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
July
29, 2009
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)
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(I.R.S.
Employer
Identification
No.)
|
|
One
Quaker Park
901
Hector Street
Conshohocken,
Pennsylvania 19428
|
|
(Address
of principal executive offices)
|
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(Zip
Code)
|
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(610)
832-4000
|
|
(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:
o Written communications
pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
o Soliciting material
pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
o Pre-commencement
communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR
240.14d-2(b))
o 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.
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Results
of Operations and Financial
Condition.
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On July
29, 2009, Quaker Chemical Corporation announced its results of operations for
the second quarter ended June 30, 2009 in a press release, the text of which is
included as Exhibit 99.1 hereto.
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Item
9.01.
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Financial
Statements and Exhibits.
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The
following exhibit is included as part of this report:
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Exhibit No.
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||
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99.1
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Press
Release of Quaker Chemical Corporation dated July 29,
2009.
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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 | |||
|
Date:
July 29, 2009
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By:
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/s/
Mark A. Featherstone
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|
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Mark
A. Featherstone
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|||
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Vice
President and
|
|
||
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Chief
Financial Officer
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|||
-3-
 |
||
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For
Release:
Immediate
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NEWS
|
Contact:
Mark
A. Featherstone
Vice President
and
Chief
Financial Officer
610-832-4160
|
QUAKER
CHEMICAL ANNOUNCES SECOND QUARTER RESULTS
|
·
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$0.29
diluted EPS compared to breakeven first quarter
2009
|
|
·
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Debt
levels reduced 20% from December
2008
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·
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Year-to-date
operating cash flow triple 2008
level
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July 29,
2009
CONSHOHOCKEN,
PA – Quaker Chemical Corporation (NYSE:KWR) today announced net sales of $102.3
million and diluted earnings per share of $0.29 for the second quarter of
2009. These results include a $1.2 million charge, or approximately
$0.07 per diluted share, related to the retirement of the Company’s former chief
executive officer.
Michael
F. Barry, Chairman, Chief Executive Officer and President, commented, "We are
pleased with our second quarter results, especially in light of the substantial
decline in volumes from last year due to the global economic
crisis. The significant improvement in our earnings from the previous
two quarters is primarily driven by our aggressive cost reduction actions and
margin improvement. While we are encouraged by emerging signs of
stability in our end markets, we believe the rebound in our end markets will be
gradual, with only very modest volume increases occurring during the second half
of the year.”
Mr. Barry
continued, "I am also very pleased with our strong cash generation in the
quarter as our net debt-to-capital ratio is at its lowest level since the third
quarter of 2003. With the high cash flow generation, we have reduced
our debt levels by 20% since the beginning of the year, maintained our dividend,
and continued to invest for the future -- an example being our Middletown, Ohio
plant expansion.”
Second Quarter
Summary
Net sales
for the second quarter were $102.3 million, down 35% from $158.2 million for the
second quarter of 2008. The decrease in net sales was primarily due
to volume declines in all of the Company’s regions and market segments, as the
global economic downturn continued to impact the Company. Volumes
were down approximately 36%, which were partially offset by a favorable 6%
increase in selling price and mix. Foreign exchange rate translation
also decreased net sales by approximately 5%.
Gross
margins were down approximately $8.7 million, or 20%, compared to the second
quarter of 2008, reflective of the above- noted volume declines. The
gross margin percentage of 35.2% represents a considerable improvement over both
the 28.3% reported for the second quarter of 2008 and the 29.1% reported for the
first quarter of 2009. This margin percentage expansion was primarily
the result of the cost reduction actions taken, a more favorable raw material
cost environment, and reduced automotive chemical management services revenue
reported on a gross basis.
Selling,
general and administrative expenses (“SG&A”) decreased $8.1 million, or 22%,
compared to the second quarter of 2008. Savings from the Company’s
restructuring programs, lower commissions, lower travel and entertainment
expenses, and other cost savings measures accounted for more than 70% of the
decline. Changes in foreign exchange rates accounted for the
remainder.
- more
- -
The
Company expects to incur CEO transition costs of $2.4 million for the full year
2009 and $1.0 million in 2010 related to the former CEO’s supplemental
retirement income plan. Costs incurred in the second quarter of 2009
totaled $1.2 million, or approximately $0.07 per diluted share, compared to $1.9
million, or approximately $0.12 per diluted share for the second quarter of
2008.
Other
income for the second quarter of 2008 includes a net arbitration award of
approximately $1.0 million, or approximately $0.04 per diluted share, related to
litigation with one of the former owners of the Company’s Italian
subsidiary. The increase in net interest expense is primarily due to
higher average interest rates and lower interest income.
Year-to-Date
Summary
Net sales
for the first half of 2009 were $200.8 million, down 34% from $305.9 million for
the first half of 2008. As with the quarterly comparisons, the
decrease in net sales was primarily due to volume declines in all of the
Company’s regions and market segments. Volumes were down
approximately 34%, which were partially offset by a favorable 5% increase in
selling price and mix. Foreign exchange rate translation also
decreased net sales by approximately 5%.
Gross
margins were down approximately $23.7 million, or 26.8%, compared to the first
half of 2008, reflective of the above- noted volume declines. The
gross margin percentage improved to 32.2% for the first half of 2009 from 28.9%
for the first half of 2008. The margin percentage expansion from the
first half of 2008 was primarily the result of the 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 $15.9 million, or 22%, compared to the first half of
2008. Savings from the Company’s restructuring programs, lower
incentive compensation, lower commissions, lower travel and entertainment
expenses, and other cost savings measures accounted for more than 70% of the
decline. Changes in foreign exchange rates accounted for the
remainder.
Other
income for the first half of 2009 includes a $1.2 million gain related to the
disposition of land in Europe, while other income for the first half of 2008
includes the net arbitration award noted above. The increase in net
interest expense is primarily due to higher average interest rates and lower
interest income.
Balance Sheet and Cash Flow
Items
The
Company’s net debt-to-total-capital ratio was 23%, compared to 32% as of
December 31, 2008. The improvement in the Company’s net
debt-to-total-capital ratio was primarily due to year-to-date cash flows from
operations of $26.8 million. Operating cash flow improved $18.6
million compared to the first quarter, largely due to reduced working capital
balances.
During
the second quarter, General Motors Corporation and Chrysler LLC, two of the
Company's largest customers, filed for and subsequently emerged from
bankruptcy. The Company's contracts with those customers were assumed
by their successor companies. To date, the Company has received
payments representing more than 85 percent of these pre-bankruptcy accounts
receivable, and the Company has been notified that its remaining pre-bankruptcy
invoices will be paid.
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
second quarter results is scheduled for July 30, 2009 at 3:30 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 Income
(Dollars in thousands,
except per share data)
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(Unaudited)
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||||||||||||||||
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Three
Months Ended June 30,
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Six
Months Ended June 30,
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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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$ | 102,335 | $ | 158,188 | $ | 200,842 | $ | 305,906 | ||||||||
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Cost
of goods sold
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66,298 | 113,402 | 136,091 | 217,485 | ||||||||||||
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Gross
margin
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36,037 | 44,786 | 64,751 | 88,421 | ||||||||||||
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%
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35.2 | % | 28.3 | % | 32.2 | % | 28.9 | % | ||||||||
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Selling,
general and administrative expenses
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29,050 | 37,153 | 55,747 | 71,657 | ||||||||||||
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Restructuring
and related charges
|
- | - | 2,289 | - | ||||||||||||
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CEO
Transition Costs
|
1,193 | 1,880 | 1,193 | 1,880 | ||||||||||||
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Operating
income
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5,794 | 5,753 | 5,522 | 14,884 | ||||||||||||
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%
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5.7 | % | 3.6 | % | 2.7 | % | 4.9 | % | ||||||||
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Other
income, net
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356 | 1,687 | 1,810 | 1,848 | ||||||||||||
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Interest
expense, net
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(1,318 | ) | (979 | ) | (2,407 | ) | (2,161 | ) | ||||||||
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Income
before taxes
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4,832 | 6,461 | 4,925 | 14,571 | ||||||||||||
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Taxes
on income
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1,567 | 2,116 | 1,316 | 4,881 | ||||||||||||
| 3,265 | 4,345 | 3,609 | 9,690 | |||||||||||||
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Equity
in net income of associated companies
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227 | 187 | 85 | 299 | ||||||||||||
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Net
income
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3,492 | 4,532 | 3,694 | 9,989 | ||||||||||||
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Less:
Net income attributable to noncontrolling interest
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258 | 211 | 458 | 575 | ||||||||||||
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Net
income attributable to Quaker Chemical Corporation
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$ | 3,234 | $ | 4,321 | $ | 3,236 | $ | 9,414 | ||||||||
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%
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3.2 | % | 2.7 | % | 1.6 | % | 3.1 | % | ||||||||
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Per share
data:
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||||||||||||||||
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Net
income attributable to Quaker Chemical Corporation - basic
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$ | 0.29 | $ | 0.42 | $ | 0.29 | $ | 0.91 | ||||||||
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Net
income attributable to Quaker Chemical Corporation -
diluted
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$ | 0.29 | $ | 0.41 | $ | 0.29 | $ | 0.90 | ||||||||
- more -
Quaker Chemical
Corporation
Condensed Consolidated
Balance Sheet
(Dollars in thousands,
except par value and share amounts)
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(Unaudited)
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||||||||
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June
30,
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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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$ | 24,605 | $ | 20,892 | ||||
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Construction
fund (restricted cash)
|
6,384 | 8,281 | ||||||
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Accounts
receivable, net
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86,675 | 98,702 | ||||||
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Inventories,
net
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43,405 | 57,419 | ||||||
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Prepaid
expenses and other current assets
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10,759 | 15,532 | ||||||
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Total
current assets
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171,828 | 200,826 | ||||||
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Property,
plant and equipment, net
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61,463 | 60,945 | ||||||
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Goodwill
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44,610 | 40,997 | ||||||
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Other
intangible assets, net
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6,027 | 6,417 | ||||||
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Investments
in associated companies
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7,904 | 7,987 | ||||||
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Deferred
income taxes
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37,023 | 34,179 | ||||||
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Other
assets
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38,735 | 34,088 | ||||||
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Total
assets
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$ | 367,590 | $ | 385,439 | ||||
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LIABILITIES
AND SHAREHOLDERS' EQUITY
|
||||||||
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Current
liabilities
|
||||||||
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Short-term
borrowings and current portion of long-term debt
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$ | 2,692 | $ | 4,631 | ||||
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Accounts
and other payables
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43,755 | 51,341 | ||||||
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Accrued
restructuring and related activities
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590 | 2,198 | ||||||
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Accrued
compensation
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7,325 | 7,741 | ||||||
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Accrued
pension and postretirement benefits
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4,919 | 7,380 | ||||||
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Other
current liabilities
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13,826 | 10,573 | ||||||
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Total
current liabilities
|
73,107 | 83,864 | ||||||
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Long-term
debt
|
68,699 | 84,236 | ||||||
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Deferred
income taxes
|
8,348 | 7,156 | ||||||
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Accrued
pension and postretirement benefits
|
36,008 | 37,638 | ||||||
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Other
non-current liabilities
|
44,208 | 42,670 | ||||||
|
Total
liabilities
|
230,370 | 255,564 | ||||||
|
Quaker
shareholders' equity
|
||||||||
|
Common
stock, $1 par value; authorized 30,000,000 shares; issued 11,049,880
shares
|
11,050 | 10,833 | ||||||
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Capital
in excess of par value
|
26,210 | 25,238 | ||||||
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Retained
earnings
|
115,254 | 117,089 | ||||||
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Accumulated
other comprehensive loss
|
(19,987 | ) | (27,237 | ) | ||||
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Total
Quaker shareholders' equity
|
132,527 | 125,923 | ||||||
|
Noncontrolling
interest
|
4,693 | 3,952 | ||||||
|
Total
shareholders' equity
|
137,220 | 129,875 | ||||||
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Total
liabilities and shareholders' equity
|
$ | 367,590 | $ | 385,439 | ||||
- more -
Quaker Chemical
Corporation
Condensed Consolidated
Statement of Cash Flows
For the six months ended
June 30,
(Dollars in
thousands)
|
(Unaudited)
|
||||||||
|
2009
|
2008
|
|||||||
|
Cash
flows from operating activities
|
||||||||
|
Net
income
|
$ | 3,694 | $ | 9,989 | ||||
|
Adjustments
to reconcile net income to net cash provided by operating
activities:
|
|
|||||||
|
Depreciation
|
4,801 | 5,457 | ||||||
|
Amortization
|
522 | 606 | ||||||
|
Equity
in net income of associated companies, net of dividends
|
(85 | ) | (299 | ) | ||||
|
Deferred
compensation and other, net
|
(1,521 | ) | 2,498 | |||||
|
Stock-based
compensation
|
927 | 1,762 | ||||||
|
Restructuring
and related charges
|
2,289 | - | ||||||
|
Gain
on disposal of property, plant and equipment
|
(1,193 | ) | (76 | ) | ||||
|
Insurance
settlement realized
|
(610 | ) | (685 | ) | ||||
|
Pension
and other postretirement benefits
|
(3,799 | ) | (3,311 | ) | ||||
|
Increase
(decrease) in cash from changes in current assets and current liabilities,
net of acquisitions:
|
||||||||
|
Accounts
receivable
|
13,498 | 1,013 | ||||||
|
Inventories
|
15,022 | (3,806 | ) | |||||
|
Prepaid
expenses and other current assets
|
3,481 | (885 | ) | |||||
|
Accounts
payable and accrued liabilities
|
(6,354 | ) | (4,146 | ) | ||||
|
Change
in restructuring liabilities
|
(3,885 | ) | - | |||||
|
Net
cash provided by operating activities
|
26,787 | 8,117 | ||||||
|
Cash
flows from investing activities
|
||||||||
|
Capital
expenditures
|
(5,078 | ) | (7,038 | ) | ||||
|
Payments
related to acquisitions
|
(1,000 | ) | (1,000 | ) | ||||
|
Proceeds
from disposition of assets
|
1,617 | 117 | ||||||
|
Insurance
settlement received and interest earned
|
5,100 | 5,178 | ||||||
|
Change
in restricted cash, net
|
(2,593 | ) | (13,818 | ) | ||||
|
Net
cash used in investing activities
|
(1,954 | ) | (16,561 | ) | ||||
|
Cash
flows from financing activities
|
||||||||
|
Net
decrease in short-term borrowings
|
(1,716 | ) | (1,488 | ) | ||||
|
Proceeds
from long-term debt
|
1,584 | 10,000 | ||||||
|
Repayments
of long-term debt
|
(17,252 | ) | (2,120 | ) | ||||
|
Dividends
paid
|
(5,022 | ) | (4,550 | ) | ||||
|
Stock
options exercised, other
|
262 | 7,628 | ||||||
|
Distributions
to noncontrolling shareholders
|
(90 | ) | - | |||||
|
Net
cash (used in) provided by financing activities
|
(22,234 | ) | 9,470 | |||||
|
Effect
of exchange rate changes on cash
|
1,114 | 949 | ||||||
|
Net
increase in cash and cash equivalents
|
3,713 | 1,975 | ||||||
|
Cash
and cash equivalents at the beginning of the period
|
20,892 | 20,195 | ||||||
|
Cash
and cash equivalents at the end of the period
|
$ | 24,605 | $ | 22,170 | ||||