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News Release

Quaker Chemical Announces Record Quarterly Sales and Net Income Growth

CONSHOHOCKEN, Pa., April 29 /PRNewswire-FirstCall/ -- Quaker Chemical Corporation (NYSE: KWR) today announced record quarterly sales of $98.1 million and net income growth of 7% for the first quarter ended March 31, 2004.

First Quarter 2004 Summary

Net income for the first quarter increased 7% to $3.3 million versus $3.1 million for the first quarter of 2003. Consistent with previous guidance, earnings per diluted share were $0.33 in the first quarters of both 2004 and 2003.

Net sales for the first quarter of 2004 were a record $98.1 million, up 34% from $73.3 million for the first quarter of 2003. Foreign exchange rate translation, the Company's 2003 acquisitions and the Company's recently awarded chemical management services (CMS) contracts favorably impacted net sales by $6.5 million, $5.5 million and $10.1 million, respectively. The remaining net sales increase of approximately 4% is primarily due to double- digit growth in the Asia/Pacific and South American regions.

Gross margin as a percentage of sales declined from 38.7% for the first quarter of 2003 to 33.1% for the first quarter of 2004. As previously disclosed, the Company's new CMS contracts have caused different relationships between margins and revenue than in the past. 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, which 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. The negative impact to gross margin for the first quarter related to the new CMS contracts is approximately 5 percentage points. The remaining decline in gross margin as a percentage of sales is due to increased raw material costs, as well as product and regional sales mix.

Selling, general and administrative expenses for the quarter increased $3.9 million compared to the first quarter of 2003. Foreign exchange rate translation and the Company's 2003 acquisitions accounted for approximately 60% of the increase over the prior year. The majority of the remaining increase was primarily due to higher expenses associated with the Company's ERP implementation, Sarbanes-Oxley compliance, as well as inflationary increases.

The increase in other income reflects a priority-return distribution from the Company's real estate joint venture in the first quarter of 2004 and foreign exchange gains in the first quarter of 2004 versus losses in the first quarter of 2003. The increase in net interest expense is primarily due to higher debt balances outstanding during the first quarter of 2004 versus the prior year.

Balance Sheet and Cash Flow Items

The Company's debt-to-total capital ratio remains strong at 37% at the end of the first quarter of 2004 compared to 34% at the end of 2003. The higher accounts receivable and inventory at the end of the first quarter are primarily due to the Company's new CMS contracts and increased sales volume. In the first quarter of 2004, capital expenditures were $2.3 million, primarily related to the Company's U.S. lab renovation and global ERP implementation.


Ronald J. Naples, Chairman and Chief Executive Officer, commented, "The first quarter results were consistent with our expectations. We are seeing signs of an improving global economy with sequential quarterly growth in all four regions and especially high growth in the South American and Asia/Pacific markets. However, partially offsetting the positive impact of this growth is the continuation of high raw material costs as well as higher expenses that are primarily a result of higher pension, insurance, Sarbanes-Oxley compliance and ERP implementation expenses."

Mr. Naples continued, "Our view of the world really hasn't changed from our last guidance. We expect 2004 to be a strong revenue growth year in all business segments and in all regions due to our business initiatives as well as an improvement in the global economy. However, we also continue to expect to be negatively impacted by high crude oil prices as well as the higher SG&A costs related to the items above and the restoration of performance-based incentive compensation. Our 2004 outlook continues to be for a slight improvement in year-over-year earnings. For the second quarter, we expect earnings to be similar to 2003, and we are moving ahead with important business initiatives. The recent increase of our dividend, the 32nd consecutive year of annual dividend increases to shareholders, is a tangible sign of our confidence in the prospects of the Company and our commitment to delivering value for our shareholders."

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.

As previously announced, Quaker Chemical's investor conference call to discuss first quarter results is scheduled for April 30, 2004 at 2:30 p.m. (ET). Access the conference by calling 800-922-0755 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,
                                                  2004             2003

    Net sales                                   $98,131          $73,337

    Cost of goods sold                           65,676           44,971

    Gross margin                                 32,455           28,366
       %                                          33.1%            38.7%

    Selling, general and administrative          26,598           22,685

    Operating income                              5,857            5,681
      %                                            6.0%             7.7%

    Other income, net                               559               88
    Interest expense, net                          (315)            (139)
    Income before taxes                           6,101            5,630

    Taxes on income                               1,922            1,858
                                                  4,179            3,772

    Equity in net income of associated
     companies                                      149               86
    Minority interest in net income of
     subsidiaries                                (1,019)            (751)

    Net income                                   $3,309           $3,107
       %                                           3.4%             4.2%

    Per share data:
        Net income - basic                        $0.35            $0.34
        Net income - diluted                      $0.33            $0.33

    Shares Outstanding:
        Basic                                 9,570,664        9,270,775
        Diluted                               9,977,713        9,508,593

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


                                                March 31,       December 31,
                                                  2004              2003

    Current assets
       Cash and cash equivalents                 $22,894          $21,915
       Accounts receivable, net                   82,063           78,121
       Inventories, net                           33,969           32,211
       Prepaid expenses and other current
        assets                                    14,065           11,277
          Total current assets                   152,991          143,524

    Property, plant, and equipment, net          137,402          136,448
       Less accumulated depreciation              75,187           74,057
          Net property, plant and equipment       62,215           62,391
    Goodwill                                      33,309           33,301
    Other intangible assets, net                   9,299            9,616
    Investments in associated companies            5,937            6,005
    Deferred income taxes                         12,875           12,846
    Other assets                                  19,525           19,664
          Total assets                          $296,151         $287,347


    Current liabilities
       Short-term borrowings and current
        portion of long-term debt                $50,614          $42,992
       Accounts and other payables                41,439           41,259
       Accrued compensation                        6,385            6,816
       Other current liabilities                  14,942           14,738
          Total current liabilities              113,380          105,805
    Long-term debt                                15,622           15,827
    Deferred income taxes                          2,749            2,688
    Other non-current liabilities                 41,278           40,967
          Total liabilities                      173,029          165,287

    Minority interest in equity of
     subsidiaries                                 10,678            9,708

    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              2,307            2,181
       Retained earnings                         118,546          117,308
       Unearned compensation                        (554)            (621)
       Accumulated other comprehensive loss      (16,851)         (15,406)
                                                 113,112          113,126
       Treasury stock, shares held at
        cost; 2004 - 39,711, 2003 - 54,178          (668)            (774)
          Total shareholders' equity             112,444          112,352
             Total liabilities and
              shareholders' equity              $296,151         $287,347

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


                                                      2004            2003
    Cash flows from operating activities
      Net income                                     $3,309          $3,107
      Adjustments to reconcile net income
       to net cash used in operating activities:
        Depreciation                                  1,981           1,646
        Amortization                                    284             215
        Equity in net income of associated
         companies                                     (149)            (86)
        Minority interest in earnings of
         subsidiaries                                 1,019             751
        Deferred compensation and other, net            208             241
        Pension and other postretirement benefits       313             317
      Increase (decrease) in cash from changes in
       current assets and current liabilities:
        Accounts receivable                          (4,316)           (399)
        Inventories                                  (1,867)         (1,389)
        Prepaid expenses and other current assets    (2,768)         (1,342)
        Accounts payable and accrued liabilities        329          (5,927)
        Change in restructuring liabilities            (290)           (699)
          Net cash used in operating activities     $(1,947)        $(3,565)

    Cash flows from investing activities
      Capital expenditures                           (2,347)         (2,113)
      Dividends and distributions from
       associated companies                             233           1,800
      Other, net                                        (57)            (40)
          Net cash used in investing activities      (2,171)           (353)

    Cash flows from financing activities
      Net increase in short-term borrowings           7,617           3,791
      Repayment of long-term debt                      (160)             (7)
      Dividends paid                                 (2,020)         (1,961)
      Treasury stock issued                             232              86
      Distributions to minority shareholders           (245)           (213)
          Net cash provided by financing
           activities                                 5,424           1,696

      Effect of exchange rate changes on cash          (327)            409
        Net increase (decrease) in cash
         and cash equivalents                           979          (1,813)
        Cash and cash equivalents at
         beginning of year                           21,915          13,857
        Cash and cash equivalents at the
         end of year                                $22,894         $12,044
SOURCE  Quaker Chemical Corporation
    -0-                             04/29/2004
    /CONTACT:  Michael F. Barry, Vice President and Chief Financial Officer,
Quaker Chemical Corporation, +1-610-832-8500/
    /Web site: /

CO:  Quaker Chemical Corporation
ST:  Pennsylvania

-- PHTH047 --
0515 04/29/2004 18:12 EDT