Press Releases
Quaker Chemical Announces First Quarter 2005 Results
CONSHOHOCKEN, Pa., May 2 /PRNewswire-FirstCall/ -- Quaker Chemical Corporation (NYSE: KWR) today announced first quarter 2005 sales of $104.2 million and diluted earnings per share of $0.32, compared to first quarter 2004 sales of $98.1 million and diluted earnings per share of $0.33. The first quarter results include a gain from the sale of property by the Company's real estate joint venture as well as charges for restructuring and related activities.
First Quarter 2005 Summary
Net sales for the first quarter of 2005 were $104.2 million, up 6% from $98.1 million for the first quarter of 2004. Foreign exchange rate translation favorably impacted net sales by approximately $2.8 million, with the remaining net sales increase of approximately 3% primarily attributable to higher sales prices. The higher sales prices are a reflection of the Company's actions throughout 2004 and in the first quarter of 2005 to partially mitigate higher raw material costs. Volume growth in the North American and Asia/Pacific regions were offset by lower sales in Europe.
Gross margin as a percentage of sales declined from 33.1% for the first quarter of 2004 to 29.7% for the first quarter of 2005. Higher prices for the Company's raw materials, particularly crude oil derivatives, outpaced the Company's price increases. The Company has also experienced significantly higher third-party product purchase costs with respect to its CMS contracts. Unfavorable product and regional sales mix also contributed to the decline in the gross margin percentage. Gross margin as a percentage of sales declined in all of the Company's regions as compared to the first quarter of 2004, with the North American region suffering the greatest decline.
Selling, general and administrative expenses for the quarter increased $1.6 million compared to the first quarter of 2004. Unfavorable foreign exchange accounted for approximately $0.7 million of the increase. The remaining increase of $0.9 million is attributable to inflationary increases, higher professional fees, and depreciation expense associated with the Company's global ERP system implementation, offset by lower incentive compensation costs. During the first quarter of 2005, the Company furthered its restructuring efforts that began in the fourth quarter of 2004 resulting in a net pretax charge of $1.2 million related to a reduction in its workforce. The Company expects to realize $1.4 to $1.6 million in annual savings as a result of the charge. These savings will be reinvested in higher growth areas such as Asia/Pacific and in the continuing development of new complementary businesses.
The increase in other income is reflective of the $4.2 million of proceeds received from the Company's real estate joint venture, previously announced on February 17, 2005. The proceeds include a $3.0 million gain relating to the sale by the venture of its real estate holdings as well as $1.2 million of preferred return distributions. Preferred distributions in 2004 totaled $0.9 million, including $0.2 million in the first quarter of 2004.
The decrease in minority interest expense from the first quarter of 2004 is reflective of the Company's acquisition of the remaining 40% interest in its Brazilian affiliate in March of 2005, as previously announced on March 7, 2005.
Net income for the first quarter decreased to $3.1 million versus $3.3 million for the first quarter of 2004. Significantly higher raw material, selling, general and administrative and restructuring costs were offset by the $4.2 million of proceeds received from the Company's real estate joint venture as well as higher selling prices.
Balance Sheet and Cash Flow Items
The Company's net debt has increased from December 2004, primarily to fund the acquisition noted above, as well as to fund working capital needs associated with the Company's growth initiatives. The Company's net debt-to- total capital ratio was 33% at March 31, 2005 compared to 28% at the end of 2004. The Company's credit lines total $95.0 million, $40.0 million committed and $55.0 million uncommitted. At March 31, 2005, the Company had approximately $59.0 million outstanding on its credit lines.
Ronald J. Naples, Chairman and Chief Executive Officer, commented, "First quarter operating results were considerably below our expectations. With crude oil prices escalating above $55 per barrel in the first quarter and with shortages in key raw materials resulting in further upward price pressure, our costs ran well ahead of our plans, which were based on more stable raw material prices than we've seen. We've been very active on the price front with our customers, and while we've had significant price recovery, we're still running behind the pace and size of cost increases. Volume growth stalled in the first quarter as steel and auto producers scaled back production to reduce high year-end inventory levels and to respond to their own demand softening. Looking ahead, we've not changed our expectation that operating earnings for the year will improve over 2004, but there are a lot of moving parts without a completely clear direction, especially demand strength and raw material price stability. We're cautiously optimistic about improvement in our volumes and product mix, primarily through share and penetration, and will continue to pursue price increases to improve our margins. We took steps at the end of 2004 and in the first quarter to shift resources to growth areas and to help restore our margins and improve our profitability. Profitability should also be helped by the recent acquisition of our minority partner's interest in Brazil."
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 3, 2005 at 2:30 p.m. (ET). 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,
2005 2004
Net sales $104,161 $98,131
Cost of goods sold 73,234 65,676
Gross margin 30,927 32,455
% 29.7% 33.1%
Selling, general and administrative 28,217 26,598
Restructuring and related activities,
net 1,232 -
Operating income 1,478 5,857
% 1.4% 6.0%
Other income, net 4,868 559
Interest expense, net (434) (315)
Income before taxes 5,912 6,101
Taxes on income 1,921 1,922
3,991 4,179
Equity in net income of associated
companies 53 149
Minority interest in net income of
subsidiaries (918) (1,019)
Net income $3,126 $3,309
% 3.0% 3.4%
Per share data:
Net income - basic $0.32 $0.35
Net income- diluted $0.32 $0.33
Shares Outstanding:
Basic 9,643,681 9,570,664
Diluted 9,883,727 9,977,713
Quaker Chemical Corporation
Condensed Consolidated Balance Sheet
(Dollars in thousands, except par value and share amounts)
(Unaudited)
March 31, December 31,
2005 2004*
ASSETS
Current assets
Cash and cash equivalents $18,098 $29,078
Accounts receivable, net 89,728 87,527
Inventories, net 39,034 41,298
Prepaid expenses and other current
assets 12,608 13,284
Total current assets 159,468 171,187
Property, plant and equipment 145,116 146,900
Less accumulated depreciation 83,872 84,012
Net property, plant and
equipment 61,244 62,888
Goodwill 35,086 34,853
Other intangible assets, net 9,667 8,574
Investments in associated companies 6,597 6,718
Deferred income taxes 18,852 18,825
Other assets 21,489 21,848
Total assets $312,403 $324,893
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
Short-term borrowings and current
portion of long-term debt $62,634 $60,695
Accounts and other payables 37,733 42,262
Accrued compensation 6,198 8,692
Other current liabilities 15,340 13,969
Total current liabilities 121,905 125,618
Long-term debt 14,483 14,848
Deferred income taxes 5,592 5,588
Other non-current liabilities 43,802 43,828
Total liabilities 185,782 189,882
Minority interest in equity of
subsidiaries 6,943 12,424
Shareholders' equity
Common stock, $1 par value;
authorized 30,000,000 shares;
issued 9,668,617 shares 9,669 9,669
Capital in excess of par value 2,623 2,632
Retained earnings 119,029 117,981
Unearned compensation (266) (355)
Accumulated other comprehensive
loss (11,377) (7,340)
Total shareholders' equity 119,678 122,587
Total liabilities and
shareholders' equity $312,403 $324,893
* 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)
2005 2004
Cash flows from operating activities
Net income $3,126 $3,309
Adjustments to reconcile net income
to net cash used in operating
activities:
Depreciation 2,268 1,981
Amortization 306 284
Equity in net income of associated
companies (53) (149)
Minority interest in earnings of
subsidiaries 918 1,019
Deferred compensation and other,
net 388 208
Restructuring and related
activities 1,232 -
Gain on sale of partnership assets (2,989) -
Pension and other postretirement
benefits (207) 313
Increase (decrease) in cash from
changes in current assets and
current liabilities, net of
acquisitions:
Accounts receivable (3,751) (4,316)
Inventories 1,599 (1,867)
Prepaid expenses and other current
assets 391 (2,768)
Accounts payable and accrued
liabilities (5,395) 329
Change in restructuring
liabilities (640) (290)
Net cash used in operating
activities (2,807) (1,947)
Cash flows from investing activities
Capital expenditures (1,628) (2,347)
Dividends and distributions from
associated companies - 233
Payments related to acquisitions (6,700) -
Proceeds from partnership
disposition of assets 2,989 -
Proceeds from disposition of assets 647 -
Other, net - (57)
Net cash used in investing
activities (4,692) (2,171)
Cash flows from financing activities
Net increase in short-term
borrowings 2,064 7,617
Repayments of long-term debt (282) (160)
Dividends paid (2,079) (2,020)
Stock options exercised, other - 232
Distributions to minority
shareholders (2,204) (245)
Other, net (9) -
Net cash (used in) provided by
financing activities (2,510) 5,424
Effect of exchange rate changes on
cash (971) (327)
Net (decrease) increase in cash
and cash equivalents (10,980) 979
Cash and cash equivalents at the
beginning of the period 29,078 21,915
Cash and cash equivalents at the
end of the period $18,098 $22,894
SOURCE Quaker Chemical Corporation
-0- 05/02/2005
/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 MAV CCA ERP
MR
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1700 05/02/2005 17:33 EDT http://www.prnewswire.com
