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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, 1996
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, 1996 8,674,819
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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 March 31, 1996 and
December 31, 1995
Consolidated Statement of Income for the three months
ended March 31, 1996 and 1995
Consolidated Statement of Cash Flows for the three months
ended March 31, 1996 and 1995.
* * * * * * * * * *
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)
March 31, December 31,
1996 1995
(Unaudited) *
Assets
Current assets
Cash and cash equivalents $ 9,548 $ 7,230
Accounts receivable 50,139 46,965
Inventories
Raw materials and supplies 11,146 10,964
Work in process and finished goods 9,744 10,669
Deferred income taxes 1,337 1,415
Prepaid expenses and other current assets 9,692 9,475
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91,606 86,718
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Investments in and advances to associated companies 9,439 10,715
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Property, plant and equipment, at cost
Land 6,855 7,279
Buildings and improvements 39,751 40,232
Machinery and equipment 69,822 70,010
Construction in progress 1,464 1,068
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117,892 118,589
Less accumulated depreciation 63,111 62,280
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54,781 56,309
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Excess of cost over net assets of acquired companies 18,532 18,973
Deferred income taxes 5,566 5,349
Other noncurrent assets 6,927 7,344
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31,025 31,666
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$186,851 $185,408
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* Condensed from audited financial statements.
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Quaker Chemical Corporation
Consolidated Balance Sheet
(dollars in thousands)
March 31, December 31,
1996 1995
(Unaudited) *
Liabilities
Current liabilities
Short-term borrowings, current
portion of long-term debt,
notes payable and capital leases $ 30,594 $ 25,548
Accounts payable 22,012 20,969
Dividends payable 1,474 1,473
Accrued liabilities 11,707 12,392
Estimated taxes on income 547 486
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Total current liabilities 66,334 60,868
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Long-term debt, notes payable and capital leases 7,614 9,300
Deferred income taxes 2,983 2,977
Accrued postretirement benefits 8,812 8,809
Other noncurrent liabilities 6,753 6,432
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Total noncurrent liabilities 26,162 27,518
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92,496 88,386
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Minority interest in equity of subsidiaries 3,264 3,030
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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 776 780
Retained earnings 88,054 87,852
Unearned compensation (656) (722)
Foreign currency translation adjustments 9,060 12,333
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106,898 109,907
Treasury stock, shares held at cost;
1996 - 992,109, 1995 - 999,924 (15,807) (15,915)
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91,091 93,992
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$186,851 $185,408
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* Condensed from audited financial statements
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Quaker Chemical Corporation
Consolidated Statement of Income
Three Months Ended March 31,
Unaudited
(dollars in thousands
except per share data)
1996 1995
Income
Net sales $ 58,203 $ 54,527
Other income, net 284 154
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58,487 54,681
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Costs and expenses
Cost of goods sold 33,955 32,724
Selling, administrative and general expenses 21,085 18,521
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55,040 51,245
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Income from operations 3,447 3,436
Interest expense (500) (332)
Interest income 92 89
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Income before taxes 3,039 3,193
Taxes on income 1,216 1,261
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1,823 1,932
Equity in net (loss) income of associated
companies (43) 90
Minority interest in net income of
subsidiaries (104) (107)
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Net income $ 1,676 $ 1,915
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Per share data:
Net income $0.19 $0.22
Dividends declared $0.17 $0.17
Based on weighted average number
of shares outstanding 8,666,747 8,823,989
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Quaker Chemical Corporation
Consolidated Statement of Cash Flows
For the Three Months Ended March 31,
1996 1995
Cash flows from operating activities:
Net income $ 1,676 $ 1,915
Adjustments to reconcile net income to net cash
provided by (used in) operating activities:
Depreciation 1,525 1,708
Amortization 546 408
Equity in net loss (income) of associated
companies 43 (90)
Minority interest in earnings of subsidiaries 104 107
Deferred income taxes (214) (20)
Deferred compensation and other
postretirement benefits 202 92
Net change in repositioning liability (265) (367)
Other, net 269 (243)
Increase (decrease) in cash from changes in current
assets and liabilities net of acquisitions
and divestitures:
Accounts receivable (3,613) (3,492)
Inventories 545 (1,012)
Prepaid expenses and other current assets (266) 567
Accounts payable and accrued liabilities 1,002 (2,960)
Estimated taxes on income 47 (323)
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Net cash provided by (used in)
operating activities 1,601 (3,710)
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Cash flows from investing activities:
Dividends from associated companies 735
Investments in property, plant, equipment
and other assets (1,111) (2,033)
Investments in and advances to associated
companies (330) (323)
Proceeds from the sale of patent, production
technology and other assets 339 2,000
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Net cash used in investing activities (367) (356)
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Cash flows from financing activities:
Net increase in short-term borrowings 5,268 1,827
Repayment of long-term debt and capital leases (1,892) (1,679)
Dividends paid (1,474) (1,500)
Treasury stock issued 105 233
Treasury stock acquired (507)
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Net cash provided by (used in)
financing activities 2,007 (1,626)
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Effect of exchange rate changes on cash (923) (20)
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Net increase (decrease) in cash and
cash equivalents 2,318 (5,712)
Cash and cash equivalents at beginning of period 7,230 11,345
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Cash and cash equivalents at end of period $ 9,548 $ 5,633
======= =======
Supplemental cash flow information
Cash paid during the quarter for:
Income taxes $ 981 $ 1,958
Interest 617 560
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Management's Discussion and Analysis of
Financial Condition and Results of Operations
Liquidity and Capital Resources
Net cash flow provided by (used by) operating activities amounted to $1.6
million in the first quarter of 1996 compared to ($3.7) million in the same
period of 1995. The improvement was principally due to the impact of
controlled growth in the required amount of operating working capital.
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 leases) decreased $2.7 million primarily as a
result of increased short-term borrowings associated with the replacement of
maturing long-term debt obligations with short-term debt and increases in
operating working capital (mainly increases in accounts receivable generated
from higher sales). The current ratio was 1.4 to 1 at March 31, 1996,
unchanged from December 31, 1995.
Operations
Comparison of First Quarter 1996 with First Quarter 1995
Consolidated net sales for the first quarter of 1996 increased $3.7
million (7%) over the first quarter of 1995, mainly due to the effects of
improved pricing and product sales mix. A 3% decrease in volume was offset by
an increase of 3% from a June 1995 acquisition in Brazil.
Income from operations was slightly higher than the first quarter of
1995. The Company's gross profit margin as a percentage of sales increased
1.4% mainly as a result of the aforementioned benefits of improved pricing and
a more profitable sales mix. Selling, administrative and general expenses as
a percent of sales were 2.2% higher than 1995 due to higher operating expenses
driven largely by additional spending in targeted geographic and product
growth areas.
Net interest costs rose due to increased financing costs associated with
higher debt levels carried into 1996 related to the financing of a 1995
acquisition and other operating needs. Other income increased in the quarter
mainly as a result of the absence of negative exchange impacts recorded in
1995. The decrease in equity in net income from associated companies was
primarily due to losses incurred by the Company's FRS joint venture related to
increased costs of new business development and staff reorganization along
with delays in new business startups.
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The Company remains cautiously optimistic about customer production
levels and raw material inflation over the balance of the year. However, the
principal challenges still facing the Company are the highly competitive
nature of the pricing environment in the Company's major markets and the
effective management of the Company's FRS joint venture. Given these factors,
the Company is in the process of evaluating alternatives to improve margins
and the utilization of assets.
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PART II. OTHER INFORMATION
Items 1, 2, 3, 4 and 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)
/s/ RICHARD J. FAGAN
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Richard J. Fagan, officer duly
authorized to sign this report,
Corporate Controller, Acting
Corporate Treasurer and Chief
Accounting Officer
Date: May 15, 1996
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