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EX-99.1 - EXHIBIT 99.1 - QUAKER CHEMICAL CORPv451341_ex99-1.htm
8-K - FORM 8-K - QUAKER CHEMICAL CORPv451341_8k.htm

 

Exhibit 99.2

 

1 Third Quarter 2016 Results Investor Conference Call October 27, 2016 Quaker Chemical Corporation

 

 

Regulation G The attached charts include C ompany 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 cons istent with similar measures provided by other companies. This data should be read in conjunction with the C ompany’s third quarter earnings news release dated October 26, 2016, 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, 2016, 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 t o 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 co nditions, foreign currency fluctuations, significant changes in applicable tax rates and regulations, 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. Risks and Uncertainties Statement

 

 

Speakers Michael F. Barry Chairman of the Board, Chief Executive Officer & President Mary Dean Hall Vice President, Chief Financial Officer & Treasurer Robert T. Traub Vice President, General Counsel & Corporate Secretary Chart #1

 

 

Third Quarter 2016 Headlines ▪ Strong operating income of $21.3 million drives 6% increase in adjusted EBITDA ▪ Volume growth drives an increase in net sales despite FX headwinds ▪ Year - to - date operating cash flow of $53.0 million increases 4% from the prior year Chart #2

 

 

Chairman Comments ▪ Third Quarter of 2016 x Revenue growth both organically by 2% and from acquisitions by 2%, despite challenging environment and foreign exchange headwinds x Strong operating income drives adjusted EBITDA increase of 6%, despite foreign exchange headwinds to sales and earnings of 2% and 3%, respectively x Adjusted EBITDA margin increased to nearly 15% on savings realized from previously announced restructuring and other cost streamlining initiatives, partially offset by some decline in gross margin on higher raw material costs ▪ Fourth Quarter of 2016 Outlook x Market share gains, leveraging of past acquisitions and cost savings efforts will continue to help the Company offset market and foreign exchange challenges x Expect gross margin to remain at a similar level compared to the third quarter of 2016 x Fourth quarter and full year 2016 forecast continues to indicate growth in both our top and bottom lines Third Quarter of 2016 Chart #3

 

 

Financial Highlights ▪ Non - GAAP earnings per diluted share up 5% to $1.25 despite higher effective tax rate and negative impact of 4 cents per diluted share from foreign exchange ▪ Adjusted EBITDA up 6% with Adjusted EBITDA margin nearly 15% ▪ Net sales increase driven by 2% growth from organic volume and 2% growth from acquisitions despite negative FX of 2% and continued pricing pressure ▪ Strong operating income up 14% driven by continued discipline in managing costs and lower costs related to certain uncommon expenses; global restructuring program on target for $3 million savings by year end ▪ Strong year - to - date net operating cash flow up 4% to $53.0 million from the prior year on solid operating performance and lower cash invested in working capital Chart #4 Third Quarter of 2016

 

 

Financial Snapshot ($ Millions unless otherwise noted) Q3 2016 Q3 2015 YTD 2016 YTD 2015 Net Sales 190.4 189.2 555.4 554.3 Gross Margin 37.2% 37.7 % 37.8% 37.6% Operating Income 21.3 18.7 62.7 58.0 Operating Margin 11.2% 9.9 % 11.3% 10.5% Net Income Attributable to Quaker Chemical Corporation 16.0 14.4 44.0 39.8 Earnings Per Diluted Share 1.21 1.08 3.32 2.98 Non - GAAP Earnings Per Diluted Share 1.25 1.19 3.34 3.27 Adjusted EBITDA 28.3 26.8 80.9 76.3 Adjusted EBITDA Margin 14.9% 14.2 % 14.6% 13.8% Net (Cash) Debt (22.7) 12.2 --- --- Net Operating Cash Flow 17.0 23.5 53.0 50.8 Effective Tax Rate 28.3% 24.4 % 31.0% 27.3% Chart #5

 

 

Product Volume by Quarter and Year In Thousands of Kilograms Chart #6 Organic and acquisition - related volume growth despite continued challenges in end - markets 115,000 135,000 155,000 175,000 195,000 215,000 235,000 255,000 25,000 31,000 37,000 43,000 49,000 55,000 61,000 67,000 Full Year Volume Quarter Volume Quarter Volume Full Year Volume

 

 

Gross Margin Percentage Trends 28.0% 34.7% 35.4% 32.6% 33.7% 35.8% 35.7% 37.6% 20.0% 25.0% 30.0% 35.0% 40.0% 2008 2009 2010 2011 2012 2013 2014 2015 Gross Margin Percentage 37.7% 37.5% 38.1% 38.1% 37.2% 20.0% 25.0% 30.0% 35.0% 40.0% Q3 2015 Q4 2015 Q1 2016 Q2 2016 Q3 2016 Gross Margin Percentage Chart #7 Slight decline in gross margin quarter - over - quarter in line with management’s expectation

 

 

Adjusted EBITDA Baseline Historical Performance $40.1 $66.8 $73.0 $80.9 $89.6 $99.8 $101.6 $106.3 $100.1 $44.2 13.0% 14.4% 11.4% 13.8% 6.9% 12.3% 10.7% 9.8% 12.3% 13.4% 2008 2009 2010 2011 2012 2013 2014 2015 Trailing Twelve Months Q3 2015 Trailing Twelve Months Q3 2016 Adjusted EBITDA ($ Mils.) Adjusted EBITDA Margin (%) FY 2008 – Q3 2016 CAGR: 13.4% +750 Margin bps Chart #8

 

 

Balance Sheet Cash and Debt -$120 -$80 -$40 $0 $40 $80 $120 2008 2009 2010 2011 2012 2013 2014 2015 Q3 2016 $ Millions Cash ST/LT Debt Net Debt Chart #9 Strong cash flow generation and balance sheet continue to support future growth

 

 

APPENDIX

 

 

Non - GAAP Earnings Per Diluted Share Reconciliation Chart #10 Q3 2016 Q3 2015 YTD 2016 YTD 2015 GAAP earnings per diluted share 1.21$ 1.08$ 3.32$ 2.98$ Equity income in a captive insurance company per diluted share (0.04) (0.04) (0.07) (0.09) Certain uncommon transaction-related expenses per diluted share 0.08 0.15 0.08 0.15 U.S Customer bankruptcies per diluted share - 0.00 - 0.01 Cost streamlining initiatives per diluted share - - - 0.01 Currency conversion impact of the Venezuelan bolivar fuerte per diluted share - - 0.01 0.21 Non-GAAP earnings per diluted share 1.25$ 1.19$ 3.34$ 3.27$

 

 

Adjusted EBITDA Reconciliation Chart #11 2008 2009 2010 2011 2012 2013 2014 2015 Net income 9,833 16,058 32,120 45,892 47,405 56,339 56,492 51,180 Depreciation 10,879 9,525 9,867 11,455 12,252 12,339 12,306 12,395 Amortization 1,177 1,078 988 2,338 3,106 3,445 4,325 6,811 Interest expense 5,509 5,533 5,225 4,666 4,283 2,922 2,371 2,585 Taxes on income 4,977 7,065 12,616 14,256 15,575 20,489 23,539 17,785 Equity loss (income) from a captive insurance company 1,299 162 (313) (2,323) (1,812) (5,451) (2,412) (2,078) Non-cash gain from the purchase of an equity affiliate - - - (2,718) - - - - Equity affiliate out of period charge - - 564 - - - - - Restructuring expenses 2,916 2,289 - - - - - 6,790 Transition costs related to key employees 3,505 2,443 1,317 - 609 - - - Certain uncommon transaction-related expenses - - - - - - - 2,813 U.K. pension plan amendment - - - - - - 902 - Customer bankruptcies - - - - 1,254 - 825 328 Cost streamlining initiatives - - - - - 1,419 1,166 173 Non-income tax contingency charges - - 4,132 - - 796 - - Change in acquisition-related earnout liability - - - (595) (1,737) (497) - - Mineral oil excise tax refund - - - - - (2,540) - - Currency conversion impacts of the Venezuelan bolivar fuerte - - 322 - - 357 321 2,806 Adjusted EBITDA 40,095 44,153 66,838 72,971 80,935 89,618 99,835 101,588 Adjusted EBITDA Margin 6.9% 9.8% 12.3% 10.7% 11.4% 12.3% 13.0% 13.8%

 

 

Trailing Twelve Months Adjusted EBITDA Reconciliation Chart #12 I = G + H H G = F - D F E = C + D D C = B - A B A Trailing Twelve Months Q3 2016 YTD Q3 2016 Last Three Months 2015 FY 2015 Trailing Twelve Months Q3 2015 YTD Q3 2015 Last Three Months 2014 FY 2014 YTD Q3 2014 Net income 55,362 43,969 11,393 51,180 52,426 39,787 12,639 56,492 43,853 Depreciation 12,635 9,469 3,166 12,395 12,381 9,229 3,152 12,306 9,154 Amortization 7,132 5,319 1,813 6,811 6,569 4,998 1,571 4,325 2,754 Interest expense 2,920 2,226 694 2,585 2,515 1,891 624 2,371 1,747 Taxes on income 21,825 19,664 2,161 17,785 20,355 15,624 4,731 23,539 18,808 Equity income from a captive insurance company (1,809) (952) (857) (2,078) (1,491) (1,221) (270) (2,412) (2,142) Restructuring expenses 6,790 - 6,790 6,790 - - - - - Certain uncommon transaction-related expenses 1,157 1,157 - 2,813 2,813 2,813 - - - U.K. pension plan amendment - - - - - - - 902 902 Customer bankruptcies 149 - 149 328 694 179 515 825 310 Cost streamlining initiatives - - - 173 991 173 818 1,166 348 Currency conversion impacts of the Venezuelan bolivar fuerte 88 88 - 2,806 2,806 2,806 - 321 321 Adjusted EBITDA 106,249 80,940 25,309 101,588 100,059 76,279 23,780 99,835 76,055 Adjusted EBITDA Margin 14.4% 14.6% 13.8% 13.8% 13.4% 13.8% 12.3% 13.0% 13.3%