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News Release


Quaker Chemical Corporation Announces First Quarter 2011 Results


- Strong quarterly sales up 25% to $159.9 million from Q1 2010
- Q1 2011 diluted EPS of $0.91 vs. $0.84 diluted EPS in Q1 2010
- Product volumes higher than Q1 2010 by 16%

CONSHOHOCKEN, Pa., April 26, 2011 /PRNewswire via COMTEX/ --

Quaker Chemical Corporation (NYSE: KWR) today announced net sales of $159.9 million and earnings per diluted share of $0.91 for the first quarter of 2011, up 25% and 8%, respectively, compared to net sales of $128.3 million and earnings per diluted share of $0.84 for the first quarter of 2010.

Michael F. Barry, Chairman, Chief Executive Officer and President, commented, "We are off to a good start in 2011, despite the continuing challenge of escalating raw material costs. We are and will be implementing additional price increases as part of our ongoing effort to restore our margins to more acceptable levels. However, our profitability continues to grow due to good demand in our base markets, new business gained and the contribution from our recent acquisitions."

Mr. Barry further stated, "Despite the uncertainties in the raw material markets and global economies, our goal for 2011 remains to build upon the profitability we achieved in 2010. With our leadership positions in both the emerging and mature markets, as well as our organic and external growth opportunities, I remain confident in our prospects for 2011 and beyond."

First Quarter 2011 Summary

Net sales for the first quarter of 2011 were $159.9 million, an increase of 25% from $128.3 million in the first quarter of 2010. The increase in net sales was primarily the result of higher volumes and selling prices across the globe. Product volumes were higher by approximately 16% including the effects of acquisitions. Selling prices and mix increased revenues by approximately 7%, as the Company continues to implement price increases to help offset higher raw material costs. Foreign exchange rates also increased revenues by approximately 2%.

Gross profit increased by approximately $5.4 million, but gross margin decreased from 36.9% in the first quarter of 2010 to 33% in the first quarter of 2011, as raw material costs continued to escalate, particularly in the first quarter of 2011. The Company continues to implement price increases to recover these higher costs.

Selling, general and administrative expenses ("SG&A") increased approximately $5.0 million compared to the first quarter of 2010. Higher selling costs on increased business activity, our 2010 acquisitions, foreign exchange rate translation and higher professional fees accounted for approximately 62% of the increase. Higher inflationary and other costs partially offset by lower incentive compensation accounted for the remainder of the increase. SG&A as a percentage of sales decreased to 24.2% in the first quarter of 2011 from 26.2% in the first quarter of 2010. Net interest expense decreased due to lower interest rates despite higher average borrowings. Equity in net income of associated companies increased compared to the first quarter of 2010 as the prior year quarter reflected a charge of approximately $0.03 per diluted share related to the first quarter 2010 devaluation of the Venezuelan Bolivar Fuerte.

The Company's low first quarter 2011 and 2010 effective tax rates include the expiration of applicable statutes of limitations for uncertain tax positions of approximately $0.11 per diluted share, in each period. The Company has experienced and expects to further experience volatility in its quarterly effective tax rates due to the varying timing of tax audits and the expiration of applicable statutes of limitations as they relate to uncertain tax positions. However, the Company expects a higher effective tax rate for the full year 2011 as compared to the first quarter 2011 rate.

Balance Sheet and Cash Flow Items

Debt increased from December 31, 2010 due to higher working capital requirements on increased business activity, as well as the timing of payments related to incentive compensation.

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 first quarter results is scheduled for April 27, 2011 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, aluminum, 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 and share amounts)













(Unaudited)








Three Months Ended March 31,



2011


2010






Net sales


$ 159,865


$ 128,320






Cost of goods sold


107,131


80,980






Gross profit


52,734


47,340

%


33.0%


36.9%






Selling, general and administrative expenses


38,634


33,669






Operating income


14,100


13,671

%


8.8%


10.7%






Other income, net


539


763

Interest expense, net


(946)


(1,127)

Income before taxes and equity in net income (loss) of associated companies


13,693


13,307






Taxes on income before equity in net income (loss) of associated companies


2,822


3,181

Income before equity in net income (loss) of associated companies


10,871


10,126






Equity in net income (loss) of associated companies


359


(89)






Net income


11,230


10,037






Less: Net income attributable to noncontrolling interest


630


618






Net income attributable to Quaker Chemical Corporation


$ 10,600


$ 9,419

%


6.6%


7.3%






Per share data:





Net income attributable to Quaker Chemical Corporation Common Shareholders - basic


$ 0.92


$ 0.85

Net income attributable to Quaker Chemical Corporation Common Shareholders - diluted


$ 0.91


$ 0.84

Quaker Chemical Corporation

Condensed Consolidated Balance Sheet

(Dollars in thousands, except par value and share amounts)








(Unaudited)








March 31,


December 31,



2011


2010

ASSETS










Current assets





Cash and cash equivalents


$ 23,564


$ 25,766

Accounts receivable, net


130,948


116,266

Inventories


70,230


60,841

Prepaid expenses and other current assets


13,899


12,609

Total current assets


238,641


215,482






Property, plant and equipment, net


78,494


76,535

Goodwill


53,675


52,758

Other intangible assets, net


23,579


24,030

Investments in associated companies


9,439


9,218

Deferred income taxes


27,303


28,846

Other assets


44,896


42,561

Total assets


$ 476,027


$ 449,430






LIABILITIES AND EQUITY










Current liabilities





Short-term borrowings and current portion of long-term debt


$ 809


$ 890

Accounts and other payables


76,595


63,893

Accrued compensation


9,728


17,140

Other current liabilities


19,108


19,268

Total current liabilities


106,240


101,191

Long-term debt


83,766


73,855

Deferred income taxes


6,410


6,108

Other non-current liabilities


78,849


81,177

Total liabilities


275,265


262,331






Equity





Common stock, $1 par value; authorized 30,000,000 shares; issued 11,531,148


11,531


11,492

Capital in excess of par value


39,132


38,275

Retained earnings


152,237


144,347

Accumulated other comprehensive loss


(9,497)


(13,736)

Total Quaker shareholders' equity


193,403


180,378

Noncontrolling interest


7,359


6,721

Total equity


200,762


187,099

Total liabilities and equity


$ 476,027


$ 449,430






Quaker Chemical Corporation

Condensed Consolidated Statement of Cash Flows

For the three months ended March 31,

(Dollars in thousands)













(Unaudited)



2011


2010

Cash flows from operating activities





Net income


$ 11,230


$ 10,037

Adjustments to reconcile net income to net cash used in operating activities:





Depreciation


2,656


2,593

Amortization


486


254

Equity in net (income) loss of associated companies, net of dividends


(262)


89

Deferred compensation and other, net


1,967


289

Stock-based compensation


868


727

Gain on disposal of property, plant and equipment


(40)


(32)

Insurance settlement realized


(365)


(345)

Pension and other postretirement benefits


(4,910)


(2,265)

Increase (decrease) in cash from changes in current assets and current liabilities, net of acquisitions:





Accounts receivable


(12,478)


(3,606)

Inventories


(8,309)


(5,332)

Prepaid expenses and other current assets


(2,397)


(1,360)

Accounts payable and accrued liabilities


4,455


(5,818)

Net cash used in operating activities


(7,099)


(4,769)






Cash flows from investing activities





Capital expenditures


(3,475)


(2,042)

Proceeds from disposition of assets


170


41

Insurance settlement received and interest earned


22


5,038

Change in restricted cash, net


343


(2,742)

Net cash (used in) provided by investing activities


(2,940)


295






Cash flows from financing activities





Proceeds from long-term debt


10,000


7,583

Repayments of long-term debt


(231)


(122)

Dividends paid


(2,701)


(2,550)

Stock options exercised, other


(50)


135

Excess tax benefit related to stock option exercises


78


321

Net cash provided by financing activities


7,096


5,367






Effect of exchange rate changes on cash


741


(1,124)

Net decrease in cash and cash equivalents


(2,202)


(231)

Cash and cash equivalents at the beginning of the period


25,766


25,051

Cash and cash equivalents at the end of the period


$ 23,564


$ 24,820






SOURCE Quaker Chemical Corporation