Quaker Chairman pleased with strong cash generation in Q2
Quaker Chemical Corporation announced net sales of $102.3 million and diluted earnings per share of $0.29 for the second quarter of 2009. These results include a $1.2 million charge, or approximately $0.07 per diluted share, related to the retirement of the Company's former chief executive officer.
Michael F. Barry, Chairman, Chief Executive Officer and President, commented, "We are pleased with our second quarter results, especially in light of the substantial decline in volumes from last year due to the global economic crisis. The significant improvement in our earnings from the previous two quarters is primarily driven by our aggressive cost reduction actions and margin improvement. While we are encouraged by emerging signs of stability in our end markets, we believe the rebound in our end markets will be gradual, with only very modest volume increases occurring during the second half of the year."
Mr. Barry continued, "I am also very pleased with our strong cash generation in the quarter as our net debt-to-capital ratio is at its lowest level since the third quarter of 2003. With the high cash flow generation, we have reduced our debt levels by 20% since the beginning of the year, maintained our dividend, and continued to invest for the future -- an example being our Middletown, Ohio plant expansion."
Second Quarter Summary
Net sales for the second quarter were $102.3 million, down 35% from $158.2 million for the second quarter of 2008. The decrease in net sales was primarily due to volume declines in all of the Company's regions and market segments, as the global economic downturn continued to impact the Company. Volumes were down approximately 36%, which were partially offset by a favorable 6% increase in selling price and mix. Foreign exchange rate translation also decreased net sales by approximately 5%.
Gross margins were down approximately $8.7 million, or 20%, compared to the second quarter of 2008, reflective of the above- noted volume declines. The gross margin percentage of 35.2% represents a considerable improvement over both the 28.3% reported for the second quarter of 2008 and the 29.1% reported for the first quarter of 2009. This margin percentage expansion was primarily the result of the cost reduction actions taken, a more favorable raw material cost environment, and reduced automotive chemical management services revenue reported on a gross basis.
Selling, general and administrative expenses ("SG&A") decreased $8.1 million, or 22%, compared to the second quarter of 2008. Savings from the Company's restructuring programs, lower commissions, lower travel and entertainment expenses, and other cost savings measures accounted for more than 70% of the decline. Changes in foreign exchange rates accounted for the remainder.
The Company expects to incur CEO transition costs of $2.4 million for the full year 2009 and $1.0 million in 2010 related to the former CEO's supplemental retirement income plan. Costs incurred in the second quarter of 2009 totaled $1.2 million, or approximately $0.07 per diluted share, compared to $1.9 million, or approximately $0.12 per diluted share for the second quarter of 2008.