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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, 1995
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
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
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 July 31, 1995 8,810,119
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This report contains a total of 12 pages.
PART I. FINANCIAL INFORMATION
QUAKER CHEMICAL CORPORATION AND CONSOLIDATED SUBSIDIARIES
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, 1995 and
December 31, 1994
Consolidated statement of income for the six months ended
June 30, 1995 and 1994
Consolidated statement of income for the three months ended
June 30, 1995 and 1994
Consolidated statement of cash flows for the six months ended
June 30, 1995 and 1994
* * * * * * * * * *
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 adjustments, 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. Certain reclassifications of prior year's data
have been made to improve comparability.
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Quaker Chemical Corporation
Consolidated Balance Sheet
(dollars in thousands)
June 30, December 31,
1995 1994
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(Unaudited) *
Assets
Current assets
Cash and cash equivalents $ 8,115 $ 11,345
Accounts receivable 51,334 43,841
Inventories
Raw materials and supplies 10,327 8,795
Work in process and finished goods 10,372 9,042
Deferred income taxes 1,546 1,473
Prepaid expenses and other current assets 10,339 8,904
-------- --------
92,033 83,400
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Investments in and advances to associated
companies 11,137 9,885
-------- --------
Property, plant and equipment, at cost
Land 7,273 6,702
Buildings and improvements 36,549 34,529
Machinery and equipment 68,160 63,403
Construction in progress 4,361 1,015
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116,343 105,649
Less accumulated depreciation 59,655 53,955
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56,688 51,694
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Excess of cost over net assets
of acquired companies 17,597 12,262
Deferred income taxes 4,935 4,971
Other noncurrent assets 7,394 7,960
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29,926 25,193
-------- --------
$189,784 $170,172
======== ========
* Condensed from audited financial statements.
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Quaker Chemical Corporation
Consolidated Balance Sheet
(dollars in thousands)
June 30, December 31,
1995 1994
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(Unaudited) *
Liabilities and shareholders' equity
Current liabilities
Short-term borrowings and current
portion of notes payable, long-term debt
and capital leases $ 20,174 $ 8,062
Accounts payable 22,496 20,575
Dividends payable 1,497 1,500
Accrued liabilities 11,391 12,231
Estimated taxes on income 511 440
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Total current liabilities 56,069 42,808
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Long-term debt, notes payable and
capital leases 11,875 12,207
Deferred income taxes 3,106 3,081
Accrued postretirement benefits 8,869 8,767
Other noncurrent liabilities 7,398 7,029
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Total noncurrent liabilities 31,248 31,084
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87,317 73,892
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Minority interest in equity of subsidiaries 2,704 2,603
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Shareholders' equity
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 774 649
Retained earnings 88,520 87,137
Foreign currency translation adjustments 14,736 9,856
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113,694 107,306
Treasury stock, shares held at cost;
1995 - 853,809, 1994 - 844,691 (13,931) (13,629)
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99,763 93,677
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$189,784 $170,172
* Condensed from audited financial statements
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Quaker Chemical Corporation
Consolidated Statement of Income
Six Months Ended June 30,
Unaudited
(dollars in thousands
except per share data)
1995 1994
Income
Net sales $113,562 $ 92,440
Other income, net 900 939
-------- --------
114,462 93,379
-------- --------
Costs and expenses
Cost of goods sold 67,835 52,132
Selling, administrative and
general expenses 38,675 33,739
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106,510 85,871
-------- --------
Income from operations 7,952 7,508
Interest expense (735) (734)
Interest income 150 296
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Income before taxes 7,367 7,070
Taxes on income 2,925 2,793
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4,442 4,277
Equity in net income of associated
companies 197 324
Minority interest in net income of
subsidiaries (253) (161)
-------- --------
Net income $ 4,386 $ 4,440
======== ========
Per share data:
Net income $0.50 $0.48
Dividends declared $0.34 $0.31
Based on weighted average number
of shares outstanding 8,812,602 9,256,400
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Quaker Chemical Corporation
Consolidated Statement of Income
Three Months Ended June 30,
Unaudited
(dollars in thousands
except per share data)
1995 1994
Income
Net sales $ 59,035 $ 47,347
Other income, net 746 581
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59,781 47,928
Costs and expenses
Cost of goods sold 35,111 26,749
Selling, administrative and
general expenses 20,154 17,385
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55,265 44,134
Income from operations 4,516 3,794
Interest expense (403) (404)
Interest income 61 160
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Income before taxes 4,174 3,550
Taxes on income 1,664 1,385
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2,510 2,165
Equity in net income of associated
companies 107 87
Minority interest in net income of
subsidiaries (146) (61)
Net income $ 2,471 $ 2,191
======== ========
Per share data:
Net income $0.28 $0.24
Dividends declared $0.17 $0.16
Based on weighted average number
of shares outstanding 8,804,016 9,260,808
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Quaker Chemical Corporation
Consolidated Statement of Cash Flows
For the Six Months Ended June 30,
Unaudited
(dollars in thousands)
1995 1994
Cash flows from operating activities:
Net income $4,386 $4,440
Adjustments to reconcile net income to net cash
used in operating activities:
Depreciation 3,346 3,656
Amortization 1,094 694
Equity in net income of associated companies (197) (324)
Minority interest in earnings of subsidiaries 253 161
Deferred income taxes 31 7
Deferred compensation and other
postretirement benefits 455 181
Net change in repositioning liability (564) (391)
Other, net (28)
Increase (decrease) in cash from changes in current
assets and liabilities net of acquisitions
and divestitures:
Accounts receivable (5,622) (4,767)
Inventories (1,573) (1,029)
Prepaid expenses (including taxes) and other
current assets (3,174) 267
Accounts payable and accrued liabilities (92) (3,004)
Estimated taxes on income 90 (232)
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Net cash used in operating activities (1,595) (341)
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Cash flows from investing activities:
Short-term investments 1,000
Dividends from associated companies 50 864
Investments in property, plant, equipment and
other assets (4,942) (3,832)
Companies/businesses acquired excluding cash (6,404)
Investments in and advances to associated companies (623) (3,464)
Proceeds from the sale of patent, production
technology and other related assets 2,000
Other, net (75) 266
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Net cash used in investing activities (9,994) (5,166)
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Cash flows from financing activities:
Net increase in other short-term borrowings 10,710 5,565
Net increase in notes payable 2,835
Repayment of long-term debt and capital leases (1,692) (5,443)
Dividends paid (3,003) (2,868)
Treasury stock issued (acquired), net (176) 21
Other (141) (3)
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Net cash provided by (used in) financing activities 8,533 (2,728)
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Effect of exchange rate changes on cash (174) (394)
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Net decrease in cash and cash equivalents (3,230) (8,629)
Cash and cash equivalents at beginning of year 11,345 19,293
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Cash and cash equivalents at end of period $8,115 $10,664
======= =======
Supplemental cash flow information
Cash paid for income taxes and interest was as follows:
Income taxes $2,285 $2,385
Interest 751 700
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Quaker Chemical Corporation
Management's Discussion and Analysis of
Financial Condition and Results of Operations
Liquidity and Capital Resources
Notwithstanding a decrease of $15.3 million in the company's net cash
position (cash and cash equivalents plus short-term investments less short-
term borrowings and current portion of notes payable, long-term debt and
capital leases) during the first six months of 1995, the company remains
strong in its ability to generate adequate cash to meet the needs of current
operations and to fund strategic initiatives. The decline in the net cash
position is due largely to increased short-term borrowings associated with
financing (i) a business acquisition in Brazil (ii) increases in operating
working capital (primarily increases in accounts receivable generated from
higher sales) and (iii) the replacement of maturing long-term obligations with
short-term debt. Net cash flow used in operating activities totaled $1.4
million. Operating working capital increased approximately $10.4 million
as a result of higher sales activity, particularly in Europe, and seasonal
prepayments. Other major sources and uses of cash during the first six
months of 1995 included: a receipt of $2.0 million related to the 1993 sale
of the SULFA-SCRUB (registered trademark) patents and technology; $4.9 million
in expenditures for additions to property, plant and equipment and other
assets; the purchase on May 31, 1995 of a 90% interest in Celumi Ltda., a
Brazilian metalworking business, for approximately $6.4 million in cash and
notes, and dividend payments of $3.0 million. The current ratio at
June 30, 1995 was 1.6/1 as compared to 1.9/1 at December 31, 1994 primarily
reflecting the impact of the aforementioned change in short-term debt.
Comparison of Six Months 1995 with Six Months 1994
Consolidated net sales for the first half of 1995 increased $21.1 million
(23%) due mainly to increased sales volume, particularly in Europe, and the
appreciation of European currencies versus the U.S. dollar. Income from
operations improved $.4 million as higher sales volume offset lower gross
margins resulting from raw material cost inflation. The increase in sales
was due to an 11% increase in volume; a 7% improvement associated with
currency translation; and increases from price/mix and business
acquisitions in Europe and South America of 3% and 2%, respectively.
Operating margins as a percentage of sales declined due to the
aforementioned negative effect of rising raw material costs. Interest
income declined due to lower cash holdings by the company. The decrease in
equity in net income from associated companies was primarily due to
business development investment costs in the company's Fluid Recycling
Services joint venture. Net income was impacted favorably by approximately
$.06 per share due to currency translation.
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Comparison of Second Quarter 1995 with Second Quarter 1994
Consolidated net sales for the second quarter of 1995 increased $11.7
million (25%) due mainly to increased sales volume, particularly in Europe,
and the appreciation of European currencies versus the U.S. dollar. Income
from operations improved $.7 million as higher sales volume offset lower
gross margins resulting from raw material cost inflation. The increase in
sales was due to a 9% increase in volume; a 7% improvement associated with
currency translation; and increases from price/mix and business
acquisitions in Europe and South America of 6% and 3%, respectively.
The reasons for the changes in operating margins as a percentage of sales
and interest income in the second quarter 1995 versus 1994 are basically
the same as for the six-month period. Other income improved slightly due to
the absence of exchange losses incurred in 1994. Net income was impacted
favorably by approximately $.03 per share due to currency translation.
The company's focus in the second half of the year will be on further
efforts to recover raw material cost increases while maintaining sales growth
and controlling discretionary spending.
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PART II. OTHER INFORMATION
Items 1, 2 and 3 are inapplicable and have been omitted.
Item 4. Submission of Matters to a Vote of Security Holders.
The 1995 Annual Meeting of the Company's shareholders was held on May
4, 1995. At the Meeting, management's nominees, Joseph B. Anderson, Jr.,
Patricia C. Barron, Edwin J. Delattre and Ronald J. Naples were elected to
fill the four available positions as Class III Directors. Voting
(expressed in number of votes) was as follows: Joseph B. Anderson, Jr. -
34,071,660 for, 205,023 against or withheld and no abstentions or broker
non-votes; Patricia C. Barron - 34,230,233 for, 66,150 against or withheld
and no abstentions or broker non- votes; Edwin J. Delattre - 34,155,527
for, 121,156 against or withheld and no abstentions or broker non-votes;
and Ronald J. Naples - 34,254,500 for, 22,183 against or withheld and no
abstentions or broker non-votes.
At the Meeting, shareholders ratified the appointment of Price
Waterhouse LLP as the Company's independent auditors to examine and report
on its financial statements for the year ending December 31, 1995 by a vote
of 33,518,701 votes for, 163,516 votes against, and 594,466 abstentions or
broker non- votes.
Item 5. Other Information.
On August 14, 1995, Ronald J. Naples accepted the position of
President and Chief Executive Officer of the Company, replacing
Sigismundus W.W. Lubsen, who resigned as President and Chief
Executive Officer, effective July 31, 1995.
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.
* * * * * * * * *
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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,
Corporate Controller, Acting
Corporate Treasurer and Principal
Financial and Chief Accounting
Officer
Date: August 14, 1995
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