UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
FORM
8-K
CURRENT
REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE
SECURITIES EXCHANGE ACT OF 1934
March
3, 2010
Date
of Report (Date of earliest event reported)
QUAKER
CHEMICAL CORPORATION
(Exact
name of Registrant as specified in its charter)
Commission
File Number 001-12019
|
PENNSYLVANIA
|
No. 23-0993790
|
|
|
(State or other jurisdiction of
incorporation or organization)
|
(I.R.S. Employer
Identification No.)
|
|
One Quaker Park
901 E. Hector Street
Conshohocken, Pennsylvania 19428
|
|
(Address of principal executive offices)
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(Zip Code)
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(610) 832-4000
|
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(Registrant’s telephone number, including area code)
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Not
Applicable
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(Former
name or former address, if changed since last
report)
|
Check the
appropriate box below if the Form 8-K filing is intended to simultaneously
satisfy the filing obligation of the registrant under any of the following
provisions:
¨ Written
communications pursuant to Rule 425 under the Securities Act (17 CFR
230.425)
¨ Soliciting
material pursuant to Rule 14a-12 under the Exchange Act (17 CFR
240.14a-12)
¨ Pre-commencement
communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR
240.14d-2(b))
¨ Pre-commencement
communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR
240.13e-4(c))
INFORMATION
TO BE INCLUDED IN THE REPORT
Item
2.02. Results of Operations and Financial
Condition.
On March 3, 2010, Quaker Chemical
Corporation announced its results of operations for the fourth quarter and full
year ended December 31, 2009 in a press release, the text of which is included
as Exhibit 99.1 hereto.
Item
9.01. Financial Statements and
Exhibits.
The following exhibit is included as
part of this report:
|
Exhibit No.
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||
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99.1
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Press
Release of Quaker Chemical Corporation dated March 3,
2010.
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-2-
SIGNATURE
Pursuant
to the requirements of the Securities Exchange Act of 1934, the Registrant has
duly caused this report to be signed on its behalf by the undersigned hereunto
duly authorized.
|
QUAKER
CHEMICAL CORPORATION
Registrant
|
||
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Date: March
3, 2010
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By:
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/s/
Mark A. Featherstone
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Mark
A. Featherstone
Vice
President and
Chief
Financial Officer
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||
-3-
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For
Release:
Immediate
|
NEWS
|
Contact:
Mark
A. Featherstone
Vice
President and
Chief
Financial Officer
610-832-4160
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QUAKER
CHEMICAL ANNOUNCES FOURTH QUARTER AND FULL YEAR RESULTS
|
|
·
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Diluted
EPS of $0.71 in Q4 09, compared to a loss of $0.26 in Q4 08, and up 58%
compared to Q3 09
|
|
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·
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Debt
levels reduced 26% from December
2008
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|
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·
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$41.6
million record operating cash flow in
2009
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March 3,
2010
CONSHOHOCKEN,
PA – Quaker Chemical Corporation (NYSE:KWR) today announced net sales of $131.7
million and earnings per diluted share of $0.71 for the fourth quarter of 2009,
compared to sales of $116.2 million and a loss of $0.26 per diluted share for
the fourth quarter of 2008. Full year 2009 sales were $451.5 million
and earnings per diluted share were $1.47, compared to full year 2008 sales of
$581.6 million and earnings per diluted share of $1.05.
Michael
F. Barry, Chairman, Chief Executive Officer and President, stated, “We posted
strong fourth quarter results, especially in light of a continued challenging
global economic environment. A large driver of the sequential
improvement in our profitability was the strong steel industry demand in China,
Brazil and India. Steel and auto volumes, while gradually recovering,
remain depressed in North America and Europe, and profitability, while improved
from the prior year loss, is not where we need it to be longer
term. We also benefited from a low tax rate and volume increases
related to our customers’ inventory restocking which we do not expect to be
repeated to the same degree going forward. In 2010, we expect
year-over-year earnings growth as volumes gradually increase, but this will be
tempered by our continued investment in the BRIC countries and other key growth
initiatives.”
Mr. Barry
added, “While 2009 was a challenging year given the severe decline in volumes,
we were able to exit the year in a stronger financial and competitive
position. During 2009, we generated record operating cash flows and
paid down more than one-quarter of our debt. In addition, due to the
aggressive actions taken over the past year, our current EBITDA run rate now
exceeds pre-crisis levels. We also continued to invest in our
business as demonstrated by our Middletown, Ohio plant expansion and an upgrade
to our global ERP system. In summary, we are a financially stronger
company today than when we entered into the global crisis, and we believe we are
in a better competitive position as well.”
Fourth Quarter
Summary
Net sales
for the fourth quarter were $131.7 million, an increase of approximately 13%
compared to $116.2 million for the fourth quarter of 2008. The
increase in net sales was primarily due to volume increases in all of the
Company’s regions, as the Company began to recover from the global economic
downturn. Volumes increased 12%, partially offset by a 7% decline in
selling price and mix. Foreign exchange rates increased revenues by
approximately 8%. Volumes also continued to increase on a sequential
quarter basis by approximately 7% compared to the third quarter of
2009.
Gross
margins increased approximately $19.5 million, or 69%, compared to the fourth
quarter of 2008. The gross margin percentage of 36.1% represents
considerable improvement over the 24.2% reported in the fourth quarter of
2008. This margin expansion was primarily the result of higher
volumes, cost reduction actions taken, a more favorable raw material cost
environment and reduced automotive chemical management services revenue reported
on a gross basis. Gross margin as a percentage of sales declined 1.3
percentage points from the third quarter 2009 level due to higher costs related
to the start-up of the Middletown, Ohio plant expansion, increasing raw material
prices and mix.
- more
- -
Selling,
general and administrative expenses (“SG&A”) increased $8.9 million, or 33%,
compared to the fourth quarter of 2008. The increase was primarily
due to incentive compensation accruals in 2009 compared to reversals in
incentive compensation accruals in the prior year quarter related to the fourth
quarter 2008 loss, and accounted for approximately 75% of the
increase. Changes in foreign exchange rates accounted for the
majority of the remainder.
The
increase in other income is primarily due to larger foreign exchange losses in
the fourth quarter of 2008. The increase in equity in net income of
associated companies and net income attributable to noncontrolling interests was
due to stronger financial performances from those affiliates as they began to
recover from the global economic downturn.
Full Year
Summary
Net sales
for 2009 were $451.5 million, a decline of $130.2 million, or approximately 22%,
compared to $581.6 million for 2008. Volumes declined approximately
20%, reflective of the global economic downturn. Changes in foreign
exchange rates also decreased revenue by approximately 2%.
Gross
margin decreased by $6.2 million, or 4%, compared to 2008, reflective of the
above-noted volume declines which were tempered by gross margin percentage
expansion. The gross margin percentage increased to 34.7% in 2009,
compared to 28.0% in 2008, primarily due to cost reduction actions taken, a more
favorable raw material cost environment and reduced automotive chemical
management services revenue reported on a gross basis.
SG&A
decreased $10.7 million, or 8%, compared to 2008. Savings from cost
reduction programs, lower travel and entertainment expenses and lower
commissions, partially offset by higher incentive compensation accruals,
accounted for 64% of the decline. Changes in foreign exchange rates
accounted for the remainder.
In
response to the global economic downturn, the Company initiated restructuring
programs and incurred charges of approximately $2.3 million, or approximately
$0.14 per diluted share, in 2009 and $2.9 million, or approximately $0.18 per
diluted share, in 2008. The Company completed both initiatives in
2009.
The
Company incurred charges related to the former CEO’s supplemental retirement
plan of approximately $2.4 million in 2009, or approximately $0.14 per diluted
share, and expects to incur a final charge of approximately $1.3 million, or
approximately $0.07 per diluted share, in 2010. The CEO transition
costs incurred in 2008 were approximately $3.5 million, or approximately $0.22
per diluted share.
Other
income for 2009 includes a $1.2 million gain related to the disposition of
excess land in Europe, while other income for 2008 includes a net arbitration
award of approximately $1.0 million related to litigation with one of the former
owners of the Company’s Italian subsidiary. Lower foreign exchange
rate losses in 2009, compared to 2008, also contributed to the change in other
income in 2009. The increase in net interest expense was primarily
due to lower interest income, as lower average debt balances were offset by
higher interest rates.
The
Company’s effective tax rate for 2009 was 29.8%, compared to 29.9% in
2008. The 2009 effective tax rate reflects no tax expense being
provided for the land sale gain due to the utilization of net operating losses,
which were previously not benefited, while the 2008 effective tax rate includes
a tax refund of $0.5 million related to the Company’s increased investment in
China. 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.
Balance Sheet and Cash Flow
Items
The
Company’s net debt-to-total-capital ratio at December 31, 2009 was 20%, compared
to 32% as of December 31, 2008. The improvement in the Company’s net
debt-to-total-capital ratio was primarily due to record cash flows from
operations of $41.6 million. Operating cash flow continued to improve
by $6.9 million in the fourth quarter of 2009 compared to the prior quarter,
primarily due to higher net income.
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.
- more -
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
fourth quarter results is scheduled for March 4, 2010 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.
- more -
Quaker Chemical
Corporation
Condensed Consolidated
Statement of Operations
(Dollars in thousands,
except per share data and share amounts)
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(Unaudited)
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||||||||||||||||
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Three Months Ended December 31,
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Twelve Months Ended December 31,
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|||||||||||||||
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2009
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2008
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2009
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2008
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|||||||||||||
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Net
sales
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$ | 131,726 | $ | 116,229 | $ | 451,490 | $ | 581,641 | ||||||||
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Cost
of goods sold
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84,111 | 88,114 | 294,652 | 418,580 | ||||||||||||
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Gross
margin
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47,615 | 28,115 | 156,838 | 163,061 | ||||||||||||
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%
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36.1 | % | 24.2 | % | 34.7 | % | 28.0 | % | ||||||||
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Selling,
general and administrative expenses
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35,625 | 26,762 | 126,018 | 136,697 | ||||||||||||
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Restructuring
and related charges
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- | 2,916 | 2,289 | 2,916 | ||||||||||||
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CEO
transition costs
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- | - | 2,443 | 3,505 | ||||||||||||
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Operating
income (loss)
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11,990 | (1,563 | ) | 26,088 | 19,943 | |||||||||||
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%
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9.1 | % | -1.3 | % | 5.8 | % | 3.4 | % | ||||||||
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Other
income (expense), net
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382 | (657 | ) | 2,409 | 1,095 | |||||||||||
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Interest
expense, net
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(1,220 | ) | (1,204 | ) | (4,805 | ) | (4,409 | ) | ||||||||
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Income
(loss) before taxes and equity in net income of associated
companies
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11,152 | (3,424 | ) | 23,692 | 16,629 | |||||||||||
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Taxes
(tax benefit) on income (loss)
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3,002 | (871 | ) | 7,065 | 4,977 | |||||||||||
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Income
(loss) before equity in net income of associated companies
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8,150 | (2,553 | ) | 16,627 | 11,652 | |||||||||||
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Equity
in net income (loss) of associated companies
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223 | (102 | ) | 863 | 388 | |||||||||||
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Net
income (loss)
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8,373 | (2,655 | ) | 17,490 | 12,040 | |||||||||||
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Less:
Net income attributable to noncontrolling interest
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441 | 67 | 1,270 | 908 | ||||||||||||
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Net
income (loss) attributable to Quaker Chemical Corporation
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$ | 7,932 | $ | (2,722 | ) | $ | 16,220 | $ | 11,132 | |||||||
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%
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6.0 | % | -2.3 | % | 3.6 | % | 1.9 | % | ||||||||
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Per
share data:
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||||||||||||||||
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Net
income (loss) attributable to Quaker Chemical Corporation Common
Shareholders - basic
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$ | 0.72 | $ | (0.26 | ) | $ | 1.48 | $ | 1.06 | |||||||
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Net
income (loss) attributable to Quaker Chemical Corporation Common
Shareholders - diluted
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$ | 0.71 | $ | (0.26 | ) | $ | 1.47 | $ | 1.05 | |||||||
- more -
Quaker Chemical
Corporation
Condensed Consolidated
Balance Sheet
(Dollars in thousands,
except par value and share amounts)
|
(Unaudited)
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||||||||
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December 31,
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December 31,
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|||||||
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2009
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2008
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|||||||
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ASSETS
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||||||||
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Current
assets
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||||||||
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Cash
and cash equivalents
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$ | 25,051 | $ | 20,892 | ||||
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Construction
fund (restricted cash)
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2,358 | 8,281 | ||||||
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Accounts
receivable, net
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108,793 | 98,702 | ||||||
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Inventories,
net
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50,040 | 57,419 | ||||||
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Deferred
income taxes
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5,247 | 4,948 | ||||||
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Prepaid
expenses and other current assets
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7,409 | 10,584 | ||||||
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Total
current assets
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198,898 | 200,826 | ||||||
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Property,
plant and equipment, net
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67,426 | 60,945 | ||||||
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Goodwill
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46,515 | 40,997 | ||||||
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Other
intangible assets, net
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5,579 | 6,417 | ||||||
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Investments
in associated companies
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8,824 | 7,987 | ||||||
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Deferred
income taxes
|
31,692 | 34,179 | ||||||
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Other
assets
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39,537 | 34,088 | ||||||
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Total
assets
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$ | 398,471 | $ | 385,439 | ||||
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LIABILITIES
AND EQUITY
|
||||||||
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Current
liabilities
|
||||||||
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Short-term
borrowings and current portion of long-term debt
|
$ | 2,431 | $ | 4,631 | ||||
|
Accounts
payable
|
58,389 | 48,849 | ||||||
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Dividends
payable
|
2,550 | 2,492 | ||||||
|
Accrued
compensation
|
16,656 | 7,741 | ||||||
|
Accrued
pension and postretirement benefits
|
4,717 | 7,380 | ||||||
|
Other
current liabilities
|
15,224 | 12,771 | ||||||
|
Total
current liabilities
|
99,967 | 83,864 | ||||||
|
Long-term
debt
|
63,685 | 84,236 | ||||||
|
Deferred
income taxes
|
8,605 | 7,156 | ||||||
|
Accrued
pension and postretirement benefits
|
27,602 | 37,638 | ||||||
|
Other
non-current liabilities
|
42,317 | 42,670 | ||||||
|
Total
liabilities
|
242,176 | 255,564 | ||||||
|
Equity
|
||||||||
|
Common
stock, $1 par value; authorized 30,000,000 shares; issued 2009 -
11,085,549 shares
|
11,086 | 10,833 | ||||||
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Capital
in excess of par value
|
27,527 | 25,238 | ||||||
|
Retained
earnings
|
123,140 | 117,089 | ||||||
|
Accumulated
other comprehensive loss
|
(10,439 | ) | (27,237 | ) | ||||
|
Total
Quaker shareholders' equity
|
151,314 | 125,923 | ||||||
|
Noncontrolling
interest
|
4,981 | 3,952 | ||||||
|
Total
equity
|
156,295 | 129,875 | ||||||
|
Total
liabilities and equity
|
$ | 398,471 | $ | 385,439 | ||||
- more -
Quaker Chemical
Corporation
Condensed Consolidated
Statement of Cash Flows
For the twelve months ended
December 31,
(Dollars in
thousands)
|
(Unaudited)
|
||||||||
|
2009
|
2008
|
|||||||
|
Cash
flows from operating activities
|
||||||||
|
Net
income
|
$ | 17,490 | $ | 12,040 | ||||
|
Adjustments
to reconcile net income to net cash provided by operating
activities:
|
||||||||
|
Depreciation
|
9,525 | 10,879 | ||||||
|
Amortization
|
1,078 | 1,177 | ||||||
|
Equity
in net income of associated companies, net of dividends
|
(833 | ) | (275 | ) | ||||
|
Deferred
income tax
|
(505 | ) | 1,014 | |||||
|
Uncertain
tax positions (non-deferred portion)
|
1,266 | 211 | ||||||
|
Deferred
compensation and other, net
|
652 | 819 | ||||||
|
Stock-based
compensation
|
2,130 | 3,901 | ||||||
|
Restructuring
and related charges, net
|
2,289 | 2,916 | ||||||
|
Gain
on disposal of property, plant and equipment
|
(1,202 | ) | (10 | ) | ||||
|
Insurance
settlement realized
|
(1,608 | ) | (1,556 | ) | ||||
|
Pension
and other postretirement benefits
|
(7,929 | ) | (3,527 | ) | ||||
|
Increase
(decrease) in cash from changes in current assets and current liabilities,
net of acquisitions:
|
||||||||
|
Accounts
receivable
|
(6,816 | ) | 15,582 | |||||
|
Inventories
|
9,765 | (73 | ) | |||||
|
Prepaid
expenses and other current assets
|
(129 | ) | (181 | ) | ||||
|
Accounts
payable and accrued liabilities
|
16,540 | (27,892 | ) | |||||
|
Change
in restructuring liabilities
|
(4,473 | ) | (749 | ) | ||||
|
Estimated
taxes on income
|
4,363 | (885 | ) | |||||
|
Net
cash provided by operating activities
|
41,603 | 13,391 | ||||||
|
Cash
flows from investing activities
|
||||||||
|
Capital
expenditures
|
(13,834 | ) | (11,742 | ) | ||||
|
Payments
related to acquisitions
|
(1,975 | ) | (1,859 | ) | ||||
|
Proceeds
from disposition of assets
|
1,666 | 177 | ||||||
|
Insurance
settlement received and interest earned
|
5,204 | 5,306 | ||||||
|
Change
in restricted cash, net
|
2,327 | (12,031 | ) | |||||
|
Net
cash used in investing activities
|
(6,612 | ) | (20,149 | ) | ||||
|
Cash
flows from financing activities
|
||||||||
|
Net
(decrease) increase in short-term borrowings
|
(1,755 | ) | 743 | |||||
|
Proceeds
from long-term debt
|
3,500 | 10,000 | ||||||
|
Repayments
of long-term debt
|
(23,973 | ) | (3,401 | ) | ||||
|
Dividends
paid
|
(10,111 | ) | (9,503 | ) | ||||
|
Stock
options exercised, other
|
412 | 11,919 | ||||||
|
Distributions
to minority shareholders
|
(890 | ) | (404 | ) | ||||
|
Net
cash (used in) provided by financing activities
|
(32,817 | ) | 9,354 | |||||
|
Effect
of exchange rate changes on cash
|
1,985 | (1,899 | ) | |||||
|
Net
increase in cash and cash equivalents
|
4,159 | 697 | ||||||
|
Cash
and cash equivalents at the beginning of the period
|
20,892 | 20,195 | ||||||
|
Cash
and cash equivalents at the end of the period
|
$ | 25,051 | $ | 20,892 | ||||