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
October
27, 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)
|
(I.R.S.
Employer
Identification
No.)
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One
Quaker Park
901
E. Hector Street
Conshohocken,
Pennsylvania 19428-2380
(Address
of principal executive offices)
(Zip
Code)
(610)
832-4000
(Registrant’s
telephone number, including area code)
Not
Applicable
(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
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Item
2.02.
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Results
of Operations and Financial
Condition.
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On October 27, 2009, Quaker Chemical
Corporation announced its results of operations for the third quarter ended
September 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 October 27,
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.
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QUAKER
CHEMICAL CORPORATION
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||
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Registrant
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||
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Date:
October 27, 2009
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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
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NEWS
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Contact:
Mark
A. Featherstone
Vice
President and
Chief
Financial Officer
610-832-4160
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QUAKER
CHEMICAL ANNOUNCES HIGHER THIRD QUARTER EARNINGS
|
|
·
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Diluted
EPS of $0.45, up 55% compared to 2Q 09, and up 10% compared to 3Q
08
|
|
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·
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Debt
levels reduced 24% from December
2008
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|
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·
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$34.7
million year-to-date operating cash
flow
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October
27, 2009
CONSHOHOCKEN,
PA – Quaker Chemical Corporation (NYSE:KWR) today announced net sales of $118.9
million and diluted earnings per share of $0.45 for the third quarter of
2009.
Michael
F. Barry, Chairman, Chief Executive Officer and President, stated, "We had a
strong quarter in a very challenging global environment as our volumes continue
to be well below prior periods. Our aggressive actions over the past
year have enabled our profitability despite the lower volumes caused by the
global recession. In the third quarter, we experienced a modest
recovery in most end markets as our volumes improved from the second
quarter. Over the longer term, we expect our volumes to continue to
increase but it will take time to get back to historical levels as there is
still a great deal of uncertainty in our end markets, especially over the
next several quarters. While I am pleased with the sequential
improvement in our quarterly earnings over the past year, our profitability is
still not at the level where we need it to be over the longer
term."
Mr. Barry
added, "The third quarter was also another strong quarter in 2009 for cash flow
generation. Since the beginning of the year, we generated nearly $35
million of operating cash flow and have now paid down our debt by
24%. Over this challenging period, we have also maintained our
dividend and are near completion of the largest capital expenditure in our
history — our Middletown, Ohio plant expansion. We remain committed
to investing in our key growth initiatives for our customers and continue to be
confident in our future."
Third Quarter
Summary
Net sales
for the third quarter were $118.9 million, down 25% from $159.5 million for the
third quarter of 2008. The decrease in net sales was primarily due to
volume declines in all of the Company’s regions and market segments, with the
exception of modest growth in Asia/Pacific, as the global economic downturn
continued to impact the Company. Volumes were down approximately 22%
and foreign exchange rate translation decreased net sales by approximately
3%. However, third quarter 2009 volumes were approximately 18% higher
than the second quarter of 2009.
Gross
margins were down approximately $2.1 million, or 4%, compared to the third
quarter of 2008. The gross margin percentage of 37.4% represents
considerable improvement over the 29.2% reported for the third quarter of
2008. This margin percentage expansion was primarily the result of
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 $3.6 million, or 9%,
compared to the third quarter of 2008. Savings from the Company’s
restructuring programs, lower commissions, lower travel and entertainment
expenses, and other cost savings measures, partially offset by the timing of
incentive compensation accruals, accounted for more than 70% of the
decline. Changes in foreign exchange rates accounted for the
remainder.
The
Company incurred charges related to the former CEO’s supplemental retirement
plan of approximately $2.4 million for the first nine months of 2009, which
represents the total amount for 2009, and expects to incur a final charge of
$1.0 million in 2010.
- more
- -
The CEO
transition costs incurred in the third quarter of 2009 totaled approximately
$1.3 million, or approximately $0.07 per diluted share, compared to $1.6
million, or approximately $0.10 per diluted share, for the third quarter of
2008.
The
increase in equity income is due to stronger financial performance from all the
Company’s associated companies.
Year-to-Date
Summary
Net sales
for the first nine months of 2009 were $319.8 million, down 31% from $465.4
million for the first nine months of 2008. 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 30%, which were partially
offset by a favorable 3% increase in selling price and mix. Foreign
exchange rate translation also decreased revenues by approximately
4%.
Gross
margins were down approximately $25.7 million, or 19%, compared to the first
nine months of 2008, reflective of the above-noted volume
declines. The gross margin percentage improved to 34.2% for the first
nine months of 2009 from 29.0% for the first nine months of
2008. This gross margin percentage expansion from the first nine
months of 2008 was primarily the result of 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 $19.5 million, or 18%, compared to the first nine months 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.
Other
income for the first nine months of 2009 includes a $1.2 million gain related to
the disposition of excess land in Europe, while other income for the first nine
months of 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. The increase in net interest expense was primarily due to
lower interest income, as lower average debt balances were offset by higher
interest rates.
Balance Sheet and Cash Flow
Items
The
Company’s net debt-to-total-capital ratio at September 30, 2009 was 21%,
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 $34.7 million. Operating cash flow improved
$7.9 million, compared to the second quarter of 2009, largely due to higher net
income and further improvements in working capital.
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
third quarter results is scheduled for October 28, 2009 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 Income
(Dollars in thousands,
except per share data)
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(Unaudited)
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||||||||||||||||
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Three Months Ended September 30,
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Nine Months Ended September 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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$ | 118,922 | $ | 159,506 | $ | 319,764 | $ | 465,412 | ||||||||
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Cost
of goods sold
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74,450 | 112,981 | 210,541 | 330,466 | ||||||||||||
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Gross
margin
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44,472 | 46,525 | 109,223 | 134,946 | ||||||||||||
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%
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37.4 | % | 29.2 | % | 34.2 | % | 29.0 | % | ||||||||
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Selling,
general and administrative expenses
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34,646 | 38,278 | 90,393 | 109,935 | ||||||||||||
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Restructuring
and related charges
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- | - | 2,289 | - | ||||||||||||
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CEO
Transition Costs
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1,250 | 1,625 | 2,443 | 3,505 | ||||||||||||
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Operating
income
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8,576 | 6,622 | 14,098 | 21,506 | ||||||||||||
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%
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7.2 | % | 4.2 | % | 4.4 | % | 4.6 | % | ||||||||
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Other
income (expense), net
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217 | (96 | ) | 2,027 | 1,752 | |||||||||||
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Interest
expense, net
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(1,178 | ) | (1,044 | ) | (3,585 | ) | (3,205 | ) | ||||||||
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Income
before taxes and equity in net income of associated
companies
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7,615 | 5,482 | 12,540 | 20,053 | ||||||||||||
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Taxes
on income
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2,747 | 967 | 4,063 | 5,848 | ||||||||||||
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Income
before equity in net income of associated companies
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4,868 | 4,515 | 8,477 | 14,205 | ||||||||||||
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Equity
in net income of associated companies
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555 | 191 | 640 | 490 | ||||||||||||
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Net
income
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5,423 | 4,706 | 9,117 | 14,695 | ||||||||||||
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Less:
Net income attributable to noncontrolling interest
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371 | 266 | 829 | 841 | ||||||||||||
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Net
income attributable to Quaker Chemical Corporation
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$ | 5,052 | $ | 4,440 | $ | 8,288 | $ | 13,854 | ||||||||
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%
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4.2 | % | 2.8 | % | 2.6 | % | 3.0 | % | ||||||||
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Per share data:
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||||||||||||||||
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Net
income attributable to Quaker Chemical Corporation, Common Shareholders -
basic
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$ | 0.46 | $ | 0.41 | $ | 0.76 | $ | 1.33 | ||||||||
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Net
income attributable to Quaker Chemical Corporation, Common
Shareholders - diluted
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$ | 0.45 | $ | 0.41 | $ | 0.75 | $ | 1.31 | ||||||||
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- -
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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September
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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$ | 25,369 | $ | 20,892 | ||||
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Construction
fund (restricted cash)
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3,805 | 8,281 | ||||||
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Accounts
receivable, net
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100,926 | 98,702 | ||||||
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Inventories,
net
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47,163 | 57,419 | ||||||
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Prepaid
expenses and other current assets
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11,229 | 15,532 | ||||||
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Total
current assets
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188,492 | 200,826 | ||||||
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Property,
plant and equipment, net
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66,504 | 60,945 | ||||||
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Goodwill
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46,362 | 40,997 | ||||||
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Other
intangible assets, net
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5,852 | 6,417 | ||||||
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Investments
in associated companies
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8,676 | 7,987 | ||||||
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Deferred
income taxes
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36,456 | 34,179 | ||||||
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Other
assets
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38,776 | 34,088 | ||||||
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Total
assets
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$ | 391,118 | $ | 385,439 | ||||
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LIABILITIES
AND SHAREHOLDERS' EQUITY
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||||||||
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Current
liabilities
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||||||||
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Short-term
borrowings and current portion of long-term debt
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$ | 2,835 | $ | 4,631 | ||||
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Accounts
and other payables
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55,495 | 51,341 | ||||||
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Accrued
restructuring and related activities
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232 | 2,198 | ||||||
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Accrued
compensation
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13,652 | 7,741 | ||||||
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Accrued
pension and postretirement benefits
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1,869 | 7,380 | ||||||
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Other
current liabilities
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16,114 | 10,573 | ||||||
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Total
current liabilities
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90,197 | 83,864 | ||||||
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Long-term
debt
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64,875 | 84,236 | ||||||
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Deferred
income taxes
|
9,055 | 7,156 | ||||||
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Accrued
pension and postretirement benefits
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35,946 | 37,638 | ||||||
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Other
non-current liabilities
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44,746 | 42,670 | ||||||
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Total
liabilities
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244,819 | 255,564 | ||||||
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Quaker
shareholders' equity
|
||||||||
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Common
stock, $1 par value; authorized 30,000,000 shares; issued 11,072,352
shares
|
11,072 | 10,833 | ||||||
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Capital
in excess of par value
|
26,937 | 25,238 | ||||||
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Retained
earnings
|
117,757 | 117,089 | ||||||
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Accumulated
other comprehensive loss
|
(14,515 | ) | (27,237 | ) | ||||
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Total
Quaker shareholders' equity
|
141,251 | 125,923 | ||||||
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Noncontrolling
interest
|
5,048 | 3,952 | ||||||
|
Total
shareholders' equity
|
146,299 | 129,875 | ||||||
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Total
liabilities and shareholders' equity
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$ | 391,118 | $ | 385,439 | ||||
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- -
Quaker Chemical
Corporation
Condensed Consolidated
Statement of Cash Flows
For the nine months ended
September 30,
(Dollars in
thousands)
|
(Unaudited)
|
||||||||
|
2009
|
2008
|
|||||||
|
Cash
flows from operating activities
|
||||||||
|
Net
income
|
$ | 9,117 | $ | 14,695 | ||||
|
Adjustments
to reconcile net income to net cash provided by operating
activities:
|
||||||||
|
Depreciation
|
6,948 | 8,279 | ||||||
|
Amortization
|
797 | 906 | ||||||
|
Equity
in net income of associated companies, net of dividends
|
(610 | ) | (490 | ) | ||||
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Deferred
compensation and other, net
|
(30 | ) | 840 | |||||
|
Stock-based
compensation
|
1,585 | 3,642 | ||||||
|
Restructuring
and related charges
|
2,289 | - | ||||||
|
Gain
on disposal of property, plant and equipment
|
(1,194 | ) | (3 | ) | ||||
|
Insurance
settlement realized
|
(1,104 | ) | (981 | ) | ||||
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Pension
and other postretirement benefits
|
(5,877 | ) | (3,541 | ) | ||||
|
Increase
(decrease) in cash from changes in current assets and current liabilities,
net of acquisitions:
|
||||||||
|
Accounts
receivable
|
951 | (3,723 | ) | |||||
|
Inventories
|
12,547 | (8,550 | ) | |||||
|
Prepaid
expenses and other current assets
|
3,283 | (863 | ) | |||||
|
Accounts
payable and accrued liabilities
|
10,273 | 788 | ||||||
|
Change
in restructuring liabilities
|
(4,240 | ) | - | |||||
|
Net
cash provided by operating activities
|
34,735 | 10,999 | ||||||
|
Cash
flows from investing activities
|
||||||||
|
Capital
expenditures
|
(9,811 | ) | (9,198 | ) | ||||
|
Payments
related to acquisitions
|
(1,000 | ) | (1,000 | ) | ||||
|
Proceeds
from disposition of assets
|
1,640 | 139 | ||||||
|
Insurance
settlement received and interest earned
|
5,164 | 5,234 | ||||||
|
Change
in restricted cash, net
|
416 | (13,578 | ) | |||||
|
Net
cash used in investing activities
|
(3,591 | ) | (18,403 | ) | ||||
|
Cash
flows from financing activities
|
||||||||
|
Net
decrease in short-term borrowings
|
(1,796 | ) | (1,389 | ) | ||||
|
Proceeds
from long-term debt
|
3,500 | 10,000 | ||||||
|
Repayments
of long-term debt
|
(22,875 | ) | (3,165 | ) | ||||
|
Dividends
paid
|
(7,565 | ) | (6,994 | ) | ||||
|
Stock
options exercised, other
|
353 | 13,974 | ||||||
|
Distributions
to noncontrolling shareholders
|
(274 | ) | (252 | ) | ||||
|
Net
cash (used in) provided by financing activities
|
(28,657 | ) | 12,174 | |||||
|
Effect
of exchange rate changes on cash
|
1,990 | (899 | ) | |||||
|
Net
increase in cash and cash equivalents
|
4,477 | 3,871 | ||||||
|
Cash
and cash equivalents at the beginning of the period
|
20,892 | 20,195 | ||||||
|
Cash
and cash equivalents at the end of the period
|
$ | 25,369 | $ | 24,066 | ||||