Press Releases
Quaker Chemical Corporation Announces First Quarter 2010 Results
CONSHOHOCKEN, Pa., April 27, 2010 /PRNewswire via COMTEX/ --Quaker Chemical Corporation (NYSE: KWR) today announced first quarter 2010 net sales of $128.3 million and earnings per diluted share of $0.84, compared to net sales of $98.5 million and breakeven results for the first quarter of 2009. The first quarter 2010 results include a tax benefit of approximately $0.11 per diluted share reflecting the expiration of applicable statutes of limitations for several uncertain tax positions.
Michael F. Barry, Chairman, Chief Executive Officer and President, commented, "Our strong first quarter results were driven by high steel industry demand in China, Brazil, India and Russia while industrial demand in North America and Europe continues to gradually recover from depressed levels. In addition, the aggressive actions we have taken over the past year and an unusually low tax rate also contributed to these results."
Mr. Barry added, "While we continue to pick up new business and will benefit from continued improvement in key steel and automotive markets, we do anticipate somewhat lower product volume in the second half of the year compared with the first half. This is primarily due to credit-tightening actions in China, seasonal factors relating to the timing of shipments to certain customers, the ending of inventory restocking in our end-use markets and the conclusion of tax incentives for automotive purchases in several countries. The combination of somewhat lower expected demand in the second half, the lag effects as we recover our margins due to the higher raw material costs and our continued investment in key growth initiatives will likely dampen earnings over the remaining quarters for 2010. However, we expect to deliver strong earnings over the rest of 2010 as the remaining quarters are still expected to equal or exceed the earnings we achieved in 2008 before the global crisis began. In summary, I am confident in our future given that we are well positioned in the fastest growing economies as well as the above normal growth we expect in the more mature markets as they recover over the next few years."
First Quarter 2010 Summary
Net sales for the first quarter were $128.3 million, up 30% from $98.5 million for the first quarter of 2009. The increase in net sales was a result of higher volumes across the globe as the Company continues to recover from the economic downturn. Product volumes increased 35%, partially offset by a 5% decline in selling price and mix. Foreign exchange rates increased revenues by approximately 7%, which was offset by lower automotive chemical management services ("CMS") revenue as a result of lower revenue reported on a gross basis. On a sequential quarterly basis, product volumes increased by approximately 3%.
The gross margin percentage of 36.9% represents considerable improvement over the 29.1% reported in the first quarter of 2009. This margin expansion was primarily the result of cost reduction actions taken, a more favorable raw material cost environment and the reduced automotive CMS revenues reported on a gross basis. The increase in gross margin percentage from the fourth quarter of 2009 was due to reduced CMS revenues reported on a gross basis, partially offset by higher costs related to the start-up of the Middletown, Ohio plant expansion, as well as increasing raw material prices and mix.
Selling, general and administrative expenses increased $7.0 million, or 26%, compared to the first quarter of 2009. Higher incentive compensation in the first quarter of 2010, compared to reductions of incentive compensation accruals in the first quarter of 2009 and foreign exchange rate increases, were the primary drivers of the increase, representing 82% of the increase. Higher commissions on improved sales and increased travel and other costs accounted for the remainder of the increase.
In the first quarter of 2009, the Company implemented a restructuring program totaling $2.3 million or approximately $0.14 per diluted share. The Company completed the initiatives under this program during 2009.
The decrease in other income is primarily due to the first quarter 2009 gain related to the disposition of land in Europe of approximately $0.11 per diluted share. Equity in net loss of associated companies includes a charge of approximately $0.03 per diluted share related to the first quarter 2010 devaluation of the Venezuelan Bolivar Fuerte. The increase in net income attributable to noncontrolling interests is due to stronger financial performances from those affiliates as they continue to recover from the global economic downturn.
The Company's low first quarter 2010 effective tax rate of 24% reflects the expiration of applicable statutes of limitations for several uncertain tax positions of approximately $0.11 per diluted share. The tax benefit recorded in the first quarter of 2009 reflects no tax provided for the land sale gain due to the utilization of net operating losses not previously benefited. The Company has experienced and expects to experience further 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 2010 as compared to the first quarter 2010 rate.
Balance Sheet and Cash Flow Items
The Company's net debt-to-total-capital ratio improved to 24% as of March 31, 2010, compared to 31% as of March 31, 2009. Debt increased from December 31, 2009 due to higher working capital as a result of improved 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 28, 2010 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, 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,
-------------------------
2010 2009
---- ----
Net sales $128,320 $98,507
Cost of goods sold 80,980 69,793
------ ------
Gross margin 47,340 28,714
% 36.9% 29.1%
Selling, general and administrative
expenses 33,669 26,697
Restructuring and related charges - 2,289
--- -----
Operating income (loss) 13,671 (272)
% 10.7% -0.3%
Other income, net 763 1,454
Interest expense, net (1,127) (1,089)
------ ------
Income before taxes and equity in net
loss of associated companies 13,307 93
Taxes (tax benefit) on income before
equity in net loss of associated
companies 3,181 (251)
----- ----
Income before equity in net loss of
associated companies 10,126 344
Equity in net loss of associated
companies (89) (142)
--- ----
Net income 10,037 202
Less: Net income attributable to
noncontrolling interest 618 200
--- ---
Net income attributable to Quaker
Chemical Corporation $9,419 $2
====== ===
% 7.3% 0.0%
Per share data:
---------------
Net income attributable to Quaker
Chemical Corporation Common Shareholders
-basic $0.85 $-
Net income attributable to Quaker
Chemical Corporation Common Shareholders
-diluted $0.84 $-
Quaker Chemical Corporation
---------------------------
Condensed Consolidated Balance Sheet
------------------------------------
(Dollars in thousands, except par value and share amounts)
----------------------------------------------------------
(Unaudited)
-----------
March 31, December 31,
2010 2009
---- ----
ASSETS
Current assets
Cash and cash equivalents $24,820 $25,051
Construction fund (restricted cash) 407 2,358
Accounts receivable, net 110,587 108,793
Inventories, net 54,458 50,040
Prepaid expenses and other current assets 12,929 12,656
Total current assets 203,201 198,898
Property, plant and equipment, net 65,561 67,426
Goodwill 45,509 46,515
Other intangible assets, net 5,272 5,579
Investments in associated companies 8,836 8,824
Deferred income taxes 31,510 31,692
Other assets 46,941 39,537
Total assets $406,830 $398,471
======== ========
LIABILITIES AND EQUITY
Current liabilities
Short-term borrowings and current portion
of long-term debt $2,485 $2,431
Accounts and other payables 56,949 60,939
Accrued compensation 10,443 16,656
Accrued pension and postretirement
benefits 4,702 4,717
Other current liabilities 16,700 15,224
Total current liabilities 91,279 99,967
Long-term debt 71,099 63,685
Deferred income taxes 8,613 8,605
Accrued pension and postretirement
benefits 26,865 27,602
Other non-current liabilities 45,859 42,317
Total liabilities 243,715 242,176
-
Equity
Common stock, $1 par value; authorized
30,000,000 shares; issued 11,151,787 11,152 11,086
Capital in excess of par value 30,277 27,527
Retained earnings 129,994 123,140
Accumulated other comprehensive loss (14,058) (10,439)
------- -------
Total Quaker shareholders' equity 157,365 151,314
-
Noncontrolling interest 5,750 4,981
Total equity 163,115 156,295
Total liabilities and equity $406,830 $398,471
======== ========
Quaker Chemical Corporation
---------------------------
Condensed Consolidated Statement of Cash Flows
----------------------------------------------
For the three months ended March 31,
------------------------------------
(Dollars in thousands)
----------------------
(Unaudited)
-----------
2010 2009
---- ----
Cash flows from operating activities
Net income $10,037 $202
Adjustments to reconcile net income to
net cash (used in) provided by
operating activities:
Depreciation 2,593 2,458
Amortization 254 257
Equity in net loss of associated
companies, net of dividends 89 142
Deferred compensation and other, net 289 (2,852)
Stock-based compensation 727 352
Restructuring and related charges - 2,289
Gain on disposal of property, plant
and equipment (32) (1,193)
Insurance settlement realized (345) (144)
Pension and other postretirement
benefits (2,265) (1,907)
Increase (decrease) in cash from
changes in current assets and current
liabilities, net of acquisitions:
Accounts receivable (3,606) 7,196
Inventories (5,332) 10,060
Prepaid expenses and other current
assets (1,360) 34
Accounts payable and accrued
liabilities (5,818) (6,045)
Change in restructuring liabilities - (2,652)
Net cash (used in) provided by
operating activities (4,769) 8,197
------ -----
Cash flows from investing activities
Capital expenditures (2,042) (2,375)
Payments related to acquisitions - (1,000)
Proceeds from disposition of assets 41 1,605
Insurance settlement received and
interest earned 5,038 5,056
Change in restricted cash, net (2,742) (4,086)
Net cash provided by (used in)
investing activities 295 (800)
--- ----
Cash flows from financing activities
Net decrease in short-term borrowings - (1,619)
Proceeds from long-term debt 7,583 1,584
Repayments of long-term debt (122) (7,728)
Dividends paid (2,550) (2,492)
Stock options exercised, other 135 69
Excess tax benefit related to stock
option exercises 321 -
--- ---
Net cash provided by (used in)
financing activities 5,367 (10,186)
----- -------
Effect of exchange rate changes on
cash (1,124) (126)
Net decrease in cash and cash
equivalents (231) (2,915)
Cash and cash equivalents at the
beginning of the period 25,051 20,892
------ ------
Cash and cash equivalents at the end
of the period $24,820 $17,977
======= =======
SOURCE Quaker Chemical Corporation
