| | | |
| | | |
For Release: Immediate | NEWS | Contact: Mark A. Featherstone Vice President and Chief Financial Officer 610-832-4160 |
Quaker Chemical Announces First Quarter Results
April 28, 2009
CONSHOHOCKEN, PA – Quaker Chemical Corporation (NYSE:KWR) today announced net sales for the first quarter 2009 of $98.5 million and breakeven results. The first quarter 2009 results include a restructuring charge of $2.3 million, or approximately $0.14 per diluted share, and a gain of $1.2 million, or approximately $0.11 per diluted share, related to the disposition of land in Europe.
Michael F. Barry, Chief Executive Officer and President, commented, "Our first quarter results represent significant progress from the fourth quarter as we have seen continued improvement as the quarter progressed. Our improvement in results is being driven by aggressive cost-reduction efforts, margin improvement and moderate product volume increases. While we continue to expect 2009 volumes to be significantly below 2008, we anticipate first quarter 2009 volumes to be the low point of the year.”
Mr. Barry continued, "We remain focused on managing our costs and working capital. We generated significant cash flow during the quarter, with our net debt at 2005 levels. As I have mentioned previously, while 2009 will be a challenging year for Quaker and our customers, we remain confident that our business model, strong associate base, key growth initiatives and solid balance sheet will get us through this difficult period in a profitable manner and position us well for the future."
First Quarter 2009 Summary
Net sales for the first quarter were $98.5 million, down 33% from $147.7 million for the first quarter of 2008. The decrease in net sales was primarily due to volume declines in all of the Company’s regions and market segments, as the global economic downturn continues to impact the Company. Volumes were down approximately 32%, which were partially offset by a favorable 4% increase in selling price and mix. Foreign exchange rate translation also decreased revenues by approximately 5%.
Gross margins were down approximately $14.9 million, or 34%, compared to the first quarter of 2008, reflective of the above noted volume declines. The gross margin percentage of 29.1% was consistent with the first quarter of 2008, but represents a considerable improvement over the 24.2% reported for the fourth quarter of 2008. The margin percentage expansion from the fourth quarter was the result of the cost reduction actions the Company has taken and a more favorable raw material cost environment as well as product and regional sales mix.
Selling, general and administrative expenses (“SG&A”) decreased $7.8 million, or 23%, compared to the first quarter of 2008. Savings from the fourth quarter 2008 and first quarter 2009 restructuring programs, reduced incentive compensation and other cost savings measures accounted for approximately 70% of the decline. Changes in foreign exchange rates accounted for the remainder of the decrease.
-more-
As previously announced, the Company implemented an additional restructuring program in the first quarter of 2009. The first quarter 2009 program included provisions for severance for 60 employees totaling $2.3 million. The fourth quarter 2008 program resulted in the elimination of more than 80 positions.
The increase in other income compared to the first quarter of 2008 reflects a $1.2 million gain related to the disposition of land in Europe. The tax benefit recorded for the first quarter of 2009 reflects no tax provided for the land sale gain, due to the utilization of net operating losses, which were previously not benefited.
The decrease in equity income reflects declining steel demand caused by declines in the auto industry that impacted the Company’s Japanese affiliate.
Balance Sheet and Cash Flow Items
The Company’s net debt-to-total-capital ratio remained strong at 31% as of March 31, 2009, compared to 32% as of December 31, 2008. In addition, cash flows from operations improved $14.4 million compared to the first quarter of 2008, largely the result of improved working capital levels.
The Company is closely monitoring the current circumstances surrounding Chrysler LLC and General Motors Corporation, two of the Company’s largest customers, both of whom have pending requests for additional government funding. The Company’s accounts receivable for General Motors Corporation and Chrysler LLC were approximately $6.7 million and $5.8 million, respectively, as of March 31, 2009. The Company has taken steps which it believes significantly reduces its exposure, and continues to pursue other measures to minimize this risk.
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 quality, and lower their costs. Quaker's headquarters is located near Philadelphia in Conshohocken, Pennsylvania.
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.
As previously announced, Quaker Chemical’s investor conference call to discuss first quarter results is scheduled for April 29, 2009 at 2:30 p.m. (ET). Access the conference by calling 877-269-7756 or visit Quaker’s Web site at www.quakerchem.com for a live webcast.
-more-
| Quaker Chemical Corporation |
| Condensed Consolidated Statement of Income |
| (Dollars in thousands, except per share data and share amounts) |
| | | (Unaudited) | |
| | | | | | | |
| | | Three Months Ended March 31, | |
| | | 2009 | | | 2008 | |
| | | | | | | |
| Net sales | | $ | 98,507 | | | $ | 147,718 | |
| | | | | | | | | |
| Cost of goods sold | | | 69,793 | | | | 104,083 | |
| | | | | | | | | |
| Gross margin | | | 28,714 | | | | 43,635 | |
| % | | | 29.1 | % | | | 29.5 | % |
| | | | | | | | | |
| Selling, general and administrative expenses | | | 26,697 | | | | 34,504 | |
| Restructuring and related charges | | | 2,289 | | | | - | |
| | | | | | | | | |
| Operating (loss) income | | | (272 | ) | | | 9,131 | |
| % | | | -0.3 | % | | | 6.2 | % |
| | | | | | | | | |
| Other income, net | | | 1,454 | | | | 161 | |
| Interest expense, net | | | (1,089 | ) | | | (1,182 | ) |
| Income before taxes | | | 93 | | | | 8,110 | |
| | | | | | | | | |
| Taxes on income | | | (251 | ) | | | 2,765 | |
| | | | 344 | | | | 5,345 | |
| | | | | | | | | |
| Equity in net (loss) income of associated companies | | | (142 | ) | | | 112 | |
| | | | | | | | | |
| Net income | | | 202 | | | | 5,457 | |
| | | | | | | | | |
| Less: Net Income attributable to noncontrolling interest | | | 200 | | | | 364 | |
| | | | | | | | | |
| Net income attributable to Quaker Chemical Corporation | | $ | 2 | | | $ | 5,093 | |
| % | | | 0.0 | % | | | 3.4 | % |
| | | | | | | | | |
| Per share data: | | | | | | | | |
| Net income attributable to Quaker Chemical Corporation - basic | | $ | 0.00 | | | $ | 0.50 | |
| Net income attributable to Quaker Chemical Corporation - diluted | | $ | 0.00 | | | $ | 0.50 | |
-more-
| Quaker Chemical Corporation |
| Condensed Consolidated Balance Sheet |
| (Dollars in thousands, except par value and share amounts) |
| | | (Unaudited) | |
| | | | | | | |
| | | March 31, | | | December 31, | |
| | | 2009 | | | 2008 | |
| ASSETS | | | | | | |
| | | | | | | |
| Current assets | | | | | | |
| Cash and cash equivalents | | $ | 17,977 | | | $ | 20,892 | |
| Construction fund (restricted cash) | | | 7,455 | | | | 8,281 | |
| Accounts receivable, net | | | 89,575 | | | | 98,702 | |
| Inventories, net | | | 46,285 | | | | 57,419 | |
| Prepaid expenses and other current assets | | | 14,987 | | | | 15,532 | |
| Total current assets | | | 176,279 | | | | 200,826 | |
| | | | | | | | | |
| Property, plant, and equipment, net | | | 59,291 | | | | 60,945 | |
| Goodwill | | | 41,889 | | | | 40,997 | |
| Other intangible assets, net | | | 6,123 | | | | 6,417 | |
| Investments in associated companies | | | 7,404 | | | | 7,987 | |
| Deferred income taxes | | | 35,638 | | | | 34,179 | |
| Other assets | | | 40,451 | | | | 34,088 | |
| Total assets | | $ | 367,075 | | | $ | 385,439 | |
| | | | | | | | | |
| LIABILITIES AND SHAREHOLDERS' EQUITY | | | | | | | | |
| | | | | | | | | |
| Current liabilities | | | | | | | | |
| Short-term borrowings and current portion of long-term debt | | $ | 2,673 | | | $ | 4,631 | |
| Accounts and other payables | | | 41,933 | | | | 51,341 | |
| Accrued restructuring and related activities | | | 1,804 | | | | 2,198 | |
| Accrued compensation | | | 6,652 | | | | 7,741 | |
| Accrued pension and postretirement benefits | | | 7,369 | | | | 7,380 | |
| Other current liabilities | | | 12,006 | | | | 10,573 | |
| Total current liabilities | | | 72,437 | | | | 83,864 | |
| Long-term debt | | | 77,629 | | | | 84,236 | |
| Deferred income taxes | | | 7,638 | | | | 7,156 | |
| Accrued pension and postretirement benefits | | | 36,852 | | | | 37,638 | |
| Other non-current liabilities | | | 44,338 | | | | 42,670 | |
| Total liabilities | | | 238,894 | | | | 255,564 | |
| | | | | | | | | |
| Quaker shareholders' equity | | | | | | | | |
| Common stock, $1 par value; authorized 30,000,000 shares; issued 10,997,036 | | | 10,997 | | | | 10,833 | |
| Capital in excess of par value | | | 25,495 | | | | 25,238 | |
| Retained earnings | | | 117,091 | | | | 117,089 | |
| Accumulated other comprehensive loss | | | (29,490 | ) | | | (27,237 | ) |
| Total Quaker shareholders' equity | | | 124,093 | | | | 125,923 | |
| Noncontrolling interest | | | 4,088 | | | | 3,952 | |
| Total shareholders' equity | | | 128,181 | | | | 129,875 | |
| Total liabilities and shareholders' equity | | $ | 367,075 | | | $ | 385,439 | |
-more-
| Quaker Chemical Corporation |
| Condensed Consolidated Statement of Cash Flows |
| For the three months ended March 31, |
| (Dollars in thousands) |
| | | (Unaudited) | |
| | | 2009 | | | 2008 | |
| Cash flows from operating activities | | | | | | |
| Net income | | $ | 202 | | | $ | 5,457 | |
| Adjustments to reconcile net income to net cash provided by (used in) operating activities: | | | | | | | | |
| Depreciation | | | 2,458 | | | | 2,680 | |
| Amortization | | | 257 | | | | 300 | |
| Equity in net loss (income) of associated companies, net of dividends | | | 142 | | | | (112 | ) |
| Deferred compensation and other, net | | | (2,852 | ) | | | 1,268 | |
| Stock-based compensation | | | 352 | | | | 376 | |
| Restructuring and related charges | | | 2,289 | | | | - | |
| Gain on disposal of property, plant and equipment | | | (1,193 | ) | | | (35 | ) |
| Insurance settlement realized | | | (144 | ) | | | (136 | ) |
| Pension and other postretirement benefits | | | (1,907 | ) | | | (2,458 | ) |
| Increase (decrease) in cash from changes in current assets and current liabilities, net of acquisitions: | | | | | | | | |
| Accounts receivable | | | 7,196 | | | | 1,159 | |
| Inventories | | | 10,060 | | | | (2,374 | ) |
| Prepaid expenses and other current assets | | | 34 | | | | (3,037 | ) |
| Accounts payable and accrued liabilities | | | (6,045 | ) | | | (9,280 | ) |
| Change in restructuring liabilities | | | (2,652 | ) | | | - | |
| Net cash provided by (used in) operating activities | | | 8,197 | | | | (6,192 | ) |
| | | | | | | | | |
| Cash flows from investing activities | | | | | | | | |
| Capital expenditures | | | (2,375 | ) | | | (1,949 | ) |
| Payments related to acquisitions | | | (1,000 | ) | | | (1,000 | ) |
| Proceeds from disposition of assets | | | 1,605 | | | | 65 | |
| Insurance settlement received and interest earned | | | 5,056 | | | | 5,112 | |
| Change in restricted cash, net | | | (4,086 | ) | | | (4,976 | ) |
| Net cash used in investing activities | | | (800 | ) | | | (2,748 | ) |
| | | | | | | | | |
| Cash flows from financing activities | | | | | | | | |
| Net decrease in short-term borrowings | | | (1,619 | ) | | | (378 | ) |
| Proceeds from long-term debt | | | 1,584 | | | | 9,844 | |
| Repayments of long-term debt | | | (7,728 | ) | | | (251 | ) |
| Dividends paid | | | (2,492 | ) | | | (2,181 | ) |
| Stock options exercised, other | | | 69 | | | | 1,486 | |
| Net cash (used in) provided by financing activities | | | (10,186 | ) | | | 8,520 | |
| | | | | | | | | |
| Effect of exchange rate changes on cash | | | (126 | ) | | | 752 | |
| Net (decrease) increase in cash and cash equivalents | | | (2,915 | ) | | | 332 | |
| Cash and cash equivalents at the beginning of the period | | | 20,892 | | | | 20,195 | |
| Cash and cash equivalents at the end of the period | | $ | 17,977 | | | $ | 20,527 | |
