Quaker Chemical Corp. Reports Operating Results (10-Q)

Author's Avatar
Apr 26, 2011
Quaker Chemical Corp. (KWR, Financial) filed Quarterly Report for the period ended 2011-03-31.

Quaker Chemical Corp. has a market cap of $484.2 million; its shares were traded at around $42.08 with a P/E ratio of 14.1 and P/S ratio of 0.9. The dividend yield of Quaker Chemical Corp. stocks is 2.2%. Quaker Chemical Corp. had an annual average earning growth of 3.2% over the past 10 years.

Highlight of Business Operations:

The first quarter 2011 results include a tax benefit of approximately $0.11 per diluted share related to the expiration of applicable statutes of limitations for uncertain tax positions. The first quarter 2010 results included a charge of $0.03 per diluted share related to devaluation of the Venezuelan Bolivar Fuerte, as well as a tax benefit of approximately $0.11 per diluted share related to the expiration of applicable statutes of limitations for uncertain tax positions.

Quaker s cash and cash equivalents decreased to $23.6 million at March 31, 2011 from $25.8 million at December 31, 2010. The decrease of $2.2 million resulted primarily from $7.1 million of cash used in operating activities, $2.9 million of cash used in investing activities, $7.1 million of cash provided by financing activities and a $0.7 million increase from the effect of exchange rates on cash.

In the first quarter of 2007, an inactive subsidiary of the Company reached a settlement agreement and release with one of its insurance carriers for $20.0 million. The proceeds of the settlement are restricted and can only be used to pay claims and costs of defense associated with this subsidiary s asbestos litigation. The payments were structured to be received over a four-year period with annual installments of $5.0 million, the final installment of which was received in the first quarter of 2010. During the third quarter of 2007, the same inactive subsidiary and one of its insurance carriers entered into a Claim Handling and Funding Agreement, under which the carrier will pay 27% of the defense and indemnity costs incurred by or on behalf of the subsidiary in connection with asbestos bodily injury claims for a minimum of five years beginning July 1, 2007.

Net cash flows provided by financing activities were $7.1 million in the first quarter of 2011 compared to $5.4 million provided by financing activities in the first quarter of 2010. Increased working capital investments due to increased business activity resulted in higher net borrowings in the first quarter of 2011 compared to the first quarter of 2010. During the first quarter of 2011, the Company recorded $0.1 million of excess tax benefits in capital in excess of par on its Condensed Consolidated Balance Sheet, and as a cash flow from financing activities in its Condensed Consolidated Statement of Cash Flows, related to stock option exercises. During the first quarter of 2010, the Company recorded approximately $2.0 million of these benefits on its Condensed Consolidated Balance Sheet and recognized $0.3 million as a cash inflow from financing activities in its Condensed Consolidated Statement of Cash Flows, related to stock option exercises which occurred over prior years. Prior to 2010, the Company s actual taxable income in affected jurisdictions was not sufficient to recognize these benefits, while the Company s 2010 taxable income was sufficient to recognize the benefits.

The Company s primary credit line is a $175.0 million syndicated multicurrency credit agreement with Bank of America, N.A. (administrative agent) and certain other major financial institutions, which expires in 2014. At March 31, 2011 and December 31, 2010, the Company had approximately $65.0 million and $55.0 million outstanding, respectively. The Company s access to this credit is largely dependent on its consolidated leverage ratio covenant, which cannot exceed 3.50 to 1, and at March 31, 2011 and December 31, 2010, the consolidated leverage ratio was below 2.0 to 1. The Company has entered into interest rate swaps with a combined notional value of $15.0 million as of March 31, 2011, in order to fix the interest rate on a portion of its variable rate debt. Outstanding financial derivative instruments may expose the Company to credit loss in the event of nonperformance by the counterparties to the agreements. To manage credit risk, the Company limits its exposure to any single counterparty. However, the Company does not expect any of the counterparties to fail to meet their obligations.

At March 31, 2011, the Company s gross liability for uncertain tax positions, including accrued interest and penalties, was $13.6 million. The Company cannot determine a reliable estimate of the timing of cash flows by period related to its uncertain tax position liability. However, should the entire liability be paid, the amount of the payment may be reduced by up to $7.6 million as a result of offsetting benefits in other tax jurisdictions.

Read the The complete Report