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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 September 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
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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 October 31, 1994 8,932,375
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This report contains a total of 12 pages.
PART I. FINANCIAL INFORMATION
QUAKER CHEMICAL CORPORATION AND CONSOLIDATED SUBSIDIARIES
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CONDENSED FINANCIAL INFORMATION
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The following condensed financial statements are filed as part
of this quarterly report on Form 10-Q:
Consolidated balance sheet at September 30, 1994 and
December 31, 1993
Consolidated statement of income for the nine months
ended September 30, 1994 and 1993
Consolidated statement of income for the three months
ended September 30, 1994 and 1993
Consolidated statement of cash flows for the nine months
ended September 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
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(DOLLARS IN THOUSANDS)
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SEPT 30, DEC 31,
1994 1993
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(UNAUDITED) *
ASSETS
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CURRENT ASSETS
CASH AND CASH EQUIVALENTS $ 12,356 $ 19,293
SHORT-TERM INVESTMENTS 1,000
ACCOUNTS RECEIVABLE 41,586 37,108
INVENTORIES
WORK IN PROCESS AND FINISHED GOODS 9,962 9,278
RAW MATERIALS AND SUPPLIES 9,063 8,269
DEFERRED TAXES 3,713 2,857
OTHER CURRENT ASSETS 8,082 6,582
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TOTAL CURRENT ASSETS 84,762 84,387
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INVESTMENTS IN ASSOCIATED COMPANIES,
AT EQUITY 10,332 6,224
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PROPERTY, PLANT AND EQUIPMENT
LAND 6,709 6,440
BUILDINGS AND IMPROVEMENTS 36,059 35,590
MACHINERY AND EQUIPMENT 64,996 63,066
CONSTRUCTION IN PROGRESS 4,407 1,980
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112,171 107,076
LESS ACCUMULATED DEPRECIATION 56,187 50,525
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55,984 56,551
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EXCESS OF COST OVER NET ASSETS
OF ACQUIRED COMPANIES, NET 12,120 14,472
DEFERRED TAXES 4,818 4,788
OTHER NONCURRENT ASSETS 3,765 4,563
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20,703 23,823
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$ 171,781 $ 170,985
========= =========
*CONDENSED FROM AUDITED FINANCIAL STATEMENTS.
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QUAKER CHEMICAL CORPORATION
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CONSOLIDATED BALANCE SHEET
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(DOLLARS IN THOUSANDS)
----------------------
SEPT 30, DEC 31,
1994 1993
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(UNAUDITED) *
LIABILITIES AND SHAREHOLDERS' EQUITY
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CURRENT LIABILITIES
SHORT-TERM BORROWINGS AND CURRENT
PORTION OF LONG-TERM DEBT
AND CAPITAL LEASE $ 7,200 $ 4,953
ACCOUNTS PAYABLE 18,392 18,117
DIVIDENDS PAYABLE 1,390 1,432
ACCRUED LIABILITIES 15,378 17,727
ESTIMATED TAXES ON INCOME 581 413
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TOTAL CURRENT LIABILITIES 42,941 42,642
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LONG-TERM DEBT AND CAPITAL LEASE 12,304 16,095
DEFERRED TAXES ON INCOME 3,185 3,043
ACCRUED POSTRETIREMENT BENEFITS 9,193 8,968
OTHER NONCURRENT LIABILITIES 6,736 6,840
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TOTAL NONCURRENT LIABILITIES 31,418 34,946
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74,359 77,588
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MINORITY INTEREST IN EQUITY OF SUBSIDIARIES 2,509 2,014
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SHAREHOLDERS' EQUITY
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COMMON STOCK, $1 PAR VALUE: AUTHORIZED
30,000,000 SHARES: ISSUED (INCLUDING
TREASURY SHARES) 9,664,009 SHARES 9,664 9,664
CAPITAL IN EXCESS OF PAR VALUE 620 529
RETAINED EARNINGS 86,028 83,498
EQUITY ADJUSTMENT FROM FOREIGN
CURRENCY TRANSLATION 9,503 3,577
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105,815 97,268
TREASURY STOCK, SHARES HELD AT COST;
1994 - 695,795, 1993 - 446,160 (10,902) (5,885)
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94,913 91,383
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$ 171,781 $ 170,985
========= =========
*CONDENSED FROM AUDITED FINANCIAL STATEMENTS.
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CONSOLIDATED STATEMENT OF INCOME
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FOR NINE MONTHS ENDED SEPTEMBER 30,
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UNAUDITED
(DOLLARS IN THOUSANDS
EXCEPT PER SHARE FIGURES)
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1994 1993
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INCOME
NET SALES $ 142,557 $ 148,145
OTHER INCOME, NET 1,294 752
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143,851 148,897
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COSTS AND EXPENSES
COST OF GOODS SOLD 80,352 85,693
SELLING, ADMINISTRATIVE AND
GENERAL EXPENSES 51,882 55,185
REPOSITIONING CHARGES 3,500
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132,234 144,378
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INCOME FROM OPERATIONS 11,617 4,519
INTEREST EXPENSE (1,107) (1,082)
INTEREST INCOME 346 1,008
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INCOME BEFORE TAXES 10,856 4,445
TAXES ON INCOME 4,332 2,088
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6,524 2,357
EQUITY IN NET INCOME OF ASSOCIATED
COMPANIES 555 952
MINORITY INTEREST IN NET INCOME OF
SUBSIDIARIES (286) (304)
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NET INCOME $ 6,793 $ 3,005
========= =========
PER SHARE:
NET INCOME $0.74 $0.33
DIVIDENDS $0.46 $0.45
BASED ON WEIGHTED AVERAGE NUMBER
OF SHARES OUTSTANDING 9,229,236 9,209,929
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QUAKER CHEMICAL CORPORATION
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CONSOLIDATED STATEMENT OF INCOME
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THREE MONTHS ENDED SEPTEMBER 30,
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UNAUDITED
(DOLLARS IN THOUSANDS
EXCEPT PER SHARE FIGURES)
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1994 1993
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INCOME
NET SALES $ 50,117 $ 48,441
OTHER INCOME, NET 355 201
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50,472 48,642
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COSTS AND EXPENSES
COST OF GOODS SOLD 28,220 27,986
SELLING, ADMINISTRATIVE AND
GENERAL EXPENSES 18,143 19,363
REPOSITIONING CHARGES -- --
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46,363 47,349
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INCOME FROM OPERATIONS 4,109 1,293
INTEREST EXPENSE (373) (353)
INTEREST INCOME 50 192
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INCOME BEFORE TAXES 3,786 1,132
TAXES ON INCOME 1,539 557
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2,247 575
EQUITY IN NET INCOME OF ASSOCIATED
COMPANIES 231 248
MINORITY INTEREST IN NET INCOME OF
SUBSIDIARIES (125) (93)
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NET INCOME $ 2,353 $ 730
========= =========
PER SHARE:
NET INCOME $0.26 $0.08
DIVIDENDS $0.31 $0.30
BASED ON WEIGHTED AVERAGE NUMBER
OF SHARES OUTSTANDING 9,182,098 9,221,520
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QUAKER CHEMICAL CORPORATION
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CONSOLIDATED STATEMENT OF CASH FLOWS
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FOR NINE MONTHS ENDED SEPTEMBER 30,
-----------------------------------
UNAUDITED
(DOLLARS IN THOUSANDS)
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1994 1993
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CASH FLOWS FROM OPERATING ACTIVITIES $ 3,783 $ 8,368
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CASH FLOWS FROM INVESTING ACTIVITIES
SHORT-TERM INVESTMENTS 1,000 (365)
DIVIDENDS FROM ASSOCIATED COMPANIES 927 457
INVESTMENTS IN AND ADVANCES TO
ASSOCIATED COMPANIES (4,325)
PURCHASE OF PROPERTY, PLANT
AND EQUIPMENT (5,134) (6,374)
PROCEEDS FROM SALE OF SUBSIDIARY 7,045
PROCEEDS FROM THE SALE OF PATENT,
PRODUCTION TECHNOLOGY AND OTHER
RELATED NONCURRENT ASSETS 6,500
COMPANIES ACQUIRED EXCLUDING CASH (11,099)
OTHER 776 (1,301)
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NET CASH USED IN INVESTING
ACTIVITIES 289 (12,182)
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CASH FLOWS FROM FINANCING ACTIVITIES
SHORT-TERM DEBT INCURRED 6,995 2,059
CAPITAL LEASE INCURRED 878
REPAYMENT OF SHORT-TERM DEBT (4,872) (2,637)
REPAYMENT OF LONG-TERM DEBT (3,582) (1,667)
REPAYMENT OF CAPITAL LEASE (264) (764)
DIVIDENDS PAID (4,305) (4,142)
TREASURY STOCK ISSUED (ACQUIRED) (4,926) 743
OTHER (17)
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NET CASH PROVIDED FROM FINANCING
ACTIVITIES (10,954) (5,547)
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EFFECT OF EXCHANGE RATE CHANGES ON CASH (55) 1,095
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NET (DECREASE) INCREASE IN CASH AND
CASH EQUIVALENTS (6,937) (8,266)
CASH AND CASH EQUIVALENTS AT:
BEGINNING OF PERIOD 19,293 24,373
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END OF PERIOD $ 12,356 $ 16,107
========= =========
CASH PAID FOR:
INCOME TAXES $ 4,937 $ 4,289
INTEREST 1,350 1,279
* * * * * * * * * *
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Management's Discussion and Analysis of
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Financial Condition and Results of Operations
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Liquidity and Capital Resources
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The working capital ratio at September 30, 1994 was 2.0 to 1,
the same as 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 $10.2 million during the
first nine months of 1994. This decline was due primarily to a
cash investment and advances of approximately $4.3 million in a
joint venture, cash outlays of about $2.1 million related to the
company's 1993 repositioning program, increased short-term
borrowings to finance the replacement of maturing long-term
obligations with short-term debt, and increases in non-cash
(primarily accounts receivable) working capital. Working capital
remained virtually unchanged from year-end 1993 due to the
offsetting impacts of the aforementioned changes in net cash and
non-cash working capital.
Pursuant to the plans identified in the company's 1993
repositioning program, the sale of certain of the company's
businesses and assets were recently completed. On September 30,
1994, and November 7, 1994, respectively, the company consummated
the sales of the businesses which comprised its wholly-owned
subsidiary, Quaker Construction Products, Incorporated (QCP). On
September 30, 1994, the coatings and waterproofing business of QCP
was sold to Carlisle Coatings & Waterproofing, Incorporated, a
subsidiary of Carlisle Corporation for approximately $8.2 million,
$7.0 million of which was received at settlement. On November 7,
1994, the flooring business of QCP was sold to Thoro System
Products, Incorporated, a subsidiary of Harris Chemical Group,
Incorporated for approximately $2.8 million. In addition, the
company sold its Pomona, California manufacturing facility, which
had ceased production in 1993, for approximately $1.0 million on
October 1, 1994. The transactions are not expected to have a
material impact on the company's operating results.
During the second and third quarters of 1994, the company
repurchased a total of 304,000 outstanding shares of common stock
for approximately $5.4 million as part of the previously announced
share repurchase program. The share repurchases were funded
primarily with the above noted business and asset sale proceeds.
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Comparison of Nine Months 1994 with Nine Months 1993
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Net sales for the first nine months of 1994 decreased $5.6
million (4%) while income from operations, before repositioning
charges, improved $3.6 million (45%) versus the first nine months
of 1993. The decrease in sales was the net result of a 3% increase
in volume offset by a decline of 2% from price and sales mix and a
5% decrease associated with the net result of acquisitions and
divestitures.
Operating margins as a percentage of sales improved in the
first nine months of 1994 when compared to the corresponding period
in 1993 as increased core market volume, improved sales mix, 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 nine months 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 nine months of 1994 decreased 7%
when compared to the first nine months 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 business development
investments in a joint venture and lower earnings from the
company's Japanese affiliate which is being hampered by sluggish
demand in the Japanese steel industry. The negative influence of
currency translation on first nine months 1994 net income was $.01
per share.
Operating conditions in the United States appear to be
sustainable at the present pace into 1995. In Europe, there are
encouraging signals as the region's automotive production rates
show signs of sustained improvement, and steel production increases
primarily to meet both local demand and export demand from the
United States and Asia Pacific regions. However, raw material
price increases have become evident in both the U.S. and Europe
mainly on the larger commodities. Programs have been initiated to
offset these increases in the fourth quarter and early next year.
However, there may be some lag in the short-term in passing on the
increases due to the longer term nature of some existing contracts
and ongoing pricing pressures exerted by some major customer
groups. Further improvement in operating results during 1994 is
dependent on the sustainability of the positive economic trends in
Europe, on minimizing the impact of recent raw material price
increases, and on accelerating the effectiveness of the company's
service activities in the United States.
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Comparison of Third Quarter 1994 with Third Quarter 1993
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Consolidated net sales for the third quarter of 1994 increased
$1.7 million (3%) while comparative income from operations improved
$2.8 million (218%) versus the third quarter of 1993. The increase
in sales was primarily due to positive improvements related to
volume and currency translation of 11% and 3%, respectively,
partially offset by an 8% decrease associated with the net result
of acquisitions and divestitures and a decline of 3% from price and
product mix.
The operating margin improvement in the third quarter of 1994
over 1993 resulted from increased volume (particularly in Europe),
more favorable sales mix, and cost savings associated with the
company's 1993 repositioning program. The reasons for the changes
in Other Income and Interest Income are basically the same as the
nine-month period. The change in effective tax rate in the third
quarter 1994 versus 1993 is mainly a result of the combination of
non-deductible expenses and low level of sales in 1993.
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PART II. OTHER INFORMATION
Items 1-5 are inapplicable and have been omitted.
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits.
Exhibit 27, Financial Data Schedule
(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)
RICHARD J. FAGAN
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Richard J. Fagan, officer duly
authorized to sign this report,
Acting Corporate Controller,
Corporate Treasurer and Principal
Financial and Chief Accounting
Officer
Date: November 11, 1994
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WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.