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
April 26, 2011
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
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PENNSYLVANIA
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No. 23-0993790
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(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 19428
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(Address of principal executive offices)
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(Zip Code)
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(610) 832-4000
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(Registrant’s telephone number, including area code)
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Not Applicable
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(Former name or former address, if changed since last report)
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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:
o Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
o Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
o Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
o 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 April 26, 2011, Quaker Chemical Corporation announced its results of operations for the first quarter ended March 31, 2011, 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.
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Item 9.01.
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Financial Statements and Exhibits.
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The following exhibits are included as part of this report:
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Exhibit No.
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99.1
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Press Release of Quaker Chemical Corporation dated April 26, 2011.
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99.2
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Supplemental Information related to first quarter ended March 31, 2011.
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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.
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QUAKER CHEMICAL CORPORATION
Registrant
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Date: April 26, 2011
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By:
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/s/ Mark A. Featherstone
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Mark A. Featherstone
Vice President and
Chief Financial Officer
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NEWS
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For Release:
Immediate
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Contact:
Mark A. Featherstone
Vice President and
Chief Financial Officer
610-832-4160
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QUAKER CHEMICAL CORPORATION ANNOUNCES FIRST QUARTER 2011 RESULTS
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Strong quarterly sales up 25% to $159.9 million from Q1 2010
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Q1 2011 diluted EPS of $0.91 vs. $0.84 diluted EPS in Q1 2010
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Product volumes higher than Q1 2010 by 16%
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April 26, 2011
CONSHOHOCKEN, PA – Quaker Chemical Corporation (NYSE:KWR) today announced net sales of $159.9 million and earnings per diluted share of $0.91 for the first quarter of 2011, up 25% and 8%, respectively, compared to net sales of $128.3 million and earnings per diluted share of $0.84 for the first quarter of 2010.
Michael F. Barry, Chairman, Chief Executive Officer and President, commented, “We are off to a good start in 2011, despite the continuing challenge of escalating raw material costs. We are and will be implementing additional price increases as part of our ongoing effort to restore our margins to more acceptable levels. However, our profitability continues to grow due to good demand in our base markets, new business gained and the contribution from our recent acquisitions.”
Mr. Barry further stated, “Despite the uncertainties in the raw material markets and global economies, our goal for 2011 remains to build upon the profitability we achieved in 2010. With our leadership positions in both the emerging and mature markets, as well as our organic and external growth opportunities, I remain confident in our prospects for 2011 and beyond.”
First Quarter 2011 Summary
Net sales for the first quarter of 2011 were $159.9 million, an increase of 25% from $128.3 million in the first quarter of 2010. The increase in net sales was primarily the result of higher volumes and selling prices across the globe. Product volumes were higher by approximately 16% including the effects of acquisitions. Selling prices and mix increased revenues by approximately 7%, as the Company continues to implement price increases to help offset higher raw material costs. Foreign exchange rates also increased revenues by approximately 2%.
Gross profit increased by approximately $5.4 million, but gross margin decreased from 36.9% in the first quarter of 2010 to 33% in the first quarter of 2011, as raw material costs continued to escalate, particularly in the first quarter of 2011. The Company continues to implement price increases to recover these higher costs.
Selling, general and administrative expenses (“SG&A”) increased approximately $5.0 million compared to the first quarter of 2010. Higher selling costs on increased business activity, our 2010 acquisitions, foreign exchange rate translation and higher professional fees accounted for approximately 62% of the increase. Higher inflationary and other costs partially offset by lower incentive compensation accounted for the remainder of the increase. SG&A as a percentage of sales decreased to 24.2% in the first quarter of 2011 from 26.2% in the first quarter of 2010.
Net interest expense decreased due to lower interest rates despite higher average borrowings. Equity in net income of associated companies increased compared to the first quarter of 2010 as the prior year quarter reflected a charge of approximately $0.03 per diluted share related to the first quarter 2010 devaluation of the Venezuelan Bolivar Fuerte.
The Company’s low first quarter 2011 and 2010 effective tax rates include the expiration of applicable statutes of limitations for uncertain tax positions of approximately $0.11 per diluted share, in each period. The Company has experienced and expects to further experience volatility in its quarterly effective tax rates due to the varying timing of tax audits and the expiration of applicable statutes of limitations as they relate to uncertain tax positions. However, the Company expects a higher effective tax rate for the full year 2011 as compared to the first quarter 2011 rate.
Balance Sheet and Cash Flow Items
Debt increased from December 31, 2010 due to higher working capital requirements on increased business activity, as well as the timing of payments related to incentive compensation.
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 first quarter results is scheduled for April 27, 2011 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, aluminum, 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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Condensed Consolidated Statement of Income
(Dollars in thousands, except per share data and share amounts)
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(Unaudited)
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Three Months Ended March 31,
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2011
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2010
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Net sales
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$ | 159,865 | $ | 128,320 | ||||
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Cost of goods sold
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107,131 | 80,980 | ||||||
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Gross profit
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52,734 | 47,340 | ||||||
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%
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33.0 | % | 36.9 | % | ||||
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Selling, general and administrative expenses
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38,634 | 33,669 | ||||||
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Operating income
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14,100 | 13,671 | ||||||
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%
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8.8 | % | 10.7 | % | ||||
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Other income, net
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539 | 763 | ||||||
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Interest expense, net
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(946 | ) | (1,127 | ) | ||||
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Income before taxes and equity in net income (loss) of associated companies
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13,693 | 13,307 | ||||||
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Taxes on income before equity in net income (loss) of associated companies
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2,822 | 3,181 | ||||||
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Income before equity in net income (loss) of associated companies
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10,871 | 10,126 | ||||||
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Equity in net income (loss) of associated companies
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359 | (89 | ) | |||||
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Net income
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11,230 | 10,037 | ||||||
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Less: Net income attributable to noncontrolling interest
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630 | 618 | ||||||
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Net income attributable to Quaker Chemical Corporation
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$ | 10,600 | $ | 9,419 | ||||
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%
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6.6 | % | 7.3 | % | ||||
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Per share data:
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Net income attributable to Quaker Chemical Corporation Common Shareholders - basic
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$ | 0.92 | $ | 0.85 | ||||
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Net income attributable to Quaker Chemical Corporation Common Shareholders - diluted
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$ | 0.91 | $ | 0.84 | ||||
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Condensed Consolidated Balance Sheet
(Dollars in thousands, except par value and share amounts)
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(Unaudited)
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March 31,
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December 31,
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2011
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2010
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ASSETS
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Current assets
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Cash and cash equivalents
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$ | 23,564 | $ | 25,766 | ||||
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Accounts receivable, net
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130,948 | 116,266 | ||||||
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Inventories
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70,230 | 60,841 | ||||||
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Prepaid expenses and other current assets
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13,899 | 12,609 | ||||||
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Total current assets
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238,641 | 215,482 | ||||||
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Property, plant and equipment, net
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78,494 | 76,535 | ||||||
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Goodwill
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53,675 | 52,758 | ||||||
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Other intangible assets, net
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23,579 | 24,030 | ||||||
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Investments in associated companies
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9,439 | 9,218 | ||||||
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Deferred income taxes
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27,303 | 28,846 | ||||||
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Other assets
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44,896 | 42,561 | ||||||
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Total assets
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$ | 476,027 | $ | 449,430 | ||||
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LIABILITIES AND EQUITY
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Current liabilities
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Short-term borrowings and current portion of long-term debt
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$ | 809 | $ | 890 | ||||
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Accounts and other payables
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76,595 | 63,893 | ||||||
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Accrued compensation
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9,728 | 17,140 | ||||||
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Other current liabilities
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19,108 | 19,268 | ||||||
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Total current liabilities
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106,240 | 101,191 | ||||||
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Long-term debt
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83,766 | 73,855 | ||||||
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Deferred income taxes
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6,410 | 6,108 | ||||||
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Other non-current liabilities
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78,849 | 81,177 | ||||||
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Total liabilities
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275,265 | 262,331 | ||||||
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Equity
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Common stock, $1 par value; authorized 30,000,000 shares; issued 11,531,148
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11,531 | 11,492 | ||||||
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Capital in excess of par value
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39,132 | 38,275 | ||||||
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Retained earnings
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152,237 | 144,347 | ||||||
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Accumulated other comprehensive loss
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(9,497 | ) | (13,736 | ) | ||||
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Total Quaker shareholders' equity
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193,403 | 180,378 | ||||||
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Noncontrolling interest
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7,359 | 6,721 | ||||||
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Total equity
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200,762 | 187,099 | ||||||
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Total liabilities and equity
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$ | 476,027 | $ | 449,430 | ||||
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Quaker Chemical Corporation
Condensed Consolidated Statement of Cash Flows
For the three months ended March 31,
(Dollars in thousands)
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(Unaudited)
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2011
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2010
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Cash flows from operating activities
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Net income
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$ | 11,230 | $ | 10,037 | ||||
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Adjustments to reconcile net income to net cash used in operating activities:
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Depreciation
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2,656 | 2,593 | ||||||
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Amortization
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486 | 254 | ||||||
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Equity in net (income) loss of associated companies, net of dividends
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(262 | ) | 89 | |||||
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Deferred compensation and other, net
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1,967 | 289 | ||||||
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Stock-based compensation
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868 | 727 | ||||||
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Gain on disposal of property, plant and equipment
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(40 | ) | (32 | ) | ||||
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Insurance settlement realized
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(365 | ) | (345 | ) | ||||
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Pension and other postretirement benefits
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(4,910 | ) | (2,265 | ) | ||||
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Increase (decrease) in cash from changes in current assets and current liabilities, net of acquisitions:
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Accounts receivable
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(12,478 | ) | (3,606 | ) | ||||
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Inventories
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(8,309 | ) | (5,332 | ) | ||||
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Prepaid expenses and other current assets
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(2,397 | ) | (1,360 | ) | ||||
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Accounts payable and accrued liabilities
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4,455 | (5,818 | ) | |||||
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Net cash used in operating activities
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(7,099 | ) | (4,769 | ) | ||||
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Cash flows from investing activities
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Capital expenditures
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(3,475 | ) | (2,042 | ) | ||||
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Proceeds from disposition of assets
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170 | 41 | ||||||
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Insurance settlement received and interest earned
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22 | 5,038 | ||||||
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Change in restricted cash, net
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343 | (2,742 | ) | |||||
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Net cash (used in) provided by investing activities
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(2,940 | ) | 295 | |||||
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Cash flows from financing activities
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Proceeds from long-term debt
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10,000 | 7,583 | ||||||
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Repayments of long-term debt
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(231 | ) | (122 | ) | ||||
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Dividends paid
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(2,701 | ) | (2,550 | ) | ||||
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Stock options exercised, other
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(50 | ) | 135 | |||||
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Excess tax benefit related to stock option exercises
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78 | 321 | ||||||
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Net cash provided by financing activities
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7,096 | 5,367 | ||||||
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Effect of exchange rate changes on cash
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741 | (1,124 | ) | |||||
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Net decrease in cash and cash equivalents
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(2,202 | ) | (231 | ) | ||||
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Cash and cash equivalents at the beginning of the period
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25,766 | 25,051 | ||||||
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Cash and cash equivalents at the end of the period
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$ | 23,564 | $ | 24,820 | ||||
