UNITED STATES
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 June 30, 2004
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 incorporation or organization) |
(I.R.S. Employer Identification No.) | |
| One Quaker Park, 901 Hector Street, 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 ¨
Indicate by check mark whether the Registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act). Yes x No ¨
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 July 31, 2004 |
9,656,715 |
QUAKER CHEMICAL CORPORATION AND CONSOLIDATED SUBSIDIARIES
* * * * * * * * * *
2
Condensed Consolidated Balance Sheet
| Unaudited (Dollars in thousands, except par |
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| June 30, 2004 |
December 31, 2003* |
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| ASSETS |
||||||||
| Current assets |
||||||||
| Cash and cash equivalents |
$ | 24,470 | $ | 21,915 | ||||
| Accounts receivable, net |
81,791 | 78,121 | ||||||
| Inventories |
||||||||
| Raw materials and supplies |
18,781 | 14,691 | ||||||
| Work-in-process and finished goods |
19,069 | 17,520 | ||||||
| Prepaid expenses and other current assets |
14,442 | 11,277 | ||||||
| Total current assets |
158,553 | 143,524 | ||||||
| Property, plant and equipment, at cost |
138,565 | 136,448 | ||||||
| Less accumulated depreciation |
76,619 | 74,057 | ||||||
| Net property, plant and equipment |
61,946 | 62,391 | ||||||
| Goodwill |
32,906 | 33,301 | ||||||
| Other intangible assets, net |
8,996 | 9,616 | ||||||
| Investments in associated companies |
5,923 | 6,005 | ||||||
| Deferred income taxes |
12,839 | 12,846 | ||||||
| Other assets |
19,718 | 19,664 | ||||||
| Total assets |
$ | 300,881 | $ | 287,347 | ||||
| LIABILITIES AND SHAREHOLDERS’ EQUITY |
||||||||
| Current liabilities |
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| Short-term borrowings and current portion of long-term debt |
$ | 54,164 | $ | 42,992 | ||||
| Accounts and other payables |
42,017 | 41,259 | ||||||
| Accrued compensation |
6,138 | 6,816 | ||||||
| Other current liabilities |
13,305 | 14,738 | ||||||
| Total current liabilities |
115,624 | 105,805 | ||||||
| Long-term debt |
17,946 | 15,827 | ||||||
| Deferred income taxes |
2,764 | 2,688 | ||||||
| Other noncurrent liabilities |
41,564 | 40,967 | ||||||
| Total liabilities |
177,898 | 165,287 | ||||||
| Minority interest in equity of subsidiaries |
11,021 | 9,708 | ||||||
| Shareholders’ equity |
||||||||
| Common stock $1 par value; authorized 30,000,000 shares; issued (including treasury shares) 9,664,009 shares |
9,664 | 9,664 | ||||||
| Capital in excess of par value |
2,489 | 2,181 | ||||||
| Retained earnings |
119,316 | 117,308 | ||||||
| Unearned compensation |
(488 | ) | (621 | ) | ||||
| Accumulated other comprehensive (loss) |
(18,790 | ) | (15,406 | ) | ||||
| 112,191 | 113,126 | |||||||
| Treasury stock, shares held at cost; 2004 – 8,832, 2003 – 54,178 |
(229 | ) | (774 | ) | ||||
| Total shareholders’ equity |
111,962 | 112,352 | ||||||
| $ | 300,881 | $ | 287,347 | |||||
| * | Condensed from audited financial statements. |
The accompanying notes are an integral part of these condensed consolidated financial statements.
3
Condensed Consolidated Statement of Income
| Unaudited (dollars in thousands, except per share data) |
||||||||||||||||
| Three Months ended June 30, |
Six Months ended June 30, |
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| 2004 |
2003 |
2004 |
2003 |
|||||||||||||
| Net sales |
$ | 98,683 | $ | 83,453 | $ | 196,814 | $ | 156,790 | ||||||||
| Cost of goods sold |
66,139 | 54,506 | 131,815 | 99,477 | ||||||||||||
| Gross margin |
32,544 | 28,947 | 64,999 | 57,313 | ||||||||||||
| Selling, general and administrative expenses |
27,209 | 23,223 | 53,807 | 45,908 | ||||||||||||
| Operating income |
5,335 | 5,724 | 11,192 | 11,405 | ||||||||||||
| Other income (expense), net |
208 | 447 | 767 | 535 | ||||||||||||
| Interest expense |
(547 | ) | (387 | ) | (1,017 | ) | (737 | ) | ||||||||
| Interest income |
198 | 152 | 353 | 363 | ||||||||||||
| Income before taxes |
5,194 | 5,936 | 11,295 | 11,566 | ||||||||||||
| Taxes on income |
1,636 | 1,843 | 3,558 | 3,701 | ||||||||||||
| 3,558 | 4,093 | 7,737 | 7,865 | |||||||||||||
| Equity in net income of associated companies |
186 | 169 | 335 | 255 | ||||||||||||
| Minority interest in net income of subsidiaries |
(897 | ) | (787 | ) | (1,916 | ) | (1,538 | ) | ||||||||
| Net income |
$ | 2,847 | $ | 3,475 | $ | 6,156 | $ | 6,582 | ||||||||
| Per share data: |
||||||||||||||||
| Net income – basic |
$ | 0.30 | $ | 0.37 | $ | 0.64 | $ | 0.71 | ||||||||
| Net income – diluted |
$ | 0.29 | $ | 0.36 | $ | 0.62 | $ | 0.69 | ||||||||
| Dividends declared |
$ | 0.215 | $ | 0.21 | $ | 0.43 | $ | 0.42 | ||||||||
| Based on weighted average number of shares outstanding: |
||||||||||||||||
| Basic |
9,604,142 | 9,323,895 | 9,587,393 | 9,297,482 | ||||||||||||
| Diluted |
9,983,809 | 9,671,578 | 9,981,999 | 9,593,466 | ||||||||||||
The accompanying notes are an integral part of these condensed consolidated financial statements.
4
Condensed Consolidated Statement of Cash Flows
| Unaudited (Dollars in thousands) For the Six Months Ended |
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| 2004 |
2003 |
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| Cash flows from operating activities |
||||||||
| Net income |
$ | 6,156 | $ | 6,582 | ||||
| Adjustments to reconcile net income to net cash (used in) operating activities: |
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| Depreciation |
4,098 | 3,394 | ||||||
| Amortization |
575 | 438 | ||||||
| Equity in net income of associated companies |
(335 | ) | (255 | ) | ||||
| Minority interest in earnings of subsidiaries |
1,916 | 1,538 | ||||||
| Deferred compensation and other, net |
245 | 226 | ||||||
| Pension and other postretirement benefits |
411 | 2,190 | ||||||
| Increase (decrease) in cash from changes in current assets and current liabilities, net of acquisitions: |
||||||||
| Accounts receivable |
(4,824 | ) | (11,380 | ) | ||||
| Inventories |
(6,110 | ) | (2,789 | ) | ||||
| Prepaid expenses and other current assets |
(3,318 | ) | 1,204 | |||||
| Accounts payable and accrued liabilities |
(213 | ) | (2,467 | ) | ||||
| Change in restructuring liabilities |
(327 | ) | (866 | ) | ||||
| Net cash (used in) operating activities |
(1,726 | ) | (2,185 | ) | ||||
| Cash flows from investing activities |
||||||||
| Investments in property, plant and equipment |
(4,915 | ) | (4,859 | ) | ||||
| Dividends and distributions from associated companies |
233 | 3,890 | ||||||
| Payments related to acquisitions |
— | (1,105 | ) | |||||
| Other, net |
28 | 53 | ||||||
| Net cash (used in) investing activities |
(4,654 | ) | (2,021 | ) | ||||
| Cash flows from financing activities |
||||||||
| Net increase in short-term borrowings |
11,165 | 7,747 | ||||||
| Proceeds from long-term debt |
2,463 | — | ||||||
| Repayment of long-term debt |
(255 | ) | — | |||||
| Dividends paid |
(4,091 | ) | (3,924 | ) | ||||
| Stock options exercised, other |
716 | 1,700 | ||||||
| Distributions to minority shareholders |
(245 | ) | (609 | ) | ||||
| Net cash provided by financing activities |
9,753 | 4,914 | ||||||
| Effect of exchange rate changes on cash |
(818 | |||||||