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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 March 31, 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 April 30, 1994 9,260,785
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This report contains a total of 9 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 March 31, 1994 and
December 31, 1993
Consolidated statement of income for the three months
ended March 31, 1994 and 1993
Consolidated statement of cash flows for the three months
ended March 31, 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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MARCH 31, DEC 31,
1994 1993
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(UNAUDITED) *
ASSETS
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CURRENT ASSETS
CASH AND CASH EQUIVALENTS $ 15,354 $ 19,293
SHORT-TERM INVESTMENTS 1,000
ACCOUNTS RECEIVABLE 40,568 37,108
INVENTORIES
WORK IN PROCESS AND FINISHED GOODS 9,902 9,278
RAW MATERIALS AND SUPPLIES 7,631 8,269
DEFERRED TAXES 2,414 2,857
OTHER CURRENT ASSETS 6,407 6,582
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TOTAL CURRENT ASSETS 82,276 84,387
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INVESTMENTS IN ASSOCIATED COMPANIES,
AT EQUITY 9,992 6,224
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PROPERTY, PLANT AND EQUIPMENT
LAND 6,559 6,440
BUILDINGS AND IMPROVEMENTS 36,247 35,590
MACHINERY AND EQUIPMENT 64,115 63,066
CONSTRUCTION IN PROGRESS 3,581 1,980
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110,502 107,076
LESS ACCUMULATED DEPRECIATION 52,961 50,525
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57,541 56,551
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EXCESS OF COST OVER NET ASSETS
OF ACQUIRED COMPANIES, NET 14,373 14,472
DEFERRED TAXES 4,792 4,788
OTHER NONCURRENT ASSETS 4,019 4,563
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23,184 23,823
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$172,993 $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)
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MARCH 31, 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 $ 8,969 $ 4,953
ACCOUNTS PAYABLE 16,474 18,117
DIVIDENDS PAYABLE 1,435 1,432
ACCRUED LIABILITIES 16,225 17,727
ESTIMATED TAXES ON INCOME 149 413
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TOTAL CURRENT LIABILITIES 43,252 42,642
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LONG-TERM DEBT AND CAPITAL LEASE 14,338 16,095
DEFERRED TAXES ON INCOME 3,004 3,043
ACCRUED POSTRETIREMENT BENEFITS 9,043 8,968
OTHER NONCURRENT LIABILITIES 6,947 6,840
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TOTAL NONCURRENT LIABILITIES 33,332 34,946
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76,584 77,588
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MINORITY INTEREST IN EQUITY OF SUBSIDIARIES 2,225 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 568 529
RETAINED EARNINGS 84,301 83,498
EQUITY ADJUSTMENT FROM FOREIGN
CURRENCY TRANSLATION 5,318 3,577
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99,852 97,268
TREASURY STOCK, SHARES HELD AT COST;
1994 - 405,611, 1993 - 458,375 (5,668) (5,885)
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94,184 91,383
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$172,993 $170,985
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* CONDENSED FROM AUDITED FINANCIAL STATEMENTS.
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QUAKER CHEMICAL CORPORATION
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CONSOLIDATED STATEMENT OF INCOME
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FOR THE PERIOD ENDED MARCH 31,
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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 $ 45,093 $ 48,361
OTHER INCOME, NET 358 203
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45,451 48,564
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COSTS AND EXPENSES
COST OF GOODS SOLD 25,383 27,822
SELLING, ADMINISTRATIVE AND
GENERAL EXPENSES 16,354 16,945
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41,737 44,767
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INCOME FROM OPERATIONS 3,714 3,797
INTEREST EXPENSE (330) (380)
INTEREST INCOME 136 469
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INCOME BEFORE TAXES 3,520 3,886
TAXES ON INCOME 1,408 1,477
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2,112 2,409
EQUITY IN NET INCOME OF ASSOCIATED
COMPANIES 237 415
MINORITY INTEREST IN NET INCOME OF
SUBSIDIARIES (100) (100)
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NET INCOME $ 2,249 $ 2,724
========== ==========
PER SHARE:
NET INCOME $0.24 $0.30
DIVIDENDS $0.16 $0.15
BASED ON WEIGHTED AVERAGE NUMBER
OF SHARES OUTSTANDING 9,252,727 9,198,536
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QUAKER CHEMICAL CORPORATION
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CONSOLIDATED STATEMENT OF CASH FLOWS
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FOR THE PERIOD ENDED MARCH 31,
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UNAUDITED
(DOLLARS IN THOUSANDS)
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1994 1993
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CASH FLOWS FROM OPERATING ACTIVITIES $ (1,105) $ 2,681
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CASH FLOWS FROM INVESTING ACTIVITIES
SHORT-TERM INVESTMENTS 1,000 (471)
DIVIDENDS FROM ASSOCIATED COMPANIES 551 277
INVESTMENT IN ASSOCIATED COMPANY (3,319)
PURCHASE OF PROPERTY, PLANT
AND EQUIPMENT (2,147) (1,373)
OTHER 47 72
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NET CASH USED IN INVESTING
ACTIVITIES (3,868) (1,495)
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CASH FLOWS FROM FINANCING ACTIVITIES
SHORT-TERM DEBT INCURRED 4,000 1,500
CAPITAL LEASE INCURRED 879
REPAYMENT OF SHORT-TERM DEBT (49) (434)
REPAYMENT OF LONG-TERM DEBT (1,667)
REPAYMENT OF CAPITAL LEASE (101) (610)
DIVIDENDS PAID (1,433) (1,379)
TREASURY STOCK ISSUED 256 233
OTHER (3) 93
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NET CASH PROVIDED FROM FINANCING
ACTIVITIES 1,003 282
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EFFECT OF EXCHANGE RATE CHANGES ON CASH 31 (178)
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NET (DECREASE) INCREASE IN CASH AND
CASH EQUIVALENTS (3,939) 1,290
CASH AND CASH EQUIVALENTS AT:
BEGINNING OF PERIOD 19,293 24,373
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END OF PERIOD $ 15,354 $ 25,663
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CASH PAID FOR:
INCOME TAXES $ 1,264 $ 1,237
INTEREST 556 650
* * * * * * * * * *
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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 March 31, 1994 was 1.9 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 $9.0 million during the quarter. This was due primarily to
a cash investment of approximately $3.3 million in a joint venture 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, and (iii) increases in non-cash (primarily accounts
receivable) working capital. Working capital decreased $2.7 million during
the quarter mainly as a result of the aforementioned reduction in net cash.
During March, 1994, the company entered into an agreement for the
creation of the above-noted joint venture with Fluid Recycling Services
Company which is expected to enhance the Total Fluid Management (TFM)
capabilities of the company. In addition to the initial contribution,
additional investments are expected over the next few years based on the
growth of the venture.
Comparison of First Quarter 1994 with First Quarter 1993
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Consolidated net sales for the first quarter of 1994 decreased $3.3
million (7%) while income from operations decreased $.1 million (2%) when
compared to the first quarter of 1993. The decrease in sales was due to a
3% decline in volume; a 2% reduction associated with currency translation;
and declines of 1% each from price and product mix, and the net result of
acquisitions and divestitures. The decrease in the volume for the quarter
was mainly a result of a reduction in orders shipped to the People's
Republic of China (PRC) as that country worked down an earlier inventory
buildup; the European recession's impact on customer production levels,
particularly in the steel and automotive markets of Southern Europe; and
the adverse effect of the continued slump in the aircraft and aerospace
industry. Shipments to the PRC are expected to resume in the second
quarter, hopefully, under a more consistent order pattern. The company
continues to be challenged with pricing pressures in key markets and
increased customer efficiencies in the usage of chemical products. While
operating conditions in the United States appear healthy, uncertainty
exists as to whether or not the current pace of industrial activity can
continue given the Federal Reserve Board's recent actions to restrain
inflation. In Europe, though there have been modest signs of improvement
in some of our markets, it is difficult to predict the timing of an overall
recovery.
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Operating margins as a percentage of sales were comparable to first
quarter 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 quarter 1994 from the
1993 repositioning program was approximately $.05 per share. Interest
income declined mainly as a result of lower cash holdings by the company.
The effective tax rate in the first quarter of 1994 increased slightly
versus first quarter 1993 primarily as a result of foreign taxes on
earnings at rates different than the U.S. federal tax rates. 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. The negative
influence of currency translation on first quarter 1994 net income was $.01
per share.
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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.
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
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Joseph F. Spanier, officer duly
authorized to sign this report,
Corporate Controller and
Principal Financial Officer
Date: May 13, 1994
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