10-K
1
ANNUAL REPORT
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1994
or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
for transition period from to
Commission file number 0-7154
QUAKER CHEMICAL CORPORATION
(Exact name of Registrant as specified in its charter)
A Pennsylvania Corporation No. 23-0993790
-------------------------------- ------------------------------------
(State or other jurisdiction of (I.R.S. EMPLOYER IDENTIFICATION NO.)
incorporation or organization)
Elm and Lee Streets, Conshohocken, Pennsylvania 19428
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (610) 832-4000
Securities registered pursuant to Section 12(b) of the Act:
Name of each Exchange on
Title of each class which registered
------------------- ------------------------
None
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, $1.00 par value
-----------------------------
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 and (2) has been
subject to such filing requirements for the past 90 days. Yes X No .
--- ---
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be
contained, to the best of Registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form
10-K or any amendment to this Form 10-K. ___
State the aggregate market value of the voting stock held by non-
affiliates of the Registrant. (The aggregate market value is computed by
reference to the last reported sale on the Nasdaq National Market System on
March 17, 1995): $131,270,024.
Indicate the number of shares outstanding of each of the Registrant's
classes of common stock as of the latest practicable date: 8,801,739 shares of
Common Stock, $1.00 Par Value, as of March 17, 1995.
DOCUMENTS INCORPORATED BY REFERENCE
(1) Portions of the Registrant's Annual Report to Shareholders for the
year ended December 31, 1994 are incorporated into Parts I and II.
(2) Portions of the Registrant's definitive Proxy Statement dated March
31, 1995 in connection with the Annual Meeting of Shareholders to be
held on May 4, 1995 are incorporated into Part III.
The exhibit index is located on page 12.
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1
PART I
As used in this Report, the term "Quaker," unless the context
otherwise requires, means Quaker Chemical Corporation, its subsidiaries,
and associated companies.
Item 1. Business.
General Description
Quaker develops, produces, and markets a broad range of formulated
chemical specialty products and services for various heavy industrial,
institutional, and manufacturing applications. Quaker's principal products
and services include: (i) rolling lubricants (used by manufacturers of
steel in the hot and cold rolling of steel); (ii) corrosion preventives
(used by steel and metalworking customers to protect metal during
manufacture, storage, and shipment); (iii) metal finishing compounds (used
to prepare metal surfaces for special treatments such as galvanizing and
tin plating and to prepare metal for further processing); (iv) machining
and grinding compounds (used by metalworking customers in cutting, shaping,
and grinding metal parts which require special treatment to enable them to
tolerate the manufacturing process); (v) forming compounds (used to
facilitate the drawing and extrusion of metal products); (vi) paper
production products (used as defoamers, release agents, softeners,
debonders, and dispersants); (vii) hydraulic fluids (used by steel,
metalworking, and other customers to operate hydraulically activated
equipment); (viii) products for the removal of hydrogen sulfide in various
industrial applications; and (ix) programs to provide recycling and
chemical management services.
AC Products, Inc., a United States subsidiary, is a producer of
products primarily for the aerospace industry. Businesses previously
conducted by Quaker Construction Products, Inc., QSC Products, Ltd., Multi-
Chemical Products, Inc., and Selby, Battersby & Co. were sold in 1994.
Collectively, these businesses made and/or sold sealants, coatings, and
flooring systems for construction, industrial use, and/or maritime use.
In 1995, the Company entered into agreements to (i) acquire 90% of
the common stock of a chemical specialty business in Brazil, and (ii)
create a manufacturing joint venture in the People's Republic of China.
If consummated, these acquisitions will require cash investments in 1995
of approximately $5.4 million. Additionally, the acquisition in Brazil
will require additional outlays in 1996 and 1997 totalling up to
approximately $2.6 million.
For additional information regarding the aforementioned acquisitions
and divestitures, see Note 10 of Notes to Consolidated Financial Statements
which appears on page 24 of the Registrant's 1994 Annual Report to
Shareholders, the incorporated portions of which are included as Exhibit 13
to this Report.
2
Substantially all of Quaker's sales worldwide are made directly
through its own sales forces. Quaker salesmen and saleswomen visit the
plants of customers regularly, and through training and experience, identify
production needs which can be resolved or alleviated either by adapting
Quaker's existing products or by applying new formulations developed in
Quaker's laboratories. Sales personnel may call upon Quaker's regional
managers, product managers, and members of its laboratory staff for
assistance in obtaining and setting up product tests and evaluating the
results of such tests. In 1994, certain products were also sold in Canada,
Korea, and India by exclusive licensees under long-term royalty agreements.
Generally, separate manufacturing facilities of a single customer are
served by different sales personnel.
Competition
The chemical specialty industry is composed of a number of companies
of similar size as well as companies larger and smaller than Quaker. Quaker
cannot readily determine its precise position in the industry. Many
competitors are in fewer and more specialized product classifications or
provide different levels of technical services in terms of specific
formulations for individual customers. Competition in the industry is based
primarily on the ability to provide products which meet the needs of the
customer and render technical services and laboratory assistance to
customers and, to a lesser extent, on price.
Major Customers
During 1994, Quaker's five largest customers (each composed of
multiple subsidiaries or divisions with semi-autonomous purchasing
authority) accounted for approximately 15% of its consolidated net sales
with the largest of these customers accounting for approximately 4% of
consolidated net sales. No one subsidiary or division of these five
customers accounted for more than 3% of consolidated net sales. During the
same period, approximately 46% of consolidated net sales were made to
customers in the steel industry.
Raw Materials
Quaker uses over 500 raw materials, including mineral oils, fats and
fat derivatives, ethylene derivatives, solvents, surface active agents,
chlorinated paraffinic compounds, and a wide variety of organic and
inorganic compounds. In 1994, only one raw material accounted for as much
as 10% of the total cost of Quaker's raw material purchases. Quaker has
multiple sources of supply for most materials, and Management believes that
the failure of any single supplier would not have a material adverse effect
upon its business.
3
Patents and Trademarks
Quaker has a limited number of patents and patent applications,
including patents issued, applied for, or acquired in the United States and
in various foreign countries, some of which may prove to be material to its
business. Principal reliance is placed upon Quaker's proprietary formulae
and the application of its skills and experience to meet customer needs.
Quaker's products are identified by trademarks which are registered
throughout its marketing area. Quaker makes little use of advertising but
relies heavily upon its reputation in the markets which it serves.
Research and Development--Laboratories
Quaker's research and development laboratories are directed primarily
toward applied research and development since the nature of Quaker's
business requires continuing modification and improvement of formulations
to provide chemical specialties to satisfy customer requirements.
Quaker maintains quality control laboratory facilities in each of its
manufacturing locations. In addition, Quaker maintains in Conshohocken,
Pennsylvania, laboratory facilities which are devoted primarily to applied
research and development.
Most of Quaker's subsidiaries and associates also have laboratory
facilities. Although not as complete as the Conshohocken laboratories,
these facilities are generally sufficient for the requirements of the
customers being served. If problems are encountered which cannot be
resolved by local laboratories, such problems may be referred to the
corporate laboratory staff, which also defines and supervises corporate
research projects.
Approximately 181 persons, of whom 105 have B. S. degrees and 28 have
B.S. and advanced degrees, are employed in Quaker's laboratories.
Number of Employees
On December 31, 1994, Quaker had 955 full-time employees, of whom 334
were employed by the parent company, 529 were employed by its non-U.S.
subsidiaries and associates, and 92 were employed by all U.S.
subsidiaries.
Product Classification
Incorporated by reference is the information concerning product
classification by markets served appearing under the caption "Supplemental
Financial Information" on page 26 of the Registrant's 1994 Annual Report to
Shareholders, the incorporated portions of which are included as Exhibit 13
to this Report.
4
Non-U.S. Activities
Incorporated by reference is the information concerning non-U.S.
activities appearing in Note 9 to Notes to Consolidated Financial
Statements on page 23 of the Registrant's 1994 Annual Report to Shareholders
and under the caption "General" of the Operations section of
Management's Discussion and Analysis of Financial Condition and Results of
Operations which appear on pages 28 and 29, respectively, of the aforementioned
Report, the incorporated portions of which are included as Exhibit 13 to
this Report.
Item 2. Properties.
Quaker's principal facilities in the United States are located in
Conshohocken, Pennsylvania and Detroit, Michigan. Quaker's non-U.S.
subsidiaries own facilities in Woodchester, England; Uithoorn, The
Netherlands; Villeneuve, France; and Santa Perpetua de Mogoda, Spain. All
of these facilities are owned mortgage free. Financing for the Corporate
Technical Center in Conshohocken, Pennsylvania was arranged through the use
of industrial revenue and development bonds with an outstanding balance at
December 31, 1994 of $5,000,000. A non-operating facility in Pomona,
California and operating facilities in Verona, Italy and Sapulpa,
Oklahoma were sold in 1994.
Quaker's aforementioned facilities consist of various manufacturing,
administrative, warehouse, and laboratory buildings. Substantially all of
the buildings are of fire-resistant construction and are equipped with
sprinkler systems. All facilities are primarily of masonry and/or steel
construction and are adequate and suitable for Quaker's present operations.
The Company has a program to identify needed capital improvements which
will be implemented as Management considers necessary or desirable. Most
locations have various numbers of raw material storage tanks ranging from
6 to 63 having a capacity from 500 to 80,000 gallons each and processing
or manufacturing vessels ranging in capacity from 50 to 12,000 gallons
each.
In order to facilitate compliance with applicable federal, state, and
local statutes and regulations relating to occupational health and safety
and protection of the environment, the Company has an ongoing program of
site assessment, currently directed primarily to facilities in the United
States for the purpose of identifying capital expenditures or other actions
that may be necessary to comply with such requirements. The program
includes periodic inspections of each facility in the United States by
Quaker and/or independent environmental experts, as well as ongoing
inspections by on-site personnel. Such inspections are addressed to
operational matters, recordkeeping, reporting requirements, and capital
improvements. In 1994, capital expenditures directed solely or primarily
to regulatory compliance amounted to approximately $700,000.
5
Quaker's executive offices are located in a four-story building
containing a total of approximately 47,000 square feet. A corporate
technical center containing approximately 28,700 square feet houses the
laboratory facility. Both of these facilities are adjacent to Quaker's
manufacturing facility in Conshohocken.
Quaker's Mexican associate (40% owned) owns a plant in Monterrey,
Mexico.
Item 3. Legal Proceedings.
The Company is a party to proceedings, cases, and requests for
information from, and negotiations with, various claimants and federal and
state agencies relating to various matters including environmental matters,
none of which is expected to result in monetary sanctions in an amount or
in an award that would have a material adverse effect on the Company's
financial condition. For information concerning pending asbestos-related
cases against a subsidiary and amounts accrued associated with certain
environmental investigatory and noncapital remediation costs, refer to
Note 11 to Notes to Consolidated Financial Statements which appears on
page 24 in the Registrant's 1994 Annual Report to Shareholders, the
incorporated portions of which are included as Exhibit 13 to this Report.
Item 4. Submission of Matters to a Vote of Security Holders.
No matters were submitted to a vote of security holders during the
last quarter of the period covered by this Report.
Item 4(a). Executive Officers of the Registrant.
Year First
Elected as
an Executive
Name Office (since) Age Officer
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Peter A. Benoliel Chairman of the Board (1980) 63 1963
S. W. W. Lubsen President (1988) and Chief 51 1988
Executive Officer (1993)
Jose Luiz Bregolato Vice President-South America 49 1993
(1993)
John E. Burrows, Jr. Vice President-North America 48 1990
(1992)
Daniel S. Ma Vice President-Asia/Pacific 54 1995
(1995)
Marcus C. J. Meijer Vice President-Europe (1990) 47 1990
Clifford E. Montgomery Vice President-Human Resources 47 1990
(1990)
Karl H. Spaeth Vice President (1981) and 66 1972
Corporate Secretary (1972)
6
All of the Executive Officers with the exception of Messrs. Bregolato,
Burrows, Ma, Meijer, and Montgomery have served as officers
of the Registrant for more than the past five years. Prior to being elected
Chief Executive Officer of the Registrant, Mr. Lubsen served as President
and Chief Operating Officer, a position to which he was elected in 1988.
Prior to his election as an officer of the Registrant, Mr. Bregolato served
as Financial Consultant and Administrative Director of Fabrica Carioca de
Catalisadores, S.A. to which he was appointed in 1985. Prior to his
election as an officer of the Registrant, Mr. Meijer served as Managing
Director of Quaker Chemical B.V. to which he was appointed in 1988. Prior to
his election as an officer of the Registrant, Mr. Burrows served as
Division Manager, Marine Colloids Division of FMC Corporation, a position
to which he was appointed in 1986. Prior to being elected Vice President-
Human Resources, Mr. Montgomery served as Manager of Human Resources,
General Electric's Worldwide Marketing and Product Management Organization.
Mr. Ma was appointed Managing Director, Asia/Pacific Region, in 1993.
Prior to that he served as Business Manager, PPG Industries, Inc., a
position to which he was appointed in 1991. Prior to that, he served in
various capacities with Ciba-Geigy Corporation, its subsidiaries and
affiliated companies.
There is no family relationship between any of the Registrant's
Executive Officers. Each Officer is elected for a term of one year.
PART II
Item 5. Market for Registrant's Common Equity and
Related Stockholder Matters.
Incorporated by reference is the information appearing under the
caption "Stock Market and Related Security Holder Matters" on page 26 of
the Registrant's 1994 Annual Report to Shareholders, the incorporated
portions of which are included as Exhibit 13 to this Report.
7
Item 6. Selected Financial Data.
Incorporated by reference is the information appearing under the
caption "Selected Financial Information" on page 27 of the Registrant's
1994 Annual Report to Shareholders, the incorporated portions of which are
included as Exhibit 13 to this Report.
Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations.
Incorporated by reference is the information appearing under the
caption "Management's Discussion and Analysis of Financial Condition and
Results of Operations" on pages 28 and 29 of the Registrant's 1994 Annual
Report to Shareholders, the incorporated portions of which are included as
Exhibit 13 to this Report.
Item 8. Financial Statements and Supplementary Data.
Incorporated by reference is the information appearing on pages 14
through 26 of the Registrant's 1994 Annual Report to Shareholders, the
incorporated portions of which are included as Exhibit 13 to this Report.
Item 9. Changes in and Disagreements With Accountants
on Accounting and Financial Disclosure.
None.
PART III
Item 10. Directors and Executive Officers of the Registrant.
Incorporated by reference is the information beginning immediately
following the caption "Election of Directors" to, but not including, the
caption "Executive Compensation" contained in the Registrant's definitive
Proxy Statement to be filed no later than 120 days after the close of its
fiscal year ended December 31, 1994 (the "1995 Proxy Statement") and the
information appearing in Item 4(a) on page 5 of this Report. Based solely on
the Company's review of certain reports filed with the Securities and Exchange
Commission pursuant to Section 16(a) of the Securities Exchange Act of 1934
(the "1934 Act"), as amended, and written representations of the Company's
officers and directors, the Company believes that all reports required to
be filed pursuant to the 1934 Act with respect to transactions in the
Company's Common Stock through December 31, 1994 were filed on a timely
basis, except for one filing on Form 4 covering one transaction each for
Mr. Benoliel and for Mr. Black.
8
Item 11. Executive Compensation.
Incorporated by reference is the information beginning immediately
following the caption "Executive Compensation" to, but not including, the
caption "Compensation/Management Development Committee Report on Executive
Compensation" contained in the Registrant's 1995 Proxy Statement.
Item 12. Security Ownership of Certain Beneficial Owners
and Management.
Incorporated by reference is the information beginning immediately
following the caption "Security Ownership of Certain Beneficial Owners and
Management" to, but not including, the caption "Election of Directors"
contained in the Registrant's 1995 Proxy Statement.
Item 13. Certain Relationships and Related Transactions.
No information is required to be provided in response to this Item 13.
PART IV
Item 14. Exhibits, Financial Statement Schedules,
and Reports on Form 8-K.
(a) Exhibits and Financial Statement Schedules
1. Financial Statements
The following is a list of the Financial Statements which
have been incorporated by reference from the Registrant's
Annual Report to Shareholders for the fiscal year ended
December 31, 1994, as set forth in Item 8:
Consolidated Statement of Operations
Consolidated Statement of Cash Flows
Consolidated Balance Sheet
Notes to Consolidated Financial Statements
Report of Independent Accountants
9
2. Financial Statement Schedules
All schedules are omitted because they are not applicable
or the required information is shown in the financial
statements or notes thereto.
Financial statements of 50% or less owned companies have
been omitted because none of the companies meets the criteria
requiring inclusion of such statements.
3. Exhibits (numbered in accordance with Item 601 of
Regulation S-K)
3(a) --Articles of Incorporation.
Incorporated by reference to Exhibit 3(a) to Form 10-Q
as filed by the Registrant for the Quarter ended
March 31, 1987.
3(b) --By Laws.
Incorporated by reference to Exhibit 3(b) to Form 10-Q
as filed by the Registrant for the Quarter ended
June 30, 1993.
4 --Shareholder Rights Plan. Incorporated by reference to
Form 8-K as filed by the Registrant on February 20, 1990.
10(a)--Long-Term Performance Incentive Plan as approved May 5,
1993. Incorporated by reference to Exhibit 10(a) as
filed by the Registrant with Form 10-K for the year
1993.
10(b)--Employment Agreement by and between Registrant and Peter
A. Benoliel. Incorporated by reference to Exhibit 10(b)
as filed by Registrant with Form 10-K for the year
1989.*
10(c)--Employment Agreement by and between the Registrant and
S. W. W. Lubsen. Incorporated by reference to Exhibit
10(c) as filed by Registrant with Form 10-K for the year
1989.*
10(d)--Restricted Stock and Cash Bonus Plan and Agreement by
and between the Registrant and S. W. W. Lubsen.
Incorporated by reference to Exhibit 10(d) as filed by
Registrant with Form 10-K for the year 1989.*
10(e)--Employment Agreement by and between Registrant and John
E. Burrows, Jr. Incorporated by reference to Exhibit
10(h) as filed by Registrant with Form 10-K for the year
1990.*
10
10(f)--Employment Agreement by and between Registrant and
Clifford E. Montgomery. Incorporated by reference to
Exhibit 10(i) as filed by Registrant with Form 10-K
for the year 1990.*
10(h)--Documents constituting employment contract by and
between Quaker Chemical Europe B.V. and M. C. J. Meijer.
Incorporated by reference to Exhibit 10(b) as filed by
Registrant with Form 10-K for the year 1993.*
13 --Portions of the 1994 Annual Report to Shareholders
incorporated by reference.
21 --Subsidiaries and Affiliates of the Registrant.
23 --Consent of Independent Accountants.
27 --Financial Data Schedule.
* A management contract or compensatory plan or arrangement required to be
filed as an exhibit to this report.
(b) Reports on Form 8-K.
No reports on Form 8-K were filed by the Registrant during the
last quarter of the period covered by this Report.
(c) The exhibits required by Item 601 of Regulation S-K filed as part
of this Report or incorporated herein by reference are listed in
subparagraph (a)(3) of this Item 14.
(d) The financial statement schedules are omitted because they are not
applicable or the required information is shown in the financial
statements or notes thereto.
11
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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: March 30, 1995 By: SIGISMUNDUS W. W. LUBSEN
-------------------------------------
Sigismundus W. W. Lubsen
President and Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934,
this Report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.
Signatures Capacity Date
SIGISMUNDUS W. W. LUBSEN
-------------------------
Sigismundus W. W. Lubsen Principal Executive Officer March 30, 1995
President and Chief and Director
Executive Officer
RICHARD J. FAGAN
-------------------------
Richard J. Fagan Principal Accounting Officer March 30, 1995
Corporate Controller and
Acting Treasurer
PETER A. BENOLIEL
-------------------------
Peter A. Benoliel, Director March 30, 1995
Chairman of the Board
JOSEPH B. ANDERSON, JR.
------------------------
Joseph B. Anderson, Jr. Director March 30, 1995
PATRICIA C. BARRON
------------------------
Patricia C. Barron Director March 30, 1995
WILLIAM L. BATCHELOR
------------------------
William L. Batchelor Director March 30, 1995
LENNOX K. BLACK
------------------------
Lennox K. Black Director March 30, 1995
EDWIN J. DELATTRE
------------------------
Edwin J. Delattre Director March 30, 1995
FRANCIS J. DUNLEAVY
------------------------
Francis J. Dunleavy Director March 30, 1995
ROBERT P. HAUPTFUHRER
------------------------
Robert P. Hauptfuhrer Director March 30, 1995
FREDERICK HELDRING
------------------------
Frederick Heldring Director March 30, 1995
RONALD J. NAPLES
------------------------
Ronald J. Naples Director March 30, 1995
ALEX SATINSKY
------------------------
Alex Satinsky Director March 30, 1995
D. ROBERT YARNALL, JR.
------------------------
D. Robert Yarnall, Jr. Director March 30, 1995
12
EX-99.1
2
INDEX TO EXHIBITS
EXHIBIT INDEX
Sequentially
Numbered
Exhibit No. Description
---------------------------------------------------------------
13 Portions of 1994 Annual Report to Shareholders
Incorporated by Reference
21 Subsidiaries and Affiliates of the Registrant
23 Consent of Independent Accountants
27 Financial Data Schedule
EX-13
3
1994 ANNUAL REPORT TO SHAREHOLDERS
EXHIBIT 13
PORTIONS OF 1994 ANNUAL REPORT TO SHAREHOLDERS INCORPORATED BY REFERENCE
FINANCIAL REVIEW
QUAKER CHEMICAL CORPORATION 1994 ANNUAL REPORT
Consolidated Statement of Operations 14
Consolidated Balance Sheet 15
Consolidated Statement of Cash Flows 16
Notes to Consolidated Financial Statements 17
Report of Independent Accountants 25
Supplemental Financial Information 26
Selected Financial Information 27
Management's Discussion and Analysis of
Financial Condition and Results of Operations 28
13
Quaker Chemical Corporation
CONSOLIDATED STATEMENT OF OPERATIONS
Year Ended December 31,
1994 1993 1992
-------------------------------------------------------------------------------
(Dollars in thousands except per share data)
Net sales $194,676 $195,004 $212,491
Other income, net (Note 1) 2,253 1,421 904
-------- -------- --------
196,929 196,425 213,395
-------- -------- --------
Costs and expenses (Notes 1, 4 and 6):
Cost of goods sold 110,732 112,369 119,176
Selling, administrative and general expenses 70,955 74,242 76,528
Repositioning (credits) charges (Note 2) (525) 11,900
-------- -------- --------
181,162 198,511 195,704
-------- -------- --------
Income (loss) from operations 15,767 (2,086) 17,691
Interest expense (1,303) (1,467) (1,541)
Interest income 457 1,376 1,997
-------- -------- --------
Income (loss) before taxes 14,921 (2,177) 18,147
Taxes on income (Note 5) 5,916 234 6,947
-------- -------- --------
9,005 (2,411) 11,200
Equity in net income of associated
companies (Note 1) 779 1,001 1,328
Minority interest in net income of subsidiary (382) (348) (430)
-------- -------- --------
Net income (loss) $ 9,402 $ (1,758) $ 12,098
======== ======== ========
Per share data (Note 1):
Net income (loss) $1.03 $(.19) $1.33
Dividends .63 1/2 .60 1/2 .57
The accompanying notes are an integral part of these statements.
14
Quaker Chemical Corporation
CONSOLIDATED BALANCE SHEET
December 31,
1994 1993
-------------------------------------------------------------------------------
(Dollars in thousands
except per share data)
Assets
Current assets
Cash and cash equivalents (Note 1) $ 11,345 $ 19,293
Short-term investments, at cost which
approximates market 1,000
Accounts receivable, less allowance for doubtful
accounts of $547 in 1994 and $1,244 in 1993 43,841 37,108
Inventories (Notes 1 and 4)
Raw materials and supplies 8,795 8,269
Work in process and finished goods 9,042 9,278
Deferred income taxes (Note 5) 1,473 2,857
Prepaid expenses and other current assets 8,904 6,582
-------- --------
Total current assets 83,400 84,387
-------- --------
Investments in and advances to associated companies
(Notes 1 and 3) 9,885 6,224
-------- --------
Property, plant and equipment, at cost (Note 1)
Land 6,702 6,440
Buildings and improvements 34,529 35,590
Machinery and equipment 63,403 63,066
Construction in progress 1,015 970
-------- --------
105,649 106,066
Less accumulated depreciation 53,955 50,525
-------- --------
51,694 55,541
-------- --------
Excess of cost over net assets of acquired
companies (Note 1) 12,262 14,472
Deferred income taxes (Note 5) 4,971 4,788
Other noncurrent assets (Note 1) 7,960 5,573
-------- --------
25,193 24,833
-------- --------
$170,172 $170,985
======== ========
Liabilities and Shareholders' Equity
Current liabilities
Short-term borrowings and current portions of
long-term debt and capital leases (Note 7) $ 8,062 $ 4,953
Accounts payable 20,575 18,117
Dividends payable 1,500 1,432
Accrued liabilities
Compensation 5,847 5,251
Other (Note 2) 7,003 12,476
Accrued taxes on income (Note 5) 440 413
-------- --------
Total current liabilities 43,427 42,642
-------- --------
Long-term debt and capital leases (Note 7) 12,207 16,095
Deferred income taxes (Note 5) 3,081 3,043
Accrued postretirement benefits (Note 6) 8,767 8,968
Other noncurrent liabilities (Note 2) 6,410 6,840
-------- --------
Total noncurrent liabilities 30,465 34,946
-------- --------
73,892 77,588
-------- --------
Minority interest in equity of subsidiary (Note 1) 2,603 2,014
-------- --------
Commitments and contingencies (Notes 1 and 11)
Shareholders' equity (Note 8)
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 649 529
Retained earnings 87,137 83,498
Foreign currency translation adjustments 9,856 3,577
-------- --------
107,306 97,268
Treasury stock, shares held at cost;
1994--844,691, 1993--421,842 13,629 5,885
-------- --------
93,677 91,383
-------- --------
$170,172 $170,985
======== ========
The accompanying notes are an integral part of these statements.
15
Quaker Chemical Corporation
CONSOLIDATED STATEMENT OF CASH FLOWS
Year Ended December 31,
1994 1993 1992
-------------------------------------------------------------------------------
(Dollars in thousands)
Cash flows from operating activities:
Net income (loss) $ 9,402 $(1,758) $12,098
Adjustments to reconcile net income (loss) to
net cash provided by operating activities:
Depreciation 6,524 6,545 6,427
Amortization 726 1,021 1,385
Equity in net income of associated companies (779) (1,001) (1,328)
Minority interest in earnings of subsidiary 382 348 430
Deferred income taxes (159) (491) 76
Deferred compensation and other
postretirement benefits (421) 254 427
Net change in repositioning liability (3,643) 9,700
Other (485) (181) 98
Increase (decrease) in cash from changes in
current assets and liabilities net of
acquisitions and divestitures:
Accounts receivable (7,341) 1,490 82
Inventories (2,126) 444 1,352
Prepaid expenses (including taxes) and
other current assets (1,837) (3,331) 621
Accounts payable and accrued liabilities 4,211 4,018 3,047
Estimated taxes on income (25) (261) (983)
-------- -------- --------
Net cash provided by
operating activities 4,429 16,797 23,732
-------- -------- --------
Cash flows from investing activities:
Short-term investments 1,000 (854) 4,097
Dividends from associated companies 1,022 785 314
Investments in property, plant, equipment
and other assets (9,255) (8,960) (7,226)
Companies/businesses acquired excluding cash (1,800) (11,271) (8,270)
Investments in and advances to associated
companies (4,482)
Purchase of patent, production technology
and other related assets (854) (4,400)
Proceeds from sale of patent, production
technology and other related assets 6,500
Proceeds from sale of subsidiary 10,864
Proceeds from the sale of assets 2,591 746 1,254
Other 463 (332) (508)
-------- -------- --------
Net cash provided by (used in)
investing activities 403 (14,240) (14,739)
-------- -------- --------
Cash flows from financing activities:
Repayment of short-term notes (14,500)
Net increase in other short-term borrowings 2,999 306 823
Long-term debt and capital leases incurred 1,102 15,727
Repayment of long-term debt and
capital leases (3,904) (2,997) (2,104)
Dividends paid (5,695) (5,525) (5,096)
Net treasury stock issued/shares acquired (7,624) 971 2,451
Other (17) (126)
-------- -------- --------
Net cash used in financing activities (14,224) (6,160) (2,825)
-------- -------- --------
Effect of exchange rate changes on cash 1,444 (1,477) (2,828)
-------- -------- --------
Net (decrease) increase in cash and
cash equivalents (7,948) (5,080) 3,340
Cash and cash equivalents at beginning
of year 19,293 24,373 21,033
-------- -------- --------
Cash and cash equivalents at end of year $ 11,345 $ 19,293 $ 24,373
======== ======== ========
Supplemental cash flow information
Cash paid for income taxes and interest was
as follows:
Income taxes $ 5,685 $ 5,535 $ 6,775
Interest 1,419 1,448 1,207
The accompanying notes are an integral part of these statements.
16
Quaker Chemical Corporation
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(all dollar amounts in thousands except share and per share data)
NOTE 1--SIGNIFICANT ACCOUNTING POLICIES
Principles of consolidation
All majority-owned subsidiaries are included in Quaker Chemical
Corporation's (the "company's") consolidated financial statements, with
appropriate elimination of intercompany balances and transactions. The
consolidated balance sheet includes total assets of $86,723 and $79,651 and
total liabilities of $21,705 and $19,221 in 1994 and 1993, respectively, of
non-U.S. subsidiaries. The consolidated statement of operations includes
net income of non-U.S. subsidiaries of $4,372, $3,729, and $9,391 in 1994,
1993 and 1992, respectively. Investments in associated (less than majority-
owned) companies are stated at the company's equity in their underlying net
assets.
Translation of foreign currency
Assets and liabilities of non-U.S. subsidiaries and associated
companies are translated into U.S. dollars at the respective rates of
exchange prevailing at the end of the year. Income and expense accounts are
translated at average exchange rates prevailing during the year.
Translation adjustments resulting from this process are recorded directly
in shareholders' equity and will be included in income only upon sale or
liquidation of the underlying investment.
Cash and cash equivalents
The company considers all highly liquid investments with a maturity of
three months or less when purchased to be cash equivalents.
Inventories
Inventories of the parent company are valued at the lower of cost or
market value, with cost determined using the last-in, first-out (LIFO)
method. Inventories of subsidiaries are valued primarily at first-in,
first-out cost, but not in excess of market value.
Property, plant and equipment
Property, plant and equipment are recorded at cost, and capital leases
are recorded at the present value of future minimum
lease payments. Depreciation is computed using the straight-line method on
an individual asset basis over the following estimated useful lives:
buildings and improvements, 10 to 45 years; machinery and equipment, 3 to
15 years; and capital leases, remaining life of the lease. At December 31,
1994 and 1993, respectively, $1,214 and $1,301 of leased equipment and
accumulated depreciation thereon in the amount $848 and $520 in 1994 and
1993, respectively, are included in the property, plant and equipment
accounts.
Expenditures for renewals and betterments which increase the estimated
useful life or capacity of the assets are capitalized; expenditures for
repairs and maintenance are charged to income as incurred.
Excess of cost over net assets of acquired companies and
other noncurrent assets
Excess of cost over net assets of acquired companies and other
noncurrent assets consist primarily of intangibles arising from
acquisitions. They are being amortized on a straight-line basis over
periods of 5 to 40 years (5 to 20 years on acquisitions subsequent to
1991). At December 31, 1994 and 1993, accumulated amortization of the
excess of cost over net assets of acquired companies amounted to $1,754 and
$1,621, respectively.
Pension and postretirement benefit plans
The company's policy is to fund pension costs allowable for income tax
purposes. See Note 6 for the cost of pension and postretirement benefits
other than pensions.
Revenue recognition
Sales are recorded primarily when products are shipped to customers.
Other income, principally license fees and royalties offset by
miscellaneous expenses, is recorded when earned. License fees from
unconsolidated non-U.S. associates, and royalties from third parties
amounted to $1,841, $1,254, and $1,135 in 1994, 1993 and 1992,
respectively.
Research and development costs
Research and development costs are expensed as incurred. Company
sponsored research and development expenses during 1994, 1993 and 1992 were
$9,919, $11,037, and $11,134, respectively.
Earnings per share
Earnings per share calculations are based on the weighted average
number of shares outstanding during the year.
17
Concentration of credit risk
Financial instruments, which potentially subject the company to a
concentration of credit risk, principally consist of cash equivalents,
short-term investments and trade receivables. The company invests excess
cash in money market securities and financial instruments having maturities
typically within 90 days. The company has not experienced losses from the
aforementioned investments.
The company sells its principal products to the major steel,
automotive and related companies around the world. The company maintains
allowances for potential credit losses. Historically, the company has
experienced some losses related to bankruptcy proceedings of major steel
companies in the U.S. However, such losses have been immaterial.
Environmental liabilities and expenditures
Accruals for environmental matters are recorded when it is probable
that a liability has been incurred and the amount of the
liability can be reasonably estimated. Accrued liabilities are exclusive of
claims against third parties and are not discounted. Environmental costs
and remediation costs are capitalized if the costs increase the value of
the property from the date acquired or constructed and/or mitigate or
prevent contamination in the future.
Reclassification
Certain reclassifications of prior years' data have been made to
improve comparability.
NOTE 2--REPOSITIONING OF OPERATIONS
In 1993, in response to changing economic and competitive market
dynamics, the company implemented a broad scope program of changes designed
to improve operating efficiency. The repositioning program included
activities associated with the consolidation of certain of the company's
facilities; closure and sale of the company's manufacturing facilities in
Pomona, California and Verona, Italy; the divestiture of nonstrategic
business operations and workforce reductions. The consolidated statement of
operations for 1993 included charges before income taxes of $11,900 ($7,854
after tax, or $.85 per share) related to this program. Of the total 1993
charges, $5,200 related to the workforce reductions, while the remaining
$6,700 provided for the other aspects of the program. The cash outlays in
1993 associated with the program were approximately $2,200. As of December
31, 1993, approximately $7,600 and $2,100 remained in accrued liabilities
and other noncurrent liabilities, respectively.
During 1994, the company substantially completed the consolidation of
certain facilities in the United States and Europe; sold its manufacturing
facilities in Pomona, California and Verona, Italy; divested the businesses
which comprised its wholly-owned subsidiary, Quaker Construction Products,
Inc., and achieved a majority of the workforce reductions outlined in the
1993 program. As of December 31, 1994, it was determined that the
repositioning activities would be accomplished for less than originally
anticipated and accordingly, the company reduced operating expenses by $525
($347 after tax, or $.04 per share). The cash outlays in 1994 associated
with the program were approximately $3,300. As of December 31, 1994,
approximately $1,800 and $2,000 remained in accrued liabilities and other
noncurrent liabilities, respectively. These future cash outlays primarily
represent termination benefits related to the workforce reductions.
NOTE 3--ASSOCIATED COMPANIES
Summarized financial information of the associated companies (less
than majority owned), in the aggregate, for 1994, 1993 and 1992 is as
follows:
1994 1993 1992
--------------------------------------------------------------------------
Current assets $25,377 $22,515 $21,841
Noncurrent assets 8,960 2,643 2,238
Current liabilities 15,030 12,888 11,432
Noncurrent liabilities 1,111 950 768
Net sales $49,949 $52,028 $44,244
Operating income (a) 4,293 5,654 5,689
Income before taxes 3,242 4,287 5,183
Net income 1,725 2,165 2,676
(a) Net sales, less costs and expenses.
NOTE 4--INVENTORIES
Inventories valued under the LIFO method amounted to $4,913 and $4,879
at December 31, 1994 and 1993, respectively. The estimated replacement
costs for these inventories using the first-in, first-out method were
approximately $6,407 and $6,115, respectively.
18
NOTE 5--TAXES ON INCOME
Taxes on income included in the consolidated statement of operations
consist of the following:
Federal Foreign State Total
---------------------------------------
1994
Currently payable $ 437 $ 5,047 $ 122 $ 5,606
Tax effect of temporary differences
Current 1,271 (63) 1,208
Noncurrent (495) (403) (898)
------- ------- ------ -------
$ 1,213 $ 4,581 $ 122 $ 5,916
======= ======= ====== =======
1993
Currently payable (recoverable) $ (598) $ 4,123 $ 144 $ 3,669
Tax effect of temporary differences
Current (2,310) (634) (2,944)
Noncurrent (478) (13) (491)
------- ------- ------ -------
$(3,386) $3,476 $ 144 $ 234
======= ======= ====== =======
1992
Currently payable $ 451 $6,213 $ 208 $6,872
Tax effect of temporary differences
Current (1) (1)
Noncurrent 453 (377) 76
------- ------- ------ -------
$ 903 $5,836 $ 208 $6,947
======= ======= ====== =======
Total deferred income tax assets and liabilities are comprised of the
following at December 31:
1994 1993
------------------ ------------------
Non- Non-
Current current Current current
--------------------------------------
Retirement benefits $ 81 $ 212
Postretirement benefits $2,981 $3,049
Supplemental retirement benefits 568 530
Repositioning charges 997 775 2,252 726
Alternative minimum tax carry-forward 432 294
Other 395 215 393 189
------ ------ ------ ------
Total deferred tax assets $1,473 $4,971 $2,857 $4,788
====== ====== ====== ======
Depreciation $2,868 $2,844
Other 213 199
------ ------
Total deferred tax liabilities $3,081 $3,043
====== ======
The following is a reconciliation of income taxes at the Federal
statutory rate with income taxes recorded by the company:
1994 1993 1992
---------------------------
Income tax provision (benefit) at the
Federal statutory tax rate $5,073 $(740) $6,170
State income tax provisions, net 81 98 137
Prior year tax settlement 710
Foreign taxes on earnings at rates
different than the Federal
statutory rate 143 723 368
Miscellaneous items, net (91) 153 272
------ ----- ------
Taxes on income $5,916 $234 $6,947
====== ===== ======
United States income taxes have not been provided on the undistributed
earnings of non-U.S. subsidiaries since it is the company's intention
to continue to reinvest these earnings abroad for working capital and
expansion needs. The amount of such undistributed earnings at December 31,
1994 was approximately $53,000. Any income tax liability which might result
from ultimate remittance of these earnings is expected to be substantially
offset by foreign tax credits.
The benefits of net operating losses approximating $1,300, expiring in
1996 and later, have been recorded.
NOTE 6--EMPLOYEE BENEFITS
Pension plans
The company maintains various noncontributory retirement plans
covering substantially all of the employees of the company and its U.S.
subsidiaries. The benefits for these plans are based primarily on years of
service and employees' pay near retirement.
The plans of non-U.S. subsidiaries are, for the most part, either
fully insured or integrated with the local governments'
plans and are not subject to the provisions of Statement of Financial
Accounting Standards ("SFAS") 87, "Employers' Accounting for Pensions."
The pension costs for all plans include the following components:
1994 1993 1992
---------------------------
Service cost--benefits earned during the period $ 880 $ 809 $ 834
Interest cost on projected benefit obligation 2,449 2,335 2,251
Net investment (income) loss on plan assets:
Actual (283) (2,820) (3,690)
Deferral of difference between actual and
expected income (2,576) 98 1,254
Other amortization--net (63) (110) (103)
------ ------ ------
Net pension costs of plans subject to SFAS 87 407 312 546
Pension costs of plans not subject to SFAS 87 962 904 872
------ ------ ------
Total pension costs $1,369 $1,216 $1,418
====== ====== ======
The following table summarizes the funded status of the company's defined
benefit pension plans and the related amounts recognized in the company's
consolidated balance sheet as of December 31:
1994 1993
-------------------
Actuarial present value of:
Vested benefit obligation $28,971 $29,542
======= =======
Accumulated benefit obligation $29,166 $29,729
======= =======
Projected benefit obligation $32,277 $32,543
Plan assets at market value 29,290 30,677
------- -------
Plan assets less than projected benefit obligation (2,987) (1,866)
Unrecognized cumulative net loss 790 222
Unrecognized prior service cost related to adjustment
of retirees' benefits and benefit update 1,828 1,963
Unrecognized net gain at date of initial application
of SFAS 87 (1,898) (2,425)
------- -------
Accrued pension costs $(2,267) $(2,106)
======= =======
The significant assumptions for the plans were as follows:
1994 1993 1992
------------------------
Discount rate for projected benefit obligation 8.0 % 7.5% 8.0%
Assumed long-term rates of compensation increases 5.5 % 5.5% 6.0%
Long-term rate of return on plan assets 9.25% 9.5% 9.5%
Profit sharing plan
The parent company also maintains a qualified profit sharing plan
covering all employees other than those who are compensated on a commission
basis. Contributions for 1994 and 1992 were $367 and $310, respectively. No
contributions were made in 1993.
Other postretirement and postemployment benefits
The company has postretirement benefit plans that provide medical and
life insurance benefits for certain retired employees of the parent
company. These benefits vary based on age, years of service and retirement
date. Coverage of health benefits under the plan may require the retiree to
make payments where the insured equivalent costs exceed the company's fixed
contribution. The cost of the life insurance benefit plan, which provides a
flat two thousand dollars per retiree, is noncontributory. Both the medical
and life insurance plans are currently unfunded.
19
The components of periodic postretirement benefit costs for 1994, 1993, and
1992 are as follows:
1994 1993 1992
--------------------
Service cost--benefits attributed to service
during the period $ 67 $ 79 $ 96
Interest cost on accumulated benefit obligation 572 650 664
---- ---- ----
Postretirement benefit cost $639 $729 $760
==== ==== ====
The status of the plan at December 31, 1994 and 1993 is as follows:
1994 1993
----------------
Retirees $6,542 $7,218
Fully eligible active participants 71 88
Other participants 1,265 1,712
------ ------
Total accumulated postretirement benefit obligation 7,878 9,018
Unrecognized actuarial gain (loss) 889 (50)
------ ------
Net unfunded postretirement benefit liability $8,767 $8,968
====== ======
The discount rate used in determining the accumulated postretirement
benefit obligation was 8.0% and 7.5% in 1994 and 1993, respectively.
In valuing costs and liabilities, different health care cost trend
rates were used for retirees under and over age 65. The average assumed
rate for medical benefits for all retirees was 8.7% in 1994--gradually
decreasing to 5.5% over 12 years. A 1% increase in the health care cost
trend rate would increase aggregate service cost for 1994 by $44 and the
accumulated postretirement benefit obligation as of December 31, 1994 by
$621.
The parent company maintains a plan under which the company will
provide, in certain cases, supplemental retirement benefits to officers of
the parent company. Benefits payable under the plan are based on a
combination of years of service and existing post-retirement benefits.
Included in total pension costs are charges of $353, $270, and $330 in
1994, 1993 and 1992, respectively, representing the annual accrued benefits
under this plan.
Effective January 1, 1993, the company adopted the provisions of SFAS
112, "Employer's Accounting for Postemployment Benefits." The cumulative
effect of adoption of SFAS 112 was not material.
NOTE 7 -- DEBT AND LEASE OBLIGATIONS
Long-term debt at December 31, consisted of the following:
1994 1993
------------------
Industrial development authority monthly floating
rate (3.85% at December 31, 1994) demand bonds
maturing 2014 $ 5,000 $ 5,000
6.64% note payable due July 8, 1997 10,000 13,333
Capital lease obligations 476 789
Other debt obligations due 1994 to 1996, interest
rates ranging to 10.8% 428 758
------- -------
15,904 19,880
Less current portion 3,697 3,785
------- -------
$12,207 $16,095
======= =======
In 1992, the company entered into a long-term private placement of
$15,000 of 6.64% notes payable requiring semiannual principal payments of
$1,667 beginning July 8, 1993 and continuing through 1997. The long-term
financing agreements require, among other things, the maintenance of
working capital and net worth ratios. The company is in compliance with
these requirements.
During the next three years, payments on long-term debt are due as
follows: $3,697, $3,815, and $3,392 in 1995, 1996 and 1997, respectively.
At December 31, 1994, the company had outstanding short-term
borrowings with banks under non-confirmed lines of credit in the aggregate
of $4,365. The weighted average interest rate on the majority of such
borrowings was 4.5% during 1994. The company also has available a $10,000
unsecured line of credit. Any borrowings under this line of credit will be
at the bank's most competitive rate of interest in effect at the time.
There were no borrowings against the line of credit during 1994 and 1993.
At December 31, 1994 and 1993, the value at which the financial
instruments were recorded approximated their fair market value.
20
NOTE 8 -- SHAREHOLDERS' EQUITY
An analysis of the changes in consolidated shareholders' equity is as follows:
Foreign
Capital in currency
Common excess of Retained translation Treasury
stock par value earnings adjustments stock Total
----------------------------------------------------------------------------------------------------------------------------------
Balance, December 31, 1991 $9,664 $83,944 $14,068 $ (8,778) $98,898
Net income--1992 12,098 12,098
Dividends--$.57 per share (5,208) (5,208)
Shares issued upon exercise of options $(389) 1,185 796
Shares issued for employee stock purchase plan 302 471 773
Shares issued for pension plan 348 416 764
Translation adjustment (6,597) (6,597)
Other 40 78 118
----------------------------------------------------------------------------------------------------------------------------------
Balance, December 31, 1992 9,664 301 90,834 7,471 (6,628) 101,642
Net loss--1993 (1,758) (1,758)
Dividends--$.605 per share (5,578) (5,578)
Shares issued upon exercise of options (27) 109 82
Shares issued for employee stock purchase plan 196 528 724
Translation adjustment (3,894) (3,894)
Other 59 106 165
----------------------------------------------------------------------------------------------------------------------------------
Balance, December 31, 1993 9,664 529 83,498 3,577 (5,885) 91,383
Net income--1994 9,402 9,402
Dividends--$.635 per share (5,763) (5,763)
Shares acquired under repurchase program (8,241) (8,241)
Shares issued for employee stock purchase plan 106 409 515
Translation adjustment 6,279 6,279
Other 14 88 102
----------------------------------------------------------------------------------------------------------------------------------
Balance December 31, 1994 $9,664 $649 $87,137 $9,856 $(13,629) $93,677
==================================================================================================================================
The treasury stock is held for use by the various company plans which
require the issuance of the company's common stock.
The company is authorized to issue 10,000,000 shares of preferred
stock, $1.00 par value, subject to approval by the Board of Directors. The
Board of Directors may designate one or more series of preferred stock and
the number of shares, rights, preferences and limitations of each series.
None of the preferred stock has been issued.
Under provisions of a stock purchase plan, which permits employees to
purchase shares of stock at 85% of the market value, 29,736 shares, 38,399
shares, and 35,277 shares were issued from treasury in 1994, 1993 and 1992,
respectively. The number of shares that may be purchased by an employee in
any year is limited by factors dependent upon the market value of the stock
and the employee's base salary. At December 31, 1994, 217,189 shares may be
issued under the plan.
The company has a long-term performance incentive plan for key
employees which provides for the granting of options to purchase stock at
prices not less than market value on the date of the grant. Options are
exercisable one year after the date of the grant for a period of time
determined by the company not to exceed ten years from the date of the
grant.
The table below summarizes transactions in the plan during 1994, 1993
and 1992.
1994 1993 1992
------------------------------ -------------------------------- ------------------------------
Number of Option price Number of Option price Number of Option price
shares per share shares per share shares per share
-----------------------------------------------------------------------------------------------------------------------------
Options outstanding
at January 1, 638,534 $11.00--$24.20 445,776 $11.00--$19.75 571,535 $11.00--$19.53
Options granted 6,553 $15.75--$15.88 206,444 $21.00--$24.20 2,598 $17.75--$19.75
Options exercised (13,686) $12.50--$19.75 (128,357) $11.00--$17.75
-----------------------------------------------------------------------------------------------------------------------------
Options outstanding
at December 31, 645,087 $11.00--$24.20 638,534 $11.00--$24.20 445,776 $11.00--$19.75
=============================================================================================================================
Options exercisable
at December 31, 638,534 $11.00--$24.20 432,090 $11.00--$19.75 445,228 $11.00--$19.75
=============================================================================================================================
No options were exercised in 1994. Options were exercised for cash and
the surrender of 5,739 and 41,770 previously outstanding shares in 1993 and
1992, respectively, resulting in the net issuance of 7,947 shares in 1993
and 86,587 shares in 1992. Options to purchase 787,003 shares were
available at December 31, 1994 for future grants.
21
The plan also provides for the issuance of performance incentive
units, the value of which is determined based on operating results over a
four-year period. The effect on operations of the change in the estimated
value of incentive units during the year was zero in 1994 and 1993 and a
credit of $292 in 1992.
On February 7, 1990, the company declared a dividend distribution to
shareholders of record on February 20, 1990 which, after giving effect for
the three-for-two stock split effective July 30, 1990, was in the form of
two stock purchase rights (the "Rights") for each three shares of common
stock outstanding. The Rights become exercisable if a person or group
acquires or announces a tender offer which would result in such person's
acquisition of 20% or more of the company's common stock. The Rights also
become exercisable if the Board of Directors declares a person to be an
"adverse person" and that person has obtained not less than 10% of the
outstanding shares of the company's common stock.
Each Right, when exercisable, entitles the registered holder to
purchase one one-hundredth of a share of a newly authorized Series A
preferred stock at an exercise price of seventy-two dollars per share
subject to certain anti-dilution adjustments. In addition, if a person or
group acquires 20% or more of the outstanding shares of the company's
common stock, without first obtaining Board of Directors' approval, as
required by the terms of the Rights Agreement, or a person is declared an
adverse person, each Right will then entitle its holder (other than such
person or members of any such group) to purchase, at the Right's then
current exercise price, a number of shares of the company's common stock
having a total market value of twice the Right's exercise price.
In the event that the company merges with or transfers 50% or more of
its assets or earnings to any entity after the Rights become exercisable,
holders of Rights may purchase, at the Right's then current exercise price,
common stock of the acquiring entity having a value equal to twice the
Right's exercise price.
In addition, at any time after a person acquires 20% of the
outstanding shares of common stock and prior to the acquisition by such
person of 50% or more of the outstanding shares of common stock, the
company may exchange the Rights (other than the Rights which have become
null and void), in whole or in part, at an exchange ratio of one share of
common stock or equivalent share of preferred stock, per Right.
The Board of Directors can redeem the Rights for $.01 per Right at any
time prior to the acquisition by a person or group of beneficial ownership
of 20% or more of the company's common stock or a person being declared an
adverse person. Until a Right is exercised, the holder thereof will have no
rights as a shareholder of the company, including without limitation, the
right to vote or to receive dividends. Unless earlier redeemed or
exchanged, the Rights will expire on February 20, 2000.
NOTE 9--BUSINESS SEGMENTS
The company operates primarily in one business segment--the
manufacture and sale of industrial chemical specialty products. The company
has both U.S. and non-U.S. operations which are summarized for 1994, 1993
and 1992 as follows:
Consolidated
United ----------------------------------------
States Europe Other 1994 1993 1992
----------------------------------------------------------------------------------------------------------------------------------
Net sales to unaffiliated customers:
1994 $97,338 $80,624 $16,714 $194,676
------- ------- ------- ========
1993 110,067 74,090 10,847 $195,004
------- ------- ------- ========
1992 118,831 83,276 10,384 $212,491
------- ------- ------- ========
Operating profit:
1994 7,960 11,076 467 $ 19,503
------- ------- -------
1993 5,164 10,745 652 $ 16,561
------- ------- -------
1992 7,196 16,025 1,368 $ 24,589
------- ------- -------
Repositioning credits (charges) 525 (11,900)
Nonoperating expenses (5,107) (6,838) (6,442)
Minority interest and equity in net income of
associated companies 397 653 898
-------- -------- -------
Income (loss) before taxes 15,318 (1,524) 19,045
Taxes on income 5,916 234 6,947
-------- -------- -------
Net income (loss).. $ 9,402 $ (1,758) $ 12,098
======== ======== ========
Identifiable assets:
1994 51,255 65,845 10,111 $127,211
------- ------- -------
1993 70,889 55,427 6,988 $133,304
------- ------- -------
1992 82,727 56,372 4,994 $144,093
------- ------- -------
Investments in associated companies 9,885 6,224 6,001
Nonoperating assets 33,076 31,457 16,519
-------- -------- --------
Total assets $170,172 $170,985 $166,613
======== ======== ========
22
Transfers between geographic areas are not material. Operating profit
comprises revenue less related costs and expenses. Nonoperating expenses
primarily consist of general corporate expenses identified as not being a
cost of operations, interest expense, interest income and license fees from
unconsolidated associates. Nonoperating assets, consisting primarily of
cash equivalents and short-term investments, have not been included with
identifiable assets. No single customer accounted for 10% of net sales in
1994, 1993, or 1992. A substantial portion of consolidated sales on a
global basis is made to the steel industry (see Classification of Products
by Markets Served on page 26 of this report), and as a result, accounts
receivable generally reflect a similar distribution of receivables from
customers in these markets.
NOTE 10--BUSINESS ACQUISITIONS AND DIVESTITURES
In 1995, the company entered into an agreement to acquire 90% of the
common stock of Celumi S.A., a metalworking chemical specialty business in
Brazil. The total acquisition cost is expected to be approximately $7,000
in cash, $4,400 of which is required in 1995 with the remainder due in the
succeeding two years. The transaction is subject to satisfactory completion
of the due diligence process.
Also, in 1995, the company entered into an agreement with Wuxi Oil
Refinery, for the creation of a joint venture in the People's Republic of
China. The company's initial contribution to the venture will be less than
$1,000 in cash and certain assets related to the formulation, manufacture
and sale of chemical specialty products for the steel industry.
Effective December 28, 1994, the company acquired, for approximately
$1,800 in cash, certain assets relating to the formulation, manufacture,
and sale of cutting fluids from Perstorp AB, a Swedish company. The effect
on the consolidated statements has not been material.
Pursuant to the plans identified in the company's 1993 repositioning
program (see Note 2), the sales of certain of the company businesses and
assets were completed in 1994. Effective November 7, 1994, the company
completed the sale of the flooring business of Quaker Construction
Products, Inc. ("QCP") for approximately $2,800. In addition, effective
October 20, 1994 and October 1, 1994, respectively, the company completed
the sales of its Verona, Italy and Pomona, California manufacturing
facilities, which had ceased production in mid-1994 and 1993, for
approximately $2,600 in cash and $200 due within one year. Effective
September 30, 1994, the company completed the sale of the coatings and
waterproofing business of QCP for approximately $8,100.
On March 24, 1994, the company entered into an agreement with Fluid
Recycling Services, Incorporated for the creation of a 50/50 joint venture.
During 1994, the company made cash investments and advances of
approximately $4,500 with additional investments expected over the next few
years based on the growth of the venture. The effect on the consolidated
statements has not been material.
Effective May 14, 1993, the company acquired, for approximately
$10,700 in cash, 100% of the common stock of Raffineries de l'Ile de France
("RIF"), a metalworking chemical specialty business in France. The results
of the operations of RIF are included in the consolidated financial
statements from that date. The effect on the consolidated statements has
not been material.
As part of a plan to exit from the petroleum production chemicals
market, effective February 12, 1992, the company acquired, for
approximately $4,400 in cash, the remaining 57.5% interest in Alpine Labs,
making it wholly owned by the company. The results of operations, which
were not material, are included in the consolidated financial statements
from that date. Pursuant to the plan noted above, effective July 27, 1993,
the company completed the sale of its petroleum production chemical
operations' assets, the principal component of which was the
SULFA-SCRUB (registered trademark) patents and technology, to the Petrolite
Corporation for $6,500 in cash, $2,000 due within three years and future
royalty payments. In addition, the agreement of sale provides that the
Petrolite Corporation grant back to the company a license to sell products
incorporating the technology in certain markets not serviced by the
Petrolite Corporation. The effect of the sale on the consolidated
statements was not material.
Effective January 1, 1992, the company acquired, for $8,600 in cash,
50% of the common stock of Quaker Chemical, S.A. in Spain making it a
wholly-owned subsidiary. The results of operations of Quaker Chemical, S.A.
are included in the consolidated financial statements from that date. The
effect on the consolidated statements has not been material.
NOTE 11--COMMITMENTS AND CONTINGENCIES
A wholly-owned subsidiary of the company is a co-defendant in claims
filed by multiple claimants alleging injury due to exposure to asbestos.
The company has reached a settlement with a group of these claimants and
has petitioned the courts for a declaratory judgement against one of its
insurance carriers for certain coverage which is in dispute. The company
believes that the potential uninsured liability associated with this action
is approximately $1,800.
The company has accrued for certain environmental investigatory and
noncapital remediation costs consistent with the policy set forth in Note
1. In 1994, the company identified certain soil and groundwater
contamination at AC Products, Inc. ("ACP"), a wholly-owned California
subsidiary. A remediation plan has been developed and approved by the Santa
Ana Regional Water Quality Board. The company believes that the potential
uninsured liability associated with this remediation plan ranges from $600
to $1,100 or more, for which the company has accrued approximately $800.
Although there can be no assurance regarding the outcome of environmental
proceedings, the company believes that it has made adequate accruals for
all cleanup and other related costs with respect to environmental problems
of which it is aware. At December 31, 1994 and 1993, the company has
accrued approximately $1,200 and $300, respectively, to provide for
anticipated future environmental assessments and remediation costs.
23
REPORT OF INDEPENDENT ACCOUNTANTS
To the Shareholders and Board of Directors of Quaker Chemical Corporation
In our opinion, the accompanying consolidated balance sheet and the
related consolidated statements of operations and of cash flows present
fairly, in all material respects, the financial position of Quaker Chemical
Corporation (the "Company") and its subsidiaries at December 31, 1994 and
1993, and the results of their operations and their cash flows for each of
the three years in the period ended December 31, 1994, in conformity with
generally accepted accounting principles. These financial statements are
the responsibility of the Company's management; our responsibility is to
express an opinion on these financial statements based on our audits. We
conducted our audits of these statements in accordance with generally
accepted auditing standards which require that we plan and perform the
audit to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a test
basis, evidence supporting the amounts and disclosures in the financial
statements, assessing the accounting principles used and significant
estimates made by management, and evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable
basis for the opinion expressed above.
PRICE WATERHOUSE LLP
----------------------------
Price Waterhouse LLP
Thirty South Seventeenth Street
Philadelphia, Pennsylvania 19103
February 21, 1995
24
Quaker Chemical Corporation
SUPPLEMENTAL FINANCIAL INFORMATION
Classification of Products by Markets Served (unaudited)
Consolidated net sales comprise chemical specialty and other products
classified by markets served for the year ended December 31 as follows:
(Dollars in thousands)
------------------------------------------------------------------------------------------------------------
1994 1993 1992 1991 1990
--------------- --------------- --------------- --------------- ---------------
Steel $ 89,453 46% $ 89,255 46% $ 94,483 44% $ 78,357 41% $ 88,447 44%
Metalworking 58,452 30 57,826 30 58,719 28 51,106 27 49,916 25
Pulp and paper 13,010 7 12,169 6 15,042 7 16,760 9 22,016 11
Other 33,761 17 35,754 18 44,247 21 44,828 23 41,095 20
-------- ---- -------- ---- -------- ---- -------- ---- -------- ----
$194,676 100% $195,004 100% $212,491 100% $191,051 100% $201,474 100%
Information on Quaker's markets appears on the inside front cover of this
report.
Quarterly Results (unaudited)
(Dollars in thousands except per share data)
---------------------------------------------------------------------------
First Second Third Fourth
-------------------------------------
1994
Net sales $45,093 $47,347 $50,117 $52,119
Operating income (1 and 2) 3,356 3,213 3,754 3,191
Net income 2,249 2,191 2,353 2,609
Net income per share $.24 $.24 $.26 $.29
1993
Net sales $48,361 $51,343 $48,441 $46,859
Operating income (loss) (1 and 3) 3,594 (919) 1,092 (7,274)
Net income (loss) 2,724 (449) 730 (4,763)
Net income (loss) per share $.30 $(.05) $.08 $(.52)
1992
Net sales $54,850 $55,853 $54,057 $47,731
Operating income (1) 5,279 4,769 4,592 2,147
Net income 3,710 3,322 3,204 1,862
Net income per share $.41 $.37 $.35 $.20
(1) Net sales, less costs and expenses.
(2) The fourth quarter includes repositioning credits of $525.
(3) The second and fourth quarters include repositioning charges of $3,500
and $8,400, respectively.
Stock Market and Related Security Holder Matters
During the past two years, the common stock of the company has been
traded in the National Over-the-Counter market at the price ranges
indicated below, and the following quarterly dividends per share have been
declared as indicated:
Range of NASDAQ System Quotations Dividends Declared
------------------------------------------------------- ------------------
1994 1993 1994 1993
------------------------------------- ------------------
High Low High Low
First quarter $19 1/2 $14 3/4 $24 5/8 $20 3/4 $.15 1/2 $.15
Second quarter 18 3/4 16 23 17 3/4 .15 1/2 .15
Third quarter 18 3/4 17 1/4 20 16 1/2 .15 1/2 .15
Fourth quarter 18 3/4 17 1/4 18 1/2 14 1/4 .17 .15 1/2
------------------------------------------------------- ------------------
As of January 15, 1995, there were 1,041 shareholders of record of the
company's common stock, $1 par value, its only outstanding class of equity
securities.
Copies of the company's Form 10-K for the year ended December 31, 1994 as
filed with the Securities and Exchange Commission will be provided without
charge on request to Quaker Chemical Corporation, Attention Karl H. Spaeth,
Vice President and Corporate Secretary, Conshohocken, PA 19428.
25
Quaker Chemical Corporation
SELECTED FINANCIAL INFORMATION
(Dollars in thousands except per share data and number of employees)
---------------------------------------------------------------------------------------------------------
1994(1) 1993(2) 1992 1991 1990 1985
----------------------------------------------------------------------------------------------------------
Summary of Operations
Net sales $194,676 $195,004 $212,491 $191,051 $201,474 $122,745
Income (loss) before taxes and
cumulative effect of change in
accounting principle 15,318 (1,524) 19,045 16,888 22,580 12,872
Cumulative effect of change in
accounting for postretirement
benefits (5,675)
Net income (loss) 9,402 (1,758) 12,098 5,115 14,106 7,580
Per share (3)
Income (loss) before cumulative
effect of change in accounting
principle. 1.03 (.19) 1.33 1.20 1.51 .73
Cumulative effect of change in
accounting for postretirement
benefits (.63)
Net income (loss). 1.03 (.19) 1.33 .57 1.51 .73
Dividends .63 1/2 .60 1/2 .57 .53 .47 .26
Financial Position
Current assets 83,400 84,387 85,567 82,725 84,833 57,529
Current liabilities 43,427 42,642 28,126 36,592 40,342 19,440
Working capital 39,973 41,745 57,441 46,133 44,491 38,089
Property, plant and equipment, net 51,694 55,541 52,179 48,661 46,315 24,612
Total assets 170,172 170,985 166,613 159,121 152,408 93,891
Long-term debt and capital leases 12,207 16,095 18,604 5,219 5,453 9,025
Shareholders' equity 93,677 91,383 101,642 98,898 99,113 59,200
Other Data
Current ratio 1.9/1 2.0/1 3.0/1 2.3/1 2.1/1 3.0/1
Capital expenditures (4) 9,255 8,960 7,226 8,420 12,663 6,139
Net income (loss) as a % of net
sales (5) 4.8% (0.9)% 5.7% 5.6% 7.0% 6.2%
Return on average shareholders'
equity (5) 10.2% (1.8)% 12.1% 10.9% 14.9% 14.0%
Shareholders' equity per share at
end of year (3) 10.62 9.89 11.06 10.95 11.11 5.67
Common stock price range (3):
High 19 1/2 24 5/8 26 22 1/4 19 1/4 9 1/8
Low 14 3/4 14 1/4 18 3/4 15 12 6
Number of shares outstanding at
end of year (3) 8,819 9,242 9,188 9,028 8,921 10,440
Number of employees at end of year:
Consolidated subsidiaries 743 865 842 840 819 785
Associated companies 212 141 130 187 261 136
(1) The results of operations for 1994 include net repositioning credits of
$347 or $0.04 per share. Excluding these credits, net income for 1994
was $9,055 or $0.99 per share.
(2) The results of operations for 1993 include net repositioning charges of
$7,854 or $0.85 per share. Excluding these charges, net income for 1993
was $6,096 or $0.66 per share.
(3) Restated to give retroactive effect to a three-for-two split in 1990.
(4) Capital expenditures prior to 1986 are stated net of dispositions.
(5) Calculated for 1991 using $10,790 which was the net income before the
cumulative effect of change in accounting principle.
Quaker Chemical Corporation
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
Liquidity and Capital Resources
The company is in sound financial condition and remains strong in its
ability to generate adequate cash to meet the needs of current operations
and to fund programs for future growth and expansion. Major sources and
uses of cash during 1994 included: proceeds of $10.9 million from the sale
of the businesses which comprised its wholly-owned subsidiary, Quaker
Construction Products, Inc. ("QCP"); proceeds of $2.6 million from the sale
of the company's manufacturing facilities in Pomona, California and Verona,
Italy; $9.3 million in expenditures for additions to property, plant,
equipment and other assets; payments of $8.2 million for 459,000
outstanding shares of the company's common stock as part of a share
repurchase program; investments and advances of approximately $4.5 million
in the company's Fluid Recycling Services joint venture; cash outlays
associated with the 1993 repositioning program of approximately $3.3
million, and the purchase of certain assets relating to the formulation,
manufacture and sale of cutting fluids for $1.8 million from Perstorp AB.
These items, along with increases in non-cash working capital (primarily
increases in accounts receivable generated from higher revenues), were the
principal reasons for the decrease of $12.1 million in 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) to $3.3 million. The current ratio was 1.9/1 in 1994 as compared to
2.0/1 in 1993 reflecting the impacts of the aforementioned changes in net
cash and non-cash working capital.
Expenditures for property, plant and equipment in 1994 included the
completion of new software systems in the U.S., environmental and
regulatory compliance efforts in the amount of $.7 million, and upgrades of
manufacturing capabilities at various locations. Capital expenditures for
1995 are expected to be in the range of $9-11 million and include various
upgrades of manufacturing capabilities in the U.S. and Europe and an
estimated $1.3 million for environmental and regulatory compliance. Cash
outlays in 1995 associated with the repositioning program are anticipated
to be approximately $1.8 million.The company believes that funds generated
internally should be sufficient to finance payments for capital
expenditures and the repositioning program.
The company has available $10 million in a line of credit and believes
that additional bank borrowings could be negotiated at competitive rates
based on its debt-equity ratio and current levels of operating performance.
The company is capable of supporting the anticipated growth in operations
during 1995, growth in dividends to shareholders, stock repurchases and
possible acquisition opportunities closely aligned with key business
strategies through internally generated funds supplemented with debt as
needed. In this regard, during 1995 the company entered into agreements to
(i) acquire 90% of the common stock of a chemical specialty business in
Brazil, and (ii) create a joint venture in the People's Republic of China
(see Note 10 on page 24). These acquisitions will require cash investments
in 1995 of approximately $5.4 million. Additionally, the acquisition in
Brazil will require additional outlays in 1996 and 1997 totaling
approximately $2.6 million. In 1995, the company's Board of Directors
authorized management to purchase in 1995 and later years, an additional
500,000 shares of the company's common stock, bringing the total current
authorization to 1,000,000 shares.
Operations
Comparison of 1994 with 1993
Consolidated net sales for 1994 were about even with 1993 as positive
volume impact in core markets and an increase from 1993 acquisitions in
France and Argentina fully offset the decrease in sales resulting from the
divestiture of QCP. The influence on net sales in 1994 of changes in
price/mix and currency translation were negligible as a 1% reduction from
price/mix was offset by a 1% increase from currency translation
(fluctuations in foreign currency exchange rates used to translate local
currency statements to dollars). The core market volume improvement was
attributable primarily to increased customer production levels in the U.S.
and Europe; synergistic benefits from a 1993 French metalworking company
acquisition; increased revenue in the U.S. from total fluid and chemical
management service contracts; and increased sales to the steel and can
markets in the Asia/Pacific region. Sales to the major U.S. markets were
steady throughout 1994. After a slow start, sales in Europe increased in
the second half of the year, due in large part to the positive impact of
the European economic recovery on steel and automotive production levels.
Sales to the aircraft and aerospace industries were below 1993 due to
continued low production levels.
Income from operations before repositioning (credits) charges improved
$5.4 million (55%) over 1993. The improvement over 1993 reflects the
positive impact of increased volume in core markets and benefits associated
with the 1993 repositioning program. These positive impacts were tempered
somewhat by investment costs related to the enhancement of marketing
capabilities and infrastructure in the Asia/Pacific and South America
regions, as well as raw material cost inflation, particularly in Europe,
which became evident late in the year. The company is encouraged by trends
in customer production levels, especially in Europe. However, raw material
cost inflation could have a dampening effect on earnings in the early part
of 1995 due to contractual pricing agreements with a number of customers in
both the U.S. and European markets and resistance to price increases in
some of the company's major markets.
Pursuant to the plans identified in the company's 1993 repositioning
program, during 1994, the company substantially completed the consolidation
of certain facilities in the U.S. and Europe; sold its manufacturing
facilities in Pomona, California and Verona, Italy; divested the businesses
which comprised its wholly-owned subsidiary, QCP, and achieved a majority
of the workforce reductions outlined in the program. As of December 31,
1994, it was determined that the repositioning activities would be
accomplished for less than originally anticipated and, accordingly, the
company reduced operating expenses by $.5 million ($.3 million after tax or
$.04 per share).
26
Operating margins, before repositioning (credits) charges, improved in
1994, when compared to 1993 as a result of the aforementioned increased
volume in core markets and cost savings associated with the repositioning
program. The estimated after-tax financial savings generated in 1994 due to
the repositioning program were approximately $.20 per share. Other income
rose primarily as a result of increased royalty income. Interest expense
declined slightly due to reduced overall borrowings in 1994 while interest
income declined due to lower cash holdings by the company. The decrease in
equity in net income from associated companies was due primarily to
business development investments in the company's Fluid Recycling Services
joint venture. The positive influence of currency translation on net income
in 1994 was approximately $.01 per share.
Comparison of 1993 with 1992
Consolidated net sales for 1993 decreased $17.5 million (8%) while
income from operations before repositioning charges decreased $7.9 million
(45%) versus 1992. In 1993, the company recorded repositioning charges of
$11.9 million ($7.9 million after tax or $.85 per share) for the costs
associated with a broad scope program of changes designed to improve
operating efficiency. The repositioning program included activities
associated with the consolidation of certain of the company's facilities;
closure and sale of the company's manufacturing facilities in Pomona,
California and Verona, Italy; the divestiture of nonstrategic business
operations and workforce reductions.
The 1993 consolidated sales decrease was due to two main factors: a 4%
decline in volume and a 4% reduction associated with currency translation
as the U.S. dollar strengthened against most major currencies during 1993.
The decrease in volume for the year was attributable primarily to: a
reduction in orders shipped to the People's Republic of China, as that
country worked down an earlier buildup of inventory; the European
recession's impact on customer production levels in markets served by the
company; and the adverse effect of lower production rates in the aircraft
and aerospace industry.
Operating margins, before the repositioning charges, declined in 1993
when compared to 1992 due mainly to the negative leverage effect of fixed
costs on reduced sales volume. In 1993, the combination of lower operating
results, foreign taxes on earnings at rates different than the U.S. federal
tax rate and the influence of non-deductible expenses, such as goodwill
amortization, resulted in a tax expense on a loss before taxes. The
negative influence of currency translation on net income in 1993 was
approximately $.8 million ($.09 per share). The decrease in equity in net
income from associated companies was primarily due to lower earnings from
the company's Mexican affiliate.
General
The company is involved in environmental cleanup activities or
litigation in connection with existing plant locations and former waste
disposal sites (see Note 11 on page 24). This involvement has not had, nor
is it expected to have, a material effect on the company's earnings or
financial position.
The company does not use financial instruments which expose it to
significant risk involving foreign currency transactions; however, the size
of non-U.S. activities has a significant impact on reported operating
results and the attendant net assets. During the past three years, sales by
non-U.S. subsidiaries accounted for approximately 44-50% of the dollar
amount of consolidated sales. In the same period, these subsidiaries
accounted for approximately 59-71% of consolidated operating profit
(see Note 9 on page 23). The greater profitability of non-U.S. sales during
this period is attributable to higher unit selling prices and lower fixed
overhead and selling costs.
27
EX-21
4
SUBSIDIARIES OF REGISTRANT
EXHIBIT 21
SUBSIDIARIES AND AFFILIATES OF THE REGISTRANT
Percentage of
voting securities
Jurisdiction of owned directly or
Name Incorporation indirectly by Quaker
---------------------------------------------------------------------------
*Quaker Chemical Europe B.V. Holland 100%
*Quaker Chemical B.V. Holland 100%
*Quaker Chemical, S.p.A. Italy 100%
+*Quaker Chemical Holdings UK United Kingdom 100%
Limited
*Quaker Chemical Limited United Kingdom 100%
*Quaker Chemical S.A. France 100%
**Quaker Chemical South Republic of South 50%
Africa (Pty.) Limited Africa
*Quaker Chemical, S.A. Spain 100%
*Quaker Chemical, S.A. Argentina 100%
*Quaker Chemical Industria e Brazil 100%
Comercio Ltda.
**Kelko Quaker Chemical, S.A. Venezuela 50%
*Quaker Chemical Limited Hong Kong 100%
*Quaker Chemical South East Singapore 100%
Asia Pte. Ltd.
**Nippon Quaker Chemical, Ltd. Japan 50%
*Quaker Chemical (Australasia) State of New South 51%
Pty. Limited Wales, Australia
+*QuakerChem Canada Limited Canada 100%
**TecniQuimia Mexicana Mexico 40%
S.A. de C.V.
+*SB Decking, Inc. (formerly Delaware, U.S.A. 100%
Selby, Battersby & Co.)
*Quaker Chemical Corporation Delaware, U.S.A. 100%
+Quaker Chemical Management, Delaware, U.S.A. 100%
Inc.
*AC Products, Inc. California, U.S.A. 100%
+*Quaker Construction Pennsylvania, U.S.A. 100%
Products, Inc.
+*QSC Products, Ltd. Pennsylvania, U.S.A. 100%
+*Multi-Chemical Products, California, U.S.A. 100%
Inc.
+*Quaker Petroleum Chemicals Pennsylvania, U.S.A. 100%
Company
**Fluid Recycling Services Michigan, U.S.A. 50%
Company
__________________
+ A non-operating company.
* Included in the consolidated financial statements.
** Accounted for in the consolidated financial statements under the
equity method.
28
EX-23
5
CONSENT OF INDEPENDENT AUDITORS
EXHIBIT 23
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the
Registration Statements on Form S-8 (No. 2-57924, No. 33-54158, and No. 33-
51655) of Quaker Chemical Corporation of our report dated February 21, 1995
appearing on page 25 of the 1994 Annual Report to Shareholders which is
incorporated in this Annual Report on Form 10-K.
PRICE WATERHOUSE LLP
Thirty South Seventeenth Street
Philadelphia, Pennsylvania 19103
March 29, 1995
29
EX-27
6
ART.5 FDS FOR 10-K
5
1,000
12-MOS
DEC-31-1994
DEC-31-1994
11,345
0
44,388
547
17,837
83,400
105,649
53,955
170,172
43,427
5,000
9,664
0
0
84,013
170,172
194,676
196,929
110,732
181,162
0
0
1,303
14,921
5,916
9,402
0
0
0
9,402
1.03
1.03