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News Release


Quaker Chemical Announces Second Quarter 2010 Results


- Q2 2010 EPS of $0.80 vs. $0.29 in Q2 2009
- First half 2010 EPS of $1.64 vs. $0.29 in the first half of 2009
- Net debt-to-total capital ratio under 20%
- $15.1 million of operating cash flow generated in Q2 2010

CONSHOHOCKEN, Pa., July 28, 2010 /PRNewswire via COMTEX/ --

Quaker Chemical Corporation (NYSE: KWR) today announced second quarter 2010 net sales of $136.0 million and earnings per diluted share of $0.80, compared to net sales of $102.3 million and earnings per diluted share of $0.29 for the second quarter of 2009. For the first half of 2010, the Company reported net sales of $264.3 million and earnings per diluted share of $1.64, compared to net sales of $200.8 million and earnings per diluted share of $0.29 for the first half of 2009.

Michael F. Barry, Chairman, Chief Executive Officer and President, commented, "Our strong second quarter earnings and EBITDA generation were driven by high steel industry shipments in China, Brazil, India and Russia and continued recovery of industrial demand in North America and Europe. Our balance sheet was also strengthened as we reduced our net debt-to-capital ratio to its lowest point since 2003."

Mr. Barry added, "We are on track to generate record earnings for 2010. Our expectations for the second half are that our earnings will continue to be strong but will be below the first half due to a softening in demand and the lag effect on margins as we recover higher raw material costs."

Mr. Barry continued, "We are pleased with our progress in 2010 in a number of ways. Besides our strong results, we lowered our debt, raised our dividend, made a small, but strategic, acquisition, and amended our credit facility for lower interest costs, an extended maturity date and greater borrowing capacity. Over the next few years, we believe Quaker is positioned well for solid growth. Our strong positions in the fastest growing countries like China, Brazil and India, as well as the gradual rebound in the more mature markets such as the U.S. and Europe, is expected to provide us with broad-based organic growth in all regions and businesses. In addition, our strong balance sheet will allow us to invest in our key growth initiatives and grow via acquisition for the right opportunities."

Second Quarter 2010 Summary

Net sales for the second quarter were $136.0 million, up 33% from $102.3 million for the second quarter of 2009. The increase in net sales was a result of double-digit volume increases across the globe as the Company continues to recover from the economic downturn. Product volumes increased 42%, partially offset by a 5% decline in selling price and mix, as well as lower automotive chemical management services ("CMS") revenue due to lower revenue reported on a gross basis. On a sequential quarterly basis, product volumes increased by approximately 7%.

Gross margin was up $12.5 million, or 35%, compared to the second quarter of 2009 as a result of increased volumes. The gross margin percentage increased slightly compared to the second quarter of 2009, but decreased 1.2 percentage points from the first quarter of 2010. The Company is implementing price increases to help offset higher raw material costs where necessary.

Selling, general and administrative expenses ("SG&A") increased $6.1 million, or 21%, compared to the second quarter of 2009. Higher selling costs with increased business activity, as well as increased incentive compensation and professional fees, were the primary drivers, representing 70% of the increase. Inflationary and other costs accounted for the remainder of the increase.

The Company incurred charges related to the former CEO's supplemental retirement plan of approximately $1.2 million in the second quarter of 2009 and expects to incur a final charge of $1.3 million later in 2010.

The increase in other income is due to higher license fees from increased business activities, as well as foreign exchange rate gains in the second quarter of 2010 versus losses in the second quarter of 2009. The decrease in net interest expense is due to lower average debt balances as well as higher interest income.

Year-to-Date Summary

Net sales for the first half of 2010 were $264.3 million, up 32% from $200.8 million for the first half of 2009. As with the quarterly comparison, the increase in net sales was a result of higher volumes across the globe as the Company continues to recover from the economic downturn. Product volumes increased 39%, partially offset by a 5% decline in selling price and mix. Foreign exchange rates increased revenues by approximately 4%, which were more than offset by lower automotive CMS revenue due to lower revenue reported on a gross basis.

Gross margin increased $31.1 million, or 48%, compared to the first half of 2009 largely as a result of increased volumes. The gross margin percentage of 36.3% represents considerable improvement over the first half of 2009 percentage of 32.2%. The margin expansion was the result of cost reduction actions taken, a more favorable year-to-date raw material cost environment and reduced automotive CMS revenues reported on a gross basis.

SG&A increased $13.0 million, or 23%, compared to the first half of 2009. Higher selling costs with increased business activity, as well as increased incentive compensation and professional fees, were the primary drivers, representing 74% of the increase. Inflationary and other costs as well as foreign exchange rates accounted for the remainder of the increase.

In the first quarter of 2009, the Company implemented a restructuring program totaling $2.3 million or approximately $0.14 per diluted share. The Company completed the initiatives under this program during 2009.

Other income for the 2010 period includes higher license fees from increased business activities as well as foreign exchange rate gains versus losses in the 2009 period, which offset a gain related to the disposition of land in Europe of approximately $0.11 per diluted share in 2009. The decrease in net interest expense is due to lower average debt balances as well as higher interest income.

Equity in net income of associated companies includes a charge of approximately $0.03 per diluted share related to the first quarter 2010 devaluation of the Venezuelan Bolivar Fuerte.

Balance Sheet and Cash Flow Items

The Company's net debt-to-total-capital ratio decreased to 19% as of June 30, 2010, compared to 24% at March 31, 2010. Operating cash flow improved $15.1 million from the first quarter of 2010, as a result of strong earnings which in turn allowed the Company to reduce its debt levels during the second quarter.

Forward-Looking Statements

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.

Conference Call

As previously announced, Quaker Chemical's investor conference call to discuss second quarter results is scheduled for July 29, 2010 at 8:30 a.m. (ET). A live webcast of the conference call, together with supplemental information, can be accessed through the Company's Investor Relations Web site at http://www.quakerchem.com. You can also access the conference call by dialing 877-269-7756.

About Quaker

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.

              Quaker Chemical Corporation
              ---------------------------
       Condensed Consolidated Statement of Income
       ------------------------------------------
     (Dollars in thousands, except per share data)
     ---------------------------------------------



                                                  (Unaudited)
                                                  -----------

                                          Three Months Ended June 30,
                                          ---------------------------
                                                2010                2009
                                                ----                ----

    Net sales                               $135,991            $102,335

    Cost of goods sold                        87,460              66,298
                                              ------              ------

    Gross margin                              48,531              36,037
    %                                           35.7%               35.2%

    Selling, general and administrative
     expenses                                 35,118              29,050
    Restructuring and related charges              -                   -
    CEO transition costs                           -               1,193
                                                 ---               -----

    Operating income                          13,413               5,794
    %                                            9.9%                5.7%

    Other income, net                          1,123                 356
    Interest expense, net                     (1,043)             (1,318)
                                              ------              ------
    Income before taxes and equity in net
     income of associated companies           13,493               4,832

    Taxes on income before equity in net
     income of associated companies            4,143               1,567
                                               -----               -----
    Income before equity in net income of
     associated companies                      9,350               3,265

    Equity in net income of associated
     companies                                   384                 227
                                                 ---                 ---

    Net income                                 9,734               3,492

    Less: Net income attributable to
     noncontrolling interest                     581                 258
                                                 ---                 ---

    Net income attributable to Quaker
     Chemical Corporation                     $9,153              $3,234
                                              ======              ======
    %                                            6.7%                3.2%

    Per share data:
    ---------------
    Net income attributable to Quaker
     Chemical Corporation Common
     Shareholders -basic                       $0.82               $0.29
    Net income attributable to Quaker
     Chemical Corporation Common
     Shareholders- diluted                     $0.80               $0.29





                                          (Unaudited)
                                          -----------

                                           Six Months Ended June 30,
                                           -------------------------
                                                2010                2009
                                                ----                ----

    Net sales                               $264,311            $200,842

    Cost of goods sold                       168,440             136,091
                                             -------             -------

    Gross margin                              95,871              64,751
    %                                           36.3%               32.2%

    Selling, general and administrative
     expenses                                 68,787              55,747
    Restructuring and related charges              -               2,289
    CEO transition costs                           -               1,193
                                                 ---               -----

    Operating income                          27,084               5,522
    %                                           10.2%                2.7%

    Other income, net                          1,886               1,810
    Interest expense, net                     (2,170)             (2,407)
                                              ------              ------
    Income before taxes and equity in net
     income of associated companies           26,800               4,925

    Taxes on income before equity in net
     income of associated companies            7,324               1,316
                                               -----               -----
    Income before equity in net income of
     associated companies                     19,476               3,609

    Equity in net income of associated
     companies                                   295                  85
                                                 ---                 ---

    Net income                                19,771               3,694

    Less: Net income attributable to
     noncontrolling interest                   1,199                 458
                                               -----                 ---

    Net income attributable to Quaker
     Chemical Corporation                    $18,572              $3,236
                                             =======              ======
    %                                            7.0%                1.6%

    Per share data:
    ---------------
    Net income attributable to Quaker
     Chemical Corporation Common
     Shareholders -basic                       $1.66               $0.29
    Net income attributable to Quaker
     Chemical Corporation Common
     Shareholders- diluted                     $1.64               $0.29


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


                                                     (Unaudited)
                                                     -----------

                                             June 30,       December 31,
                                                   2010              2009
                                                   ----              ----
    ASSETS

    Current assets
      Cash and cash equivalents                 $27,606           $25,051
      Construction fund (restricted cash)             -             2,358
      Accounts receivable, net                  114,595           108,793
      Inventories, net                           54,844            50,040
      Prepaid expenses and other current
       assets                                    13,149            12,656
                                                 ------            ------
         Total current assets                   210,194           198,898

    Property, plant and equipment, net           62,859            67,426
    Goodwill                                     44,452            46,515
    Other intangible assets, net                  5,012             5,579
    Investments in associated companies           9,317             8,824
    Deferred income taxes                        31,210            31,692
    Other assets                                 46,282            39,537
                                                 ------            ------
         Total assets                          $409,326          $398,471
                                               ========          ========

    LIABILITIES AND EQUITY

    Current liabilities
      Short-term borrowings and current
       portion of long-term debt                 $3,596            $2,431
      Accounts and other payables                62,200            60,939
      Accrued compensation                       13,012            16,656
      Accrued pension and postretirement
       benefits                                   4,682             4,717
      Other current liabilities                  18,174            15,224
                                                 ------            ------
        Total current liabilities               101,664            99,967
                                                -------            ------
    Long-term debt                               60,975            63,685
    Deferred income taxes                         8,443             8,605
    Accrued pension and postretirement
     benefits                                    26,235            27,602
                                                 ------            ------
    Other non-current liabilities                45,462            42,317
                                                 ------            ------
        Total liabilities                       242,779           242,176
                                                -------           -------

    Equity
      Common stock, $1 par value; authorized
       30,000,000 shares; issued 11,258,582
       shares                                    11,259            11,086
      Capital in excess of par value             32,798            27,527
      Retained earnings                         136,497           123,140
      Accumulated other comprehensive loss      (20,070)          (10,439)
                                                -------           -------
        Total Quaker shareholders' equity       160,484           151,314
                                                -------           -------
    Noncontrolling interest                       6,063             4,981
                                                  -----             -----
    Total equity                                166,547           156,295
        Total liabilities and equity           $409,326          $398,471
                                               ========          ========



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



                                                           (Unaudited)
                                                           -----------
                                                        2010            2009
                                                        ----            ----
    Cash flows from operating activities
      Net income                                     $19,771          $3,694
      Adjustments to reconcile net income to net
       cash provided by operating activities:
        Depreciation                                   5,068           4,801
        Amortization                                     462             522
        Equity in net income of associated
         companies, net of dividends                    (233)            (85)
        Deferred compensation and other, net            (357)         (1,521)
        Stock-based compensation                       1,663             927
        Restructuring and related charges                  -           2,289
        Gain on disposal of property, plant and
         equipment                                       (22)         (1,193)
        Insurance settlement realized                   (772)           (610)
        Pension and other postretirement benefits     (2,227)         (3,799)
      Increase (decrease) in cash from changes
       in current assets and current
       liabilities, net of acquisitions:
        Accounts receivable                          (10,645)         13,498
        Inventories                                   (7,181)         15,022
        Prepaid expenses and other current assets     (1,641)          3,481
        Accounts payable and accrued liabilities       6,409          (6,354)
        Change in restructuring liabilities                -          (3,885)
           Net cash provided by operating activities  10,295          26,787
                                                      ------          ------

    Cash flows from investing activities
        Capital expenditures                          (3,468)         (5,078)
        Payments related to acquisitions                   -          (1,000)
        Proceeds from disposition of assets               59           1,617
        Insurance settlement received and interest
         earned                                        5,070           5,100
        Change in restricted cash, net                (1,940)         (2,593)
           Net cash used in investing activities        (279)         (1,954)
                                                        ----          ------

    Cash flows from financing activities
        Net increase (decrease) in short-term
         borrowings                                    1,263          (1,716)
        Proceeds from long-term debt                       -           1,584
        Repayments of long-term debt                  (2,614)        (17,252)
        Dividends paid                                (5,119)         (5,022)
        Stock options exercised, other                 1,663             262
        Excess tax benefit related to stock option
         exercises                                     1,236               -
        Distributions to noncontrolling
         shareholders                                      -             (90)
                                                         ---             ---
           Net cash used in financing activities      (3,571)        (22,234)
                                                      ------         -------

    Effect of exchange rate changes on cash           (3,890)          1,114
        Net increase in cash and cash equivalents      2,555           3,713
        Cash and cash equivalents at the beginning
         of the period                                25,051          20,892
                                                      ------
        Cash and cash equivalents at the end of
         the period                                  $27,606         $24,605
                                                     =======         =======



SOURCE Quaker Chemical Corporation