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News Release


Quaker Chemical Corporation Announces First Quarter 2012 Results

- Net sales up 11% from the first quarter of 2011
- Net income up 13% from the first quarter of 2011
- Net operating cash flow of $6.7 million

CONSHOHOCKEN, Pa., April 30, 2012 /PRNewswire/ -- Quaker Chemical Corporation (NYSE:KWR) today announced net sales of $177.6 million for the first quarter of 2012, up 11% compared to first quarter 2011 net sales of $159.9 million.  Net income of $11.9 million for the first quarter of 2012 was up 13% compared to $10.6 million for the first quarter of 2011.  Earnings per diluted share were consistent for the first quarter of 2012 compared to the first quarter of 2011, reflective of the dilution from the Company's second quarter 2011 equity offering.  

Michael F. Barry, Chairman, Chief Executive Officer and President, commented, "We are off to a solid start in 2012, despite a sluggish global economic environment, particularly in Europe and China.  However, we continue to benefit from the ongoing recovery of manufacturing in North America, additional new business, and our recent acquisitions.  Looking forward, we expect the global economic environment to remain mixed, with continued softness in many regions.  In addition, we are now experiencing higher raw material costs, which began to escalate toward the end of the quarter.  We will be implementing price increases over the next several months, but there will be a lag impact in our margins.  Despite these factors, I remain confident in our future and expect 2012 to be another good year for Quaker." 

First Quarter 2012 Summary

Net sales for the first quarter of 2012 were $177.6 million, an increase of 11% from $159.9 million in the first quarter of 2011.  Selling prices and mix increased revenues by approximately 8%, reflecting the Company's price increases implemented in 2011 to help offset rising raw material costs.  Product volumes were higher by approximately 5%, including acquisitions.  Foreign exchange rates decreased revenues by approximately 2%. 

Gross profit increased by approximately $7.1 million, or 13%, from the first quarter of 2011, with gross margin increasing to 33.7% from 33.0%.  The increase in gross margin from the first quarter of 2011 reflects price increases the Company implemented in 2011 to help restore margins that were affected by escalating raw material costs.  Gross margin also increased one percentage point from the fourth quarter of 2011 percentage of 32.7%. 

Selling, general and administrative expenses ("SG&A") increased approximately $4.5 million compared to the first quarter of 2011, primarily related to acquisitions and higher selling, inflationary and other costs on increased business activity, which were partially offset by decreases due to foreign exchange rate translation and lower incentive compensation costs.  SG&A as a percentage of sales was 24.3% for the first quarter of 2012, which was consistent with the first quarter of 2011 but lower than the fourth quarter of 2011 percentage of 26.1%.  

The Company's low first quarter of 2012 and first quarter of 2011 effective tax rates include the expiration of applicable statutes of limitations for uncertain tax positions of approximately $0.12 and $0.11 per diluted share, respectively.  The Company has experienced and expects to 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, among other factors.  However, the Company expects a higher effective tax rate for the full year of 2012 as compared with the first quarter of 2012 effective tax rate. 

Equity in net income of associated companies decreased in the first quarter of 2012 as compared to the first quarter of 2011, primarily due to the Company's July 2011 purchase of the remaining ownership interest in its Mexican affiliate.  The first quarter of 2012 earnings per diluted share of $0.91 reflect an approximate $0.08 dilutive effect as a result of the second quarter of 2011 equity offering. 

Balance Sheet and Cash Flow Items

Net operating cash flow was $6.7 million for the first quarter of 2012 versus an outflow in the first quarter of 2011, due in part to higher earnings as well as significantly improved working capital performance.  The Company's consolidated leverage ratio remained strong at less than one times EBITDA. 

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 May 1, 2012 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, 



2012


2011






Net sales 


$                177,638


$                159,865






Cost of goods sold 


117,843


107,131






Gross profit


59,795


52,734

%


33.7%


33.0%






Selling, general and administrative expenses


43,093


38,634






Operating income


16,702


14,100

%


9.4%


8.8%






Other income, net 


341


539

Interest expense


(1,174)


(1,218)

Interest income


123


272

Income before taxes and equity in net income of associated companies


15,992


13,693






Taxes on income before equity in net income of associated companies


3,445


2,822

Income before equity in net income of associated companies


12,547


10,871






Equity in net income of associated companies


146


359






Net income


12,693


11,230






Less: Net income attributable to noncontrolling interest


747


630






Net income attributable to Quaker Chemical Corporation


$                  11,946


$                  10,600

%


6.7%


6.6%






Per share data:





Net income attributable to Quaker Chemical Corporation Common Shareholders - basic


$                      0.92


$                      0.92

Net income attributable to Quaker Chemical Corporation Common Shareholders - diluted


$                      0.91


$                      0.91


 

Quaker Chemical Corporation 

Condensed Consolidated Balance Sheet 

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








(Unaudited)








March 31,


December 31, 



2012


2011

ASSETS










Current assets 





Cash and cash equivalents 


$                18,964


$                16,909

Accounts receivable, net 


162,464


150,676

Inventories


75,588


74,758

Prepaid expenses and other current assets 


17,024


17,206

Total current assets 


274,040


259,549






Property, plant and equipment, net


83,991


82,916

Goodwill 


59,064


58,152

Other intangible assets, net 


31,303


31,783

Investments in associated companies 


7,458


7,942

Deferred income taxes 


29,368


29,823

Other assets 


37,181


35,356

Total assets 


$              522,405


$              505,521






LIABILITIES AND EQUITY










Current liabilities 





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


$                     607


$                     636

Accounts and other payables 


76,257


68,125

Accrued compensation 


9,906


16,987

Other current liabilities 


22,889


20,901

Total current liabilities 


109,659


106,649

Long-term debt 


47,900


46,701

Deferred income taxes 


7,236


7,094

Other non-current liabilities 


86,946


89,351

Total liabilities 


251,741


249,795






Equity





Common stock, $1 par value; authorized 30,000,000 shares; issued 12,950,752


12,951


12,912

Capital in excess of par value 


90,836


89,725

Retained earnings 


184,764


175,932

Accumulated other comprehensive loss 


(25,902)


(29,820)

Total Quaker shareholders' equity 


262,649


248,749

Noncontrolling interest


8,015


6,977

Total equity 


270,664


255,726

Total liabilities and equity 


$              522,405


$              505,521







 

Quaker Chemical Corporation 

Condensed Consolidated Statement of Cash Flows 

For the three months ended March 31,

(Dollars in thousands)













(Unaudited)



2012


2011

Cash flows from operating activities 





Net income


$          12,693


$          11,230

Adjustments to reconcile net income to net cash provided by (used in) operating activities: 





Depreciation 


3,057


2,656

Amortization 


746


486

Equity in undistributed earnings of associated companies, net of dividends 


38


(262)

Deferred compensation and other, net 


(103)


1,967

Stock-based compensation 


1,186


868

Gain on disposal of property, plant and equipment


(14)


(40)

Insurance settlement realized 


(483)


(365)

Pension and other postretirement benefits


(2,357)


(4,910)

Decrease in cash from changes in current assets and current liabilities, net of acquisitions: 





Accounts receivable


(9,764)


(12,478)

Inventories 


352


(8,309)

Prepaid expenses and other current assets 


(557)


(2,397)

Accounts payable and accrued liabilities 


1,938


4,455

Net cash provided by (used in) operating activities 


6,732


(7,099)






Cash flows from investing activities 





Investments in property, plant and equipment


(3,178)


(3,475)

Proceeds from disposition of assets


64


170

Insurance settlement received and interest earned


18


22

Change in restricted cash, net 


465


343

Net cash used in investing activities 


(2,631)


(2,940)






Cash flows from financing activities 





Proceeds from long-term debt 


1,350


10,000

Repayments of long-term debt 


(189)


(231)

Dividends paid 


(3,105)


(2,701)

Stock options exercised, other


(1,288)


(50)

Excess tax benefit related to stock option exercises


546


78

Net cash (used in) provided by financing activities 


(2,686)


7,096






Effect of exchange rate changes on cash 


640


741

Net increase (decrease) in cash and cash equivalents 


2,055


(2,202)

Cash and cash equivalents at the beginning of the period 


16,909


25,766

Cash and cash equivalents at the end of the period


$          18,964


$          23,564






 

SOURCE Quaker Chemical Corporation

Mark A. Featherstone, Vice President and Chief Financial Officer, +1-610-832-4160