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SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
_______________________
FORM 10-Q
/ X / QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1994
OR
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from ____________ to ____________
Commission file number 0-7154
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QUAKER CHEMICAL CORPORATION
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(Exact name of registrant as specified in its charter)
Pennsylvania 23-0993790
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
Elm and Lee Streets, Conshohocken, Pennsylvania 19428 - 0809
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code 610-832-4000
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Not Applicable
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Former name, former address and former fiscal year, if changed since
last report.
Indicate by check mark whether the Registrant (1) has filed
all reports required to be filed by Section 13 or 15 (d) of the
Securities Exchange Act of 1934 during the preceding 12 months (or
for such shorter period that the registrant was required to file
such reports), and (2) has been subject to such filing requirements
for the past 90 days. Yes X No
--- ---
APPLICABLE ONLY TO CORPORATE ISSUERS: Indicate the number of
shares outstanding of each of the issuer's classes of common stock,
as of the latest practicable date.
Number of Shares of Common Stock
Outstanding on July 29, 1994 9,238,987
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This report contains a total of 10 pages.
PART I. FINANCIAL INFORMATION
QUAKER CHEMICAL CORPORATION AND CONSOLIDATED SUBSIDIARIES
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CONDENSED FINANCIAL INFORMATION
-------------------------------
The following condensed financial statements are filed as part
of this quarterly report on Form 10-Q:
Consolidated balance sheet at June 30, 1994 and
December 31, 1993
Consolidated statement of income for the six months
ended June 30, 1994 and 1993
Consolidated statement of income for the three months
ended June 30, 1994 and 1993
Consolidated statement of cash flows for the six months
ended June 30, 1994 and 1993
* * * * * * * * * *
NOTE TO CONDENSED FINANCIAL INFORMATION
---------------------------------------
The attached condensed financial information has been prepared
in accordance with instructions for Form 10-Q and, therefore, does
not include all financial note information which might be necessary
for a fair presentation in accordance with generally accepted
accounting principles. Such condensed financial information is
unaudited, but in the opinion of management, includes all adjust-
ments, consisting only of normal recurring adjustments and
accruals, necessary for a fair presentation of results for the
periods indicated. The net income reported for the periods should
not necessarily be regarded as indicative of net income on an
annualized basis; however, significant variations from the results
for the same period of the previous year, if any, have been
disclosed in the accompanying management's discussion and analysis.
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QUAKER CHEMICAL CORPORATION
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CONSOLIDATED BALANCE SHEET
--------------------------
(DOLLARS IN THOUSANDS)
----------------------
JUNE 30, DEC 31,
1994 1993
---- ----
(UNAUDITED) *
ASSETS
- ------
CURRENT ASSETS
CASH AND CASH EQUIVALENTS $ 10,664 $ 19,293
SHORT-TERM INVESTMENTS 1,000
ACCOUNTS RECEIVABLE 43,460 37,108
INVENTORIES
WORK IN PROCESS AND FINISHED GOODS 9,626 9,278
RAW MATERIALS AND SUPPLIES 9,642 8,269
DEFERRED TAXES 2,648 2,857
OTHER CURRENT ASSETS 6,716 6,582
-------- --------
TOTAL CURRENT ASSETS 82,756 84,387
-------- --------
INVESTMENTS IN ASSOCIATED COMPANIES,
AT EQUITY 9,677 6,224
-------- --------
PROPERTY, PLANT AND EQUIPMENT
LAND 6,705 6,440
BUILDINGS AND IMPROVEMENTS 37,103 35,590
MACHINERY AND EQUIPMENT 66,180 63,066
CONSTRUCTION IN PROGRESS 4,059 1,980
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114,047 107,076
LESS ACCUMULATED DEPRECIATION 55,805 50,525
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58,242 56,551
-------- --------
EXCESS OF COST OVER NET ASSETS
OF ACQUIRED COMPANIES, NET 14,755 14,472
DEFERRED TAXES 4,636 4,788
OTHER NONCURRENT ASSETS 3,831 4,563
-------- --------
23,222 23,823
-------- --------
$173,897 $170,985
======== ========
* CONDENSED FROM AUDITED FINANCIAL STATEMENTS.
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QUAKER CHEMICAL CORPORATION
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CONSOLIDATED BALANCE SHEET
--------------------------
(DOLLARS IN THOUSANDS)
----------------------
JUNE 30, DEC 31,
1994 1993
---- ----
(UNAUDITED) *
LIABILITIES AND SHAREHOLDERS' EQUITY
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CURRENT LIABILITIES
SHORT-TERM BORROWINGS AND CURRENT
PORTION OF LONG-TERM DEBT
AND CAPITAL LEASE $ 7,192 $ 4,953
ACCOUNTS PAYABLE 16,217 18,117
DIVIDENDS PAYABLE 1,432
ACCRUED LIABILITIES 16,236 17,727
ESTIMATED TAXES ON INCOME 211 413
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TOTAL CURRENT LIABILITIES 39,856 42,642
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LONG-TERM DEBT AND CAPITAL LEASE 14,205 16,095
DEFERRED TAXES ON INCOME 3,073 3,043
ACCRUED POSTRETIREMENT BENEFITS 9,118 8,968
OTHER NONCURRENT LIABILITIES 6,695 6,840
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TOTAL NONCURRENT LIABILITIES 33,091 34,946
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72,947 77,588
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MINORITY INTEREST IN EQUITY OF SUBSIDIARIES 2,318 2,014
- ------------------------------------------- -------- --------
SHAREHOLDERS' EQUITY
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COMMON STOCK, $1 PAR VALUE: AUTHORIZED
30,000,000 SHARES: ISSUED (INCLUDING
TREASURY SHARES) 9,664,009 SHARES 9,664 9,664
CAPITAL IN EXCESS OF PAR VALUE 594 529
RETAINED EARNINGS 86,502 83,498
EQUITY ADJUSTMENT FROM FOREIGN
CURRENCY TRANSLATION 7,801 3,577
-------- --------
104,561 97,268
TREASURY STOCK, SHARES HELD AT COST;
1994 - 398,587, 1993 - 446,160 (5,929) (5,885)
-------- --------
98,632 91,383
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$173,897 $170,985
======== ========
* CONDENSED FROM AUDITED FINANCIAL STATEMENTS.
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QUAKER CHEMICAL CORPORATION
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CONSOLIDATED STATEMENT OF INCOME
--------------------------------
FOR SIX MONTHS ENDED JUNE 30,
-----------------------------
UNAUDITED
(DOLLARS IN THOUSANDS
EXCEPT PER SHARE FIGURES)
-------------------------
1994 1993
---- ----
INCOME
NET SALES $ 92,440 $ 99,704
OTHER INCOME, NET 939 551
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93,379 100,255
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COSTS AND EXPENSES
COST OF GOODS SOLD 52,132 57,707
SELLING, ADMINISTRATIVE AND
GENERAL EXPENSES 33,739 35,822
REPOSITIONING CHARGES 3,500
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85,871 97,029
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INCOME FROM OPERATIONS 7,508 3,226
INTEREST EXPENSE (734) (729)
INTEREST INCOME 296 816
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INCOME BEFORE TAXES 7,070 3,313
TAXES ON INCOME 2,793 1,531
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4,277 1,782
EQUITY IN NET INCOME OF ASSOCIATED
COMPANIES 324 704
MINORITY INTEREST IN NET INCOME OF
SUBSIDIARIES (161) (211)
---------- ----------
NET INCOME $ 4,440 $ 2,275
========== ==========
PER SHARE:
NET INCOME $0.48 $0.25
DIVIDENDS $0.16 $0.15
BASED ON WEIGHTED AVERAGE NUMBER
OF SHARES OUTSTANDING 9,256,400 9,204,037
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QUAKER CHEMICAL CORPORATION
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CONSOLIDATED STATEMENT OF INCOME
--------------------------------
THREE MONTHS ENDED JUNE 30,
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UNAUDITED
(DOLLARS IN THOUSANDS
EXCEPT PER SHARE FIGURES)
-------------------------
1993 1992
---- ----
INCOME
NET SALES $ 47,347 $ 51,343
OTHER INCOME, NET 581 348
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47,928 51,691
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COSTS AND EXPENSES
COST OF GOODS SOLD 26,749 29,885
SELLING, ADMINISTRATIVE AND
GENERAL EXPENSES 17,385 18,877
REPOSITIONING CHARGES 3,500
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44,134 52,262
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INCOME FROM OPERATIONS 3,794 (571)
INTEREST EXPENSE (404) (349)
INTEREST INCOME 160 347
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INCOME BEFORE TAXES 3,550 (573)
TAXES ON INCOME 1,385 54
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2,165 (627)
EQUITY IN NET INCOME OF ASSOCIATED
COMPANIES 87 289
MINORITY INTEREST IN NET INCOME OF
SUBSIDIARIES (61) (111)
---------- ----------
NET INCOME $ 2,191 $ (449)
========== ==========
PER SHARE:
NET INCOME $0.24 ($0.05)
DIVIDENDS * *
BASED ON WEIGHTED AVERAGE NUMBER
OF SHARES OUTSTANDING 9,260,808 9,209,478
* DIVIDENDS APPLICABLE TO THE SECOND QUARTER ARE NORMALLY DECLARED
AND PAID IN JULY.
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QUAKER CHEMICAL CORPORATION
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CONSOLIDATED STATEMENT OF CASH FLOWS
------------------------------------
FOR SIX MONTHS ENDED JUNE 30,
-----------------------------
UNAUDITED
(DOLLARS IN THOUSANDS)
----------------------
1994 1993
---- ----
CASH FLOWS FROM OPERATING ACTIVITIES $ (341) $ 7,255
-------- --------
CASH FLOWS FROM INVESTING ACTIVITIES
SHORT-TERM INVESTMENTS 1,000 152
DIVIDENDS FROM ASSOCIATED COMPANIES 864 277
INVESTMENT IN ASSOCIATED COMPANY (3,464)
PURCHASE OF PROPERTY, PLANT
AND EQUIPMENT (3,832) (3,563)
COMPANIES ACQUIRED EXCLUDING CASH (11,099)
OTHER 266 (308)
-------- --------
NET CASH USED IN INVESTING
ACTIVITIES (5,166) (14,541)
-------- --------
CASH FLOWS FROM FINANCING ACTIVITIES
SHORT-TERM DEBT INCURRED 5,565 1,752
CAPITAL LEASE INCURRED 879
REPAYMENT OF SHORT-TERM DEBT (3,500) (2,434)
REPAYMENT OF LONG-TERM DEBT (1,761)
REPAYMENT OF CAPITAL LEASE (182) (697)
DIVIDENDS PAID (2,868) (2,760)
TREASURY STOCK ISSUED 21 401
OTHER (3) 145
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NET CASH PROVIDED FROM FINANCING
ACTIVITIES (2,728) (2,714)
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EFFECT OF EXCHANGE RATE CHANGES ON CASH (394) (34)
-------- --------
NET (DECREASE) INCREASE IN CASH AND
CASH EQUIVALENTS (8,629) (10,034)
CASH AND CASH EQUIVALENTS AT:
BEGINNING OF PERIOD 19,293 24,373
-------- --------
END OF PERIOD $ 10,664 $ 14,339
======== ========
CASH PAID FOR:
INCOME TAXES $ 2,385 $ 2,763
INTEREST 700 1,016
* * * * * * * * * *
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Management's Discussion and Analysis of
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Financial Condition and Results of Operations
---------------------------------------------
Liquidity and Capital Resources
- -------------------------------
The working capital ratio at June 30, 1994 was 2.1 to 1 as compared to
2.0 to 1 at December 31, 1993, reflecting the continuation of an adequate
level of liquidity necessary to support operations. The company's net cash
position (cash and cash equivalents plus short-term investments less
short-term borrowings and current portion of long-term debt and capital
lease) declined $11.9 million during the first six months of 1994. This
was due primarily to a cash investment of approximately $3.5 million in a
joint venture, cash outlays of about $1.5 million related to the company's
1993 repositioning program and increased short-term borrowings in the U.S.
associated with (i) seasonal cash needs, (ii) the replacement of maturing
long-term obligations with short-term debt, (iii) increases in non-cash
(primarily accounts receivable) working capital. Working capital increased
$1.2 million in the first half of 1994 mainly as a result of the
aforementioned increases in non-cash working capital.
On March 24, 1994, the formation of the above-noted joint venture with
Fluid Recycling Services was completed. In addition to the initial
contribution, additional investments are expected over the next few years
based on the growth of the venture.
Comparison of Six Months 1994 with Six Months 1993
- --------------------------------------------------
Consolidated net sales for the first half of 1994 decreased $7.3
million (7%) while comparative income from operations improved $.8 million
(12%) versus the first half of 1993. The decrease in sales was due to a 2%
reduction associated with currency translation; a decline of 1% from price
and product mix; and a 4% decrease associated with the net result of
acquisitions and divestitures. The company's major markets continue to be
characterized by customers focused on increasing efficiencies in the usage
of chemical products and lowering their costs by demanding more value-added
services and exerting price pressures on suppliers. In addition, there are
signs that raw material prices for many commodity chemicals are starting to
rise. Operating conditions in the United States appear to be sustainable
at the present pace at least into early 1995. In Europe, some positive
trends have been apparent, but the timing of an overall recovery is
difficult to predict. Continued improvement in operating results during
1994 is largely dependent on both the timing of the European economic
recovery and the acceleration of the effectiveness of the company's
service activities in the United States.
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Operating margins as a percentage of sales improved in the first half
of 1994 when compared to the corresponding period in 1993 as improved sales
mix, lower raw material costs, and cost savings associated with the
company's 1993 repositioning program offset the negative leverage effect of
fixed costs on reduced sales volume. The after-tax financial benefit
generated in the first half of 1994 due to the 1993 repositioning program
was approximately $.05 per share in each quarter. Other income rose
primarily as a result of increased royalty income. Interest income
declined due to lower cash holdings by the company. The effective tax rate
in the first half of 1994 decreased 6% when compared to the first half of
1993 due in large part to the negative influence on the prior year rate of
non-deductible expenses related to both goodwill and a second quarter
repositioning charge. The decrease in equity in net income from associated
companies was primarily due to lower earnings from the company's Japanese
affiliate which is being hampered by sluggish demand in the Japanese steel
industry and business development investments in the joint venture
mentioned above. The negative influence of currency translation on first
half 1994 net income was $.02 per share.
Comparison of Second Quarter 1994 with Second Quarter 1993
- ----------------------------------------------------------
Consolidated net sales for the second quarter of 1994 decreased $4.0
million (8%) while comparative income from operations improved $.9 million
(30%) versus the second quarter of 1993. The decrease in sales was
primarily due to an 8% decrease associated with the net result of
acquisitions and divestitures as volume improvements of 2% were offset by a
decline of 1% each from price and product mix, and currency translation.
The operating margin improvement in the second quarter of 1994 over
1993 resulted from more favorable sales mix and cost savings associated
with the company's 1993 repositioning program. The reasons for the change
in Other Income, Interest Income and the effective tax rate in the second
quarter 1994 versus 1993 are basically the same as the six-month period.
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PART II. OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders.
The 1994 Annual Meeting of the Company's shareholders
was held on May 4, 1994. At the Meeting, management's nominees,
Lennox K. Black, Robert P. Hauptfuhrer, Frederick Heldring,
Ronald J. Naples and Alex Satinsky were elected to fill the
five available positions as Class II directors. Voting
(expressed in numbers of votes) was as follows: Mr. Black --
35,877,982 for, 47,605 against or withheld and no abstentions
or broker non-votes; Mr. Hauptfuhrer -- 35,887,982 for, 37,605
against or withheld and no abstentions or broker non-votes;
Mr. Heldring -- 35,886,882 for, 38,705 against or withheld and
no abstentions or broker non-votes; Mr. Naples -- 35,870,232
for, 55,355 against or withheld and no abstentions or broker
non-votes; and Mr. Satinsky -- 35,861,382 for, 64,205 against
or withheld and no abstentions or broker non-votes.
At the Meeting, shareholders ratified the appointment of
Price Waterhouse as the Company's independent auditors to
examine and report on its financial statements for the year
ending December 31, 1994 by a vote of 35,252,668 votes for,
662,614 votes against and 10,305 abstentions or broker
non-votes.
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits.
None.
(b) Reports on Form 8-K.
No report on Form 8-K was filed during the
quarter for which this report is filed.
* * * * * * * * *
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 thereunto duly authorized.
QUAKER CHEMICAL CORPORATION
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(registrant)
JOSEPH F. SPANIER
-----------------------------------------------
Joseph F. Spanier, officer duly
authorized to sign this report,
Corporate Controller and
Principal Financial Officer
Date: August 12, 1994
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