EX-99.2 3 v423074_ex99-2.htm EXHIBIT 99.2

 

Exhibit 99.2

 

 

Quaker Chemical Corporation Third Quarter 2015 Results Investor Conference Call October 29, 2015

 

 

 

 

 

Risks and Uncertainties Statement Regulation G The attached charts include Company information that does not conform to generally accepted accounting principles (“GAAP”). Management believes that an analysis of this data is meaningful to investors because it provides insight with respect to ongoing operating results of the Company and allows investors to better evaluate the financial results of the Company. These measures should not be viewed as an alternative to GAAP measures of performance. Furthermore, these measures may not be consistent with similar measures provided by other companies. This data should be read in conjunction with the Company’s third quarter earnings news release dated October 28, 2015, which has been furnished to the SEC on Form 8-K and the Company’s Form 10-Q for the quarterly period ended September 30, 2015, which has been filed with the SEC. Forward-Looking Statements This presentation may contain 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 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 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, future terrorist attacks and other acts of violence. 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.

 

 

 

 

 

Speakers Michael F. Barry Chairman of the Board, Chief Executive Officer & President Shane W. Hostetter Global Controller and Principal Accounting Officer Robert T. Traub Vice President, General Counsel & Corporate Secretary Chart #1

 

 

 

 

 

Third Quarter 2015 Headlines Strong operating results drive consistent non-GAAP earnings, despite an 8% negative impact from foreign exchange and lower global steel production Current quarter results include $2.8 million of one-time non-GAAP transaction expenses related to the Verkol S.A. acquisition Strong quarterly operating cash flow generation of $24 million Chart #2

 

 

 

 

 

Chairman Comments Third Quarter 2015 Third Quarter 2015 Stable earnings and strong cash flow on margin expansion, market share gains, and recent acquisitions, which offset difficult market conditions Foreign exchange headwinds continue to have the most significant negative impact on earnings Global steel industry production declines of nearly 4% and downward price adjustments due to lower raw material costs Solid operating cash flow and balance sheet enable key strategic initiatives and acquisitions 2015 Outlook Foreign exchange impacts continue from strong U.S. Dollar Weak conditions in several regions Anticipate market share gains and acquisition leverage will continue to compensate for various market challenges “Overall, we remain confident in our future and expect our fourth quarter and full year 2015 non-GAAP earnings to exceed 2014, leading to our sixth consecutive year of earnings improvement.” -- Michael F. Barry, Chairman, CEO & President Chart #3

 

 

 

 

 

Financial Highlights Third Quarter 2015 1) Strong operating results drive consistent non-GAAP earnings per diluted share of $1.19, despite a negative impact of $0.09 per diluted share, or 8%, due to foreign exchange 2) One-time transaction expenses of $2.8 million, or $0.15 per diluted share, related to the Company’s Verkol acquisition driving SG&A increase and variance between reported and non-GAAP earnings 3) Quarterly net sales down 5% on $14.9 million, or 8%, of foreign currency translation, offsetting product volume and acquisition related growth 4) Increased gross margin in the current quarter driven by product mix and timing of certain raw material cost decreases 5) Current quarter benefits of a lower year-over-year effective tax rate primarily offset by a decrease in other income from prior year government grants 6) Solid quarterly operating cash flow generation of $23.5 million enhances strong balance sheet and liquidity for future acquisitions Chart #4

 

 

 

 

 

Financial Snapshot Q3 2015 Q3 2014 YTD 2015 YTD 2014 Net Sales ($Mils.) 189.2 198.9 554.3 571.8 Gross Margin (%) 37.7 35.4 37.6 35.6 Operating Margin (%) 9.9 10.3 10.5 10.6 Net Income attributable to Quaker Chemical Corporation ($Mils.) 14.4 15.7 39.8 43.9 Adjusted EBITDA ($Mils.) – Trailing Twelve Months 100.1 97.0 -- -- Adjusted EBITDA Margin (%) 13.4 12.8 -- -- Earnings Per Diluted Share 1.08 1.18 2.98 3.31 Non-GAAP Earnings Per Diluted Share 1.19 1.19 3.27 3.26 Debt ($Mils.) 108.3 62.6 -- -- Equity ($Mils.) 376.2 367.0 -- -- Net Operating Cash Flow ($Mils.) 23.5 29.8 50.8 38.0 Chart #5

 

 

 

 

 

Product Volume by Quarter Thousand Kilograms 55,000 61,000 49,000 25,000 31,000 37,000 43,000 4Q08 YTD Avg. 1Q09 2Q09 3Q09 4Q09 1Q10 2Q10 3Q10 4Q10 1Q11 2Q11 3Q11 4Q11 1Q12 2Q12 3Q12 4Q12 1Q13 2Q13 3Q13 4Q13 1Q14 2Q14 3Q14 4Q14 1Q15 2Q15 3Q15 Chart #6

 

 

 

 

 

Gross Margin Percentage 40.0% 40.0% 38.4% 37.6% 37.7% 36.6% 35.8% 35.7% 35.9% 35.4% 35.4% 34.7% 35.0% 33.7% 35.0% 32.6% 30.0% 30.0% 28.0% 25.0% 25.0% 20.0% 20.0% 2008 2009 2010 2011 2012 2013 2014 YTD 2015 Q3 2014 Q4 2014 Q1 2015 Q2 2015 Q3 2015 Gross Margin Percentage Gross Margin Percentage Chart #7

 

 

 

 

 

Adjusted EBITDA Baseline Historical Performance 2008 –– – 2015 $99.8 $100.1 $97.0 CAGR: 14.0% $89.6 $80.9 +650 Margin bps $73.0 $66.8 13.4% 13.0% 12.8% 12.3% 12.3% $44.2 11.4% $40.1 10.7% 9.8% 6.9% 2008 2009 2010 2011 2012 2013 2014 Trailing Trailing Twelve Twelve Months Months Q3 2014 Q3 2015 Adjusted EBITDA ($Mils.) Adjusted EBITDA Margin (%) Chart #8

 

 

 

 

 

Balance Sheet Net Cash / (Debt) $120 $80 $40 $Millions $0$0 $0 -$40 -$80 -$120 2008 2009 2010 2011 2012 2013 2014 Q3Q3 Q3 2015 Cash ST/LT Debt Net Debt Chart #9

 

 

 

 

 

APPENDIX

 

 

 

 

 

Non-GAAP Earnings Per Diluted Share Reconciliation Q3 2015 Q3 2014 YTD 2015 YTD 2014 GAAP earnings per diluted share $1.08 $1.18 $2.98 $3.31 Equity income in a captive insurance company per diluted share $(0.04) $(0.01) $(0.09) $(0.16) Verkol transaction expenses per diluted share $0.15 $- $0.15 $- U.K. pension plan amendment per diluted share $- $- $- $0.05 U.S. customer bankruptcies per diluted share $0.00 $0.02 $0.01 $0.02 Cost streamlining initiatives per diluted share $- $- $0.01 $0.02 Currency conversion impact of the Venezuelan Bolivar Fuerte per diluted share $- $- $0.21 $0.02 Non-GAAP earnings per diluted share $1.19 $1.19 $3.27 $3.26 Chart #10

 

 

 

 

 

Adjusted EBITDA Reconciliation 2008 2009 2010 2011 2012 2013 2014 Net income 9,833 16,058 32,120 45,892 47,405 56,339 56,492 Depreciation 10,879 9,525 9,867 11,455 12,252 12,339 12,306 Amortization 1,177 1,078 988 2,338 3,106 3,445 4,325 Interest expense 5,509 5,533 5,225 4,666 4,283 2,922 2,371 Taxes on income 4,977 7,065 12,616 14,256 15,575 20,489 23,539 Restructuring and related activities 2,916 2,289 - - - - - Non-income tax contingency charge - - 4,132 - - 796 - Equity affiliate out of period charge - - 564 - - - - Mineral oil excise tax refund - - - - - (2,540) - Transition costs related to key employees 3,505 2,443 1,317 - 609 - - Non-cash gain from the purchase of an equity affiliate - - - (2,718) - - - Change in acquisition-related earnout liability - - - (595) (1,737) (497) - Equity loss (income) from a captive insurance company 1,299 162 (313) (2,323) (1,812) (5,451) (2,412) Currency conversion impacts of the Venezuelan Bolivar - - 322 - - 357 321 Customer Bankruptcies - - - - 1,254 - 825 Cost streamlining initiatives - - - - - 1,419 1,166 U.K. pension plan amendment - - - - - - 902 Adjusted EBITDA 40,095 44,153 66,838 72,971 80,935 89,618 99,835 Adjusted EBITDA Margin 6.9% 9.8% 12.3% 10.7% 11.4% 12.3% 13.0% Chart #11

 

 

 

 

 

Trailing Twelve Months Adjusted EBITDA Reconciliation I = G + H HH H G = F - D FF F E = C + D D DD C = B - A BB B AA A Trailing Trailing Twelve Last Three Twelve Last Three Months Q3 YTD Q3 Months Months Q3 YTD Q3 Months YTD Q3 2015 2015 2014 YTD 2014 2014 2014 2013 YTD 2013 2013 Net income 52,426 39,787 12,639 56,492 57,939 43,853 14,086 56,339 42,253 Depreciation 12,381 9,229 3,152 12,306 12,274 9,154 3,120 12,339 9,219 Amortization 6,569 4,998 1,571 4,325 3,578 2,754 824 3,445 2,621 Interest expense 2,515 1,891 624 2,371 2,446 1,747 699 2,922 2,223 Taxes on income 20,355 15,624 4,731 23,539 22,364 18,808 3,556 20,489 16,933 Non-income tax contingency - - - - 796 - 796 796 - Mineral oil excise tax refund - - - - - - - (2,540) (2,540) Change in acquisition-related earnout liability - - - - (1,172) - (1,172) (497) 675 Equity income from a captive insurance company (1,491) (1,221) (270) (2,412) (3,215) (2,142) (1,073) (5,451) (4,378) Verkol transaction expenses 2,813 2,813 - - - - - - - Currency conversion impacts of the Venezuelan Bolivar 2,806 2,806 - 321 321 321 - 357 357 Customer bankruptcies 694 179 515 825 310 310 - - - Cost streamlining initiatives 991 173 818 1,166 490 348 142 1,419 1,277 U.K. pension plan amendment - - - 902 902 902 - - - Adjusted EBITDA 100,059 76,279 23,780 99,835 97,033 76,055 20,978 89,618 68,640 Adjusted EBITDA Margin 13.4% 13.8% 12.3% 13.0% 12.8% 13.3% 11.4% 12.3% 12.6% Chart #12