Press Releases
Quaker Chemical Announces Earnings Growth and Record Sales For Full Year and Fourth Quarter 2002
CONSHOHOCKEN, Pa., Feb 20, 2003 /PRNewswire-FirstCall via COMTEX/ -- Quaker Chemical Corporation (NYSE: KWR) today announced record annual and fourth quarter sales and improved earnings for both periods ending December 31, 2002. Net sales for 2002 were $274.5 million, up 9% from the prior year, and for the fourth quarter were $71.9 million, up 23% from the fourth quarter of 2001. For the year 2002, earnings were $1.51 per diluted share compared to $0.84 per diluted share in 2001. Earnings for the fourth quarter of 2002 were $0.46 per diluted share compared to a loss of $0.17 per diluted share in the fourth quarter of 2001. Results for the fourth quarter and full year 2001 included special items relating primarily to restructuring charges and an additional provision for doubtful accounts. Excluding the special items, 2001 earnings for the fourth quarter and full year were $0.20 per diluted share and $1.49 per diluted share, respectively. The 2002 full year and fourth quarter earnings were consistent with previous Company guidance.
Ronald J. Naples, Chairman and Chief Executive Officer, stated, "All things considered, we feel good about 2002. In a continued difficult worldwide economic environment, our earnings were up, albeit at a rate below our long-term goals, and we continued to position and prepare the Company for industry leadership in an integrated global world. We delivered on the sequential quarterly earnings improvements we projected through the year and reached record sales; we maintained our strong balance sheet; we made a couple of accretive acquisitions. Earnings in 2002 showed growth over the prior year not only on a reported basis, but even with the effect of the 2001 special items stripped out. This is important because one of our primary goals is consistent year-over-year earnings growth, something we've achieved over the past seven years with the sole exception of an extraordinary 2001."
Full Year 2002
Net sales for 2002 were a record $274.5 million, or 9% over 2001 net sales of $251.1 million. The United Lubricants and Epmar acquisitions, as well as the purchase of a controlling interest in the Company's South African joint venture, provided a year-over-year increase in net sales of approximately $20 million. Currency fluctuations negatively impacted net sales by 2%. Absent the acquisitions and currency fluctuations, net sales increased by 3% with all four regions of the world showing growth. SG&A expenses (excluding the 2001 special items) increased primarily due to the noted acquisitions, as well as higher pension, insurance, and other administrative expenses.
Earnings for 2002 were $14.3 million, or $1.51 per diluted share, up 80% over 2001 earnings of $7.7 million, or $0.84 per diluted share. Results in 2001 were negatively impacted by $8.6 million in special items primarily related to two plant closings in Europe and an additional provision for doubtful accounts. Absent the special items, 2001 earnings would have been $1.49 per diluted share. Acquisitions in 2002 were accretive to earnings by approximately $0.06 per diluted share.
Fourth Quarter 2002
Fourth quarter 2002 net sales were a record $71.9 million, up 23% from the fourth quarter of 2001. Approximately one-half of this increase was due to the 2002 United Lubricants and Epmar acquisitions, as well as the purchase of a controlling interest in the Company's South African joint venture. Net sales in all four regions of the world showed 9% or higher increases on a local currency basis. However, currency fluctuations negatively impacted consolidated U.S. dollar sales by 1%. SG&A expenses (excluding the 2001 special items) increased primarily due to the noted acquisitions, as well as higher pension, insurance, and other administrative expenses such as the Company's ERP implementation.
Earnings for the fourth quarter of 2002 were $4.4 million or $0.46 per diluted share. This represents a 130% increase over fourth quarter 2001 earnings of $0.20 per diluted share, excluding special items. In the fourth quarter of 2001, special items of $4.9 million were made relating primarily to restructuring charges and an additional provision for doubtful accounts. Including the special items, the Company incurred a loss of $0.17 per diluted share for the fourth quarter of 2001.
Balance Sheet and Cash Flow Items
In the fourth quarter of 2002, debt levels were reduced 37% to $28.8 million. The debt-to-total capital ratio as of December 31, 2002, was 25%, down from 35% at September 30, 2002.
Working capital reduction was a major initiative in 2002. The Company measures working capital as a percent of sales. At December 31, 2002, this ratio was 17.8% compared to 20.1% at the end of 2001. The working capital reduction initiatives generated approximately $6 million of cash in 2002 on a constant sales level basis.
In 2002, capital expenditures were $10.8 million, and spending on acquisitions was $21.3 million.
Shareholders' equity increased $2.3 million and $7.2 million from September 30, 2002, and December 31, 2001, respectively, despite a non-cash charge to equity of $4.3 million due to declines in the asset value of the Company's defined benefit pension plans.
2003 Outlook
In 2003, net sales are projected to continue to grow. The Company expects to see higher raw material prices and higher SG&A expenses related to pension, insurance, and its ERP implementation. These items alone are expected to reduce diluted earnings per share by approximately $0.35, despite which the Company projects earnings growth in 2003.
Mr. Naples stated, "The global business environment as we enter 2003 is still uncertain, which puts pressure on industrial production demand. In addition, the rise in crude oil prices is expected to negatively impact our raw materials prices, especially in the short term. These factors and geopolitical risk make forecasting more difficult than usual. Our 2003 plans call for solid year-over-year earnings improvement versus 2002. For the first quarter of 2003, we expect earnings to be higher than the first quarter 2002, but below our fourth quarter 2002 due to the increased costs previously noted, as well as seasonal demand factors."
Mr. Naples continued, "Our management team remains convinced that our key strategic imperatives of selling value rather than simply fluids, operating as a globally integrated enterprise, and harnessing our global knowledge will bring unique value to our customers and continue to increase our differentiation from competitors. Our 2003 plans project continued penetration in our core steel and metalworking markets to help overcome higher costs and generate earnings growth. Also, it is our expectation that our strong balance sheet and good cash flow generation will enable us to continue to grow the Company through acquisitions and still maintain our record of annual dividend increases, which is now at 30 years."
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. Such risks and uncertainties include, but are not limited to, further downturns in our customers' businesses, significant increases in raw material costs, worldwide economic and political conditions, foreign currency fluctuations, a conflict in Iraq, and future terrorist attacks such as those that occurred on September 11, 2001.
As previously announced, Quaker Chemical's investor conference to discuss fourth quarter and full year 2002 earnings results is scheduled for February 21, 2003, at 2:30 p.m. (ET). Access the conference by calling 800-922-0755 or visit Quaker's Web site at http://www.quakerchem.comfor a live webcast.
Quaker Chemical Corporation
Condensed Consolidated Statement of Operations
For the period ended December 31,
Dollars in thousands, except per share data
(Unaudited)
Three Months ended Twelve Months
December 31, ended December 31,
2002 2001 2002 2001
Net sales $71,869 $58,272 $274,521 $251,074
Cost of goods sold 43,010 35,293 162,944 150,045
Gross 28,859 22,979 111,577 101,029
% 40.2% 39.4% 40.6% 40.2%
Selling, general and
administrative - Note A 21,604 21,803 87,604 80,984
Restructuring - Note B -- 2,896 -- 5,854
Operating income 7,255 (1,720) 23,973 14,191
% 10.1% (3.0%) 8.7% 5.7%
Other income (expense), net (59) 399 1,135 1,089
Interest expense, net (43) (131) (790) (850)
Income (loss) before taxes 7,153 (1,452) 24,318 14,430
Taxes on income (loss) 2,289 (450) 7,782 4,473
4,864 (1,002) 16,536 9,957
Equity in net income (loss)
of associated companies (19) (127) 295 613
Minority interest in net
income of subsidiaries (431) (449) (2,534) (2,905)
Net income (loss) $4,414 $(1,578) $14,297 $7,665
% 6.1% (2.7%) 5.2% 3.1%
Per share data:
Net income (loss) - basic $0.48 ($0.17) $1.56 $0.85
Net income (loss) - diluted $0.46 ($0.17) $1.51 $0.84
Shares Outstanding:
Basic 9,238,138 9,129,566 9,171,720 9,053,672
Diluted
9,503,266 9,129,566 9,473,914 9,113,689
A - 2001 includes an additional provision for doubtful accounts primarily
related to the poor financial condition of certain U.S. steel
customers which filed for bankruptcy protection, an additional
environmental reserve, and other organizational structure costs
totaling $2,050 and $2,767 for the fourth quarter and full year,
respectively. Upon adopting SFAS No. 142, "Goodwill and Other
Intangible Assets," effective January 1, 2002, the Company no longer
amortizes goodwill. The Company recorded goodwill amortization of
$244 or $0.02 per diluted share and $1,004 or $0.08 per diluted share
for the three and twelve months ended December 31, 2001,
respectively.
B - Includes facility rationalization, severance, and abandoned
acquisition-related costs totaling $2,896 and $5,854 for the fourth
quarter and full year 2001, respectively.
Quaker Chemical Corporation
Operating Income (Loss) and Earnings (Loss) Per Share
Reconciliation
For the period ended December 31,
Unaudited
Dollars in thousands except
per share data
Fourth Quarter Twelve Months
2002 2001 2002 2001
Operating Income (Loss)
Operating income (loss),
as reported $7,255 $(1,720) $23,973 $14,191
Special items:
Restructuring
Facility rationalization -- 575 -- 2,613
Severance -- 2,124 -- 2,644
Costs related to abandoned
acquisitions -- 197 -- 597
Additional provision for doubtful
accounts - Note A -- 1,550 -- 2,000
Organization structure -- -- -- 267
Environmental reserve -- 500 -- 500
-- 4,946 -- 8,621
Operating income, excluding
special items $7,255 $3,226 $23,973 $22,812
Earnings (Loss) Per Share - Diluted
Earnings (loss) per share, as
reported $0.46 $(0.17) $1.51 $0.84
Special items:
Restructuring
Facility rationalization -- 0.04 -- 0.20
Severance -- 0.16 -- 0.20
Costs related to
abandoned acquisitions -- 0.01 -- 0.04
Additional provision for
doubtful accounts - Note A -- 0.12 -- 0.15
Organization structure -- -- -- 0.02
Environmental reserve -- 0.04 -- 0.04
-- 0.37 -- 0.65
Operating income,
excluding special items $0.46 $0.20 $1.51 $1.49
A - Primarily related to the poor financial condition of certain U.S.
steel customers which filed for bankruptcy protection.
Quaker Chemical Corporation
Condensed Consolidated Balance Sheet
December 31, December 31,
2002 2001*
ASSETS
Current assets
Cash and cash equivalents $13,857 $20,549
Accounts receivable, net 53,353 44,787
Inventories, net 23,636 18,785
Deferred income taxes 5,874 4,031
Prepaid expenses and
other current assets 6,953 4,778
Total current assets 103,673 92,930
Property, plant and equipment, net 48,512 38,244
Goodwill 21,927 14,960
Other intangible assets 5,852 1,442
Investments in associated companies 9,060 9,839
Deferred income taxes 10,609 9,085
Other assets 14,225 13,166
Total Assets $213,858 $179,666
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
Short-term borrowings and current
portion of long-term debt $12,205 $2,858
Accounts payable 27,461 18,323
Dividends payable 1,962 1,873
Accrued compensation 10,254 8,109
Other current liabilities 14,262 14,343
Total current liabilities 66,144 45,506
Long-term debt 16,590 19,380
Deferred income taxes 1,518 1,233
Accrued pension and postretirement
benefits 28,723 19,239
Other noncurrent liabilities 5,166 4,973
Total liabilities 118,141 90,331
Minority interest in equity of subsidiaries 7,662 8,436
Commitments and contingencies -- --
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 626 357
Retained earnings 110,448 103,953
Unearned compensation (1,245) (1,597)
Accumulated other comprehensive (loss) (27,078) (24,075)
92,415 88,302
Treasury stock, shares held at cost:
2002 - 324,109, 2001 - 526,865 (4,360) (7,403)
Total shareholders' equity 88,055 80,899
$213,858 $179,666
* Certain reclassifications of prior year data have been made to
improve comparability.
Quaker Chemical Corporation
Condensed Consolidated Statement of Cash Flows
(Dollars in thousands)
2002 2001
Cash flows from operating activities
Net income $14,297 $7,665
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation 5,432 4,913
Amortization 805 1,467
Equity in net income of
associated companies (295) (613)
Minority interest in earnings of subsidiaries 2,534 2,905
Deferred income taxes 328 (627)
Deferred compensation and
other postretirement benefits 35 201
Environmental charge -- 500
Restructuring charge -- 5,854
Pension and other, net 1,524 (695)
Increase (decrease) in cash from changes
in current assets and current liabilities:
Accounts receivable, net (657) 7,573
Inventories (3,101) 2,762
Prepaid expenses and other current assets (194) 39
Accounts payable and accrued liabilities 7,107 (6,603)
Change in restructuring liabilities (2,156) (1,123)
Estimated taxes on income (1,261) (1,614)
Net cash provided by operating activities 24,398 22,604
Cash flows from investing activities
Capital expenditures (10,837) (8,036)
Dividends from associated companies 515 1,208
Investments in and advances to
associated companies -- 95
Payments related to acquisitions (21,285) (1,718)
Proceeds from disposition of assets 1,682 259
Other, net (326) 165
Net cash (used in) investing activities (30,251) (8,027)
Cash flows from financing activities
Dividends paid (7,714) (7,410)
Net increase (decrease) in
short-term borrowings 9,026 (56)
Repayment of long-term debt (2,853) (2,891)
Treasury stock issued 2,951 2,902
Distributions to minority shareholders (2,673) (2,335)
Other, net -- 234
Net cash (used in) financing activities (1,263) (9,556)
Effect of exchange rate changes on cash 424 (1,024)
Net (decrease) increase in cash
and cash equivalents (6,692) 3,997
Cash and cash equivalents at
beginning of period 20,549 16,552
Cash and cash equivalents at end of period $13,857 $20,549
Supplemental cash flow disclosures
Cash paid during the year for:
Income taxes $7,787 $7,550
Interest 1,897 1,876
Noncash investing activities:
Contribution of property, plant & equipment
to real estate joint venture $ -- $4,358
SOURCE Quaker Chemical Corporation
CONTACT: Michael F. Barry, Vice President and Chief Financial Officer of
Quaker Chemical Corporation, +1-610-832-8500
URL: http://www.quakerchem.com
http://www.prnewswire.com
