CONSHOHOCKEN, Pa., Aug. 3, 2021 /PRNewswire/ -- Quaker Houghton
("the Company") (NYSE: KWR), the global leader in industrial
process fluids, today announced its second quarter of 2021
results.
|
Three Months
Ended
June
30,
|
|
Six Months
Ended
June
30,
|
($ in millions,
except per share data)
|
2021
|
|
2020
|
|
2021
|
|
2020
|
Net sales
|
$
435.3
|
|
$
286.0
|
|
$
865.0
|
|
$
664.6
|
Net income (loss)
attributable to Quaker Chemical
|
|
|
|
|
|
|
|
Corporation
|
33.6
|
|
(7.7)
|
|
72.2
|
|
(36.1)
|
Earnings (loss) per
diluted share attributable to
|
|
|
|
|
|
|
|
Quaker
Chemical Corporation
|
1.88
|
|
(0.43)
|
|
4.03
|
|
(2.03)
|
Non-GAAP net income
*
|
32.4
|
|
3.7
|
|
70.4
|
|
28.2
|
Non-GAAP earnings per
diluted share *
|
1.82
|
|
0.21
|
|
3.93
|
|
1.59
|
Adjusted EBITDA
*
|
70.1
|
|
32.1
|
|
147.2
|
|
92.5
|
|
|
|
|
|
|
|
|
* Refer to the Non-GAAP Measures and Reconciliations section
below for additional information
Second Quarter of 2021 Consolidated Results
Second quarter of 2021 net sales of $435.3 million increased 52% compared to
$286.0 million in the prior year
quarter primarily due to higher volumes of 40%, which includes
additional net sales from acquisitions of 5%, the positive impact
from foreign currency translation of 8% as well as increases from
selling price and product mix of approximately 4%. The
significant increase in sales volumes compared to the second
quarter of 2020 was primarily a result of the prior year quarter
being the most severely impacted by COVID-19 globally as well as
the continued improvement in end market conditions and continued
market share gains realized in the current quarter.
The Company had net income in the second quarter of 2021 of
$33.6 million or $1.88 per diluted share, compared to a second
quarter of 2020 net loss of $7.7
million or $0.43 per diluted
share. The current quarter net income includes a
non-recurring amount related to certain non-income tax credits
recorded by the Company's Brazilian subsidiaries. The prior
year second quarter net loss was primarily driven by the negative
impact of the COVID-19 pandemic on the Company. Excluding the
Brazil non-income tax credits as
well as costs associated with the combination with Houghton
International, Inc. (the "Combination") and other non-core or
non-recurring items in each period, the Company's second quarter of
2021 non-GAAP earnings per diluted share was $1.82 compared to $0.21 in the prior year second quarter. The
Company's current quarter adjusted EBITDA of $70.1 million increased 118% compared to
$32.1 million in the second quarter
of 2020 primarily due to the significant increase in net sales
quarter-over-quarter as well as higher realized cost synergies from
the Combination, partially offset by higher raw material costs
incurred in the current quarter. While the Company's current
quarter gross margin of 35.5% did improve compared to the prior
year second quarter, this was primarily driven by the prior year
negative impact of significantly lower volumes and the related
impact from fixed manufacturing costs. The Company's current
quarter gross margin declined sequentially compared to 36.3% in the
first quarter of 2021 due to raw material cost increases and global
supply chain and logistics pressures. The Company estimates that it
realized cost synergies associated with the Combination of
approximately $18.5 million during
the second quarter of 2021 compared to approximately $12 million during the second quarter of
2020.
Michael F. Barry, Chairman, Chief
Executive Officer and President, commented, "We had a strong second
quarter despite unprecedented increases in raw material costs and
supply chain issues. Strong demand continues to be the
major contributor to our earnings performance as sales volumes
increased 4% from the fourth quarter of 2020; although
volumes did decline 3% sequentially from the first quarter which
was unusually strong due to some customer replenishment in their
supply chains. We continued to see strong market share
gains in the quarter as our net sales benefited 4% compared to the
prior year from new business wins. The major negative trend
in the quarter was the continued escalation of raw material
costs. This negatively impacted our sequential gross margins
by 1% as there was a lag between our product price increases and
our raw material cost increases."
Mr. Barry continued, " Looking forward, we expect raw material
costs to continue to increase in the third quarter and we are
implementing additional price increases to help offset them.
Our gross margins for the third quarter are expected to be at or
somewhat below our second quarter level before beginning to
increase in the fourth quarter. We do expect that we will
have a more stable raw material environment in the fourth quarter
and will have implemented sufficient price increases during the
year to return our product margins to their targeted level as we
exit the year. On the sales side, we do expect demand
to remain strong, but also to have some headwinds in automotive due
to the semiconductor shortage and some seasonality trends which we
typically experience in the second half of the year.
Overall, we reaffirm our previous floor guidance on
full year adjusted EBITDA and believe 2021 will be a very good year
for us as we take a step change in our profitability, complete our
integration cost synergies, continue to take share in the market
place, achieve positive impacts from our recent acquisitions, and
get to our targeted leverage ratio."
Second Quarter of 2021 Segment Results
The Company's second quarter of 2021 operating performance in
each of its four reportable operating segments: (i) Americas; (ii)
Europe, Middle East and Africa ("EMEA"); (iii) Asia/Pacific; and (iv) Global Specialty
Businesses, reflect similar drivers to that of its consolidated
performance.
|
Three Months
Ended
June
30,
|
|
Six Months
Ended
June
30,
|
Net
Sales*
|
2021
|
|
2020
|
|
2021
|
|
2020
|
Americas
|
$
139.7
|
|
$
80.6
|
|
$
274.5
|
|
$
210.5
|
EMEA
|
123.4
|
|
77.7
|
|
243.3
|
|
182.5
|
Asia/Pacific
|
91.6
|
|
68.4
|
|
188.3
|
|
142.0
|
Global Specialty
Businesses
|
80.6
|
|
59.3
|
|
159.0
|
|
129.6
|
|
|
|
|
|
|
|
|
Segment operating
earnings*
|
Americas
|
$
33.6
|
|
$
10.3
|
|
$
65.9
|
|
$
39.5
|
EMEA
|
23.4
|
|
10.5
|
|
48.6
|
|
28.8
|
Asia/Pacific
|
23.2
|
|
19.3
|
|
50.7
|
|
38.8
|
Global Specialty
Businesses
|
24.2
|
|
16.4
|
|
48.4
|
|
37.0
|
* Refer to the Segment Measures and Reconciliations section
below for additional information
All four segments had higher net sales compared to the second
quarter of 2020. Each of the segments benefited from higher sales
volumes, additional net sales from acquisitions, the positive
impact of foreign currency translation and generally from increases
in selling price and product mix. Net sales in the Americas
and Global Specialty Businesses benefited from additional net sales
from Coral while each of the regional segments benefited from
additional net sales from the tin-plating solutions business
acquired in February 2021. As reported, all of the Company's
segment operating earnings were higher compared to the second
quarter of 2020 which reflects higher current quarter net sales
coupled with a higher gross margin in most segments as compared to
the prior year second quarter, partially offset by higher selling,
general and administrative expenses ("SG&A") in each segment,
which was the result of an increase in direct selling expenses
associated with the significant increase in net sales and to a
lesser extent the lower levels of prior year SG&A as a result
of COVID-19 temporary cost saving measures. Overall, the
Company and all of its segments continued to benefit from the
global economic recovery from the COVID-19 pandemic as well as the
benefits of realized cost savings associated with the
Combination.
Cash Flow and Liquidity Highlights
The Company has no material debt maturities until August 1, 2024. As of June 30, 2021, the Company's total gross debt was
$904.8 million and its cash on hand
was $145.6 million. The
Company's net debt was $759.2
million, and its net debt divided by its trailing twelve
months adjusted EBITDA was approximately 2.7 to 1 as of
June 30, 2021. The Company's
consolidated net leverage ratio, as defined under its bank
agreement, was approximately 2.5 to 1 as of June 30, 2021 compared to a maximum permitted
leverage of 4.0 to 1. Based on current projections of future
liquidity and leverage, the Company does not expect any compliance
issues with its bank covenants.
The Company had net operating cash flow of $3.0 million during the second quarter of 2021,
bringing its year-to-date net operating cash outflow to
$9.6 million in the first six months
of 2021, as compared to a net operating cash inflow of $44.7 million in the first six months of
2020. The $54.2 million
decrease in net operating cash flow year-over-year was primarily
driven by a significant change in working capital, as the Company's
strong current year net sales and volumes resulted in a large
increase in accounts receivable coupled with an increase in
inventory as a result of rising raw material costs as well as a
build in inventory to ensure the Company has appropriate stock to
meet customer demands in anticipation of potential further stress
on the global supply chain.
Non-GAAP Measures and Reconciliations
The information included in this press release includes non-GAAP
(unaudited) financial information that includes EBITDA, adjusted
EBITDA, adjusted EBITDA margin, non-GAAP operating income, non-GAAP
operating margin, non-GAAP net income and non-GAAP earnings per
diluted share. The Company believes these non-GAAP financial
measures provide meaningful supplemental information as they
enhance a reader's understanding of the financial performance of
the Company, are indicative of future operating performance of the
Company, and facilitate a comparison among fiscal periods, as the
non-GAAP financial measures exclude items that are not indicative
of future operating performance or 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.
The Company presents EBITDA which is calculated as net income
(loss) attributable to the Company before depreciation and
amortization, interest expense, net, and taxes on income (loss)
before equity in net income of associated companies. The
Company also presents adjusted EBITDA which is calculated as EBITDA
plus or minus certain items that are not indicative of future
operating performance or not considered core to the Company's
operations. In addition, the Company presents non-GAAP
operating income which is calculated as operating income (loss)
plus or minus certain items that are not indicative of future
operating performance or not considered core to the Company's
operations. Adjusted EBITDA margin and non-GAAP operating
margin are calculated as the percentage of adjusted EBITDA and
non-GAAP operating income to consolidated net sales,
respectively. The Company believes these non-GAAP measures
provide transparent and useful information and are widely used by
analysts, investors, and competitors in our industry as well as by
management in assessing the operating performance of the Company on
a consistent basis.
Additionally, the Company presents non-GAAP net income and
non-GAAP earnings per diluted share as additional performance
measures. Non-GAAP net income is calculated as adjusted
EBITDA, defined above, less depreciation and amortization, interest
expense, net, and taxes on income before equity in net income of
associated companies, in each case adjusted, as applicable, for any
depreciation, amortization, interest or tax impacts resulting from
the non-core items identified in the reconciliation of net
income attributable to the Company to adjusted EBITDA.
Non-GAAP earnings per diluted share is calculated as non-GAAP net
income per diluted share as accounted for under the "two-class
share method." The Company believes that non-GAAP net income
and non-GAAP earnings per diluted share provide transparent and
useful information and are widely used by analysts, investors, and
competitors in our industry as well as by management in assessing
the operating performance of the Company on a consistent
basis.
As it relates to 2021 projected adjusted EBITDA growth for the
Company, including as a result of our recent acquisitions, as well
as other forward-looking information described further above, the
Company has not provided guidance for comparable GAAP measures or a
quantitative reconciliation of forward-looking non-GAAP financial
measures to the most directly comparable U.S. GAAP measure because
it is unable to determine with reasonable certainty the ultimate
outcome of certain significant items necessary to calculate such
measures without unreasonable effort. These items include,
but are not limited to, certain non-recurring or non-core items the
Company may record that could materially impact net income, as well
as the impact of COVID-19. These items are uncertain, depend
on various factors, and could have a material impact on the U.S.
GAAP reported results for the guidance period.
The Company's reference to trailing twelve months adjusted
EBITDA within this press release refers to the twelve month period
ended June 30, 2021 adjusted EBITDA
of $276.6 million, which includes (i)
the six months ended June 30, 2021
adjusted EBITDA of $147.2 million, as
presented in the non-GAAP reconciliations below, and (ii) the
twelve months ended December 31, 2020
adjusted EBITDA of $222.0 million, as
presented in the non-GAAP reconciliations included in the Company's
fourth quarter and full year 2020 results press release dated
February 25, 2021, less (iii) the six
months ended June 30, 2020 adjusted
EBITDA of approximately $92.5
million, as presented in the non-GAAP reconciliations
below.
The following tables reconcile the Company's non-GAAP financial
measures (unaudited) to their most directly comparable GAAP
(unaudited) financial measures (dollars in thousands unless
otherwise noted, except per share amounts):
|
Non-GAAP Operating
Income and Margin Reconciliations
|
|
|
Three Months
Ended
June
30,
|
|
Six Months
Ended
June
30,
|
|
2021
|
|
2020
|
|
2021
|
|
2020
|
Operating income
(loss)
|
$
38,816
|
|
$
2,238
|
|
$
83,710
|
|
$
(10,206)
|
Houghton combination,
integration and other
|
6,784
|
|
8,253
|
|
13,014
|
|
16,529
|
acquisition-related
expenses (a)
|
|
|
|
Restructuring and
related charges
|
298
|
|
486
|
|
1,473
|
|
2,202
|
Fair value step up of
acquired inventory sold
|
—
|
|
226
|
|
801
|
|
226
|
CEO transition
costs
|
308
|
|
—
|
|
812
|
|
—
|
Inactive subsidiary's
non-operating litigation costs
|
242
|
|
—
|
|
293
|
|
—
|
Customer bankruptcy
costs
|
—
|
|
—
|
|
—
|
|
463
|
Indefinite-lived
intangible asset impairment
|
—
|
|
—
|
|
—
|
|
38,000
|
Non-GAAP operating
income
|
$
46,448
|
|
$
11,203
|
|
$
100,103
|
|
$
47,214
|
Non-GAAP operating
margin (%)
|
10.7%
|
|
3.9%
|
|
11.6%
|
|
7.1%
|
EBITDA, Adjusted
EBITDA, Adjusted EBITDA Margin
and Non-GAAP Net Income Reconciliations
|
|
|
Three Months
Ended
June
30,
|
|
Six Months
Ended
June
30,
|
|
2021
|
|
2020
|
|
2021
|
|
2020
|
Net income (loss)
attributable to Quaker Chemical Corporation
|
$
33,570
|
|
$
(7,735)
|
|
$
72,185
|
|
$
(36,116)
|
Depreciation and
amortization (a)(b)
|
22,344
|
|
21,158
|
|
44,792
|
|
42,742
|
Interest expense,
net
|
5,618
|
|
6,811
|
|
11,088
|
|
15,272
|
Taxes on income (loss)
before equity in net income
|
15,218
|
|
3,222
|
|
25,907
|
|
(9,848)
|
of associated
companies (c)
|
|
|
|
EBITDA
|
$
76,750
|
|
$
23,456
|
|
$
153,972
|
|
$
12,050
|
Equity income in a
captive insurance company
|
(883)
|
|
(482)
|
|
(3,963)
|
|
(155)
|
Houghton combination,
integration and other
|
6,658
|
|
7,963
|
|
7,085
|
|
15,766
|
acquisition-related
expenses (a)
|
|
|
|
Restructuring and
related charges
|
298
|
|
486
|
|
1,473
|
|
2,202
|
Fair value step up of
acquired inventory sold
|
—
|
|
226
|
|
801
|
|
226
|
CEO transition
costs
|
308
|
|
—
|
|
812
|
|
—
|
Inactive subsidiary's
non-operating litigation costs
|
242
|
|
—
|
|
293
|
|
—
|
Customer bankruptcy
costs
|
—
|
|
—
|
|
—
|
|
463
|
Indefinite-lived
intangible asset impairment
|
—
|
|
—
|
|
—
|
|
38,000
|
Pension and
postretirement benefit costs,
|
(129)
|
|
341
|
|
(253)
|
|
23,866
|
non-service
components
|
|
|
|
Brazilian non-income
tax credits
|
(13,293)
|
|
—
|
|
(13,293)
|
|
—
|
Currency conversion
impacts of hyper-
|
106
|
|
73
|
|
278
|
|
124
|
inflationary
economies
|
|
|
|
Adjusted
EBITDA
|
$
70,057
|
|
$
32,063
|
|
$
147,205
|
|
$
92,542
|
Adjusted EBITDA
margin (%)
|
16.1%
|
|
11.2%
|
|
17.0%
|
|
13.9%
|
|
|
|
|
|
|
|
|
Adjusted
EBITDA
|
$
70,057
|
|
$
32,063
|
|
$
147,205
|
|
$
92,542
|
Less: Depreciation and
amortization - adjusted (a)(b)
|
22,218
|
|
20,869
|
|
44,251
|
|
41,980
|
Less: Interest
expense, net
|
5,618
|
|
6,811
|
|
11,088
|
|
15,272
|
Less: Taxes on income
before equity in net
|
9,773
|
|
673
|
|
21,512
|
|
7,136
|
income of associated
companies – adjusted (c)
|
|
|
|
Non-GAAP net
income
|
$
32,448
|
|
$
3,710
|
|
$
70,354
|
|
$
28,154
|
|
|
|
|
|
|
|
|
|
|
Non-GAAP Earnings
per Diluted Share Reconciliations
|
|
|
|
|
|
|
Three Months
Ended
June
30,
|
Six Months
Ended
June
30,
|
|
2021
|
|
2020
|
|
2021
|
|
2020
|
GAAP earnings (loss)
per diluted share attributable to Quaker Chemical Corporation
common shareholders
|
$
1.88
|
|
$
(0.43)
|
|
$
4.03
|
|
$
(2.03)
|
Equity income in a
captive insurance company per diluted share
|
(0.05)
|
|
(0.03)
|
|
(0.22)
|
|
(0.01)
|
Houghton combination,
integration and other acquisition-related expenses per diluted
share (a)
|
0.28
|
|
0.37
|
|
0.32
|
|
0.73
|
Restructuring and
related charges per diluted share
|
0.02
|
|
0.02
|
|
0.07
|
|
0.09
|
Fair value step up of
acquired inventory sold per diluted share
|
—
|
|
0.01
|
|
0.03
|
|
0.01
|
CEO transition costs
per diluted share
|
0.02
|
|
—
|
|
0.04
|
|
—
|
Inactive subsidiary's
non-operating litigation costs per diluted share
|
0.01
|
|
—
|
|
0.01
|
|
—
|
Customer bankruptcy
costs per diluted share
|
—
|
|
—
|
|
—
|
|
0.02
|
Indefinite-lived
intangible asset impairment per diluted share
|
—
|
|
—
|
|
—
|
|
1.65
|
Pension and
postretirement benefit costs, non-service components per diluted
share
|
(0.01)
|
|
0.01
|
|
(0.01)
|
|
0.89
|
Brazilian non-income
tax credits per diluted share
|
(0.44)
|
|
—
|
|
(0.44)
|
|
—
|
Currency conversion
impacts of hyper-inflationary economies per diluted
share
|
0.01
|
|
0.01
|
|
0.02
|
|
0.01
|
Impact of certain
discrete tax items per diluted share
|
0.10
|
|
0.25
|
|
0.08
|
|
0.23
|
Non-GAAP earnings per
diluted share
|
$
1.82
|
|
$
0.21
|
|
$
3.93
|
|
$
1.59
|
(a)
|
The Company recorded
$0.1 million and $0.5 million of accelerated depreciation expense
related to the Combination during the three and six months ended
June 30, 2021, respectively, compared to $0.3 million and $0.8
million during the three and six months ended June 30, 2020,
respectively. In the three and six months ended June 30, 2021
all $0.1 million and $0.5 million, respectively, was recorded in
cost of goods sold ("COGS"), while in the three and six months
ended June 30, 2020, $0.3 million and $0.7 million, respectively,
was recorded in COGS, and less than $0.1 million and $0.1 million,
respectively, was recorded in Combination, integration and other
acquisition-related expenses. The amounts recorded within
COGS are included in the caption Houghton combination, integration
and other acquisition-related expenses in the reconciliation of
Operating income (loss) to Non-GAAP operating income and GAAP
earnings (loss) per diluted share attributable to Quaker Chemical
Corporation common shareholders to Non-GAAP earnings per diluted
share. In addition, the total amounts are included within the
caption Depreciation and amortization in the reconciliation of Net
income (loss) attributable to Quaker Chemical Corporation to
Adjusted EBITDA; however, they are excluded in the reconciliation
of Adjusted EBITDA to Non-GAAP net income. In addition,
during the six months ended June 30, 2021, the Company recognized a
gain of $5.4 million associated with the sale of certain
held-for-sale real property assets which was the result of the
Company's manufacturing footprint integration plans. This
gain was recorded within Other income (expense), net and therefore
is included in the caption Houghton combination, integration and
other acquisition-related expenses in the reconciliation of Net
income (loss) attributable to Quaker Chemical Corporation to
Adjusted EBITDA and GAAP earnings (loss) per diluted share
attributable to Quaker Chemical Corporation common shareholders to
Non-GAAP earnings per diluted share, however it is excluded in the
reconciliation of Operating income (loss) to Non-GAAP operating
income.
|
|
|
(b)
|
Depreciation and
amortization for the three and six months ended June 30, 2021
includes $0.3 million and $0.6 million, respectively, and for the
three and six months ended June 30, 2020 included $0.3 million and
$0.7 million, respectively, of amortization expense recorded within
equity in net income of associated companies in the Statement of
Operations, which is attributable to the amortization of the fair
value step up for the Company's 50% interest in a Houghton joint
venture in Korea as a result of required purchase
accounting.
|
|
|
(c)
|
Taxes on income
before equity in net income of associated companies – adjusted
includes the Company's tax expense adjusted for the impact of any
current and deferred income tax expense (benefit), as applicable,
of the reconciling items presented in the reconciliation of Net
income (loss) attributable to Quaker Chemical Corporation to
adjusted EBITDA, above, determined utilizing the applicable rates
in the taxing jurisdictions in which these adjustments occurred,
subject to deductibility. This caption also includes the
impact of certain specific tax charges and benefits in the three
and six months ended June 30, 2021 and 2020, which the Company does
not consider core or indicative of future performance.
|
Segment Measures and Reconciliations
The Company's operating segments, which are consistent with its
reportable segments, reflect the structure of the Company's
internal organization, the method by which the Company's resources
are allocated and the manner by which the chief operating decision
maker assesses the Company's performance. The Company has
four reportable segments: (i) Americas; (ii) EMEA; (iii)
Asia/Pacific; and (iv) Global
Specialty Businesses. The three geographic segments are
composed of the net sales and operations in each respective region,
excluding net sales and operations managed globally by the Global
Specialty Businesses segment, which includes the Company's
container, metal finishing, mining, offshore, specialty coatings,
specialty grease and Norman Hay
businesses. Segment operating earnings for each of the
Company's reportable segments are comprised of the segment's net
sales less directly related COGS and SG&A. Operating
expenses not directly attributable to the net sales of each
respective segment, such as certain corporate and administrative
costs, Combination, integration and other acquisition-related
expenses, and Restructuring and related charges, are not included
in segment operating earnings. Other items not specifically
identified with the Company's reportable segments include interest
expense, net and other income (expense), net.
The following tables reconcile the Company's reportable
operating segments performance to that of the Company's (dollars in
thousands):
|
Three Months
Ended
June
30,
|
|
Six Months
Ended
June
30,
|
Net
Sales
|
2021
|
|
2020
|
|
2021
|
|
2020
|
Americas
|
$
139,673
|
|
$
80,576
|
|
$
274,544
|
|
$
210,472
|
EMEA
|
123,436
|
|
77,702
|
|
243,250
|
|
182,541
|
Asia/Pacific
|
91,559
|
|
68,421
|
|
188,265
|
|
141,973
|
Global Specialty
Businesses
|
80,594
|
|
59,341
|
|
158,986
|
|
129,615
|
Total net
sales
|
$
435,262
|
|
$
286,040
|
|
$
865,045
|
|
$
664,601
|
|
|
|
|
|
|
|
|
Segment operating
earnings
|
Americas
|
$
33,648
|
|
$
10,303
|
|
$
65,882
|
|
$
39,491
|
EMEA
|
23,405
|
|
10,471
|
|
48,649
|
|
28,830
|
Asia/Pacific
|
23,227
|
|
19,261
|
|
50,705
|
|
38,802
|
Global Specialty
Businesses
|
24,209
|
|
16,393
|
|
48,378
|
|
36,953
|
Total segment
operating earnings
|
104,489
|
|
56,428
|
|
213,614
|
|
144,076
|
Combination,
integration and other acquisition-related expenses
|
(6,658)
|
|
(7,995)
|
|
(12,473)
|
|
(15,873)
|
Restructuring and
related charges
|
(298)
|
|
(486)
|
|
(1,473)
|
|
(2,202)
|
Fair value step up of
acquired inventory sold
|
—
|
|
(226)
|
|
(801)
|
|
(226)
|
Indefinite-lived
intangible asset impairment
|
—
|
|
—
|
|
—
|
|
(38,000)
|
Non-operating and
administrative expenses
|
(43,077)
|
|
(32,045)
|
|
(84,069)
|
|
(70,496)
|
Depreciation of
corporate assets and amortization
|
(15,640)
|
|
(13,438)
|
|
(31,088)
|
|
(27,485)
|
Operating income
(loss)
|
38,816
|
|
2,238
|
|
83,710
|
|
(10,206)
|
Other income
(expense), net
|
14,010
|
|
(993)
|
|
18,697
|
|
(22,168)
|
Interest expense,
net
|
(5,618)
|
|
(6,811)
|
|
(11,088)
|
|
(15,272)
|
Income (loss)
before taxes and equity in net income of associated
companies
|
$
47,208
|
|
$
(5,566)
|
|
$
91,319
|
|
$
(47,646)
|
Forward-Looking Statements
This press release contains "forward-looking statements" within
the meaning of Section 27A of the Securities Act of 1933, as
amended, and Section 21E of the Securities Exchange Act of 1934, as
amended. These statements can be identified by the fact that
they do not relate strictly to historical or current facts.
We have based these forward-looking statements, including
statements regarding the potential effects of the COVID-19 pandemic
on the Company's business, results of operations, and financial
condition, our expectations that we will maintain sufficient
liquidity and remain in compliance with the terms of the Company's
credit facility, statements regarding remediation of our material
weaknesses in internal control over financial reporting,
expectations about future demand and raw material costs, and
statements regarding the impact of increased raw material costs and
pricing initiatives, on our current expectations about future
events. These forward-looking statements include statements
with respect to our beliefs, plans, objectives, goals,
expectations, anticipations, intentions, financial condition,
results of operations, future performance, and business, including
but not limited to the potential benefits of the Combination and
other acquisitions, the impacts on our business as a result of the
COVID-19 pandemic and any projected global economic rebound or
anticipated positive results due to Company actions taken in
response to the pandemic, and our current and future results and
plans and statements that include the words "may," "could,"
"should," "would," "believe," "expect," "anticipate," "estimate,"
"intend," "plan" or similar expressions. These
forward-looking statements 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
demand for the Company's products and services is largely derived
from the demand for its customers' products, which subjects the
Company to uncertainties related to downturns in a customer's
business and unanticipated customer production slowdowns and
shutdowns, including as is currently being experienced by many
automotive industry companies. Other major risks and
uncertainties include, but are not limited to, the primary and
secondary impacts of the COVID-19 pandemic, including actions taken
in response to the pandemic by various governments, which could
exacerbate some or all of the other risks and uncertainties faced
by the Company, including the potential for significant increases
in raw material costs, supply chain disruptions, customer financial
instability, worldwide economic and political disruptions, foreign
currency fluctuations, significant changes in applicable tax rates
and regulations, future terrorist attacks and other acts of
violence. Furthermore, the Company is subject to the same
business cycles as those experienced by our customers in the steel,
automobile, aircraft, industrial equipment, and durable goods
industries. The ultimate impact of COVID-19 on our business
will depend on, among other things, the extent and duration of the
pandemic, the severity of the disease and the number of people
infected with the virus including as new variants emerge, the
continued uncertainty regarding global availability,
administration, acceptance and long-term efficacy of vaccines, or
other treatments, for COVID-19 or its variants, the longer-term
effects on the economy by the pandemic, including the resulting
market volatility, and by the measures taken by governmental
authorities and other third parties restricting day-to-day life and
business operations and the length of time that such measures
remain in place, as well as laws and other governmental programs
implemented to address the pandemic or assist impacted businesses,
such as fiscal stimulus and other legislation designed to deliver
monetary aid and other relief. Other factors could also
adversely affect us, including those related to the Combination and
other acquisitions and the integration of acquired businesses.
Our forward-looking statements are subject to risks,
uncertainties and assumptions about the Company and its operations
that are subject to change based on various important factors, some
of which are beyond our control. These risks, uncertainties,
and possible inaccurate assumptions relevant to our business could
cause our actual results to differ materially from expected and
historical results. All forward-looking statements included
in this press release, including expectations about the
improvements in business conditions during 2021 and future periods,
are based upon information available to the Company as of the date
of this press release, which may change. Therefore, we
caution you not to place undue reliance on our forward-looking
statements. For more information regarding these risks and
uncertainties as well as certain additional risks that we face,
refer to the Risk Factors section, which appears in Item 1A of our
Annual Report on Form 10-K for the year ended December 31, 2020, and in subsequent reports
filed from time to time with the Securities and Exchange
Commission. We do not intend to, and we disclaim any duty or
obligation to, update or revise any forward-looking statements to
reflect new information or future events or for any other
reason. This discussion is provided as permitted by the
Private Securities Litigation Reform Act of 1995.
Conference Call
As previously announced, the Company's investor conference call
to discuss its second quarter performance is scheduled for
August 4, 2021 at 7:30 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
investors.quakerhoughton.com. You can also access the
conference call by dialing 877-269-7756.
About Quaker Houghton
Quaker Houghton is the global leader in industrial process
fluids. With a presence around the world, including
operations in over 25 countries, our customers include thousands of
the world's most advanced and specialized steel, aluminum,
automotive, aerospace, offshore, can, mining, and metalworking
companies. Our high-performing, innovative and sustainable
solutions are backed by best-in-class technology, deep process
knowledge and customized services. With approximately 4,200
employees, including chemists, engineers and industry experts, we
partner with our customers to improve their operations so they can
run even more efficiently, even more effectively, whatever comes
next. Quaker Houghton is headquartered in Conshohocken, Pennsylvania, located near
Philadelphia in the United
States. Visit quakerhoughton.com to learn more.
Quaker Chemical
Corporation
|
Condensed
Consolidated Statements of Operations
|
(Dollars in
thousands, except share and per share amounts)
|
|
|
|
|
|
|
|
|
|
(Unaudited)
|
|
Three Months
Ended
June 30,
|
|
Six Months
Ended
June 30,
|
|
2021
|
|
2020
|
|
2021
|
|
2020
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
sales
|
$
435,262
|
|
$
286,040
|
|
$
865,045
|
|
$
664,601
|
|
|
|
|
|
|
|
|
Cost of goods
sold
|
280,811
|
|
188,654
|
|
554,400
|
|
433,364
|
|
|
|
|
|
|
|
|
Gross
profit
|
154,451
|
|
97,386
|
|
310,645
|
|
231,237
|
%
|
35.5%
|
|
34.0%
|
|
35.9%
|
|
34.8%
|
|
|
|
|
|
|
|
|
Selling, general and
administrative expenses
|
108,679
|
|
86,667
|
|
212,989
|
|
185,368
|
Indefinite-lived
intangible asset impairment
|
-
|
|
-
|
|
-
|
|
38,000
|
Restructuring and
related charges
|
298
|
|
486
|
|
1,473
|
|
2,202
|
Combination,
integration and other acquisition-related expenses
|
6,658
|
|
7,995
|
|
12,473
|
|
15,873
|
|
|
|
|
|
|
|
|
Operating income
(loss)
|
38,816
|
|
2,238
|
|
83,710
|
|
(10,206)
|
%
|
8.9%
|
|
0.8%
|
|
9.7%
|
|
-1.5%
|
|
|
|
|
|
|
|
|
Other income
(expense), net
|
14,010
|
|
(993)
|
|
18,697
|
|
(22,168)
|
Interest expense,
net
|
(5,618)
|
|
(6,811)
|
|
(11,088)
|
|
(15,272)
|
Income (loss) before
taxes and equity in net income of associated companies
|
47,208
|
|
(5,566)
|
|
91,319
|
|
(47,646)
|
|
|
|
|
|
|
|
|
Taxes on income
(loss) before equity in net income of associated
companies
|
15,218
|
|
3,222
|
|
25,907
|
|
(9,848)
|
Income (loss) before
equity in net income of associated companies
|
31,990
|
|
(8,788)
|
|
65,412
|
|
(37,798)
|
|
|
|
|
|
|
|
|
Equity in net income
of associated companies
|
1,610
|
|
1,066
|
|
6,820
|
|
1,732
|
|
|
|
|
|
|
|
|
Net income
(loss)
|
33,600
|
|
(7,722)
|
|
72,232
|
|
(36,066)
|
|
|
|
|
|
|
|
|
Less: Net income
attributable to noncontrolling interest
|
30
|
|
13
|
|
47
|
|
50
|
|
|
|
|
|
|
|
|
Net income (loss)
attributable to Quaker Chemical Corporation
|
$
33,570
|
|
$
(7,735)
|
|
$
72,185
|
|
$
(36,116)
|
%
|
7.7%
|
|
-2.7%
|
|
8.3%
|
|
-5.4%
|
|
|
|
|
|
|
|
|
Share and per
share data:
|
|
|
|
|
|
|
|
Basic weighted
average common shares outstanding
|
17,802,366
|
|
17,697,496
|
|
17,793,915
|
|
17,685,010
|
Diluted weighted
average common shares outstanding
|
17,849,521
|
|
17,697,496
|
|
17,846,010
|
|
17,685,010
|
|
|
|
|
|
|
|
|
Net income (loss)
attributable to Quaker Chemical Corporation common shareholders -
basic
|
$
1.88
|
|
$
(0.43)
|
|
$
4.04
|
|
$
(2.03)
|
Net income (loss)
attributable to Quaker Chemical Corporation common shareholders -
diluted
|
$
1.88
|
|
$
(0.43)
|
|
$
4.03
|
|
$
(2.03)
|
|
|
|
Quaker Chemical
Corporation
|
Condensed
Consolidated Balance Sheets
|
(Dollars in
thousands, except par value and share amounts)
|
|
|
|
|
|
(Unaudited)
|
|
June 30,
2021
|
|
December 31,
2020
|
ASSETS
|
|
|
|
|
|
|
|
Current
assets
|
|
|
|
Cash and cash
equivalents
|
$
145,610
|
|
$
181,833
|
Accounts receivable,
net
|
418,642
|
|
372,974
|
Inventories,
net
|
242,809
|
|
187,764
|
Prepaid expenses and
other current assets
|
60,844
|
|
50,156
|
Total current
assets
|
867,905
|
|
792,727
|
|
|
|
|
Property, plant and
equipment, net
|
194,441
|
|
203,883
|
Right of use lease
assets
|
36,160
|
|
38,507
|
Goodwill
|
633,449
|
|
631,212
|
Other intangible
assets, net
|
1,068,795
|
|
1,081,358
|
Investments in
associated companies
|
98,013
|
|
95,785
|
Deferred tax
assets
|
13,392
|
|
16,566
|
Other non-current
assets
|
32,664
|
|
31,796
|
Total
assets
|
$
2,944,819
|
|
$
2,891,834
|
|
|
|
|
LIABILITIES AND
EQUITY
|
|
|
|
|
|
|
|
Current
liabilities
|
|
|
|
Short-term borrowings
and current portion of long-term debt
|
$
48,079
|
|
$
38,967
|
Accounts and other
payables
|
219,617
|
|
198,872
|
Accrued
compensation
|
33,399
|
|
43,300
|
Accrued
restructuring
|
5,278
|
|
8,248
|
Other current
liabilities
|
94,061
|
|
93,573
|
Total current
liabilities
|
400,434
|
|
382,960
|
|
|
|
|
Long-term
debt
|
847,154
|
|
849,068
|
Long-term lease
liabilities
|
25,668
|
|
27,070
|
Deferred tax
liabilities
|
181,264
|
|
192,763
|
Other non-current
liabilities
|
114,898
|
|
119,059
|
Total
liabilities
|
1,569,418
|
|
1,570,920
|
|
|
|
|
Equity
|
|
|
|
Common stock, $1 par
value; authorized 30,000,000 shares; issued and outstanding 2021 -
17,878,137 shares; 2020 - 17,850,616 shares
|
17,878
|
|
17,851
|
Capital in excess of
par value
|
910,862
|
|
905,171
|
Retained
earnings
|
482,001
|
|
423,940
|
Accumulated other
comprehensive loss
|
(35,943)
|
|
(26,598)
|
Total Quaker
shareholders' equity
|
1,374,798
|
|
1,320,364
|
Noncontrolling
interest
|
603
|
|
550
|
Total
equity
|
1,375,401
|
|
1,320,914
|
Total liabilities and
equity
|
$
2,944,819
|
|
$
2,891,834
|
|
|
|
Quaker Chemical
Corporation
|
Condensed
Consolidated Statements of Cash Flows
|
(Dollars in
thousands)
|
|
|
|
|
|
(Unaudited)
|
|
Six Months
Ended
June 30,
|
|
2021
|
|
2020
|
Cash flows from
operating activities
|
|
|
|
Net income
(loss)
|
$
72,232
|
|
$
(36,066)
|
Adjustments to
reconcile net income (loss) to net cash (used in) provided by
operating activities:
|
|
|
|
Amortization of debt
issuance costs
|
2,375
|
|
2,375
|
Depreciation and
amortization
|
44,188
|
|
42,079
|
Equity in
undistributed earnings of associated companies, net of
dividends
|
(6,715)
|
|
3,219
|
Acquisition-related
fair value adjustments related to inventory
|
801
|
|
229
|
Deferred
compensation, deferred taxes and other, net
|
(13,849)
|
|
(22,033)
|
Share-based
compensation
|
6,134
|
|
7,673
|
(Gain) loss on
disposal of property, plant, equipment and other assets
|
(5,356)
|
|
81
|
Insurance settlement
realized
|
-
|
|
(542)
|
Indefinite-lived
intangible asset impairment
|
-
|
|
38,000
|
Combination and other
acquisition-related expenses, net of payments
|
(2,305)
|
|
1,860
|
Restructuring and
related charges
|
1,473
|
|
2,202
|
Pension and other
postretirement benefits
|
(2,223)
|
|
18,784
|
(Decrease) increase
in cash from changes in current assets and current liabilities, net
of acquisitions:
|
|
|
|
Accounts
receivable
|
(47,252)
|
|
61,659
|
Inventories
|
(57,020)
|
|
(3,689)
|
Prepaid expenses and
other current assets
|
(20,111)
|
|
(2,849)
|
Change in
restructuring liabilities
|
(4,214)
|
|
(9,592)
|
Accounts payable and
accrued liabilities
|
22,274
|
|
(58,728)
|
Net cash (used in)
provided by operating activities
|
(9,568)
|
|
44,662
|
|
|
|
|
Cash flows from
investing activities
|
|
|
|
Investments in
property, plant and equipment
|
(6,974)
|
|
(7,534)
|
Payments related to
acquisitions, net of cash acquired
|
(29,424)
|
|
(3,132)
|
Proceeds from
disposition of assets
|
14,744
|
|
11
|
Insurance settlement
interest earned
|
-
|
|
37
|
Net cash used in
investing activities
|
(21,654)
|
|
(10,618)
|
|
|
|
|
Cash flows from
financing activities
|
|
|
|
Payments of term loan
debt
|
(19,065)
|
|
(18,702)
|
Borrowings on
revolving credit facilities, net
|
29,433
|
|
205,500
|
Repayments on other
debt, net
|
(219)
|
|
(684)
|
Dividends
paid
|
(14,113)
|
|
(13,662)
|
Stock options
exercised, other
|
(416)
|
|
(1,923)
|
Purchase of
noncontrolling interest in affiliates
|
-
|
|
(1,047)
|
Distributions to
noncontrolling affiliate shareholders
|
-
|
|
(751)
|
Net cash (used in)
provided by financing activities
|
(4,380)
|
|
168,731
|
|
|
|
|
Effect of foreign
exchange rate changes on cash
|
(683)
|
|
(4,575)
|
|
|
|
|
Net (decrease)
increase in cash, cash equivalents and restricted cash
|
(36,285)
|
|
198,200
|
Cash, cash
equivalents and restricted cash at the beginning of the
period
|
181,895
|
|
143,555
|
Cash, cash
equivalents and restricted cash at the end of the
period
|
$
145,610
|
|
$
341,755
|
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SOURCE Quaker Houghton