.2% was lower than the third quarter of 2007 at 30.7% but represented an improvement versus the 28.3% in the second quarter of 2008. The Company's larger mix of CMS contracts reported on a gross versus pass-through basis and lower Quaker product sales due to lower customer production levels resulted in a gross margin percentage decline of approximately 0.6 percentage points. The remaining decline in the gross margin percentage is due to increased raw material costs partially offset by price increases, as well as product and regional sales mix.

Selling, general and administrative expenses ("SG&A") increased $1.7 million, compared to the third quarter of 2007, due to foreign exchange rate translation. Investments in higher growth areas, as well as inflationary increases, were offset by lower legal, environmental and other costs. SG&A as a percentage of sales was 24% versus 26% in the third quarter of 2007.

Effective October 3, 2008, Ronald J. Naples, Chairman, retired as Quaker's Chief Executive Officer. As further discussed in the Company's 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. Of the $3.5 million, or approximately $0.22 per diluted share, in incremental costs incurred in 2008, $1.6 million, or approximately $0.10 per diluted share, was recognized in the third quarter of 2008.

In the third quarter of 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 third quarter and year-to-date 2007 results also include 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.

Year-to-Date Summary

Net sales for the first nine months of 2008 were $465.4 million, up 15% from $403.2 million for the first nine months of 2007. The increase in net sales was attributable to higher selling prices, higher revenue related to the Company's CMS channel and foreign exchange rate translation. Volume growth in Asia/Pacific and South America was more than offset by volume declines in the Company's other regions. Foreign exchange rate translation increased revenues by approximately 7%. 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 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 $10.6 million, almost 9% for the first nine months of 2008, compared to the first nine months of 2007. However, the gross margin percentage was 29.0% for the first nine months of 2008, compared to 30.8% in the first nine months of 2007. The Company's larger mix of CMS contracts reported on a gross versus pass-through basis and lower Quaker product sales due to lower customer production levels resulted in a gross margin percentage decline of approximately 0.5 percentage points. The remaining decline in the gross margin percentage is due to increased raw material costs partially offset by price increases, as well as product and regional sales mix.

SG&A for the first nine months of 2008 increased $6.0 million, compared to the first nine months of 2007, due to foreign exchange rate translation. Investments in higher growth areas, as well as inflationary increases, were offset by lower legal and environmental costs and lower incentive compensation expense.

Other income for 2008 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 decrease in interest expense is due to lower average debt balances and interest rates, as well as higher interest income.

Balance Sheet and Cash Flow Items

The Company's net debt-to-total-capital ratio has decreased to 27% from 32% at December 31, 2007, primarily on strong 2008 operating cash flow.

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 third quarter results is scheduled for October 29, 2008 at 2:30 p.m. (ET). Access the conference by calling 877-269-7756 or visit Quaker's Web site at 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      Nine Months Ended
                                    September 30,          September 30,
                                   2008        2007       2008        2007

    Net sales                   $159,506    $140,715    $465,412    $403,204

    Cost of goods sold           112,981      97,547     330,466     278,878

    Gross margin                  46,525      43,168     134,946     124,326
     %                             29.2%       30.7%       29.0%       30.8%

    Selling, general and
     administrative expenses      38,278      36,602     109,935     103,930
    CEO transition costs           1,625         -         3,505         -
    Environmental charges            -         3,300         -         3,300

    Operating income               6,622       3,266      21,506      17,096
    %                               4.2%        2.3%        4.6%        4.2%

    Other income, net                (96)        382       1,752       1,618
    Interest expense, net         (1,044)     (1,370)     (3,205)     (4,221)
    Income before taxes            5,482       2,278      20,053      14,493

    Taxes on income                  967      (1,066)      5,848       3,076
                                   4,515       3,344      14,205      11,417

    Equity in net income of
     associated companies            191         166         490         557
    Minority interest in net
     income of subsidiaries         (266)       (350)       (841)     (1,126)

    Net income                    $4,440      $3,160     $13,854     $10,848
     %                              2.8%        2.2%        3.0%        2.7%

    Per share data:
      Net income - basic           $0.42       $0.32       $1.34       $1.09
      Net income - diluted         $0.41       $0.31       $1.31       $1.07

    Shares Outstanding:
      Basic                   10,573,497  10,016,801  10,315,769   9,969,739
      Diluted                 10,796,716  10,134,909  10,544,070  10,095,945





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

                                             (Unaudited)

                                     September 30,  December 31,
                                           2008          2007
    ASSETS

    Current assets
      Cash and cash equivalents          $24,066        $20,195
      Construction fund
       (restricted cash)                   9,325            -
      Accounts receivable, net           119,538        118,135
      Inventories, net                    67,577         60,738
      Prepaid expenses and other
       current assets                     14,562         14,433
      Deferred compensation                2,795            -
        Total current assets             237,863        213,501

    Property, plant and equipment, net    62,349         62,287
    Goodwill                              43,300         43,789
    Other intangible assets, net           6,873          7,873
    Investments in associated companies    8,027          7,323
    Deferred income taxes                 31,542         30,257
    Other assets                          35,275         34,019
        Total assets                    $425,229       $399,049

    LIABILITIES AND SHAREHOLDERS' EQUITY

    Current liabilities
      Short-term borrowings and
       current portion of long-
       term debt                          $2,635         $4,288
      Accounts and other payables         71,196         67,380
      Accrued compensation                14,034         17,287
      Deferred compensation                3,006            -
      Other current liabilities           17,501         17,396
        Total current liabilities        108,372        106,351
    Long-term debt                        85,364         78,487
    Deferred income taxes                  8,217          7,583
    Other non-current liabilities         68,294         71,722
        Total liabilities                270,247        264,143

    Minority interest in equity of
     subsidiaries                          4,339          4,513

    Shareholders' equity
      Common stock, $1 par value;
       authorized 30,000,000 shares;
       issued 10,832,828 shares           10,833         10,147
      Capital in excess of par value      27,034         10,104
      Retained earnings                  122,320        115,767
      Accumulated other
       comprehensive loss                 (9,544)        (5,625)
        Total shareholders' equity       150,643        130,393
          Total liabilities and
           shareholders' equity         $425,229       $399,049



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

                                                            (Unaudited)
                                                        2008           2007
    Cash flows from operating activities
      Net income                                      $13,854        $10,848
      Adjustments to reconcile net income to
       net cash provided by operating activities:
        Depreciation                                    8,279          8,579
        Amortization                                      906            900
        Equity in net income of associated
         companies, net of dividends                     (490)           (83)
        Minority interest in earnings of subsidiaries     841          1,126
        Deferred compensation and other, net              840           (620)
        Stock-based compensation                        3,642            863
        Environmental charges                             -            3,300
        (Gain) loss on disposal of
         property, plant and equipment                     (3)            33
        Insurance settlement realized                    (981)        (1,266)
        Pension and other postretirement benefits      (3,541)        (2,532)
      Increase (decrease) in cash from changes in
       current assets and current liabilities,
       net of acquisitions:
        Accounts receivable                            (3,723)        (5,795)
        Inventories                                    (8,550)        (3,227)
        Prepaid expenses and other current assets        (863)        (1,750)
        Accounts payable and accrued liabilities          788          6,009
          Net cash provided by operating activities    10,999         16,385

    Cash flows from investing activities
      Capital expenditures                             (9,198)        (5,431)
      Payments related to acquisitions                 (1,000)        (1,543)
      Proceeds from disposition of assets                 139            176
      Insurance settlement received and
       interest earned                                  5,234          5,534
      Change in restricted cash, net                  (13,578)        (4,268)
          Net cash used in investing activities       (18,403)        (5,532)

    Cash flows from financing activities
      Short-term debt borrowings                          -            1,305
      Net decrease in short-term borrowings            (1,389)        (3,267)
      Proceeds from long-term debt                     10,000          3,132
      Repayments of long-term debt                     (3,165)          (674)
      Dividends paid                                   (6,994)        (6,484)
      Stock options exercised, other                   13,974          2,935
      Distributions to minority shareholders             (252)          (864)
          Net cash provided by (used in)
           financing activities                        12,174         (3,917)

      Effect of exchange rate changes on cash            (899)         1,226
        Net increase in cash and cash equivalents       3,871          8,162
        Cash and cash equivalents at the
         beginning of the period                       20,195         16,062
        Cash and cash equivalents at the
         end of the period                            $24,066        $24,224

SOURCE  Quaker Chemical Corporation
    -0-                             10/28/2008
    /CONTACT: Mark A. Featherstone, Vice President and Chief Financial
Officer, +1-610-832-4160/
    /Web site:  www.quakerchem.com/
    (KWR)

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

WB-JK
-- NETU172 --
7205 10/28/2008 18:29 EDT http://www.prnewswire.com