8-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C.  20549

FORM 8-K

CURRENT REPORT PURSUANT TO SECTION 13 OR 15(d) OF

THE SECURITIES EXCHANGE ACT OF 1934

July 28, 2010

Date of Report (Date of earliest event reported)

QUAKER CHEMICAL CORPORATION

(Exact name of Registrant as specified in its charter)

Commission File Number 001-12019

PENNSYLVANIA	No. 23-0993790
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)

One Quaker Park

901 E. Hector Street

Conshohocken, Pennsylvania  19428

(Address of principal executive offices)

(Zip Code)

(610) 832-4000

(Registrant’s telephone number, including area code)

Not Applicable

(Former name or former address, if changed since last report)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

¨ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

¨ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

¨ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

¨ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

INFORMATION TO BE INCLUDED IN THE REPORT

Item 2.02. Results of Operations and Financial Condition.

On July 28, 2010, Quaker Chemical Corporation announced its results of operations for the second quarter ended June 30, 2010 in a press release, the text of which is included as Exhibit 99.1 hereto.  Supplemental information related to the same period is also included as Exhibit 99.2 hereto.

Item 9.01. Financial Statements and Exhibits.

The following exhibits are included as part of this report:

Exhibit No.
99.1	Press Release of Quaker Chemical Corporation dated July 28, 2010.
99.2	Supplemental Information related to second quarter ended June 30, 2010.

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SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

	QUAKER CHEMICAL CORPORATION Registrant
Date:  July 29, 2010	By:	/s/ Mark A. Featherstone
		Mark A. Featherstone Vice President and Chief Financial Officer

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EX-99.1

For Release: Immediate NEWS Contact: Mark A. Featherstone Vice President and Chief Financial Officer 610-832-4160

QUAKER CHEMICAL ANNOUNCES SECOND QUARTER 2010 RESULTS

· Q2 2010 EPS of $0.80 vs. $0.29 in Q2 2009

· First half 2010 EPS of $1.64 vs. $0.29 in the first half of 2009

· Net debt-to-total capital ratio under 20%

· $15.1 million of operating cash flow generated in Q2 2010

July 28, 2010

CONSHOHOCKEN, PA - Quaker Chemical Corporation (NYSE:KWR) today announced second quarter 2010 net sales of $136.0 million and earnings per diluted share of $0.80, compared to net sales of $102.3 million and earnings per diluted share of $0.29 for the second quarter of 2009.  For the first half of 2010, the Company reported net sales of $264.3 million and earnings per diluted share of $1.64, compared to net sales of $200.8 million and earnings per diluted share of $0.29 for the first half of 2009.

Michael F. Barry, Chairman, Chief Executive Officer and President, commented, “Our strong second quarter earnings and EBITDA generation were driven by high steel industry shipments in China, Brazil, India and Russia and continued recovery of industrial demand in North America and Europe.  Our balance sheet was also strengthened as we reduced our net debt-to-capital ratio to its lowest point since 2003.”

Mr. Barry added, “We are on track to generate record earnings for 2010.  Our expectations for the second half are that our earnings will continue to be strong but will be below the first half due to a softening in demand and the lag effect on margins as we recover higher raw material costs.”

Mr. Barry continued, “We are pleased with our progress in 2010 in a number of ways.  Besides our strong results, we lowered our debt, raised our dividend, made a small, but strategic, acquisition, and amended our credit facility for lower interest costs, an extended maturity date and greater borrowing capacity.  Over the next few years, we believe Quaker is positioned well for solid growth.  Our strong positions in the fastest growing countries like China, Brazil and India, as well as the gradual rebound in the more mature markets such as the U.S. and Europe, is expected to provide us with broad-based organic growth in all regions and businesses.  In addition, our strong balance sheet will allow us to invest in our key growth initiatives and grow via acquisition for the right opportunities.”

Second Quarter 2010 Summary

Net sales for the second quarter were $136.0 million, up 33% from $102.3 million for the second quarter of 2009.  The increase in net sales was a result of double-digit volume increases across the globe as the Company continues to recover from the economic downturn.  Product volumes increased 42%, partially offset by a 5% decline in selling price and mix, as well as lower automotive chemical management services (“CMS”) revenue due to lower revenue reported on a gross basis.  On a sequential quarterly basis, product volumes increased by approximately 7%.

Gross margin was up $12.5 million, or 35%, compared to the second quarter of 2009 as a result of increased volumes.  The gross margin percentage increased slightly compared to the second quarter of 2009, but decreased 1.2 percentage points from the first quarter of 2010.  The Company is implementing price increases to help offset higher raw material costs where necessary.

Selling, general and administrative expenses (“SG&A”) increased $6.1 million, or 21%, compared to the second quarter of 2009.  Higher selling costs with increased business activity, as well as increased incentive compensation and professional fees, were the primary drivers, representing 70% of the increase.  Inflationary and other costs accounted for the remainder of the increase.

The Company incurred charges related to the former CEO’s supplemental retirement plan of approximately $1.2 million in the second quarter of 2009 and expects to incur a final charge of $1.3 million later in 2010.

The increase in other income is due to higher license fees from increased business activities, as well as foreign exchange rate gains in the second quarter of 2010 versus losses in the second quarter of 2009.  The decrease in net interest expense is due to lower average debt balances as well as higher interest income.

Year-to-Date Summary

Net sales for the first half of 2010 were $264.3 million, up 32% from $200.8 million for the first half of 2009.  As with the quarterly comparison, the increase in net sales was a result of higher volumes across the globe as the Company continues to recover from the economic downturn.  Product volumes increased 39%, partially offset by a 5% decline in selling price and mix.  Foreign exchange rates increased revenues by approximately 4%, which were more than offset by lower automotive CMS revenue due to lower revenue reported on a gross basis.

Gross margin increased $31.1 million, or 48%, compared to the first half of 2009 largely as a result of increased volumes.  The gross margin percentage of 36.3% represents considerable improvement over the first half of 2009 percentage of 32.2%.  The margin expansion was the result of cost reduction actions taken, a more favorable year-to-date raw material cost environment and reduced automotive CMS revenues reported on a gross basis.

SG&A increased $13.0 million, or 23%, compared to the first half of 2009.  Higher selling costs with increased business activity, as well as increased incentive compensation and professional fees, were the primary drivers, representing 74% of the increase.  Inflationary and other costs as well as foreign exchange rates accounted for the remainder of the increase.

In the first quarter of 2009, the Company implemented a restructuring program totaling $2.3 million or approximately $0.14 per diluted share.  The Company completed the initiatives under this program during 2009.

Other income for the 2010 period includes higher license fees from increased business activities as well as foreign exchange rate gains versus losses in the 2009 period, which offset a gain related to the disposition of land in Europe of approximately $0.11 per diluted share in 2009.  The decrease in net interest expense is due to lower average debt balances as well as higher interest income.

Equity in net income of associated companies includes a charge of approximately $0.03 per diluted share related to the first quarter 2010 devaluation of the Venezuelan Bolivar Fuerte.

Balance Sheet and Cash Flow Items

The Company’s net debt-to-total-capital ratio decreased to 19% as of June 30, 2010, compared to 24% at March 31, 2010.  Operating cash flow improved $15.1 million from the first quarter of 2010, as a result of strong earnings which in turn allowed the Company to reduce its debt levels during the second quarter.

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Forward-Looking Statements

This release contains forward-looking statements that 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 the Company’s demand is largely derived from the demand for its customers’ products, which subjects the Company to downturns in a customer’s business and unanticipated customer production shutdowns.  Other major risks and uncertainties include, but are not limited to, significant increases in raw material costs, customer financial stability, worldwide economic and political conditions, foreign currency fluctuations, and future terrorist attacks such as those that occurred on September 11, 2001.  Other factors could also adversely affect us. Therefore, we caution you not to place undue reliance on our forward-looking statements.  This discussion is provided as permitted by the Private Securities Litigation Reform Act of 1995.

Conference Call

As previously announced, Quaker Chemical's investor conference call to discuss second quarter results is scheduled for July 29, 2010 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 Web site at http://www.quakerchem.com.  You can also access the conference call by dialing 877-269-7756.

About Quaker

Quaker Chemical Corporation is a leading global provider of process chemicals, chemical specialties, services, and technical expertise to a wide range of industries – including steel, automotive, mining, aerospace, tube and pipe, coatings and construction materials.  Our products, technical solutions and chemical management services enhance our customers’ processes, improve their product quality and lower their costs.  Quaker’s headquarters is located near Philadelphia in Conshohocken, Pennsylvania.

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Quaker Chemical Corporation

Condensed Consolidated Statement of Income

(Dollars in thousands, except per share data)
 

	(Unaudited)
	Three Months Ended June 30,						Six Months Ended June 30,
	2010			2009			2010			2009
Net sales	$	135,991		$	102,335		$	264,311		$	200,842
Cost of goods sold		87,460			66,298			168,440			136,091
Gross margin		48,531			36,037			95,871			64,751
%		35.7	%		35.2	%		36.3	%		32.2	%
Selling, general and administrative expenses		35,118			29,050			68,787			55,747
Restructuring and related charges		-			-			-			2,289
CEO transition costs		-			1,193			-			1,193
Operating income		13,413			5,794			27,084			5,522
%		9.9	%		5.7	%		10.2	%		2.7	%
Other income, net		1,123			356			1,886			1,810
Interest expense, net		(1,043	)		(1,318	)		(2,170	)		(2,407	)
Income before taxes and equity in net income of associated companies		13,493			4,832			26,800			4,925
Taxes on income before equity in net income of associated companies		4,143			1,567			7,324			1,316
Income before equity in net income of associated companies		9,350			3,265			19,476			3,609
Equity in net income of associated companies		384			227			295			85
Net income		9,734			3,492			19,771			3,694
Less: Net income attributable to noncontrolling interest		581			258			1,199			458
Net income attributable to Quaker Chemical Corporation	$	9,153		$	3,234		$	18,572		$	3,236
%		6.7	%		3.2	%		7.0	%		1.6	%
Per share data:
Net income attributable to Quaker Chemical Corporation Common Shareholders - basic	$	0.82		$	0.29		$	1.66		$	0.29
Net income attributable to Quaker Chemical Corporation Common Shareholders- diluted	$	0.80		$	0.29		$	1.64		$	0.29

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Quaker Chemical Corporation

Condensed Consolidated Balance Sheet

(Dollars in thousands, except par value and share amounts)

	(Unaudited)
	June 30,			December 31,
	2010			2009
ASSETS
Current assets
Cash and cash equivalents	$	27,606		$	25,051
Construction fund (restricted cash)		-			2,358
Accounts receivable, net		114,595			108,793
Inventories, net		54,844			50,040
Prepaid expenses and other current assets		13,149			12,656
Total current assets		210,194			198,898
Property, plant and equipment, net		62,859			67,426
Goodwill		44,452			46,515
Other intangible assets, net		5,012			5,579
Investments in associated companies		9,317			8,824
Deferred income taxes		31,210			31,692
Other assets		46,282			39,537
Total assets	$	409,326		$	398,471
LIABILITIES AND EQUITY
Current liabilities
Short-term borrowings and current portion of long-term debt	$	3,596		$	2,431
Accounts and other payables		62,200			60,939
Accrued compensation		13,012			16,656
Accrued pension and postretirement benefits		4,682			4,717
Other current liabilities		18,174			15,224
Total current liabilities		101,664			99,967
Long-term debt		60,975			63,685
Deferred income taxes		8,443			8,605
Accrued pension and postretirement benefits		26,235			27,602
Other non-current liabilities		45,462			42,317
Total liabilities		242,779			242,176
Equity
Common stock, $1 par value; authorized 30,000,000 shares; issued 11,258,582 shares		11,259			11,086
Capital in excess of par value		32,798			27,527
Retained earnings		136,497			123,140
Accumulated other comprehensive loss		(20,070	)		(10,439	)
Total Quaker shareholders' equity		160,484			151,314
Noncontrolling interest		6,063			4,981
Total equity		166,547			156,295
Total liabilities and equity	$	409,326		$	398,471

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Quaker Chemical Corporation

Condensed Consolidated Statement of Cash Flows

For the six months ended June 30,

(Dollars in thousands)

	(Unaudited)
	2010			2009
Cash flows from operating activities
Net income	$	19,771		$	3,694
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation		5,068			4,801
Amortization		462			522
Equity in net income of associated companies, net of dividends		(233	)		(85	)
Deferred compensation and other, net		(357	)		(1,521	)
Stock-based compensation		1,663			927
Restructuring and related charges		-			2,289
Gain on disposal of property, plant and equipment		(22	)		(1,193	)
Insurance settlement realized		(772	)		(610	)
Pension and other postretirement benefits		(2,227	)		(3,799	)
Increase (decrease) in cash from changes in current assets and current liabilities, net of acquisitions:
Accounts receivable		(10,645	)		13,498
Inventories		(7,181	)		15,022
Prepaid expenses and other current assets		(1,641	)		3,481
Accounts payable and accrued liabilities		6,409			(6,354	)
Change in restructuring liabilities		-			(3,885	)
Net cash provided by operating activities		10,295			26,787
Cash flows from investing activities
Capital expenditures		(3,468	)		(5,078	)
Payments related to acquisitions		-			(1,000	)
Proceeds from disposition of assets		59			1,617
Insurance settlement received and interest earned		5,070			5,100
Change in restricted cash, net		(1,940	)		(2,593	)
Net cash used in investing activities		(279	)		(1,954	)
Cash flows from financing activities
Net increase (decrease) in short-term borrowings		1,263			(1,716	)
Proceeds from long-term debt		-			1,584
Repayments of long-term debt		(2,614	)		(17,252	)
Dividends paid		(5,119	)		(5,022	)
Stock options exercised, other		1,663			262
Excess tax benefit related to stock option exercises		1,236			-
Distributions to noncontrolling shareholders		-			(90	)
Net cash used in financing activities		(3,571	)		(22,234	)
Effect of exchange rate changes on cash		(3,890	)		1,114
Net increase in cash and cash equivalents		2,555			3,713
Cash and cash equivalents at the beginning of the period		25,051			20,892
Cash and cash equivalents at the end of the period	$	27,606		$	24,605

EX-99.2