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.

 
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	

 	
  
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.
 
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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.
 
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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.
 
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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	 	
 
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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	 	
  
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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$