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 31, 2014
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 31, 2014, Quaker Chemical Corporation announced its results of operations for the second quarter ended June 30, 2014, 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 31, 2014.	
 	 	
99.2	Supplemental Information related to second quarter ended June 30, 2014.	
 
-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.
 
 	QUAKER CHEMICAL CORPORATION
Registrant	
 	 	 	
Date: July 31, 2014	By:	/S/ MARGARET M. LOEBL	
 	 	Margaret M. Loebl	
 	 	Vice President, Chief Financial	
 	 	Officer and Treasurer	
 
-3-	

NEWS
 
Contact:
Margaret M. Loebl
Vice President, Chief Financial Officer and Treasurer
loeblm@quakerchem.com
T. 610.832.4160	 	
For Release: Immediate
 
QUAKER CHEMICAL ANNOUNCES SECOND QUARTER 2014 RESULTS
 
·     3.5% revenue growth on increased product volume levels
·     Strong operating income leads 11% increase in non-GAAP earnings per diluted share
·     Acquisition of remaining 49% interest in Australian affiliate
 
July 31, 2014
 
CONSHOHOCKEN, PA - Quaker Chemical Corporation (NYSE: KWR) today announced a 3.5% increase in net sales to $191.3 million for the second quarter of 2014 compared to the second quarter of 2013 net sales of $184.8 million. Earnings per diluted share for the second quarter of 2014 were $1.16 compared to $1.22 for the second quarter of 2013, which included $0.14 of earnings per diluted share related to the prior year receipt of a mineral oil excise tax refund. Non-GAAP earnings per diluted share increased 11% to $1.11 for the second quarter of 2014 compared to $1.00 for the second quarter of 2013. The Company’s adjusted EBITDA increased 6% to approximately $25.8 million for the second quarter of 2014 compared to $24.5 million in the second quarter of 2013. For the first six months of 2014, the Company’s net sales increased 3% to $373.0 million from $361.0 million for the first six months of 2013, including a 1% negative impact due to foreign exchange rate translation. Earnings per diluted share for the first six months of 2014 were $2.13 compared to $2.26 for the first six months of 2013, with non-GAAP earnings per diluted share increasing 6% to $2.07 for the first six months of 2014 from $1.96 for the first six months of 2013. The Company’s adjusted EBITDA increased 8% to $49.6 million for the first six months of 2014 from $45.8 million for the first six months of 2013.
 
Michael F. Barry, Chairman, Chief Executive Officer and President commented, “We are pleased with our second quarter results especially in light of a continuing uneven global economic environment as well as negative impacts due to foreign exchange. Our 11% growth in non-GAAP earnings is an indication that our business model and competitive positioning continue to serve us well. We experienced good growth in North America and China, a continued modest recovery in Europe after the long economic downturn, and a significant decline in South America, primarily due to exchange rates and poor economic conditions.”
 
Mr. Barry continued, “Looking forward, we expect to see modest growth in most of our major markets, although some countries such as India and Brazil could continue to be challenging. We are also experiencing some increases in our raw material costs. However, we do believe our track record of increasing our market share and leveraging our recent acquisitions will continue and help offset the market issues we may experience. Overall, I continue to remain confident in our future and expect 2014 to be another good year for Quaker as we strive to increase revenue and non-GAAP earnings for the fifth consecutive year.”
 
Quaker Chemical Corporation
One Quaker Park, 901 E. Hector Street, Conshohocken, PA 19428-2380 USA
P: 610.832.4000 F: 610.832.8682
quakerchem.com

 	

 
Second Quarter of 2014 Summary
 
Net sales for the second quarter of 2014 of $191.3 million increased approximately 3.5% from net sales of $184.8 million for the second quarter of 2013. The increase in net sales was primarily due to higher product volumes net of a decrease of approximately $0.5 million due to foreign exchange rate translation.
 
Gross profit increased approximately $0.9 million, or approximately 1%, from the second quarter of 2013 on the increase in sales volumes, noted above. The Company’s gross margin decreased to 35.7% for the second quarter of 2014 from 36.4% for the second quarter of 2013, which was primarily driven by a change in price and product mix and additional expenses to finalize the manufacturing cost streamlining initiative that began in the prior year in our Europe, Middle East and Africa (“EMEA”) segment.
 
Selling, general and administrative expenses (“SG&A”) decreased approximately $0.3 million from the second quarter of 2013. The decrease in SG&A was driven by lower incentive compensation costs in the current quarter and additional costs in the prior year period related to a South American cost streamlining initiative, partially offset by higher labor-related and acquisition-related costs.
 
The Company had other income of $0.1 million in the second quarter of 2014 compared to $2.3 million in the second quarter of 2013, which primarily consisted of the prior year mineral oil excise tax refund net of expense related to a change in an acquisition-related earnout liability.
 
Interest expense was lower in the second quarter of 2014 compared to the second quarter of 2013, primarily due to decreases in average borrowings and interest rates. Interest income was higher in the second quarter of 2014 compared to the second quarter of 2013, primarily due to interest received on several tax-related credits and an increase in the level of the Company’s cash on hand in the current period.
 
The Company’s effective tax rates for the second quarters of 2014 and 2013 were generally consistent at 30.6% and 31.7%, respectively, with certain timing items slightly decreasing the current quarter’s effective tax rate.
 
Equity in net income of associated companies (“equity income”) decreased $0.8 million from the second quarter of 2013 to the second quarter of 2014. The primary component of the Company’s equity income is its interest in a captive insurance company, which was higher in the prior year period. In addition, the Company’s equity income for the second quarter of 2014 includes a currency charge related to the conversion of certain Venezuelan Bolivar Fuerte to U.S. dollars.
 
Changes in foreign exchange rates, excluding the current quarter conversion of certain Venezuelan Bolivar Fuerte, negatively impacted the second quarter of 2014 net income by approximately $0.1 million, or $0.01 per diluted share.
 
Year-to-Date 2014 Summary
 
Net sales for the first six months of 2014 of $373.0 million increased 3% from $361.0 million for the first six months of 2013, primarily due to higher product volumes across most regions net of a decrease of approximately $3.2 million due to foreign exchange rate translation.
 
Quaker Chemical Corporation
One Quaker Park, 901 E. Hector Street, Conshohocken, PA 19428-2380 USA
P: 610.832.4000 F: 610.832.8682
quakerchem.com

 	
 
Gross profit increased approximately $3.4 million, or approximately 3%, from the first six months of 2013, which was primarily driven by the increase in sales volumes, noted above, on stable gross margins of 35.7% and 36.0% for the first six months of 2014 and the first six months of 2013, respectively.
 
SG&A increased approximately $0.3 million from the first six months of 2013, primarily due to higher labor related costs, acquisition related costs and, also, additional costs related to an amendment to the Company’s pension plan in the United Kingdom (“UK”). These increases to the first six months of 2014 SG&A were net of lower incentive compensation costs, decreases in foreign currency exchange rate translation and additional costs in the prior year related to a South American cost streamlining initiative.
 
The Company had other expense of $0.4 million in the first six months of 2014, which was primarily the result of foreign exchange losses net of third party license fee income. Whereas, the Company had other income of $2.6 million in the first six months of 2013, which primarily consisted of the prior year mineral oil excise tax refund net of expense related to a change in an acquisition-related earnout liability.
 
Interest expense was lower in the first six months of 2014 compared to the first six months of 2013, primarily due to decreases in average borrowings and interest rates. Interest income was higher in the first six months of 2014 compared to the first six months of 2013, primarily due to interest received on several tax-related credits and an increase in the level of the Company’s cash on hand in the current period.
 
The Company’s effective tax rates for the first six months of 2014 and 2013 were 32.5% and 28.3%, respectively. The primary contributors to the increase in the Company’s effective tax rate were lower changes in reserves related to uncertain tax positions and certain one-time items that increased the first six months of 2014 effective tax rate. Although the tax rate remains inflated above our full year expectation, the Company estimates its full year 2014 effective tax rate to approximate 31%.
 
The decrease in the Company’s equity income of $1.0 million from the first six months of 2013 to the first six months of 2014 was primarily caused by lower earnings related to the Company’s equity interest in a captive insurance company. In addition, the Company’s equity income for both the first six months of 2014 and the first six months of 2013 include comparable currency charges related to the conversion of Venezuelan Bolivar Fuerte to the U.S. dollar.
 
Changes in foreign exchange rates negatively impacted the first six months of 2014 net income by approximately $0.8 million, or $0.06 per diluted share.
 
Balance Sheet and Cash Flow Items
 
The Company’s net operating cash flow of approximately $10.1 million for the second quarter of 2014 increased its year-to-date net operating cash flow to $8.3 million compared to $27.5 million for the first six months of 2013. The Company’s operating cash flow continued to be impacted by cash invested in working capital during the second quarter of 2014. Specifically, the Company’s accounts receivables increased primarily due to higher sales volumes at the end of the second quarter of 2014 and a further delay in timing of cash receipts, its inventory was slightly higher due to a further build of raw material stock levels, and its accounts payable were down due to timing of payments to third party suppliers. Overall, the Company’s liquidity remains strong, as its cash position continued to exceed its debt at June 30, 2014 and, also, the Company’s consolidated leverage ratio continued to be less than one times EBITDA. In June 2014, the Company acquired the remaining 49% ownership interest in its Australian affiliate, Quaker Chemical (Australasia) Pty. Limited for A$8 million from its joint venture partner, Nuplex Industries.
 
-more-

 	
 
Non-GAAP Measures
 
Included in this public release are non-GAAP financial measures of non-GAAP earnings per diluted share and adjusted EBITDA. The Company believes these non-GAAP financial measures provide meaningful supplemental information as they enhance a reader’s understanding of the financial performance of the Company, are more indicative of future operating performance of the Company, and facilitate a better comparison among fiscal periods, as the non-GAAP financial measures exclude 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 are reconciliations between the non-GAAP (unaudited) financial measures of non-GAAP earnings per diluted share and adjusted EBITDA to their most directly comparable GAAP (unaudited) financial measures:
 
 	 	Three Months Ended
June 30,	 	 	Six Months Ended
June 30,	 	
 	 	2014	 	 	2013	 	 	2014	 	 	2013	 	
GAAP earnings per diluted share attributable to Quaker Chemical Corporation Common Shareholders	 	$	1.16	 	 	$	1.22	 	 	$	2.13	 	 	$	2.26	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
UK pension plan amendment per diluted share	 	 	-	 	 	 	-	 	 	 	0.05	 	 	 	-	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
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	 	 	 	0.02	 	 	 	0.02	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Currency conversion impacts of the Venezuelan Bolivar Fuerte per diluted share	 	 	0.02	 	 	 	-	 	 	 	0.02	 	 	 	0.03	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Equity income in a captive insurance company per diluted share	 	 	(0.09	)	 	 	(0.13	)	 	 	(0.15	)	 	 	(0.24	)	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Non-GAAP earnings per diluted share	 	$	1.11	 	 	$	1.00	 	 	$	2.07	 	 	$	1.96	 	
 
 	 	Three Months Ended
June 30,	 	 	Six Months Ended
June 30,	 	
 	 	2014	 	 	2013	 	 	2014	 	 	2013	 	
Net income attributable to Quaker Chemical Corporation	 	$	15,427	 	 	$	16,083	 	 	$	28,157	 	 	$	29,702	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Depreciation and amortization	 	 	3,824	 	 	 	3,953	 	 	 	7,712	 	 	 	7,888	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Interest expense	 	 	581	 	 	 	762	 	 	 	1,106	 	 	 	1,506	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Taxes on income before equity in net income of associated companies	 	 	6,538	 	 	 	6,828	 	 	 	13,084	 	 	 	10,961	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Equity income in a captive insurance company	 	 	(1,225	)	 	 	(1,696	)	 	 	(2,071	)	 	 	(3,131	)	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Mineral oil excise tax refund	 	 	-	 	 	 	(2,540	)	 	 	-	 	 	 	(2,540	)	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Change in acquisition-related earnout liability	 	 	-	 	 	 	675	 	 	 	-	 	 	 	675	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Cost streamlining initiatives	 	 	348	 	 	 	402	 	 	 	348	 	 	 	402	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Currency conversion impacts of the Venezuelan Bolivar Fuerte	 	 	321	 	 	 	-	 	 	 	321	 	 	 	357	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
UK pension plan amendment	 	 	-	 	 	 	-	 	 	 	902	 	 	 	-	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Adjusted EBITDA	 	$	25,814	 	 	$	24,467	 	 	$	49,559	 	 	$	45,820	 	
 
-more-

 	
 
Forward-Looking Statements
 
This release contains “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. These forward looking statements 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 2014 results is scheduled for August 1, 2014 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.
 
-more-

 	
 
Quaker Chemical Corporation
Condensed Consolidated Statement of Income
(Dollars in thousands, except per share data and share amounts)
 
 	 	(Unaudited)	 	
 	 	Three Months Ended June 30,	 	 	Six Months Ended June 30,	 	
 	 	2014	 	 	2013	 	 	2014	 	 	2013	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	
Net sales	 	$	191,286	 	 	$	184,846	 	 	$	372,960	 	 	$	361,039	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Cost of goods sold	 	 	123,070	 	 	 	117,532	 	 	 	239,630	 	 	 	231,117	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Gross profit	 	 	68,216	 	 	 	67,314	 	 	 	133,330	 	 	 	129,922	 	
%	 	 	35.7	%	 	 	36.4	%	 	 	35.7	%	 	 	36.0	%	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Selling, general and administrative expenses	 	 	47,271	 	 	 	47,521	 	 	 	93,012	 	 	 	92,718	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Operating income	 	 	20,945	 	 	 	19,793	 	 	 	40,318	 	 	 	37,204	 	
%	 	 	10.9	%	 	 	10.7	%	 	 	10.8	%	 	 	10.3	%	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Other income (expense), net	 	 	117	 	 	 	2,301	 	 	 	(356	)	 	 	2,647	 	
Interest expense	 	 	(581	)	 	 	(762	)	 	 	(1,106	)	 	 	(1,506	)	
Interest income	 	 	895	 	 	 	229	 	 	 	1,348	 	 	 	398	 	
Income before taxes and equity in net income of associated companies	 	 	21,376	 	 	 	21,561	 	 	 	40,204	 	 	 	38,743	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Taxes on income before equity in net income of associated companies	 	 	6,538	 	 	 	6,828	 	 	 	13,084	 	 	 	10,961	 	
Income before equity in net income of associated companies	 	 	14,838	 	 	 	14,733	 	 	 	27,120	 	 	 	27,782	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Equity in net income of associated companies	 	 	1,104	 	 	 	1,942	 	 	 	2,131	 	 	 	3,084	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Net income	 	 	15,942	 	 	 	16,675	 	 	 	29,251	 	 	 	30,866	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Less: Net income attributable to noncontrolling interest	 	 	515	 	 	 	592	 	 	 	1,094	 	 	 	1,164	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Net income attributable to Quaker Chemical Corporation	 	$	15,427	 	 	$	16,083	 	 	$	28,157	 	 	$	29,702	 	
%	 	 	8.1	%	 	 	8.7	%	 	 	7.5	%	 	 	8.2	%	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Per share data:	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Net income attributable to Quaker Chemical Corporation Common Shareholders - basic	 	$	1.17	 	 	$	1.22	 	 	$	2.13	 	 	$	2.26	 	
Net income attributable to Quaker Chemical Corporation Common Shareholders - diluted	 	$	1.16	 	 	$	1.22	 	 	$	2.13	 	 	$	2.26	 	
 
-more-

 	
 
Quaker Chemical Corporation
Condensed Consolidated Balance Sheet
(Dollars in thousands, except par value and share amounts)
 
 	 	(Unaudited)	 	
 	 	June 30,	 	 	December 31,	 	
 	 	2014	 	 	2013	 	
ASSETS	 	 	 	 	 	 	 	 	
 	 	 	 	 	 	 	 	 	
Current assets	 	 	 	 	 	 	 	 	
Cash and cash equivalents	 	$	60,232	 	 	$	68,492	 	
Accounts receivable, net	 	 	186,323	 	 	 	165,629	 	
Inventories	 	 	79,272	 	 	 	71,557	 	
Prepaid expenses and other current assets	 	 	20,133	 	 	 	23,169	 	
Total current assets	 	 	345,960	 	 	 	328,847	 	
 	 	 	 	 	 	 	 	 	
Property, plant and equipment, net	 	 	83,342	 	 	 	85,488	 	
Goodwill	 	 	58,921	 	 	 	58,151	 	
Other intangible assets, net	 	 	29,657	 	 	 	31,272	 	
Investments in associated companies	 	 	21,416	 	 	 	19,397	 	
Deferred income taxes	 	 	22,158	 	 	 	24,724	 	
Other assets	 	 	35,183	 	 	 	36,267	 	
Total assets	 	$	596,637	 	 	$	584,146	 	
 	 	 	 	 	 	 	 	 	
LIABILITIES AND EQUITY	 	 	 	 	 	 	 	 	
 	 	 	 	 	 	 	 	 	
Current liabilities	 	 	 	 	 	 	 	 	
Short-term borrowings and current portion of long-term debt	 	$	1,348	 	 	$	1,395	 	
Accounts and other payables	 	 	80,033	 	 	 	75,580	 	
Accrued compensation	 	 	12,516	 	 	 	20,801	 	
Other current liabilities	 	 	26,806	 	 	 	33,080	 	
Total current liabilities	 	 	120,703	 	 	 	130,856	 	
Long-term debt	 	 	24,611	 	 	 	17,321	 	
Deferred income taxes	 	 	6,500	 	 	 	6,729	 	
Other non-current liabilities	 	 	80,113	 	 	 	84,544	 	
Total liabilities	 	 	231,927	 	 	 	239,450	 	
 	 	 	 	 	 	 	 	 	
Equity	 	 	 	 	 	 	 	 	
Common stock, $1 par value; authorized 30,000,000 shares; issued 13,242,167	 	 	13,242	 	 	 	13,196	 	
Capital in excess of par value	 	 	95,508	 	 	 	99,038	 	
Retained earnings	 	 	279,161	 	 	 	258,285	 	
Accumulated other comprehensive loss	 	 	(31,587	)	 	 	(34,700	)	
Total Quaker shareholders' equity	 	 	356,324	 	 	 	335,819	 	
Noncontrolling interest	 	 	8,386	 	 	 	8,877	 	
Total equity	 	 	364,710	 	 	 	344,696	 	
Total liabilities and equity	 	$	596,637	 	 	$	584,146	 	
 
-more-

 	
 
Quaker Chemical Corporation
Condensed Consolidated Statement of Cash Flows
For the Six months ended June 30,
(Dollars in thousands)
 
 	 	(Unaudited)	 	
 	 	2014	 	 	2013	 	
Cash flows from operating activities	 	 	 	 	 	 	 	 	
Net income	 	$	29,251	 	 	$	30,866	 	
Adjustments to reconcile net income to net cash provided by operating activities:	 	 	 	 	 	 	 	 	
Depreciation	 	 	6,084	 	 	 	6,125	 	
Amortization	 	 	1,628	 	 	 	1,763	 	
Equity in undistributed earnings of associated companies, net of dividends	 	 	(1,931	)	 	 	(1,021	)	
Deferred compensation and other, net	 	 	3,340	 	 	 	(1,080	)	
Stock-based compensation	 	 	2,732	 	 	 	2,152	 	
Gain on disposal of property, plant and equipment	 	 	(97	)	 	 	(224	)	
Insurance settlement realized	 	 	(980	)	 	 	(384	)	
Pension and other postretirement benefits	 	 	(926	)	 	 	(1,884	)	
(Decrease) increase in cash from changes in current assets and current liabilities, net of acquisitions:	 	 	 	 	 	 	 	 	
Accounts receivable	 	 	(20,563	)	 	 	(9,913	)	
Inventories	 	 	(7,568	)	 	 	(2,269	)	
Prepaid expenses and other current assets	 	 	1,157	 	 	 	(286	)	
Accounts payable and accrued liabilities	 	 	(3,873	)	 	 	3,650	 	
Net cash provided by operating activities	 	 	8,254	 	 	 	27,495	 	
 	 	 	 	 	 	 	 	 	
Cash flows from investing activities	 	 	 	 	 	 	 	 	
Investments in property, plant and equipment	 	 	(5,521	)	 	 	(5,202	)	
Payments related to acquisitions, net of cash acquired	 	 	-	 	 	 	(2,478	)	
Proceeds from disposition of assets	 	 	128	 	 	 	345	 	
Interest earned on insurance settlements	 	 	23	 	 	 	28	 	
Change in restricted cash, net	 	 	957	 	 	 	356	 	
Net cash used in investing activities	 	 	(4,413	)	 	 	(6,951	)	
 	 	 	 	 	 	 	 	 	
Cash flows from financing activities	 	 	 	 	 	 	 	 	
Proceeds from long-term debt	 	 	7,500	 	 	 	-	 	
Repayment of long-term debt	 	 	(248	)	 	 	(7,563	)	
Dividends paid	 	 	(6,607	)	 	 	(6,428	)	
Stock options exercised, other	 	 	(33	)	 	 	84	 	
Excess tax benefit related to stock option exercises	 	 	267	 	 	 	452	 	
Purchase of a noncontrolling interest in an affiliate	 	 	(7,532	)	 	 	-	 	
Payment of acquisition-related earnout liability	 	 	(4,709	)	 	 	-	 	
Distributions to noncontrolling affiliate shareholders	 	 	(657	)	 	 	-	 	
Net cash used in financing activities	 	 	(12,019	)	 	 	(13,455	)	
 	 	 	 	 	 	 	 	 	
Effect of exchange rate changes on cash	 	 	(82	)	 	 	(1,090	)	
Net (decrease) increase in cash and cash equivalents	 	 	(8,260	)	 	 	5,999	 	
Cash and cash equivalents at the beginning of the period	 	 	68,492	 	 	 	32,547	 	
Cash and cash equivalents at the end of the period	 	$	60,232	 	 	$	38,546	 	

 

Exhibit 99.2

1 Quaker Chemical Corporation Investor Conference Call August 1, 2014 Second Quarter 2014 Results

 	

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 31, 2014, 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, 2014, 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

 	

Speakers Chart #1 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

 	

Second Quarter 2014 Headlines ▪ 3.5% revenue growth on increased product volume levels ▪ Strong operating income leads 11% increase in non - GAAP earnings per share ▪ Acquisition of remaining 49% interest in Australian affiliate Chart #2

 	

Chairman Comments Second Quarter 2014 ▪ Second Quarter 2014 x Solid volume growth x Growth in North America, China and Europe, partially offset by poor economic conditions in South America x Stable margins despite select market challenges x Strong operating results x Effective business model and competitive position ▪ 2014 Outlook x Expect further share gains and leverage from acquisitions x Some increases in raw material costs x Continue to actively pursue acquisitions “Overall, I continue to remain confident in our future and expect 2014 to be another good year for Quaker as we strive to increase revenue and earnings for the fifth consecutive year.” -- Michael F. Barry, Chairman, CEO & President Chart #3

 	

Chief Financial Officer -- Highlights 1) Solid Volume Increases Net Sales 2) Stable Margins Continue to Drive Strong Operating Results 3) SG&A Down Compared to Second Quarter of 2013 4) Solid Growth in Operating Income and Adjusted EBITDA 5) Higher Operating Income Leads 11% Increase in Non - GAAP Earnings 6) Liquidity is a Quaker Strength Chart #4 Second Quarter 2014

 	

Product Volume by Quarter Thousand Kilograms 25,000 30,000 35,000 40,000 45,000 50,000 55,000 4Q08 YTD Avg. 1Q092Q093Q094Q091Q102Q103Q104Q101Q112Q113Q114Q111Q122Q123Q124Q121Q132Q133Q134Q131Q142Q14 Chart #5

 	

Financial Snapshot Q2 2014 Q2 2013 YTD 2014 YTD 2013 Net Sales ($Mils.) 191.3 184.8 373.0 361.0 Gross Margin (%) 35.7 36.4 35.7 36.0 Operating Margin (%) 10.9 10.7 10.8 10.3 Net Income attributable to Quaker Chemical Corporation ($Mils.) 15.4 16.1 28.2 29.7 Adjusted EBITDA ($Mils.) – Trailing Twelve Months 93.4 84.4 -- -- Adjusted EBITDA Margin (%) 12.6 11.8 -- -- Earnings Per Diluted Share 1.16 1.22 2.13 2.26 Non - GAAP Earnings Per Diluted Share 1.11 1.00 2.07 1.96 Debt ($Mils.) 26.0 23.9 -- -- Equity ($Mils.) 364.7 312.4 -- -- Net Operating Cash Flow ($Mils.) 10.1 16.2 8.3 27.5 Chart #6

 	

Gross Margin Percentage 28.0% 34.7% 35.4% 32.6% 33.7% 35.8% 20.0% 25.0% 30.0% 35.0% 40.0% 2008 2009 2010 2011 2012 2013 Gross Margin Percentage 36.4% 35.9% 35.4% 35.8% 35.7% 20.0% 25.0% 30.0% 35.0% 40.0% Q2 2013 Q3 2013 Q4 2013 Q1 2014 Q2 2014 Gross Margin Percentage Chart #7

 	

Adjusted EBITDA Baseline Historical Performance $40.1 $44.2 $66.8 $73.0 $80.9 $89.6 $99.1 6.9% 9.8% 12.3% 10.7% 11.4% 12.3% 13.3% 2008 2009 2010 2011 2012 2013 Q2 2014 Annualized Adjusted EBITDA ($ Mils.) Adjusted EBITDA Margin (%) 2008 – 2014 Annualized CAGR: 16.3% +640 Margin bps Chart #8

 	

Balance Sheet Net Cash / (Debt) -$100 -$80 -$60 -$40 -$20 $0 $20 $40 $60 $80 2008 2009 2010 2011 2012 2013 Q2 2014 $ Millions Cash ST/LT Debt Net Debt Chart #9

 	

APPENDIX

 	

Non - GAAP Earnings Per Diluted Share Reconciliation Chart #10 Q2 2014 Q2 2013 YTD 2014YTD 2013 GAAP Earnings Per Diluted Share 1.16$ 1.22$ 2.13$ 2.26$ UK pension plan amendment per diluted share -$ -$ 0.05$ -$ 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 inititiatives per diluted share 0.02$ 0.02$ 0.02$ 0.02$ Currency conversion impacts of the Venezuelan Bolivar Fuerte per diluted share 0.02$ -$ 0.02$ 0.03$ Equity income in a captive insurance company per diluted share (0.09)$ (0.13)$ (0.15)$ (0.24)$ Non-GAAP Earnings Per Diluted Share 1.11$ 1.00$ 2.07$ 1.96$

 	

Annualized Adjusted EBITDA Reconciliation Chart #11 2008 2009 2010 2011 2012 2013 YTD Q2 2014 Net income 9,833 16,058 32,120 45,892 47,405 56,339 28,157 Depreciation 10,879 9,525 9,867 11,455 12,252 12,339 6,084 Amortization 1,177 1,078 988 2,338 3,106 3,445 1,628 Interest expense 5,509 5,533 5,225 4,666 4,283 2,922 1,106 Taxes on income 4,977 7,065 12,616 14,256 15,575 20,489 13,084 Restructuring and related activities 2,916 2,289 - - - - - Non-income tax contingency charge - - 4,132 - - 796 - Equity affiliate out of period charge - - 564 - - - - Mineral oil excise tax refund - - - - - (2,540) - 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 acquisition-related earnout liability - - - (595) (1,737) (497) - Equity loss (income) from a captive insurance company 1,299 162 (313) (2,323) (1,812) (5,451) (2,071) Currency conversion impacts of the Venezuelan Bolivar - - 322 - - 357 321 U.S customer bankruptcies - - - - 1,254 - - Cost streamlining initiatives - - - - - 1,419 348 UK pension plan amendment - - - - - - 902 Adjusted EBITDA 40,095 44,153 66,838 72,971 80,935 89,618 49,559 Adjusted EBITDA Margin 6.9% 9.8% 12.3% 10.7% 11.4% 12.3% 13.3% Multiply Adjusted EBITDA by Annual Run Rate 1 1 1 1 1 1 2 Annualized Adjusted EBITDA 40,095 44,153 66,838 72,971 80,935 89,618 99,118

 	

Trailing Twelve Months Adjusted EBITDA Reconciliation Chart #12 I = G + H H G = F - D F E = C + D D C = B - A B A Trailing Twelve Months Q2 2014 YTD Q2 2014 Last Six Months 2013 YTD 2013 Trailing Twelve Months Q2 2013 YTD Q2 2013 Last Six Months 2012 YTD 2012 YTD Q2 2012 Net income 54,794 28,157 26,637 56,339 53,634 29,702 23,932 47,405 23,473 Depreciation 12,298 6,084 6,214 12,339 12,408 6,125 6,283 12,252 5,969 Amortization 3,310 1,628 1,682 3,445 3,404 1,763 1,641 3,106 1,465 Interest expense 2,522 1,106 1,416 2,922 3,464 1,506 1,958 4,283 2,325 Taxes on income 22,612 13,084 9,528 20,489 18,217 10,961 7,256 15,575 8,319 Non-income tax contingency 796 - 796 796 - - - - - Mineral oil excise tax refund - - - (2,540) (2,540) (2,540) - - - Non-cash gain from the purchase of an equity affiliate - - - - - - - - - Change in acquisition-related earnout liability (1,172) - (1,172) (497) (1,062) 675 (1,737) (1,737) - Equity loss (income) from a captive insurance company (4,391) (2,071) (2,320) (5,451) (3,956) (3,131) (825) (1,812) (987) Currency conversion impacts of the Venezuelan Bolivar 321 321 - 357 357 357 - - - U.S. customer bankruptcies - - - - 98 - 98 1,254 1,156 Transition costs related to key employees - - - - (0) - (0) 609 609 Cost streamlining initiatives 1,365 348 1,017 1,419 402 402 - - - UK pension plan amendment 902 902 - - - - - - - Adjusted EBITDA 93,357 49,559 43,798 89,618 84,426 45,820 38,606 80,935 42,329 Adjusted EBITDA Margin 12.6% 13.3% 11.9% 12.3% 11.8% 12.7% 10.9% 11.4% 11.9%