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News Release


Quaker Chemical Announces Record Revenues for the First Quarter 2006 and Significant Improvement in Core Earnings

CONSHOHOCKEN, Pa., May 1 /PRNewswire-FirstCall/ -- Quaker Chemical Corporation (NYSE: KWR) today announced record first quarter 2006 sales of $109.8 million and net income of $2.5 million, compared to first quarter 2005 sales of $104.2 million and net income of $3.1 million. Core earnings improved significantly, as the prior year quarter included a $4.2 million pre- tax gain from the sale of property by the Company's real estate joint venture, as well as $1.2 million of charges for restructuring and related activities, contributing $3.0 million pre-tax to the result in the first quarter, 2005. The first quarter of 2006 included a pension gain of $0.9 million. Diluted earnings per share for the first quarter were $0.26, as compared to $0.32 for the first quarter of last year with those aforementioned non-recurring items included.

First Quarter 2006 Summary

Net sales for the first quarter of 2006 were $109.8 million, up 5.4% from $104.2 million for the first quarter of 2005. The increase in net sales was attributable to higher sales prices and volume growth of 6.6% offset by foreign exchange rate translation, which negatively impacted net sales by approximately 1.2%. Volume growth was mainly attributable to market share growth and increased demand in China. Selling price increases were implemented across all regions and market segments to offset significantly higher raw material costs.

Gross margin as a percentage of sales was 29.6% for the first quarter of 2006, as compared to 29.7% for the first quarter of 2005, and 30.2% for the fourth quarter of 2005. Higher selling prices and a stronger performance from the Company's CMS business helped maintain margins notwithstanding continued increases in raw material prices, particularly crude oil derivatives.

Selling, general and administrative expenses for the quarter decreased $0.9 million. Cost savings from restructuring efforts completed in 2005 were partially offset by increased spending in higher growth areas, higher variable compensation, and inflationary and other increases. In addition, due to a legislative change, effective January 1, 2006, the Company recorded a pension gain of $0.9 million relating to one of its European pension plans.

The decrease in other income is largely due to $4.2 million of pre-tax gain in the first quarter of 2005 received from the Company's real estate joint venture. The remainder of the decrease was the result of foreign exchange losses in the first quarter of 2006 compared to gains in the first quarter of 2005.

The increase in net interest expense is attributable to higher average borrowings and higher interest rates. The decrease in minority interest expense from the first quarter of 2005 is primarily due to the acquisition of the remaining 40% interest in the Company's Brazilian affiliate in March of 2005.

Balance Sheet and Cash Flow Items

The Company's net debt has increased from December 2005, primarily to fund working capital needs, as well as the restructuring actions taken in the fourth quarter of 2005. The Company's net debt-to-total capital ratio was 40% at March 31, 2006, compared to 35% at December 31, 2005.

Ronald J. Naples, Chairman and Chief Executive Officer, commented, "We are pleased with continued solid revenue growth flowing from our pricing actions and business building initiatives. Our core earnings, before considering such prior year items as real estate gains and restructuring costs, show a marked improvement over our last several quarters. Our restructuring efforts of 2005 are positively impacting bottom line results in accordance with expectations. While we have achieved some gross margin improvement in dollar terms, our significant efforts to improve gross margin percentage have been mitigated by yet another spike in our raw material costs. With crude prices recently moving past $70 a barrel, we will necessarily continue the pricing dialog with our customers. We are shooting for gross margin percentage recovery upon a sustained period of stable or, better yet, declining raw material costs."

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. 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 to discuss first quarter results is scheduled for May 2, 2006 at 2:30 p.m. (EDT). Access the conference by calling 877-269-7756 (toll-free) 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,
                                                    2006              2005

    Net sales                                     $109,816          $104,161

    Cost of goods sold                              77,331            73,234

    Gross margin                                    32,485            30,927
       %                                             29.6%             29.7%

    Selling, general and administrative             27,362            28,217

    Restructuring and related activities, net          -               1,232

    Operating income                                 5,123             1,478
       %                                              4.7%              1.4%

    Other income, net                                  128             4,868
    Interest expense, net                             (965)             (434)
    Income before taxes                              4,286             5,912

    Taxes on income                                  1,553             1,921
                                                     2,733             3,991

    Equity in net income of associated companies       113                53
    Minority interest in net income of subsidiaries   (304)             (918)

    Net income                                      $2,542            $3,126
       %                                              2.3%              3.0%

    Per share data:
        Net income - basic                           $0.26             $0.32
        Net income - diluted                         $0.26             $0.32

    Shares Outstanding:
        Basic                                    9,723,432         9,643,681
        Diluted                                  9,816,149         9,883,727



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

                                                          (Unaudited)

                                                   March 31,      December 31,
                                                     2006             2005*
    ASSETS

    Current assets
       Cash and cash equivalents                    $9,605           $16,121
       Accounts receivable, net                    101,524            93,943
       Inventories, net                             50,185            45,818
       Prepaid expenses and other current assets    12,541            10,111
          Total current assets                     173,855           165,993

    Property, plant and equipment                  144,367           140,903
       Less accumulated depreciation                87,414            84,006
          Net property, plant and equipment         56,953            56,897
    Goodwill                                        37,237            35,418
    Other intangible assets, net                     8,494             8,703
    Investments in associated companies              6,472             6,624
    Deferred income taxes                           24,856            24,385
    Other assets                                    34,588            33,975
          Total assets                            $342,455          $331,995

    LIABILITIES AND SHAREHOLDERS' EQUITY

    Current liabilities
       Short-term borrowings and current
        portion of long-term debt                   $2,643            $5,094
       Accounts and other payables                  53,546            52,923
       Accrued compensation                          9,068             9,818
       Other current liabilities                    17,332            19,053
          Total current liabilities                 82,589            86,888
    Long-term debt                                  79,989            67,410
    Deferred income taxes                            4,792             4,608
    Other non-current liabilities                   58,740            60,573
          Total liabilities                        226,110           219,479

    Minority interest in equity of subsidiaries      6,636             6,609

    Shareholders' equity
       Common stock, $1 par value;
        authorized 30,000,000 shares;
        issued 2006 - 9,804,154, 2005 - 9,726,385    9,804             9,726
       Capital in excess of par value                3,768             3,574
       Retained earnings                           111,752           111,317
       Accumulated other comprehensive loss        (15,615)          (18,710)
          Total shareholders' equity               109,709           105,907
             Total liabilities and
              shareholders' equity                $342,455          $331,995


    *  Condensed from audited financial statements.


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

                                                          (Unaudited)

                                                     2006              2005
    Cash flows from operating activities
      Net income                                    $2,542            $3,126
      Adjustments to reconcile net income
       to net cash used in operating activities:
        Depreciation                                 2,495             2,268
        Amortization                                   351               306
        Equity in net income of associated companies  (113)              (53)
        Minority interest in earnings of subsidiaries  304               918
        Deferred income taxes                         (361)              -
        Deferred compensation and other, net          (184)              388
        Restructuring and related activities           -               1,232
        Gain on sale of partnership assets             -              (2,989)
        Insurance settlement realized                  (72)              -
        Pension and other postretirement benefits   (1,865)             (207)
      Increase (decrease) in cash from changes in
       current assets and current liabilities, net
       of acquisitions:
        Accounts receivable                         (6,425)           (3,751)
        Inventories                                 (3,696)            1,599
        Prepaid expenses and other current assets   (2,330)              391
        Accounts payable and accrued liabilities       245            (5,395)
        Change in restructuring liabilities         (2,912)             (640)
          Net cash used in operating activities    (12,021)           (2,807)

    Cash flows from investing activities
      Capital expenditures                          (1,655)           (1,628)
      Dividends and distributions from
       associated companies                            205               -
      Payments related to acquisitions              (1,000)           (6,700)
      Proceeds from partnership
       disposition of assets                           -               2,989
      Proceeds from disposition of assets              -                 647
      Interest earned on insurance settlement           75               -
      Change in restricted cash, net                    (3)              -
          Net cash used in investing activities     (2,378)           (4,692)

    Cash flows from financing activities
      Net (decrease) increase in short-term
       borrowings                                   (2,504)            2,064
      Long-term debt borrowings                     12,340               -
      Repayments of long-term debt                    (233)             (282)
      Dividends paid                                (2,090)           (2,079)
      Stock options exercised, other                   272               -
      Distributions to minority shareholders          (350)           (2,204)
      Other, net                                       -                  (9)
          Net cash provided by (used in)
           financing activities                      7,435            (2,510)

      Effect of exchange rate changes on cash          448              (971)
        Net decrease in cash and cash equivalents   (6,516)          (10,980)
        Cash and cash equivalents at the
         beginning of the period                    16,121            29,078
        Cash and cash equivalents at the
         end of the period                          $9,605           $18,098
SOURCE  Quaker Chemical Corporation
    -0-                             05/01/2006
    /CONTACT:  Neal E. Murphy, Vice President and Chief Financial Officer,
Quaker Chemical Corporation, +1-610-832-4189/
    /Web site:  http://www.quakerchem.com /
    (KWR)

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

MZ
-- PHM064 --
0413 05/01/2006 17:52 EDT http://www.prnewswire.com