x
|
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|
¨
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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Pennsylvania
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23-0993790
|
|
(State or other jurisdiction of
incorporation or organization)
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(I.R.S. Employer
Identification No.)
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One Quaker Park, 901 E. Hector Street,
Conshohocken, Pennsylvania
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19428 – 2380
|
|
(Address of principal executive offices)
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(Zip Code)
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Large accelerated filer ¨
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Accelerated filer x
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|||
Non-accelerated filer ¨ (Do not check if smaller reporting company)
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Smaller reporting Company ¨
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Number of Shares of Common Stock
Outstanding on June 30, 2012
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13,010,639
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|
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Page
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||
PART I.
|
|
FINANCIAL INFORMATION
|
|
|
Item 1.
|
|
Financial Statements (unaudited)
|
|
|
|
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3
|
||
|
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4
|
||
5
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||||
|
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6
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||
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7
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||
Item 2.
|
|
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23
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Item 3.
|
|
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28
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Item 4.
|
|
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29
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PART II.
|
|
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30
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Item 1.
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30
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|||
Item 2.
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30
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|||
Item 6.
|
|
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31
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Signatures
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31
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Unaudited
|
|||||
(Dollars in thousands,
|
|||||
except par value
|
|||||
and share amounts)
|
|||||
June 30, 2012
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December 31, 2011*
|
||||
ASSETS
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||||||||
Current assets
|
||||||||
Cash and cash equivalents
|
$
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25,252
|
$
|
16,909
|
||||
Accounts receivable, net
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156,424
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150,676
|
||||||
Inventories
|
||||||||
Raw materials and supplies
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43,565
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41,771
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||||||
Work-in-process and finished goods
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34,113
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32,987
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||||||
Prepaid expenses and other current assets
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18,009
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17,206
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||||||
Total current assets
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277,363
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259,549
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||||||
Property, plant and equipment, at cost
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214,027
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214,695
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||||||
Less accumulated depreciation
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(131,372)
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(131,779)
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||||||
Net property, plant and equipment
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82,655
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82,916
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||||||
Goodwill
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57,033
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58,152
|
||||||
Other intangible assets, net
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30,397
|
31,783
|
||||||
Investments in associated companies
|
7,891
|
7,942
|
||||||
Deferred income taxes
|
27,644
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29,823
|
||||||
Other assets
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36,370
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35,356
|
||||||
Total assets
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$
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519,353
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$
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505,521
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||||
LIABILITIES AND EQUITY
|
||||||||
Current liabilities
|
||||||||
Short-term borrowings and current portion of long-term debt
|
$
|
563
|
$
|
636
|
||||
Accounts and other payables
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74,679
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68,125
|
||||||
Accrued compensation
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10,610
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16,987
|
||||||
Other current liabilities
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22,334
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20,901
|
||||||
Total current liabilities
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108,186
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106,649
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||||||
Long-term debt
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45,004
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46,701
|
||||||
Deferred income taxes
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6,622
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7,094
|
||||||
Other non-current liabilities
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86,116
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89,351
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||||||
Total liabilities
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245,928
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249,795
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||||||
Equity
|
||||||||
Common stock $1 par value; authorized 30,000,000 shares; issued and outstanding
|
||||||||
2012 – 13,010,639 shares; 2011 – 12,911,508 shares
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13,011
|
12,912
|
||||||
Capital in excess of par value
|
92,199
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89,725
|
||||||
Retained earnings
|
192,116
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175,932
|
||||||
Accumulated other comprehensive loss
|
(32,091)
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(29,820)
|
||||||
Total Quaker shareholders’ equity
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265,235
|
248,749
|
||||||
Noncontrolling interest
|
8,190
|
6,977
|
||||||
Total equity
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273,425
|
255,726
|
||||||
Total liabilities and equity
|
$
|
519,353
|
$
|
505,521
|
*
|
Condensed from audited financial statements
|
|
Unaudited
|
|||||||||||||||
|
(Dollars in thousands, except per share amounts)
|
|||||||||||||||
|
Three Months Ended June 30,
|
Six Months Ended June 30,
|
||||||||||||||
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2012
|
2011
|
2012
|
2011
|
||||||||||||
Net sales
|
$ | 176,797 | $ | 167,792 | $ | 354,435 | $ | 327,657 | ||||||||
Cost of goods sold
|
116,161 | 114,026 | 234,004 | 221,157 | ||||||||||||
Gross profit
|
60,636 | 53,766 | 120,431 | 106,500 | ||||||||||||
Selling, general and administrative expenses
|
43,653 | 38,825 | 86,746 | 77,459 | ||||||||||||
Operating income
|
16,983 | 14,941 | 33,685 | 29,041 | ||||||||||||
Other (expense) income, net
|
(134 | ) | 791 | 207 | 1,330 | |||||||||||
Interest expense
|
(1,151 | ) | (1,200 | ) | (2,325 | ) | (2,418 | ) | ||||||||
Interest income
|
137 | 271 | 260 | 543 | ||||||||||||
Income before taxes and equity in net income of associated companies
|
15,835 | 14,803 | 31,827 | 28,496 | ||||||||||||
Taxes on income before equity in net income of associated companies
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4,874 | 4,499 | 8,319 | 7,321 | ||||||||||||
Income before equity in net income of associated companies
|
10,961 | 10,304 | 23,508 | 21,175 | ||||||||||||
Equity in net income of associated companies
|
209 | 251 | 355 | 610 | ||||||||||||
Net income
|
11,170 | 10,555 | 23,863 | 21,785 | ||||||||||||
Less: Net income attributable to noncontrolling interest
|
630 | 714 | 1,377 | 1,344 | ||||||||||||
Net income attributable to Quaker Chemical Corporation
|
$ | 10,540 | $ | 9,841 | $ | 22,486 | $ | 20,441 | ||||||||
Per share data:
|
||||||||||||||||
Net income attributable to Quaker Chemical Corporation Common
|
||||||||||||||||
Shareholders – basic
|
$ | 0.81 | $ | 0.80 | $ | 1.74 | $ | 1.72 | ||||||||
Net income attributable to Quaker Chemical Corporation Common
|
||||||||||||||||
Shareholders – diluted
|
$ | 0.81 | $ | 0.79 | $ | 1.72 | $ | 1.69 | ||||||||
Dividends declared
|
$ | 0.245 | $ | 0.24 | $ | 0.485 | $ | 0.475 | ||||||||
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|
|
|
|
|||||||||||||
|
|
|
|
|||||||||||||
|
Unaudited
|
|||||||||||||||
|
(Dollars in thousands, except per share amounts)
|
|||||||||||||||
|
Three Months Ended June 30,
|
Six Months Ended June 30,
|
||||||||||||||
|
2012
|
2011
|
2012
|
2011
|
||||||||||||
Net income
|
$ | 11,170 | $ | 10,555 | $ | 23,863 | $ | 21,785 | ||||||||
|
||||||||||||||||
Other comprehensive (loss) income, net of tax
|
||||||||||||||||
Currency translation adjustments
|
(7,211 | ) | 3,656 | (3,576 | ) | 7,477 | ||||||||||
Defined benefit retirement plans
|
499 | 325 | 969 | 649 | ||||||||||||
Current period change in fair value of derivatives
|
103 | 78 | 199 | 174 | ||||||||||||
Unrealized (loss) gain on available-for-sale securities
|
(5 | ) | — | 3 | 6 | |||||||||||
Other comprehensive (loss) income
|
(6,614 | ) | 4,059 | (2,405 | ) | 8,306 | ||||||||||
|
||||||||||||||||
Comprehensive income
|
4,556 | 14,614 | 21,458 | 30,091 | ||||||||||||
Less: comprehensive income attributable to noncontrolling interest
|
(205 | ) | (783 | ) | (1,243 | ) | (1,421 | ) | ||||||||
Comprehensive income attributable to Quaker Chemical Corporation
|
$ | 4,351 | $ | 13,831 | $ | 20,215 | $ | 28,670 |
Unaudited
|
||||||||
(Dollars in thousands)
|
||||||||
For the Six Months Ended
|
||||||||
June 30,
|
||||||||
2012
|
2011
|
|||||||
Cash flows from operating activities
|
||||||||
Net income
|
$ | 23,863 | $ | 21,785 | ||||
Adjustments to reconcile net income to net cash provided by operating activities:
|
||||||||
Depreciation
|
5,969 | 5,405 | ||||||
Amortization
|
1,465 | 973 | ||||||
Equity in undistributed earnings of associated companies, net of dividends
|
(171 | ) | (32 | ) | ||||
Deferred compensation and other, net
|
1,332 | 4,162 | ||||||
Stock-based compensation
|
2,078 | 1,854 | ||||||
Gain on disposal of property, plant and equipment
|
(13 | ) | (78 | ) | ||||
Insurance settlement realized
|
(808 | ) | (864 | ) | ||||
Pension and other postretirement benefits
|
(1,951 | ) | (4,168 | ) | ||||
(Decrease) increase in cash from changes in current assets and current liabilities, net of acquisitions:
|
||||||||
Accounts receivable
|
(7,031 | ) | (17,392 | ) | ||||
Inventories
|
(3,871 | ) | (13,986 | ) | ||||
Prepaid expenses and other current assets
|
(1,946 | ) | (4,029 | ) | ||||
Accounts payable and accrued liabilities
|
3,025 | 6,537 | ||||||
Net cash provided by operating activities
|
21,941 | 167 | ||||||
Cash flows from investing activities
|
||||||||
Investments in property, plant and equipment
|
(6,423 | ) | (6,641 | ) | ||||
Proceeds from disposition of assets
|
84 | 221 | ||||||
Payments related to acquisitions, net of cash acquired
|
— | (717 | ) | |||||
Insurance settlement received and interest earned
|
35 | 42 | ||||||
Change in restricted cash, net
|
773 | 822 | ||||||
Net cash used in investing activities
|
(5,531 | ) | (6,273 | ) | ||||
Cash flows from financing activities
|
||||||||
Repayment of long-term debt
|
(1,754 | ) | (40,402 | ) | ||||
Dividends paid
|
(6,213 | ) | (5,413 | ) | ||||
Stock options exercised, other
|
(925 | ) | 146 | |||||
Excess tax benefit related to stock option exercises
|
1,420 | 162 | ||||||
Proceeds from sale of common stock, net of related expenses
|
— | 48,143 | ||||||
Distributions to noncontrolling shareholders
|
(30 | ) | — | |||||
Net cash (used in) provided by financing activities
|
(7,502 | ) | 2,636 | |||||
Effect of exchange rate changes on cash
|
(565 | ) | 1,245 | |||||
Net increase (decrease) in cash and cash equivalents
|
8,343 | (2,225 | ) | |||||
Cash and cash equivalents at beginning of period
|
16,909 | 25,766 | ||||||
Cash and cash equivalents at end of period
|
$ | 25,252 | $ | 23,541 |
•
|
Level 1: Observable inputs such as quoted prices (unadjusted) in active markets for identical assets or liabilities.
|
|
•
|
Level 2: Inputs other than quoted prices that observable for the asset or liability, either directly or indirectly. These include quoted prices for similar assets or liabilities in active markets and quoted prices for identical or similar assets or liabilities in markets that not active.
|
|
•
|
Level 3: Unobservable inputs that reflect the reporting entity's own assumptions.
|
Fair Value Measurements at June 30, 2012
|
||||||||||||||||
Fair Value
|
Using Fair Value Hierarchy
|
|||||||||||||||
as of
|
||||||||||||||||
Assets
|
June 30, 2012
|
Level 1
|
Level 2
|
Level 3
|
||||||||||||
Company-owned life insurance
|
$ | 1,585 | $ | — | $ | 1,585 | $ | — | ||||||||
Company-owned life insurance - Deferred compensation assets
|
441 | — | 441 | — | ||||||||||||
Other deferred compensation assets
|
||||||||||||||||
Large capitalization registered investment companies
|
59 | 59 | — | — | ||||||||||||
Mid capitalization registered investment companies
|
5 | 5 | — | — | ||||||||||||
Small capitalization registered investment companies
|
8 | 8 | — | — | ||||||||||||
International developed and emerging markets registered investment
|
||||||||||||||||
companies
|
32 | 32 | — | — | ||||||||||||
Fixed income registered investment companies
|
9 | 9 | — | — | ||||||||||||
Total
|
$ | 2,139 | $ | 113 | $ | 2,026 | $ | — |
Fair Value Measurements at June 30, 2012
|
||||||||||||||||
Fair Value
|
Using Fair Value Hierarchy
|
|||||||||||||||
as of
|
||||||||||||||||
Liabilities
|
June 30, 2012
|
Level 1
|
Level 2
|
Level 3
|
||||||||||||
Deferred compensation liabilities
|
||||||||||||||||
Large capitalization registered investment companies
|
$ | 314 | $ | 314 | $ | — | $ | — | ||||||||
Mid capitalization registered investment companies
|
83 | 83 | — | — | ||||||||||||
Small capitalization registered investment companies
|
68 | 68 | — | — | ||||||||||||
International developed and emerging markets registered investment
|
||||||||||||||||
companies
|
163 | 163 | — | — | ||||||||||||
Fixed income registered investment companies
|
48 | 48 | — | — | ||||||||||||
Fixed general account
|
169 | — | 169 | — | ||||||||||||
Interest rate derivatives
|
112 | — | 112 | — | ||||||||||||
Acquisition-related consideration
|
9,506 | — | — | 9,506 | ||||||||||||
Total
|
$ | 10,463 | $ | 676 | $ | 281 | $ | 9,506 |
Fair Value Measurements at December 31, 2011
|
||||||||||||||||
Fair Value
|
Using Fair Value Hierarchy
|
|||||||||||||||
as of
|
||||||||||||||||
Assets
|
December 31, 2011
|
Level 1
|
Level 2
|
Level 3
|
||||||||||||
Company-owned life insurance
|
$ | 1,508 | $ | — | $ | 1,508 | $ | — | ||||||||
Company-owned life insurance - Deferred compensation assets
|
487 | — | 487 | — | ||||||||||||
Other deferred compensation assets
|
||||||||||||||||
Large capitalization registered investment companies
|
64 | 64 | — | — | ||||||||||||
Mid capitalization registered investment companies
|
4 | 4 | — | — | ||||||||||||
Small capitalization registered investment companies
|
7 | 7 | — | — | ||||||||||||
International developed and emerging markets registered investment
|
||||||||||||||||
companies
|
32 | 32 | — | — | ||||||||||||
Fixed income registered investment companies
|
8 | 8 | — | — | ||||||||||||
Total
|
$ | 2,110 | $ | 115 | $ | 1,995 | $ | — |
Fair Value Measurements at December 31, 2011
|
||||||||||||||||
Fair Value
|
Using Fair Value Hierarchy
|
|||||||||||||||
as of
|
||||||||||||||||
Liabilities
|
December 31, 2011
|
Level 1
|
Level 2
|
Level 3
|
||||||||||||
Deferred compensation liabilities
|
||||||||||||||||
Large capitalization registered investment companies
|
$ | 318 | $ | 318 | $ | — | $ | — | ||||||||
Mid capitalization registered investment companies
|
83 | 83 | — | — | ||||||||||||
Small capitalization registered investment companies
|
68 | 68 | — | — | ||||||||||||
International developed and emerging markets registered investment
|
||||||||||||||||
companies
|
168 | 168 | — | — | ||||||||||||
Fixed income registered investment companies
|
50 | 50 | — | — | ||||||||||||
Fixed general account
|
177 | — | 177 | — | ||||||||||||
Interest rate derivatives
|
418 | — | 418 | — | ||||||||||||
Acquisition related consideration
|
8,898 | — | — | 8,898 | ||||||||||||
Total
|
$ | 10,180 | $ | 687 | $ | 595 | $ | 8,898 |
Non-competition
|
|||||||||||||||
Earnout
|
Hold-back
|
Agreement
|
Hold-back
|
||||||||||||
Summit
|
Tecniquimia
|
Obligation
|
GW Smith
|
Total
|
|||||||||||
Balance at December 31, 2011
|
$ | 5,444 | $ | 1,877 | $ | 675 | $ | 902 | $ | 8,898 | |||||
Interest accretion
|
395 | 123 | 25 | 65 | 608 | ||||||||||
Balance at June 30, 2012
|
$ | 5,839 | $ | 2,000 | $ | 700 | $ | 967 | $ | 9,506 |
Fair value at June 30, 2012
|
Valuation technique
|
Unobservable input
|
Input value
|
||||||
Summit earnout
|
5,839
|
Discounted cash flow
|
Discount rate
|
14.5%
|
|||||
Tecniquimia hold-back
|
2,000
|
Discounted cash flow
|
Discount rate
|
14.0%
|
|||||
Non-competition agreement obligation
|
700
|
Discounted cash flow
|
Discount rate
|
14.0%
|
|||||
G.W. Smith hold-back
|
967
|
Discounted cash flow
|
Discount rate
|
15.0%
|
Fair Value
|
|||||||
June 30,
|
December 31,
|
||||||
Balance Sheet Location
|
2012
|
2011
|
|||||
Derivatives designated as cash flow hedges:
|
|||||||
Interest rate swaps
|
Other current liabilities
|
$ | 112 | $ | 418 | ||
$ | 112 | $ | 418 |
Cash Flow Hedges
|
|||||||||||||
Interest Rate Swaps
|
|||||||||||||
Three Months Ended
|
Six Months Ended
|
||||||||||||
June 30,
|
June 30,
|
||||||||||||
2012
|
2011
|
2012
|
2011
|
||||||||||
Amount of Gain Recognized in Accumulated OCI on Derivative
|
|||||||||||||
(Effective Portion)
|
$ | 103 | $ | 78 | $ | 199 | $ | 174 | |||||
Amount and Location of Gain Reclassified from Accumulated OCI into
|
|||||||||||||
Income (Effective Portion)
|
Interest Expense
|
$ | (160 | ) | $ | (165 | ) | $ | (318 | ) | $ | (328 | ) |
Amount and Location of Gain Recognized in Income on Derivative
|
|||||||||||||
(Ineffective Portion and Amount Excluded from Effectiveness Testing)
|
Other Income
|
$ | — | $ | — | $ | — | $ | — |
For the Six Months Ended June 30,
|
||||||||
2012
|
2011
|
|||||||
Stock options
|
$ | 263 | $ | 228 | ||||
Nonvested stock awards and restricted stock units
|
732 | 671 | ||||||
Employee stock purchase plan
|
23 | 23 | ||||||
Non-elective and elective 401(k) matching contribution in stock
|
1,030 | 902 | ||||||
Director stock ownership plan
|
30 | 30 | ||||||
Total share-based compensation expense
|
$ | 2,078 | $ | 1,854 |
Weighted
|
||||||
Average
|
||||||
Weighted Average
|
Remaining
|
|||||
Number of
|
Exercise Price per
|
Contractual
|
||||
Shares
|
Share
|
Term (years)
|
||||
Balance at December 31, 2011
|
253,342
|
$
|
16.43
|
|||
Options granted
|
40,157
|
38.57
|
||||
Options exercised
|
(77,176)
|
9.62
|
||||
Options forfeited
|
(8,470)
|
29.32
|
||||
Balance at June 30, 2012
|
207,853
|
$
|
22.72
|
4.5
|
||
Exercisable at June 30, 2012
|
117,758
|
$
|
15.85
|
3.5
|
Weighted
|
Weighted
|
Number
|
Weighted
|
||||||||||||
Number
|
Average
|
Average
|
Exercisable
|
Average
|
|||||||||||
Range of
|
Outstanding
|
Contractual
|
Exercise
|
at
|
Exercise
|
||||||||||
Exercise Prices
|
at 6/30/2012
|
Life
|
Price
|
6/30/2012
|
Price
|
||||||||||
$
|
4.62
|
-
|
$
|
9.24
|
47,325
|
2.6
|
$
|
6.93
|
47,325
|
$
|
6.93
|
||||
$
|
9.25
|
-
|
$
|
18.48
|
—
|
—
|
—
|
—
|
—
|
||||||
$
|
18.49
|
-
|
$
|
23.11
|
89,216
|
4.1
|
18.86
|
59,150
|
18.88
|
||||||
$
|
23.12
|
-
|
$
|
36.97
|
—
|
—
|
—
|
—
|
—
|
||||||
$
|
36.98
|
-
|
$
|
41.59
|
69,120
|
6.1
|
37.76
|
11,283
|
37.37
|
||||||
$
|
41.60
|
-
|
$
|
46.21
|
2,192
|
7.0
|
46.21
|
—
|
—
|
||||||
207,853
|
4.5
|
22.72
|
117,758
|
15.85
|
March, 31,
|
||
2012
|
||
Dividend Yield
|
3.09
|
%
|
Expected Volatility
|
69.90
|
%
|
Risk-free interest rate
|
0.61
|
%
|
Expected term (years)
|
4.0
|
June 30,
|
||
2012
|
||
Dividend Yield
|
2.69
|
%
|
Expected Volatility
|
69.09
|
%
|
Risk-free interest rate
|
0.58
|
%
|
Expected term (years)
|
4.0
|
Weighted
|
|||||
Average Grant
|
|||||
Number of
|
Date Fair Value
|
||||
Shares
|
(per share)
|
||||
Nonvested awards, December 31, 2011
|
169,863
|
$
|
20.66
|
||
Granted
|
42,754
|
$
|
39.43
|
||
Vested
|
(79,519)
|
$
|
12.33
|
||
Forfeited
|
(5,104)
|
$
|
28.32
|
||
Nonvested awards, June 30, 2012
|
127,994
|
$
|
31.79
|
Weighted
|
|||||
Average Grant
|
|||||
Number of
|
Date Fair Value
|
||||
units
|
(per unit)
|
||||
Nonvested awards, December 31, 2011
|
—
|
$
|
—
|
||
Granted
|
2,100
|
$
|
38.13
|
||
Vested
|
—
|
$
|
—
|
||
Forfeited
|
—
|
$
|
—
|
||
Nonvested awards, June 30, 2012
|
2,100
|
$
|
38.13
|
Weighted
|
|||||
Average Grant
|
|||||
Number of
|
Date Fair Value
|
||||
Shares
|
(per share)
|
||||
Nonvested awards, December 31, 2011
|
62,250
|
$
|
7.72
|
||
Granted
|
—
|
$
|
—
|
||
Vested
|
(59,850)
|
$
|
7.72
|
||
Forfeited
|
(2,400)
|
$
|
7.72
|
||
Nonvested awards, June 30, 2012
|
—
|
$
|
—
|
Three Months Ended
|
Six Months Ended
|
|||||||||||||||
June 30,
|
June 30,
|
|||||||||||||||
2012
|
2011
|
2012
|
2011
|
|||||||||||||
Basic earnings per common share
|
||||||||||||||||
Net income attributable to Quaker Chemical Corporation
|
$ | 10,540 | $ | 9,841 | $ | 22,486 | $ | 20,441 | ||||||||
Less: income allocated to participating securities
|
(101 | ) | (182 | ) | (289 | ) | (384 | ) | ||||||||
Net income available to common shareholders
|
$ | 10,439 | $ | 9,659 | $ | 22,197 | $ | 20,057 | ||||||||
Basic weighted average common shares outstanding
|
12,850,917 | 12,043,858 | 12,790,799 | 11,668,657 | ||||||||||||
Basic earnings per common share
|
$ | 0.81 | $ | 0.80 | $ | 1.74 | $ | 1.72 | ||||||||
Diluted earnings per common share
|
||||||||||||||||
Net income attributable to Quaker Chemical Corporation
|
$ | 10,540 | $ | 9,841 | $ | 22,486 | $ | 20,441 | ||||||||
Less: income allocated to participating securities
|
(100 | ) | (180 | ) | (288 | ) | (380 | ) | ||||||||
Net income available to common shareholders
|
$ | 10,440 | $ | 9,661 | $ | 22,198 | $ | 20,061 | ||||||||
Basic weighted average common shares outstanding
|
12,850,917 | 12,043,858 | 12,790,799 | 11,668,657 | ||||||||||||
Effect of dilutive securities, employee stock options
|
80,913 | 174,919 | 88,838 | 175,905 | ||||||||||||
Diluted weighted average common shares outstanding
|
12,931,830 | 12,218,777 | 12,879,637 | 11,844,562 | ||||||||||||
Diluted earnings per common share
|
$ | 0.81 | $ | 0.79 | $ | 1.72 | $ | 1.69 |
•
|
Metalworking process chemicals—industrial process fluids for various heavy industrial and manufacturing applications.
|
|
•
|
Coatings—temporary and permanent coatings for metal and concrete products and chemical milling maskants.
|
|
•
|
Other chemical products—other various chemical products.
|
Three Months Ended
|
Six Months Ended
|
|||||||||||||||
June 30,
|
June 30,
|
|||||||||||||||
2012
|
2011
|
2012
|
2011
|
|||||||||||||
Metalworking Process Chemicals
|
||||||||||||||||
Net sales
|
$ | 165,011 | $ | 156,772 | $ | 330,986 | $ | 307,505 | ||||||||
Operating income for reportable segments
|
30,649 | 26,149 | 61,624 | 53,084 | ||||||||||||
Coatings
|
||||||||||||||||
Net sales
|
10,950 | 10,487 | 21,473 | 18,969 | ||||||||||||
Operating income for reportable segments
|
2,799 | 2,446 | 5,312 | 4,409 | ||||||||||||
Other Chemical Products
|
||||||||||||||||
Net sales
|
836 | 533 | 1,976 | 1,183 | ||||||||||||
Operating income for reportable segments
|
53 | 4 | 195 | 39 | ||||||||||||
Total
|
||||||||||||||||
Net sales
|
176,797 | 167,792 | 354,435 | 327,657 | ||||||||||||
Operating income for reportable segments
|
33,501 | 28,599 | 67,131 | 57,532 | ||||||||||||
Non-operating expenses
|
(15,799 | ) | (13,171 | ) | (31,981 | ) | (27,518 | ) | ||||||||
Amortization
|
(719 | ) | (487 | ) | (1,465 | ) | (973 | ) | ||||||||
Consolidated operating income
|
16,983 | 14,941 | 33,685 | 29,041 | ||||||||||||
Interest expense
|
(1,151 | ) | (1,200 | ) | (2,325 | ) | (2,418 | ) | ||||||||
Interest income
|
137 | 271 | 260 | 543 | ||||||||||||
Other (expense) income, net
|
(134 | ) | 791 | 207 | 1,330 | |||||||||||
Consolidated income before taxes and equity in net income of associated companies
|
$ | 15,835 | $ | 14,803 | $ | 31,827 | $ | 28,496 |
|
|
|
|
Accumulated
|
|
|
||||||||||||||||||
|
|
Capital in
|
|
Other
|
|
|
||||||||||||||||||
|
Common
|
Excess of
|
Retained
|
Comprehensive
|
Noncontrolling
|
|
||||||||||||||||||
|
Stock
|
Par Value
|
Earnings
|
Loss
|
Interest
|
Total
|
||||||||||||||||||
Balance at March 31, 2012
|
$ | 12,951 | $ | 90,836 | $ | 184,764 | $ | (25,902 | ) | $ | 8,015 | $ | 270,664 | |||||||||||
Net income
|
— | — | 10,540 | — | 630 | 11,170 | ||||||||||||||||||
Currency translation adjustments
|
— | — | — | (6,786 | ) | (425 | ) | (7,211 | ) | |||||||||||||||
Defined benefit retirement plans
|
— | — | — | 499 | — | 499 | ||||||||||||||||||
Current period changes in fair value of derivatives
|
— | — | — | 103 | — | 103 | ||||||||||||||||||
Unrealized gain on available-for-sale securities
|
— | — | — | (5 | ) | — | (5 | ) | ||||||||||||||||
Dividends ($0.245 per share)
|
— | — | (3,188 | ) | — | — | (3,188 | ) | ||||||||||||||||
Dvidends paid to noncontrolling shareholders
|
— | — | — | — | (30 | ) | (30 | ) | ||||||||||||||||
Share issuance and equity-based compensation plans
|
60 | 1,195 | — | — | — | 1,255 | ||||||||||||||||||
Excess tax benefit from stock option exercises
|
— | 168 | — | — | — | 168 | ||||||||||||||||||
Balance at June 30, 2012
|
$ | 13,011 | $ | 92,199 | $ | 192,116 | $ | (32,091 | ) | $ | 8,190 | $ | 273,425 | |||||||||||
|
||||||||||||||||||||||||
Balance at March 31, 2011
|
$ | 11,531 | $ | 39,132 | $ | 152,237 | $ | (9,497 | ) | $ | 7,359 | $ | 200,762 | |||||||||||
Net income
|
— | — | 9,841 | — | 714 | 10,555 | ||||||||||||||||||
Currency translation adjustments
|
— | — | — | 3,587 | 69 | 3,656 | ||||||||||||||||||
Defined benefit retirement plans
|
— | — | — | 325 | — | 325 | ||||||||||||||||||
Current period changes in fair value of derivatives
|
— | — | — | 78 | — | 78 | ||||||||||||||||||
Dividends ($0.24 per share)
|
— | — | (3,080 | ) | — | — | (3,080 | ) | ||||||||||||||||
Stock offering, net of related expenses
|
1,265 | 46,878 | — | — | — | 48,143 | ||||||||||||||||||
Share issuance and equity-based compensation plans
|
27 | 1,155 | — | — | — | 1,182 | ||||||||||||||||||
Excess tax benefit from stock option exercises
|
— | 84 | — | — | — | 84 | ||||||||||||||||||
Balance at June 30, 2011
|
$ | 12,823 | $ | 87,249 | $ | 158,998 | $ | (5,507 | ) | $ | 8,142 | $ | 261,705 |
|
|
|
|
Accumulated
|
|
|
||||||||||||||||||
|
|
Capital in
|
|
Other
|
|
|
||||||||||||||||||
|
Common
|
Excess of
|
Retained
|
Comprehensive
|
Noncontrolling
|
|
||||||||||||||||||
|
Stock
|
Par Value
|
Earnings
|
Loss
|
Interest
|
Total
|
||||||||||||||||||
Balance at December 31, 2011
|
$ | 12,912 | $ | 89,725 | $ | 175,932 | $ | (29,820 | ) | $ | 6,977 | $ | 255,726 | |||||||||||
Net income
|
— | — | 22,486 | — | 1,377 | 23,863 | ||||||||||||||||||
Currency translation adjustments
|
— | — | — | (3,442 | ) | (134 | ) | (3,576 | ) | |||||||||||||||
Defined benefit retirement plans
|
— | — | — | 969 | — | 969 | ||||||||||||||||||
Current period changes in fair value of derivatives
|
— | — | — | 199 | — | 199 | ||||||||||||||||||
Unrealized gain on available-for-sale securities
|
— | — | — | 3 | — | 3 | ||||||||||||||||||
Dividends ($0.485 per share)
|
— | — | (6,302 | ) | — | — | (6,302 | ) | ||||||||||||||||
Dividends paid to noncontrolling interests
|
— | — | — | — | (30 | ) | (30 | ) | ||||||||||||||||
Share issuance and equity-based compensation plans
|
99 | 1,054 | — | — | — | 1,153 | ||||||||||||||||||
Excess tax benefit from stock option exercises
|
— | 1,420 | — | — | — | 1,420 | ||||||||||||||||||
Balance at June 30, 2012
|
$ | 13,011 | $ | 92,199 | $ | 192,116 | $ | (32,091 | ) | $ | 8,190 | $ | 273,425 | |||||||||||
|
||||||||||||||||||||||||
Balance at December 31, 2010
|
$ | 11,492 | $ | 38,275 | $ | 144,347 | $ | (13,736 | ) | $ | 6,721 | $ | 187,099 | |||||||||||
Net income
|
— | — | 20,441 | — | 1,344 | 21,785 | ||||||||||||||||||
Currency translation adjustments
|
— | — | — | 7,400 | 77 | 7,477 | ||||||||||||||||||
Defined benefit retirement plans
|
— | — | — | 649 | — | 649 | ||||||||||||||||||
Current period changes in fair value of derivatives
|
— | — | — | 174 | — | 174 | ||||||||||||||||||
Unrealized loss on available-for-sale securities
|
— | — | — | 6 | — | 6 | ||||||||||||||||||
Dividends ($0.475 per share)
|
— | — | (5,790 | ) | — | — | (5,790 | ) | ||||||||||||||||
Stock offering, net of related expenses
|
1,265 | 46,878 | — | — | — | 48,143 | ||||||||||||||||||
Share issuance and equity-based compensation plans
|
66 | 1,934 | — | — | — | 2,000 | ||||||||||||||||||
Excess tax benefit from stock option exercises
|
— | 162 | — | — | — | 162 | ||||||||||||||||||
Balance at June 30, 2011
|
$ | 12,823 | $ | 87,249 | $ | 158,998 | $ | (5,507 | ) | $ | 8,142 | $ | 261,705 |
|
Quaker
|
GW Smith
|
||||||
2011 Acquisitions
|
Tecniquimia
|
& Sons, Inc.
|
||||||
Current assets
|
$ | 8,946 | $ | 6,138 | ||||
Fixed assets
|
4,308 | 2,869 | ||||||
Intangibles
|
3,556 | 6,260 | ||||||
Goodwill
|
6,773 | 1,120 | ||||||
Other long-term assets
|
1,355 | 1 | ||||||
Total assets purchased
|
24,938 | 16,388 | ||||||
Current liabilities
|
(2,224 | ) | (1,001 | ) | ||||
Long-term liabilities
|
(6,869 | ) | — | |||||
Present value of hold-back
|
(1,754 | ) | (869 | ) | ||||
Total liabilities assumed
|
(10,847 | ) | (1,870 | ) | ||||
Additional minimum pension liability
|
987 | — | ||||||
Total equity assumed
|
987 | — | ||||||
Fair value of previously held equity interest
|
(4,578 | ) | — | |||||
Cash paid for acquisitions
|
$ | 10,500 | $ | 14,518 |
|
Metalworking
|
|
|
||||||
|
Process
|
|
|
||||||
|
Chemicals
|
Coatings
|
Total
|
||||||
Balance as of December 31, 2011
|
$ | 50,071 | $ | 8,081 | $ | 58,152 | |||
Currency translation adjustments
|
(1,119 | ) | — | (1,119 | ) | ||||
Balance as of June 30, 2012
|
$ | 48,952 | $ | 8,081 | $ | 57,033 |
|
Gross Carrying
|
Accumulated
|
||||||||||||||
|
Amount
|
Amortization
|
||||||||||||||
|
2012
|
2011
|
2012
|
2011
|
||||||||||||
Amortized intangible assets
|
|
|
|
|
||||||||||||
Customer lists and rights to sell
|
$ | 30,413 | $ | 30,435 | $ | 7,192 | $ | 6,386 | ||||||||
Trademarks and patents
|
4,741 | 4,685 | 2,217 | 1,991 | ||||||||||||
Formulations and product technology
|
5,278 | 5,278 | 3,269 | 3,090 | ||||||||||||
Other
|
5,309 | 5,309 | 3,766 | 3,557 | ||||||||||||
Total
|
$ | 45,741 | $ | 45,707 | $ | 16,444 | $ | 15,024 |
For the year ended December 31, 2012
|
$ | 2,878 | ||
For the year ended December 31, 2013
|
$ | 2,702 | ||
For the year ended December 31, 2014
|
$ | 2,472 | ||
For the year ended December 31, 2015
|
$ | 2,472 | ||
For the year ended December 31, 2016
|
$ | 2,015 | ||
For the year ended December 31, 2017
|
$ | 1,600 |
|
Three Months Ended June 30,
|
Six Months Ended June 30,
|
||||||||||||||||||||||||||
|
|
|
Other
|
|
|
Other
|
||||||||||||||||||||||
|
|
|
Postretirement
|
|
|
Postretirement
|
||||||||||||||||||||||
|
Pension Benefits
|
Benefits
|
Pension Benefits
|
Benefits
|
||||||||||||||||||||||||
|
2012
|
2011
|
2012
|
2011
|
2012
|
2011
|
2012
|
2011
|
||||||||||||||||||||
Service cost
|
$ | 614 | $ | 593 | $ | 5 | $ | 5 | $ | 1,238 | $ | 1,164 | $ | 9 | $ | 10 | ||||||||||||
Interest cost and other
|
1,457 | 1,555 | 71 | 89 | 2,927 | 3,077 | 142 | 178 | ||||||||||||||||||||
Expected return on plan assets
|
(1,368 | ) | (1,449 | ) | — | — | (2,743 | ) | (2,873 | ) | — | — | ||||||||||||||||
Other amortization, net
|
717 | 461 | 30 | 31 | 1,436 | 921 | 61 | 62 | ||||||||||||||||||||
Net periodic benefit cost
|
$ | 1,420 | $ | 1,160 | $ | 106 | $ | 125 | $ | 2,858 | $ | 2,289 | $ | 212 | $ | 250 |
Management’s Discussion and Analysis of Financial Condition and Results of Operations.
|
|
·
|
statements relating to our business strategy;
|
|
·
|
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.
|
Item 3.
|
Quantitative and Qualitative Disclosures About Market Risk.
|
Controls and Procedures.
|
|
|
|
(c)
|
(d)
|
||||||||||||
|
|
|
Total Number of
|
Maximum
|
||||||||||||
|
|
|
Shares Purchased as
|
Number of Shares that
|
||||||||||||
|
(a)
|
(b)
|
Part of
|
May Yet
|
||||||||||||
|
Total Number
|
Average
|
Publicly Announced
|
Be Purchased Under the
|
||||||||||||
|
of Shares
|
Price Paid
|
Plans
|
Plans or
|
||||||||||||
Period
|
Purchased (1)
|
Per Share (2)
|
or Programs (3)
|
Programs (3)
|
||||||||||||
April 1 - April 30
|
312 | $ | 38.76 | — | 252,600 | |||||||||||
May 1 - May 31
|
3,380 | $ | 45.13 | — | 252,600 | |||||||||||
June 1 - June 30
|
2,512 | $ | 44.73 | — | 252,600 | |||||||||||
|
||||||||||||||||
Total
|
6,204 | $ | 44.65 | — | 252,600 |
(1)
|
All of the 6,204 shares acquired by the Company during the period covered by this report were acquired from employees upon their surrender of previously owned shares in payment of the exercise price of employee stock options exercised, or for the payment of taxes upon exercise of employee stock options or vesting of restricted stock.
|
(2)
|
The price per share represented the closing price of the Company’s common stock on the date of vesting or stock option exercise, as specified by the plan pursuant to which the restricted stock or the employee stock option was granted.
|
(3)
|
On February 15, 1995, the Board of Directors of the Company authorized a share repurchase program authorizing the repurchase of up to 500,000 shares of Quaker common stock, and, on January 26, 2005, the Board authorized the repurchase of up to an additional 225,000 shares. Under the 1995 action of the Board, 27,600 shares may yet be purchased. Under the 2005 action of the Board, none of the shares authorized have been purchased and, accordingly, all of those shares may yet be purchased. Neither of the share repurchase authorizations has an expiration date.
|
Exhibits
|
(a) Exhibits
|
||||
10.1
|
–
|
|||
10.2
|
–
|
|||
31.1
|
–
|
|||
31.2
|
–
|
|||
32.1
|
–
|
|||
32.2
|
–
|
|||
101.INS **
|
–
|
XBRL Instance Document
|
||
101.SCH **
|
–
|
XBRL Extension Schema Document
|
||
101.CAL **
|
–
|
XBRL Calculation Linkbase Document
|
||
101.DEF **
|
–
|
XBRL Definition Linkbase Document
|
||
101.LAB **
|
–
|
XBRL Label Linkbase Document
|
||
101.PRE **
|
–
|
XBRL Presentation Linkbase Document
|
*
|
This exhibit is a management contract or compensation plan or arrangement required to be filed as an exhibit.
|
**
|
Pursuant to Rule 406T of Regulation S-T, these interactive data files are deemed not filed or part of a registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933 and are deemed not filed for purposes of Section 18 of the Securities Exchange Act of 1934 and otherwise are not subject to liability under these Sections.
|
QUAKER CHEMICAL CORPORATION
(Registrant)
|
||||
/s/ Margaret M. Loebl
|
||||
Date: July 30, 2012
|
Margaret M. Loebl, officer duly authorized to sign this report, Vice President, Chief Financial Officer and Treasurer
|
NAME:
|
Margaret Loebl
|
ADDRESS:
|
2538 Lakeshore Drive
Fennville, MI 49408
|
8.
|
Termination.
|
9.
|
Non-Disparagement
|
ATTEST:
|
QUAKER CHEMICAL CORPORATION
|
|
/s/ Irene M. Kisleiko
|
/s/ Michael F. Barry
|
|
WITNESS:
|
||
/s/ Mary Amanda Laman
|
/s/ Margaret M. Loebl
|
|
Margaret Loebl
|
Base Salary:
|
Your salary will be payable on a semi-monthly basis at the rate of
$13,750.00, which is annualized at $330,000.00. You will be eligible for your next salary increase in 2013.
|
Annual and Long-
Term Bonuses:
|
For your position, you are eligible to participate in the Global Annual Incentive Plan (“GAIP”). Your annual cash bonus is up to a maximum of 70% (target of 38.5%) of your base salary. This bonus is adjusted for annual company performance. For 2012, you will receive a minimum guaranteed GAIP payment of $127,050.00.
You will be eligible to participate in the Long Term Incentive Plan (“LTIP”) as a Level I participant. For the 2012-2014 LTIP cycle, you will be granted an even mix of time-based restricted stock, stock options, and a cash award. The total value, at a target level, is approximately $133,000. The exact number of restricted stock, options, and target cash amount will be determined based on the Quaker stock close price on your first day of employment. The exact awards will be determined by performance over the three-year period based on relative total shareholder returns against a pre-determined peer group.
On or about your start date, you will be awarded 5,000 restricted shares of Quaker common stock. These will vest in increments of 1,000 shares over a five-year period. The first 1,000 shares will vest one year from the award date, and the others will vest in equal increments on each annual anniversary thereafter. You must be actively employed by Quaker on each vesting date to receive any of the respective vested shares.
All incentive compensation awards are made at the Company’s discretion, are subject to change, and require the approval of the Compensation Committee.
|
Relocation:
|
You will receive, as soon as administratively possible after your start date, a lump sum payment of $75,000.00 to cover relocation expenses. This payment is subject to all normal withholdings. In addition, you will be reimbursed for temporary housing, up to $5,000.00 per month, for a period of two months. You will also be reimbursed for up to three (3) house hunting trips (from the greater Fennville, Michigan area to the greater Philadelphia area), covering reasonable coach airfare, hotel, and other miscellaneous expenses. If you should voluntarily leave Quaker within one year of receipt, all financial relocation assistance must be reimbursed to Quaker.
In the alternative,
You will receive, as soon as administratively possible after your start date, a lump sum payment of $100,000.00 to cover all relocation expenses. This payment is subject to all normal withholdings. If you should voluntarily leave Quaker within one year of receipt, all financial relocation assistance must be reimbursed to Quaker.
|
Other Items:
|
You will be allowed 12 months severance if you are asked to leave Quaker for other than Cause as defined in the Memorandum of Employment.
|
Financial Planning:
|
You will be eligible to be reimbursed for up to $3,500.00 per calendar year for expenses incurred for financial planning and/or tax preparation.
|
Benefits:
|
Quaker offers a Flexible Benefits Program. You have the opportunity to choose from a variety of options creating a customized benefits package. The following benefits are part of the program. In each of these areas, you are offered a range of options so you may choose the ones that make the most sense for your personal situation.
· Medical
· Dental
· Life & AD&D Insurance
· Long-term Disability
· Health Care and Dependent Care Flexible Spending Accounts (FSAs)
In addition to these flexible benefits, Quaker also offers the following benefit plans:
· Retirement Savings Plan (401K)
|
Vacation / Holidays:
|
In 2012, you will eligible for 10 days vacation. Beginning in 2013, you will begin to accrue 2 days per month up to 20 days per year.
You will start to accrue, on a monthly basis, up to an additional 5 days of vacation per calendar year when you meet the next service level as defined in the plan, and will remain at the level of 25 days per year until reaching the next service level. For example, in 2019 you will start to accrue up to an additional 5 days of vacation per calendar year.
In addition you are eligible for 11½ paid holidays.
|
(i)
|
The Company or its affiliates without Cause (as defined below); or
|
(ii)
|
Resignation of the Manager for Good Reason (as defined below).
|
(i)
|
An amount equivalent to the highest annualized base salary which the Manager was entitled to receive from the Company and its subsidiaries at any time during his employment prior to the Covered Termination; and
|
(ii)
|
An amount equal to the average of the aggregate annual amounts paid to the Manager in the Applicable Three-Year Period under all applicable annual incentive compensation plans maintained by the Company and its affiliates (other than compensation relating to relocation expense; the grant, exercise, or settlement of stock options, restricted stock or performance incentive units or the sale or other disposition of shares received upon exercise or settlement of such awards); provided, however, that (x) in determining the average amount paid under the annual incentive plan during the Applicable Three-Year Period there shall be excluded any year in which no amounts were paid to the Manager under that plan; and (y) there shall be excluded from such calculation any amounts paid to the Manager under any such incentive compensation plan as a result of the acceleration of such payments under such plan due to termination of the plan, a Change in Control, or a similar occurrence. The Applicable Three-Year Period shall be (A) if the Manager has received an annual incentive compensation plan payment in the calendar year of his Covered Termination, the calendar year in which such Covered Termination occurs and the two preceding calendar years, or (B) in any other case, the three calendar years preceding the calendar year in which the Manager’s Covered Termination occurs; provided, however, that the Applicable Three-Year Period shall be determined by substituting “Change In Control” for “Covered Termination” if such substitution results in a higher amount under this subsection (ii).
|
(i)
|
The Manager agrees that at no time during or following his employment with the Company will he use, divulge, or pass on, directly or through any other individual or entity, any Trade Secrets.
|
(ii)
|
Upon termination of the Manager’s employment with the Company regardless of the reason for the termination of the Manager’s employment hereunder, or at any other time upon the Company’s request, the Manager agrees to forthwith surrender to the Company any and all materials in his possession or control which constitute or contain any Proprietary Business Information.
|
(i)
|
directly or indirectly, together or separately or with any third party, whether as an individual proprietor, partner, stockholder, officer, director, joint venturer, investor, or in any other capacity whatsoever actively engage in business or assist anyone or any firm in business as a manufacturer, seller, or distributor of specialty chemical products or chemical management services which are the same, like, similar to, or which compete with the products and services offered by the Company (or any of its affiliates);
|
(ii)
|
directly or indirectly recruit, solicit or encourage any employee of the Company (or any of its affiliates) or otherwise induce such employee to leave the employ of the Company (or any of its affiliates) or to become an employee or otherwise be associated with his or any firm, corporation, business or other entity with which he is or may become associated; or
|
(iii)
|
solicit, directly or indirectly, for himself or as agent or employee of any person, partnership, corporation, or other entity (other than for the Company), any then or former customer, supplier, or client of the Company with the intent of actively engaging in business which would cause competitive harm to the Company (or any of its affiliates).
|
(i)
|
the term “Parachute Payment” shall mean a payment described in Section 280G(b)(2)(A) or Section 280G(b)(2)(B) of the Code (including, but not limited to, any stock option rights, stock grants, and other cash and noncash compensation amounts that are treated as payments under either such section) and not excluded under Section 280G(b)(4)(A) or Section 280G(b)(6) of the Code;
|
(ii)
|
the term “Reasonable Compensation” shall mean reasonable compensation for prior personal services as defined in Section 280G(b)(4)(B) of the Code and subject to the requirement that any such reasonable compensation must be established by clear and convincing evidence; and
|
(iii)
|
the portion of the “Base Amount” and the amount of “Reasonable Compensation” allocable to any “Parachute Payment” shall be determined in accordance with Section 280G(b)(3) and (4) of the Code.
|
1.
|
I have reviewed this quarterly report on Form 10-Q of Quaker Chemical Corporation;
|
2.
|
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
|
3.
|
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
|
4.
|
The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
|
(a)
|
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
|
(b)
|
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
|
(c)
|
Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
|
(d)
|
Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
|
5.
|
The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
|
(a)
|
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
|
(b)
|
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
|
/s/ Michael F. Barry
|
Michael F. Barry
|
Chief Executive Officer
|
1.
|
I have reviewed this quarterly report on Form 10-Q of Quaker Chemical Corporation;
|
2.
|
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
|
3.
|
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
|
4.
|
The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
|
(a)
|
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
|
(b)
|
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
|
(c)
|
Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
|
(d)
|
Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
|
5.
|
The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
|
(a)
|
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
|
(b)
|
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
|
/s/ Margaret M. Loebl
|
Margaret M. Loebl
|
Chief Financial Officer
|
Dated: July 30, 2012
|
/s/ Michael F. Barry
|
|
Michael F. Barry
|
||
Chief Executive Officer of Quaker Chemical Corporation
|
Dated: July 30, 2012
|
/s/ Margaret M. Loebl
|
|
Margaret M. Loebl
|
||
Chief Financial Officer of Quaker Chemical Corporation
|
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Stock Based Compensation - Narrative (Details) (USD $)
In Thousands, except Share data, unless otherwise specified |
6 Months Ended |
---|---|
Jun. 30, 2012
|
|
Share Based Compensation [Abstract] | |
Forfeiture Rate, Nonvested stock awards | 13.00% |
Option Award Vesting And Exercisable Period | Most options become exercisable between one and three years after the date of the grant for a period of time determined by the Company not to exceed seven years from the date of grant. |
Nonvested Stock Award Vesting Period | Common stock awards issued under the LTIP program are subject only to time vesting over a three to five-year period. In addition, as part of the Company’s Global Annual Incentive Plan (“GAIP”), nonvested shares may be issued to key employees, which generally vest over a two to five-year period. |
Outstanding Options, Intrinsic Value | $ 4,761 |
Exercisable Options, Intrinsic Value | 3,505 |
Option Award Vesting Period | three-year |
Share Based Compensation [Line Items] | |
ESPP: Purchase Price Percentage | 85.00% |
ESPP: Discount from Market Price | 15.00% |
ESPP: Maximum Ownership of Outstanding Shares | An employee whose stock ownership of the Company exceeds five percent of the outstanding common stock is not eligible to participate in this plan. |
Director Stock Ownership Plan Maximum Number of Shares Authorized Under Plan | 75,000 |
Director Stock Ownership Plan Terms | Currently, each Director who owns less than 7,500 shares of Company Common Stock is required to receive 75% of the annual retainer in Common Stock and 25% of the annual retainer in cash. Each Director who owns 7,500 or more shares of Company Common Stock may elect to receive payment of a percentage (up to 100%) of the annual retainer in shares of common stock. ten years |
Director Retainer Annual Fee | 40 |
Restricted Stock LTIP Plan
|
|
Share Based Compensation [Line Items] | |
Unrecognized Share-based Compensation Expense, Nonvested Stock Award | 2,469 |
Weighted Average Remaining Life, Nonvested Stock Awards | 2 years 1 month |
Restricted Stock Units (RSUs) LTIP Plan
|
|
Share Based Compensation [Line Items] | |
Unrecognized Share-based Compensation Expense, Nonvested Stock Award | 62 |
Weighted Average Remaining Life, Nonvested Stock Awards | 2 years 9 months |
Options granted in 2012
|
|
Employee Service Share-based Compensation, Allocation of Recognized Period Costs [Line Items] | |
Share-based Compensation Expense in Period, Stock Option Awards | 62 |
Unrecognized Share-Based Compensation Expense, Stock Option Awards | 568 |
Options granted in 2011
|
|
Employee Service Share-based Compensation, Allocation of Recognized Period Costs [Line Items] | |
Unrecognized Share-Based Compensation Expense, Stock Option Awards | 263 |
Options granted in 2010
|
|
Employee Service Share-based Compensation, Allocation of Recognized Period Costs [Line Items] | |
Unrecognized Share-Based Compensation Expense, Stock Option Awards | $ 112 |
Goodwill Assets (Details) (USD $)
In Thousands, unless otherwise specified |
6 Months Ended |
---|---|
Jun. 30, 2012
|
|
Goodwill [Roll Forward] | |
Goodwill | $ 58,152 |
Goodwill, Translation Adjustments | (1,119) |
Goodwill | 57,033 |
Metalworking Process Chemicals [Member]
|
|
Goodwill [Roll Forward] | |
Goodwill | 50,071 |
Goodwill, Translation Adjustments | (1,119) |
Goodwill | 48,952 |
Coatings [Member]
|
|
Goodwill [Roll Forward] | |
Goodwill | 8,081 |
Goodwill, Translation Adjustments | 0 |
Goodwill | $ 8,081 |
Business Segments (Details) (USD $)
In Thousands, unless otherwise specified |
3 Months Ended | 6 Months Ended | ||
---|---|---|---|---|
Jun. 30, 2012
|
Jun. 30, 2011
|
Jun. 30, 2012
|
Jun. 30, 2011
|
|
Segment Reporting Information [Line Items] | ||||
Net sales | $ 176,797 | $ 167,792 | $ 354,435 | $ 327,657 |
Operating income for reportable segments | 33,501 | 28,599 | 67,131 | 57,532 |
Reconciliation from Segment Totals to Consolidated [Abstract] | ||||
Non-operating expenses | (15,799) | (13,171) | (31,981) | (27,518) |
Amortization | (719) | (487) | (1,465) | (973) |
Operating income | 16,983 | 14,941 | 33,685 | 29,041 |
Interest expense | (1,151) | (1,200) | (2,325) | (2,418) |
Interest income | 137 | 271 | 260 | 543 |
Other (expense) income, net | (134) | 791 | 207 | 1,330 |
Income before taxes and equity in net income of associated companies | 15,835 | 14,803 | 31,827 | 28,496 |
Metalworking Process Chemicals [Member]
|
||||
Segment Reporting Information [Line Items] | ||||
Net sales | 165,011 | 156,772 | 330,986 | 307,505 |
Operating income for reportable segments | 30,649 | 26,149 | 61,624 | 53,084 |
Coatings [Member]
|
||||
Segment Reporting Information [Line Items] | ||||
Net sales | 10,950 | 10,487 | 21,473 | 18,969 |
Operating income for reportable segments | 2,799 | 2,446 | 5,312 | 4,409 |
All Other Segments [Member]
|
||||
Segment Reporting Information [Line Items] | ||||
Net sales | 836 | 533 | 1,976 | 1,183 |
Operating income for reportable segments | $ 53 | $ 4 | $ 195 | $ 39 |
Earnings Per Share - Diluted (Details) (USD $)
In Thousands, except Share data, unless otherwise specified |
3 Months Ended | 6 Months Ended | ||
---|---|---|---|---|
Jun. 30, 2012
|
Jun. 30, 2011
|
Jun. 30, 2012
|
Jun. 30, 2011
|
|
Earnings Per Share [Abstract] | ||||
Net income attributable to Quaker Chemical Corporation | $ 10,540 | $ 9,841 | $ 22,486 | $ 20,441 |
Less: income allocated to participating securities | (100) | (180) | (288) | (380) |
Net income available to common shareholders | $ 10,440 | $ 9,661 | $ 22,198 | $ 20,061 |
Basic weighted average common shares outstanding | 12,850,917 | 12,043,858 | 12,790,799 | 11,668,657 |
Effect of dilutive securities, employee stock options | 80,913 | 174,919 | 88,838 | 175,905 |
Diluted weighted average common shares outstanding | 12,931,830 | 12,218,777 | 12,879,637 | 11,844,562 |
Diluted earnings per common share | $ 0.81 | $ 0.79 | $ 1.72 | $ 1.69 |
Business Segments (Tables)
|
6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jun. 30, 2012
|
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Segment Reporting Measurement Disclosures [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Segment Reporting Information, by Segment [Table Text Block] |
|
Equity and Noncontrolling Interest - Parentheticals (Details) (USD $)
|
3 Months Ended | 6 Months Ended | ||
---|---|---|---|---|
Jun. 30, 2012
|
Jun. 30, 2011
|
Jun. 30, 2012
|
Jun. 30, 2011
|
|
Stockholders Equity [Abstract] | ||||
Dividends declared | $ 0.245 | $ 0.24 | $ 0.485 | $ 0.475 |
Stock Based Compensation - Options Rollforward (Details) (USD $)
|
6 Months Ended |
---|---|
Jun. 30, 2012
|
|
Share-based Compensation Arrangement by Share-based Payment Award, Options, Outstanding [Roll Forward] | |
Beginning Balance | 253,342 |
Options Granted | 40,157 |
Options Exercised | (77,176) |
Options Forfeited | (8,470) |
Ending Balance | 207,853 |
Options Exerciseable | 117,758 |
Weighted Average Exercise Price [Abstract] | |
Outstanding at beginning of year | $ 16.43 |
Options Granted | $ 38.57 |
Options Exercised | $ 9.62 |
Options Forfeited | $ 29.32 |
Outstanding at End of Period | $ 22.72 |
Options Exercisable | $ 15.85 |
Weighted Average Contractual Term [Abstract] | |
Weighted Average Remaining Contractual Term, Outstanding | 4 years 6 months |
Weighted Average Remaining Contractual Term, Exercisable | 3 years 6 months |
Hedging Activities - Table (Details) (USD $)
In Thousands, unless otherwise specified |
3 Months Ended | 6 Months Ended | ||
---|---|---|---|---|
Jun. 30, 2012
|
Jun. 30, 2011
|
Jun. 30, 2012
|
Jun. 30, 2011
|
|
Derivative Instruments, Gain (Loss) [Line Items] | ||||
Derivative Instruments, Gain (Loss) Recognized in Other Comprehensive Income (Loss), Effective Portion, Net | $ 103 | $ 78 | $ 199 | $ 174 |
Interest Expense [Member]
|
||||
Derivative Instruments, Gain (Loss) [Line Items] | ||||
Derivative Instruments, Gain (Loss) Reclassified from Accumulated OCI into Income, Effective Portion, Net | (160) | (165) | (318) | (328) |
Other Income [Member] | Interest Rate Swap [Member]
|
||||
Derivative Instruments, Gain (Loss) [Line Items] | ||||
Derivative Instruments, Gain (Loss) Recognized in Income, Ineffective Portion and Amount Excluded from Effectiveness Testing, Net | $ 0 | $ 0 | $ 0 | $ 0 |
Business Acquisitions - Table (Details) (USD $)
In Thousands, unless otherwise specified |
Sep. 30, 2011
TQM [Member]
|
Dec. 31, 2011
GW Smith [Member]
|
Dec. 31, 2010
Summit [Member]
|
---|---|---|---|
Business Acquisition [Line Items] | |||
Current assets | $ 8,946 | $ 6,138 | |
Fixed assets | 4,308 | 2,869 | |
Intangibles | 3,556 | 6,260 | 17,100 |
Goodwill | 6,773 | 1,120 | 3,423 |
Other long-term assets | 1,355 | 1 | |
Business Acquisition, Purchase Price Allocation, Assets Acquired | 24,938 | 16,388 | |
Current liabilities | (2,224) | (1,001) | |
Long-term liabilities | (6,869) | 0 | |
Present value of hold-back | (1,754) | (869) | |
Business Acquisition, Purchase Price Allocation, Liabilities Assumed | (10,847) | (1,870) | |
Business Acquisition Purchase Price Allocation Additional Minimum Pension Liability | 987 | 0 | |
Business Acquisition Purchase Price Allocation Equity Acquired | 987 | 0 | |
Fair Value of Previously Held Equity Interest | (4,578) | 0 | |
Business Acquisition, Cost of Acquired Entity, Purchase Price | $ 10,500 | $ 14,518 | $ 29,116 |
Earnings Per Share - Antidilutive Shares (Details)
|
3 Months Ended | 6 Months Ended | ||
---|---|---|---|---|
Jun. 30, 2012
|
Jun. 30, 2011
|
Jun. 30, 2012
|
Jun. 30, 2011
|
|
Earnings Per Share [Abstract] | ||||
Antidilutive Securities Excluded from Computation of Earnings Per Share, Amount | 9,917 | 8,209 | 7,859 | 10,208 |
Income Taxes and Uncertain Tax Positions
|
6 Months Ended |
---|---|
Jun. 30, 2012
|
|
Income Tax Expense Benefit [Abstract] | |
Income Tax Disclosure [Text Block] | Note 3 – Income Taxes and Uncertain Income Tax Positions
The Company's year-to-date 2012 effective tax rate of 26.1% was higher than the year-to-date 2011 effective tax rate of 25.7%. Both year-to-date effective tax rates reflect decreases in reserves for uncertain tax positions due to the expiration of applicable statutes of limitations for certain tax years of approximately $0.12 and $0.11 per diluted share for the six months ended June 30, 2012 and June 30, 2011, respectively. The most significant other items affecting the comparison of the 2012 and 2011 year-to-date effective tax rates were a higher utilization of foreign tax credits in 2011, which were previously not benefited, and lower withholding taxes on dividends in 2012. The FASB's guidance regarding accounting for uncertainty in income taxes prescribes the recognition threshold and measurement attributes for financial statement recognition and measurement of tax positions taken or expected to be taken on a tax return. The guidance further requires the determination of whether the benefits of tax positions will be more likely than not sustained upon audit based upon the technical merits of the tax position. For tax positions that are determined to be more likely than not sustained upon audit, a company recognizes the largest amount of benefit that is greater than 50% likely of being realized upon ultimate settlement in the financial statements. For tax positions that are not determined to be more likely than not sustained upon audit, a company does not recognize any portion of the benefit in the financial statements. Additionally, the guidance provides for derecognition, classification, penalties and interest, accounting in interim periods, disclosure and transition. As of June 30, 2012, the Company's cumulative liability for gross unrecognized tax benefits was $12,426. At December 31, 2011, the Company's cumulative liability for gross unrecognized tax benefits was $12,719. The Company continues to recognize interest and penalties associated with uncertain tax positions as a component of taxes on income before equity in net income of associated companies in its Condensed Consolidated Statement of Income. The Company recognized $164 and $(51) for interest and $99 and $194 for penalties on its Condensed Consolidated Statement of Income for the three and six months ended June 30, 2012, respectively, and recognized $184 and $59 for interest and $145 and $424 for penalties on its Condensed Consolidated Statement of Income for the three and six months ended June 30, 2011, respectively. As of June 30, 2012, the Company had accrued $2,175 for cumulative interest and $1,463 for cumulative penalties, and $2,268 for cumulative interest and $1,298 for cumulative penalties at December 31, 2011. During the three months ended June 30, 2012, there were no expirations of statutes of limitations for uncertain tax positions. During the three months ended June 30, 2011, the Company recognized a decrease in its cumulative liability for gross unrecognized tax benefits due to the liquidation of the Company's subsidiary in Wuxi China for certain tax years of approximately $36. During the six months ended June 30, 2012, the Company recognized a $1,072 decrease in its cumulative liability for gross unrecognized tax benefits due to the expiration of the applicable statutes of limitations for certain tax years. During the six months ended June 30, 2011, the Company recognized a $958 decrease in its cumulative liability for gross unrecognized tax benefits due to the expiration of the applicable statutes of limitations for certain tax years. The Company estimates that during the year ending December 31, 2012 it will reduce its cumulative liability for gross unrecognized tax benefits by approximately $1,700 to $1,800 due to the expiration of the statute of limitations with regard to certain tax positions. This estimated reduction in the cumulative liability for unrecognized tax benefits does not consider any increase in liability for unrecognized tax benefits with regard to existing tax positions or any increase in cumulative liability for unrecognized tax benefits with regard to new tax positions for the year ending December 31, 2012. The Company and its subsidiaries are subject to U.S. Federal income tax, as well as the income tax of various state and foreign tax jurisdictions. Tax years that remain subject to examination by major tax jurisdictions include the Netherlands and the United Kingdom from 2006, Brazil and Spain from 2007, the United States from 2008, China from 2009, Italy from 2010, and various domestic state tax jurisdictions from 1993. In the second quarter of 2012, the Internal Revenue Service initiated a limited scope audit of the Company's 2009 federal income tax return. The Company has responded to all information requests and has not received any further communications. Also, during the second quarter of 2012, the Italian tax authorities initiated a transfer pricing audit of the Company's Italian subsidiary. On July 7, 2012, the Company received the preliminary tax report, which proposed several adjustments to the taxable income of the subsidiary. In conjunction with outside counsel, the Company reviewed the report and believes it should prevail on the merits of the case. As a result, the Company does not believe it has any exposures warranting an uncertain tax position reserve. |