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, 2013

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:

 

¨	Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
¨	Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
¨	Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
¨	Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

 

 

 

INFORMATION TO BE INCLUDED IN THE REPORT

 

 

 

Item 2.02.

Results of Operations and Financial Condition.

 

On July 29, 2013, Quaker Chemical Corporation announced its results of operations for the second quarter ended June 30, 2013, 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.

Financial Statements and Exhibits.

 

The following exhibits are included as part of this report:

 

Exhibit No.
99.1	Press Release of Quaker Chemical Corporation dated July 29, 2013.
99.2	Supplemental information related to second quarter ended June 30, 2013.

 

 

 

 

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, 2013		By:	/s/ Margaret m. loebl
			Margaret M. Loebl Vice President, Chief Financial Officer and Treasurer

 

 

 

 

 

NEWS Contact: Margaret M. Loebl Vice President, Chief Financial Officer & Treasurer loeblm@quakerchem.com T. 610.832.4160

 

For Release: Immediate

 

QUAKER CHEMICAL ANNOUNCES SECOND QUARTER 2013 RESULTS

 

·

Net sales up 5% from second quarter of 2012

·

Net operating cash flow of $16 million in the quarter

 

July 29, 2013

 

CONSHOHOCKEN, PA – Quaker Chemical Corporation (NYSE: KWR) today announced net sales of $184.8 million for the second quarter of 2013, up approximately 5% compared to the second quarter of 2012 net sales of $176.8 million. Earnings per diluted share for the second quarter of 2013 were $1.22 compared to $0.85 for the second quarter of 2012, with non-GAAP earnings per diluted share increasing to $1.00 for the second quarter of 2013 from $0.90 in the second quarter of 2012. See Non-GAAP Measures section below. For the first six months of 2013, the Company reported net sales of $361.0 million, up approximately 2% compared to the first six months of 2012 net sales of $354.4 million. Earnings per diluted share for the first six months of 2013 were $2.26 compared to earnings per diluted share of $1.80 for the first six months of 2012, with non-GAAP earnings per diluted share increasing to $1.96 for the first six months of 2013 from $1.81 in the first six months of 2012. See Non-GAAP Measures section below.

 

Michael F. Barry, Chairman, Chief Executive Officer and President, commented, “We are pleased to report solid results in the second quarter given the challenging global economic environment. Our market share gains and acquisitions have helped us to grow despite weak conditions in numerous parts of the world, especially in Europe.”

 

Mr. Barry concluded, “Going forward, we believe we will continue to face challenging market conditions around the world with Europe continuing to be the most pronounced. In addition, we do expect some of our raw material prices to increase in the second half of the year. However, we remain optimistic about our future and expect 2013 to be another good year for Quaker.”

 

Second Quarter of 2013 Summary

 

Net sales for the second quarter of 2013 were $184.8 million, an increase of approximately 5% from net sales of $176.8 million in the second quarter of 2012. Product volumes, including acquisitions, increased revenues by approximately 6%, which was partially offset by a decrease of less than 1% due to selling and price mix. The impact on net sales due to foreign exchange rate translation was relatively consistent between the second quarter of 2013 and the second quarter of 2012.

 

Gross profit increased approximately $6.7 million, or approximately 11%, from the second quarter of 2012. The increase in gross profit was primarily driven by an improvement in gross margin to 36.4% from 34.3% in the second quarter of 2012 and 35.5% in the first quarter of 2013. The increase in gross margin reflects that the Company’s product margins have returned to more acceptable levels.

 

 

 

  

Selling, general and administrative expenses (“SG&A”) increased $3.9 million, or approximately 9%, from the second quarter of 2012, primarily due to increased costs related to acquisitions, higher incentive compensation and higher selling, inflationary and other labor related costs. Included in SG&A for the second quarter of 2013 was an expense of approximately $0.4 million, or $0.02 per diluted share, which related to actions taken to streamline the costs of certain business operations. Included in the second quarter of 2012 were charges of $1.2 million, or $0.06 per diluted share, associated with the bankruptcies of certain U.S. customers and $0.6 million, or $0.03 per diluted share, related to the transition of the Company’s CFO.

 

Other income for the second quarter of 2013 included a refund of $2.5 million, or $0.14 per diluted share, related to excise taxes paid on certain mineral oil sales, which was partially offset by an increase in the fair value of an acquisition’s earnout liability of $0.7 million, or $0.03 per diluted share. Also, there were lower foreign exchange rate translation losses in the second quarter of 2013 compared to the second quarter of 2012, contributing to the increase in other income.

 

The decrease in interest expense was due to lower average borrowings and lower interest rates experienced in the second quarter of 2013 as compared to the second quarter of 2012.

 

The increase in equity in net income of associated companies from the second quarter of 2012 was primarily due to higher earnings related to the Company’s equity interest in a captive insurance company. Earnings from this affiliate were $1.7 million, or $0.13 per diluted share, in the second quarter of 2013 compared to $0.6 million, or $0.04 per diluted share, in the second quarter of 2012.

 

Changes in foreign exchange rates negatively impacted the second quarter of 2013 net income by approximately $0.1 million, or $0.01 per diluted share.

 

Year-to-Date Summary

 

Net sales for the first six months of 2013 were $361.0 million, an increase of approximately 2% from $354.4 million in the first six months of 2012. Product volumes, including acquisitions, increased revenues by approximately 3%, which were partially offset by a decrease due to foreign exchange rate translation of approximately 1%. The effect of selling and price mix on net sales was relatively consistent in the first six months of 2013 compared to the first six months of 2012.

 

Gross profit increased by approximately $9.5 million, or approximately 8%, from the first six months of 2012. The increase in gross profit was driven by an improvement in gross margin to 36.0% from 34.0% in the first six months of 2012, reflective of the Company’s product margins returning to more acceptable levels, as noted above.

 

SG&A increased approximately $6.0 million, or approximately 7%, from the first six months of 2012, primarily due to increased costs related to acquisitions, higher incentive compensation and higher selling, inflationary and other labor related costs. Also, included in SG&A for the first six months of 2013, was an expense related to streamlining the costs of certain business operations, noted above. Compared to these increases in SG&A for the first six months of 2013, there were decreases due to foreign exchange rate translation and the prior year costs associated with the bankruptcies and CFO transition, noted above.

 

Other income increased in the first six months of 2013 compared to the first six months of 2012 primarily due to the mineral oil excise tax refund, partially offset by an increase in the acquisition-related earnout liability, noted above. Also, there were lower foreign exchange rate translation losses in the first six months of 2013 compared to the first six months of 2012, contributing to the increase in other income.

 

Interest expense was lower in the first six months of 2013 compared to the first six months of 2012 due to lower interest rates and lower average borrowings.

 

 

The Company’s effective tax rates for the first six months of 2013 and 2012 of 28.3% and 26.1%, respectively, reflect decreases in reserves for uncertain tax positions due to the expiration of applicable statutes of limitations for certain tax years of approximately $0.10 and $0.12 per diluted share, respectively. Also contributing to the increase in the effective tax rate is an increase in the statutory tax rate in China from 15%, in 2012, to 25%, in 2013. While the Company’s recertification of its Chinese subsidiary’s high tech status is pending, the Company will record tax expense at the current statutory rate of 25%. The Company has experienced and expects to further experience volatility in its effective tax rates due to the varying timing of tax audits and the expiration of applicable statutes of limitations as they relate to uncertain tax positions, among other factors. The Company currently estimates that its effective tax rate will be in the high twenty percent range for the full year of 2013.

 

Equity in net income of associated companies increased due to higher earnings related to the Company’s equity interest in a captive insurance company in the first six months of 2013 compared to the first six months of 2012. Earnings attributable to this equity interest increased from approximately $1.0 million, or $0.08 per diluted share, for the first six months of 2012 to approximately $3.1 million, or $0.24 per diluted share, for the first six months of 2013. Included in the Company’s equity in net income of associated companies for the first six months of 2013 was a non-cash out-of-period adjustment of approximately $1.0 million, primarily related to a reinsurance contract. This increase in equity in net income of associated companies was partially offset by a charge of approximately $0.4 million, or $0.03 per diluted share, related to the devaluation of the Venezuelan Bolivar Fuerte during 2013.

 

Changes in foreign exchange rates negatively impacted the first six months of 2013 net income by approximately $0.2 million, or $0.01 per diluted share.

 

Balance Sheet and Cash Flow Items

 

The Company’s net operating cash flow for the second quarter of 2013 was $16.2 million, which increased its year-to-date 2013 net operating cash flow to $27.5 million as compared to $21.9 million for the first six months of 2012. The increase in the Company’s net operating cash flow during the first six months of 2013 was primarily driven by increased net income and improved working capital management. During the second quarter of 2013, the Company revised its credit facility, increasing the amount available for borrowings from $175 million to $300 million, which provides the Company further financial flexibility for potential future initiatives. In addition to the revised facility, the Company’s current liquidity remains strong, as its cash position continued to exceed its debt at June 30, 2013 and its consolidated leverage ratio continued to be less than one times EBITDA.

 

Non-GAAP Measures

 

Included in this public release is a non-GAAP financial measure of non-GAAP earnings per diluted share. The Company believes this non-GAAP financial measure provides meaningful supplemental information as it enhances a reader’s understanding of the financial performance of the Company, is more indicative of future operating performance of the Company, and facilitates a better comparison among fiscal periods, as the non-GAAP measure excludes items that are not considered core to the Company’s operations. Non-GAAP results are presented for supplemental informational purposes only and should not be considered a substitute for the financial information presented in accordance with GAAP.

 

  

The following is a reconciliation between the non-GAAP (unaudited) financial measure of non-GAAP earnings per diluted share to its most directly comparable GAAP (unaudited) measure:

  

		Three Months Ended June 30,								Six Months Ended June 30,
		2013				2012				2013				2012
GAAP earnings per diluted share attributable to Quaker Chemical Corporation Common Shareholders		$	1.22			$	0.85			$	2.26			$	1.80
CFO transition costs per diluted share			--				0.03				--				0.03
Customer bankruptcy costs per diluted share			--				0.06				--				0.06
Mineral oil excise tax refund per diluted share			(0.14	)			--				(0.14	)			--
Change in acquisition-related earnout liability per diluted share			0.03				--				0.03				--
Cost streamlining initiatives per diluted share			0.02				--				0.02				--
Devaluation of the Venezuelan Bolivar per diluted share			—				—				0.03				—
Equity income in a captive insurance company per diluted share			(0.13	)			(0.04	)			(0.24	)			(0.08	)
Non-GAAP earnings per diluted share		$	1.00			$	0.90			$	1.96			$	1.81

 

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, future terrorist attacks and other acts of violence. 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 the second quarter of 2013 results is scheduled for July 30, 2013 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 website at http://www.quakerchem.com. You can also access the conference call by dialing 877-269-7756.

 

About Quaker

 

Quaker Chemical is a leading global provider of process fluids, chemical specialties, and technical expertise to a wide range of industries, including steel, aluminum, automotive, mining, aerospace, tube and pipe, cans, and others.  For nearly 100 years, Quaker has helped customers around the world achieve production efficiency, improve product quality, and lower costs through a combination of innovative technology, process knowledge, and customized services. Headquartered in Conshohocken, Pennsylvania USA, Quaker serves businesses worldwide with a network of dedicated and experienced professionals whose mission is to make a difference.

 

 

Quaker Chemical Corporation

Condensed Consolidated Statement of Income

(Dollars in thousands, except per share data)

                  

		(Unaudited)
		Three Months Ended June 30,								Six Months Ended June 30,
		2013				2012				2013				2012
Net sales		$	184,846			$	176,797			$	361,039			$	354,435
Cost of goods sold			117,532				116,161				231,117				234,004
Gross profit			67,314				60,636				129,922				120,431
%			36.4	%			34.3	%			36.0	%			34.0	%
Selling, general and administrative expenses			47,521				43,653				92,718				86,746
Operating income			19,793				16,983				37,204				33,685
%			10.7	%			9.6	%			10.3	%			9.5	%
Other income (expense), net			2,301				(134	)			2,647				207
Interest expense			(762	)			(1,151	)			(1,506	)			(2,325	)
Interest income			229				137				398				260
Income before taxes and equity in net income of associated companies			21,561				15,835				38,743				31,827
Taxes on income before equity in net income of associated companies			6,828				4,874				10,961				8,319
Income before equity in net income of associated companies			14,733				10,961				27,782				23,508
Equity in net income of associated companies			1,942				777				3,084				1,342
Net income			16,675				11,738				30,866				24,850
Less: Net income attributable to noncontrolling interest			592				630				1,164				1,377
Net income attributable to Quaker Chemical Corporation		$	16,083			$	11,108			$	29,702			$	23,473
%			8.7	%			6.3	%			8.2	%			6.6	%
Per share data:
Net income attributable to Quaker Chemical Corporation Common Shareholders - basic		$	1.22			$	0.86			$	2.26			$	1.81
Net income attributable to Quaker Chemical Corporation Common Shareholders - diluted		$	1.22			$	0.85			$	2.26			$	1.80

 

 

Quaker Chemical Corporation

Condensed Consolidated Balance Sheet

(Dollars in thousands, except par value and share amounts)

         

		(Unaudited)
		June 30,				December 31,
		2013				2012
ASSETS
Current assets
Cash and cash equivalents		$	38,546			$	32,547
Accounts receivable, net			162,105				154,197
Inventories, net			74,023				72,471
Prepaid expenses and other current assets			17,722				18,595
Total current assets			292,396				277,810
Property, plant and equipment, net			85,142				85,112
Goodwill			58,334				59,169
Other intangible assets, net			32,806				32,809
Investments in associated companies			16,554				16,603
Deferred income taxes			28,437				30,673
Other assets			35,824				34,458
Total assets		$	549,493			$	536,634
LIABILITIES AND EQUITY
Current liabilities
Short-term borrowings and current portion of long-term debt		$	1,337			$	1,468
Accounts and other payables			76,191				70,794
Accrued compensation			13,013				16,842
Other current liabilities			25,618				18,688
Total current liabilities			116,159				107,792
Long-term debt			22,550				30,000
Deferred income taxes			6,147				6,383
Other non-current liabilities			92,280				102,783
Total liabilities			237,136				246,958
Equity
Common stock, $1 par value; authorized 30,000,000 shares; issued 13,168,484 shares			13,168				13,095
Capital in excess of par value			97,085				94,470
Retained earnings			238,580				215,390
Accumulated other comprehensive loss			(45,252	)			(41,855	)
Total Quaker shareholders' equity			303,581				281,100
Noncontrolling interest			8,776				8,576
Total equity			312,357				289,676
Total liabilities and equity		$	549,493			$	536,634

  

 

Quaker Chemical Corporation

Condensed Consolidated Statement of Cash Flows

For the six months ended June 30,

(Dollars in thousands)

          

		(Unaudited)
		2013				2012
Cash flows from operating activities
Net income		$	30,866			$	24,850
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation			6,125				5,969
Amortization			1,763				1,465
Equity in undistributed earnings of associated companies, net of dividends			(1,021	)			(1,158	)
Deferred compensation and other, net			(1,080	)			1,332
Stock-based compensation			2,152				2,078
Gain on disposal of property, plant and equipment			(224	)			(13	)
Insurance settlement realized			(384	)			(808	)
Pension and other postretirement benefits			(1,884	)			(1,951	)
(Decrease) increase in cash from changes in current assets and current liabilities, net of acquisitions:
Accounts receivable			(9,913	)			(7,031	)
Inventories			(2,269	)			(3,871	)
Prepaid expenses and other current assets			(286	)			(1,946	)
Accounts payable and accrued liabilities			3,650				3,025
Net cash provided by operating activities			27,495				21,941
Cash flows from investing activities
Capital expenditures			(5,202	)			(6,423	)
Payments related to acquisitions			(2,478	)			-
Proceeds from disposition of assets			345				84
Insurance settlement interest earned			28				35
Change in restricted cash, net			356				773
Net cash used in investing activities			(6,951	)			(5,531	)
Cash flows from financing activities
Repayments of long-term debt			(7,563	)			(1,754	)
Dividends paid			(6,428	)			(6,213	)
Stock options exercised, other			84				(925	)
Excess tax benefit related to stock option exercises			452				1,420
Distributions to noncontrolling shareholders			-				(30	)
Net cash used in financing activities			(13,455	)			(7,502	)
Effect of exchange rate changes on cash			(1,090	)			(565	)
Net increase in cash and cash equivalents			5,999				8,343
Cash and cash equivalents at the beginning of the period			32,547				16,909
Cash and cash equivalents at the end of the period		$	38,546			$	25,252

 

 

1 Quaker Chemical Corporation Investor Conference Call July 30, 2013 Second Quarter 2013 Results

2 Regulation G The attached charts include Company information that does not conform to generally accepted accounting principles (GAAP). Management believes that an analysis of this data is meaningful to investors because it provides insight with respect to ongoing operating results of the Company and allows investors to better evaluate the financial results of the Company. These measures should not be viewed as an alternative to GAAP measures of performance. Furthermore, these measures may not be consistent with similar measures provided by other companies. This data should b e read in conjunction with the C ompany’s second quarter earnings news release dated July 29, 2013, which has been furnished to the SEC on Form 8-K, and the Company’s Form 10-Q for the quarterly period ended June 30, 2013, which has been filed with the SEC. Forward-Looking Statements This presentation may contain forward-looking statements that are subject to certain risks and uncertainties that could cause actual results to differ ma terially 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, future terrorist attacks and other acts of violence. 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. Risks and Uncertainties Statement

3 Speakers Michael F. Barry Chairman of the Board, Chief Executive Officer & President Margaret M. Loebl Vice President, Chief Financial Officer & Treasurer Robert T. Traub General Counsel Chart #1

4 2 nd Quarter 2013 Headlines • Net sales up 5% from second quarter 2012 despite challenging environment • Volume and margins drive solid operating performance • Quarterly net operating cash flow of approximately $16 million Chart #2

5 Chairman Comments ▪ Positives x Solid sales / margins in a difficult economy x Gaining share & leveraging acquisitions x Good cash flow generation x Liquidity remains a Company strength ▪ Negatives x Weak market conditions x Potential raw material cost increases in the second half of the year Second Quarter 2013 Chart #3 On balance, we remain optimistic about our future and expect 2013 to be another good year for Quaker.

6 Product Volume by Quarter 25,000 30,000 35,000 40,000 45,000 50,000 55,000 4Q08 YTD Avg. 1Q09 2Q09 3Q09 4Q09 1Q10 2Q10 3Q10 4Q10 1Q11 2Q11 3Q11 4Q11 1Q12 2Q12 3Q12 4Q12 1Q13 2Q13 Metalworking Process Chemicals Segment Chart #4

7 Financial Snapshot Q2 2013 Q2 2012 YTD 2013 YTD 2012 Net Sales ($Mils.) 184.8 176.8 361.0 354.4 Gross Margin (%) 36.4 34.3 36.0 34.0 Operating Margin (%) 10.7 9.6 10.3 9.5 Net Income attributable to Quaker Chemical Corporation ($Mils.) 16.1 11.1 29.7 23.5 Adjusted EBITDA ($Mils.) – Trailing Twelve Months 84.4 78.7 84.4 78.7 Adjusted EBITDA Margin (%) 11.8 11.1 11.8 11.1 Earnings Per Diluted Share 1.22 0.85 2.26 1.80 Non - GAAP Earnings Per Diluted Share 1.00 0.90 1.96 1.81 Debt ($Mils.) 23.9 45.6 23.9 45.6 Equity ($Mils.) 312.4 280.7 312.4 280.7 Net Operating Cash Flow ($Mils.) 16.2 15.2 27.5 21.9 Chart #5

8 Gross Margin Percentage 34.3% 32.7% 34.2% 35.5% 36.4% 20.0% 25.0% 30.0% 35.0% 40.0% Q2 2012 Q3 2012 Q4 2012 Q1 2013 Q2 2013 Gross Margin Percentage Chart #6 28.0% 34.7% 35.4% 32.6% 33.7% 36.0% 20.0% 25.0% 30.0% 35.0% 40.0% 2008 2009 2010 2011 2012 2013 YTD Gross Margin Percentage

9 Baseline Historical Performance $40.1 $44.2 $66.8 $73.0 $80.9 $84.4 6.90% 9.80% 12.30% 10.70% 11.40% 11.80% 2008 2009 2010 2011 2012 Q2 2013 Trailing Twelve Months Adjusted EBITDA ($ Mils.) Adjusted EBITDA Margin (%) Chart #7 (Adjusted EBITDA)

10 Balance Sheet Net Cash / (Debt) -$100 -$80 -$60 -$40 -$20 $0 $20 $40 $60 2008 2009 2010 2011 2012 Q2 2013 $ Millions Cash ST/LT Debt Net Debt Chart #8

11 Net Cash Flow From Operations 15.2 19.8 21.1 11.3 16.2 0 10 20 30 40 50 60 70 80 Q2 2012 Q3 2012 Q4 2012 Q1 2013 Q2 2013 Operating Cash Flow ($ Millions) Chart #9 13.4 41.6 37.5 19.7 62.9 0 10 20 30 40 50 60 70 80 2008 2009 2010 2011 2012 Operating Cash Flow ($ Millions)

12 APPENDIX

13 Trailing Twelve Months Adjusted EBITDA Reconciliation Chart #10 I = G + H H G = F - D F E = C + D D C = B - A B A Trailing Twelve Months Q2 2013 YTD Q2 2013 Last Six Months 2012 YTD 2012 Trailing Twelve Months Q2 2012 YTD Q2 2012 Last Six Months 2011 YTD 2011 YTD Q2 2011 Net income 53,634 29,702 23,932 47,405 47,785 23,473 24,312 45,892 21,580 Depreciation 12,408 6,125 6,283 12,252 12,019 5,969 6,050 11,455 5,405 Amortization 3,404 1,763 1,641 3,106 2,830 1,465 1,365 2,338 973 Interest expense 3,464 1,506 1,958 4,283 4,573 2,325 2,248 4,666 2,418 Taxes on income 18,217 10,961 7,256 15,575 15,254 8,319 6,935 14,256 7,321 Mineral oil excise tax refund (2,540) (2,540) - - - - - - Non-cash gain from the purchase of an equity affiliate - - - - (2,718) - (2,718) (2,718) - Change in fair value of an acquisition- related earnout liability (1,062) 675 (1,737) (1,737) (595) - (595) (595) - Equity loss (income) from a captive insurance company (3,956) (3,131) (825) (1,812) (2,171) (987) (1,184) (2,323) (1,139) Devaluation of the Venezuelan Bolivar 357 357 - - - - - - - U.S. customer bankruptcies 98 - 98 1,254 1,156 1,156 - - - CFO transition costs (0) - (0) 609 609 609 - - - Cost streamlining initiatives 402 402 - - - - - - - Adjusted EBITDA 84,426 45,820 38,606 80,935 78,742 42,329 36,413 72,971 36,558 Adjusted EBITDA Margin 11.8% 12.7% 10.9% 11.4% 11.1% 11.9% 10.2% 10.7% 11.2%

14 Annual Adjusted EBITDA Reconciliation Chart #11 2008 2009 2010 2011 2012 Net income 9,833 16,058 32,120 45,892 47,405 Depreciation 10,879 9,525 9,867 11,455 12,252 Amortization 1,177 1,078 988 2,338 3,106 Interest expense 5,509 5,533 5,225 4,666 4,283 Taxes on income 4,977 7,065 12,616 14,256 15,575 Restructuring and related activities 2,916 2,289 - - - Non-income tax contingency charge - - 4,132 - - Equity affiliate out of period charge - - 564 - - Transition costs related to key employees 3,505 2,443 1,317 - 609 Non-cash gain from the purchase of an equity affiliate - - - (2,718) - Change in fair value of acquisition related earnout liability - - - (595) (1,737) Equity loss (income) from a captive insurance company 1,299 162 (313) (2,323) (1,812) Devaluation of the Venezuelan Bolivar - - 322 - - U.S customer bankruptcies - - - - 1,254 Adjusted EBITDA 40,095 44,153 66,838 72,971 80,935 Adjusted EBITDA Margin 6.9% 9.8% 12.3% 10.7% 11.4%

Non - GAAP Earnings Per Diluted Share Reconciliation Chart #12 Q2 2013 Q2 2012 YTD 2013 YTD 2012 GAAP Earnings Per Diluted Share 1.22$ 0.85$ 2.26$ 1.80$ CFO transition costs per diluted share -$ 0.03$ -$ 0.03$ Customer bankruptcies per diluted share -$ 0.06$ -$ 0.06$ Cost streamlining initiatives per diluted share 0.02$ -$ 0.02$ -$ Mineral oil excise tax refund per diluted share (0.14)$ -$ (0.14)$ -$ Change in fair value of acquisition-related earnout liability per diluted share 0.03$ -$ 0.03$ -$ Devaluation of the Venezuelan Bolivar per diluted share -$ -$ 0.03$ -$ Equity income in a captive insurance company per diluted share (0.13)$ (0.04)$ (0.24)$ (0.08)$ Non-GAAP Earnings per Diluted Share 1.00$ 0.90$ 1.96$ 1.81$