Quaker Chemical Corporation Announces Second Quarter 2012 Results
· Net sales up 5% from the second quarter of 2011
· Net income up 7% from the second quarter of 2011
· Quarterly operating cash flow of $15.2 million
CONSHOHOCKEN, Pa.- Quaker Chemical Corporation (NYSE: KWR) today announced net sales of $176.8 million for the second quarter of 2012, up 5% compared to second quarter 2011 net sales of $167.8 million. Net income of $10.5 million and earnings per diluted share of $0.81 for the second quarter of 2012 were up 7% and 3%, respectively, compared to $9.8 million and $0.79 earnings per diluted share for the second quarter of 2011. For the first six months of 2012, the Company reported net sales of $354.4 million, up 8% compared to net sales of $327.7 million for the first six months of 2011. Net income of $22.5 million and earnings per diluted share of $1.72 for the first six months of 2012 were up 10% and 2%, respectively, compared to net income of $20.4 million and earnings per diluted share of $1.69 for the first six months of 2011. The second quarter of 2012 includes charges of approximately $0.06 per diluted share for certain customer bankruptcies in the U.S. and $0.03 per diluted share related to CFO transition costs. The second quarter and first half of 2012 earnings per diluted share include an approximate $0.03 and $0.11 dilutive effect as a result of the Company's equity offering in May 2011, respectively.
Michael F. Barry, Chairman, Chief Executive Officer and President, commented, "We are pleased with the second quarter results, especially in light of the bankruptcy and CFO transition charges. We are being negatively impacted by a stronger dollar and weaker demand in several geographical areas such as Europe, China, Brazil and India. However, these negatives have been offset by additional new business and our recent acquisitions as well as the continuing manufacturing recovery of North America. Looking forward to the second half, we expect the global economic environment to remain challenging, with continued weakness in most regions. However, I remain confident that 2012 will be another good year for Quaker. In addition, our strong balance sheet and cash flow generation continues to provide us the financial flexibility to invest in our strategic growth initiatives, pay dividends to our shareholders, and grow our Company further via acquisition."
Second Quarter 2012 Summary
Net sales for the second quarter of 2012 were $176.8 million, an increase of 5% from $167.8 million in the second quarter of 2011. Product volumes, including acquisitions, were higher by 6%, selling price and mix increased revenues by 5%, while foreign exchange rates decreased revenues by 6%.
Gross profit increased by $6.9 million, or 13%, from the second quarter of 2011. The second quarter of 2012 gross margin increased to 34.3% from 32.0% for the second quarter of 2011 and 33.7% for the first quarter of 2012. The increase in gross margin reflects the Company's ongoing initiative of restoring margins to more acceptable levels through price increases, as well as mix effects experienced in the quarter.
Selling, general and administrative expenses ("SG&A") increased approximately $4.8 million compared to the second quarter of 2011, primarily related to acquisitions and higher selling, inflationary and other costs on increased business activity, which were partially offset by decreases due to foreign exchange rate translation. The second quarter of 2012 SG&A includes charges of approximately $0.06 per diluted share for certain customer bankruptcies in the U.S. and $0.03 per diluted share related to CFO transition costs. As a result, the second quarter of 2012 SG&A, as a percentage of sales, increased to 24.7% compared to 23.1% for the second quarter of 2011 and 24.3% for the first quarter of 2012.
Other income decreased in the second quarter of 2012 primarily due to foreign exchange losses compared to foreign exchange gains in the second quarter of 2011. Interest expense in the second quarter of 2012 was comparable to the second quarter of 2011, however, decreases in interest expense due to lower average borrowings were partially offset by increases related to the accretion of certain acquisition-related liabilities.
The second quarter of 2012 earnings per diluted share of $0.81 reflects an approximate $0.03 dilutive effect as a result of the Company's equity offering in May of 2011.
Year-to-Date Summary
Net sales for the first half of 2012 were $354.4 million, an increase of 8% from $327.7 million in the first half of 2011. Product volumes, including acquisitions, were higher by 5%, selling price and mix increased revenues by 7%, while foreign exchange rates decreased revenues by 4%.
Gross profit increased by $13.9 million, or 13%, from the first half of 2011 with gross margin increasing to 34.0% from 32.5% for the first half of 2011, reflecting the Company's ongoing initiative of restoring margins and mix effects noted above.
SG&A increased approximately $9.3 million compared to the first half of 2011, primarily related to acquisitions and higher selling, inflationary and other costs on increased business activity, which were partially offset by decreases due to foreign exchange rate translation. The first half of 2012 SG&A includes the bankruptcy charges and CFO transition costs, as discussed above. SG&A, as a percentage of sales, increased to 24.5% from 23.6% for the first half of 2011.
Other income decreased in the first half of 2012 primarily due to higher foreign exchange losses and lower third party license fees as compared to the first half of 2011. Interest expense was relatively flat compared to the first half of 2011, however, decreases in interest expense due to lower average borrowings were offset by increases related to the accretion of certain acquisition-related liabilities.
The Company's low year-to-date 2012 and 2011 effective tax rates of 26.1% and 25.7%, respectively, reflect decreases in reserves for uncertain tax positions due to the expiration of applicable statutes of limitations for certain tax years of approximately $0.12 and $0.11 per diluted share, respectively. 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.
Equity in net income of associated companies decreased in the first half of 2012 as compared to the first half of 2011, primarily due to the Company's July 2011 purchase of the remaining ownership interest in its Mexican affiliate.
The first half of 2012 earnings per diluted share of $1.72 reflect an approximate $0.11 dilutive effect as a result of the Company's equity offering in May of 2011.
Balance Sheet and Cash Flow Items
Net operating cash flow of $15.2 million was generated in the second quarter of 2012, primarily led by the Company's second quarter net income. The Company's consolidated leverage ratio remained strong at less than one times EBITDA.
Subsequent Events
In July 2012, the Company acquired NP Coil Dexter Industries, S.r.l., a European manufacturer and supplier of metal surface treatment products. The acquired business has annual net sales of approximately $11.0 million.
Conference Call
As previously announced, Quaker Chemical's investor conference call to discuss second quarter results is scheduled for July 31, 2012 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 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.
SOURCE Quaker Chemical Corporation
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