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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
April 29, 2004
Date of Report (Date of earliest event reported)
QUAKER CHEMICAL CORPORATION
(Exact name of Registrant as specified in its charter)
Commission File Number 0-7154
PENNSYLVANIA No. 23-0993790
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
One Quaker Park
901 Hector Street
Conshohocken, Pennsylvania 19428
(Address of principal executive offices)
(Zip Code)
(610) 832-4000
(Registrant's telephone number, including area code)
Not Applicable
(Former name or former address, if changed since last report)
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INFORMATION TO BE INCLUDED IN THE REPORT
Item 7. Financial Statements, Pro Forma Financial Information and Exhibits.
The following exhibit is filed as part of this report:
Exhibit No.
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99.1 Press Release of Quaker Chemical Corporation dated April
29, 2004.
Item 12. Results of Operations and Financial Condition.
On April 29, 2004, Quaker Chemical Corporation announced its results of
operations for the first quarter ended March 31, 2004 in a press release, the
text of which is included as Exhibit 99.1 hereto.
SIGNATURE
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
Registrant
Date: April 29, 2004 By: /s/ Michael F. Barry
-----------------------
Vice President and
Chief Financial Officer
Exhibit 99.1
[LOGO] Quaker
For Release: NEWS Contact:
Immediate Michael F. Barry
Vice President and
Chief Financial Officer
610/832-8500
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QUAKER CHEMICAL ANNOUNCES RECORD QUARTERLY SALES
AND NET INCOME GROWTH
CONSHOHOCKEN, Pa., April 29 /PRNewswire-FirstCall/ -- Quaker Chemical
Corporation (NYSE: KWR) today announced record quarterly sales of $98.1 million
and net income growth of 7% for the first quarter ended March 31, 2004.
First Quarter 2004 Summary
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Net income for the first quarter increased 7% to $3.3 million versus $3.1
million for the first quarter of 2003. Consistent with previous guidance,
earnings per diluted share were $0.33 in the first quarters of both 2004 and
2003.
Net sales for the first quarter of 2004 were a record $98.1 million, up 34% from
$73.3 million for the first quarter of 2003. Foreign exchange rate translation,
the Company's 2003 acquisitions and the Company's recently awarded chemical
management services (CMS) contracts favorably impacted net sales by $6.5
million, $5.5 million and $10.1 million, respectively. The remaining net sales
increase of approximately 4% is primarily due to double- digit growth in the
Asia/Pacific and South American regions.
Gross margin as a percentage of sales declined from 38.7% for the first quarter
of 2003 to 33.1% for the first quarter of 2004. As previously disclosed, the
Company's new CMS contracts have caused different relationships between margins
and revenue than in the past. At the majority of current CMS sites, the Company
effectively acts as an agent and records revenue and costs from these sales on a
net sales or "pass-through" basis. The new CMS contracts have a different
structure, which results in the Company recognizing in reported revenue the
gross revenue received from the CMS site customer, and in cost of goods sold the
third party product purchases. The negative impact to gross margin for the first
quarter related to the new CMS contracts is approximately 5 percentage points.
The remaining decline in gross margin as a percentage of sales is due to
increased raw material costs, as well as product and regional sales mix.
Selling, general and administrative expenses for the quarter increased $3.9
million compared to the first quarter of 2003. Foreign exchange rate translation
and the Company's 2003 acquisitions accounted for approximately 60% of the
increase over the prior year. The majority of the remaining increase was
primarily due to higher expenses associated with the Company's ERP
implementation, Sarbanes-Oxley compliance, as well as inflationary increases.
The increase in other income reflects a priority-return distribution from the
Company's real estate joint venture in the first quarter of 2004 and foreign
exchange gains in the first quarter of 2004 versus losses in the first quarter
of 2003. The increase in net interest expense is primarily due to higher debt
balances outstanding during the first quarter of 2004 versus the prior year.
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Quaker Chemical Corporation
One Quaker Park, 901 Hector Street, Conshohocken, PA 19428-0809 USA
www.quakerchem.com
T 610.832.4000 F 610.832.8682
Balance Sheet and Cash Flow Items
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The Company's debt-to-total capital ratio remains strong at 37% at the end of
the first quarter of 2004 compared to 34% at the end of 2003. The higher
accounts receivable and inventory at the end of the first quarter are primarily
due to the Company's new CMS contracts and increased sales volume. In the first
quarter of 2004, capital expenditures were $2.3 million, primarily related to
the Company's U.S. lab renovation and global ERP implementation.
Outlook
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Ronald J. Naples, Chairman and Chief Executive Officer, commented, "The first
quarter results were consistent with our expectations. We are seeing signs of an
improving global economy with sequential quarterly growth in all four regions
and especially high growth in the South American and Asia/Pacific markets.
However, partially offsetting the positive impact of this growth is the
continuation of high raw material costs as well as higher expenses that are
primarily a result of higher pension, insurance, Sarbanes-Oxley compliance and
ERP implementation expenses."
Mr. Naples continued, "Our view of the world really hasn't changed from our last
guidance. We expect 2004 to be a strong revenue growth year in all business
segments and in all regions due to our business initiatives as well as an
improvement in the global economy. However, we also continue to expect to be
negatively impacted by high crude oil prices as well as the higher SG&A costs
related to the items above and the restoration of performance-based incentive
compensation. Our 2004 outlook continues to be for a slight improvement in
year-over-year earnings. For the second quarter, we expect earnings to be
similar to 2003, and we are moving ahead with important business initiatives.
The recent increase of our dividend, the 32nd consecutive year of annual
dividend increases to shareholders, is a tangible sign of our confidence in the
prospects of the Company and our commitment to delivering value for our
shareholders."
This release contains forward-looking statements that are subject to certain
risks and uncertainties that could cause actual results to differ materially
from those projected in such statements. A major risk is that the Company's
demand is largely derived from the demand for its customers' products, which
subjects the Company to downturns in a customer's business and unanticipated
customer production shutdowns. Other major risks and uncertainties include, but
are not limited to, significant increases in raw material costs, customer
financial stability, worldwide economic and political conditions, foreign
currency fluctuations, and future terrorist attacks such as those that occurred
on September 11, 2001.
As previously announced, Quaker Chemical's investor conference call to discuss
first quarter results is scheduled for April 30, 2004 at 2:30 p.m. (ET). Access
the conference by calling 800-922-0755 or visit Quaker's Web site at
www.quakerchem.com for a live webcast.
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Quaker Chemical Corporation
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Condensed Consolidated Statement of Income
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(Dollars in thousands, except per share data and share amounts)
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(Unaudited)
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Three Months ended March 31,
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2004 2003
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Net sales $ 98,131 $ 73,337
Cost of goods sold 65,676 44,971
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Gross margin 32,455 28,366
% 33.1% 38.7%
Selling, general and administrative 26,598 22,685
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Operating income 5,857 5,681
% 6.0% 7.7%
Other income, net 559 88
Interest expense, net (315) (139)
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Income before taxes 6,101 5,630
Taxes on income 1,922 1,858
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4,179 3,772
Equity in net income of associated companies 149 86
Minority interest in net income of subsidiaries (1,019) (751)
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Net income $ 3,309 $ 3,107
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% 3.4% 4.2%
Per share data:
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Net income - basic $0.35 $0.34
Net income - diluted $0.33 $0.33
Shares Outstanding:
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Basic 9,570,664 9,270,775
Diluted 9,977,713 9,508,593
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Quaker Chemical Corporation
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Condensed Consolidated Balance Sheet
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(Dollars in thousands, except par value and share amounts)
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(Unaudited)
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March 31, December 31,
2004 2003
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ASSETS
Current assets
Cash and cash equivalents $ 22,894 $ 21,915
Accounts receivable, net 82,063 78,121
Inventories, net 33,969 32,211
Prepaid expenses and other current assets 14,065 11,277
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Total current assets 152,991 143,524
Property, plant, and equipment, net 137,402 136,448
Less accumulated depreciation 75,187 74,057
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Net property, plant and equipment 62,215 62,391
Goodwill 33,309 33,301
Other intangible assets, net 9,299 9,616
Investments in associated companies 5,937 6,005
Deferred income taxes 12,875 12,846
Other assets 19,525 19,664
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Total assets $ 296,151 $ 287,347
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LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
Short-term borrowings and current
portion of long-term debt $ 50,614 $ 42,992
Accounts and other payables 41,439 41,259
Accrued compensation 6,385 6,816
Other current liabilities 14,942 14,738
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Total current liabilities 113,380 105,805
Long-term debt 15,622 15,827
Deferred income taxes 2,749 2,688
Other non-current liabilities 41,278 40,967
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Total liabilities 173,029 165,287
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Minority interest in equity of subsidiaries 10,678 9,708
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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 2,307 2,181
Retained earnings 118,546 117,308
Unearned compensation (554) (621)
Accumulated other comprehensive loss (16,851) (15,406)
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113,112 113,126
Treasury stock, shares held at
cost; 2004 - 39,711, 2003 - 54,178 (668) (774)
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Total shareholders' equity 112,444 112,352
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Total liabilities and
shareholders' equity $ 296,151 $ 287,347
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Quaker Chemical Corporation
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Condensed Consolidated Statement of Cash Flows
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For the three months ended March 31,
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(Dollars in thousands)
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(Unaudited)
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2004 2003
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Cash flows from operating activities
Net income $ 3,309 $ 3,107
Adjustments to reconcile net income
to net cash used in operating activities:
Depreciation 1,981 1,646
Amortization 284 215
Equity in net income of associated companies (149) (86)
Minority interest in earnings of subsidiaries 1,019 751
Deferred compensation and other, net 208 241
Pension and other postretirement benefits 313 317
Increase (decrease) in cash from changes in
current assets and current liabilities:
Accounts receivable (4,316) (399)
Inventories (1,867) (1,389)
Prepaid expenses and other current assets (2,768) (1,342)
Accounts payable and accrued liabilities 329 (5,927)
Change in restructuring liabilities (290) (699)
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Net cash used in operating activities $ (1,947) $ (3,565)
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Cash flows from investing activities
Capital expenditures (2,347) (2,113)
Dividends and distributions from
associated companies 233 1,800
Other, net (57) (40)
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Net cash used in investing activities (2,171) (353)
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Cash flows from financing activities
Net increase in short-term borrowings 7,617 3,791
Repayment of long-term debt (160) (7)
Dividends paid (2,020) (1,961)
Treasury stock issued 232 86
Distributions to minority shareholders (245) (213)
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Net cash provided by financing activities 5,424 1,696
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Effect of exchange rate changes on cash (327) 409
Net increase (decrease) in cash
and cash equivalents 979 (1,813)
Cash and cash equivalents at beginning of year 21,915 13,857
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Cash and cash equivalents at the end of year $ 22,894 $ 12,044
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SOURCE Quaker Chemical Corporation
-0- 04/29/2004
/CONTACT: Michael F. Barry, Vice President and Chief Financial Officer,
Quaker Chemical Corporation, +1-610-832-8500/
/Web site: http://www.quakerchem.com /
(KWR)
CO: Quaker Chemical Corporation
ST: Pennsylvania
IN: CHM
SU: ERN ERP CCA MAV