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

October 30, 2012 | About:
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10qk

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Quaker Chemical Corp. (KWR) filed Quarterly Report for the period ended 2012-09-30.

Quaker Chemical Corporation has a market cap of $617.9 million; its shares were traded at around $47.49 with a P/E ratio of 13.6 and P/S ratio of 0.9. The dividend yield of Quaker Chemical Corporation stocks is 2.1%. Quaker Chemical Corporation had an annual average earning growth of 5.3% over the past 10 years.

Highlight of Business Operations:

The Company s revenue decrease of less than 1% in the third quarter of 2012 compared to the third quarter of 2011 was primarily caused by a 6% decrease from foreign exchange rate translation, which more than offset a 5% increase in product volumes, including acquisitions. The gross profit decrease of approximately $0.4 million, or less than 1%, as compared to the third quarter of 2011 was consistent with the decrease in sales noted above, with gross margin slightly increasing to 32.7% from 32.6% for the third quarter of 2011. Selling, general and administrative expenses (“SG&A”) increased approximately $1.3 million from the third quarter of 2011, primarily related to acquisitions and higher selling, inflationary and other labor-related costs which were partially offset by decreases due to foreign exchange rate translation. Also, included in SG&A, for the third quarter of 2012, were certain uncommon expenses totaling $0.05 per diluted share largely consisting of severance and Brand launch costs. As a result, the third quarter of 2012 SG&A, as a percentage of sales, increased to 23.9% compared to 23.0% for the third quarter of 2011. In the first nine months of 2012, the Company s net cash provided by operating activities was $41.8 million, which surpasses any previous full year result. Net operating cash flow of $19.8 million was generated in the third quarter of 2012, primarily led by the Company s third quarter net income and an improved working capital position. Earnings per diluted share for the third quarter of 2012 were $0.80, as compared to earnings per diluted share for the third quarter of 2011 of $1.03 or $0.81 excluding a non-cash gain on the revaluation of a previously held ownership interest in a Mexican affiliate of $0.22 per diluted share. The Company s results continue to be negatively impacted by a strengthening dollar and weaker demand experienced in several geographical areas, including Europe, China, Brazil and India. However, the Company achieved record quarterly product volumes for the third quarter of 2012 by continuing to grow through additional new business and recent acquisitions. Despite record volume levels, sales revenue for the third quarter of 2012 was down slightly compared to the third quarter of 2011 due to foreign exchange impacts. For the fourth quarter of 2012, the Company expects to continue to be impacted by the challenging global economic environment, along with the negative seasonality experienced around the holidays, but remains committed to delivering good results through the execution of its business strategies. Overall, the Company s expectations and guidance have not changed for its full year results and the Company expects 2012 to be another good year for Quaker. In addition, the Company s balance sheet and cash flow generation continue to provide financial flexibility for the Company to be able to invest in strategic growth opportunities, such as the recent NP Coil Dexter Industries S.r.l acquisition. This was the Company s fifth acquisition in the last two years, as the Company continues to add new adjacent product lines which can be leveraged on a global platform. Further, the Company launched a new revitalized Brand in the third quarter of 2012, which the Company believes will build on its 94-year history and take the Company to the next level. CMS Discussion

The Company s revenue decrease of less than 1% in the third quarter of 2012 compared to the third quarter of 2011 was primarily caused by a 6% decrease from foreign exchange rate translation, which more than offset a 5% increase in product volumes, including acquisitions. The gross profit decrease of approximately $0.4 million, or less than 1%, as compared to the third quarter of 2011 was consistent with the decrease in sales noted above, with gross margin slightly increasing to 32.7% from 32.6% for the third quarter of 2011. Selling, general and administrative expenses (“SG&A”) increased approximately $1.3 million from the third quarter of 2011, primarily related to acquisitions and higher selling, inflationary and other labor-related costs which were partially offset by decreases due to foreign exchange rate translation. Also, included in SG&A, for the third quarter of 2012, were certain uncommon expenses totaling $0.05 per diluted share largely consisting of severance and Brand launch costs. As a result, the third quarter of 2012 SG&A, as a percentage of sales, increased to 23.9% compared to 23.0% for the third quarter of 2011. In the first nine months of 2012, the Company s net cash provided by operating activities was $41.8 million, which surpasses any previous full year result. Net operating cash flow of $19.8 million was generated in the third quarter of 2012, primarily led by the Company s third quarter net income and an improved working capital position. Earnings per diluted share for the third quarter of 2012 were $0.80, as compared to earnings per diluted share for the third quarter of 2011 of $1.03 or $0.81 excluding a non-cash gain on the revaluation of a previously held ownership interest in a Mexican affiliate of $0.22 per diluted share. The Company s results continue to be negatively impacted by a strengthening dollar and weaker demand experienced in several geographical areas, including Europe, China, Brazil and India. However, the Company achieved record quarterly product volumes for the third quarter of 2012 by continuing to grow through additional new business and recent acquisitions. Despite record volume levels, sales revenue for the third quarter of 2012 was down slightly compared to the third quarter of 2011 due to foreign exchange impacts. For the fourth quarter of 2012, the Company expects to continue to be impacted by the challenging global economic environment, along with the negative seasonality experienced around the holidays, but remains committed to delivering good results through the execution of its business strategies. Overall, the Company s expectations and guidance have not changed for its full year results and the Company expects 2012 to be another good year for Quaker. In addition, the Company s balance sheet and cash flow generation continue to provide financial flexibility for the Company to be able to invest in strategic growth opportunities, such as the recent NP Coil Dexter Industries S.r.l acquisition. This was the Company s fifth acquisition in the last two years, as the Company continues to add new adjacent product lines which can be leveraged on a global platform. Further, the Company launched a new revitalized Brand in the third quarter of 2012, which the Company believes will build on its 94-year history and take the Company to the next level. CMS Discussion

The Company s revenue decrease of less than 1% in the third quarter of 2012 compared to the third quarter of 2011 was primarily caused by a 6% decrease from foreign exchange rate translation, which more than offset a 5% increase in product volumes, including acquisitions. The gross profit decrease of approximately $0.4 million, or less than 1%, as compared to the third quarter of 2011 was consistent with the decrease in sales noted above, with gross margin slightly increasing to 32.7% from 32.6% for the third quarter of 2011. Selling, general and administrative expenses (“SG&A”) increased approximately $1.3 million from the third quarter of 2011, primarily related to acquisitions and higher selling, inflationary and other labor-related costs which were partially offset by decreases due to foreign exchange rate translation. Also, included in SG&A, for the third quarter of 2012, were certain uncommon expenses totaling $0.05 per diluted share largely consisting of severance and Brand launch costs. As a result, the third quarter of 2012 SG&A, as a percentage of sales, increased to 23.9% compared to 23.0% for the third quarter of 2011.

Metalworking Process Chemicals generally consists of industrial process fluids for various heavy industrial and manufacturing applications, and represented approximately 93% of the Company s net sales in the third quarter of 2012. Net sales for this segment decreased approximately $2.5 million, or 1%, compared to the third quarter of 2011. Foreign currency translation negatively impacted net sales by approximately 6%, primarily driven by the E.U. Euro to U.S. Dollar and Brazilian Real to U.S. Dollar exchange rates. The average E.U. Euro to U.S. Dollar exchange rate was 1.25 in the third quarter of 2012 compared to 1.41 in the third quarter of 2011. The average Brazilian Real to U.S. Dollar exchange rate was 0.49 in the third quarter of 2012 compared to 0.61 in the third quarter of 2011. The decrease to net sales related to foreign currency translation was partially offset by an increase due to acquisition activity of approximately 3% and an increase in volumes of approximately 2%, on a constant currency basis, as compared to the third quarter of 2011. This segment s net sales by region were positively impacted by increases of 3% in North America (excluding

Metalworking Process Chemicals generally consists of industrial process fluids for various heavy industrial and manufacturing applications, and represented approximately 93% of the Company s net sales in the first nine months of 2012. Net sales for this segment were up approximately $21.0 million, or 4%, compared to the first nine months of 2011. Foreign currency translation negatively impacted net sales by approximately 5%, primarily driven by the E.U. Euro to U.S. Dollar and Brazilian Real to U.S. Dollar exchange rates. The average E.U. Euro to U.S. Dollar exchange rate was 1.28 in the first nine months of 2012 compared to 1.41 in the first nine months of 2011. The average Brazilian Real to U.S. Dollar exchange rate was 0.52 in the first nine months of 2012 compared to 0.61 in the first nine months of 2011. Net sales were positively impacted by increases of 9% in North America and 1% in Europe (excluding acquisitions in both regions) and 5% in Asia/Pacific, partially offset by a 5% decrease in South America, all on a constant currency basis. The Company s 2012 and 2011 acquisition activity increased this segment s sales by approximately 5% in the first nine months of 2012, as compared to the first nine months of 2011, on a constant currency basis. The remaining increase in this segment s net sales was primarily due to selling and price mix changes. This segment s operating income increased approximately $4.9 million in the first nine months of 2012, as compared to the first nine months of 2011, reflecting the Company s acquisition activity and the sales price increases noted above.

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