-----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, S8xhzJdhkg1Phe+VT7xhKvM47R9vwOByO8by8Xc/ldDkbisN99e5upvGgoyFmY6l 84BTYmMxUNoEE0+C9dVyyg== 0000920049-98-000023.txt : 19980518 0000920049-98-000023.hdr.sgml : 19980518 ACCESSION NUMBER: 0000920049-98-000023 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19980331 FILED AS OF DATE: 19980515 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: SEC FILE NUMBER: 001-12019 FILM NUMBER: 98622800 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 ================================================================================ 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, 1998 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, 1998 8,780,331 --------- ================================================================================ 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, 1998 and December 31, 1997 Consolidated Statement of Income for the three months ended March 31, 1998 and 1997 Consolidated Statement of Cash Flows for the three months ended March 31, 1998 and 1997. * * * * * * * * * * 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 (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. - 2 - Quaker Chemical Corporation Consolidated Balance Sheet (dollars in thousands) March 31, December 31, 1998 1997 (Unaudited) * Assets Current assets Cash and cash equivalents $ 14,126 $ 18,416 Accounts receivable 49,669 48,625 Inventories Raw materials and supplies 12,583 10,316 Work in process and finished goods 11,950 11,365 Deferred income taxes 5,823 5,729 Prepaid expenses and other current assets 4,752 3,675 -------- -------- Total current assets 98,903 98,126 -------- -------- Investments in and advances to associated companies 4,767 4,925 -------- -------- Property, plant and equipment, at cost Land 5,676 5,751 Buildings and improvements 31,272 31,523 Machinery and equipment 58,503 58,532 Construction in progress 1,789 1,213 -------- -------- 97,240 97,019 Less accumulated depreciation 56,770 56,365 -------- -------- Total property, plant and equipment 40,470 40,654 -------- -------- Goodwill, net 14,179 14,500 Deferred income taxes 9,078 9,090 Other noncurrent assets 2,977 3,345 -------- -------- Total noncurrent assets 26,234 26,935 -------- -------- $170,374 $170,640 ======== ======== * Condensed from audited financial statements. - 3 - Quaker Chemical Corporation Consolidated Balance Sheet (dollars in thousands) March 31, December 31, 1998 1997 (Unaudited) * Liabilities Current liabilities Short-term borrowings, current portion of long-term debt, notes payable and capital leases $ 549 $ - Accounts payable 22,109 22,871 Dividends payable 1,580 1,570 Accrued liabilities 17,241 20,824 Estimated taxes on income 5,165 2,494 -------- -------- Total current liabilities 46,644 47,759 -------- -------- Long-term debt 25,215 25,203 Deferred income taxes 3,611 3,752 Accrued postretirement benefits 8,942 8,934 Other noncurrent liabilities 5,604 5,825 -------- -------- Total noncurrent liabilities 43,372 43,714 -------- -------- Total liabilities 90,016 91,473 -------- -------- Minority interest in equity of subsidiaries 3,804 3,525 -------- -------- 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 1,202 928 Retained earnings 82,063 80,749 Unearned compensation (463) (528) Foreign currency translation adjustments (1,747) (208) -------- -------- 90,719 90,605 Treasury stock, shares held at cost; 1998 - 885,485, 1997 - 943,552 (14,165) (14,963) -------- -------- Total shareholders' equity 76,554 75,642 -------- -------- $170,374 $170,640 ======== ======== * 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) 1998 1997 Net sales $ 62,235 $ 58,543 ---------- ---------- Costs and expenses Cost of goods sold 34,498 33,176 Selling, administrative and general expenses 22,769 21,495 ---------- ---------- 57,267 54,671 ---------- ---------- Income from operations 4,968 3,872 Other income, net 291 352 Interest expense (447) (425) Interest income 197 60 ---------- ---------- Income before taxes 5,009 3,859 Taxes on income 2,004 1,544 ---------- ---------- 3,005 2,315 Equity in net income of associated companies 229 287 Minority interest in net income of subsidiaries (340) (35) ---------- ---------- Net income $ 2,894 $ 2,567 ========== ========== Per share data: Net income (basic and diluted) $0.33 $0.30 Dividends declared $0.18 $0.175 Based on weighted average number of shares outstanding: Basic 8,735,875 8,622,064 Diluted 8,833,700 8,656,541 - 5-
Quaker Chemical Corporation Consolidated Statement of Cash Flows For the Three Months Ended March 31, Unaudited (dollars in thousands) 1998 1997 Cash flows from operating activities Net income $ 2,894 $ 2,567 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation 1,295 1,189 Amortization 583 508 Equity in net (income) loss of associated companies (229) (287) Minority interest in earnings of subsidiaries 328 35 Deferred income taxes (114) (228) Deferred compensation and other postretirement benefits 338 262 Net change in repositioning liabilities (959) (1,923) Other, net 192 (17) Increase (decrease) in cash from changes in current assets and liabilities net of acquisitions and divestitures: Accounts receivable (1,619) (1,260) Inventories (3,054) 415 Prepaid expenses and other current assets (1,171) (1,790) Accounts payable and accrued liabilities (2,719) 593 Estimated taxes on income 2,915 2,154 -------- -------- Net cash (used in) provided by operating activities (1,320) 2,218 -------- -------- Cash flows from investing activities Dividends from associated companies 207 -- Investments in property, plant, equipment and other assets (1,473) (1,221) Investments in and advances to associated companies (70) (120) Other, net (66) -- -------- -------- Net cash used in investing activities (1,402) (1,341) -------- -------- Cash flows from financing activities Net increase in short-term borrowings and notes payable 561 5,541 Repayment of long-term debt -- (1,729) Dividends paid (1,581) (1,520) Treasury stock issued 122 122 -------- -------- Net cash (used in) provided by financing activities (898) 2,414 -------- -------- Effect of exchange rate changes on cash (670) (1,952) -------- -------- Net (decrease) increase in cash and cash equivalents (4,290) 1,339 Cash and cash equivalents at beginning of period 18,416 8,525 -------- -------- Cash and cash equivalents at end of period $ 14,126 $ 9,864 ======== ======== Supplemental cash flow information Cash paid during the quarter for: Income taxes $ 175 $ 171 Interest 98 431
- 6- Quaker Chemical Corporation Quaker Chemical Corporation Notes to Consolidated Financial Statements (Unaudited) Note 1 - Weighted Average Shares Outstanding The following table reconciles basic and diluted weighted average shares outstanding at March 31, 1998 and 1997: 1998 1997 ---- ---- Weighted average shares outstanding - basic 8,735,875 8,622,064 Effect of dilutive securities: Employee stock options 60,480 34,477 Executive stock bonus 37,777 --------- --------- Weighted average shares outstanding - diluted 8,833,700 8,656,541 ========= ========= Note 2 - Comprehensive Income Effective January 1, 1998, the Company adopted Statement of Financial Accounting Standards ("SFAS") No. 130 - Reporting Comprehensive Income. SFAS No. 130 requires that the components of comprehensive income be reported in the financial statements. The following table summarizes comprehensive income for the three months ended March 31, 1998 and 1997: 1998 1997 ---- ---- Net income $2,894 $ 2,567 Foreign currency translation adjustments (1,539) (5,572) ------ ------- Comprehensive income (loss) $1,355 $(3,005) ====== ======= -7- 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 $(1.3) million in the first quarter of 1998 compared to $2.2 million in the same period of 1997. The decrease was principally due to changes in 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) decreased $4.8 million primarily as a result of changes in working capital. The current ratio at March 31, 1998 was 2.1 to 1 unchanged from December 31, 1997. Operations Comparison of First Quarter 1998 with First Quarter 1997 Consolidated net sales for the first quarter of 1998 increased by 6% over the first quarter of 1997. The increase in sales was the net result of an 10% increase in volume offset by a 4% decrease due to foreign currency translation rates. Operating income improved 28% to $5.0 million as compared to $3.9 million in the same period of 1997. The 28% improvement was mainly attributable to the higher level of sales and expanded gross margins. The Company's gross profit margin as a percentage of sales increased 1.3% primarily as a result of improved sales mix and stable raw material costs. Selling, administrative and general expenses as a percentage of sales decreased 0.1% as compared to 1997. Net interest costs declined as an improved cash position versus March 31, 1997 led to higher interest income. Minority interest increased as a result of improved performances by the Company's consolidated joint ventures in China and Australia and earnings from the Company's consolidated joint venture in India which was formed in the fourth quarter of 1997. Earnings per share of $.33 were 10% higher than the prior year despite a negative foreign currency translation impact of approximately $.03 per share due to the strengthening of the dollar, primarily against the Dutch guilder. Other Significant Items: The Company is currently working to resolve the potential impact of the year 2000 on the processing of date sensitive information by the Company's computerized information system. Historically, certain computer programs have been written using two digits rather than four digits to define the applicable year. Any of the Company's programs that have time sensitive software may recognize a date using "00" as the year 1900 rather than the year 2000, which could result in miscalculations or system failures. The costs of addressing poetential problems are not currently expected to have a material adverse impact on the Company's financial position, results of operations, or cash flows in future periods. The Company expects that all necessary modifications or replacements to key systems will occur on a timely basis. During 1997 the Financial Accounting Standards Board ("FASB") issued SFAS No. 131 - Disclosures about Segments of an Enterprise and Related Information. SFAS No. 131 is effective in 1998. The Company is currently assessing the impact this new standard will have on its financial statements. SFAS No. 131 requires the disclosure of segment information utilizing the approach that the Company uses to manage its internal organization. Also, SFAS No. 131 requires the reporting of segment information on a condensed basis for interim periods beginning in 1999. -8- During 1998 the FASB issued SFAS No. 132 - Employers' Disclosure about Pensions and Other Postretirement Benefits. This statement standardizes the disclosures for pensions and other postretirement benefits. SFAS No.132 is effective in 1998 and is not expected to have a material impact on the Company's financial statements. 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 in St. Louis, Missouri, against the Company and certain of its subsidiaries. Petrolite asserted claims for negligent misrepresentation and breach of contract arising out of a Technology Purchase Agreement (the "Agreement") between Petrolite and the Company (and certain of its subsidiaries) dated April 13, 1993, as amended, pursuant to which the Company sold various assets, including patent rights, to Petrolite for a purchase price of approximately $8.5 million plus an obligation to pay royalties. Petrolite sought damages in an unspecified amount, rescission of the Agreement, costs, and other relief. On May 11, 1998, the Company and Petrolite agreed in principle to resolve all disputes between them and terminate the arbitration proceeding. In connection therewith, the Company agreed to pay Petrolite an undisclosed amount not to exceed the reserve previously taken on this matter. 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 (b) Reports on Form 8-K. No reports on Form 8-K were filed during the quarter for which this report is filed. * * * * * * * * * -9- 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. Fagen --------------------------------------- Richard J. Fagan, officer duly authorized to sign this report, Controller, Treasurer and Principal Financial and Chief Accounting Officer Date: May 15, 1998 - 10 - EX-27 2 ART.5 FDS FOR FIRST QUARTER 10-Q
5 1,000 3-MOS DEC-31-1998 MAR-31-1998 14,126 0 50,749 1,080 24,533 98,903 97,240 56,770 170,374 46,644 5,000 9,664 0 0 66,890 170,374 62,235 62,235 34,498 57,267 0 0 447 5,009 2,004 2,894 0 0 0 2,894 0.33 0.33
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