-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, SUHwy+6WD4KVt5Q1ZJccSUyxmyhIjjS6pSalnQa/9wdv2QEsORCc2lVu9Ssq3v5P zmlo6xRzMYvQDEiQ3KWCpg== 0000920049-97-000027.txt : 19970520 0000920049-97-000027.hdr.sgml : 19970520 ACCESSION NUMBER: 0000920049-97-000027 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19970331 FILED AS OF DATE: 19970515 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: QUAKER CHEMICAL CORP CENTRAL INDEX KEY: 0000081362 STANDARD INDUSTRIAL CLASSIFICATION: MISCELLANEOUS PRODUCTS OF PETROLEUM & COAL [2990] IRS NUMBER: 230993790 STATE OF INCORPORATION: PA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-12019 FILM NUMBER: 97606349 BUSINESS ADDRESS: STREET 1: ELM AND LEE STS CITY: CONSHOHOCKEN STATE: PA ZIP: 19428 BUSINESS PHONE: 2158324011 MAIL ADDRESS: STREET 1: ELM & LEE STS CITY: CONSHOHOCKEN STATE: PA ZIP: 19428 10-Q 1 QUARTERLY REPORT ====================================================================== 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, 1997 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 ------------------------------------------------------- (Exact name of Registrant as specified in its charter) Pennsylvania 23-0993790 ---------------------------------- --------------------- (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) Elm and Lee Streets, Conshohocken, Pennsylvania 19428 - 0809 ---------------------------------------------------------------- (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code 610-832-4000 Not Applicable - ----------------------------------------------------------------------- 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 --- --- 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, 1997 8,645,122 ---------- ====================================================================== 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, 1997 and December 31, 1996 Consolidated Statement of Income for the three months ended March 31, 1997 and 1996 Consolidated Statement of Cash Flows for the three months ended March 31, 1997 and 1996. * * * * * * * * * * 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 (see accompanying Management's Discussion and Analysis-Other Significant Items); 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 years' data have been made to improve comparability. - 2 - Quaker Chemical Corporation Consolidated Balance Sheet (dollars in thousands) March 31, December 31, 1997 1996 ---- ---- (Unaudited) * Assets Current assets Cash and cash equivalents $ 9,864 $ 8,525 Accounts receivable 45,035 45,564 Inventories Raw materials and supplies 8,580 9,094 Work in process and finished goods 11,416 11,947 Deferred income taxes 4,446 4,840 Prepaid expenses and other current assets 8,553 6,582 -------- -------- Total current assets 87,894 86,552 -------- -------- Investments in and advances to associated companies 4,334 3,941 -------- -------- Property, plant and equipment, at cost Land 6,336 6,586 Buildings and improvements 31,841 32,680 Machinery and equipment 56,701 58,220 Construction in progress 1,727 1,476 -------- -------- 96,605 98,962 Less accumulated depreciation 54,272 55,002 -------- -------- Total property, plant and equipment 42,333 43,960 -------- -------- Goodwill, net 15,225 16,222 Deferred income taxes 9,556 9,278 Other noncurrent assets 5,475 5,655 -------- -------- Total noncurrent assets 30,256 31,155 -------- -------- $164,817 $165,608 ======== ======== * Condensed from audited financial statements. - 3 - Quaker Chemical Corporation Consolidated Balance Sheet (dollars in thousands) March 31, December 31, 1997 1996 ---- ---- (Unaudited) * Liabilities Current liabilities Short-term borrowings, current portion of long-term debt, notes payable and capital leases $21,148 $17,404 Accounts payable 22,350 23,386 Dividends payable 1,520 1,508 Accrued liabilities 18,540 19,843 Estimated taxes on income 3,889 1,893 -------- -------- Total current liabilities 67,447 64,034 -------- -------- Long-term debt, notes payable and capital leases 5,218 5,182 Deferred income taxes 3,232 3,222 Accrued postretirement benefits 8,930 8,898 Other noncurrent liabilities 6,047 6,255 -------- -------- Total noncurrent liabilities 23,427 23,557 -------- -------- Total liabilities 90,874 87,591 -------- -------- Minority interest in equity of subsidiaries 4,027 3,763 -------- -------- 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 647 634 Retained earnings 75,364 74,317 Unearned compensation (394) (459) Foreign currency translation adjustments 903 6,475 -------- -------- 86,184 90,631 Treasury stock, shares held at cost; 1997 - 1,021,706, 1996 - 1,044,452 (16,268) (16,377) -------- -------- Total shareholders' equity 69,916 74,254 -------- -------- $164,817 $165,608 ======== ======== * Condensed from audited financial statements - 4 - Quaker Chemical Corporation Consolidated Statement of Income Three Months Ended March 31, Unaudited (dollars in thousands except per share data) ---------------------- 1997 1996 ---- ---- Net sales $ 58,543 $ 58,203 -------- -------- Costs and expenses Cost of goods sold 33,176 33,955 Selling, administrative and general expenses 21,495 21,085 -------- -------- 54,671 55,040 -------- -------- Income from operations 3,872 3,163 Other income, net 352 284 Interest expense (425) (500) Interest income 60 92 -------- -------- Income before taxes 3,859 3,039 Taxes on income 1,544 1,216 -------- -------- 2,315 1,823 Equity in net income of associated companies 287 (43) Minority interest in net income of subsidiaries (35) (104) -------- -------- Net income $ 2,567 $ 1,676 ======== ======== Per share data: Net income $0.30 $0.19 Dividends declared $0.175 $0.17 Based on weighted average number of shares outstanding 8,622,064 8,666,747 - 5 - Quaker Chemical Corporation Consolidated Statement of Cash Flows For the Three Months Ended March 31, Unaudited (dollars in thousands) 1997 1996 ---- ---- Cash flows from operating activities Net income $2,567 $1,676 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation 1,189 1,525 Amortization 508 546 Equity in net (income) loss of associated companies (287) 43 Minority interest in earnings of subsidiaries 35 104 Deferred income taxes (228) (214) Deferred compensation and other postretirement benefits 262 202 Net change in repositioning liability (1,923) (265) Other, net (17) 269 Increase (decrease) in cash from changes in current assets and liabilities net of acquisitions and divestitures: Accounts receivable (1,260) (3,613) Inventories 415 545 Prepaid expenses and other current assets (1,790) (266) Accounts payable and accrued liabilities 593 1,002 Estimated taxes on income 2,154 47 ------ ------ Net cash provided by operating activities 2,218 1,601 ------ ------ Cash flows from investing activities Dividends from associated companies 735 Investments in property, plant, equipment and other assets (1,221) (1,111) Investments in and advances to associated companies (120) (330) Proceeds from the sale of assets 339 ------ ------ Net cash used in investing activities (1,341) (367) ------ ------ Cash flows from financing activities Net increase in short-term borrowings and notes payable 5,541 5,268 Repayment of long-term debt, notes payable and capital leases (1,729) (1,892) Dividends paid (1,520) (1,474) Treasury stock issued 122 105 ------ ------ Net cash provided by financing activities 2,414 2,007 ------ ------ Effect of exchange rate changes on cash (1,952) (923) ------ ------ Net increase in cash and cash equivalents 1,339 2,318 Cash and cash equivalents at beginning of period 8,525 7,230 ------ ------ Cash and cash equivalents at end of period $9,864 $9,548 ====== ====== Supplemental cash flow information Cash paid during the quarter for: Income taxes $ 171 $ 981 Interest 431 617 - 6 - Management's Discussion and Analysis of Financial Condition and Results of Operations Liquidity and Capital Resources Net cash flow provided by operating activities amounted to $2.2 million in the first quarter of 1997 compared to $1.6 million in the same period of 1996. The improvement was principally due to a better operating performance offset by payments related to the 1996 repositioning program. 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 $2.4 million primarily as a result of increased short-term borrowings associated with the replacement of maturing long-term debt and seasonal cash needs. The current ratio at March 31, 1997 was 1.3 to 1 as compared to 1.4 to 1 at December 31, 1996, down slightly due to the increased short-term borrowings. Operations Comparison of First Quarter 1997 with First Quarter 1996 Consolidated net sales for the first quarter of 1997 increased by 1% over the first quarter of 1996. The increase in sales was the net result of a 3% increase due to pricing initiatives and product sales mix; a 3% increase in volume; and a 5% decrease due to foreign currency translation rates. Operating income improved 22% to $3.9 million as compared to $3.2 million in the same period of 1996. The 22% improvement was mainly attributable to better European results, which benefited from strong demand from European steel customers and improved pricing, and early benefits associated with the 1996 repositioning of operations. The Company's gross profit margin as a percentage of sales increased 1.6% mainly as a result of benefits associated with the consolidation of manufacturing operations in the United States, improved pricing, particularly in Europe, stable raw material costs and changes in sales mix. Selling, administrative and general expenses increased 2% over 1996. Net interest costs decreased slightly due to decreased financing costs associated with lower overall debt levels. Other income increased due to higher license fee income. The increase in equity in net income from associated companies was primarily due to reduced losses incurred by the Company's Fluid Recycling Services joint venture. Earnings per share of $.30 were 58% higher than the prior year despite a negative foreign currency translation impact of approximately $.05 per share due to the strengthening of the dollar, primarily against the Dutch guilder. - 7 - PART II. OTHER INFORMATION Item 1. Legal Proceedings. On or about October 24, 1996, Petrolite Corporation and its subsidiary, Petrolite Holdings, Inc. (collectively, "Petrolite") filed a Demand for Arbitration with the American Arbitration Association and a Petition with the Circuit Court for the County of St. Louis, State of Missouri, against the Registrant and certain of its subsidiaries (collectively, the "Company"). The actions arise out of a Technology Purchase Agreement (the "Agreement") between Petrolite and the Company dated April 13, 1993, as amended, pursuant to which the Company sold various assets, including a patent (the "Patent"), to Petrolite for a purchase price of approximately $8.5 million plus an obligation to pay royalties. In a suit brought by Petrolite against Baker Hughes, Inc., et al. for infringement of the Patent, the United States District Court for the Western District of Oklahoma (No. CIV-94-311-M) affirmed by the United States Court of Appeals for the Federal Circuit (No. 95-1447) declared all of the claims of the Patent invalid as a result of sales allegedly made by the Company more than one year prior to the filing of the Patent application. In its actions against the Company, Petrolite seeks damages in an unspecified amount, rescission of the Agreement, costs, and other relief. The Company believes that it has complete and meritorious defenses to the Petrolite actions and intends to vigorously defend the actions and deny liability and to pursue a claim against Petrolite for royalties. The bases for the Company's position include, but are not limited to, the Company specifically made no representations or warranties with respect to the validity of the Patent, all sales made by the Company prior to filing the Patent application were disclosed to Petrolite prior to closing under the Agreement and the findings made by the Court in Petrolite's suit with Baker Hughes, Inc. were the result of the failure of Petrolite's counsel to take certain required actions in the handling of the case. Items 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 - 8 - (b) Reports on Form 8-K. A report on Form 8-K was filed on February 20, 1997. No other reports on Form 8-K were 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 (Registrant) /s/ Richard J. Fagan --------------------------------------- Richard J. Fagan, officer duly authorized to sign this report, Controller, Treasurer and Principal Financial and Chief Accounting Officer Date: May 14, 1997 - 9 - EX-27 2 ART.5 FDS FOR FIRST QUARTER 10-Q
5 1,000 3-MOS DEC-31-1997 MAR-31-1997 9,864 0 43,832 1,203 19,996 87,894 96,605 54,272 164,817 67,447 5,000 9,664 0 0 60,252 164,817 58,543 58,543 33,176 54,671 0 0 425 3,859 1,544 2,567 0 0 0 2,567 0.30 0.30
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