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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
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(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
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None
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, $1.00 par value
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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)
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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.
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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
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Registrant
Date: March 30, 1995 By: SIGISMUNDUS W. W. LUBSEN
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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
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Sigismundus W. W. Lubsen Principal Executive Officer March 30, 1995
President and Chief and Director
Executive Officer
RICHARD J. FAGAN
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Richard J. Fagan Principal Accounting Officer March 30, 1995
Corporate Controller and
Acting Treasurer
PETER A. BENOLIEL
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Peter A. Benoliel, Director March 30, 1995
Chairman of the Board
JOSEPH B. ANDERSON, JR.
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Joseph B. Anderson, Jr. Director March 30, 1995
PATRICIA C. BARRON
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Patricia C. Barron Director March 30, 1995
WILLIAM L. BATCHELOR
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William L. Batchelor Director March 30, 1995
LENNOX K. BLACK
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Lennox K. Black Director March 30, 1995
EDWIN J. DELATTRE
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Edwin J. Delattre Director March 30, 1995
FRANCIS J. DUNLEAVY
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Francis J. Dunleavy Director March 30, 1995
ROBERT P. HAUPTFUHRER
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Robert P. Hauptfuhrer Director March 30, 1995
FREDERICK HELDRING
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Frederick Heldring Director March 30, 1995
RONALD J. NAPLES
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Ronald J. Naples Director March 30, 1995
ALEX SATINSKY
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Alex Satinsky Director March 30, 1995
D. ROBERT YARNALL, JR.
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D. Robert Yarnall, Jr. Director March 30, 1995
12