Press Releases
Quaker Chemical Announces Record Quarterly Sales and a 44% Increase in First Quarter Earnings
CONSHOHOCKEN, Pa., April 29 /PRNewswire-FirstCall/ -- Quaker Chemical Corporation (NYSE: KWR) today announced sales for the first quarter 2008 of $147.7 million, a quarterly record, and net income of $5.1 million, increases of 18.3% and 44.0%, respectively, compared to the first quarter of 2007. Earnings per share increased to $0.50 per diluted share from $0.35 per diluted share for the first quarter of 2007.
"We're very pleased with our start in 2008, particularly given today's world," commented Ronald J. Naples, Chairman and Chief Executive Officer. "We achieved improvement in operating income as a percentage of sales to over 6%, despite the headwinds of rapidly escalating raw material costs. We did see a decrease in our sequential gross margin percentage from the fourth quarter of 2007, but were able to maintain our margins in dollar terms, and continue to work with our customers to recognize the value we deliver and our cost realities. With our future in mind, we remain committed to invest in key growth initiatives, while at the same time being mindful of today's challenges and limited visibility of the current economic environment and commodity price trends. As suggested by our recent dividend increase, we have confidence about our long-term future and the prospects of earnings improvement for 2008."
First Quarter 2008 Summary
Net sales for the first quarter were $147.7 million, up 18.3% from $124.9 million for the first quarter 2007. The increase in net sales was attributable to volume growth, higher sales prices and foreign exchange rate translation. Volume growth was realized in virtually all the Company's regions, including higher revenue related to the Company's Chemical Management Services ("CMS") channel. Foreign exchange rate translation increased revenues by approximately 8% for the first quarter of 2008, compared to the same period in 2007. Selling price increases were realized, in part, as a result of an ongoing effort to offset higher raw material costs. CMS revenues were higher due to the full year impact of additional CMS accounts gained in 2007, as well as the renewal and restructuring of several of the Company's CMS contracts.
Gross margin dollars were up more than $5.0 million, or 13.2% for the first quarter of 2008, compared to the same period in 2007. However, the gross margin percentage was 29.5% for the first quarter of 2008, compared to 30.9% for the first quarter of 2007. The Company's larger mix of CMS contracts reported on a gross versus pass-through basis decreased gross margin as a percentage of sales by approximately 0.5 percentage points. The remaining decline in gross margin as a percentage of sales is due to increased raw material costs in excess of price increases, as well as product and regional sales mix. The Company has announced and implemented a number of further price increases to aid in offsetting unprecedented levels in the Company's key raw material costs.
Selling, general and administrative expenses for the quarter increased $2.6 million, compared to the first quarter of 2007. Foreign exchange rate translation accounted for the majority of the increase over the prior year period. Inflationary increases were largely offset by lower legal and environmental costs and lower incentive compensation expense.
The decrease in other income was primarily due to foreign exchange rate losses in 2008 compared to gains in 2007. Net interest expense was lower due to lower average borrowings as well as lower interest rates.
Balance Sheet and Cash Flow Items
The Company's net debt increased from December 31, 2007, primarily to fund working capital needs driven by higher quarterly sales and scheduled first quarter payments, including the payment of incentive compensation. The Company's net debt-to-total-capital ratio was 34% at March 31, 2008, compared to 43% at March 31, 2007 and 32% at December 31, 2007.
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.
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 call to discuss first quarter results is scheduled for April 30, 2008 at 2:30 p.m. (ET). Access the conference by calling 877-269-7756 or visit Quaker's Web site at 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,
2008 2007
Net sales $147,718 124,891
Cost of goods sold 104,083 86,345
Gross margin 43,635 38,546
% 29.5% 30.9%
Selling, general and administrative expenses 34,504 31,919
Operating income 9,131 6,627
% 6.2% 5.3%
Other income, net 161 327
Interest expense, net (1,182) (1,350)
Income before taxes 8,110 5,604
Taxes on income 2,765 1,844
5,345 3,760
Equity in net income of associated companies 112 125
Minority interest in net income of subsidiaries (364) (348)
Net income $5,093 $3,537
% 3.4% 2.8%
Per share data:
Net income - basic $0.50 $0.36
Net income - diluted $0.50 $0.35
Shares Outstanding:
Basic 10,085,859 9,907,683
Diluted 10,179,539 10,024,905
Quaker Chemical Corporation
Condensed Consolidated Balance Sheet
(Dollars in thousands, except par value and share amounts)
(Unaudited)
March 31, December 31,
2008 2007
ASSETS
Current assets
Cash and cash equivalents $20,527 $20,195
Accounts receivable, net 120,273 118,135
Inventories, net 64,559 60,738
Prepaid expenses and other
current assets 16,057 14,433
Total current assets 221,416 213,501
Property, plant and equipment, net 63,707 62,287
Goodwill 45,799 43,789
Other intangible assets, net 7,668 7,873
Investments in associated companies 7,959 7,323
Deferred income taxes 32,018 30,257
Other assets 40,476 34,019
Total assets $419,043 $399,049
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
Short-term borrowings and current portion of
long-term debt $3,875 $4,288
Accounts and other payables 68,519 67,380
Accrued compensation 9,730 17,287
Other current liabilities 17,701 17,396
Total current liabilities 99,825 106,351
Long-term debt 89,235 78,487
Deferred income taxes 8,209 7,583
Other non-current liabilities 77,557 71,722
Total liabilities 274,826 264,143
Minority interest in equity of subsidiaries 4,750 4,513
Shareholders' equity
Common stock, $1 par value;
authorized 30,000,000 shares;
issued 10,268,988 shares 10,269 10,147
Capital in excess of par value 11,844 10,104
Retained earnings 118,506 115,767
Accumulated other comprehensive loss (1,152) (5,625)
Total shareholders' equity 139,467 130,393
Total liabilities and shareholders' equity 419,043 $399,049
Quaker Chemical Corporation
Condensed Consolidated Statement of Cash Flows
For the Three months ended March 31,
(Dollars in thousands)
(Unaudited)
2008 2007
Cash flows from operating activities
Net income $5,093 $3,537
Adjustments to reconcile net income
to net cash used in operating activities:
Depreciation 2,680 2,719
Amortization 300 339
Equity in net income of associated companies,
net of dividends (112) 44
Minority interest in earnings of subsidiaries 364 348
Deferred income tax 1,246 361
Deferred compensation and other, net 22 267
Stock-based compensation 376 262
(Gain) Loss on disposal of property, plant
and equipment (35) 5
Insurance settlement realized (136) (265)
Pension and other postretirement benefits (2,458) (869)
Increase (decrease) in cash from changes in
current assets and current liabilities, net of
acquisitions:
Accounts receivable 1,159 (10,633)
Inventories (2,374) (3,019)
Prepaid expenses and other current assets (3,037) (873)
Accounts payable and accrued liabilities (9,280) 2,749
Net cash used in operating activities (6,192) (5,028)
Cash flows from investing activities
Capital expenditures (1,949) (2,721)
Payments related to acquisitions (1,000) (1,000)
Proceeds from disposition of assets 65 -
Insurance settlement received and interest
earned 5,112 143
Change in restricted cash, net (4,976) 122
Net cash used in investing activities (2,748) (3,456)
Cash flows from financing activities
Net decrease in short-term borrowings (378) (1,262)
Proceeds from long-term debt 9,844 5,277
Repayments of long-term debt (251) (225)
Dividends paid (2,181) (2,137)
Stock options exercised, other 1,486 1,809
Distributions to minority shareholders - (270)
Net cash provided by financing activities 8,520 3,192
Effect of exchange rate changes on cash 752 17
Net increase (decrease) in cash and cash
equivalents 332 (5,275)
Cash and cash equivalents at the beginning
of the period 20,195 16,062
Cash and cash equivalents at the end of the
period $20,527 $10,787
SOURCE Quaker Chemical Corporation
-0- 04/29/2008
/CONTACT: Mark A. Featherstone, Vice President and Chief Financial
Officer of Quaker Chemical Corporation, +1-610-832-4160/
/Web site: http://www.quakerchem.com /
(KWR)
CO: Quaker Chemical Corporation
ST: Pennsylvania
IN: CHM FIN
SU: ERN CCA
AM-AD
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4106 04/29/2008 17:00 EDT http://www.prnewswire.com
