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
April
27, 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:
| 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 April 27, 2010, Quaker Chemical
Corporation announced its results of operations for the first quarter ended
March 31, 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. 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 April 27,
2010.
|
| 99.2 | Supplemental Information related to first quarter ended March 31, 2010. |
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
|
|||
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Date: April
27, 2010
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By:
|
/s/
Mark A. Featherstone
|
|
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Mark
A. Featherstone
Vice
President and
Chief
Financial Officer
|
|||
|
NEWS
|
||
|
For
Release:
Immediate
|
Contact:
Mark
A. Featherstone
Vice President
and
Chief
Financial Officer
610-832-4160
|
|
QUAKER
CHEMICAL CORPORATION ANNOUNCES FIRST QUARTER 2010 RESULTS
|
|
·
|
Q1
2010 diluted EPS of $0.84 vs. breakeven Q1
2009
|
|
|
·
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Product
volumes up 35% from Q1 2009
|
|
|
·
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Net
debt-to-total capital ratio improved to 24% vs. 31% at March 31,
2009
|
April 27,
2010
CONSHOHOCKEN,
PA – Quaker Chemical Corporation (NYSE: KWR) today announced first quarter 2010
net sales of $128.3 million and earnings per diluted share of $0.84, compared to
net sales of $98.5 million and breakeven results for the first quarter of
2009. The first quarter 2010 results include a tax benefit of
approximately $0.11 per diluted share reflecting the expiration of applicable
statutes of limitations for several uncertain tax positions.
Michael
F. Barry, Chairman, Chief Executive Officer and President, commented, “Our
strong first quarter results were driven by high steel industry demand in China,
Brazil, India and Russia while industrial demand in North America and Europe
continues to gradually recover from depressed levels. In addition,
the aggressive actions we have taken over the past year and an unusually low tax
rate also contributed to these results.”
Mr. Barry
added, “While we continue to pick up new business and will benefit from
continued improvement in key steel and automotive markets, we do anticipate
somewhat lower product volume in the second half of the year compared with the
first half. This is primarily due to credit-tightening actions in
China, seasonal factors relating to the timing of shipments to certain
customers, the ending of inventory restocking in our end-use markets and the
conclusion of tax incentives for automotive purchases in several
countries. The combination of somewhat lower expected demand in the
second half, the lag effects as we recover our margins due to the higher raw
material costs and our continued investment in key growth initiatives will
likely dampen earnings over the remaining quarters for 2010. However,
we expect to deliver strong earnings over the rest of 2010 as the remaining
quarters are still expected to equal or exceed the earnings we achieved in 2008
before the global crisis began. In summary, I am confident in our
future given that we are well positioned in the fastest growing economies as
well as the above normal growth we expect in the more mature markets as they
recover over the next few years."
First Quarter 2010
Summary
Net sales
for the first quarter were $128.3 million, up 30% from $98.5 million for the
first quarter of 2009. 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 35%, partially offset by
a 5% decline in selling price and mix. Foreign exchange rates
increased revenues by approximately 7%, which was offset by lower automotive
chemical management services (“CMS”) revenue as a result of lower revenue
reported on a gross basis. On a sequential quarterly basis, product
volumes increased by approximately 3%.
The gross
margin percentage of 36.9% represents considerable improvement over the 29.1%
reported in the first quarter of 2009. This margin expansion was
primarily the result of cost reduction actions taken, a more favorable raw
material cost environment and the reduced automotive CMS revenues reported on a
gross basis. The increase in gross margin percentage from the fourth
quarter of 2009 was due to reduced CMS revenues reported on a gross basis,
partially offset by higher costs related to the start-up of the Middletown, Ohio
plant expansion, as well as increasing raw material prices and mix.
- more -
Selling,
general and administrative expenses increased $7.0 million, or 26%, compared to
the first quarter of 2009. Higher incentive compensation in the first
quarter of 2010, compared to reductions of incentive compensation accruals in
the first quarter of 2009 and foreign exchange rate increases, were the primary
drivers of the increase, representing 82% of the increase. Higher
commissions on improved sales and increased travel and other costs 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.
The
decrease in other income is primarily due to the first quarter 2009 gain related
to the disposition of land in Europe of approximately $0.11 per diluted
share. Equity in net loss 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. The increase in net
income attributable to noncontrolling interests is due to stronger financial
performances from those affiliates as they continue to recover from the global
economic downturn.
The
Company’s low first quarter 2010 effective tax rate of 24% reflects the
expiration of applicable statutes of limitations for several uncertain tax
positions of approximately $0.11 per diluted share. The tax benefit
recorded in the first quarter of 2009 reflects no tax provided for the land sale
gain due to the utilization of net operating losses not previously
benefited. The Company has experienced and expects to experience
further volatility in its quarterly 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. However, the Company expects
a higher effective tax rate for the full year 2010 as compared to the first
quarter 2010 rate.
Balance Sheet and Cash Flow
Items
The
Company's net debt-to-total-capital ratio improved to 24% as of March
31, 2010, compared to 31% as of March 31, 2009. Debt increased from
December 31, 2009 due to higher working capital as a result of improved business
activity, as well as the timing of payments related to incentive
compensation.
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
first quarter results is scheduled for April 28, 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 and share amounts)
|
(Unaudited)
|
||||||||
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Three
Months Ended March 31,
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||||||||
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2010
|
2009
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|||||||
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Net
sales
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$ | 128,320 | $ | 98,507 | ||||
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Cost
of goods sold
|
80,980 | 69,793 | ||||||
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Gross
margin
|
47,340 | 28,714 | ||||||
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%
|
36.9 | % | 29.1 | % | ||||
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Selling,
general and administrative expenses
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33,669 | 26,697 | ||||||
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Restructuring
and related charges
|
- | 2,289 | ||||||
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Operating
income (loss)
|
13,671 | (272 | ) | |||||
|
%
|
10.7 | % | -0.3 | % | ||||
|
Other
income, net
|
763 | 1,454 | ||||||
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Interest
expense, net
|
(1,127 | ) | (1,089 | ) | ||||
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Income
before taxes and equity in net loss of associated
companies
|
13,307 | 93 | ||||||
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Taxes
(tax benefit) on income before equity in net loss of associated
companies
|
3,181 | (251 | ) | |||||
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Income
before equity in net loss of associated companies
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10,126 | 344 | ||||||
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Equity
in net loss of associated companies
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(89 | ) | (142 | ) | ||||
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Net
income
|
10,037 | 202 | ||||||
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Less:
Net income attributable to noncontrolling interest
|
618 | 200 | ||||||
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Net
income attributable to Quaker Chemical Corporation
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$ | 9,419 | $ | 2 | ||||
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%
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7.3 | % | 0.0 | % | ||||
|
Per share
data:
|
||||||||
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Net
income attributable to Quaker Chemical Corporation Common Shareholders -
basic
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$ | 0.85 | $ | - | ||||
|
Net
income attributable to Quaker Chemical Corporation Common Shareholders -
diluted
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$ | 0.84 | $ | - | ||||
- more
- -
Quaker Chemical
Corporation
Condensed Consolidated
Balance Sheet
(Dollars in thousands,
except par value and share amounts)
|
(Unaudited)
|
||||||||
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March
31,
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December
31,
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|||||||
|
2010
|
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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$ | 24,820 | $ | 25,051 | ||||
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Construction
fund (restricted cash)
|
407 | 2,358 | ||||||
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Accounts
receivable, net
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110,587 | 108,793 | ||||||
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Inventories,
net
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54,458 | 50,040 | ||||||
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Prepaid
expenses and other current assets
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12,929 | 12,656 | ||||||
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Total
current assets
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203,201 | 198,898 | ||||||
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Property,
plant and equipment, net
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65,561 | 67,426 | ||||||
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Goodwill
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45,509 | 46,515 | ||||||
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Other
intangible assets, net
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5,272 | 5,579 | ||||||
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Investments
in associated companies
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8,836 | 8,824 | ||||||
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Deferred
income taxes
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31,510 | 31,692 | ||||||
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Other
assets
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46,941 | 39,537 | ||||||
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Total
assets
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$ | 406,830 | $ | 398,471 | ||||
|
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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$ | 2,485 | $ | 2,431 | ||||
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Accounts
and other payables
|
56,949 | 60,939 | ||||||
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Accrued
compensation
|
10,443 | 16,656 | ||||||
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Accrued
pension and postretirement benefits
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4,702 | 4,717 | ||||||
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Other
current liabilities
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16,700 | 15,224 | ||||||
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Total
current liabilities
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91,279 | 99,967 | ||||||
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Long-term
debt
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71,099 | 63,685 | ||||||
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Deferred
income taxes
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8,613 | 8,605 | ||||||
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Accrued
pension and postretirement benefits
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26,865 | 27,602 | ||||||
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Other
non-current liabilities
|
45,859 | 42,317 | ||||||
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Total
liabilities
|
243,715 | 242,176 | ||||||
|
Equity
|
||||||||
|
Common
stock, $1 par value; authorized 30,000,000 shares; issued
11,151,787
|
11,152 | 11,086 | ||||||
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Capital
in excess of par value
|
30,277 | 27,527 | ||||||
|
Retained
earnings
|
129,994 | 123,140 | ||||||
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Accumulated
other comprehensive loss
|
(14,058 | ) | (10,439 | ) | ||||
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Total
Quaker shareholders' equity
|
157,365 | 151,314 | ||||||
|
Noncontrolling
interest
|
5,750 | 4,981 | ||||||
|
Total
equity
|
163,115 | 156,295 | ||||||
|
Total
liabilities and equity
|
$ | 406,830 | $ | 398,471 | ||||
- more -
Quaker Chemical
Corporation
Condensed Consolidated
Statement of Cash Flows
For the three months ended
March 31,
(Dollars in
thousands)
|
(Unaudited)
|
||||||||
|
2010
|
2009
|
|||||||
|
Cash
flows from operating activities
|
||||||||
|
Net
income
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$ | 10,037 | $ | 202 | ||||
|
Adjustments
to reconcile net income to net cash (used in) provided by operating
activities:
|
||||||||
|
Depreciation
|
2,593 | 2,458 | ||||||
|
Amortization
|
254 | 257 | ||||||
|
Equity
in net loss of associated companies, net of dividends
|
89 | 142 | ||||||
|
Deferred
compensation and other, net
|
289 | (2,852 | ) | |||||
|
Stock-based
compensation
|
727 | 352 | ||||||
|
Restructuring
and related charges
|
- | 2,289 | ||||||
|
Gain
on disposal of property, plant and equipment
|
(32 | ) | (1,193 | ) | ||||
|
Insurance
settlement realized
|
(345 | ) | (144 | ) | ||||
|
Pension
and other postretirement benefits
|
(2,265 | ) | (1,907 | ) | ||||
|
Increase
(decrease) in cash from changes in current assets and current liabilities,
net of acquisitions:
|
||||||||
|
Accounts
receivable
|
(3,606 | ) | 7,196 | |||||
|
Inventories
|
(5,332 | ) | 10,060 | |||||
|
Prepaid
expenses and other current assets
|
(1,360 | ) | 34 | |||||
|
Accounts
payable and accrued liabilities
|
(5,818 | ) | (6,045 | ) | ||||
|
Change
in restructuring liabilities
|
- | (2,652 | ) | |||||
|
Net
cash (used in) provided by operating activities
|
(4,769 | ) | 8,197 | |||||
|
Cash
flows from investing activities
|
||||||||
|
Capital
expenditures
|
(2,042 | ) | (2,375 | ) | ||||
|
Payments
related to acquisitions
|
- | (1,000 | ) | |||||
|
Proceeds
from disposition of assets
|
41 | 1,605 | ||||||
|
Insurance
settlement received and interest earned
|
5,038 | 5,056 | ||||||
|
Change
in restricted cash, net
|
(2,742 | ) | (4,086 | ) | ||||
|
Net
cash provided by (used in) investing activities
|
295 | (800 | ) | |||||
|
Cash
flows from financing activities
|
||||||||
|
Net
decrease in short-term borrowings
|
- | (1,619 | ) | |||||
|
Proceeds
from long-term debt
|
7,583 | 1,584 | ||||||
|
Repayments
of long-term debt
|
(122 | ) | (7,728 | ) | ||||
|
Dividends
paid
|
(2,550 | ) | (2,492 | ) | ||||
|
Stock
options exercised, other
|
135 | 69 | ||||||
|
Excess
tax benefit related to stock option exercises
|
321 | - | ||||||
|
Net
cash provided by (used in) financing activities
|
5,367 | (10,186 | ) | |||||
|
Effect
of exchange rate changes on cash
|
(1,124 | ) | (126 | ) | ||||
|
Net
decrease in cash and cash equivalents
|
(231 | ) | (2,915 | ) | ||||
|
Cash
and cash equivalents at the beginning of the period
|
25,051 | 20,892 | ||||||
|
Cash
and cash equivalents at the end of the period
|
$ | 24,820 | $ | 17,977 | ||||
