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
28, 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)
(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:
|
¨
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Written
communications pursuant to Rule 425 under the Securities Act (17 CFR
230.425)
|
|
¨
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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))
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|
¨
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Pre-commencement
communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR
240.13e-4(c))
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INFORMATION
TO BE INCLUDED IN THE REPORT
|
Item
2.02.
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Results
of Operations and Financial
Condition.
|
On July 28, 2010, Quaker Chemical
Corporation announced its results of operations for the second quarter ended
June 30, 2010 in a press release, the text of which is included as Exhibit 99.1
hereto. Supplemental information related to the same period is also
included as Exhibit 99.2 hereto.
|
Item
9.01.
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Financial
Statements and Exhibits.
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The following exhibits are 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 28,
2010.
|
|
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99.2
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Supplemental
Information related to second quarter ended June 30,
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.
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QUAKER
CHEMICAL CORPORATION
Registrant
|
||
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Date: July
29, 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
|
||
-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
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QUAKER
CHEMICAL ANNOUNCES SECOND QUARTER 2010 RESULTS
|
|
·
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Q2
2010 EPS of $0.80 vs. $0.29 in Q2
2009
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·
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First
half 2010 EPS of $1.64 vs. $0.29 in the first half of
2009
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|
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·
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Net
debt-to-total capital ratio under
20%
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|
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·
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$15.1
million of operating cash flow generated in Q2
2010
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July 28,
2010
CONSHOHOCKEN,
PA - Quaker Chemical Corporation (NYSE:KWR) today announced second quarter 2010
net sales of $136.0 million and earnings per diluted share of $0.80, compared to
net sales of $102.3 million and earnings per diluted share of $0.29 for the
second quarter of 2009. For the first half of 2010, the Company
reported net sales of $264.3 million and earnings per diluted share of $1.64,
compared to net sales of $200.8 million and earnings per diluted share of $0.29
for the first half of 2009.
Michael
F. Barry, Chairman, Chief Executive Officer and President, commented, “Our
strong second quarter earnings and EBITDA generation were driven by high steel
industry shipments in China, Brazil, India and Russia and continued recovery of
industrial demand in North America and Europe. Our balance sheet was
also strengthened as we reduced our net debt-to-capital ratio to its lowest
point since 2003.”
Mr. Barry
added, “We are on track to generate record earnings for 2010. Our
expectations for the second half are that our earnings will continue to be
strong but will be below the first half due to a softening in demand and the lag
effect on margins as we recover higher raw material costs.”
Mr. Barry
continued, “We are pleased with our progress in 2010 in a number of
ways. Besides our strong results, we lowered our debt, raised our
dividend, made a small, but strategic, acquisition, and amended our credit
facility for lower interest costs, an extended maturity date and greater
borrowing capacity. Over the next few years, we believe Quaker is
positioned well for solid growth. Our strong positions in the fastest
growing countries like China, Brazil and India, as well as the gradual rebound
in the more mature markets such as the U.S. and Europe, is expected to provide
us with broad-based organic growth in all regions and businesses. In
addition, our strong balance sheet will allow us to invest in our key growth
initiatives and grow via acquisition for the right opportunities.”
Second Quarter 2010
Summary
Net sales
for the second quarter were $136.0 million, up 33% from $102.3 million for the
second quarter of 2009. The increase in net sales was a result of
double-digit volume increases across the globe as the Company continues to
recover from the economic downturn. Product volumes increased 42%,
partially offset by a 5% decline in selling price and mix, as well as lower
automotive chemical management services (“CMS”) revenue due to lower revenue
reported on a gross basis. On a sequential quarterly basis, product
volumes increased by approximately 7%.
Gross
margin was up $12.5 million, or 35%, compared to the second quarter of 2009 as a
result of increased volumes. The gross margin percentage increased
slightly compared to the second quarter of 2009, but decreased 1.2 percentage
points from the first quarter of 2010. The Company is implementing
price increases to help offset higher raw material costs where
necessary.
Selling,
general and administrative expenses (“SG&A”) increased $6.1 million, or 21%,
compared to the second quarter of 2009. Higher selling costs with
increased business activity, as well as increased incentive compensation and
professional fees, were the primary drivers, representing 70% of the
increase. Inflationary and other costs accounted for the remainder of
the increase.
The
Company incurred charges related to the former CEO’s supplemental retirement
plan of approximately $1.2 million in the second quarter of 2009 and expects to
incur a final charge of $1.3 million later in 2010.
The
increase in other income is due to higher license fees from increased business
activities, as well as foreign exchange rate gains in the second quarter of 2010
versus losses in the second quarter of 2009. The decrease in net
interest expense is due to lower average debt balances as well as higher
interest income.
Year-to-Date
Summary
Net sales
for the first half of 2010 were $264.3 million, up 32% from $200.8 million for
the first half of 2009. As with the quarterly comparison, the
increase in net sales was a result of higher volumes across the globe as the
Company continues to recover from the economic downturn. Product
volumes increased 39%, partially offset by a 5% decline in selling price and
mix. Foreign exchange rates increased revenues by approximately 4%,
which were more than offset by lower automotive CMS revenue due to lower revenue
reported on a gross basis.
Gross
margin increased $31.1 million, or 48%, compared to the first half of 2009
largely as a result of increased volumes. The gross margin percentage
of 36.3% represents considerable improvement over the first half of 2009
percentage of 32.2%. The margin expansion was the result of cost
reduction actions taken, a more favorable year-to-date raw material cost
environment and reduced automotive CMS revenues reported on a gross
basis.
SG&A
increased $13.0 million, or 23%, compared to the first half of
2009. Higher selling costs with increased business activity, as well
as increased incentive compensation and professional fees, were the primary
drivers, representing 74% of the increase. Inflationary and other
costs as well as foreign exchange rates accounted for the remainder of the
increase.
In the
first quarter of 2009, the Company implemented a restructuring program totaling
$2.3 million or approximately $0.14 per diluted share. The Company
completed the initiatives under this program during 2009.
Other
income for the 2010 period includes higher license fees from increased business
activities as well as foreign exchange rate gains versus losses in the 2009
period, which offset a gain related to the disposition of land in Europe of
approximately $0.11 per diluted share in 2009. The decrease in net
interest expense is due to lower average debt balances as well as higher
interest income.
Equity in
net income of associated companies includes a charge of approximately $0.03 per
diluted share related to the first quarter 2010 devaluation of the Venezuelan
Bolivar Fuerte.
Balance Sheet and Cash Flow
Items
The
Company’s net debt-to-total-capital ratio decreased to 19% as of June 30, 2010,
compared to 24% at March 31, 2010. Operating cash flow improved $15.1
million from the first quarter of 2010, as a result of strong earnings which in
turn allowed the Company to reduce its debt levels during the second
quarter.
- more -
Forward-Looking
Statements
This
release contains forward-looking statements that are subject to certain risks
and uncertainties that could cause actual results to differ materially from
those projected in such statements. A major risk is that the
Company’s demand is largely derived from the demand for its customers’ products,
which subjects the Company to downturns in a customer’s business and
unanticipated customer production shutdowns. Other major risks and
uncertainties include, but are not limited to, significant increases in raw
material costs, customer financial stability, worldwide economic and political
conditions, foreign currency fluctuations, and future terrorist attacks such as
those that occurred on September 11, 2001. Other factors could also
adversely affect us. Therefore, we caution you not to place undue reliance on
our forward-looking statements. This discussion is provided as
permitted by the Private Securities Litigation Reform Act of 1995.
Conference
Call
As
previously announced, Quaker Chemical's investor conference call to discuss
second quarter results is scheduled for July 29, 2010 at 8:30 a.m.
(ET). A live webcast of the conference call, together with
supplemental information, can be accessed through the Company's Investor
Relations Web site at http://www.quakerchem.com. You
can also access the conference call by dialing 877-269-7756.
About
Quaker
Quaker
Chemical Corporation is a leading global provider of process chemicals, chemical
specialties, services, and technical expertise to a wide range of industries –
including steel, automotive, mining, aerospace, tube and pipe, coatings and
construction materials. Our products, technical solutions and
chemical management services enhance our customers’ processes, improve their
product quality and lower their costs. Quaker’s headquarters is
located near Philadelphia in Conshohocken, Pennsylvania.
- more -
Quaker Chemical
Corporation
Condensed Consolidated
Statement of Income
(Dollars in thousands,
except per share data)
|
(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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2010
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2009
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2010
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2009
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|||||||||||||
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Net
sales
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$ | 135,991 | $ | 102,335 | $ | 264,311 | $ | 200,842 | ||||||||
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Cost
of goods sold
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87,460 | 66,298 | 168,440 | 136,091 | ||||||||||||
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Gross
margin
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48,531 | 36,037 | 95,871 | 64,751 | ||||||||||||
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%
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35.7 | % | 35.2 | % | 36.3 | % | 32.2 | % | ||||||||
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Selling,
general and administrative expenses
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35,118 | 29,050 | 68,787 | 55,747 | ||||||||||||
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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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- | 1,193 | - | 1,193 | ||||||||||||
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Operating
income
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13,413 | 5,794 | 27,084 | 5,522 | ||||||||||||
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%
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9.9 | % | 5.7 | % | 10.2 | % | 2.7 | % | ||||||||
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Other
income, net
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1,123 | 356 | 1,886 | 1,810 | ||||||||||||
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Interest
expense, net
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(1,043 | ) | (1,318 | ) | (2,170 | ) | (2,407 | ) | ||||||||
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Income
before taxes and equity in net income of associated
companies
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13,493 | 4,832 | 26,800 | 4,925 | ||||||||||||
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Taxes
on income before equity in net income of associated
companies
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4,143 | 1,567 | 7,324 | 1,316 | ||||||||||||
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Income
before equity in net income of associated companies
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9,350 | 3,265 | 19,476 | 3,609 | ||||||||||||
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Equity
in net income of associated companies
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384 | 227 | 295 | 85 | ||||||||||||
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Net
income
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9,734 | 3,492 | 19,771 | 3,694 | ||||||||||||
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Less:
Net income attributable to noncontrolling interest
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581 | 258 | 1,199 | 458 | ||||||||||||
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Net
income attributable to Quaker Chemical Corporation
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$ | 9,153 | $ | 3,234 | $ | 18,572 | $ | 3,236 | ||||||||
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%
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6.7 | % | 3.2 | % | 7.0 | % | 1.6 | % | ||||||||
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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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$ | 0.82 | $ | 0.29 | $ | 1.66 | $ | 0.29 | ||||||||
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Net
income attributable to Quaker Chemical Corporation Common Shareholders-
diluted
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$ | 0.80 | $ | 0.29 | $ | 1.64 | $ | 0.29 | ||||||||
- 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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June
30,
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December
31,
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|||||||
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2010
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2009
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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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$ | 27,606 | $ | 25,051 | ||||
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Construction
fund (restricted cash)
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- | 2,358 | ||||||
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Accounts
receivable, net
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114,595 | 108,793 | ||||||
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Inventories,
net
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54,844 | 50,040 | ||||||
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Prepaid
expenses and other current assets
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13,149 | 12,656 | ||||||
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Total
current assets
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210,194 | 198,898 | ||||||
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Property,
plant and equipment, net
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62,859 | 67,426 | ||||||
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Goodwill
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44,452 | 46,515 | ||||||
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Other
intangible assets, net
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5,012 | 5,579 | ||||||
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Investments
in associated companies
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9,317 | 8,824 | ||||||
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Deferred
income taxes
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31,210 | 31,692 | ||||||
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Other
assets
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46,282 | 39,537 | ||||||
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Total
assets
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$ | 409,326 | $ | 398,471 | ||||
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LIABILITIES
AND EQUITY
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||||||||
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Current
liabilities
|
||||||||
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Short-term
borrowings and current portion of long-term debt
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$ | 3,596 | $ | 2,431 | ||||
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Accounts
and other payables
|
62,200 | 60,939 | ||||||
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Accrued
compensation
|
13,012 | 16,656 | ||||||
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Accrued
pension and postretirement benefits
|
4,682 | 4,717 | ||||||
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Other
current liabilities
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18,174 | 15,224 | ||||||
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Total
current liabilities
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101,664 | 99,967 | ||||||
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Long-term
debt
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60,975 | 63,685 | ||||||
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Deferred
income taxes
|
8,443 | 8,605 | ||||||
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Accrued
pension and postretirement benefits
|
26,235 | 27,602 | ||||||
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Other
non-current liabilities
|
45,462 | 42,317 | ||||||
|
Total
liabilities
|
242,779 | 242,176 | ||||||
|
Equity
|
||||||||
|
Common
stock, $1 par value; authorized 30,000,000 shares; issued 11,258,582
shares
|
11,259 | 11,086 | ||||||
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Capital
in excess of par value
|
32,798 | 27,527 | ||||||
|
Retained
earnings
|
136,497 | 123,140 | ||||||
|
Accumulated
other comprehensive loss
|
(20,070 | ) | (10,439 | ) | ||||
|
Total
Quaker shareholders' equity
|
160,484 | 151,314 | ||||||
|
Noncontrolling
interest
|
6,063 | 4,981 | ||||||
|
Total
equity
|
166,547 | 156,295 | ||||||
|
Total
liabilities and equity
|
$ | 409,326 | $ | 398,471 | ||||
- more -
Quaker Chemical
Corporation
Condensed Consolidated
Statement of Cash Flows
For the six months ended
June 30,
(Dollars in
thousands)
|
(Unaudited)
|
||||||||
|
2010
|
2009
|
|||||||
|
Cash
flows from operating activities
|
||||||||
|
Net
income
|
$ | 19,771 | $ | 3,694 | ||||
|
Adjustments
to reconcile net income to net cash provided by operating
activities:
|
||||||||
|
Depreciation
|
5,068 | 4,801 | ||||||
|
Amortization
|
462 | 522 | ||||||
|
Equity
in net income of associated companies, net of dividends
|
(233 | ) | (85 | ) | ||||
|
Deferred
compensation and other, net
|
(357 | ) | (1,521 | ) | ||||
|
Stock-based
compensation
|
1,663 | 927 | ||||||
|
Restructuring
and related charges
|
- | 2,289 | ||||||
|
Gain
on disposal of property, plant and equipment
|
(22 | ) | (1,193 | ) | ||||
|
Insurance
settlement realized
|
(772 | ) | (610 | ) | ||||
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Pension
and other postretirement benefits
|
(2,227 | ) | (3,799 | ) | ||||
|
Increase
(decrease) in cash from changes in current assets and current liabilities,
net of acquisitions:
|
||||||||
|
Accounts
receivable
|
(10,645 | ) | 13,498 | |||||
|
Inventories
|
(7,181 | ) | 15,022 | |||||
|
Prepaid
expenses and other current assets
|
(1,641 | ) | 3,481 | |||||
|
Accounts
payable and accrued liabilities
|
6,409 | (6,354 | ) | |||||
|
Change
in restructuring liabilities
|
- | (3,885 | ) | |||||
|
Net
cash provided by operating activities
|
10,295 | 26,787 | ||||||
|
Cash
flows from investing activities
|
||||||||
|
Capital
expenditures
|
(3,468 | ) | (5,078 | ) | ||||
|
Payments
related to acquisitions
|
- | (1,000 | ) | |||||
|
Proceeds
from disposition of assets
|
59 | 1,617 | ||||||
|
Insurance
settlement received and interest earned
|
5,070 | 5,100 | ||||||
|
Change
in restricted cash, net
|
(1,940 | ) | (2,593 | ) | ||||
|
Net
cash used in investing activities
|
(279 | ) | (1,954 | ) | ||||
|
Cash
flows from financing activities
|
||||||||
|
Net
increase (decrease) in short-term borrowings
|
1,263 | (1,716 | ) | |||||
|
Proceeds
from long-term debt
|
- | 1,584 | ||||||
|
Repayments
of long-term debt
|
(2,614 | ) | (17,252 | ) | ||||
|
Dividends
paid
|
(5,119 | ) | (5,022 | ) | ||||
|
Stock
options exercised, other
|
1,663 | 262 | ||||||
|
Excess
tax benefit related to stock option exercises
|
1,236 | - | ||||||
|
Distributions
to noncontrolling shareholders
|
- | (90 | ) | |||||
|
Net
cash used in financing activities
|
(3,571 | ) | (22,234 | ) | ||||
|
Effect
of exchange rate changes on cash
|
(3,890 | ) | 1,114 | |||||
|
Net
increase in cash and cash equivalents
|
2,555 | 3,713 | ||||||
|
Cash
and cash equivalents at the beginning of the period
|
25,051 | 20,892 | ||||||
|
Cash
and cash equivalents at the end of the period
|
$ | 27,606 | $ | 24,605 | ||||
