- Q3'23 net sales of $490.6
million, net income of $33.7
million and earnings per diluted share of $1.87
- Q3'23 non-GAAP net income of $36.9
million and non-GAAP earnings per diluted share of
$2.05
- Delivered adjusted EBITDA of $84.4
million in Q3'23, a 20% increase compared to $70.3 million in Q3'22
- Generated approximately $199.5
million of operating cash flow year-to-date; Net debt to
adjusted EBITDA improved to 2.0x
CONSHOHOCKEN, Pa., Nov. 2, 2023
/PRNewswire/ -- Quaker Houghton ("the Company") (NYSE: KWR), the
global leader in industrial process fluids, announced its third
quarter 2023 results today.
|
Three Months
Ended
September 30,
|
|
Nine Months
Ended
September 30,
|
($ in thousands,
except per share data)
|
2023
|
|
2022
|
|
2023
|
|
2022
|
Net sales
|
$
490,612
|
|
$
492,218
|
|
$ 1,486,204
|
|
$ 1,458,777
|
Net income attributable
to Quaker Chemical Corporation
|
33,670
|
|
25,867
|
|
92,550
|
|
60,026
|
Net income attributable
to Quaker Chemical Corporation common shareholders –
diluted
|
1.87
|
|
1.44
|
|
5.14
|
|
3.35
|
Non-GAAP net income
*
|
36,928
|
|
31,173
|
|
105,694
|
|
80,318
|
Non-GAAP Earnings per
diluted share *
|
2.05
|
|
1.74
|
|
5.87
|
|
4.48
|
Adjusted EBITDA
*
|
84,381
|
|
70,291
|
|
243,414
|
|
189,226
|
|
* Refer
to the Non-GAAP Measures and Reconciliations section below for
additional information
|
Third Quarter 2023 Consolidated Results
Net sales in the third quarter of 2023 were $490.6 million compared to $492.2 million in the third quarter of 2022. This
result was primarily due to an increase in selling price and
product mix of approximately 2% and a favorable impact of foreign
currency translation of 2%, offset by a decrease in sales volumes
of approximately 4%. The increase in selling price and product mix
was primarily attributable to higher selling prices in all
segments. The decline in sales volumes was primarily
attributable to a continuation of softer market conditions that
have persisted throughout the year and the wind-down of the tolling
agreement for products previously divested related to the
Combination, in the Europe,
Middle East and Africa ("EMEA") segment, partially offset by
new business wins in all segments.
The Company reported net income in the third quarter of 2023 of
$33.7 million, or $1.87 per diluted share, compared to net income
of $25.9 million or $1.44 per diluted share in the third quarter of
2022. Excluding non-recurring and non-core items in each period,
the Company's non-GAAP net income and earnings per diluted share
were $36.9 million and $2.05 respectively in the third quarter of 2023
compared to $31.2 million and
$1.74 respectively in the prior year
quarter. The Company generated adjusted EBITDA of $84.4 million in the third quarter of 2023, an
increase of 20% compared to $70.3
million in the third quarter of 2022, primarily driven by an
improvement in gross margins in all segments compared to the prior
year.
Andy Tometich, Chief Executive
Officer and President, commented, "Quaker Houghton achieved record
results in the third quarter highlighted by further improvement in
our profitability and double-digit earnings growth as well as
robust cash flow generation. I am proud of the organization's
resolve and consistent execution; delivering strong operational and
financial performance in a challenging end market environment.
Looking ahead, we expect current unsettled market conditions,
primarily in the Americas and EMEA, to continue through year
end. We are confident in the future of Quaker Houghton.
We are firmly committed to advancing our enterprise strategy as we
partner with customers to provide value-added services and
solutions. We are making progress positioning the
organization to build upon our market leading position by further
differentiating our customer intimacy model and accelerating new
business wins. We expect to capitalize on the momentum we
have built in 2024."
Third Quarter 2023 Segment Results
During the first quarter of 2023, the Company reorganized its
executive management team to align with its new business structure.
The Company's new structure includes three reportable segments: (i)
Americas; (ii) EMEA; and (iii) Asia/Pacific. Prior to the Company's
reorganization, the Company's historical reportable segments were:
(i) Americas; (ii) EMEA; (iii) Asia/Pacific; and (iv) Global Specialty
Businesses. Prior period information has been recast to align with
the Company's business structure as of January 1, 2023.
The Company's three and nine months of September 30, 2023
operating performance of each of its three reportable segments, (i)
Americas; (ii) EMEA; and (iii) Asia/Pacific, are further described below.
|
Three Months
Ended
September 30,
|
|
Nine Months
Ended
September 30,
|
|
2023
|
|
2022
|
|
2023
|
|
2022
|
Net Sales
*
|
|
|
|
|
|
|
|
Americas
|
$
245,899
|
|
$
254,678
|
|
$
750,531
|
|
$
702,580
|
EMEA
|
139,620
|
|
134,386
|
|
435,602
|
|
426,739
|
Asia/Pacific
|
105,093
|
|
103,154
|
|
300,071
|
|
329,458
|
Total net
sales
|
$
490,612
|
|
$
492,218
|
|
$ 1,486,204
|
|
$ 1,458,777
|
Segment operating
earnings *
|
|
|
|
|
|
|
|
Americas
|
$
69,148
|
|
$
66,749
|
|
$
204,280
|
|
$
164,065
|
EMEA
|
27,922
|
|
15,479
|
|
81,076
|
|
58,803
|
Asia/Pacific
|
30,963
|
|
26,723
|
|
86,604
|
|
76,146
|
Total segment
operating earnings
|
$
128,033
|
|
$
108,951
|
|
$
371,960
|
|
$
299,014
|
|
* Refer
to the Segment Measures and Reconciliations section below for
additional information
|
Net sales in the Americas segment decreased in the third quarter
of 2023 compared to the same period in 2022 primarily due to a
decrease in sales volumes, partially offset by higher selling price
and product mix and a favorable impact from foreign currency
translation. Net sales in the EMEA segment increased compared to
the prior year quarter as a result of an increase in selling price
and product mix and a favorable impact from foreign currency
translation, partially offset by a decline in sales volumes. Net
sales in the Asia/Pacific segment
increased compared to the prior year quarter as a result of an
increase in sales volumes, partially offset by an unfavorable
impact of foreign currency translation.
The increases in selling price and product mix were primarily
related to our value-based pricing initiatives implemented across
all segments and further targeted actions. Sales volumes increased
in the Asia/Pacific segment due to
continued new business wins and an improvement in end market
conditions. Sales volumes declined in the Americas and EMEA
segments primarily reflecting a continuation of softer market
conditions compared to the prior year, partially offset by new
business wins in both segments.
Compared to the second quarter of 2023, total company sales
volumes increased approximately 1%, partially offset by a similar
decline in selling price and product mix. By segment, net sales
increased in the Asia/Pacific
segment primarily due to a double-digit increase in sales volumes,
partially offset by an unfavorable impact from foreign currency
translation. Net sales declined in the Americas segment primarily
due to a decline in selling price and product mix and stable sales
volumes. Net sales declined in the EMEA segment as an increase in
selling price and product mix was offset by a decline in sales
volumes.
Operating earnings increased in all three segments in the third
quarter of 2023 compared to the prior year driven by a further
improvement in operating margins in all segments. Operating
earnings and operating margins also increased across all segments
in the third quarter compared to the second quarter of 2023.
Cash Flow and Liquidity Highlights
Net cash provided by operating activities was $199.5 million for the first nine months of 2023
compared to net cash used in operating activities of $26.3 million in the first nine months of 2022.
The $225.8 million improvement
in net operating cash flow primarily reflects a stronger operating
performance and working capital management in the first nine months
of 2023 compared to the same period in 2022.
As of September 30, 2023, the Company's total gross debt
was $825.9 million and its cash and
cash equivalents was $198.4 million,
which resulted in net debt of $627.5
million. The Company has paid down approximately
$127 million of gross debt
year-to-date in 2023. The Company's net debt divided by its
trailing twelve months adjusted EBITDA was approximately 2.0x.
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 considered
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. In addition, our definitions of 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, as discussed and reconciled below to
the most comparable respective GAAP measures, may not be comparable
to similarly named measures reported by other companies.
The Company presents EBITDA which is calculated as net income
attributable to the Company before depreciation and amortization,
interest expense, net, and taxes on income 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 considered 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 plus or minus certain items that are not
considered 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
investors, analysts, and peers 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 investors, analysts, and peers in our industry as
well as by management in assessing the operating performance of the
Company on a consistent basis.
As it relates to future projections for the Company 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 September 30, 2023 adjusted EBITDA of $311.3 million, which includes (i) the nine
months ended September 30, 2023 adjusted EBITDA of
$243.4 million, as presented in the
non-GAAP reconciliations below, and (ii) the twelve months ended
December 31, 2022 adjusted EBITDA of $257.2 million, as presented in the non-GAAP
reconciliations included in the Company's fourth quarter and full
year 2022 results press release dated February 23, 2023, less (iii) the nine months
ended September 30, 2022 adjusted EBITDA of $189.2 million, as presented in the non-GAAP
reconciliations below.
Certain of the prior period non-GAAP financial measures
presented in the following tables have been adjusted to conform
with current period presentation. 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):
|
Three Months
Ended
September 30,
|
|
Nine Months
Ended
September 30,
|
Non-GAAP Operating
Income and Margin Reconciliations:
|
2023
|
|
2022
|
|
2023
|
|
2022
|
Operating
income
|
$
59,518
|
|
$
44,609
|
|
$
166,242
|
|
$
105,915
|
Combination,
integration and other acquisition-related expenses (a)
|
—
|
|
2,107
|
|
—
|
|
7,992
|
Restructuring and
related charges (credits), net
|
1,019
|
|
(1,423)
|
|
6,034
|
|
(609)
|
Strategic planning
expenses
|
1,093
|
|
4,545
|
|
3,759
|
|
10,745
|
Russia-Ukraine conflict
related expenses
|
—
|
|
88
|
|
—
|
|
2,183
|
Other
charges
|
206
|
|
1,016
|
|
855
|
|
2,681
|
Non-GAAP operating
income
|
$
61,836
|
|
$
50,942
|
|
$
176,890
|
|
$
128,907
|
Non-GAAP operating
margin (%)
|
12.6 %
|
|
10.3 %
|
|
11.9 %
|
|
8.8 %
|
EBITDA, Adjusted
EBITDA, Adjusted EBITDA Margin and Non-GAAP Net Income
Reconciliations:
|
Three Months
Ended
September 30,
|
|
Nine Months
Ended
September 30,
|
2023
|
|
2022
|
|
2023
|
|
2022
|
Net income attributable
to Quaker Chemical Corporation
|
$
33,670
|
|
$
25,867
|
|
$
92,550
|
|
$
60,026
|
Depreciation and
amortization (b)
|
20,866
|
|
19,908
|
|
62,210
|
|
61,491
|
Interest expense,
net
|
12,781
|
|
8,389
|
|
38,744
|
|
20,228
|
Taxes on income before
equity in net income of associated companies (c)
|
13,593
|
|
10,185
|
|
36,956
|
|
14,425
|
EBITDA
|
80,910
|
|
64,349
|
|
230,460
|
|
156,170
|
Equity (income) loss in
a captive insurance company
|
(756)
|
|
174
|
|
(748)
|
|
2,199
|
Combination,
integration and other acquisition-related expenses (credits)
(a)
|
—
|
|
2,107
|
|
(475)
|
|
10,387
|
Restructuring and
related charges (credits), net
|
1,019
|
|
(1,423)
|
|
6,034
|
|
(609)
|
Strategic planning
expenses
|
1,093
|
|
4,545
|
|
3,759
|
|
10,745
|
Russia-Ukraine conflict
related expenses
|
—
|
|
88
|
|
—
|
|
2,183
|
Currency conversion
impacts of hyper-inflationary economies
|
1,229
|
|
991
|
|
2,869
|
|
1,216
|
Loss on extinguishment
of debt
|
—
|
|
—
|
|
—
|
|
6,763
|
Other charges
(credits)
|
886
|
|
(540)
|
|
1,515
|
|
172
|
Adjusted
EBITDA
|
$
84,381
|
|
$
70,291
|
|
$
243,414
|
|
$
189,226
|
Adjusted EBITDA margin
(%)
|
17.2 %
|
|
14.3 %
|
|
16.4 %
|
|
13.0 %
|
|
|
|
|
|
|
|
|
Adjusted
EBITDA
|
$
84,381
|
|
$
70,291
|
|
$
243,414
|
|
$
189,226
|
Less: Depreciation and
amortization - adjusted (b)
|
20,866
|
|
19,908
|
|
62,210
|
|
61,491
|
Less: Interest expense,
net
|
12,781
|
|
8,389
|
|
38,744
|
|
20,228
|
Less: Taxes on income
before equity in net income of associated companies - adjusted
(c)
|
13,806
|
|
10,821
|
|
36,766
|
|
27,189
|
Non-GAAP net
income
|
$
36,928
|
|
$
31,173
|
|
$
105,694
|
|
$
80,318
|
|
Three Months
Ended
September 30,
|
|
Nine Months
Ended
September 30,
|
Non-GAAP Earnings
per Diluted Share Reconciliations:
|
2023
|
|
2022
|
|
2023
|
|
2022
|
GAAP earnings per
diluted share attributable to Quaker Chemical Corporation common
shareholders
|
$
1.87
|
|
$
1.44
|
|
$
5.14
|
|
$
3.35
|
Equity (income) loss in
a captive insurance company per diluted share
|
(0.04)
|
|
0.01
|
|
(0.04)
|
|
0.12
|
Combination,
integration and other acquisition-related expenses (credits) per
diluted share (a)
|
—
|
|
0.09
|
|
(0.03)
|
|
0.47
|
Restructuring and
related charges (credits), net per diluted share
|
0.04
|
|
(0.05)
|
|
0.25
|
|
(0.02)
|
Strategic planning
expenses per diluted share
|
0.04
|
|
0.19
|
|
0.17
|
|
0.46
|
Russia-Ukraine conflict
related expenses per diluted share
|
—
|
|
0.01
|
|
—
|
|
0.11
|
Currency conversion
impacts of hyper-inflationary economies per diluted
share
|
0.07
|
|
0.06
|
|
0.16
|
|
0.07
|
Loss on extinguishment
of debt per diluted share
|
—
|
|
—
|
|
—
|
|
0.29
|
Other charges (credits)
per diluted share
|
0.04
|
|
(0.03)
|
|
0.06
|
|
—
|
Impact of certain
discrete tax items per diluted share
|
0.03
|
|
0.02
|
|
0.16
|
|
(0.37)
|
Non-GAAP earnings per
diluted share
|
$
2.05
|
|
$
1.74
|
|
$
5.87
|
|
$
4.48
|
a.
|
Combination,
integration and other acquisition-related expenses (credits) in
2022 included certain legal, financial, and other advisory and
consultant costs incurred in connection with the Combination
integration activities. These amounts also include expense
associated with the Company's other recent acquisitions, including
certain legal, financial, and other advisory and consultant costs
incurred in connection with due diligence. During the nine months
ended September 30, 2023, the Company recorded $0.5 million of
other income due to changes in an indemnification asset related to
the Combination. Similarly, during the nine months ended September
30, 2022, the Company recorded $2.4 million of other expense due to
changes in a Combination-related indemnification asset. These
amounts were recorded within Other (expense) income, net and
therefore are included in the caption "Combination, integration and
other acquisition-related expenses (credits)" in the reconciliation
of Net income attributable to Quaker Chemical Corporation to
Adjusted EBITDA and GAAP earnings 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 to Non-GAAP operating
income.
|
b.
|
Depreciation and
amortization for both the three and nine months ended September 30,
2023 and September 30, 2022 includes approximately $0.3 million and
$0.8 million, respectively, of amortization expense recorded within
equity in net income of associated companies in the Company's
Condensed Consolidated Statements of Operations, which is
attributable to the amortization of the fair value step up for the
Company's 50% interest in a 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
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 specific
tax charges and benefits in the three and nine months ended
September 30, 2023 and 2022, which the Company does not consider
core to the Company's operations or indicative of future
performance.
|
Segment Measures and Reconciliations
Segment operating earnings for each of the Company's reportable
segments are comprised of the segment's net sales less directly
related Cost of goods sold ("COGS") and Selling, general and
administrative expenses ("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 (credits), net, are not included
in segment operating earnings. Other items not specifically
identified with the Company's reportable segments include Interest
expense, net and Other (expense) income, net.
The following table presents information about the performance
of the Company's reportable segments (dollars in thousands):
|
Three Months
Ended
September 30,
|
|
Nine Months
Ended
September 30,
|
|
2023
|
|
2022
|
|
2023
|
|
2022
|
Net
Sales
|
|
|
|
|
|
|
|
Americas
|
$
245,899
|
|
$
254,678
|
|
$
750,531
|
|
$
702,580
|
EMEA
|
139,620
|
|
134,386
|
|
435,602
|
|
$
426,739
|
Asia/Pacific
|
105,093
|
|
103,154
|
|
300,071
|
|
$
329,458
|
Total net
sales
|
$
490,612
|
|
$
492,218
|
|
$ 1,486,204
|
|
$ 1,458,777
|
Segment operating
earnings
|
|
|
|
|
|
|
|
Americas
|
$
69,148
|
|
$
66,749
|
|
$
204,280
|
|
$
164,065
|
EMEA
|
27,922
|
|
15,479
|
|
81,076
|
|
$
58,803
|
Asia/Pacific
|
30,963
|
|
26,723
|
|
86,604
|
|
$
76,146
|
Total segment
operating earnings
|
128,033
|
|
108,951
|
|
371,960
|
|
299,014
|
Combination,
integration and other acquisition-related expenses
|
—
|
|
(2,107)
|
|
—
|
|
(7,992)
|
Restructuring and
related (charges) credits, net
|
(1,019)
|
|
1,423
|
|
(6,034)
|
|
604
|
Non-operating and
administrative expenses
|
(52,280)
|
|
(47,852)
|
|
(154,001)
|
|
(139,894)
|
Depreciation of
corporate assets and amortization
|
(15,216)
|
|
(15,806)
|
|
(45,683)
|
|
(45,817)
|
Operating
income
|
59,518
|
|
44,609
|
|
166,242
|
|
105,915
|
Other expense,
net
|
(2,713)
|
|
85
|
|
(8,558)
|
|
(10,520)
|
Interest expense,
net
|
(12,781)
|
|
(8,389)
|
|
(38,744)
|
|
(20,228)
|
Income before taxes
and equity in net income of associated companies
|
$
44,024
|
|
$
36,305
|
|
$
118,940
|
|
$
75,167
|
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 on our current
expectations about future events, including statements regarding
the potential effects of the COVID-19 pandemic, the conflicts
between Russia and Ukraine and Israel and Hamas, inflation, bank failures,
higher interest rate environment, global supply chain constraints
on the Company's business, results of operations, and financial
condition, our expectations that we will maintain sufficient
liquidity, remain in compliance with the terms of the Company's
credit facility, expectation about future demand and raw material
costs, and statements regarding the impact of increased raw
material costs and pricing initiatives. 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 global supply chain
constraints, the potential impacts of the automotive industry labor
dispute, and our current and future results and plans including our
sustainability goals 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 as a result of supply chain
disruptions and labor disputes. Other major risks and uncertainties
include, but are not limited to, the primary and secondary impacts
of the COVID-19 pandemic, as well as inflationary pressures,
including the potential for continued significant increases in raw
material costs, supply chain disruptions, customer financial
instability, rising interest rates and the possibility of economic
recession, worldwide economic and political disruptions, including
the impacts of the military conflicts between Russia and Ukraine and Israel and Hamas, the economic and other
sanctions imposed by other nations on Russia, suspensions of activities in
Russia by many multinational
companies and the potential expansion of military activity, foreign
currency fluctuations, significant changes in applicable tax rates
and regulations, future terrorist attacks and other acts of
violence, the impact of consolidation in our industry, including
loss or consolidation of a major customer and the potential
occurrence of cyber-security breaches, cyber-security attacks and
other security incidents. 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. 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 business conditions during 2023 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, 2022,
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 third quarter of 2023 performance is scheduled
for Friday, November 3, 2023 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 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, container, 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 4,600 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
(Unaudited;
Dollars in thousands, except per share data)
|
|
|
Three Months
Ended
September 30,
|
|
Nine Months
Ended
September 30,
|
|
2023
|
|
2022
|
|
2023
|
|
2022
|
Net sales
|
$
490,612
|
|
$
492,218
|
|
$ 1,486,204
|
|
$ 1,458,777
|
Cost of goods
sold
|
307,265
|
|
331,469
|
|
951,716
|
|
1,002,393
|
Gross profit
|
183,347
|
|
160,749
|
|
534,488
|
|
456,384
|
Selling, general and
administrative expenses
|
122,810
|
|
115,456
|
|
362,212
|
|
343,081
|
Restructuring and
related charges (credits), net
|
1,019
|
|
(1,423)
|
|
6,034
|
|
(604)
|
Combination,
integration and other acquisition-related expenses
|
—
|
|
2,107
|
|
—
|
|
7,992
|
Operating
income
|
59,518
|
|
44,609
|
|
166,242
|
|
105,915
|
Other (income) expense,
net
|
(2,713)
|
|
85
|
|
(8,558)
|
|
(10,520)
|
Interest expense,
net
|
(12,781)
|
|
(8,389)
|
|
(38,744)
|
|
(20,228)
|
Income before taxes and
equity in net income of associated companies
|
44,024
|
|
36,305
|
|
118,940
|
|
75,167
|
Taxes on income before
equity in net income of associated companies
|
13,593
|
|
10,185
|
|
36,956
|
|
14,425
|
Income before equity in
net income of associated companies
|
30,431
|
|
26,120
|
|
81,984
|
|
60,742
|
Equity in net income
(loss) of associated companies
|
3,279
|
|
(212)
|
|
10,660
|
|
(642)
|
Net income
|
33,710
|
|
25,908
|
|
92,644
|
|
60,100
|
Less: Net income
attributable to noncontrolling interest
|
40
|
|
41
|
|
94
|
|
74
|
Net income attributable
to Quaker Chemical Corporation
|
$
33,670
|
|
$
25,867
|
|
$
92,550
|
|
$
60,026
|
Per share
data:
|
|
|
|
|
|
|
|
Net income attributable
to Quaker Chemical Corporation common shareholders –
basic
|
$
1.87
|
|
$
1.44
|
|
$
5.15
|
|
$
3.35
|
Net income attributable
to Quaker Chemical Corporation common shareholders –
diluted
|
$
1.87
|
|
$
1.44
|
|
$
5.14
|
|
$
3.35
|
Basic weighted average
common shares outstanding
|
17,908,754
|
|
17,847,305
|
|
17,889,444
|
|
17,835,976
|
Diluted weighted
average common shares outstanding
|
17,921,274
|
|
17,859,871
|
|
17,906,153
|
|
17,851,441
|
Quaker Chemical
Corporation
Condensed
Consolidated Balance Sheets
(Unaudited;
Dollars in thousands, except par value)
|
|
|
September
30,
2023
|
|
December 31,
2022
|
ASSETS
|
|
|
|
Current
assets
|
|
|
|
Cash and cash
equivalents
|
$
198,358
|
|
$
180,963
|
Accounts receivable,
net
|
446,459
|
|
472,888
|
Inventories,
net
|
250,770
|
|
284,848
|
Prepaid expenses and
other current assets
|
70,724
|
|
55,438
|
Total current
assets
|
966,311
|
|
994,137
|
|
|
|
|
Property, plant and
equipment, net
|
196,440
|
|
198,595
|
Right of use lease
assets
|
38,595
|
|
43,766
|
Goodwill
|
504,457
|
|
515,008
|
Other intangible
assets, net
|
890,464
|
|
942,925
|
Investments in
associated companies
|
92,965
|
|
88,234
|
Deferred tax
assets
|
9,569
|
|
11,218
|
Other non-current
assets
|
33,705
|
|
27,739
|
Total
assets
|
$
2,732,506
|
|
$ 2,821,622
|
|
|
|
|
LIABILITIES AND
EQUITY
|
|
|
|
Current
liabilities
|
|
|
|
Short-term borrowings
and current portion of long-term debt
|
$
19,246
|
|
$
19,245
|
Accounts
payable
|
190,067
|
|
193,983
|
Dividends
payable
|
8,190
|
|
7,808
|
Accrued
compensation
|
43,641
|
|
39,834
|
Accrued
restructuring
|
3,590
|
|
5,483
|
Accrued pension and
postretirement benefits
|
1,574
|
|
1,560
|
Other accrued
liabilities
|
85,799
|
|
86,873
|
Total current
liabilities
|
352,107
|
|
354,786
|
|
|
|
|
Long-term
debt
|
804,973
|
|
933,561
|
Long-term lease
liabilities
|
22,163
|
|
26,967
|
Deferred tax
liabilities
|
151,606
|
|
160,294
|
Non-current accrued
pension and postretirement benefits
|
27,344
|
|
28,765
|
Other non-current
liabilities
|
33,212
|
|
38,664
|
Total
liabilities
|
1,391,405
|
|
1,543,037
|
|
|
|
|
Equity
|
|
|
|
Common stock $1 par
value; authorized 30,000,000 shares; issued and outstanding
September 30, 2023 – 0 shares; December 31, 2022 – 17,950,264
shares
|
18,001
|
|
17,950
|
Capital in excess of
par value
|
938,473
|
|
928,288
|
Retained
earnings
|
538,628
|
|
469,920
|
Accumulated other
comprehensive loss
|
(154,724)
|
|
(138,240)
|
Total Quaker
shareholders' equity
|
1,340,378
|
|
1,277,918
|
Noncontrolling
interest
|
723
|
|
667
|
Total
equity
|
1,341,101
|
|
1,278,585
|
Total liabilities and
equity
|
$
2,732,506
|
|
$ 2,821,622
|
Quaker Chemical
Corporation
Condensed
Consolidated Statements of Cash Flows
(Unaudited;
Dollars in thousands)
|
|
|
Nine Months
Ended
September 30,
|
|
2023
|
|
2022
|
Cash flows from
operating activities
|
|
|
|
Net income
|
$
92,644
|
|
$
60,100
|
Adjustments to
reconcile net income to net cash used in operating
activities:
|
|
|
|
Amortization of debt
issuance costs
|
1,059
|
|
2,589
|
Depreciation and
amortization
|
61,434
|
|
60,692
|
Equity in
undistributed earnings of associated companies, net of
dividends
|
(7,486)
|
|
3,612
|
Deferred compensation,
deferred taxes and other, net
|
(515)
|
|
(8,844)
|
Share-based
compensation
|
11,189
|
|
8,635
|
Loss on extinguishment
of debt
|
—
|
|
5,246
|
Combination and other
acquisition-related expenses, net of payments
|
—
|
|
(4,265)
|
Restructuring and
related charges (credits), net
|
6,034
|
|
(604)
|
Pension and other
postretirement benefits
|
(2,000)
|
|
(6,556)
|
Increase (decrease) in
cash from changes in current assets and current liabilities, net of
acquisitions:
|
|
|
|
Accounts
receivable
|
22,133
|
|
(65,256)
|
Inventories
|
30,607
|
|
(72,386)
|
Prepaid expenses and
other current assets
|
(9,771)
|
|
(11,081)
|
Change in
restructuring liabilities
|
(7,914)
|
|
(1,234)
|
Accounts payable and
accrued liabilities
|
2,046
|
|
3,059
|
Net cash provided by
(used in) operating activities
|
199,460
|
|
(26,293)
|
Cash flows from
investing activities
|
|
|
|
Investments in
property, plant and equipment
|
(25,794)
|
|
(20,230)
|
Payments related to
acquisitions, net of cash acquired
|
—
|
|
(9,421)
|
Proceeds from
disposition of assets
|
—
|
|
65
|
Net cash used in
investing activities
|
(25,794)
|
|
(29,586)
|
Cash flows from
financing activities
|
|
|
|
Payments of long-term
debt
|
(14,075)
|
|
(668,500)
|
Proceeds from
long-term debt
|
—
|
|
750,000
|
Payments on revolving
credit facilities, net
|
(112,835)
|
|
(10,418)
|
Borrowings on other
debt, net
|
797
|
|
2,131
|
Financing-related debt
issuance costs
|
—
|
|
(3,734)
|
Dividends
paid
|
(23,459)
|
|
(22,302)
|
Other stock related
activity
|
(953)
|
|
(616)
|
Net cash (used in)
provided by financing activities
|
(150,525)
|
|
46,561
|
Effect of foreign
exchange rate changes on cash
|
(5,746)
|
|
(16,967)
|
Net increase (decrease)
in cash and cash equivalents
|
17,395
|
|
(26,285)
|
Cash and cash
equivalents at the beginning of the period
|
180,963
|
|
165,176
|
Cash and cash
equivalents at the end of the period
|
$
198,358
|
|
$
138,891
|
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SOURCE Quaker Houghton