FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended January 25, 1997
Commission file number: 0-3947
Hach Company
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(Exact name of Registrant as specified in its charter)
Delaware 42-070442
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
5600 Lindbergh Drive, Loveland, CO 80537
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(Address of principal executive offices) (Zip code)
(970) 669-3050
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(Registrant's telephone number including area code)
Not applicable
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(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
At March 7, 1997 the Registrant had 11,375,597 shares of its common stock
outstanding.
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Part I. Financial Information
Item 1. Financial Statements
Summarized Financial Statements
The accompanying Consolidated Balance Sheet as of January 25, 1997, and the
Consolidated Statements of Income and Retained Earnings for the quarters and the
nine months ended January 25, 1997 and January 27, 1996 and the Consolidated
Statements of Cash Flows for the nine months ended January 25, 1997 and January
27, 1996 are unaudited; however, in the opinion of management all adjustments
(consisting only of normal recurring adjustments) considered necessary for a
fair presentation of the results of such periods have been made. The results of
operations for the quarters and nine months ended January 25, 1997 and January
27, 1996 are not necessarily indicative of the results of operations to be
expected for the full year.
The financial data included herein pursuant to Rule 10-01 of Regulation S-X has
been subjected to a review by Coopers & Lybrand L.L.P., the Registrant's
independent accountants.
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HACH COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME AND RETAINED EARNINGS
(Thousands of Dollars Except Share Data)
(Unaudited)
QUARTER ENDED NINE MONTHS ENDED
------------- -----------------
1/25/97 1/27/96 1/25/97 1/27/96
---------- ---------- ---------- ----------
Net sales $ 29,481 $ 27,999 $ 88,675 $ 83,904
Cost of sales 15,324 14,262 45,395 42,047
------------ ------------ ------------ ------------
Gross profit 14,157 13,737 43,280 41,857
Selling, general & administrative expense 8,015 8,087 24,268 24,606
Research and development expense 1,986 1,832 6,230 5,492
------------ ------------ ------------ ------------
Income from operations 4,156 3,818 12,782 11,759
Interest income 460 383 1,261 994
------------ ------------ ------------ ------------
Income before income taxes 4,616 4,201 14,043 12,753
Income tax expense 1,591 1,451 4,843 4,453
------------ ------------ ------------ ------------
Net income 3,025 2,750 9,200 8,300
Retained earnings, beginning of period 71,988 62,838 67,177 58,425
Cash dividends (682) (683) (2,046) (1,820)
------------ ------------ ------------ ------------
Retained earnings, end of period $ 74,331 $ 64,905 $ 74,331 $ 64,905
============ ============ ============ ============
Net income per common share $ 0.27 $ 0.24 $ 0.81 $ 0.73
============ ============ ============ ============
Dividends per common share $ 0.06 $ 0.06 $ 0.18 $ 0.16
============ ============ ============ ============
Weighted avgerage shares outstanding 11,367,881 11,372,396 11,362,429 11,369,527
============ ============ ============ ============
The accompanying notes are an integral part of the consolidated financial
statements.
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HACH COMPANY AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Thousands of Dollars)
(Unaudited)
January 25, 1997 April 30, 1996
ASSETS
Current assets:
Cash and cash equivalents $ 11,986 $ 8,487
Marketable securities, held-to-maturity . 16,149 12,804
Accounts receivable, less reserves
of $248 and $215, respectively 17,715 15,846
Inventories 12,849 12,769
Prepaid expenses and other current assets 4,882 3,277
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Total current assets 63,581 53,183
Property, plant and equipment at cost:
Buildings and improvements 23,483 23,557
Machinery and equipment 46,637 43,129
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70,120 66,686
Less allowance for depreciation
and amortization 41,751 38,571
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28,369 28,115
Land 992 997
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Net property, plant and equipment 29,361 29,112
Marketable securities, held-to-maturity . 7,165 9,316
Other assets 2,050 1,684
-------- --------
Total assets $102,157 $ 93,295
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The accompanying notes are an integral part of the consolidated financial
statements.
Continued
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HACH COMPANY AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Thousands of Dollars)
(Unaudited)
January 25, 1997 April 30, 1996
LIABILITIES
Current liabilities:
Accounts payable $ 3,439 $ 2,826
Accrued liabilities:
Compensation 1,205 731
Compensated absences 3,490 3,500
Profit sharing 2,618 3,069
Other 1,875 1,188
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Total current liabilities 12,627 11,314
Deferred income taxes 2,240 1,814
Long term liabilities 1,765 1,347
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Total liabilities 16,632 14,475
STOCKHOLDERS' EQUITY
Common stock, $1 par value; authorized
25,000,000 shares in 1997 and
40,000,000 shares in 1996;
issued 11,622,953 shares 11,623 11,623
Capital contributed in excess of par value 453 316
Retained earnings 74,331 67,177
Cumulative currency translation adjustment 1,067 1,636
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87,474 80,752
Less: Shares held in treasury at cost:
(247,354 at January 25, 1997 and
258,881 at April 30, 1996) (1,949) (1,932)
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Total Liabilities and Stockholders' Equity $ 102,157 $ 93,295
========= =========
The accompanying notes are an integral part of the consolidated financial
statements.
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HACH COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Thousands of Dollars)
(Unaudited)
NINE MONTHS ENDED NINE MONTHS ENDED
JANUARY 25, 1997 JANUARY 27, 1996
----------------- -----------------
Cash Flows from operating activities:
Net income $ 9,200 $ 8,300
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation & amortization 4,567 4,487
Provision for deferred income taxes 426 61
Loss on disposal of property, plant & equipment 33 122
(Increase) decrease in accounts receivable (1,869) 371
(Increase) in inventories (80) (1,521)
(Increase) decrease in prepaid expenses &
other current assets (1,605) 1,135
Increase in accounts payable 613 680
Increase in other liabilities 1,118 1,665
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Net cash provided by operating activities 12,403 15,300
Cash flows from investing activities:
Proceeds from sale of property, plant & equipment 6 255
Capital expenditures (4,956) (4,887)
Purchases of investments held-to-maturity (12,929) (18,949)
Proceeds from the maturity of short-term investments 11,736 5,670
(Increase) in long-term assets (366) (368)
-------- --------
Net cash used by investing activities (6,509) (18,279)
Cash flows from financing activities:
Dividends paid (2,046) (1,820)
Exercise of stock options 327 245
Purchases of treasury stock (206) (599)
-------- --------
Net cash used by financing activities (1,925) (2,174)
Effects of exchange rate changes (470) (363)
-------- --------
Net increase (decrease) in cash & cash equivalents 3,499 (5,516)
Cash & cash equivalents at the beginning of the period 8,487 13,050
-------- --------
Cash & cash equivalents at the end of the period $ 11,986 $ 7,534
======== ========
The accompanying notes are an integral part of the consolidated financial
statements.
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Notes to Consolidated Financial Statements
HACH COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. Financial Statements
The consolidated balance sheet as of January 25, 1997, and the consolidated
statements of income and retained earnings for the quarters and the nine months,
ended January 25, 1997 and January 27, 1996 and the consolidated statements of
cash flows for the nine months ended January 25, 1997 and January 27, 1996 have
been prepared by the Company, without audit. The April 30, 1996 balance sheet
was derived from audited financial statements and as presented does not include
all the disclosures required by generally accepted accounting principles. In the
opinion of management, all adjustments, consisting only of normal recurring
adjustments, necessary to present fairly the consolidated financial position,
results of operations and cash flows have been made. These financial statements
include forward looking information as defined by the Private Securities
Litigation Reform Act of 1995 and therefore results of operations for the
interim periods are not necessarily indicative of the operating results for a
full year or of future operations.
Certain amounts in the financial statements for April 30, 1996 have been
reclassified to conform with the current periods presentation.
2. Inventories
The components of inventories are:
(Thousands of Dollars)
January 25, 1997 April 30, 1996
---------------- --------------
Raw materials and purchased parts $3,083 $2,977
Work-in-process 1,935 2,030
Finished goods 7,831 7,762
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$12,849 $12,769
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3. Income Taxes
For both periods presented, the provision for income taxes is based upon an
expected annual effective income tax rate. The rates utilized for the quarter
ended January 25, 1997 and January 27, 1996 were 34.5% and for the nine months
ended January 25, 1997 and January 27, 1996 were 34.5% and 34.9% respectively.
4. Net Income Per Common Share
Net income per common share is based on the weighted average number of
common shares outstanding during the period. Common stock equivalents do not
have a materially dilutive effect on net income per common share.
5. Capital Stock
At the annual stockholders meeting on August 27, 1996, the stockholders
approved a reduction in the number of authorized shares form 40,000,000 to
25,000,000.
6. Recently Issued Financial Accounting Standards
The Financial Accounting Standards Board issued Statement of Financial
Accounting Standards No. 123 "Accounting for Stock-Based Compensation," FAS No.
123 in October of 1995. This statement, which is required to be adopted in
fiscal year 1997, introduces a fair-value based method of accounting for
stock-based compensation. The Company has decided to adopt the disclosure method
for FAS No. 123.
7. Subsequent Event
On March 3, 1997, the Company's Board of Directors announced it had
approved an amendment to its Certificate of Incorporation creating two new
classes of stock that would replace its existing common stock. The new Class B
Common Stock would be similar to the existing common stock and would carry the
right to vote on all matters. The new Class A Common Stock would be nonvoting
except under certain limited circumstances related to legal requirements.
The proposed amendment is subject to approval by the holders of a majority
of the outstanding shares of existing common stock. Upon such approval, each
share of existing common stock would be converted to one-half of a share of
Class A Common Stock and one-half of a share of Class B Common Stock.
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Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operation
Analysis of Financial Condition:
There was no material change in the liquidity of the Company during the quarter
ended January 25, 1997. Cash and short-term investments increased $3,378,000
during the quarter and increased $6,844,000 during the nine month period to
$28,135,000.
The Company monitors cash flow and capital expenditures in great detail as part
of its total budgeting process. Capital needs in the near future will be for
production equipment; computer systems and equipment; and peripheral equipment
to support production, research and development and administration.
The Company's Board of Directors authorized the Company to repurchase up to
$2,000,000 in value of the Company's common stock.
The Company's Board of Directors authorized the construction of a 66,350 square
foot facility to be added to the existing Loveland, Colorado facility. The
addition will provide more manufacturing, research and development and office
space. Construction is tentatively scheduled to begin in late summer or early
fall of 1997.
The Company intends to finance its capital projects, dividend payments and stock
buy back through existing cash and cash equivalents, short-term investments and
projected cash flow from operations.
Results of Operations: Quarter ended January 25, 1997 compared to quarter ended
January 27, 1996.
Net sales increased 5.3% to $29,481,000 from $27,999,000. The Company's domestic
net sales increased 7.0% while its international net sales increased 2.6%. Both
the domestic and international net sales increases were due primarily to unit
volume increases in most of the Company's major product lines.
Cost of sales increased 7.4% to $15,324,000 from $14,262,000. This item,
composed of material, labor and product overhead, increased primarily because of
unit volume increases. The gross profit percent decreased to 48.0% from 49.0%
due to the mix of products sold.
Selling, general and administrative expense decreased .1% to $8,015,000 from
$8,087,000. The decrease was primarily due to lower payroll and related expenses
due to a reduction in the number of employees.
Research and development expense increased 8.4% to $1,986,000 from $1,832,000.
The increase was due to an increased emphasis on research and development
efforts. The increased research and development spending will result in a number
of new products being introduced during the next six months.
Interest income increased to $460,000 from $383,000. The increase was due to
higher average investment balances and higher interest rates in the quarter.
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Results of Operations: Nine months ended January 25, 1997 compared to nine
months ended January 27, 1996.
Net sales increased 5.7% to $88,675,000 from $83,904,000. The Company's domestic
net sales increased 4.5% while its international net sales increased 7.9%. Both
the domestic and international net sales increases were primarily due to unit
volume increases in most of the Company's major product lines.
Cost of sales increased 8.0% to $45,395,000 from $42,047,000. This item,
composed of material, labor and product overhead, increased primarily because of
unit volume increases. The gross profit percent decreased to 48.8% from 49.9%
due to the mix of products sold.
Selling, general and administrative expense decreased 1.4% to $24,268,000 from
$24,606,000. The decrease was primarily due to lower payroll and related
expenses due to a reduction in the number of employees.
Research and development expense increased 13.4% to $6,230,000 from $5,492,000.
The increase was due to an increased emphasis on research and development
efforts. This increased research and development spending will result in a
number of new products being introduced during the next six months.
Interest income increased to $1,261,000 from $994,000. The increase was due to
higher average investment balances and higher interest rates in the current
period.
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Part II. Other Information
Item 1. Legal Proceedings
N/A
Item 2. Changes in Securities
A certificate of Amendment was filed on September 12, 1996 in the
Office of the Secretary of State of Delaware, setting out the amendment to
Article Four of the Company's Certificate of Incorporation which reduced the
number of shares of capital stock ($1.00 par value) which the company may issue
to 25,000,000 shares. Prior to the amendment, the Company was authorized to
issue a maximum of 40,000,000 share of its $1.00 par value common stock. See
Item 4, Part II of the 10-Q report for the quarter ended July 27, 1996.
Item 6. Exhibits and Reports on Form 8-K
1. Report of Independent Accountants.
2. Awareness Letter of Independent Accountants.
3. Financial Data Schedule.
During the quarter ended January 25, 1997, the Registrant filed no report on
Form 8-K.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
Hach Company
March 11, 1997 By: /s/ Bruce J. Hach
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Date Bruce J. Hach, President and Chief Operating Officer
March 11, 1997 By: /s/ Gary R. Dreher
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Date Gary R. Dreher, Vice President and Chief Financial Officer
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