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

News Release


Quaker Chemical Announces Record Quarterly Sales and Increased Earnings

CONSHOHOCKEN, Pa., July 31 /PRNewswire-FirstCall/ -- Quaker Chemical Corporation (NYSE: KWR) today announced record quarterly sales of $83.5 million and net income growth of 7% for the second quarter ended June 30, 2003 versus the comparable period in 2002.

Second Quarter 2003 Summary

Net income for the second quarter was $3.5 million versus $3.2 million for the second quarter of 2002. The earnings per diluted share of $0.36 were a 3% improvement over the second quarter of 2002 of $0.35 per diluted share.

Net sales for the second quarter were a record $83.5 million, up 20% from $69.5 million for the second quarter 2002. Foreign exchange rate translation and the timing of the Company's 2002 acquisitions favorably impacted net sales by $4.2 million and $2.5 million, respectively. Second quarter sales also include $6.7 million from the Company's recently awarded chemical management services (CMS) contracts, which were effective May 1, 2003.

Gross margin as a percentage of sales declined from 41.7% for the second quarter of 2002 to 34.7% for the second quarter of 2003. As previously disclosed, the Company's new CMS contracts, which were effective May 1, cause a different relationship between margins and revenue than has applied in the past for the Company's traditional product business. At the majority of current CMS sites, the Company effectively acts as an agent and records revenue and costs from these sales on a net sales or "pass-through" basis. The new CMS contracts have a different structure that results in the Company recognizing in reported revenue the gross revenue received from the CMS site customer, and in cost of goods sold the third party product purchases, which substantially offset each other. The negative impact on the gross margin for the second quarter related to the new CMS contracts is approximately 3 percentage points. The remaining decline in gross margin as a percentage of sales was due to increased raw material costs, as well as product and regional sales mix. The Company continues to expect raw material prices to be higher in 2003 primarily due to continued high oil prices.

Selling, general and administrative expenses for the quarter were essentially flat with the second quarter of 2002. Increases due to foreign exchange rates and the timing of the Company's 2002 acquisitions were offset by reduced incentive compensation expense and cost containment efforts of the Company.

In the second quarter, the Company received a $2.4 million priority cash distribution from its real estate joint venture. This favorably impacted other income by $0.3 million.

Ronald J. Naples, Chairman and Chief Executive Officer, stated, "While our second quarter earnings were up consistent with our previous guidance, through the quarter we did see an increasingly difficult demand environment in comparison to the course of the business last year. Our sales to the steel industry were below our expectations in both the U.S. and Europe due to lower steel production. In addition, we saw higher raw material costs, which we expect to remain higher than last year -- and higher than we expected -- primarily due to continued strength in crude oil prices."

Mr. Naples continued, "Even as we keep a sharp eye on current performance, we continue our emphasis on building for the long-term with initiatives that expand our market reach and strengthen our competitive positioning. In the second quarter, we won a number of new CMS contracts and began operations at seven new sites in May. Also, we completed two tight-fit acquisitions in May and July, which broaden our product lines for both our steel and metalworking businesses and our geographic market presence. We'll see only minimal profit contribution from these initiatives in 2003, but we expect these to be meaningful long-term contributors."

Year-to-Date Summary

Net income for the first half of the year was $6.6 million versus $5.6 million in the first half of 2002. Earnings per diluted share increased 15% to $0.69 versus $0.60 in the first half of 2002.

Net sales for the first half of the year increased to $156.8 million, up 21% from $129.4 million for the first half of 2002. Net sales were favorably impacted by foreign exchange rate translation and the timing of the Company's 2002 acquisitions in the respective amounts of $6.3 million and $8.1 million. As noted above, net sales for the first half of the year also include $6.7 million from the Company's new CMS contracts.

Gross margin as a percentage of sales declined from 41.2% for the first half of 2002 to 36.6% for the first half of 2003. The Company's new CMS contracts negatively impacted gross margin for the first half of 2003 by approximately 2 percentage points with the remaining decline due to increased raw material costs, as well as product and regional sales mix.

Selling, general and administrative expenses for the first half of 2003 increased $2.6 million from the first half of 2002. Increases due to foreign exchange rates and the timing of the Company's 2002 acquisitions were partially offset by reduced incentive compensation expense and cost containment efforts of the Company.

Balance Sheet and Cash Flow Items

The Company's debt to total capital ratio remains strong at 27% at the end of June, 2003 compared to 25% at the end of 2002 and 34% at the end of June, 2002. In addition, the Company has increased its credit lines from $25 million at the end of March to its current position of $30 million committed and $20 million uncommitted. As of the end of June, the Company had approximately $17 million outstanding on its credit lines.

The Company also received $4.2 million of priority cash distributions from its real estate joint venture in the first half of 2003. In addition, the Company had higher accounts receivable at the end of the second quarter primarily due to the $6.7 million of sales attributable to the start-up of the new CMS contracts as well as increased sales volume quarter-over-quarter.

Outlook

Mr. Naples stated, "As we look ahead, we expect that the demand uncertainties noted in the second quarter will continue, particularly in steel. We've seen weakness as steel producers in some markets lower their production to maintain pricing. We do expect some improvement in raw material costs as compared to the first half, but not to the extent we had expected earlier in the year, and, we expect to get some benefit from a strong euro. The net of all this is to make second half prior-year comparisons tougher against the relatively strong second half of 2002. Nevertheless, as we see the world today, we continue to expect to have 2003 full-year earnings slightly ahead of last year, with the third and fourth quarter earnings level being approximately equal. Whatever the precise course of the second half, though, we're pleased with the long-term building steps we've already taken in 2003."

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. Such risks and uncertainties include, but are not limited to, further downturns in our customers' businesses, significant increases in raw material costs, worldwide economic and political conditions, foreign currency fluctuations, and future terrorist attacks such as those that occurred on September 11, 2001.

As previously announced, Quaker Chemical's investor conference to discuss second quarter results is scheduled for August 1, 2003 at 10:30 a.m. (ET). Access the conference by calling 800-922-0755 or visit Quaker's Web site at www.quakerchem.com for a live webcast.

                        Quaker Chemical Corporation
                  Condensed Consolidated Statement of Income
                        For the period ended June 30,

                                               Unaudited
                             (Dollars in thousands, except per share data)

                                Second Quarter              Six Months
                                2003        2002         2003        2002

    Net sales                 $83,453     $69,457      $156,790    $129,384

    Cost of goods sold        54,506       40,495        99,477      76,065

    Gross margin              28,947       28,962        57,313      53,319
        %                      34.7%        41.7%         36.6%       41.2%

    Selling, general and
     administrative           23,223       23,279        45,908      43,303

    Operating income           5,724        5,683        11,405      10,016
        %                       6.9%         8.2%          7.3%        7.7%

    Other income, net            447          (28)          535         252
    Interest expense, net       (235)        (112)         (374)       (278)
    Income before taxes        5,936        5,543        11,566       9,990

    Taxes on income            1,843        1,774         3,701       3,197
                               4,093        3,769         7,865       6,793

    Equity in net income of
     associated companies        169          201           255         184
    Minority interest in net
     income of subsidiaries     (787)        (734)       (1,538)     (1,383)

    Net income                $3,475       $3,236        $6,582      $5,594
        %                       4.2%         4.7%          4.2%        4.3%

    Per share data:
      Net income - basic      $ 0.37       $ 0.35        $ 0.71      $ 0.61
      Net income - diluted    $ 0.36       $ 0.35        $ 0.69      $ 0.60

    Shares Outstanding:
      Basic                9,323,895    9,249,925     9,297,482   9,202,378
      Diluted              9,671,578    9,308,678     9,593,466   9,262,025



                         Quaker Chemical Corporation
                     Condensed Consolidated Balance Sheet

                                                          Unaudited
                                                   (Dollars in thousands)

                                                   June 30,    December 31,
                                                     2003          2002
    ASSETS

    Current Assets
      Cash and cash equivalents                     $15,098       $13,857
      Accounts receivable, net                       67,964        53,353
      Inventories
        Raw materials and supplies                   13,352        11,342
        Work-in-process and finished goods           14,739        12,294
      Prepaid expenses and other current assets      12,298        12,827
        Total current assets                        123,451       103,673

    Property, plant and equipment, at cost          123,125       113,207
      Less accumulated depreciation                  70,540        64,695
        Net property, plant and equipment            52,585        48,512
    Goodwill                                         24,155        21,927
    Other intangible assets                           5,771         5,852
    Investments in associated companies               5,420         9,060
    Deferred income taxes                            10,566        10,609
    Other assets                                     15,093        14,225
        Total assets                               $237,041      $213,858

    LIABILITIES AND SHAREHOLDERS' EQUITY

    Current Liabilities
      Short-term borrowings and current portion
       of long-term debt                            $19,987       $12,205
      Accounts and other payables                    33,828        29,423
      Accrued compensation                            6,192        10,254
      Other current liabilities                      13,471        14,262
        Total current liabilities                    73,478        66,144
    Long-term debt                                   16,620        16,590
    Deferred income taxes                             1,700         1,518
    Other noncurrent liabilities                     36,006        33,889
        Total liabilities                           127,804       118,141

    Minority interest in equity of subsidiaries       9,585         7,662

    Shareholders' equity
      Common stock $1 par value; authorized
       30,000,000 shares; issued (including
       treasury shares) 9,664,009 shares              9,664         9,664
      Capital in excess of par value                  1,174           626
      Retained earnings                             113,083       110,448
      Unearned compensation                            (931)       (1,245)
      Accumulated other comprehensive (loss)        (20,410)      (27,078)
                                                    102,580        92,415

      Treasury stock, shares held at cost;
       2003 - 213,566, 2002 - 324,109                (2,928)       (4,360)
        Total shareholders' equity                   99,652        88,055
                                                   $237,041      $213,858 
                        Quaker Chemical Corporation
                Condensed Consolidated Statement of Cash Flows
                      For the Six months ended June 30,

                                                           Unaudited
                                                    (Dollars in thousands)

                                                      2003          2002*

    Cash flows from operating activities
      Net income                                     $6,582        $5,594
      Adjustments to reconcile net income to cash
       provided by operating activities:
        Depreciation                                  3,394         2,327
        Amortization                                    438           325
        Equity in net income of associated companies   (255)         (184)
        Minority interest in earnings of
         subsidiaries                                 1,538         1,383
        Deferred compensation and other postretirement
         benefits                                      (382)         (329)
        Pension and other, net                        2,798         1,096
      Increase (decrease) in cash from changes in
       current assets and current liabilities:
        Accounts receivable, net                    (11,380)       (4,532)
        Inventories                                  (2,789)         (798)
        Prepaid expenses and other current assets     1,204        (2,293)
        Accounts payable and accrued liabilities     (2,467)        2,750
        Change in restructuring liabilities            (866)       (1,167)
           Net cash (used in) provided by operating
            activities                               (2,185)        4,172

    Cash flows from investing activities
      Investments in property, plant and equipment   (4,859)       (5,060)
      Dividends and distributions from associated
       companies                                      3,890           307
      Payments related to acquisitions               (1,105)      (21,576)
      Other, net                                         53            (9)
        Net cash (used in) investing activities      (2,021)      (26,338)

    Cash flows from financing activities
      Net increase in short-term borrowings           7,747        22,009
      Dividends paid                                 (3,924)       (3,802)
      Treasury stock issued                           1,697         2,404
      Distributions to minority shareholders           (609)       (1,335)
      Other, net                                          3            85
        Net cash provided by financing activities     4,914        19,361

    Effect of exchange rate changes on cash             533           572

      Net increase (decrease) in cash and cash
       equivalents                                    1,241        (2,233)
      Cash and cash equivalents at beginning
       of period                                     13,857        20,549
      Cash and cash equivalents at end of period    $15,098       $18,316

    * Certain reclassification of prior year data have been made to improve
      comparability.
SOURCE  Quaker Chemical Corporation
    -0-                             07/31/2003
    /CONTACT:  Michael F. Barry, Vice President and Chief Financial Officer,
Quaker Chemical, +1-610-832-8500/
    /Web site:  http://www.quakerchem.com /
    (KWR)

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


PD 
-- PHTH037 --
6991 07/31/2003 17:14 EDT http://www.prnewswire.com