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 26, 2011
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 26, 2011, Quaker Chemical Corporation announced its results of operations for the first quarter ended March 31, 2011, 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 26, 2011.	
 	 	
99.2	Supplemental Information related to first quarter ended March 31, 2011.	

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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:  April 26, 2011	 	By:	/S/ MARK A. FEATHERSTONE	 	
 	 	 	Mark A. Featherstone
Vice President and
Chief Financial Officer	 	

 
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 	 NEWS	 	 	
    For Release:
       Immediate	 	Contact:
Mark A. Featherstone
Vice President and
Chief Financial Officer
610-832-4160	 	

QUAKER CHEMICAL CORPORATION ANNOUNCES FIRST QUARTER 2011 RESULTS

 	·	Strong quarterly sales up 25% to $159.9 million from Q1 2010	

 	·	Q1 2011 diluted EPS of $0.91 vs. $0.84 diluted EPS in Q1 2010	

 	·	Product volumes higher than Q1 2010 by 16%	

April 26, 2011

CONSHOHOCKEN, PA – Quaker Chemical Corporation (NYSE:KWR) today announced net sales of $159.9 million and earnings per diluted share of $0.91 for the first quarter of 2011, up 25% and 8%, respectively, compared to net sales of $128.3 million and earnings per diluted share of $0.84 for the first quarter of 2010.

Michael F. Barry, Chairman, Chief Executive Officer and President, commented, “We are off to a good start in 2011, despite the continuing challenge of escalating raw material costs.  We are and will be implementing additional price increases as part of our ongoing effort to restore our margins to more acceptable levels.  However, our profitability continues to grow due to good demand in our base markets, new business gained and the contribution from our recent acquisitions.”

Mr. Barry further stated, “Despite the uncertainties in the raw material markets and global economies, our goal for 2011 remains to build upon the profitability we achieved in 2010.  With our leadership positions in both the emerging and mature markets, as well as our organic and external growth opportunities, I remain confident in our prospects for 2011 and beyond.”

First Quarter 2011 Summary

Net sales for the first quarter of 2011 were $159.9 million, an increase of 25% from $128.3 million in the first quarter of 2010.  The increase in net sales was primarily the result of higher volumes and selling prices across the globe.  Product volumes were higher by approximately 16% including the effects of acquisitions.  Selling prices and mix increased revenues by approximately 7%, as the Company continues to implement price increases to help offset higher raw material costs.  Foreign exchange rates also increased revenues by approximately 2%.

Gross profit increased by approximately $5.4 million, but gross margin decreased from 36.9% in the first quarter of 2010 to 33% in the first quarter of 2011, as raw material costs continued to escalate, particularly in the first quarter of 2011.  The Company continues to implement price increases to recover these higher costs.

Selling, general and administrative expenses (“SG&A”) increased approximately $5.0 million compared to the first quarter of 2010.  Higher selling costs on increased business activity, our 2010 acquisitions, foreign exchange rate translation and higher professional fees accounted for approximately 62% of the increase.  Higher inflationary and other costs partially offset by lower incentive compensation accounted for the remainder of the increase.  SG&A as a percentage of sales decreased to 24.2% in the first quarter of 2011 from 26.2% in the first quarter of 2010.

 

Net interest expense decreased due to lower interest rates despite higher average borrowings.  Equity in net income of associated companies increased compared to the first quarter of 2010 as the prior year quarter reflected a charge of approximately $0.03 per diluted share related to the first quarter 2010 devaluation of the Venezuelan Bolivar Fuerte.

The Company’s low first quarter 2011 and 2010 effective tax rates include the expiration of applicable statutes of limitations for uncertain tax positions of approximately $0.11 per diluted share, in each period.  The Company has experienced and expects to further experience 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 2011 as compared to the first quarter 2011 rate.

Balance Sheet and Cash Flow Items

Debt increased from December 31, 2010 due to higher working capital requirements on increased 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 27, 2011 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, aluminum, 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.

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Quaker Chemical Corporation
Condensed Consolidated Statement of Income
(Dollars in thousands, except per share data and share amounts)

 	 	(Unaudited)	 	
 	 	 	 	 	 	 	
 	 	Three Months Ended March 31,	 	
 	 	2011	 	 	2010	 	
 	 	 	 	 	 	 	
Net sales	 	$	159,865	 	 	$	128,320	 	
 	 	 	 	 	 	 	 	 	
Cost of goods sold	 	 	107,131	 	 	 	80,980	 	
 	 	 	 	 	 	 	 	 	
Gross profit	 	 	52,734	 	 	 	47,340	 	
  %	 	 	33.0	%	 	 	36.9	%	
 	 	 	 	 	 	 	 	 	
Selling, general and administrative expenses	 	 	38,634	 	 	 	33,669	 	
 	 	 	 	 	 	 	 	 	
Operating income	 	 	14,100	 	 	 	13,671	 	
  %	 	 	8.8	%	 	 	10.7	%	
 	 	 	 	 	 	 	 	 	
Other income, net	 	 	539	 	 	 	763	 	
Interest expense, net	 	 	(946	)	 	 	(1,127	)	
Income before taxes and equity in net income (loss) of associated companies	 	 	13,693	 	 	 	13,307	 	
 	 	 	 	 	 	 	 	 	
Taxes on income before equity in net income (loss) of associated companies	 	 	2,822	 	 	 	3,181	 	
Income before equity in net income (loss) of associated companies	 	 	10,871	 	 	 	10,126	 	
 	 	 	 	 	 	 	 	 	
Equity in net income (loss) of associated companies	 	 	359	 	 	 	(89	)	
 	 	 	 	 	 	 	 	 	
Net income	 	 	11,230	 	 	 	10,037	 	
 	 	 	 	 	 	 	 	 	
Less: Net income attributable to noncontrolling interest	 	 	630	 	 	 	618	 	
 	 	 	 	 	 	 	 	 	
Net income attributable to Quaker Chemical Corporation	 	$	10,600	 	 	$	9,419	 	
  %	 	 	6.6	%	 	 	7.3	%	
 	 	 	 	 	 	 	 	 	
Per share data:	 	 	 	 	 	 	 	 	
Net income attributable to Quaker Chemical Corporation Common Shareholders - basic	 	$	0.92	 	 	$	0.85	 	
Net income attributable to Quaker Chemical Corporation Common Shareholders - diluted	 	$	0.91	 	 	$	0.84	 	

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Quaker Chemical Corporation
Condensed Consolidated Balance Sheet
(Dollars in thousands, except par value and share amounts)

 	 	(Unaudited)	 	
 	 	 	 	 	 	 	
 	 	March 31,	 	 	December 31,	 	
 	 	2011	 	 	2010	 	
ASSETS	 	 	 	 	 	 	
 	 	 	 	 	 	 	
Current assets	 	 	 	 	 	 	
Cash and cash equivalents	 	$	23,564	 	 	$	25,766	 	
Accounts receivable, net	 	 	130,948	 	 	 	116,266	 	
Inventories	 	 	70,230	 	 	 	60,841	 	
Prepaid expenses and other current assets	 	 	13,899	 	 	 	12,609	 	
Total current assets	 	 	238,641	 	 	 	215,482	 	
 	 	 	 	 	 	 	 	 	
Property, plant and equipment, net	 	 	78,494	 	 	 	76,535	 	
Goodwill	 	 	53,675	 	 	 	52,758	 	
Other intangible assets, net	 	 	23,579	 	 	 	24,030	 	
Investments in associated companies	 	 	9,439	 	 	 	9,218	 	
Deferred income taxes	 	 	27,303	 	 	 	28,846	 	
Other assets	 	 	44,896	 	 	 	42,561	 	
Total assets	 	$	476,027	 	 	$	449,430	 	
 	 	 	 	 	 	 	 	 	
LIABILITIES AND EQUITY	 	 	 	 	 	 	 	 	
 	 	 	 	 	 	 	 	 	
Current liabilities	 	 	 	 	 	 	 	 	
Short-term borrowings and current portion of long-term debt	 	$	809	 	 	$	890	 	
Accounts and other payables	 	 	76,595	 	 	 	63,893	 	
Accrued compensation	 	 	9,728	 	 	 	17,140	 	
Other current liabilities	 	 	19,108	 	 	 	19,268	 	
Total current liabilities	 	 	106,240	 	 	 	101,191	 	
Long-term debt	 	 	83,766	 	 	 	73,855	 	
Deferred income taxes	 	 	6,410	 	 	 	6,108	 	
Other non-current liabilities	 	 	78,849	 	 	 	81,177	 	
Total liabilities	 	 	275,265	 	 	 	262,331	 	
 	 	 	 	 	 	 	 	 	
Equity	 	 	 	 	 	 	 	 	
Common stock, $1 par value; authorized 30,000,000 shares; issued 11,531,148	 	 	11,531	 	 	 	11,492	 	
Capital in excess of par value	 	 	39,132	 	 	 	38,275	 	
Retained earnings	 	 	152,237	 	 	 	144,347	 	
Accumulated other comprehensive loss	 	 	(9,497	)	 	 	(13,736	)	
Total Quaker shareholders' equity	 	 	193,403	 	 	 	180,378	 	
Noncontrolling interest	 	 	7,359	 	 	 	6,721	 	
Total equity	 	 	200,762	 	 	 	187,099	 	
Total liabilities and equity	 	$	476,027	 	 	$	449,430	 	

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Quaker Chemical Corporation
Condensed Consolidated Statement of Cash Flows
For the three months ended March 31,
(Dollars in thousands)

 	 	(Unaudited)	 	
 	 	2011	 	 	2010	 	
Cash flows from operating activities	 	 	 	 	 	 	
Net income	 	$	11,230	 	 	$	10,037	 	
Adjustments to reconcile net income to net cash used in operating activities:	 	 	 	 	 	 	 	 	
Depreciation	 	 	2,656	 	 	 	2,593	 	
Amortization	 	 	486	 	 	 	254	 	
Equity in net (income) loss of associated companies, net of dividends	 	 	(262	)	 	 	89	 	
Deferred compensation and other, net	 	 	1,967	 	 	 	289	 	
Stock-based compensation	 	 	868	 	 	 	727	 	
Gain on disposal of property, plant and equipment	 	 	(40	)	 	 	(32	)	
Insurance settlement realized	 	 	(365	)	 	 	(345	)	
Pension and other postretirement benefits	 	 	(4,910	)	 	 	(2,265	)	
Increase (decrease) in cash from changes in current assets and current liabilities, net of acquisitions:	 	 	 	 	 	 	 	 	
Accounts receivable	 	 	(12,478	)	 	 	(3,606	)	
Inventories	 	 	(8,309	)	 	 	(5,332	)	
Prepaid expenses and other current assets	 	 	(2,397	)	 	 	(1,360	)	
Accounts payable and accrued liabilities	 	 	4,455	 	 	 	(5,818	)	
Net cash used in operating activities	 	 	(7,099	)	 	 	(4,769	)	
 	 	 	 	 	 	 	 	 	
Cash flows from investing activities	 	 	 	 	 	 	 	 	
Capital expenditures	 	 	(3,475	)	 	 	(2,042	)	
Proceeds from disposition of assets	 	 	170	 	 	 	41	 	
Insurance settlement received and interest earned	 	 	22	 	 	 	5,038	 	
Change in restricted cash, net	 	 	343	 	 	 	(2,742	)	
Net cash (used in) provided by investing activities	 	 	(2,940	)	 	 	295	 	
 	 	 	 	 	 	 	 	 	
Cash flows from financing activities	 	 	 	 	 	 	 	 	
Proceeds from long-term debt	 	 	10,000	 	 	 	7,583	 	
Repayments of long-term debt	 	 	(231	)	 	 	(122	)	
Dividends paid	 	 	(2,701	)	 	 	(2,550	)	
Stock options exercised, other	 	 	(50	)	 	 	135	 	
Excess tax benefit related to stock option exercises	 	 	78	 	 	 	321	 	
Net cash provided by financing activities	 	 	7,096	 	 	 	5,367	 	
 	 	 	 	 	 	 	 	 	
Effect of exchange rate changes on cash	 	 	741	 	 	 	(1,124	)	
Net decrease in cash and cash equivalents	 	 	(2,202	)	 	 	(231	)	
Cash and cash equivalents at the beginning of the period	 	 	25,766	 	 	 	25,051	 	
Cash and cash equivalents at the end of the period	 	$	23,564	 	 	$	24,820