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
May
1, 2007
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
Hector Street
Conshohocken,
Pennsylvania 19428
|
|
(Address
of principal executive offices)
|
|
(Zip
Code)
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(610)
832-4000
|
|
(Registrant’s
telephone number, including area code)
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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
Item
2.02. Results
of Operations and Financial Condition.
On
May 1,
2007, Quaker Chemical Corporation announced its results of operations for the
first quarter ended March 31, 2007 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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99.1
|
Press
Release of Quaker Chemical Corporation dated May 1, 2007.
|
-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 thereunto
duly authorized.
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QUAKER
CHEMICAL CORPORATION
Registrant
|
|||
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Date:
May 2, 2007
|
By:
|
/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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|||
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For
Release:
Immediate
|
NEWS
|
Contact:
Mark
A. Featherstone
Vice
President and
Chief
Financial Officer
610-832-4160
|
|
QUAKER
CHEMICAL ANNOUNCES RECORD QUARTERLY SALES
AND
SIGNIFICANTLY IMPROVED EARNINGS FOR FIRST QUARTER 2007
May
1,
2007
CONSHOHOCKEN,
PA - Quaker Chemical Corporation (NYSE:KWR) today announced record quarterly
sales for the first quarter 2007 of $124.9 million and net income of $3.5
million, a sales increase of 13.7%, and a net income increase of 39%, compared
to the first quarter 2006. Earnings per share increased to $0.35 per diluted
share from $0.26 per diluted share for the first quarter 2006.
First
Quarter 2007 Summary
Net
sales
for the first quarter were $124.9 million, compared to $109.8 for the first
quarter of 2006. The increase in net sales was primarily attributable to a
combination of higher sales prices and volume growth. Volume growth was mainly
attributable to double digit sales growth in China and higher revenue related
to
the Company’s CMS channel. Foreign exchange rate translation also increased
revenues by approximately 4% for the first quarter of 2007, compared to the
same
period in 2006. Selling price increases were realized across all regions and
market segments, in part, as an ongoing effort to offset higher raw material
costs. CMS revenues were higher due to additional CMS accounts and the renewal
and restructuring of several of the Company’s CMS contracts.
Gross
margin as a percentage of sales was 30.9% for the first quarter of 2007,
compared to 29.6% for the first quarter of 2006. Higher selling prices and
additional contribution from the Company’s CMS channel helped improve margins.
On a sequential basis, however, the first quarter 2007 gross margin percentage
was below the fourth quarter 2006 gross margin percentage of 32.3%, as higher
CMS service revenues, which include revenues from third-party product sales
to
CMS accounts, have lower gross margin percentages than traditional product
sales. This change in sales mix decreased gross margin as a percentage of sales
by approximately 1.5 percentage points compared to the fourth quarter of 2006.
Selling,
general and administrative expenses for the quarter increased $4.6 million,
as
compared to the first quarter of 2006. Foreign exchange rate translation
accounted for approximately $1.0 million of the increase over the first quarter
of 2006. Also negatively affecting the comparison with the prior year is a
pension gain of $0.9 million recorded in the first quarter of 2006 due to a
legislative change. The remainder of the increase was due to continued planned
spending in higher growth areas, primarily China, higher commissions as a result
of higher sales, and increased incentive compensation as a result of higher
earnings.
The
increase in other income was the result of higher foreign exchange rate losses
recorded in the prior year. The increase in net interest expense is attributable
to higher average borrowings and higher interest rates.
-
more
-
The
Company’s effective tax rate was 32.9% for the first quarter of 2007, compared
to 36.2% for the first quarter of 2006. The decrease in the effective tax rate
was primarily attributable to a shifting of income to lower rate tax
jurisdictions, which was offset in part by the Company’s first quarter 2007
adoption of FASB Interpretation No. 48, “Accounting for Uncertainty in Income
Taxes” (“FIN 48”).
Balance
Sheet and Cash Flow Items
The
Company’s net debt has increased from December 31, 2006, primarily to fund
working capital needs driven by higher sales late in the quarter and the
start-up of a new operation in China. The Company’s net debt-to-total capital
ratio was 43% at March 31, 2007, compared to 40% at December 31, 2006.
In
connection with the adoption of FIN 48, the Company recorded a non-cash charge
to shareholders’ equity of $5.5 million, which negatively impacted the Company’s
net debt-to-total capital ratio by approximately 1 percentage point.
Ronald
J.
Naples, Chairman and Chief Executive Officer, commented, “We had a fine first
quarter resulting from increased contributions from strategic initiatives such
as Asia/Pacific growth and CMS, as well as our continued actions on the pricing
front. Virtually worldwide, we had solid results in the first quarter. Even
though sequential quarterly gross margin percentage slipped a bit, due primarily
to sales mix, we were able to achieve higher gross margin in dollar terms even
as raw material costs ran considerably ahead of last year. This flowed from
business expansion efforts and, importantly, from our work with customers to
recognize the value we deliver as well as our cost realities. We continue to
invest where we think we can get growth and feel good about our long-term future
and the prospects of continuing earnings improvement in 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 May 2, 2007 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.
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more
-
|
Quaker
Chemical Corporation
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|||||||
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Condensed
Consolidated Statement of Income
|
|||||||
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(Dollars
in thousands, except per share data and share
amounts)
|
|
(Unaudited)
|
|||||||
|
Three
Months ended March 31,
|
|||||||
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2007
|
2006
|
||||||
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Net
sales
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$
|
124,891
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$
|
109,816
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|||
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Cost
of goods sold
|
86,345
|
77,331
|
|||||
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Gross
margin
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38,546
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32,485
|
|||||
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%
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30.9
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%
|
29.6
|
%
|
|||
|
Selling,
general and administrative
|
31,919
|
27,362
|
|||||
|
Operating
income
|
6,627
|
5,123
|
|||||
|
%
|
5.3
|
%
|
4.7
|
%
|
|||
|
Other
income, net
|
327
|
128
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|||||
|
Interest
expense, net
|
(1,350
|
)
|
(965
|
)
|
|||
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Income
before taxes
|
5,604
|
4,286
|
|||||
|
Taxes
on income
|
1,844
|
1,553
|
|||||
|
3,760
|
2,733
|
||||||
|
Equity
in net income of associated companies
|
125
|
113
|
|||||
|
Minority
interest in net income of subsidiaries
|
(348
|
)
|
(304
|
)
|
|||
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Net
income (loss)
|
$
|
3,537
|
$
|
2,542
|
|||
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%
|
2.8
|
%
|
2.3
|
%
|
|||
|
Per
share data:
|
|||||||
|
Net
income - basic
|
$
|
0.36
|
$
|
0.26
|
|||
|
Net
income - diluted
|
$
|
0.35
|
$
|
0.26
|
|||
|
Shares
Outstanding:
|
|||||||
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Basic
|
9,907,683
|
9,723,432
|
|||||
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Diluted
|
10,024,905
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9,816,149
|
|||||
-
more
-
|
Quaker
Chemical Corporation
|
|||||||||||
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Condensed
Consolidated Balance Sheet
|
|||||||||||
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(Dollars
in thousands, except par value and share
amounts)
|
|
(Unaudited)
|
|||||||
|
March
31,
|
December
31,
|
||||||
|
2007
|
2006
|
||||||
|
ASSETS
|
|||||||
|
Current
assets
|
|||||||
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Cash
and cash equivalents
|
$
|
10,787
|
$
|
16,062
|
|||
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Accounts
receivable, net
|
118,834
|
107,340
|
|||||
|
Inventories,
net
|
55,420
|
51,984
|
|||||
|
Prepaid
expenses and other current assets
|
12,213
|
10,855
|
|||||
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Total
current assets
|
197,254
|
186,241
|
|||||
|
Property,
plant and equipment, net
|
61,464
|
60,927
|
|||||
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Goodwill
|
40,235
|
38,740
|
|||||
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Other
intangible assets, net
|
8,046
|
8,330
|
|||||
|
Investments
in associated companies
|
6,840
|
7,044
|
|||||
|
Deferred
income taxes
|
33,197
|
28,573
|
|||||
|
Other
assets
|
27,083
|
27,527
|
|||||
|
Total
assets
|
$
|
374,119
|
$
|
357,382
|
|||
|
LIABILITIES
AND SHAREHOLDERS' EQUITY
|
|||||||
|
Current
liabilities
|
|||||||
|
Short-term
borrowings and current portion of long-term debt
|
$
|
3,702
|
$
|
4,950
|
|||
|
Accounts
and other payables
|
64,404
|
56,345
|
|||||
|
Accrued
compensation
|
8,987
|
15,225
|
|||||
|
Other
current liabilities
|
15,480
|
13,659
|
|||||
|
Total
current liabilities
|
92,573
|
90,179
|
|||||
|
Long-term
debt
|
90,535
|
85,237
|
|||||
|
Deferred
income taxes
|
5,493
|
5,317
|
|||||
|
Other
non-current liabilities
|
71,139
|
61,783
|
|||||
|
Total
liabilities
|
259,740
|
242,516
|
|||||
|
Minority
interest in equity of subsidiaries
|
4,154
|
4,035
|
|||||
|
Shareholders'
equity
|
|||||||
|
Common
stock, $1 par value; authorized 30,000,000 shares;
issued
10,083,434 shares
|
10,083
|
9,926
|
|||||
|
Capital
in excess of par value
|
7,380
|
5,466
|
|||||
|
Retained
earnings
|
110,365
|
114,498
|
|||||
|
Accumulated
other comprehensive loss
|
(17,603
|
)
|
(19,059
|
)
|
|||
|
Total
shareholders' equity
|
110,225
|
110,831
|
|||||
|
Total
liabilities and shareholders' equity
|
$
|
374,119
|
$
|
357,382
|
|||
-
more
-
|
Quaker
Chemical Corporation
|
||||||||||||
|
Condensed
Consolidated Statement of Cash Flows
|
||||||||||||
|
For
the Three Months ended March 31,
|
||||||||||||
|
(Dollars
in thousands)
|
|
(Unaudited)
|
|||||||
|
2007
|
2006
|
||||||
|
Cash
flows from operating activities
|
|||||||
|
Net
income
|
$
|
3,537
|
2,542
|
||||
|
Adjustments
to reconcile net income to net cash used in operating activities:
|
|||||||
|
Depreciation
|
2,719
|
2,495
|
|||||
|
Amortization
|
339
|
351
|
|||||
|
Equity
in net income of associated companies, net of dividends
|
44
|
92
|
|||||
|
Minority
interest in earnings of subsidiaries
|
348
|
304
|
|||||
|
Deferred
income tax
|
361
|
(361
|
)
|
||||
|
Deferred
compensation and other, net
|
267
|
(184
|
)
|
||||
|
Stock-based
compensation
|
262
|
171
|
|||||
|
(Gain)
Loss on disposal of property, plant and equipment
|
5
|
-
|
|||||
|
Insurance
settlement realized
|
(265
|
)
|
(72
|
)
|
|||
|
Pension
and other postretirement benefits
|
(869
|
)
|
(1,865
|
)
|
|||
|
Increase
(decrease) in cash from changes in current assets and current liabilities,
net of acquisitions:
|
|||||||
|
Accounts
receivable
|
(10,633
|
)
|
(6,425
|
)
|
|||
|
Inventories
|
(3,019
|
)
|
(3,696
|
)
|
|||
|
Prepaid
expenses and other current assets
|
(873
|
)
|
(2,330
|
)
|
|||
|
Accounts
payable and accrued liabilities
|
2,749
|
245
|
|||||
|
Change
in restructuring liabilities
|
—
|
(2,912
|
)
|
||||
|
Net
cash used in operating activities
|
(5,028
|
)
|
(11,645
|
)
|
|||
|
Cash
flows from investing activities
|
|||||||
|
Capital
expenditures
|
(2,721
|
)
|
(1,655
|
)
|
|||
|
Payments
related to acquisitions
|
(1,000
|
)
|
(1,000
|
)
|
|||
|
Insurance
settlement received and interest earned
|
143
|
75
|
|||||
|
Change
in restricted cash, net
|
122
|
(3
|
)
|
||||
|
Net
cash used in investing activities
|
(3,456
|
)
|
(2,583
|
)
|
|||
|
Cash
flows from financing activities
|
|||||||
|
Net
(decrease) increase in short-term borrowings
|
(1,262
|
)
|
(2,504
|
)
|
|||
|
Proceeds
from long-term debt
|
5,277
|
12,340
|
|||||
|
Repayments
of long-term debt
|
(225
|
)
|
(233
|
)
|
|||
|
Dividends
paid
|
(2,137
|
)
|
(2,090
|
)
|
|||
|
Stock
options exercised, other
|
1,809
|
101
|
|||||
|
Distributions
to minority shareholders
|
(270
|
)
|
(350
|
)
|
|||
|
Net
cash provided by financing activities
|
3,192
|
7,264
|
|||||
|
Effect
of exchange rate changes on cash
|
17
|
448
|
|||||
|
Net
decrease in cash and cash equivalents
|
(5,275
|
)
|
(6,516
|
)
|
|||
|
Cash
and cash equivalents at the beginning of the period
|
16,062
|
16,121
|
|||||
|
Cash
and cash equivalents at the end of the period
|
$
|
10,787
|
$
|
9,605
|
|||