SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended April 30, 2001 Commission file numbe
r 1-5838
NCH CORPORATION
(Exact name of registrant as specified in its charter)
Delaware 75-0457200
(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
P.O. Box 152170
2727 Chemsearch Boulevard
Irving, Texas 75015
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (972) 438-0211
Securities registered pursuant to Section 12(b) of the Act:
Name of each exchange on
Title of each class which registered
Common Stock, $1 Par Value New York Stock Exchange
Securities registered pursuant to Section 12(g) of the Act:
None
(Title of Class)
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 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. (X)
Indicate the number of shares outstanding of each of the registrant's
classes of common stock, as of the latest practicable date:
Approximate Aggregate
Market Value Total Shares
of Shares Held by Outstanding
Class Non-affiliates at June 26, 2001
----- --------------------- ----------------
Common Stock, $1 Par Value $ 80,427,000 5,307,330
*The approximate aggregate market value of the common stock held by
non-affiliates is based on the closing price of these shares on the New York
Stock Exchange on June 26, 2001.
DOCUMENTS INCORPORATED BY REFERENCE:
Portions of the Registrant's 2001 Annual Report to the Shareholders and
definitive Proxy Statement relating to the Registrant's 2001 Annual Shareholders
Meeting are incorporated by reference in Parts II and III of this Form 10-K.
DOCUMENTS INCORPORATED BY REFERENCE
Location in Form 10-K Incorporated Document
PART II
Item 5 - Market for the Registrant's Page 32 of the 2001 Annual
Common Equity and Related Shareholder Report.
Matters.
Item 6 - Selected Financial Data. Page 8 of the 2001 Annual
Report.
Item 7 - Management's Discussion and Pages 8-12 of the 2001
Analysis of Financial Condition and Annual Report.
Results of Operations.
Item 8 - Financial Statements and Pages 13-32 of the 2001
Supplementary Data. Annual Report.
PART III
Item 10 - Directors and Executive Pages 2-4 and 9-10 of the
Officers of the Registrant. Company's Proxy Statement
dated June 27, 2001, in
connection with its Annual
Meeting to be held on July
26, 2001.
Item 11 - Executive Compensation. Pages 5-10 of the Company's
Proxy Statement dated June
27, 2001, inconnection with
its Annual Meeting to be
held on July 26, 2001.
Item 12 - Security Ownership of Certain Pages 12-13 of the Company's
Beneficial Owners and Management. Proxy Statement dated June
27, 2001, in connection with
its Annual Meeting to be
held on July 26, 2001.
Item 13 - Certain Relationships and Pages 2-3 of the Company's
Related Transactions. Proxy Statement dated June
27, 2001, in connection with
its Annual Meeting to be
held on July 26, 2001.
PART I
Item 1. Business
NCH Corporation, a Delaware corporation, and its subsidiaries (herein
collectively referred to as the "Company" or "NCH" unless the context requires
differently) markets an extensive line of maintenance, repair and supply
products to customers throughout the world. NCH products include chemical
specialties, fasteners, welding alloys, and plumbing parts. These products are
marketed principally through the Company's own sales force. Since the DBS
Services segment was closed during the current year, direct broadcast satellite
equipment is no longer included in the Company's product offerings. There have
been no other significant changes in the kind of products produced or marketed
by the Company since the beginning of the last fiscal year, although individual
products are continually added to and deleted from the product lines. Sales are
generally consistent throughout the year, with no significant seasonal
fluctuations.
Competitive conditions in the industries in which NCH Corporation is
involved are severe and the Company believes that no one enterprise or group of
enterprises has a dominant or preeminent position in the market. Further, the
Company believes that no enterprise has a significant percentage of the market.
No informative statement can be made as to the Company's rank in its industry.
Not only do other concerns compete in the broad general range of maintenance,
repair or supply products, but there are also many competitors who produce one
or more products which compete with specific products sold by the Company.
Competition in the industry is primarily on the basis of price, service and
product performance. The Company's main emphasis is on service and product
performance rather than price. Sales of Company products are not dependent upon
a limited number of customers, and no particular customer accounts for more than
5% of net sales. However, in the Plumbmaster Group, major home building supply
centers accounted for approximately 27% of that segment's sales in this fiscal
year. Of the sales to home building supply centers, approximately 59%
represented one customer in this fiscal year, which results in increased pricing
pressure for the plumbing products.
Qualified sales representatives are crucial to the Company's operations. In
addition to industry competition, the Company competes with the entire business
community for qualified sales representatives. This competition has been, and
remains, severe. The Company has a required formal training program for its
sales representatives consisting of in-house and field training. Based on the
Company's experience in the last three years, turnover of new sales
representatives in the first year is estimated to be 78%. The annual cost of
recruiting and training sales representatives over the past three years has
averaged approximately $34 million per year.
Patents, franchises and concessions have not played an important role in
the Company's business. Trademarks are extensively used on products, and are
useful but not of paramount importance.
As of the end of its last fiscal year the Company employed 8,404 persons.
The Company employs 59 professional or technical persons on its laboratory staff
ranging from Ph.D's to nongraduate chemical technicians. Although the laboratory
staff spends time on research activities relating to the development of new
products or services and the improvement of existing products or services, the
staff is also engaged in quality control and customer service activities. Costs
cannot be broken down between these various activities. The approximate amounts
spent on laboratory operations in the years ended April 30, 2001, 2000 and 1999,
were $4.6 million, $5.1 million and $5.3 million, respectively. All laboratory
costs, including research and development, are expensed as incurred.
Incorporated herein by reference is the footnote entitled "Segment and
Geographic Area Information" of the Consolidated Financial Statements in the NCH
Corporation Annual Report for the year ended April 30, 2001 (2001 Annual
Report), filed as an exhibit to this report. NCH has five segments: Chemical
Specialties, Plumbmaster Group, Partsmaster Group, Landmark Direct, and Other
Product Lines. Other product lines include only the results of N-E Thing Supply
which was sold on September 30, 2000.
International sales, primarily for Chemical Specialties and Partsmaster
Group, are conducted through subsidiaries in Europe, Canada, Latin America,
Australia and the Far East. In the Company's experience, other than currency
fluctuations, the overall risk of international operations has not been
appreciably higher than domestic operations, although the risk of operations in
any one country may be greater than in the United States. The Company is subject
to the risks inherent in operating in foreign countries, including government
regulation, currency restrictions and other restraints, risk of expropriation
and burdensome taxes.
The products that the Company markets in each of its segments are readily
available from numerous sources. The Company buys raw materials and finished
products from a large number of suppliers, none of whom would materially impact
the consolidated sales or earnings of the Company should they cease to be a
source of supply. In some foreign countries, licensees manufacture specialty
chemical products for marketing by the Company's subsidiaries.
In each of its operating segments, the Company is subject to various
federal, state and local laws and regulations affecting businesses in general,
including environmental laws and regulations. All laws and regulations are
subject to change and the Company cannot predict what effect, if any, changes
might have on its business.
Item 2. Properties
The Company owns its world headquarters and domestic administrative center
complex in Irving, Texas, containing approximately 319,000 square feet.
The Company owns and operates 19 manufacturing facilities in 7 states and
11 foreign countries, located in Canada, Europe, Latin America and the Far East,
containing approximately 1,132,000 square feet. These facilities also include
related office and warehouse space.
The Company owns and occupies a total of 17 office or office/warehouse
combinations in 3 states and 6 foreign countries, located in Europe and Latin
America, containing approximately 755,000 square feet.
In addition, the Company leases additional warehouse space, manufacturing
plants, and office space at various locations in the United States and abroad,
none of which is material in relation to the Company's overall assets.
The Company also owns five parcels of undeveloped land in 5 states.
During the last fiscal year the Company made investments, net of
dispositions, of $2,459,000 ($10,543,000 gross) in property, plant and
equipment.
The plants and properties owned and operated by the Company are maintained
in good condition and are believed to be suitable and adequate for the next
several years.
Item 3. Legal Proceedings
Contingent Liabilities and Environmental Matters, appearing on page 25-26
of the 2001 Annual Report, is incorporated by reference herein.
Item 4. Submission of Matters to a Vote of Security Holders
No matters were submitted to a vote of security holders during the fourth
quarter of the fiscal year covered by this report.
Executive Officers of the Registrant
The following are the executive officers of the Company as of June 1,
2001:
Name Office Age
Irvin L. Levy President; Director 72
John I. Levy Executive Vice President 39
Lester A. Levy, Jr. Executive Vice President 40
Robert M. Levy Executive Vice President 42
Walter M. Levy Executive Vice President 45
Joe Cleveland Vice President and Secretary 67
Tom Hetzer Vice President - Finance 64
Glen Scivally Vice President and Treasurer 60
Messrs. John I. Levy, and Robert M. Levy are brothers and are cousins to
Walter M. Levy and Lester Levy, Jr., who are brothers. Messrs. Robert M. Levy
and John I. Levy are sons of Irvin L. Levy. Messrs. Lester A. Levy, Jr., Walter
M. Levy, Robert M. Levy, and John I. Levy were elected Executive Vice Presidents
of the Company effective May 1, 2000. Each has served in senior management
capacities of NCH from between 14 to 20 years. Each of the remaining Company's
executive officers has been an executive officer of the registrant for more than
five years as his principal employment.
PART II
Item 5. Market for the Registrant's Common Equity and Related Stockholder
Matters
Market and Dividend Information, appearing on page 32 of the 2001 Annual
Report, is incorporated by reference herein.
Item 6. Selected Financial Data
Selected Financial Data, appearing on page 8 of the 2001 Annual Report, is
incorporated by reference herein.
Item 7. Management's Discussion and Analysis of Financial Condition and Results
of Operations
Management's Discussion and Analysis of Financial Condition and Results of
Operations, appearing on pages 8-12 of the 2001 Annual Report, is incorporated
by reference herein.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk
The Company, through its foreign subsidiaries, manufactures and distributes
products worldwide. As a result, the Company is from time to time exposed to
market risk relating to the impact of foreign currency exchange rates; however,
this exposure has not been significant in the past and is not expected to be
significant in the future.
In addition, the Company maintains a portfolio of marketable securities,
the majority of which are debt securities issued by U.S. Government agencies. As
a result, the Company is exposed to market risk relating to interest rate
movements; however, a hypothetical 10% adverse movement in interest rates would
have no material impact on net income of the Company.
Item 8. Financial Statements and Supplementary Data
The Financial Statements and Supplementary Data, appearing on pages 13-32
of the 2001 Annual Report, is incorporated by reference herein.
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure
Not applicable
PART III
Item 10. Directors and Executive Officers of the Registrant
Information on directors of the registrant, found on pages 2-4 of the
Company's Proxy Statement dated June 27, 2001, in connection with its Annual
Meeting to be held July 26, 2001, is incorporated by reference herein.
Information on executive officers of the registrant, found on pages 9-10 of
the Company's Proxy Statement dated June 27, 2001, is incorporated by reference
herein.
Item 11. Executive Compensation
Information on executive compensation and transactions, found on pages 4-7
of the Company's Proxy Statement dated June 27, 2001, in connection with its
Annual Meeting to be held July 26, 2001, is incorporated by reference herein.
Item 12. Security Ownership of Certain Beneficial Owners and Management
Information on security ownership of principal stockholders and management,
found on pages 9-10 of the Company's Proxy Statement dated June 27, 2001, in
connection with its Annual Meeting to be held on July 26, 2001, is incorporated
by reference herein.
Item 13. Certain Relationships and Related Transactions
Information on certain relationships and related transactions, found on
pages 2-3 of the Company's Proxy Statement dated June 27, 2001, in connection
with its Annual Meeting to be held on July 26, 2001, is incorporated by
reference herein.
PART IV
Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K
(a) (1) and (2): The response to this portion of Item 14 is submitted as a
separate section of this report on pages 15-16. The information set forth on
pages 15-16 of this report is incorporated by reference. The consolidated
financial statements set forth on page 15 of this report are filed as part of
this Form 10-K by incorporation by reference to pages 13-32 of the 2001 Annual
Report.
(a) (3) and (c): Exhibits. For a list of the exhibits filed as a part of this
report, see the Index to Exhibits on pages 19-20 of this report, which is
incorporated by reference.
(b) Reports on Form 8-K: No reports on Form 8-K were filed during the quarter
ended April 30, 2001.
(d) Not applicable.
SIGNATURES
The Issuer
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, NCH Corporation has duly caused this report to be signed
on its behalf by the undersigned, thereunto duly authorized, in the City of
Irving, and the State of Texas, on this 1st day of June, 2001.
NCH CORPORATION, Registrant
By /s/Irvin L. Levy
-------------------------
Irvin L. Levy, President
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of NCH
Corporation and in the capacities and on the date indicated.
Signature Capacity at Registrant Date
- --------- ---------------------- -----
/s/Irvin L. Levy President; Chairman of the Board June 1, 2001
- ----------------------- (Principal Executive Officer)
Irvin L. Levy
/s/John I. Levy Executive Vice President June 1, 2001
- -----------------------
John I. Levy
/s/Lester A. Levy, Jr. Executive Vice President June 1, 2001
- -----------------------
Lester A. Levy, Jr.
/s/Robert M. Levy Executive Vice President June 1, 2001
- -----------------------
Robert M. Levy
/s/Walter M. Levy Executive Vice President June 1, 2001
- -----------------------
Walter M. Levy
/s/Tom Hetzer Vice President - Finance June 1, 2001
- ---------------------- (Principal Accounting Officer)
Tom Hetzer
/s/Robert L. Blumenthal Director June 1, 2001
- -----------------------
Robert L. Blumenthal
/s/Rawles Fulgham Director June 1, 2001
- -----------------------
Rawles Fulgham
/s/Ronald G. Steinhart Director June 1, 2001
- -----------------------
Ronald G. Steinhart
/s/Jerrold M. Trim Director June 1, 2001
- -----------------------
Jerrold M. Trim
Director June 1, 2001
- -----------------------
Thomas B. Walker Jr.
NCH CORPORATION
AND SUBSIDIARY COMPANIES
FORM 10-K
ITEMS 8, 14(a)(1) and (2) and (a)(3) and (c)
INDEX OF FINANCIAL STATEMENTS, SCHEDULES AND EXHIBITS
The following consolidated financial statements are filed as part of this
Form 10-K by incorporation by reference to pages 13-32 of the 2001 Annual
Report.
Consolidated Financial Statements:
Statements of Income, Years Ended April 30, 2001, 2000 and 1999
Balance Sheets, April 30, 2001 and 2000
Statements of Cash Flows, Years Ended April 30, 2001, 2000 and 1999
Statements of Stockholders' Equity, Years Ended April 30, 2001, 2000 and 1999
Notes to Consolidated Financial Statements
Independent Auditors' Report
Selected Unaudited Quarterly Data, Years Ended April 30, 2001 and 2000
The following consolidated financial statement schedule of the registrant
and its subsidiaries is included in Item 14(a)(2):
Page
Consolidated Financial Statement Schedule
Independent Auditors' Report 17
II - Valuation and Qualifying Accounts 18
Schedules other than those listed above are omitted because they are not
required or are not applicable, the information required is immaterial in
relation to the registrant's consolidated financial statements, or the required
information is shown in the consolidated financial statements or notes thereto.
Columns omitted from schedules filed have been omitted because the information
is not applicable.
INDEPENDENT AUDITORS' REPORT
The Stockholders and Board of Directors
NCH Corporation:
Under date of May 30, 2001, we reported on the consolidated balance sheets
of NCH Corporation and subsidiaries as of April 30, 2001 and 2000, and the
related consolidated statements of income, stockholders' equity and cash flows
for each of the years in the three-year period ended April 30, 2001, as
contained in the 2001 Annual Report to Shareholders. These consolidated
financial statements and our report thereon are incorporated by reference in the
annual report on Form 10-K for the year ended April 30, 2001. In connection with
our audits of the aforementioned consolidated financial statements, we also
audited the related consolidated financial statement schedule as listed in the
accompanying index. This consolidated financial statement schedule is the
responsibility of the Company's management. Our responsibility is to express an
opinion on this consolidated financial statement schedule based on our audits.
In our opinion, such consolidated financial statement schedule, when
considered in relation to the basic consolidated financial statements taken as a
whole, presents fairly, in all material respects, the information set forth
therein.
/s/ KPMG LLP
Dallas, Texas
May 30, 2001
NCH CORPORATION AND SUBSIDIARIES
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
(In Thousands)
Balance at Charged to Foreign Deductions-- Balance
Beginning Costs and Currency Accounts at End of
Description of Period Expenses Translation Written-Off Period
- --------------------------------- ----------- ----------- ------------ ------------- ------------
Reserves Deducted in the Balance
Sheet from Assets to Which They
Apply
Allowance for Doubtful Accounts
Year Ended April 30, 2001 $15,871 $4,199 $ (930) $4,991 $14,149
Year Ended April 30, 2000 $16,993 $5,270 $(1,162) $5,230 $15,871
Year Ended April 30, 1999 $15,331 $5,695 $ (126) $3,907 $16,993
INDEX TO EXHIBITS
Exhibit Sequentially
Number Exhibit Numbered Page
--------- --------- -------------
Exhibit 3.1 (1) Restated Certificate of Incorporation
Exhibit 3.2 (1) Bylaws, as amended
Exhibit 10.1 (1) (3) Form of 1980 Non-Qualified Stock Option
Plan, as amended
Exhibit 10.5 (1) (3) Form of Non-Qualified Stock Option
Agreement
Exhibit 10.6 (1) (3) Forms of Deferred Compensation
Agreements with Messrs. Irvin, Lester,
and Milton Levy
Exhibit 10.7 (3) (4) Fourth and Fifth Amendments to Deferred Compensation
Agreements with Messrs. Irvin, Lester,
and Milton Levy
Exhibit 10.8 (3) (5) Executive Committee Incentive Bonus Plan
Exhibit 10.9 (3) (6) Fourth, Fifth and Sixth Amendments to Deferred
Compensation Agreements with Messrs. Irvin, Lester,
and Milton Levy
Exhibit 10.10 (2) Forms of Deferred Compensation Agreements with
Messrs. Lester Levy, Jr., Walter Levy, Robert Levy,
and John Levy
Exhibit 21 (2) Subsidiaries of the Registrant
Exhibit 23 (2) Independent Auditors' Consent
(1) Incorporated herein by reference to the exhibits with the same exhibit
number and designation in the Registrant's report on Form 10-K for the
fiscal year ended April 30, 1987, filed with the Securities and Exchange
Commission.
(2) Filed herewith.
(3) Management contract or compensatory plan or arrangement required to be
filed as an exhibit to this report pursuant to Item 14(c) of Form 10-K.
(4) Incorporated herein by reference to the exhibit with the same exhibit
number and designation in the Registrant's report on Form 10-K for the
fiscal year ended April 30, 1995, filed with the Securities and Exchange
Commission.
(5) Incorporated herein by reference to the exhibit with the same exhibit
number and designation in the Registrant's report on Form 10-K for the
fiscal year ended April 30, 1994, filed with the Securities and Exchange
Commission.
(6) Incorporated herein by reference to the exhibit with the same exhibit
number and designation in the Registrant's report on Form 10-K for the
fiscal year ended April 30, 1997, filed with the Securities and Exchange
Commission.
NCH CORPORATION AND SUBSIDIARIES
EXHIBIT 10.10
AGREEMENT
THE STATE OF TEXAS '
'
COUNTY OF DALLAS '
THIS AGREEMENT entered into as of this 13th day of April, 1995, by and
between NCH CORPORATION (hereinafter referred to as "Corporation"), and JOHN I.
LEVY, of Dallas, Dallas County, Texas (hereinafter referred to as "Levy"):
R E C I T A L S:
The following facts exist:
A. Levy has rendered valuable services to the Corporation for many years.
Levy's experience and knowledge of the affairs of the Corporation and his
reputation and contacts in the industry are extremely important to the continued
success of the Corporation.
C. This Agreement was approved by the Board of Directors on April 13, 1995.
---------------------------------------------
NOW, THEREFORE, for and in consideration of the recitals above, and in
consideration of the covenants and agreements of the parties hereto, each to the
other, the parties agree as follows:
1. Continuation of Employment. Levy agrees to continue in the employment of
the Corporation upon such terms as the Board of Directors and Levy shall
mutually agree until he reaches the age of fifty-nine and one-half (59-1/2)
years, and thereafter until such date as shall be mutually agreed upon.
2. Payment upon Retirement or Disability. At any time after reaching age
fifty-nine and one-half (59-1/2) years, Levy may retire from the active and
daily service of the Corporation. Commencing with the date of such retirement,
the Corporation shall pay to Levy an annual amount (the "Annual Amount") of Two
Hundred Thousand Dollars ($200,000.00). The Annual Amount shall be increased for
retirement in a calendar year subsequent to 1995 by the increase in the United
States Consumer Price Index (All Urban Consumers - U.S. City Average) for the
preceding calendar year. The Annual Amount for each year shall be paid in twelve
(12) equal monthly installments (the "Monthly Payments"), with an installment
payable on the first day of each month. The Corporation shall continue to make
such payments to Levy during his lifetime, and additionally agrees as follows:
a. If Levy so retires, but dies before receiving one hundred
twenty (120) monthly payments, the Corporation shall continue to
make such monthly payments to Levy's wife, if she survives him,
until the total of one hundred twenty (120) Monthly Payments have
been made to Levy and his wife, if any.
b. If Levy so retires, but dies before receiving one hundred
twenty (120) Monthly Payments, and if his wife, if any, does not
survive him, or survives him and dies before one hundred twenty
(120) Monthly Payments have been made to Levy and his wife, the
Corporation shall continue to make such Monthly Payments to the then
surviving issue of Levy, such issue to take per stirpes, until a
total of one hundred twenty (120) Monthly Payments have been made to
Levy, his wife, if any, and his issue; provided that the Corporation
shall have no liability to continue any payments hereunder beyond
the first day of the month in which the last survivor of Levy, his
wife, if any, and his issue shall die.
c. Levy dies before his retirement date while in the employ of
the Corporation, the Corporation shall pay to Levy's wife, if she
shall survive him, Monthly Payments commencing the first day of the
month following the month in which Levy dies and ending when one
hundred twenty (120) Monthly Payments have been made to Levy's wife;
or if Levy's wife dies after surviving to survive Levy or fails to
survive Levy, the Corporation shall pay or continue to pay to such
of Levy's issue who survive Levy and his wife, per stirpes, the
Monthly Payments until a total of one hundred twenty (120) Monthly
Payments have been made to Levy's wife and his issue; provided that
the Corporation shall have no liability to continue any payments
hereunder beyond the first day of the month in which the last
survivor of Levy, his wife, and his issue shall die.
d. If Levy becomes disabled before his retirement date, the
Corporation shall pay Monthly Payments to Levy, commencing the first
day of the month following the month in which Levy becomes unable to
continue active employment and continuing during the lifetime of
Levy. In the event of Levy's death after becoming disabled but prior
to the time when Levy shall have received one hundred twenty (120)
Monthly Payments, the Corporation shall continue to make such
Monthly Payments to Levy's wife, if any, if she survives him, until
a total of one hundred twenty (120) Monthly Payments have been made
to Levy and his wife. If Levy's wife survives Levy but does before
one hundred twenty (120) Monthly Payments are made to Levy and his
wife, or if Levy's wife fails to survive him, the Corporation shall
continue such Monthly Payments to such of Levy's issue as survive
him and his wife, if any, such issue to take per stirpes, until a
total of one hundred twenty (120) Monthl Payments have been made to
Levy, his wife, and his surviving issue.
e. The Corporation shall have no further liability beyond the
date of death of the last survivor of Levy, his wife, if any, and
all of his issue.
3. Definition of Disability. For the purposes of subparagraph d of
paragraph 2 of this Agreement, the obligations of the Corporation to make the
payments upon the disability of Levy shall not become effective unless and until
all of the following conditions are met:
a. Levy shall become physically or mentally incapable of
properly performing the services required of him in accordance with
his obligation under paragraph 1 hereof;
b. such incapacity shall exist or shall be reasonably
expected to exist for more than one hundred twenty (120) days in
the aggregate during any period of twelve (12) consecutive months;
and
c. either Levy or the Corporation shall have given the other
thirty (30) days written notice of his or its intention to terminate
the active employment of Levy because of such disability.
4. Restrictive Covenants. Levy agrees that as a condition to the payment of
benefits to himself and his family granted herein, from the date of this
Agreement he shall not, directly or indirectly, enter into or in any manner take
part in any business, profession, or other endeavor, either as an employee,
agent, independent contractor, owner, or otherwise, which shall be in any way
connected with or in the business of manufacturing, jobbing, selling or
marketing chemicals or chemical specialties anywhere in the United States of
America. It is recognized that a broad geographical area is being described in
this restrictive covenant; however, both parties hereto recognize that Levy has
operated extensively throughout the United States for the Corporation and that
the Corporation does business throughout the United States and other parts of
the world, and such a broad area would be necessary for protection of the
Corporation.
5. Forfeiture of Payments. If Levy fails to observe any of the terms of
this Agreement and continues such breach for a period of thirty (30) days after
the Corporation shall have requested him to perform the same, or if he enters
any business described in Paragraph 4 hereof and continues therein either
directly or indirectly for a period of fifteen (15) days after the Corporation
shall have notified him in writing at his home address that the Directors of the
Corporation have decided that such business is in competition with the
Corporation, then no further payments shall be due or payable by the Corporation
hereunder either to Levy, his wife, or his issue, and the Corporation shall have
no further liability hereunder.
6. Assignment. Neither Levy nor his wife shall have any right to commute,
encumber, or dispose of the right to receive payments hereunder, which payments
and the right thereto are expressly declared to be non-assignable and
nontransferable, and in the event of any attempted assignment or transfer, the
Corporation shall have no further liability hereunder.
7. Reorganization. The Corporation shall not merge or consolidate with any
other corporation until such corporation expressly assumes the duties of the
Corporation herein set forth.
8. Benefit. This Agreement shall be binding upon the parties hereto, their
heirs, executors, administrators or successors.
9. Definition of Wife and Issue. By the word wife wherever used in this
Agreement, is meant the person to whom Levy is married by a ceremonial marriage
and is not separated or divorced at the time the definition of the word becomes
important. By the word issue is meant all of the legitimate descendants of
whatever degree of Levy, including descendants both by blood and by adoption,
provided such adoption is by a court proceeding, the finality of which has not
been questioned by the adopting person.
10. Special Methods of Payment. During the minority or physical or mental
incapacity of any person to whom Monthly Payments by the Corporation shall be
paid, the Corporation may make such payments in any one or more of the following
ways: (i) to such person directly, (ii) to the guardian, committee, conservator,
or other similar official representative of such person, (iii) to a relative of
such person to be expended by such relative for the care, support, education or
maintenance of such person, (iv) as to any minor person, to a custodian
designated by the Corporation under the Texas Uniform Gifts to Minors Act, or
other similar statute, or (v) by the Corporation expending the same directly for
the care, support, education and maintenance of such person. The Corporation's
determination of the minority or incapacity of any person shall be final and the
Corporation shall not be responsible or liable for the application of any
payment after the same has been made in accordance with the provisions hereof.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first above written.
NCH CORPORATION
ATTEST:
/s/ Joseph H. Cleveland By: /s/ Tom Hetzer
- ----------------------- ---------------------
Secretary Tom Hetzer
By: /s/ John I. Levy
---------------------
John I. Levy
STATE OF TEXAS '
'
COUNTY OF DALLAS '
This instrument was acknowledged before me on April 13 , 1995, by Tom
Hetzer of NCH Corporation, a Delaware corporation, on behalf of said
corporation.
/s/ Becky L. Lovelace
-----------------------------
Notary Public in and for
the State of Texas
My Commission Expires: 2/5/98
STATE OF TEXAS '
'
COUNTY OF DALLAS '
This instrument was acknowledged before me on April 13, 1995, by John I.
Levy.
/s/ Becky L. Lovelace
-----------------------------
Notary Public in and for
the State of Texas
My Commission Expires: 2/5/98
AGREEMENT
THE STATE OF TEXAS '
'
COUNTY OF DALLAS '
THIS AGREEMENT entered into as of this 13th day of April, 1995, by and
between NCH CORPORATION (hereinafter referred to as "Corporation"), and LESTER
A. LEVY, JR., of Dallas, Dallas County, Texas (hereinafter referred to as
"Levy"):
R E C I T A L S:
The following facts exist:
A. Levy has rendered valuable services to the Corporation for many years.
Levy's experience and knowledge of the affairs of the Corporation and his
reputation and contacts in the industry are extremely important to the continued
success of the Corporation.
C. This Agreement was approved by the Board of Directors on April 13, 1995.
---------------------------------------------
NOW, THEREFORE, for and in consideration of the recitals above, and in
consideration of the covenants and agreements of the parties hereto, each to the
other, the parties agree as follows:
1. Continuation of Employment. Levy agrees to continue in the employment of
the Corporation upon such terms as the Board of Directors and Levy shall
mutually agree until he reaches the age of fifty-nine and one-half (59-1/2)
years, and thereafter until such date as shall be mutually agreed upon.
2. Payment upon Retirement or Disability. At any time after reaching age
fifty-nine and one-half (59-1/2) years, Levy may retire from the active and
daily service of the Corporation. Commencing with the date of such retirement,
the Corporation shall pay to Levy an annual amount (the "Annual Amount") of Two
Hundred Thousand Dollars ($200,000.00). The Annual Amount shall be increased for
retirement in a calendar year subsequent to 1995 by the increase in the United
States Consumer Price Index (All Urban Consumers - U.S. City Average) for the
preceding calendar year. The Annual Amount for each year shall be paid in twelve
(12) equal monthly installments (the "Monthly Payments"), with an installment
payable on the first day of each month. The Corporation shall continue to make
such payments to Levy during his lifetime, and additionally agrees as follows:
a. If Levy so retires, but dies before receiving one hundred
twenty (120) monthly payments, the Corporation shall continue to
make such monthly payments to Levy's wife, if she survives him,
until the total of one hundred twenty (120) Monthly Payments have
been made to Levy and his wife, if any.
b. If Levy so retires, but dies before receiving one hundred
twenty (120) Monthly Payments, and if his wife, if any, does not
survive him, or survives him and dies before one hundred twenty
(120) Monthly Payments have been made to Levy and his wife, the
Corporation shall continue to make such Monthly Payments to the then
surviving issue of Levy, such issue to take per stirpes, until a
total of one hundred twenty (120) Monthly Payments have been made to
Levy, his wife, if any, and his issue; provided that the Corporation
shall have no liability to continue any payments hereunder beyond
the first day of the month in which the last survivor of Levy, his
wife, if any, and his issue shall die.
c. Levy dies before his retirement date while in the employ of
the Corporation, the Corporation shall pay to Levy's wife, if she
shall survive him, Monthly Payments commencing the first day of the
month following the month in which Levy dies and ending when one
hundred twenty (120) Monthly Payments have been made to Levy's wife;
or if Levy's wife dies after surviving to survive Levy or fails to
survive Levy, the Corporation shall pay or continue to pay to such
of Levy's issue who survive Levy and his wife, per stirpes, the
Monthly Payments until a total of one hundred twenty (120) Monthly
Payments have been made to Levy's wife and his issue; provided that
the Corporation shall have no liability to continue any payments
hereunder beyond the first day of the month in which the last
survivor of Levy, his wife, and his issue shall die.
d. If Levy becomes disabled before his retirement date, the
Corporation shall pay Monthly Payments to Levy, commencing the first
day of the month following the month in which Levy becomes unable to
continue active employment and continuing during the lifetime of
Levy. In the event of Levy's death after becoming disabled but prior
to the time when Levy shall have received one hundred twenty (120)
Monthly Payments, the Corporation shall continue to make such
Monthly Payments to Levy's wife, if any, if she survives him, until
a total of one hundred twenty (120) Monthly Payments have been made
to Levy and his wife. If Levy's wife survives Levy but does before
one hundred twenty (120) Monthly Payments are made to Levy and his
wife, or if Levy's wife fails to survive him, the Corporation shall
continue such Monthly Payments to such of Levy's issue as survive
him and his wife, if any, such issue to take per stirpes, until a
total of one hundred twenty (120) Monthl Payments have been made to
Levy, his wife, and his surviving issue.
e. The Corporation shall have no further liability beyond the
date of death of the last survivor of Levy, his wife, if any, and
all of his issue.
3. Definition of Disability. For the purposes of subparagraph d of
paragraph 2 of this Agreement, the obligations of the Corporation to make the
payments upon the disability of Levy shall not become effective unless and until
all of the following conditions are met:
a. Levy shall become physically or mentally incapable of
properly performing the services required of him in accordance with
his obligation under paragraph 1 hereof;
b. such incapacity shall exist or shall be reasonably
expected to exist for more than one hundred twenty (120) days in
the aggregate during any period of twelve (12) consecutive months;
and
c. either Levy or the Corporation shall have given the other
thirty (30) days written notice of his or its intention to terminate
the active employment of Levy because of such disability.
4. Restrictive Covenants. Levy agrees that as a condition to the payment of
benefits to himself and his family granted herein, from the date of this
Agreement he shall not, directly or indirectly, enter into or in any manner take
part in any business, profession, or other endeavor, either as an employee,
agent, independent contractor, owner, or otherwise, which shall be in any way
connected with or in the business of manufacturing, jobbing, selling or
marketing chemicals or chemical specialties anywhere in the United States of
America. It is recognized that a broad geographical area is being described in
this restrictive covenant; however, both parties hereto recognize that Levy has
operated extensively throughout the United States for the Corporation and that
the Corporation does business throughout the United States and other parts of
the world, and such a broad area would be necessary for protection of the
Corporation.
5. Forfeiture of Payments. If Levy fails to observe any of the terms of
this Agreement and continues such breach for a period of thirty (30) days after
the Corporation shall have requested him to perform the same, or if he enters
any business described in Paragraph 4 hereof and continues therein either
directly or indirectly for a period of fifteen (15) days after the Corporation
shall have notified him in writing at his home address that the Directors of the
Corporation have decided that such business is in competition with the
Corporation, then no further payments shall be due or payable by the Corporation
hereunder either to Levy, his wife, or his issue, and the Corporation shall have
no further liability hereunder.
6. Assignment. Neither Levy nor his wife shall have any right to commute,
encumber, or dispose of the right to receive payments hereunder, which payments
and the right thereto are expressly declared to be non-assignable and
nontransferable, and in the event of any attempted assignment or transfer, the
Corporation shall have no further liability hereunder.
7. Reorganization. The Corporation shall not merge or consolidate with any
other corporation until such corporation expressly assumes the duties of the
Corporation herein set forth.
8. Benefit. This Agreement shall be binding upon the parties hereto, their
heirs, executors, administrators or successors.
9. Definition of Wife and Issue. By the word wife wherever used in this
Agreement, is meant the person to whom Levy is married by a ceremonial marriage
and is not separated or divorced at the time the definition of the word becomes
important. By the word issue is meant all of the legitimate descendants of
whatever degree of Levy, including descendants both by blood and by adoption,
provided such adoption is by a court proceeding, the finality of which has not
been questioned by the adopting person.
10. Special Methods of Payment. During the minority or physical or mental
incapacity of any person to whom Monthly Payments by the Corporation shall be
paid, the Corporation may make such payments in any one or more of the following
ways: (i) to such person directly, (ii) to the guardian, committee, conservator,
or other similar official representative of such person, (iii) to a relative of
such person to be expended by such relative for the care, support, education or
maintenance of such person, (iv) as to any minor person, to a custodian
designated by the Corporation under the Texas Uniform Gifts to Minors Act, or
other similar statute, or (v) by the Corporation expending the same directly for
the care, support, education and maintenance of such person. The Corporation's
determination of the minority or incapacity of any person shall be final and the
Corporation shall not be responsible or liable for the application of any
payment after the same has been made in accordance with the provisions hereof.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first above written.
NCH CORPORATION
ATTEST:
/s/ Joseph H. Cleveland By: /s/ Tom Hetzer
- ----------------------- ---------------------
Secretary Tom Hetzer
By: /s/ Lester A. Levy, Jr.
---------------------------
Lester A. Levy, Jr.
STATE OF TEXAS '
'
COUNTY OF DALLAS '
This instrument was acknowledged before me on April 13 , 1995, by Tom
Hetzer of NCH Corporation, a Delaware corporation, on behalf of said
corporation.
/s/ Becky L. Lovelace
-----------------------------
Notary Public in and for
the State of Texas
My Commission Expires: 2/5/98
STATE OF TEXAS '
'
COUNTY OF DALLAS '
This instrument was acknowledged before me on April 13, 1995, by Lester A.
Levy, Jr..
/s/ Becky L. Lovelace
-----------------------------
Notary Public in and for
the State of Texas
My Commission Expires: 2/5/98
AGREEMENT
THE STATE OF TEXAS '
'
COUNTY OF DALLAS '
THIS AGREEMENT entered into as of this 13th day of April, 1995, by and
between NCH CORPORATION (hereinafter referred to as "Corporation"), and ROBERT
M. LEVY, of Dallas, Dallas County, Texas (hereinafter referred to as "Levy"):
R E C I T A L S:
The following facts exist:
A. Levy has rendered valuable services to the Corporation for many years.
Levy's experience and knowledge of the affairs of the Corporation and his
reputation and contacts in the industry are extremely important to the continued
success of the Corporation.
C. This Agreement was approved by the Board of Directors on April 13, 1995.
---------------------------------------------
NOW, THEREFORE, for and in consideration of the recitals above, and in
consideration of the covenants and agreements of the parties hereto, each to the
other, the parties agree as follows:
1. Continuation of Employment. Levy agrees to continue in the employment of
the Corporation upon such terms as the Board of Directors and Levy shall
mutually agree until he reaches the age of fifty-nine and one-half (59-1/2)
years, and thereafter until such date as shall be mutually agreed upon.
2. Payment upon Retirement or Disability. At any time after reaching age
fifty-nine and one-half (59-1/2) years, Levy may retire from the active and
daily service of the Corporation. Commencing with the date of such retirement,
the Corporation shall pay to Levy an annual amount (the "Annual Amount") of Two
Hundred Thousand Dollars ($200,000.00). The Annual Amount shall be increased for
retirement in a calendar year subsequent to 1995 by the increase in the United
States Consumer Price Index (All Urban Consumers - U.S. City Average) for the
preceding calendar year. The Annual Amount for each year shall be paid in twelve
(12) equal monthly installments (the "Monthly Payments"), with an installment
payable on the first day of each month. The Corporation shall continue to make
such payments to Levy during his lifetime, and additionally agrees as follows:
a. If Levy so retires, but dies before receiving one hundred
twenty (120) monthly payments, the Corporation shall continue to
make such monthly payments to Levy's wife, if she survives him,
until the total of one hundred twenty (120) Monthly Payments have
been made to Levy and his wife, if any.
b. If Levy so retires, but dies before receiving one hundred
twenty (120) Monthly Payments, and if his wife, if any, does not
survive him, or survives him and dies before one hundred twenty
(120) Monthly Payments have been made to Levy and his wife, the
Corporation shall continue to make such Monthly Payments to the then
surviving issue of Levy, such issue to take per stirpes, until a
total of one hundred twenty (120) Monthly Payments have been made to
Levy, his wife, if any, and his issue; provided that the Corporation
shall have no liability to continue any payments hereunder beyond
the first day of the month in which the last survivor of Levy, his
wife, if any, and his issue shall die.
c. Levy dies before his retirement date while in the employ of
the Corporation, the Corporation shall pay to Levy's wife, if she
shall survive him, Monthly Payments commencing the first day of the
month following the month in which Levy dies and ending when one
hundred twenty (120) Monthly Payments have been made to Levy's wife;
or if Levy's wife dies after surviving to survive Levy or fails to
survive Levy, the Corporation shall pay or continue to pay to such
of Levy's issue who survive Levy and his wife, per stirpes, the
Monthly Payments until a total of one hundred twenty (120) Monthly
Payments have been made to Levy's wife and his issue; provided that
the Corporation shall have no liability to continue any payments
hereunder beyond the first day of the month in which the last
survivor of Levy, his wife, and his issue shall die.
d. If Levy becomes disabled before his retirement date, the
Corporation shall pay Monthly Payments to Levy, commencing the first
day of the month following the month in which Levy becomes unable to
continue active employment and continuing during the lifetime of
Levy. In the event of Levy's death after becoming disabled but prior
to the time when Levy shall have received one hundred twenty (120)
Monthly Payments, the Corporation shall continue to make such
Monthly Payments to Levy's wife, if any, if she survives him, until
a total of one hundred twenty (120) Monthly Payments have been made
to Levy and his wife. If Levy's wife survives Levy but does before
one hundred twenty (120) Monthly Payments are made to Levy and his
wife, or if Levy's wife fails to survive him, the Corporation shall
continue such Monthly Payments to such of Levy's issue as survive
him and his wife, if any, such issue to take per stirpes, until a
total of one hundred twenty (120) Monthl Payments have been made to
Levy, his wife, and his surviving issue.
e. The Corporation shall have no further liability beyond the
date of death of the last survivor of Levy, his wife, if any, and
all of his issue.
3. Definition of Disability. For the purposes of subparagraph d of
paragraph 2 of this Agreement, the obligations of the Corporation to make the
payments upon the disability of Levy shall not become effective unless and until
all of the following conditions are met:
a. Levy shall become physically or mentally incapable of
properly performing the services required of him in accordance with
his obligation under paragraph 1 hereof;
b. such incapacity shall exist or shall be reasonably
expected to exist for more than one hundred twenty (120) days in
the aggregate during any period of twelve (12) consecutive months;
and
c. either Levy or the Corporation shall have given the other
thirty (30) days written notice of his or its intention to terminate
the active employment of Levy because of such disability.
4. Restrictive Covenants. Levy agrees that as a condition to the payment of
benefits to himself and his family granted herein, from the date of this
Agreement he shall not, directly or indirectly, enter into or in any manner take
part in any business, profession, or other endeavor, either as an employee,
agent, independent contractor, owner, or otherwise, which shall be in any way
connected with or in the business of manufacturing, jobbing, selling or
marketing chemicals or chemical specialties anywhere in the United States of
America. It is recognized that a broad geographical area is being described in
this restrictive covenant; however, both parties hereto recognize that Levy has
operated extensively throughout the United States for the Corporation and that
the Corporation does business throughout the United States and other parts of
the world, and such a broad area would be necessary for protection of the
Corporation.
5. Forfeiture of Payments. If Levy fails to observe any of the terms of
this Agreement and continues such breach for a period of thirty (30) days after
the Corporation shall have requested him to perform the same, or if he enters
any business described in Paragraph 4 hereof and continues therein either
directly or indirectly for a period of fifteen (15) days after the Corporation
shall have notified him in writing at his home address that the Directors of the
Corporation have decided that such business is in competition with the
Corporation, then no further payments shall be due or payable by the Corporation
hereunder either to Levy, his wife, or his issue, and the Corporation shall have
no further liability hereunder.
6. Assignment. Neither Levy nor his wife shall have any right to commute,
encumber, or dispose of the right to receive payments hereunder, which payments
and the right thereto are expressly declared to be non-assignable and
nontransferable, and in the event of any attempted assignment or transfer, the
Corporation shall have no further liability hereunder.
7. Reorganization. The Corporation shall not merge or consolidate with any
other corporation until such corporation expressly assumes the duties of the
Corporation herein set forth.
8. Benefit. This Agreement shall be binding upon the parties hereto, their
heirs, executors, administrators or successors.
9. Definition of Wife and Issue. By the word wife wherever used in this
Agreement, is meant the person to whom Levy is married by a ceremonial marriage
and is not separated or divorced at the time the definition of the word becomes
important. By the word issue is meant all of the legitimate descendants of
whatever degree of Levy, including descendants both by blood and by adoption,
provided such adoption is by a court proceeding, the finality of which has not
been questioned by the adopting person.
10. Special Methods of Payment. During the minority or physical or mental
incapacity of any person to whom Monthly Payments by the Corporation shall be
paid, the Corporation may make such payments in any one or more of the following
ways: (i) to such person directly, (ii) to the guardian, committee, conservator,
or other similar official representative of such person, (iii) to a relative of
such person to be expended by such relative for the care, support, education or
maintenance of such person, (iv) as to any minor person, to a custodian
designated by the Corporation under the Texas Uniform Gifts to Minors Act, or
other similar statute, or (v) by the Corporation expending the same directly for
the care, support, education and maintenance of such person. The Corporation's
determination of the minority or incapacity of any person shall be final and the
Corporation shall not be responsible or liable for the application of any
payment after the same has been made in accordance with the provisions hereof.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first above written.
NCH CORPORATION
ATTEST:
/s/ Joseph H. Cleveland By: /s/ Tom Hetzer
- ----------------------- ---------------------
Secretary Tom Hetzer
By: /s/ Robert M. Levy
----------------------
Robert M. Levy
STATE OF TEXAS '
'
COUNTY OF DALLAS '
This instrument was acknowledged before me on April 13 , 1995, by Tom
Hetzer of NCH Corporation, a Delaware corporation, on behalf of said
corporation.
/s/ Becky L. Lovelace
-----------------------------
Notary Public in and for
the State of Texas
My Commission Expires: 2/5/98
STATE OF TEXAS '
'
COUNTY OF DALLAS '
This instrument was acknowledged before me on April 13, 1995, by Robert M.
Levy.
/s/ Becky L. Lovelace
-----------------------------
Notary Public in and for
the State of Texas
My Commission Expires: 2/5/98
AGREEMENT
THE STATE OF TEXAS '
'
COUNTY OF DALLAS '
THIS AGREEMENT entered into as of this 13th day of April, 1995, by and
between NCH CORPORATION (hereinafter referred to as "Corporation"), and WALTER
M. LEVY, of Dallas, Dallas County, Texas (hereinafter referred to as "Levy"):
R E C I T A L S:
The following facts exist:
A. Levy has rendered valuable services to the Corporation for many years.
Levy's experience and knowledge of the affairs of the Corporation and his
reputation and contacts in the industry are extremely important to the continued
success of the Corporation.
C. This Agreement was approved by the Board of Directors on April 13, 1995.
---------------------------------------------
NOW, THEREFORE, for and in consideration of the recitals above, and in
consideration of the covenants and agreements of the parties hereto, each to the
other, the parties agree as follows:
1. Continuation of Employment. Levy agrees to continue in the employment of
the Corporation upon such terms as the Board of Directors and Levy shall
mutually agree until he reaches the age of fifty-nine and one-half (59-1/2)
years, and thereafter until such date as shall be mutually agreed upon.
2. Payment upon Retirement or Disability. At any time after reaching age
fifty-nine and one-half (59-1/2) years, Levy may retire from the active and
daily service of the Corporation. Commencing with the date of such retirement,
the Corporation shall pay to Levy an annual amount (the "Annual Amount") of Two
Hundred Thousand Dollars ($200,000.00). The Annual Amount shall be increased for
retirement in a calendar year subsequent to 1995 by the increase in the United
States Consumer Price Index (All Urban Consumers - U.S. City Average) for the
preceding calendar year. The Annual Amount for each year shall be paid in twelve
(12) equal monthly installments (the "Monthly Payments"), with an installment
payable on the first day of each month. The Corporation shall continue to make
such payments to Levy during his lifetime, and additionally agrees as follows:
a. If Levy so retires, but dies before receiving one hundred
twenty (120) monthly payments, the Corporation shall continue to
make such monthly payments to Levy's wife, if she survives him,
until the total of one hundred twenty (120) Monthly Payments have
been made to Levy and his wife, if any.
b. If Levy so retires, but dies before receiving one hundred
twenty (120) Monthly Payments, and if his wife, if any, does not
survive him, or survives him and dies before one hundred twenty
(120) Monthly Payments have been made to Levy and his wife, the
Corporation shall continue to make such Monthly Payments to the then
surviving issue of Levy, such issue to take per stirpes, until a
total of one hundred twenty (120) Monthly Payments have been made to
Levy, his wife, if any, and his issue; provided that the Corporation
shall have no liability to continue any payments hereunder beyond
the first day of the month in which the last survivor of Levy, his
wife, if any, and his issue shall die.
c. Levy dies before his retirement date while in the employ of
the Corporation, the Corporation shall pay to Levy's wife, if she
shall survive him, Monthly Payments commencing the first day of the
month following the month in which Levy dies and ending when one
hundred twenty (120) Monthly Payments have been made to Levy's wife;
or if Levy's wife dies after surviving to survive Levy or fails to
survive Levy, the Corporation shall pay or continue to pay to such
of Levy's issue who survive Levy and his wife, per stirpes, the
Monthly Payments until a total of one hundred twenty (120) Monthly
Payments have been made to Levy's wife and his issue; provided that
the Corporation shall have no liability to continue any payments
hereunder beyond the first day of the month in which the last
survivor of Levy, his wife, and his issue shall die.
d. If Levy becomes disabled before his retirement date, the
Corporation shall pay Monthly Payments to Levy, commencing the first
day of the month following the month in which Levy becomes unable to
continue active employment and continuing during the lifetime of
Levy. In the event of Levy's death after becoming disabled but prior
to the time when Levy shall have received one hundred twenty (120)
Monthly Payments, the Corporation shall continue to make such
Monthly Payments to Levy's wife, if any, if she survives him, until
a total of one hundred twenty (120) Monthly Payments have been made
to Levy and his wife. If Levy's wife survives Levy but does before
one hundred twenty (120) Monthly Payments are made to Levy and his
wife, or if Levy's wife fails to survive him, the Corporation shall
continue such Monthly Payments to such of Levy's issue as survive
him and his wife, if any, such issue to take per stirpes, until a
total of one hundred twenty (120) Monthl Payments have been made to
Levy, his wife, and his surviving issue.
e. The Corporation shall have no further liability beyond the
date of death of the last survivor of Levy, his wife, if any, and
all of his issue.
3. Definition of Disability. For the purposes of subparagraph d of
paragraph 2 of this Agreement, the obligations of the Corporation to make the
payments upon the disability of Levy shall not become effective unless and until
all of the following conditions are met:
a. Levy shall become physically or mentally incapable of
properly performing the services required of him in accordance with
his obligation under paragraph 1 hereof;
b. such incapacity shall exist or shall be reasonably
expected to exist for more than one hundred twenty (120) days in
the aggregate during any period of twelve (12) consecutive months;
and
c. either Levy or the Corporation shall have given the other
thirty (30) days written notice of his or its intention to terminate
the active employment of Levy because of such disability.
4. Restrictive Covenants. Levy agrees that as a condition to the payment of
benefits to himself and his family granted herein, from the date of this
Agreement he shall not, directly or indirectly, enter into or in any manner take
part in any business, profession, or other endeavor, either as an employee,
agent, independent contractor, owner, or otherwise, which shall be in any way
connected with or in the business of manufacturing, jobbing, selling or
marketing chemicals or chemical specialties anywhere in the United States of
America. It is recognized that a broad geographical area is being described in
this restrictive covenant; however, both parties hereto recognize that Levy has
operated extensively throughout the United States for the Corporation and that
the Corporation does business throughout the United States and other parts of
the world, and such a broad area would be necessary for protection of the
Corporation.
5. Forfeiture of Payments. If Levy fails to observe any of the terms of
this Agreement and continues such breach for a period of thirty (30) days after
the Corporation shall have requested him to perform the same, or if he enters
any business described in Paragraph 4 hereof and continues therein either
directly or indirectly for a period of fifteen (15) days after the Corporation
shall have notified him in writing at his home address that the Directors of the
Corporation have decided that such business is in competition with the
Corporation, then no further payments shall be due or payable by the Corporation
hereunder either to Levy, his wife, or his issue, and the Corporation shall have
no further liability hereunder.
6. Assignment. Neither Levy nor his wife shall have any right to commute,
encumber, or dispose of the right to receive payments hereunder, which payments
and the right thereto are expressly declared to be non-assignable and
nontransferable, and in the event of any attempted assignment or transfer, the
Corporation shall have no further liability hereunder.
7. Reorganization. The Corporation shall not merge or consolidate with any
other corporation until such corporation expressly assumes the duties of the
Corporation herein set forth.
8. Benefit. This Agreement shall be binding upon the parties hereto, their
heirs, executors, administrators or successors.
9. Definition of Wife and Issue. By the word wife wherever used in this
Agreement, is meant the person to whom Levy is married by a ceremonial marriage
and is not separated or divorced at the time the definition of the word becomes
important. By the word issue is meant all of the legitimate descendants of
whatever degree of Levy, including descendants both by blood and by adoption,
provided such adoption is by a court proceeding, the finality of which has not
been questioned by the adopting person.
10. Special Methods of Payment. During the minority or physical or mental
incapacity of any person to whom Monthly Payments by the Corporation shall be
paid, the Corporation may make such payments in any one or more of the following
ways: (i) to such person directly, (ii) to the guardian, committee, conservator,
or other similar official representative of such person, (iii) to a relative of
such person to be expended by such relative for the care, support, education or
maintenance of such person, (iv) as to any minor person, to a custodian
designated by the Corporation under the Texas Uniform Gifts to Minors Act, or
other similar statute, or (v) by the Corporation expending the same directly for
the care, support, education and maintenance of such person. The Corporation's
determination of the minority or incapacity of any person shall be final and the
Corporation shall not be responsible or liable for the application of any
payment after the same has been made in accordance with the provisions hereof.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first above written.
NCH CORPORATION
ATTEST:
/s/ Joseph H. Cleveland By: /s/ Tom Hetzer
- ----------------------- ---------------------
Secretary Tom Hetzer
By: /s/ Walter M. Levy
----------------------
Walter M. Levy
STATE OF TEXAS '
'
COUNTY OF DALLAS '
This instrument was acknowledged before me on April 13 , 1995, by Tom
Hetzer of NCH Corporation, a Delaware corporation, on behalf of said
corporation.
/s/ Becky L. Lovelace
-----------------------------
Notary Public in and for
the State of Texas
My Commission Expires: 2/5/98
STATE OF TEXAS '
'
COUNTY OF DALLAS '
This instrument was acknowledged before me on April 13, 1995, by Walter M.
Levy.
/s/ Becky L. Lovelace
-----------------------------
Notary Public in and for
the State of Texas
My Commission Expires: 2/5/98
NCH CORPORATION AND SUBSIDIARIES
EXHIBIT 21
SUBSIDIARIES OF THE REGISTRANT
NCH Corporation is the parent company of numerous wholly-owned subsidiaries
engaged in the business of marketing an extensive line of maintenance, repair
and supply products. At the close of the last fiscal year, fourteen of these
subsidiaries were operating domestically and 120 in foreign countries. The
Company is also the parent of several wholly-owned subsidiaries that market
various other products, and all such subsidiaries considered in the aggregate as
a single subsidiary would not constitute a significant subsidiary of NCH
Corporation, and therefore are not listed here.
As of the close of the last fiscal year, the following corporation was not
wholly-owned by NCH Corporation:
Immediate Parent and Jurisdiction
Name of Subsidiary Percentage of Ownership of Incorporation
NCH Hua Yang Ltd. 51% NCH Corporation People's Republic
of China
NCH CORPORATION AND SUBSIDIARIES
EXHIBIT 23
INDEPENDENT AUDITORS' CONSENT
The Board of Directors
NCH Corporation:
We consent to incorporation by reference in the registration statement (No.
33-65206) on Form S-8 of NCH Corporation of our reports dated May 30, 2001,
relating to the consolidated balance sheets of NCH Corporation and subsidiaries
as of April 30, 2001 and 2000, and the related consolidated statements of
income, stockholders' equity, and cash flows and related schedule for each of
the years in the three-year period ended April 30, 2001, which reports appear in
or are incorporated by reference in the April 30, 2001 annual report on Form
10-K of NCH Corporation.
Dallas, Texas /s/ KPMG LLP
July 9, 2001
NCH CORPORATION AND SUBSIDIARIES
ANNUAL REPORT FOR THE YEAR ENDED APRIL 30, 2001
Selected Financial Data
NCH Corporation and
Subsidiaries
(In Thousands Except Per
Share Data)
Years Ended April 30,
2001 2000 1999 1998 1997
---------- ---------- ---------- ---------- ----------
Net Sales $ 679,718 $ 725,990 $ 725,353 $ 721,840 $ 710,305
Income from
Continuing Operations $ 30,129 $ 18,374 $ 22,396 $ 34,132 $ 33,693
Earnings Per Share from
Continuing Operations
Basic $5.66 $3.40 $3.92 $4.77 $4.60
Diluted $5.65 $3.39 $3.91 $4.75 $4.59
Current Ratio 3.7 to 1 3.3 to 1 2.7 to 1 3.6 to 1 3.3 to 1
Total Assets $ 425,504 $ 427,149 $ 429,742 $ 515,773 $ 492,772
Long-Term Debt $ 4,992 $ 12,049 $ 1,104 $ 1,400 $ 112
Retirement and Deferred
Compensation Plans $ 114,599 $ 115,344 $ 115,162 $ 111,088 $ 107,057
Cash Dividends Declared
Per Share $1.40 $1.40 $1.40 $1.35 $2.20
Note:Amounts for prior years have been restated as applicable to reflect the
discontinuation of DBS Services Group and the reclassification of shipping
and handling revenues and costs
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
Liquidity and Capital Resources
In the fiscal year ended April 30, 2001, working capital increased to
$223.4 million from $200.2 million at April 30, 2000. The current ratio was 3.7
to 1 at April 30, 2001, compared to 3.3 to 1 at April 30, 2000. The total of
cash, cash equivalents and marketable securities increased by $35.9 million to
$88.5 million at April 30, 2001. Net cash flow from operating activities of
continuing operations totaled $30.6 million for fiscal 2001. Additional cash was
provided by the sale of the net assets of subsidiaries of $16.8 million and $7.2
million from the sale of undeveloped surplus land. Principal uses of cash
consisted of net purchases of marketable securities of $47.2 million, capital
expenditures of $10.5 million, and payment of dividends of $7.5 million.
Management expects that operating cash flows will continue to generate
sufficient funds to finance operating needs, capital expenditures and the
payment of dividends.
The Company's international subsidiaries operate on a fiscal year ending on
the last day of February. The reported values of both assets and liabilities of
the Company's international subsidiaries decreased as a result of the change in
the Company's composite spot rate at February 28, 2001, compared to February 29,
2000. This is reflected by the foreign currency translation component of
accumulated other comprehensive loss, which changed from a $42.5 million
reduction of stockholders' equity at April 30, 2000, to a $49.5 million
reduction of stockholders' equity at April 30, 2001.
As reported on the Consolidated Balance Sheets, accounts receivable
decreased by $13.2 million in the year ended April 30, 2001, including a $4.9
million reduction from the sale of net subsidiary assets. The change in accounts
receivable presented in the Consolidated Statements of Cash Flows excludes the
effect of exchange rates on the reported asset values and the sale of net
subsidiary assets and shows that accounts receivable, net of the provision for
losses, decreased by $3.7 million compared to the end of the prior year. The
decrease in accounts receivable was primarily due to decreased sales in certain
of the Company's international operations during the fourth quarter.
Inventories at April 30, 2001, decreased $2.5 million from April 30, 2000,
as reported on the Consolidated Balance Sheets. This decrease is the net between
a $1.7 million increase on inventories in the Company's current business units
and a $4.2 million decrease from the sale of net subsidiary assets. The change
in inventories presented in the Consolidated Statements of Cash Flows excludes
the effect of exchange rates and the sale of net subsidiary assets on the
reported asset values and shows that inventories increased $3.1 million in
fiscal 2001.
Accounts payable, accrued expenses and income taxes payable increased by
$1.3 million as reported on the Consolidated Balance Sheets. Income taxes
payable increased due to net income in the fourth quarter of the current year as
compared to a net loss in the fourth quarter of the prior year. Accrued expenses
decreased due to decreased international marketing costs. Accounts payable
decreased as a result of normal business activity associated with timing of
payments.
Expenditures for property, plant and equipment were $10.5 million for the
year ended April 30, 2001. These consisted of the installation and update of
worldwide computer systems and normal additions of operating equipment. Capital
expenditures for the upcoming year are not expected to vary significantly from
the current year.
Deferred tax benefits represent future income tax deductions and,
therefore, impact future cash flows by reducing federal income taxes to be paid
in future years in which the temporary differences are expected to be recovered
or settled. Management believes the Company will have sufficient future taxable
income to make it more likely than not that the net deferred tax assets will be
realized.
Total indebtedness, comprised of long-term debt, current maturities of
long-term debt and notes payable, decreased $12.1 million as reported on the
Consolidated Balance Sheets. During the fourth quarter of the prior year, an
environmental insurance policy was purchased and funded by a note payable in a
non-cash transaction. The $11.2 million in long-term debt and current maturities
of long-term debt is the note payable related to the environmental insurance
policy. The $.7 million of notes payable to banks consist of international
subsidiary borrowings in local country currencies used primarily to finance
working capital requirements.
The retirement and deferred compensation plan liability on the Consolidated
Balance Sheets represents compensation deferred by employees and accrued
interest on such deferrals as well as accrued retirement benefits under
non-qualified retirement plans. Deferred compensation is expensed as earned with
a liability recorded for payment in future years.
During fiscal year 2001, cash dividends paid amounted to $7.5 million
($1.40 per share) compared to $7.6 million in 2000 ($1.40 per share). On April
19, 2001, the directors of the Company declared a regular quarterly cash
dividend of $.35 per share of Common Stock to be paid June 15, 2001, to
shareholders of record June 1, 2001.
Sales and Operating Income - Fiscal 2001 to Fiscal 2000
Net Sales Operating Income
---------------------------- ----------------------------
Years Ended April 30, Years Ended April 30,
---------------------------- ----------------------------
2001 2000 2001 2000
------------- ------------- ------------- -------------
Chemical Specialties Group $ 429,026 $ 449,237 $ 32,319 $ 16,908
Plumbing Products Group 113,946 122,031 5,609 7,690
Partsmaster Group 78,118 87,954 6,597 10,973
Landmark Direct 43,959 37,226 (541) 519
Other Product Lines 14,669 29,542 (28) 833
Unallocated Corporate Expenses - - (3,092) (2,559)
------------- ------------- ------------- -------------
Total $ 679,718 $ 725,990 $ 40,864 $ 34,364
============= ============= ============= =============
Net sales from Continuing Operations decreased from $726.0 in fiscal year
2000 to $679.7 in the current fiscal year. Of this decrease, $16.4 million is
attributable to a domestic business unit and several product lines that were
sold during fiscal 2001. Sales from the Company's domestic operations excluding
the $16.4 million increased 1% from fiscal year 2000 to fiscal 2001. Sales from
the Company's international operations decreased 11% from fiscal year 2000 to
fiscal 2001 as reported in U.S. dollars, compared to a 4% decrease when measured
on a local currency basis. Sales for the Chemical Specialties Group segment
decreased 4% from fiscal year 2000 to fiscal 2001 with sales decreasing 8% in
the international operations and increasing 1% domestically. Internationally,
sales in Europe were down 8% in fiscal year 2001 from fiscal 2000 on a local
currency basis, while sales for non-Europe international operations increased 8%
on a local currency basis. In Europe, weak economies were a major contributor to
weak sales. Net sales for the Plumbing Products Group were down 7% in fiscal
year 2001 compared to fiscal 2000. Sales to large retailers were down in fiscal
year 2001 compared to fiscal 2000 especially in the fourth quarter when the
domestic economy slowed. Sales for the Partsmaster Group decreased 11% in fiscal
year 2001 from fiscal 2000. Domestic sales were approximately the same as in the
prior year, but sales in the Company's international operations decreased
approximately 12% on a local currency basis. Sales for the Landmark Direct
increased 18% in fiscal year 2001 from fiscal 2000. In the fourth quarter three
of the product lines were discontinued and their assets were sold. Sales for
these product lines amounted to $6.9 million in fiscal 2001. The Other Product
Lines includes only the sales for N-E Thing Supply which was sold September 30,
2000.
Operating income increased to $40.9 million in fiscal year 2001 from $34.4
million in fiscal 2000. Included in operating income for fiscal 2000 was an
accrual for environmental remediation expenses of approximately $16.1 million.
Lower sales in fiscal year 2001 compared to fiscal 2000 was primary in the
reduction in operating income across all segments. Cost reduction efforts in
both the domestic and international chemical operation helped to off-set the
impact that lower sales had on income. In the Plumbing Products Group, operating
income was also negatively impacted by pricing pressures due to both competition
and large retailers. The reduction in operating income in the Landmark Direct
segment was due to lower gross margins.
Sales and Operating Income - Fiscal 2000 to Fiscal 1999
Net Sales Operating Income
---------------------------- ----------------------------
Years Ended April 30, Years Ended April 30,
---------------------------- ----------------------------
2000 1999 2000 1999
------------- ------------- ------------- -------------
Chemical Specialties Group $ 449,237 $ 458,481 $ 16,908 $ 34,717
Plumbing Products Group 122,031 121,928 7,690 2,754
Partsmaster Group 87,954 87,384 10,973 8,378
Landmark Direct 37,226 30,010 519 1,193
Other Product Lines 29,542 27,550 833 848
Unallocated Corporate Expenses - - (2,559) (2,469)
------------- ------------- ------------- -------------
Total $ 725,990 $ 725,353 $ 34,364 $ 45,421
============= ============= ============= =============
Net sales from Continuing Operations were $726.0 million in fiscal 2000
compared to $725.4 million in fiscal 1999. Domestic net sales increased 1% from
fiscal 1999 to 2000. Net sales from total international operations decreased 3%
from fiscal 1999 to 2000 when measured on a local currency basis. Net sales from
international operations reflected a decrease of 1% from fiscal 1999 to 2000 as
reported in U.S. dollars, and international sales were also lower due to
continued difficult economic conditions primarily in the European operations.
Net sales for the Chemical Specialties Group decreased $9.2 million, or 2% from
fiscal 1999 to 2000 due to a decrease in international sales, as measured in
U.S. dollars, which offset increased domestic sales. Net sales in the Plumbing
Products Group increased slightly from 1999 to 2000 as a result of increased
domestic sales to major home building supply centers and increased sales of
plumbing components to OEM manufacturers, partially offset by lower
international sales. Net sales in the Partsmaster Group increased slightly from
1999 to 2000, due to increased domestic sales, partially offset by lower
international sales. Net sales for Landmark Direct increased $7.2 million, or
24%, from 1999 to 2000 primarily due to increased sales of medical and first aid
supplies. Net sales in the Other Product Lines increased $2.0 million, or 7%,
primarily due to increased sales of apartment maintenance products.
Operating income decreased to $34.4 million in fiscal 2000 from $45.4
million in 1999. Domestic operating margins decreased from fiscal 1999 to 2000,
primarily due to the accrual for increased environmental remediation expenses,
of which approximately $16.1 million was expensed in the fourth quarter of
fiscal 2000, and was partially offset by revisions of prior year liabilities of
approximately $4.2 million as a result of changes in management's estimates.
Internationally, operating margins increased due to lower cost of sales and
marketing costs in fiscal 2000 compared to 1999. In the Chemical Specialties
Group, operating income decreased $17.8 million, due to the environmental costs
discussed above and lower international sales. Operating income for the Plumbing
Products Group increased $4.9 million due to increased domestic sales and cost
saving strategies in domestic operations. Operating income for the Partsmaster
Group increased $2.6 million, or 31%, due to higher domestic and international
margins. Operating income for Landmark Direct decreased $.7 million due to
increased sales into bid-dependent market channels, which have historically
lower gross margins. Operating income in the Other Product Lines decreased
slightly from fiscal 1999 to 2000.
Other Operating Results - Fiscal Years 2001, 2000 and 1999
In fiscal year 2001, interest expense was $6.7 million compared to $5.6
million for fiscal 2000 and $4.8 million for fiscal 1999. Interest income was
$4.5 million for fiscal 2001 as compared to $2.0 million for fiscal 2000 and
$2.1 million for fiscal 1999.
Loss on revaluation of foreign currencies was $0.8 million in fiscal 2001
compared to $2.7 million in fiscal 2000. The current year loss is attributable
to foreign exchange expense in certain European subsidiaries and translation
losses in hyper-inflationary countries. In fiscal 1999, loss on currency
revaluation was $1.5 million.
During the current year, the Company sold two parcels of surplus land,
resulting in a pretax gain of $3.1 million. Also during fiscal 2001, the Company
sold net assets of two subsidiaries, resulting in a pretax gain of $7.5 million.
Sales relating to these assets were less than 5% of the Company's consolidated
annual sales, and therefore these transactions are not expected to have a
material impact on the Company's future operations.
The overall corporate tax rate for fiscal 2001 was 37.9% of pre-tax income
compared to 34.8% in 2000 and 45.6% in 1999. The fluctuation in the corporate
tax rates are due to variations in individual country income levels, tax rates
in the international countries and to revisions of prior years tax estimates. A
reconciliation of the effective tax rate to the U.S. statutory rate is contained
in the Notes to Consolidated Financial Statements.
Discontinued Operations - Fiscal Years 2001, 2000 and 1999
Income (loss) from discontinued operations, net of taxes in fiscal years
2001, 2000 and 1999 includes the operating results of Resource Electronics, Inc.
and Resource Satellite, Inc. These operations were previously reported as
segments.
The $1.6 million loss on disposition of discontinued operations, net of
taxes for fiscal year 2001 includes the net loss from the closing of Resource
Satellite, Inc. of $3.1 million net of taxes partially offset by $1.5 million of
income, net of income taxes, that resulted from additional payments for
inventory that was transferred on a contingency basis at the time of sale of
Resource Electronics, Inc. Loss on disposition of discontinued operations, net
of taxes for fiscal year 2000 includes the loss from the sale of net assets of
Resource Electronics, Inc.
Net Income - Fiscal Years 2001, 2000 and 1999
Net income in fiscal year 2001, including the results of discontinued
operations, increased to $27.5 million from $17.0 million in fiscal 2000. Basic
and diluted earnings per share - net income increased to $5.16 per share in
fiscal year 2001 from $3.15 in fiscal 2000. Net income in fiscal year 1999 was
$24.4 million. Basic earnings per share - net income was $4.27 in fiscal 1999.
Euro Conversion
On January 1, 1999, 11 of the 15 member countries of the European Union
established fixed conversion rates between their existing currencies ("legacy
currencies") and one common currency - the euro. The euro is now trading on
currency exchanges and can be used in business transactions. Beginning in
January 2002, new euro-denominated bills and coins will be issued, and legacy
currencies will be withdrawn from circulation. The Company's operating
subsidiaries affected by the euro conversion have developed plans to address the
systems and business issues affected by the euro currency conversion. These
issues include, among others, the need to adapt computer and other business
systems and equipment to accommodate euro-denominated transactions. The Company
does not expect this conversion to have a material impact on its financial
condition or results of operations.
Forward-Looking Information
Management's Discussion and Analysis of Financial Condition and Results of
Operations and other sections of this Annual Report contain forward-looking
statements that are based on current expectations, estimates and assumptions
regarding the worldwide economy, technological innovation, competitive activity,
interest rates, pricing, and currency movements. These statements are not
guarantees of future results or events, and involve certain risk and
uncertainties which are difficult to predict and many of which are beyond the
control of the Company. Actual results and events could differ materially from
those anticipated by the forward-looking statements.
Consolidated Statements of Income
NCH Corporation and Subsidiaries
(In Thousands Except Per Share Data)
Years Ended April 30,
2001 2000 1999
---------------- -------------- ---------------
Net Sales $679,718 $725,990 $725,353
---------------- -------------- ---------------
Operating Expenses
Cost of sales, including warehousing
and commissions 381,561 396,231 392,854
Marketing and administrative 257,293 295,395 287,078
expenses
---------------- -------------- ---------------
638,854 691,626 679,932
---------------- -------------- ---------------
Operating Income 40,864 34,364 45,421
Other (Expenses) Income
Revaluation of foreign (756) (2,651) (1,515)
currencies
Interest income 4,496 2,011 2,069
Interest expense (6,682) (5,557) (4,790)
Gain on sale of subsidiaries' 7,461 - -
net assets
Gain on sale of land 3,115 - -
---------------- -------------- ---------------
Income from Continuing Operations
before Income Taxes 48,498 28,167 41,185
Provision for Income Taxes 18,369 9,793 18,789
---------------- -------------- ---------------
Income from Continuing Operations 30,129 18,374 22,396
---------------- -------------- ---------------
Discontinued Operations:
Income (Loss) from discontinued (1,006) 1,968 1,965
operations, net of income taxes
Loss on disposition of discontinued (1,622) (3,309) -
operations, net of income taxes
---------------- -------------- ---------------
Net Income $27,501 $17,033 $24,361
================ ============== ===============
Earnings Per Share from Continuing
Operations
Basic $5.66 $3.40 $3.92
================ ============== ===============
Diluted $5.65 $3.39 $3.91
================ ============== ===============
Earnings Per Share - Net Income
Basic $5.16 $3.15 $4.27
================ ============== ===============
Diluted $5.16 $3.15 $4.25
================ ============== ===============
The accompanying notes are an integral part of these financial statements.
Consolidated Balance Sheets
NCH Corporation and Subsidiaries
(In Thousands Except Share Data)
As of April 30,
2001 2000
-------------- --------------
Assets
Current Assets
Cash and cash equivalents $19,830 $32,146
Marketable securities 68,682 20,429
Accounts receivable (less allowance for 116,518 129,767
doubtful accounts of $14,149 and $15,871)
Inventories 82,470 84,991
Prepaid expenses 6,390 6,203
Deferred income taxes 12,788 13,691
-------------- --------------
Total Current Assets 306,678 287,227
-------------- --------------
Property, Plant and Equipment 183,554 189,079
Accumulated depreciation 120,344 119,021
-------------- --------------
63,210 70,058
-------------- --------------
Deferred Income Taxes 36,114 36,714
-------------- --------------
Other 17,620 20,211
-------------- --------------
Net assets of discontinued operations 1,882 12,939
-------------- --------------
Total $425,504 $427,149
============== ==============
Liabilities and Stockholders' Equity
Current Liabilities
Notes payable to banks $685 $5,956
Current maturities of long-term debt 6,210 5,971
Accounts payable 38,603 40,112
Accrued expenses 24,804 26,718
Income taxes payable 11,090 6,344
Dividends payable 1,858 1,893
-------------- --------------
Total Current Liabilities 83,250 86,994
-------------- --------------
Long-Term Debt, less current maturities 4,992 12,049
-------------- --------------
Retirement and Deferred Compensation Plans 114,599 115,344
-------------- --------------
Stockholders' Equity
Common stock, par value $1 per share, 11,769 11,769
authorized 20,000,000 shares. Issued
11,769,304 shares
Additional paid-in-capital 12,774 12,714
Retained earnings 521,212 501,146
Accumulated other comprehensive loss (48,700) (42,389)
-------------- --------------
497,055 483,240
Less treasury stock
(6,461,974 and 6,361,081 shares) 274,392 270,478
-------------- --------------
222,663 212,762
-------------- --------------
Total $425,504 $427,149
============== ==============
The accompanying notes are an integral part of these financial statements.
Consolidated Statements of Cash Flows
NCH Corporation and Subsidiaries
(In Thousands)
Years Ended April 30,
2001 2000 1999
----------- ---------- ----------
Cash Flows from Operating Activities
Income from Continuing Operations $ 30,129 $ 18,374 $ 22,396
Adjustments to reconcile income from
Continuing Operations to net cash provided
by Continuing Operations:
Depreciation and amortization 12,118 13,790 13,757
Gain on sale of subsidiaries' net assets (7,461) - -
Gain on sale of land - - (3,115)
Provision for losses on accounts receivable 4,199 5,270 5,695
Deferred income taxes 1,149 2,622 (3,152)
Accrual of environmental expenses (5,736) 16,138 -
Retirement and deferred compensation plans (248) 411 4,189
Other noncash items
162 1,069 (469)
Change in assets and liabilities, excluding
net assets acquired in the purchase of
businesses:
Accounts receivable (464) (1,120) (12,498)
Inventories (3,056) 6,373 (2,735)
Prepaid expenses (357) 2,966 (441)
Accounts payable, accrued expenses
and income taxes payable 4,369 (13,919) 3,192
Other noncurrent assets
(1,100) (2,425) (710)
----------- ---------- ----------
Net cash provided by Continuing Operations 30,589 49,549 29,224
----------- ---------- ----------
Operating cash flows from Discontinued Operations 9,937 (9,578) 5,719
----------- ---------- ----------
Net cash provided by operating activities 40,526 39,971 34,943
----------- ---------- ----------
Cash Flows from Investing Activities
Sales of property, plant and equipment 8,084 1,105 1,034
Purchases of property, plant and equipment (10,543) (8,807) (12,748)
Redemptions of marketable securities 51,118 7,831 104,221
Purchases of marketable securities (98,359) (24,865) (5,932)
Acquisition of businesses - (2,027) (2,773)
Sale of subsidiaries 16,826 12,697 -
Other (991) (1,005) (1,005)
----------- ---------- ----------
Net cash provided by (used in) investing
activities (33,865) (15,071) 82,797
----------- ---------- ----------
Cash Flows from Financing Activities
Proceeds from notes payable 4,547 5,221 2,346
Payments of notes payable (9,459) (4,212) (4,266)
Payments of long-term debt (1,026) (2,004) (310)
Borrowing of cash surrender values 2,436 826 2,023
Surrender of insurance contracts - - 317
Payments of dividends (7,470) (7,572) (7,827)
Purchases of treasury stock (4,360) (3) (105,963)
Proceeds from exercise of stock options 463 - 1,200
----------- ---------- ----------
Net cash used in financing activities (14,869) (7,427) (112,797)
----------- ---------- ----------
Effect of Exchange Rate Changes on Cash
and Cash Equivalents (4,108) (5,141) (2,268)
----------- ---------- ----------
Net Increase (Decrease) in Cash and Cash Equivalents (12,316) 12,332 2,675
Cash and Cash Equivalents at Beginning of Year 32,146 19,814 17,139
----------- ---------- ----------
Cash and Cash Equivalents at End of Year $ 19,830 $ 32,146 $ 19,814
----------- ---------- ----------
The accompanying notes are an integral part of these financial statements.
Consolidated Statements of Stockholders' Equity
NCH Corporation and Subsidiaries
(In Thousands Except Per Share Data)
Accumulated
Common Treasury Common Treasury Additional Other
Stock Stock Stock Stock Paid-In Retained Comprehensive
Shares Shares Amount Amount Capital Earnings Loss Total
-------- --------- -------- --------- ---------- --------- ------------- ---------
Balance, April 30, 1998 11,769 (4,616) $11,769 $(165,519) $ 12,289 $474,540 $ (33,675) $299,404
-------- --------- -------- --------- ---------- --------- ------------- ---------
Comprehensive income:
Net income 24,361 24,361
Foreign currency
translation adjustment (2,506) (2,506)
Unrealized losses on
investments (98) (98)
---------
Comprehensive income 21,757
---------
Cash dividends on common
stock, $1.05 per share (5,323) (5,323)
Dividend declared, but
not paid, $.35 per share (1,893) (1,893)
Treasury stock acquired (1,769) (105,963) (105,963)
Treasury stock issued
under stock plans 24 1,007 425 1,432
-------- --------- -------- --------- ---------- --------- ------------- ---------
Balance, April 30, 1999 11,769 (6,361) 11,769 (270,475) 12,714 491,685 (36,279) 209,414
-------- --------- -------- --------- ---------- --------- ------------- ---------
Comprehensive income:
Net income 17,033 17,033
Foreign currency
translation adjustment (6,245) (6,245)
Unrealized gains on
investments 135 135
---------
Comprehensive income 10,923
---------
Cash dividends on common
stock, $1.05 per share (5,679) (5,679)
Dividend declared, but
not
paid, $.35 per share (1,893) (1,893)
Treasury stock acquired (3) (3)
-------- --------- -------- --------- ---------- --------- ------------- ---------
Balance, April 30, 2000 11,769 (6,361) 11,769 (270,478) 2,714 501,146 (42,389) 212,762
-------- --------- -------- --------- ---------- --------- ------------- ---------
Comprehensive income:
Net income 27,501 27,501
Foreign currency
translation adjustment (6,969) (6,969)
Unrealized gains on
investments 658 658
---------
Comprehensive income 21,190
---------
Cash dividends on common
stock, $1.05 per share (5,577) (5,577)
Dividend declared, but
not paid, $.35 per share (1,858) (1,858)
Treasury stock acquired (111) (4,360) (4,360)
Treasury stock issued
under stock plans 10 446 60 506
-------- --------- -------- --------- ---------- --------- ------------- ---------
Balance, April 30, 2001 11,769 (6,462) $11,769 $(274,392) $12,774 $521,212 $(48,700) $ 222,663
-------- --------- -------- --------- ---------- --------- ------------- ---------
The accompanying notes are an integral part of these financial statements.
Notes to Consolidated Financial Statements
NCH Corporation and Subsidiaries
Years Ended April 30, 2001, 2000, 1999
1. Summary of Significant Accounting Policies
Principles of consolidation - The consolidated financial statements include
the accounts of NCH Corporation and its majority owned subsidiaries (the
"Company"). Significant intercompany transactions and balances have been
eliminated. A February fiscal year-end is used for most international
subsidiaries in order to meet reporting requirements.
Nature of operations - The Company markets an extensive line of
maintenance, repair and supply products to customers throughout the world.
Products include specialty chemicals, fasteners, welding supplies, and plumbing
parts. These products are marketed principally through the Company's own sales
force.
Use of estimates in the financial statements - The preparation of financial
statements in conformity with accounting principles generally accepted in the
United States of America requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
Foreign currency translation - With the exception of hyper-inflationary
countries, all assets and liabilities of operations outside the United States
are translated into U.S. dollars at period-end exchange rates, and income and
expenses are translated at average rates for the year. Gains and losses
resulting from translation are included in the foreign currency translation
adjustment component of accumulated other comprehensive loss. The
hyper-inflationary countries have been translated into U.S. dollar equivalents
as follows: current assets (except for inventories), current liabilities,
long-term debt and other liabilities at period-end exchange rates; inventories,
property, plant and equipment, other assets, capital stock and retained earnings
at historical rates; income and expense items at average rates for the year,
except for cost of sales and depreciation expense, which are translated at
historical rates. Gains and losses resulting from translation for
hyper-inflationary countries are recognized in the income statement as expense
or income in the current period. Exchange adjustments resulting from foreign
currency transactions are recognized as expense or income in the current period
for all countries.
Cash and cash equivalents and marketable securities - Cash and cash
equivalents include cash on hand, cash in banks and all highly liquid
investments with a maturity of three months or less at the time of purchase.
Cash equivalents are stated at amortized cost plus accrued interest. Marketable
securities are stated at estimated fair value.
Inventories - Raw materials, sales supplies and purchased finished goods
are stated at a moving average cost, which approximates cost on a first-in,
first-out basis and is not in excess of market value. Manufactured finished
goods are stated at estimated cost of manufacturing, which is not in excess of
net realizable value.
Property, plant and equipment - These assets are recorded at cost. When
these assets are disposed of, the cost and related accumulated depreciation are
removed from the accounts, and any resulting gain or loss is included in income
during that year. The cost of maintenance and repairs is charged to expense as
incurred, whereas expenditures that substantially increase the useful lives of
plant or equipment are capitalized. The carrying value of property, plant and
equipment is periodically evaluated using undiscounted future cash flows as the
basis of determining if impairment exists under the provisions of Statement of
Financial Accounting Standards ("SFAS") No. 121, "Accounting for the Impairment
of Long-Lived Assets and for Long-Lived Assets to be Disposed Of". To the extent
impairment is indicated to exist, an impairment loss will be recognized under
SFAS No. 121 based on fair value.
Depreciation - Depreciation on buildings and equipment is provided for
financial statement purposes using the straight-line method over the estimated
useful lives of the related assets. Depreciation on certain buildings and
equipment is provided for income tax purposes using accelerated methods.
Intangible assets - Intangible assets are classified as other assets in the
consolidated financial statements and include goodwill, patents, computer
software and trademarks. Intangible assets are amortized using the straight-line
method over their estimated useful lives, but not in excess of 40 years. The
unamortized cost of impaired intangible assets is charged to expense when
impairment occurs.
Research and development - Research and development costs, which are
included in the costs of laboratory operations, are charged to expense as
incurred. Research and development costs, however, cannot be separately
identified from the total laboratory costs. Total laboratory costs amounted to
approximately $4.6 million in 2001, $5.1 million in 2000 and $5.3 million in
1999.
Income taxes - Deferred income taxes result from temporary differences
between the financial statement carrying amounts of existing assets and
liabilities and their respective tax bases. State and foreign income taxes have
been included in the provision for income taxes and income taxes payable.
Treasury stock - Treasury stock is stated at cost.
Retirement plans - The Company's policy is to fund its qualified retirement
type plans as accrued. The cost of these retirement benefits for past service
has been fully funded. Non-qualified retirement plans are not funded, but
provision for the estimated liabilities arising from these plans has been made
in the consolidated financial statements.
Postretirement benefits other than pensions - The Company charges to
expense the estimated future costs of retiree health care benefits during the
years that employees render service. The postretirement health care benefit plan
is not funded.
Stock options - The Company issues shares from its treasury as options are
exercised. When an option is exercised, treasury stock is credited with the
average cost of the treasury shares issued, and additional paid-in capital is
charged or credited for the difference between the option price and the average
cost of the treasury shares. No charge to income is made in connection with the
stock option plan. For the impact of the fair value of employee stock options
granted during fiscal years 1996 through 2001, see footnote 8, "Capital Stock
and Options".
Revenue recognition - Sales are recognized upon shipment of products when
title transfers to customers. In September 2000, the Emerging Issues Task Force
(EITF) of the Financial Accounting Standards Board issued EITF 00-10, Accounting
for Shipping and Handling Fees and Costs, stating that all amounts billed to
customers in a sale transaction related to shipping and handling be reported as
revenue. The Company had previously netted freight cost recovery against freight
expenses in marketing and administrative expenses. For fiscal year 2001, freight
costs billed to customers are included in net sales with the actual freight
costs being charged to cost of sales. All prior periods have been restated to
conform to this presentation. This change has no effect on the dollar amount of
the Company's operating income or net income.
Earnings per share - Basic earnings per share is computed by dividing net
income by the weighted-average number of shares outstanding. Diluted earnings
per share includes the dilutive effect of stock options.
Comprehensive income - SFAS No. 130 requires foreign currency translation
adjustments and unrealized gains or losses on the Company's available-for-sale
securities to be included in the measure of comprehensive income and segregated
in stockholders' equity as accumulated other comprehensive income.
Environmental costs - Liabilities for environmental costs are recorded when
it is probable that obligations have been incurred and the amounts can be
reasonably estimated. Any recorded liabilities would not be reduced by possible
recoveries from third parties and projected cash expenditures would not be
discounted unless fixed and determinable payment terms exist.
Reclassifications - Certain prior year amounts have been reclassified to
conform with the current year presentation.
2. Consolidated International Subsidiaries
At April 30, 2001 and 2000, the parent Company's investment in consolidated
international subsidiaries amounted to $47,994,000 and $48,589,000. The current
year consolidated financial statements include international subsidiaries'
assets of $116,812,000, liabilities of $46,972,000 and net income of $4,920,000,
after allocation of corporate expenses and excluding intercompany sales and
profits. For the prior year, these subsidiaries had assets of $137,471,000,
liabilities of $55,629,000 and net income of $7,185,000, after allocation of
corporate expenses and excluding intercompany sales and profits.
3. Income Taxes
Income taxes from continuing operations are as follows (in thousands of
dollars):
Years Ended April 30,
-----------------------------------------------
2001 2000 1999
------------ ------------- -------------
U.S. Federal Current $ 6,845 $ (4,632) $ 8,408
Deferred 984 3,361 (2,695)
Foreign Current 9,552 10,314 11,935
Deferred 165 (739) (457)
State 823 1,489 1,598
------------ ------------- -------------
$ 18,369 $ 9,793 $ 18,789
============ ============= =============
Deferred tax assets and liabilities are measured using enacted tax rates
expected to apply to taxable income in the years in which those temporary
differences are expected to be recovered or settled.
The components of deferred tax assets and liabilities as of April 30 are as
follows (in thousands of dollars):
2001 2000
------------ ------------
Deferred tax assets:
Allowance for doubtful accounts $ 3,387 $ 3,154
Inventory related 4,498 4,535
Insurance related 5,696 6,076
Accrued expenses 5,042 5,881
Retirement and deferred compensation plans 37,934 38,130
Foreign tax credit carryforward 2,575 -
Foreign net operating loss carryforwards 2,602 3,058
Valuation allowance (5,177) (3,058)
------------ ------------
56,557 57,776
------------ ------------
Deferred tax liabilities:
Depreciation 4,679 4,553
Other 2,976 2,818
------------ ------------
7,655 7,371
------------ ------------
Net deferred tax asset $ 48,902 $ 50,405
============== =============
The following is a reconciliation of the difference between the U.S.
statutory income tax rate and the effective tax rate related to continuing
operations:
Years Ended April 30,
--------------------------------------
2001 2000 1999
---------- -------- --------
U.S statutory rate 35.0% 35.0% 35.0%
Tax exempt interest (0.1) (0.1) (0.2)
Other (0.8) (0.2) 1.2
Effect of international operations 2.7 (3.3) 7.1
Effect of state income taxes 1.1 3.4 2.5
---------- -------- --------
Effective tax rate 37.9% 34.8% 45.6%
========== ======== ========
The Company files a consolidated U.S. federal income tax return with its
domestic subsidiaries. International subsidiaries file tax returns in countries
of their incorporation. In addition, branches of certain U.S. and international
companies file tax returns in countries in which they conduct business. Certain
of these subsidiaries have operating loss carryforwards totaling approximately
$7,226,000, which will expire between 2002 and 2007 and net operating loss
carryforwards totaling approximately $334,000 which have no expiration date. The
accumulated undistributed earnings of international subsidiaries not included in
the consolidated U.S. federal income tax return approximated $67,187,000 at
April 30, 2001, $76,053,000 at April 30, 2000 and $78,157,000 at April 30, 1999.
No provision is made in the accompanying consolidated financial statements for
the estimated taxes that would result on distribution of the accumulated
undistributed earnings since the Company intends to invest indefinitely in the
operations of these subsidiaries. Income from continuing U.S. operations before
income taxes was $38,705,000 in 2001, $14,985,000 in 2000, and $19,967,000 in
1999. Income from foreign operations before income taxes for the same three
years was $9,793,000, $13,182,000, and $21,218,000, respectively. For 2001, 2000
and 1999, worldwide income tax payments amounted to $13,152,000, $21,841,000 and
$19,955,000, respectively.
4. Inventories
A summary of inventories at April 30 follows (in thousands of dollars):
2001 2000
------------ ------------
Raw materials $ 14,561 $ 16,137
Finished goods 66,634 67,402
Sales supplies 1,275 1,452
------------ ------------
$ 82,470 $ 84,991
============ ============
5. Property, Plant and Equipment
Property, plant and equipment at April 30 consists of the following (in
thousands of dollars):
2001 2000
------------ ------------
Land $ 7,989 $ 12,035
Buildings 74,609 75,927
Equipment 100,956 101,117
------------ ------------
$ 183,554 $ 189,079
============ ============
Depreciation charged to income from continuing operations was $10,145,000,
$11,919,000 and $12,481,000 for each of the years ended April 30, 2001, 2000 and
1999, respectively. The estimated useful life of buildings is 25 to 40 years;
equipment is 3 to 10 years.
6. Long-Term Debt
Long-term debt at April 30 consists of the following (in thousands of
dollars):
2001 2000
------------ ------------
Borrowed by domestic companies:
Note issued to provider of insurance
policy, at 7.91%, principal and
interest payable quarterly through
2003 (see note 13). $ 11,177 $ 16,913
Note issued to individual in connection with
purchase of business - 1,071
Borrowed by international companies 25 36
------------ ------------
11,202 18,020
Less current maturities 6,210 5,971
------------ ------------
Long-term debt, less current maturities $ 4,992 $ 12,049
============ ===========
Scheduled maturities of long-term debt for the years following April 30, 2001,
are as follows:
2002 $ 6,210,000
2003 4,992,000
--------------
Total $ 11,202,000
==============
7. Employee Benefits
Retirement plans - The parent and its domestic subsidiaries have various
qualified retirement type plans covering substantially all domestic employees.
None of these plans have defined benefits. Some of the international
subsidiaries also have non-defined benefit retirement plans. These plans are
funded on a current basis, and the cost of retirement benefits for past service
has been fully funded. In addition, the Company has non-qualified deferred
compensation plans for the primary purpose of providing retirement benefits.
These plans are not funded, but provision for the estimated liabilities arising
from these plans has been made in the consolidated financial statements.
Expenses for retirement plans, exclusive of interest expense, were
$5,582,000, $7,430,000 and $8,872,000 in the years ended April 30, 2001, 2000
and 1999, respectively.
Postretirement benefits other than pensions - The Company and several of
its domestic subsidiaries have a postretirement health care benefit plan
covering substantially all domestic employees. Eligible retirees receive a
specific contribution from the Company toward the cost of the health plan, which
is a supplement to Medicare. The amount of the contribution is based on years of
service with the Company at retirement. The plan is not funded; retiree health
benefits are paid as covered expenses are incurred. Provision has been made in
the accompanying consolidated financial statements for the net postretirement
benefit expense of this plan.
Net postretirement benefit expenses for the years ended April 30 are as
follows (in thousands of dollars):
2001 2000 1999
-------- -------- --------
Service cost - benefits earned during the $ (43) $ (103) $ 179
year.
Interest cost on accumulated postretirement
benefit obligation 306 292 262
Net amortization of prior service cost 176 176 176
-------- -------- --------
Net postretirement benefit expense $ 439 $ 365 $ 617
======== ======== ========
The reconciliation of changes in the benefit obligation is as follows (in
thousands of dollars):
2001 2000
-------- --------
Postretirement benefit obligation, beginning
of period $ 3,931 $ 3,848
Service cost (43) (103)
Interest cost 306 292
Benefits paid (132) (106)
-------- --------
Postretirement benefit obligation, year-end $ 4,062 $ 3,931
======== =========
The reconciliation of the accumulated postretirement benefit obligation to
the recorded liability at April 30 is as follows (in thousands of dollars):
2001 2000
-------- --------
Accumulated postretirement benefit obligation $ 4,062 $ 3,931
Unrecognized prior service cost (411) (587)
-------- --------
Accrued postretirement benefit liability $ 3,651 $ 3,344
======== =========
Measurement of the accumulated postretirement benefit obligation is based
on a 7% assumed discount rate for 2001 and 2000.
Certain of the Company's non-U.S. subsidiaries have health care plans for
retirees, although many retirees outside of the United States are covered by
government sponsored and administered programs. The provision for the estimated
liabilities arising from these plans was not significant.
8. Capital Stock and Options
None of the Company's authorized 500,000 shares of $1 par value Preferred
Stock has been issued.
On April 19, 2001, the directors of the Company declared a regular
quarterly cash dividend of $.35 per share of Common Stock to be paid June 15,
2001, to shareholders of record June 1, 2001.
At April 30, 2001, the Company has a non-qualified stock option plan, which
is described below. The Company applies APB Opinion No. 25 and related FASB
Interpretations for its plan. No charge to income is made in connection with the
stock option plan. Had compensation cost for the Company's stock option plan
been determined consistent with SFAS No. 123, the Company's net income and
earnings per share would have been reduced to the pro forma amounts indicated
below (in thousands except per share data):
2001 2000 1999
----------- ------------ ------------
Net Income
As Reported $ 27,501 $ 17,033 $ 24,361
Pro Forma $ 27,209 $ 16,788 $ 24,188
Earnings per share
As Reported
Basic $ 5.16 $ 3.15 $ 4.27
Diluted $ 5.16 $ 3.15 $ 4.25
Pro Forma
Basic $ 5.11 $ 3.10 $ 4.24
Diluted $ 5.10 $ 3.10 $ 4.22
Under the 1980 Non-Qualified Stock Option Plan, the Company may grant
options to its employees for up to 1.5 million shares of common stock. At April
30, 2001, 2000 and 1999, 521,000, 531,000 and 531,000 shares of the Company's
Common Stock, respectively, were reserved for issuance under this plan which
grants options to key employees and officers. The purchase price under the grant
cannot be less than the market value at the date of grant. The options under
such plan are exercisable in equal amounts at the beginning of the second, third
and fourth year of their lives and expire after five years.
The fair value of each option grant is estimated on the date of grant using
the Black-Scholes option pricing model with the following weighted-average
assumptions:
2001 2000 1999
--------- -------- --------
Annual dividend yield 3.7% 3.1% 2.7%
Expected volatility 24.5% 22.0% 20.8%
Risk-free interest rates 5.2% 6.3% 4.5%
Expected lives (years) 5 5 5
The annual dividend yield shown above is weighted over the expected life of the
options.
A summary of the status of the Company's stock option plan as of April 30,
2001, 2000, and 1999, and changes during the years ended on those dates is
presented below:
(In Thousands Except Per Share Data)
Years Ended April 30,
------------------------------------------------------------------------
2001 2000 1999
---------------------- --------------------- ---------------------
Average Average Average
Number Price Number Price Number Price
of Per of Per of Per
Shares Share Shares Share Shares Share
---------- --------- --------- --------- --------- ---------
Outstanding at beginning
of period 402 $ 52.46 317 $ 56.54 227 $ 58.97
Granted 150 38.00 134 45.00 125 52.25
Exercised (10) 46.13 - - (21) 55.87
Canceled or expired (58) 54.61 (49) 58.62 (14) 58.85
---------- --------- --------- --------- --------- ---------
Outstanding at end
of period 484 $ 47.88 402 $ 52.46 317 $ 56.54
========== ========= ========= ========= ========= =========
Options exercisable
at year-end 215 $ 55.20 169 $ 57.15 117 $ 58.44
========== ========= ========= ========= ========= =========
The following table summarizes information about stock options outstanding
as of April 30, 2001 (in thousands except per share data):
Number of Number of Average Average
Options Options Price Per Remaining
Outstanding Exercisable Share Life
----------- ----------- ---------- ----------
Range of option exercise prices:
$38.00 - $45.00 268 34 $41.10 4.5 years
$52.25 - $62.50 216 181 $56.33 2.3 years
The weighted average fair value of options, calculated using the
Black-Scholes option pricing model, granted during the years ended April 30,
2001, 2000 and 1999 was $2.54, $3.89, and $4.15, respectively. At April 30,
2001, 2000 and 1999, 19,000 shares of Treasury Stock were reserved for issuance
to employees under a stock participation plan.
9. Comprehensive Income
Accumulated other comprehensive loss consists of the following (in thousands of
dollars):
2001 2000 1999
---------- ---------- ----------
Unrealized gain on available-for-sale $ 806 $ 148 $ 13
securities
Foreign currency translation adjustment (49,506) (42,537) (36,292)
---------- ---------- ----------
Accumulated other comprehensive loss $ (48,700) $ (42,389) $(36,279)
A summary of the components of other comprehensive income for the years
ended April 30, 2001, 2000 and 1999 is as follows (in thousands of dollars):
Before-Tax Income After-Tax
Amount Tax Amount
---------- ---------- -----------
2001
Unrealized gain on available-for-sale $ 1,012 $ (354) $ 658
securities
Net foreign currency translation (6,969) - (6,969)
---------- ---------- -----------
Other comprehensive income $ (5,957) $ (354) $ (6,311)
========== ========== ===========
2000
Unrealized gain on available-for-sale $ 208 $ (73) $ 135
securities
Net foreign currency translation (6,245) - (6,245)
---------- ---------- -----------
Other comprehensive income $ (6,037) $ (73) $ (6,110)
========== ========== ===========
1999
Unrealized loss on available-for-sale $ (151) $ 53 $ (98)
securities
Net foreign currency translation
(2,506) - (2,506)
---------- ---------- -----------
Other comprehensive income $ (2,657) $ 53 $ (2,604)
========== ========== ===========
10. Interest Costs
During the years ended April 30, 2001, 2000 and 1999, interest costs,
including interest expense on non-funded retirement plans, amounting to
$6,682,000, $5,557,000 and $4,790,000, respectively, were expensed as incurred.
For the same periods, interest payments were $5,293,000, $4,087,000 and
$3,664,000, respectively.
11. Leases
At April 30, 2001, the Company and its subsidiaries had a number of
noncancellable leases for various office and warehouse facilities. These
agreements expire at various times through 2006 and substantially all include
renewal provisions. The amount of other obligations assumed, such as payment of
property taxes and maintenance, is nominal. Total rent expense for 2001, 2000
and 1999 (including operating leases on data processing equipment, trucks and
trailers, and office equipment) was approximately $9,914,000, $10,608,000 and
$11,382,000, respectively. The minimum aggregate rentals under the terms of
noncancellable operating leases for future years are:
2002 $ 7,355,000
2003 5,201,000
2004 3,602,000
2005 2,573,000
2006 1,340,000
Thereafter 1,884,000
12. Contingent Liabilities
The Company and its subsidiaries are engaged in a variety of legal
proceedings arising in the ordinary course of business. In the opinion of
Management, the ultimate liabilities resulting from these proceedings will not
have a material adverse effect on the Company's financial position or operating
results. See Note 13 for discussion of environmental matters.
At April 30, 2001 and 2000, the Company had standby letters of credit
outstanding totaling $4,621,000 and $4,823,000, respectively, which guarantee
payment to certain insurance carriers.
13. Environmental Matters
The Company's operations are subject to comprehensive laws and regulations
relating to the management of hazardous substances and wastes and to the
remediation of contaminated sites. The Company regularly incurs costs to comply
with these laws and regulations. The amount of these costs varies each year and
could be substantial in any future year. The Company believes that it is in
substantial compliance with all material environmental laws and regulations.
During the fourth quarter of the prior year, the Company obtained
additional investigative findings related to a Company owned manufacturing site
which indicated further environmental remediation will be required. As a result,
the Company recorded an additional accrual of approximately $16.1 million, which
was included in marketing and administrative expenses on the Consolidated
Statements of Income for fiscal year 2000. In the prior year, the Company
purchased an environmental insurance policy to cover this site and one other
Company property. This policy covers all pollution remediation and site
reclamation costs up to $40 million for these two properties for a ten year
term. The premium for this policy was $18.6 million, of which $1.7 million was
paid in the prior year. The balance was funded in a non-cash transaction by a
note payable to be paid quarterly through fiscal year 2003. During the current
year, the Company made payments of $6.9 million, including interest of $1.1
million.
Certain environmental laws, such as the federal Superfund law, can impose
liability for the entire cost of site remediation upon each of the current or
former owners or operators of a site or parties who arranged for disposal of
hazardous substances at a site where such substances were released into the
environment. This liability can attach regardless of fault or lawfulness of the
original activity. Generally, where there are a number of potentially
responsible parties ("PRPs") that are financially viable, liability has been
apportioned between the PRPs based on equitable factors such as the type and
amount of waste attributable to each party at the site, although no assurance
can be given as to how liability will be assigned on any particular site.
The Company is one of three named parties in a civil lawsuit filed on
November 20, 1998, in the U.S. District Court, District of New Jersey, by the
U.S. Department of Justice on behalf of the U.S. Environmental Protection Agency
seeking reimbursement of approximately $21 million of past costs plus future
costs associated with the cleanup of a Superfund site in New Jersey. Although
named as a PRP, the Company contends that it did not arrange for the disposal of
any materials at this site and intends to vigorously defend this lawsuit. The
Company and other defendants, as Third Party Plaintiffs, have sued approximately
20 additional companies and individuals for contribution in this case. At this
time, it is too early to determine the likelihood of an adverse result or to
quantify the Company's likely exposure, if any.
14. Fair Value of Financial Instruments
The carrying amounts of cash equivalents, accounts receivable, accounts
payable, and notes payable to banks approximate fair value because of the short
maturities of these financial instruments. The carrying amounts of marketable
securities approximate fair value and are based on quoted market prices obtained
from an independent broker. The carrying amounts of long-term debt approximate
fair value as estimated based on the discounted value of future cash flows using
the Company's current borrowing rate for loans of comparable terms and
maturities.
15. Marketable Securities
Marketable securities which do not meet the definition of cash equivalents
are classified as marketable securities available-for-sale. These securities are
reported at fair value with unrealized gains and losses (net of deferred income
taxes) being recognized on the balance sheet as a component of accumulated other
comprehensive loss. Values are based on quoted market prices obtained from an
independent broker. Realized gains and losses are included in operating income
and are immaterial. The cost of securities sold is based on the specific
identification method.
The following is a summary of available-for-sale marketable securities
which consist of Government Bonds, Treasury Notes and Bills as of April 30 (in
thousands of dollars):
2001
- ---------
Cost $ 67,442
Gross Unrealized Gains 1,240
------------
Estimated Fair Value $ 68,682
============
2000
- ---------
Cost $ 20,201
Gross Unrealized Gains 228
------------
Estimated Fair Value $ 20,429
============
The contractual maturities of all the marketable securities at estimated
fair value as of April 30, 2001 are in fiscal year 2002.
16. Discontinued Operations
During the third quarter of the current year, the Company closed the DBS
Services Group due to the weakness in the direct broadcast satellite equipment
market and to increased competition. Operations for this segment ceased in
January 2001. The remaining net assets at April 30, 2001 consist primarily of
receivables and accrued closing costs. The assets have been written down to
their estimated net realizable values, and expenses have been estimated and
accrued through the estimated closing date. These items are expected to be
liquidated during the first quarter of fiscal year 2002. These charges are
included in the loss on disposition of discontinued operations, net of taxes and
are partially offset by income of $1.5 million, net of income taxes, that
resulted from additional payments for inventory that was transferred on a
contingency basis at the time of sale of Resource Electronics, Inc.
In the second quarter of the prior year, the Company sold substantially all
the net assets of Resource Electronics Inc., a subsidiary of the Company. This
sale closed on November 11, 1999. The net assets that were sold consisted
primarily of accounts receivable, inventories, fixed assets, and accounts
payable. The selling price for these net assets was $12,697,000 in cash and was
received by the Company in November 1999.
The financial position, operating results, and cash flows of DBS Services
Group and Resource Electronics are shown separately as discontinued operations.
Net sales of DBS Services Group for the years ended April 30, 2001, 2000,
and 1999, were $9,682,000, $21,038,000, and $16,530,000, respectively. As DBS
Services Group was closed in January 2001, the above amount for fiscal year 2001
represents approximately seven months of sales. Net sales of Resource
Electronics for the years ended April 30, 2000, and 1999, were $32,493,000, and
$63,468,000, respectively. As Resource Electronics was sold in the second
quarter of the prior year, the above amount for fiscal year 2000 represents
approximately six months of sales. These amounts are not included in net sales
in the accompanying Consolidated Statements of Income.
As shown on the accompanying Consolidated Statements of Income, amounts
relating to discontinued operations are as follows (in thousands except per
share amounts):
2001 2000 1999
-------------- ----------------- --------------
Income (Loss) from Discontinued
Operations before taxes $ (1,531) $ 3,342 $ 3,084
Income Taxes 525 (1,374) (1,119)
-------------- ----------------- --------------
Income (Loss) from Discontinued
Operations $ (1,006) $ 1,968 $ 1,965
============== ================= ==============
Loss on Disposition of
Discontinued Operations
before taxes $ (2,495) $ (5,091) $ -
Income Taxes 873 1,782 -
-------------- ----------------- --------------
Loss on Disposition of
Discontinued Operations $ (1,622) $ (3,309) $ -
============== ================= ==============
Per share - basic and diluted
Income (Loss) from
Discontinued Operations $ (0.19) $ 0.36 $ 0.34
Loss on Disposition of
Discontinued Operations (0.30) (0.61) -
-------------- ----------------- --------------
Total from Discontinued
Operations $ (0.49) $ (0.25) $ 0.34
============== ================= ==============
17. Segment and Geographic Area Information
The Company's segments are based on the organization structure that is used
by management for making operating and investment decisions and for assessing
performance. Based on this management approach, the Company has five segments:
Chemical Specialties Group, Plumbing Products Group, Partsmaster Group, Landmark
Direct, and Other Product Lines. Chemical Specialties Group manufacture and sell
a broad line of chemical cleaning and maintenance products, including water
treatment and oil field production chemicals, to industrial and institutional
customers worldwide. The Plumbing Products Group markets products for plumbing
repair and replacement parts as well as parts for new building construction. The
majority of these products are purchased finished goods, but the group also
manufactures various products. These products are primarily sold in the United
States to the plumbing trade, construction contractors, institutional and
industrial customers, as well as to major home building supply centers, hardware
stores and other retail outlets. The Partsmaster Group sells fasteners, cutting
tools, electrical products, and welding alloys to industrial customers
worldwide. Landmark Direct markets first-aid supplies and products used by
schools, colleges and professional athletic trainers. The segment
classifications shown below have been realigned to reflect changes in the
Company's decision making structure. Compared to the prior year's presentation,
the operating results of certain chemical specialty products have been
reclassified to Chemical Specialties Group from Other Product Lines. Also, the
previous year-end disclosures included the DBS Services Group, which is now
included as a discontinued operation. Fiscal 2000 and 1999 information has been
restated to conform to the current segment classifications. Other Product Lines
shown below includes only the results of N-E Thing Supply which was sold on
September 30, 2000.
The accounting policies of the segments are the same as those described in
Note 1. The Company evaluates the performance of its segments primarily based on
operating profit. All intercompany transactions have been eliminated, and
intersegment revenues are not significant. In calculating operating profit for
individual segments, administrative expenses incurred at the Company's corporate
headquarters (Corporate) that are common to more than one segment are allocated
on a usage basis. Certain items are maintained at Corporate and are not
allocated to the segments. These are primarily marketable securities, certain
corporate costs, and other corporate assets. Although the Company allocates
deferred income tax assets to segments for balance sheet purposes, income tax
expense is not allocated in measuring performance of individual segments.
Segment information is as follows (in thousands of dollars):
Depreciation and
Net Sales Operating Profit Amortization
--------------------------------- ------------------------------ ----------------------------
Years Ended April 30, Years Ended April 30, Years Ended April 30,
--------------------------------- ------------------------------ ----------------------------
2001 2000 1999 2001 2000 1999 2001 2000 1999
--------------------------------- ------------------------------ ----------------------------
Chemical Specialties
Group $ 429,026 $ 449,237 $ 458,481 $ 32,319 $ 16,908 $ 34,717 $ 8,188 $ 8,846 $ 8,933
Plumbing Products Group 113,946 122,031 121,928 5,609 7,690 2,754 2,202 2,557 2,715
Partsmaster Group 78,118 87,954 87,384 6,597 10,973 8,378 1,118 1,421 1,356
Landmark Direct 43,959 37,226 30,010 (541) 519 1,193 442 424 375
Other Product Lines 14,669 29,542 27,550 (28) 833 848 168 542 378
--------------------------------- ------------------------------ ----------------------------
Total $ 679,718 $ 725,990 $ 725,353 $ 43,956 $ 36,923 $ 47,890 $ 12,118 $ 13,790 $13,757
================================= ============================== ============================
Capital Expenditures Total Assets
--------------------------------- ------------------------------
Years Ended April 30, As of April 30,
--------------------------------- ------------------------------
2001 2000 1999 2001 2000 1999
--------------------------------- ------------------------------
Chemical Specialties
Group $ 7,284 $ 6,122 $ 9,078 $239,907 $257,662 $266,970
Plumbing Products Group 934 1,174 1,741 67,905 72,198 75,029
Partsmaster Group 1,506 938 886 24,964 27,700 29,736
Landmark Direct 819 372 403 11,721 10,375 9,143
Other Product Lines - 152 402 - 10,376 14,308
--------------------------------- ------------------------------
Total $ 10,543 $ 8,758 $ 12,510 $344,497 $378,311 $395,186
================================= ==============================
With respect to capital expenditures, the difference between the segment
totals and the consolidated totals relates to assets acquired in the purchases
of businesses.
A reconciliation of the segment information to the consolidated financial
statements is as follows:
Years Ended April 30,
---------------------------------------
2001 2000 1999
---------------------------------------
Total segment operating profit $ 43,956 $ 36,923 $ 47,890
Unallocated Corporate expenses (3,092) (2,559) (2,469)
Revaluation of foreign currencies (756) (2,651) (1,515)
Interest income 4,496 2,011 2,069
Interest expense (6,682) (5,557) (4,790)
Gain on sale of net subsidiary assets 7,461 - -
Gain on sale of land 3,115 - -
---------------------------------------
Income from Continuing Operations
before Income Taxes $ 48,498 $ 28,167 $ 41,185
=======================================
As of April 30,
---------------------------------------
2001 2000 1999
---------------------------------------
Total segment assets $ 344,497 $ 378,311 $ 395,186
Net assets of discontinued operations 1,882 12,939 21,319
Unallocated assets:
Marketable securities 68,682 20,429 3,187
Other Corporate assets 10,443 15,470 10,050
---------------------------------------
Consolidated total assets $ 425,504 $ 427,149 $ 429,742
=======================================
Geographic information is as follows:
Net Sales Long-lived Assets
------------------------------------- ---------------------------------
Years Ended April 30, As of April 30,
------------------------------------- ---------------------------------
2001 2000 1999 2001 2000 1999
------------------------------------- ---------------------------------
United States $ 407,197 $ 420,234 $ 394,087 $ 44,044 $ 44,842 $ 48,969
Europe 195,960 232,895 257,735 12,820 18,128 18,046
Pacific & Far East 29,044 28,192 25,743 2,092 2,377 2,398
Latin America & Canada 47,517 44,669 47,788 4,254 4,711 6,668
------------------------------------- ---------------------------------
Total $ 679,718 $ 725,990 $ 725,353 $ 63,210 $ 70,058 $ 76,081
===================================== =================================
18. Earnings Per Share
The following is a reconciliation of basic earnings per share to diluted
earnings per share for the years ended April 30, 2001, 2000, and 1999 (shares in
thousands):
2001 2000 1999
--------- --------- ---------
Basic earnings per share $ 5.16 $ 3.15 $4.27
========= ========= =========
Average shares outstanding - basic 5,327 5,408 5,708
Potential shares exercisable under stock option plan 50 134 220
Less: shares potentially repurchased under treasury
stock method (46) (129) (200)
--------- --------- ---------
Adjusted average shares outstanding - diluted 5,331 5,413 5,728
========= ========= =========
Diluted earnings per share $ 5.16 $ 3.15 $ 4.25
Stock options are the Company's only potential dilutive securities and are
considered in the diluted earnings per share calculations if dilutive for those
periods. For the years ended April 30, 2001, 2000, and 1999, options totaling
335,000, 268,000 and 97,000, respectively, were excluded as their effect would
have been antidilutive.
INDEPENDENT AUDITORS' REPORT
The Stockholders and Board of Directors
NCH Corporation:
We have audited the accompanying consolidated balance sheets of NCH
Corporation and subsidiaries as of April 30, 2001 and 2000, and the related
consolidated statements of income, stockholders' equity, and cash flows for each
of the years in the three-year period ended April 30, 2001. These consolidated
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these consolidated financial
statements based on our audits.
We conducted our audits in accordance with auditing standards generally
accepted in the United States of America. Those standards 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. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of NCH
Corporation and subsidiaries as of April 30, 2001 and 2000, and the results of
their operations and their cash flows for each of the years in the three-year
period ended April 30, 2001, in conformity with accounting principles generally
accepted in the United States of America.
Dallas, Texas
May 30, 2001
RESPONSIBILITY FOR FINANCIAL REPORTING
The management of the Company is responsible for the financial
information and representations contained in the financial statements and
other sections of the annual report. The financial statements have been
prepared in conformity with generally accepted accounting principles, and
therefore include informed estimates and judgments.
The Company's system of internal control is designed to provide
reasonable, but not absolute, assurance as to the integrity, objectivity and
reliability of the financial records and the safeguarding of assets.
Management believes that, within a cost-effective framework, the Company's
accounting controls provide reasonable assurance that material errors or
irregularities are prevented or would be detected within a relatively short
period of time. The possibility exists, however, that errors or
irregularities may occur and not be detected. The Company has a program of
internal audits and follow-up, covering separate Company operations and
functions in the U.S. and its international subsidiaries.
The Board of Directors pursues its review of the audit function,
internal controls and the financial statements largely through its Audit
Committee, which consists solely of directors who are not employees of the
Company. The Audit Committee periodically meets with management, the
independent auditors and internal auditors with regard to their respective
responsibilities. Both KPMG LLP and the internal auditors have full access
to the Audit Committee. They meet with the committee, without management
present, to discuss the scope and results of their examination, including
internal control and financial reporting matters.
Management also recognizes its responsibility for fostering a strong
ethical climate so that the Company's affairs are conducted according to the
highest standards of personal and corporate conduct. This responsibility is
characterized and reflected in the Company's code of corporate conduct, which
is publicized throughout the Company. The code of conduct addresses, among
other things, the necessity of ensuring open communication within the
Company; potential conflicts of interests; compliance with all domestic and
foreign laws, including those relating to financial disclosure; and the
confidentiality of proprietary information. The Company maintains a
systematic program to assess compliance with these policies.
/S/Irvin L. Levy /S/ Tom Hetzer
---------------------- ------------------------
Irvin L. Levy Tom Hetzer
Chief Executive Officer Chief Financial Officer
Selected Unaudited Quarterly Data
(In Thousands Except Per Share Data)
Years Ended April 30,
Quarter
-----------------------------------------------------------
2001 First Second Third Fourth
- ---- ----------- ----------- ----------- -----------
Net Sales $ 180,757 $ 173,650 $ 163,781 $ 161,530
Operating Income 12,304 14,560 9,195 4,805
Income from Continuing Operations 8,860 11,272 7,709 2,288
Net Income 9,073 10,210 4,405 3,813
Earnings Per Share from Continuing Operations
Basic $1.65 $2.12 $1.45 $0.43
Diluted $1.65 $2.12 $1.45 $0.43
Earnings Per Share - Net Income
Basic $1.69 $1.92 $0.83 $0.72
Diluted $1.69 $1.92 $0.83 $0.72
2000
- ----
Net Sales $ 183,952 $ 179,940 $ 182,874 $ 179,224
Operating Income (Loss) 11,205 12,822 13,891 (3,554)
Income (Loss) from Continuing Operations 5,650 6,988 8,226 (2,490)
Net Income (Loss) 6,261 3,916 8,678 (1,822)
Earnings (Loss) Per Share from Continuing Operations
Basic $1.04 $1.29 $1.52 ($0.46)
Diluted $1.04 $1.29 $1.52 ($0.46)
Earnings (Loss) Per Share - Net Income
Basic $1.16 $0.72 $1.60 ($0.34)
Diluted $1.16 $0.72 $1.60 ($0.34)
Basic earnings per share for each period is calculated based on the
weighted average number of shares outstanding during the period. Diluted
earnings per share includes the dilutive effect of stock options.
During the fourth quarter of the prior year, the Company obtained
additional investigative findings related to a Company owned manufacturing site
which indicated further environmental remediation will be required. As a result,
the Company recorded an additional accrual of approximately $16.1 million, which
is included in marketing and administrative expenses on the Consolidated
Statements of Income for fiscal year 2000.
Market and Dividend Information
NCH Corporation stock is traded on the New York Stock Exchange. The high
and low prices by quarter are shown for the past two years in the schedule
below.
Cash dividends paid during the fiscal year ended April 30, 2001, amounted
to $7.5 million compared to $7.6 million and $7.8 million in fiscal years 2000
and 1999, respectively. On April 19, 2001, a dividend of $.35 per share was
declared, payable June 15, 2001. A summary of the quarterly dividends per share
for the past two years is set forth in the schedule below.
Common Stock Prices Dividends Per Share
-------------------------------------- -------------------------------
2001 2000 Declared Paid
------------------ ------------------ --------------- --------------
Quarter High Low High Low 2001 2000 2001 2000
First 44.88 34.00 56.25 49.00 $ .35 $ .35 $ .35 $ .35
Second 39.56 32.38 50.56 44.25 $ .35 $ .35 $ .35 $ .35
Third 45.13 35.25 48.25 42.44 $ .35 - $ .35 $ .35
Fourth 57.10 44.56 47.00 39.00 $ .35 $ .70 $ .35 $ .35
As of June 1, 2001, there were 430 holders of record of the Company's
Common Stock, which includes several brokerage firms that hold shares of the
Company's stock for an estimated 1,800 investors.
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934
Filed by the Registrant [ X ]
Filed by a party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement [ ] Confidential, for Use of the
Commission Only (as permitted
by Rule 14a-6(e)(2))
[ X ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
NCH Corporation
(Name of Registrant as Specified in Its Charter)
Payment of Filing Fee (Check the appropriate box):
[ X ] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1)Title of each class of securities to which transaction applies:
(2)Aggregate number of securities to which transaction applies:
(3)Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
(4)Proposed maximum aggregate value of transaction:
(5)Total fee paid:
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
(1)Amount Previously Paid:
(2)Form, Schedule or Registration Statement No.:
(3)Filing Party:
(4)Date Filed:
[LOGO]
2727 Chemsearch Boulevard
Irving, Texas 75062
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
To Be Held July 26, 2001
NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders of NCH
Corporation will be held in the Gourmet Room II of the Crescent Club, 17th
Floor, 200 Crescent Court (at the corner of Pearl and Cedar Springs Streets),
Dallas, Texas, on Thursday, the 26th day of July, 2001, at 10:00 a.m., Central
Daylight Time, for the following purposes:
1. To elect three Class I directors of NCH to hold office until the next
annual election of Class I directors by stockholders or until their respective
successors are duly elected and qualified.
2. To ratify the appointment of KPMG LLP, Certified Public Accountants, to
be the independent auditors of NCH for the fiscal year ending April 30, 2002.
3. To transact such other business as may properly come before the
meeting or any adjournments of the meeting.
The Board of Directors has fixed the close of business on Friday, June 1,
2001, as the record date for determining stockholders entitled to vote at and to
receive notice of the annual meeting.
Whether or not you expect to attend the meeting in person, you are urged to
complete, sign, and date the enclosed form of proxy and return it promptly so
that your shares of stock may be represented and voted at the meeting. If you
are present at the meeting, your proxy will be returned to you if you so
request.
Joe Cleveland,
Secretary
Dated: June 27, 2001
[LOGO]
2727 Chemsearch Boulevard
Irving, Texas 75062
PROXY STATEMENT
For
ANNUAL MEETING OF STOCKHOLDERS
To Be Held on July 26, 2001
Dated: June 27, 2001
SOLICITATION AND REVOCABILITY OF PROXIES
The accompanying proxy is solicited by the management of, and on behalf of,
NCH Corporation, a Delaware corporation ("NCH"), to be voted at the Annual
Meeting of the Stockholders of NCH, to be held Thursday, July 26, 2001 (the
"Meeting"), at the time and place and for the purposes set forth in the
accompanying Notice of Annual Meeting. When properly executed proxies in the
accompanying form are received, the shares represented thereby will be voted at
the Meeting in accordance with the directions noted on the proxies; if no
direction is indicated, then such shares will be voted for the election of the
directors and in favor of the second proposal set forth in the Notice of Annual
Meeting attached to this Proxy Statement.
The enclosed proxy confers discretionary authority to vote with respect to
any and all of the following matters that may come before the Meeting: (1)
matters that NCH's Board of Directors does not know a reasonable time before the
Meeting are to be presented at the Meeting; and (2) matters incidental to the
conduct of the Meeting. Management does not intend to present any business for a
vote at the Meeting other than the matters set forth in the accompanying Notice
of Annual Meeting, and it has no information that others will do so. If other
matters requiring the vote of the stockholders properly come before the Meeting,
then, subject to the limitations set forth in the applicable regulations under
the Securities Exchange Act of 1934, as amended, it is the intention of the
persons named in the attached form of proxy to vote the proxies held by them in
accordance with their judgment on such matters.
Any stockholder giving a proxy has the power to revoke that proxy at any
time before it is voted. A proxy may be revoked by filing with the Secretary of
NCH either a written revocation or a duly executed proxy bearing a date
subsequent to the date of the proxy being revoked. Any stockholder may attend
the Meeting and vote in person, whether or not such stockholder has previously
submitted a proxy.
In addition to soliciting proxies by mail, officers and regular employees
of NCH may solicit the return of proxies. Brokerage houses and other custodians,
nominees, and fiduciaries may be requested to forward solicitation material to
the beneficial owners of stock.
This Proxy Statement and the accompanying proxy are first being sent or
given to NCH's stockholders on or about June 27, 2001.
NCH will bear the cost of preparing, printing, assembling, and mailing the
Notice of Annual Meeting, this Proxy Statement, the enclosed proxy, and any
additional material, as well as the cost of forwarding solicitation material to
the beneficial owners of stock.
VOTING RIGHTS
The record date for determining stockholders entitled to notice of and to
vote at the Meeting is the close of business on June 1, 2001. On that date there
were 5,307,330 shares issued and outstanding of NCH's $1.00 par value common
stock ("Common Stock"), which is NCH's only class of voting securities
outstanding. Each share of NCH's Common Stock is entitled to one vote in the
matter of election of directors and in any other matter that may be acted upon
at the Meeting. Neither NCH's certificate of incorporation nor its bylaws
permits cumulative voting. The presence, in person or by proxy, of the holders
of a majority of the outstanding shares of Common Stock entitled to vote at the
Meeting is necessary to constitute a quorum at the Meeting, but in no event will
a quorum consist of less than one-third of the shares entitled to vote at the
Meeting. The affirmative vote of a plurality of the shares of Common Stock
represented at the Meeting and entitled to vote is required to elect directors.
All other matters to be voted on will be decided by a majority of the shares of
Common Stock represented at the meeting and entitled to vote. Abstentions and
broker nonvotes are each included in determining the number of shares present at
the meeting for purposes of determining a quorum. Abstentions and broker
nonvotes have no effect on determining plurality, except to the extent that they
affect the total votes received by any particular candidate.
ELECTION OF DIRECTORS
NCH's Board consists of ten members, divided into three classes: Class I
(three directors), Class II (three directors), and Class III (four directors).
Only the Class I positions are due for nomination and election at the Meeting.
The Class II and Class III positions will be due for nomination and election at
the annual meetings of stockholders to be held in 2002 and 2003, respectively.
The intention of the persons named in the enclosed proxy, unless such proxy
specifies otherwise, is to vote the shares represented by such proxy for the
election of Rawles Fulgham, Robert M. Levy, and Lester A. Levy, Jr. as the Class
I directors. Rawles Fulgham, Robert M. Levy, and Lester A. Levy, Jr. have been
nominated to stand for election by the Board of Directors until their terms
expire or until their respective successors are duly elected and qualified. All
of the aforementioned nominees are presently directors of NCH.
Walter M. Levy and Lester A. Levy, Jr. are brothers. Robert M. Levy and
John I. Levy are brothers and Irvin L. Levy is their father. Walter M. Levy and
Lester A. Levy, Jr. are first cousins of Robert M. Levy and John I. Levy. Irvin
L. Levy is an uncle of Walter M. Levy and Lester A. Levy, Jr. Mr. Blumenthal is
a first cousin of Irvin L. Levy. Certain information regarding each nominee and
director is set forth below. The number of shares beneficially owned by each
nominee is listed under "Security Ownership of Principal Stockholders and
Management."
Class I Directors and Nominees
Rawles Fulgham, 73, has been a director of NCH since 1981. Mr. Fulgham was
an executive director of Merrill Lynch Private Capital Inc. from 1982 until
1989, and served as a Senior Advisor to Merrill Lynch & Co., Inc. from 1989
until 1998. He was also a director, the Chairman of the Board and Chief
Executive Officer of Global Industrial Technologies, Inc., located in Dallas,
Texas, until it was acquired by RHI-AG, located in Vienna, Austria, on December
31, 1999. Mr. Fulgham also served on the Board of Directors of BancTec, Inc. and
currently serves on the Audit and Advisory Committees of Dorchester Hugoton,
Ltd. From 1975 through October 1998, he served on the Board of Directors of
Dresser Industries, Inc. until it was merged with Halliburton Company. Mr.
Fulgham is a member of the Audit Committee and the Compensation Committee.
Robert M. Levy, 42, has been a director of NCH since July 2000. He joined
NCH in 1985 after attending business school at the University of Texas at
Austin. His initial responsibility was in domestic chemical marketing, after
which he served in management positions with increasing responsibility in Europe
and the United States. Mr. Levy is an Executive Vice President of NCH and an
officer and/or director of several of NCH's subsidiaries. He is a member of the
Executive Committee.
Lester A. Levy, Jr., 40, has been a director of NCH since July 2000. He
joined NCH in 1985 after attending business school at Northwestern University.
His initial responsibility was in domestic chemical sales, after which he served
in management positions with increasing responsibility in Europe and the United
States. Mr. Levy is an Executive Vice President of NCH and an officer and/or
director of several of NCH's subsidiaries. He is a member of the Executive
Committee.
If any of the above nominees for Class I directors should become
unavailable to serve as a director, then the shares represented by proxy will be
voted for such substitute nominees as may be nominated by the Board of
Directors. NCH has no reason to believe that any of the above nominees are, or
will be, unavailable to serve as a director.
Class II Directors
Robert L. Blumenthal, 70, has engaged in the practice of law since 1957. He
is a partner at the Dallas law firm of Carrington, Coleman, Sloman & Blumenthal,
L.L.P., which serves as NCH's legal counsel.
Thomas B. Walker, Jr., 77, has been a director of NCH since 1987. Mr.
Walker was a general partner of Goldman, Sachs & Co. from 1968 until 1984 and a
limited partner of The Goldman Sachs Group, L.P. ("Goldman Sachs") from 1984
through May 1999, when he assumed his current position as a Senior Director to
Goldman Sachs. Mr. Walker is also a director of Riviana Foods, Inc. He is a
member of the Audit Committee and the Compensation Committee.
John I. Levy, 39, has been a director of NCH since July 2000. He joined NCH
in 1985 after attending business school at Southern Methodist University. His
initial responsibility was in corporate planning, after which he served in
management positions with increasing responsibility in Europe and the United
States. Mr. Levy is an Executive Vice President of NCH and an officer and/or
director of several of NCH's subsidiaries. He is a member of the Executive
Committee.
Class III Directors
Jerrold M. Trim, 64, has been a director of NCH since 1980 and is the
President and majority shareholder of Windsor Association, Inc., which is
engaged primarily in investment consulting services. He is a member of the Audit
Committee and the Compensation Committee.
Irvin L. Levy, 72, has been a director and an officer of NCH since 1950,
and has served as NCH's President since 1965. He is either president or a vice
president of substantially all of NCH's subsidiaries. Mr. Levy is a member of
the Stock Option Committee and the Executive Committee. Mr. Levy also serves as
Chairman of the Board of Directors of NCH.
Walter M. Levy, 46, has been a director of NCH since July 2000. He joined
NCH in 1980 after attending business school at the University of Virginia. His
initial responsibility was in field sales, after which he served in management
positions with increasing responsibility in Europe, Asia and the United States.
Mr. Levy is an Executive Vice President of NCH and an officer and/or director of
several of NCH's subsidiaries. He is a member of the Executive Committee.
Ronald G. Steinhart, 61, has been a director of NCH since July 2000. He has
held several executive level positions with various business organizations,
including Interfirst Corporation, Team Bancshares, Inc. and Bank One
Corporation. From 1995 through 1996, he served as Chairman and Chief Executive
Officer of Bank One, Texas. In December 1996, he was elected Chairman and Chief
Executive Officer, Commercial Banking Group, of Bank One Corporation, in which
capacity he served until his retirement in January 2000. Mr. Steinhart also
serves as a trustee of Prentiss Properties Trust, a publicly traded real estate
investment trust, and MFS/Sun Life Series Trust, a group of mutual funds. He
also serves on the Board of Managers of Compass Variable Accounts, a group of
mutual funds. Mr. Steinhart is a director of United Auto Group, Inc. and
Carriker Corporation. He is a member of the Audit Committee and the Compensation
Committee.
Meeting Attendance and Committees of the Board
NCH has audit, compensation, and executive committees of the Board, whose
members are noted above. NCH also has a stock option committee, the members of
which are Lester A. Levy, Milton P. Levy, Jr., and Irvin L. Levy. During the
last fiscal year, the Board of Directors met on five occasions, the Compensation
Committee met once, the Audit Committee met once, the Executive Committee met at
least 30 times, and the Stock Option Committee met once. NCH does not have a
standing nominating committee of the Board. Nominees to the Board are selected
by the entire Board.
The Audit Committee of the Board reviews the scope of the independent
auditors' examinations and the scope of activities of NCH's internal auditors.
Additionally, it receives and reviews reports of NCH's independent auditors and
internal auditors. The Audit Committee also meets (without management's
presence, if the Audit Committee so desires) with the independent auditors and
members of the internal auditing staff, receives recommendations or suggestions
for change, and may initiate or supervise any special investigations it may
choose to undertake. See "Audit Committee Report" on page 12.
The Compensation Committee recommends to the Board of Directors the
salaries of the members of the Executive Committee.
The Executive Committee possesses all of the powers of the Board of
Directors between meetings of the Board.
The Stock Option Committee of the Board determines those employees of NCH
and its subsidiaries who will receive stock options and the amount of such
options.
COMPENSATION OF DIRECTORS AND EXECUTIVE OFFICERS
Director Compensation
Directors who are not executive officers of NCH receive compensation of
$25,000 per annum and $1,000 for each meeting of the Board of Directors or Board
committee attended. All other directors receive $1,000 for each such meeting
attended. Members of the Stock Option Committee and Executive Committee are not
compensated separately for their services on such committees.
Report on Executive Compensation
Responsibility for Executive Compensation
The Compensation Committee of NCH has the primary responsibility for
recommending to the Board the executive compensation program for the members of
the Executive Committee. The Compensation Committee recommends to the Board
annual base compensation for the members of the Executive Committee and is
responsible for administering and approving incentive compensation for the
members of the Executive Committee. The Executive Committee is responsible for
setting the compensation for all other officers of NCH.
Executive Compensation Strategy
With respect to compensation of all key executives other than those
executives whose compensation is determined by the Compensation Committee, NCH's
strategy is generally as follows:
* Attract and retain key executives by delivering a market
competitive rate of base pay. Market competitive rates of pay
are determined by reviewing compensation data from other
companies that resemble NCH in terms of lines of business,
size, scope, and complexity.
* Provide salary increases to key executives based on their
individual effort and performance. In addition to the
individual's experience, job duties, and performance, annual
increases are influenced by NCH's overall performance.
* Provide annual incentive opportunities based on objectives
that NCH feels are critical to its success during the year.
Target incentive levels are set on an individual basis and
actual awards are made at the Executive Committee's
discretion.
* Provide long-term incentives to key employees so that
employees are focused on activities and decisions that promote
NCH's long-term financial and operational success. To meet
this objective, NCH offers stock options to certain key
employees. Options are generally granted for a period of
five years at a price that is at least equal to the fair
market value of the Common Stock at the time of grant.
Options vest in equal increments over a three-year period
from the time of grant.
Report of the Compensation Committee on Compensation for the Members of the
Executive Committee
As stated above, the Compensation Committee is responsible for recommending
to the Board of Directors the compensation program for the members of the
Executive Committee. NCH's current compensation program for the members of the
Executive Committee consists of base salary determined by the Compensation
Committee and stock option grants determined by the Stock Option Committee.
The Compensation Committee's determinations for fiscal 2001 regarding the
appropriate level of base salary were guided by the contributions of the
individual members of the Executive Committee, as well as the Compensation
Committee's assessment of the increasingly competitive demand for executive
talent, the Company's overall performance, and the Company's future objectives
and challenges. Although no formula or preset goal was used in setting the base
salary, performance in sales and earnings was considered, in addition to the
foregoing factors. The Compensation Committee also considered the compensation
practices and performance of other companies that resemble NCH in terms of lines
of business, size, scope, and complexity.
Base salary payments for 2001 were made to compensate ongoing performance
throughout the year. The Compensation Committee's decisions concerning the
specific 2001 compensation for individual members of the Executive Committee
were made within this broad framework and in light of each member's level of
responsibility, performance, prior salary and other compensation awards. In all
cases the Compensation Committee's specific decisions involving 2001
compensation were ultimately based upon the Compensation Committee's judgment
about the individual's performance and potential future contributions, and about
whether each particular payment would provide an appropriate reward and
incentive for the executive to sustain and enhance the Company's long term
performance.
On April 28, 1994, the Compensation Committee of the Board of Directors
adopted an incentive bonus plan (the "Bonus Plan"), for the Office of the
Executive Committee, which was approved by the stockholders at the 1994 Annual
Meeting. The Bonus Plan provided a formula for determining the amounts of annual
bonuses to be paid to each member of the Executive Committee. Bonus amounts
depended on the amount by which NCH's net income after taxes, but before accrual
for any bonus under the Bonus Plan, for a particular fiscal year increased over
its net income before accrual for any bonus for the preceding fiscal year. The
Bonus Plan was eliminated effective as of October 30, 2000; therefore, no bonus
was payable for fiscal 2001. Although no bonus plan was in place for fiscal
2001, the Compensation Committee may decide to implement a bonus plan or other
incentive compensation for the Office of the Executive Committee for future
fiscal years.
Conclusion
The Compensation Committee believes that current compensation arrangements
in place at NCH are reasonable and competitive given NCH's size and status and
the current regulatory environment surrounding executive compensation. The base
salary program allows NCH to attract and retain management talent. In addition,
for those employees who are incentive eligible, such systems continue to provide
the necessary link between the attainment of NCH's performance objectives and
the compensation received by executives.
Compensation Committee Stock Option Committee
Rawles Fulgham Irvin L. Levy
Jerrold M. Trim Lester A. Levy
Thomas B. Walker, Jr. Milton P. Levy, Jr.
Ronald Steinhart
Executive Committee
Irvin L. Levy
Lester A. Levy, Jr.
Robert M. Levy
Walter M. Levy
John I. Levy
The report on executive compensation will not be deemed to be incorporated
by reference into any filing by NCH under the Securities Act of 1933 or the
Securities Exchange Act of 1934, except to the extent that NCH specifically
incorporates the above report by reference.
Compensation Committee Interlocks and Insider Participation in Compensation
Decisions
Irvin L. Levy, Lester A. Levy, Jr., Robert M. Levy, John I. Levy, and
Walter M. Levy are members of the Executive Committee of NCH's Board of
Directors, which committee determines most salaries and promotions with respect
to officers of NCH and its subsidiaries. Irvin L. Levy, Milton P. Levy, Jr., and
Lester A. Levy are members of the Stock Option Committee, which determines those
employees of NCH and its subsidiaries who will receive stock options and the
amount of such options. All of the aforementioned persons, with the exception of
Milton P. Levy, Jr. and Lester A. Levy, are executive officers and employees of
NCH. Milton P. Levy, Jr. and Lester A. Levy were executive officers and
employees of NCH prior to July 27, 2000.
NCH's Board of Directors (with the subject members abstaining) determines
the salaries of the members of the Executive Committee after recommendation of
the Compensation Committee, whose members are Rawles Fulgham, Jerrold M. Trim,
Thomas B. Walker, Jr., and Ronald Steinhart.
Executive Compensation
The following table summarizes the compensation paid to Mr. Irvin L. Levy,
who, as President and Chairman of the Board, acts in a capacity similar to the
chief executive officer of NCH, and to Lester A. Levy, Jr., Robert M. Levy,
Walter M. Levy, and John I. Levy, NCH's four most highly compensated executive
officers other than Irvin L. Levy, for services rendered in their capacities as
executive officers of NCH during the fiscal years ended April 30, 2001, 2000 and
1999.
SUMMARY COMPENSATION TABLE
Name and Fiscal Annual Compensation(1) All Other
Principal Positions Year Salary(2) Bonus Compensation (3)
Irvin L. Levy, President and 2001 $935,328 -- $4,400
Chairman of the Board 2000 916,505 -- 4,200
1999 913,106 -- 4,000
Robert M. Levy (4), 2001 $421,825 -- $3,400
Executive Vice President 2000 -- -- --
1999 -- -- --
Lester A. Levy, Jr. (4), 2001 $422,616 -- $4,400
Executive Vice President 2000 -- -- --
1999 -- -- --
John I. Levy (4), 2001 $424,778 -- $4,400
Executive Vice President 2000 -- -- --
1999 -- -- --
Walter M. Levy (4), 2001 $427,908 -- $4,400
Executive Vice President 2000 -- -- --
1999 -- -- --
- --------------------
(1) Certain of NCH's executive officers receive personal benefits in addition to
annual salary and bonus. The aggregate amounts of the personal benefits,
however, do not exceed the lesser of $50,000 or 10% of the total of the annual
salary and bonus reported for the named executive officer.
(2) Includes compensation for services as a director.
(3) The amounts included in this column were contributed to the accounts of the
executives included in the table under NCH's qualified profit sharing and
savings plan.
(4) Robert M. Levy, Lester A. Levy, Jr., John I. Levy and Walter M. Levy each
became an executive officer of NCH effective May 1, 2000.
OPTION GRANTS IN LAST FISCAL YEAR
Individual Grants
-----------------------------------------------------------
Potential Realizable Value
at Assumed Annual
Number of Percent of Rates of Stock Price
Securities Total Options/ Appreciation for
Underlying SARs Granted to Exercise or Option Term ($) (3)
Options Employees in Base Price Expiration --------------------------
Name Granted (#)(1) Fiscal Year (2) ($/Share) Date 5% 10%
- ------------------ -------------- ---------------- ----------- ---------- ----------- ------------
Irvin L. Levy n/a n/a n/a n/a n/a n/a
Lester A. Levy, Jr. 13,158 8.8 38 12/18/05 48.50 61.20
Robert Levy 13,158 8.8 38 12/18/05 48.50 61.20
John Levy 13,158 8.8 38 12/18/05 48.50 61.20
Walter Levy 13,158 8.8 38 12/18/05 48.50 61.20
- ------------------
(1) These options are first exercisable on 12/18/01.
(2) Based upon a total of 150,000 shares subject to options granted to employees
under NCH's Stock Option Plan.
(3) In accordance with Securities and Exchange Commission Rules, these columns
show gains that could accrue for the respective options, assuming that the
market price of NCH Common Stock appreciates from the date of grant over a
period of 5 years at an annualized rate of 5% and 10%, respectively. If the
stock price does not increase above the exercise price at the time of
exercise, realized value to the named executives from these options will be
zero.
Retirement Agreements
NCH has entered into retirement agreements allowing retirement at any time
after age 59-1/2 with each of Irvin L. Levy, Lester A. Levy, Jr., Robert M.
Levy, Walter M. Levy and John I. Levy that provide for lifetime monthly payments
and guarantee 120 monthly payments beginning at death, retirement, or
disability. Payment under these agreements is $550,000 per year for Irvin L.
Levy and $200,000 per year for each of the other Levys, subject to adjustment
each year for increases in the United States Consumer Price Index for the
preceding year.
FIVE YEAR COMPARISON OF CUMULATIVE TOTAL RETURN
The following graph presents NCH's cumulative stockholder return during the
period beginning April 30, 1996, and ending April 30, 2001. NCH is compared to
the S&P 500 and a peer group consisting of companies that collectively represent
lines of business in which NCH competes. The companies included in the peer
group index are Betz Laboratories, Inc. (Betz), The Dexter Corporation (Dexter),
Ecolab Inc., H.B Fuller Company (Fuller), International Specialty Products, Inc.
(International Specialty), Lawson Products, Inc., Lilly Industries (Lilly),
Lubrizol Corporation, Nalco Chemical Company (Nalco), National Service
Industries, Inc., Petrolite Corporation (Petrolite), Premier Industrial
Corporation (Premier), Quaker Chemical Corporation, Safety-Kleen Corporation,
Snap-On Tools Corporation and Strategic Distribution Inc. (Strategic
Distribution). During fiscal year 1997, Premier was acquired by another
corporation. Since Premier's shareholder return is no longer available, they
were excluded from the peer group for performance after 1996. During fiscal year
1998, Petrolite was acquired by another corporation, and was excluded from the
peer group for performance after 1997. During fiscal year 1999, Betz was
acquired by another corporation, and was excluded from the peer group for
performance after 1998. During fiscal year 2000, Nalco was acquired by another
corporation, and was excluded from the peer group for performance after 1999.
During fiscal year 2001, Lilly and Dexter were each acquired by another
corporation, and were excluded from the peer group for performance after 2000.
Due to these acquisitions, Fuller, International Specialty, and Strategic
Distribution were added to the peer group. The index that includes Fuller,
International Specialty, and Strategic Distribution is designated below as "New
Peer Group". For comparison purposes, the former index, without these additions,
is included as "Former Peer Group". Each index assumes $100 invested at the
close of trading on April 30, 1996, and is calculated assuming quarterly
reinvestment of dividends and quarterly weighting by market capitalization.
Data for Fiscal Year Ending April 30,
- ------------------------------------------------------------------------------
1996 1997 1998 1999 2000 2001
- ------------------------------------------------------------------------------
NCH Corp 100 113 116 102 84 112
S&P 500 Index 100 125 177 215 237 206
Former Peer Group 100 125 153 150 123 131
New Peer Group 100 124 155 142 114 124
- ------------------------------------------------------------------------------
Data source: S&P Compustat, a division of McGraw-Hill, Inc.
The stock price performance depicted in the graph above is not necessarily
indicative of future price performance. The graph will not be deemed to be
incorporated by reference in any filing by NCH under the Securities Act of 1933
or the Securities Exchange Act of 1934, except to the extent that NCH
specifically incorporates the graph by reference.
SECURITY OWNERSHIP OF
PRINCIPAL STOCKHOLDERS AND MANAGEMENT
The following table sets forth certain information regarding the beneficial
ownership of NCH's Common Stock as of June 1, 2001, by: (i) persons known to
management to beneficially own more than 5% of NCH's Common Stock; (ii) each
director and nominee for director; (iii) NCH's five most highly compensated
executive officers (whose compensation exceeded $100,000 in fiscal 2001); and
(iv) all directors and executive officers of NCH as a group. Except as noted
below, each person included in the table has sole voting and investment power
with respect to the shares that the person beneficially owns.
Name of Amount & Nature
Beneficial Owner of Beneficial Ownership Percent of Class
------------------------- ----------------------- ----------------
Robert L. Blumenthal 2,683 *
Rawles Fulgham (1) 2,000 *
Thomas F. Hetzer 0 -
Irvin L. Levy (2)(3) 1,443,857 27.2%
Lester A. Levy (2)(4) 1,437,362 27.2%
John I. Levy (2)(5) 85,397 1.6%
Lester A. Levy, Jr. (2)(6) 39,044 *
Robert M. Levy (2)(7) 70,160 1.3%
Walter M. Levy (2)(8) 41,331 *
Ronald G. Steinhart 2,500 *
Jerrold M. Trim (9) 0 -
Thomas B. Walker, Jr. 10,000 *
All directors and executive 1,697,035 32.0%
officers as a group (13 people)
Dimensional Fund Advisors, Inc. (10) 337,600 6.4%
- --------------------
* Less than 1% of class.
(1) Of these shares, 700 are held by a Dallas bank in trust for the
retirement plan and benefit of Mr. Fulgham.
(2) The address of Irvin L. Levy, Lester A. Levy, Lester A. Levy,
Jr., Robert M. Levy, Walter M. Levy and John I. Levy is P.O. Box
152170, Irving, Texas 75015. The definition of beneficial
ownership under the rules and regulations of the Securities and
Exchange Commission requires inclusion of the same 29,000 shares
held as cotrustees by Messrs. Irvin and Lester Levy for a family
trust in the totals listed above for each of Messrs. Irvin and
Lester Levy.
(3) Irvin L. Levy owns a life estate interest in 1,000,000 shares
included in the table over which he has sole voting and investment
power, and his children own a remainder interest in such 1,000,000
shares. The table includes 29,000 shares held as cotrustee with his
brothers for a family trust over which he shares voting and
investment power, the beneficial ownership of which Mr. Levy
disclaims.
(4) Lester A. Levy owns a life estate interest in 685,194 shares
included in the table over which he has sole voting and investment
power, and his children own a remainder interest in such 685,194
shares. The table includes 29,000 shares held as cotrustee with his
brothers for a family trust over which he shares voting and
investment power, the beneficial ownership of which Mr. Levy
disclaims.
(5) The table includes 1,576 shares held by the wife of John I. Levy,
the beneficial ownership of which Mr. Levy disclaims, and 1,798
shares held by the children of John I. Levy, the beneficial
ownership of which Mr. Levy disclaims. The table also includes
options held by John I. Levy exercisable within 60 days to acquire
15,102 shares. John I. Levy and a trust for the benefit of Mr.
Levy's family additionally hold, in the aggregate, a remainder
interest in 500,000 shares held by his father, Irvin L. Levy (see
footnote (3) above).
(6) The table includes options held by Lester A. Levy, Jr.
exercisable within 60 days to acquire 15,102 shares. Lester A.
Levy, Jr. additionally holds a remainder interest in 228,398
shares held by his father, Lester A. Levy (see footnote (4)
above).
(7) The table includes options held by Robert M. Levy exercisable within
60 days to acquire 15,102 shares. Robert M. Levy and a trust for the
benefit of Mr. Levy's family additionally hold, in the aggregate, a
remainder interest in 500,000 shares held by his father, Irvin L.
Levy (see footnote (3) above).
(8) The table includes 1,135 shares held by the wife of Walter M. Levy,
the beneficial ownership of which Mr. Levy disclaims, and 6,315
shares held by Walter M. Levy as trustee for family trusts for the
benefit of his children, the beneficial ownership of which Mr. Levy
disclaims. The table also includes options held by Walter M. Levy
exercisable within 60 days to acquire 15,102 shares. Walter M. Levy
(and entities controlled by Walter M. Levy) additionally holds a
remainder interest in 228,398 shares held by his father, Lester A.
Levy (see footnote (4) above).
(9) Windsor Association, Inc., of which Mr. Trim is President, has a
corporate policy against its employees owning any publicly traded
securities.
(10) The table sets forth Dimensional Fund Advisors, Inc.'s stockholding
based on its latest Schedule 13G filed with the SEC as of February
2, 2001. Dimensional Fund Advisors, Inc. reports its address as 1299
Ocean Avenue, 11th Floor, Santa Monica, California 90401. It has
sole dispositive power over 337,600 shares, shared dispositive power
over 0 shares, sole voting power over 337,600 shares, and shared
voting power over 0 shares.
AUDIT COMMITTEE REPORT
The Securities and Exchange Commission rules now require the Company to
include in its proxy statement a report of the Audit Committee. The following
report concerns the Committee's activities regarding oversight of the Company's
financial reporting and auditing process.
The Audit Committee is comprised solely of independent directors, as
defined in the New York Stock Exchange rules, and it operates under a written
charter adopted by the Board of Directors, a copy of which is attached to this
proxy statement as Exhibit A. The composition of the Audit Committee, the
attributes of its members and the responsibilities of the Committee, as
reflected in its charter, are intended to be in accordance with applicable
requirements for corporate audit committees. The Committee reviews and assesses
the adequacy of its charter on an annual basis.
As described more fully in its charter, the purpose of the Audit Committee
is to assist the Board of Directors in its general oversight of the Company's
financial reporting, internal control and audit functions. The Committee has
reviewed and discussed the Company's audited financial statements with
management, which has primary responsibility for the financial statements. KPMG
LLP ("KPMG"), the Company's independent auditing firm, is responsible for
performing an independent audit of the consolidated financial statements of the
Company in accordance with accounting principles generally accepted in the
United States. The Committee has discussed with KPMG the matters that are
required to be discussed with the independent auditor by Statement on Auditing
Standards No. 61, as amended, "Communication with Audit Committees." KPMG has
provided the Committee with the written disclosures required by Independent
Standards Board Standard No. 1, "Independence Discussions with Audit
Committees," and the Committee discussed with KPMG that firm's independence. The
Committee also considered whether KPMG's provision of non-audit services to NCH
is compatible with KPMG's independence.
Following the Committee's discussions with management and the independent
auditor, the Committee recommended that the Board of Directors include the
audited consolidated financial statements in the Company's annual report on Form
10-K for the year ended April 30, 2001 and that KPMG be appointed independent
auditors for the Company for fiscal 2002. The foregoing report is provided by
the following independent directors, who constitute the Audit Committee.
Audit Committee:
Rawles Fulgham, Chairman
Thomas B. Walker, Jr.
Jerrold Trim
Ronald Steinhart
SELECTION OF AUDITORS
The Board of Directors has appointed KPMG to continue to be the principal
independent auditor of NCH, subject to stockholder ratification at the Meeting.
A representative of that firm has been requested to be present at the Meeting
and will have an opportunity to make a statement if the representative desires
to do so and to respond to appropriate questions.
Fees Paid to KPMG LLP
The following table shows the fees paid or accrued by the Company for the
audit and other services provided by KPMG for fiscal year 2001.
Audit Fees(1) $ 698,105
Financial Information Systems Design $ 0
and Implementation Plan
All Other Fees(2) $ 38,000
Total $ 736,105
(1) Audit services of KPMG LLP for 2001 consisted of the examination of the
consolidated financial statements of the Company and quarterly review of the
financial statements.
(2) "All Other Fees" includes fees for internal audit outsourcing services
provided in international locations.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
During fiscal 2001, Robert M. Levy and John I. Levy each transferred 5,000
shares of Common Stock to a newly formed family limited partnership. Robert M.
Levy's transfer occurred in August and John I. Levy's transfer occurred in
December. Messrs. Robert and John Levy failed to report such transfers on Form
4's in September 2000 and January 2001, respectively. The failure to report was
inadvertent and was corrected on a subsequently filed Form 4 with respect to
Robert M. Levy and Form 5 for John I. Levy. Also, during fiscal 2001, Ronald
Steinhart failed to timely file a Form 3 reporting his initial ownership of
Common Stock upon becoming a director of NCH. This failure to file was also
inadvertent and was corrected on a subsequently filed Form 5.
PROPOSALS OF STOCKHOLDERS
Stockholders of NCH who intend to present a proposal for action at the 2002
Annual Meeting of Stockholders of NCH must notify NCH's management of such
intention by notice received at NCH's principal executive offices not less than
120 days in advance of June 27, 2002, for such proposal to be included in NCH's
proxy statement and form of proxy relating to such meeting.
ANNUAL REPORT
The Annual Report for the year ended April 30, 2001, is being mailed to
stockholders with this Proxy Statement. The Annual Report is not to be regarded
as proxy soliciting material. NCH will provide without charge to each
stockholder to whom this Proxy Statement and the accompanying form of proxy are
sent, on the written request of such person, a copy of NCH's annual report on
Form 10-K for the fiscal year ended April 30, 2001, including the financial
statements and the financial statement schedules, required to be filed with the
Securities and Exchange Commission. Requests should be directed to NCH
Corporation, Attention: Secretary, P. O. Box 152170, Irving, Texas 75015.
Irvin L. Levy,
President
Irving, Texas
Dated: June 27, 2001
EXHIBIT A
NCH CORPORATION
Charter of the Audit Committee of the Board of Directors
I. Audit Committee Purpose
The Audit Committee is appointed by the Board of Directors to assist
the Board in fulfilling its oversight responsibilities. The Audit
Committee's primary duties and responsibilities are to:
o Monitor the integrity of the Company's financial reporting
process and systems of internal controls regarding finance,
accounting, and legal compliance.
o Monitor the independence and performance of the Company's
independent auditors and internal auditing department.
o Provide an avenue of communication among the independent
auditors, management, the internal auditing department, and the
Board of Directors.
The Audit Committee has the authority to conduct any investigation
appropriate to fulfilling its responsibilities, and it has direct
access to the independent auditors as well as anyone in the
organization. The Audit Committee has the ability to retain, at the
Company's expense, special legal, accounting, or other consultants
or experts it deems necessary in the performance of its duties.
II. Audit Committee Composition and Meetings
Audit Committee members shall be appointed by the Board on
recommendation of the Nominating Committee and shall meet the
requirements of the New York Stock Exchange. The Audit Committee
shall be comprised of three or more independent non-executive
directors who are free of any relationship that would interfere with
the exercise of his or her independent judgment. All members of the
Committee shall have a basic understanding of finance and accounting
and at least one member of the Committee shall have accounting or
related financial management expertise.
The Committee shall meet as frequently as circumstances dictate but
at least annually. The Committee should meet privately in executive
session at least annually with management, the director of the
internal auditing department, the independent auditors, and as a
committee to discuss any matters that the Committee or each of these
groups believe should be discussed.
III. Audit Committee Responsibilities and Duties
Review Procedures
1. Review and reassess the adequacy of this Charter at least
annually. Submit the charter to the Board of Directors for
approval and have the document published at least every three
years in accordance with SEC regulations.
2. Review the Company's annual audited financial statements prior
to filing or distribution, to include discussion with management
and independent auditors of significant issues regarding
accounting principles, practices, and judgments.
3. In consultation with the management, the independent auditors,
and the internal auditors, consider the integrity of the
Company's financial reporting processes and controls. Review
significant findings prepared by the independent auditors and
the internal auditing department.
4. Review as deemed necessary, with financial management and the
independent auditors, the company's quarterly financial results
prior to the release of earnings and/or the company's quarterly
financial statements prior to filing or distribution. The Chair
of the Committee may represent the entire Audit Committee for
purposes of any quarterly review.
Independent Auditors
5. The independent auditors are ultimately accountable to the Audit
Committee and the Board of Directors. The Audit Committee shall
review the independence and performance of the auditors and
recommend to the Board of Directors the appointment of the
independent auditors or approve any discharge of auditors when
circumstances warrant.
6. Approve the fees and other significant compensation to be paid to
the independent auditors.
7. On an annual basis, the Committee should review and discuss with
the independent auditors their formal written statement
delineating all significant relationships they have with and
services they performed for the Company that could impair the
auditors' objectivity and independence.
Internal Audit Department and Legal Compliance
8. Review the qualifications and activities of the internal audit
department, as needed.
9. Review the appointment and replacement of the senior internal
audit executive.
10. Review significant reports prepared by the internal audit
department.
11. On at least an annual basis, review with the Company's counsel,
any legal matters that could have a significant impact on the
organization's financial statements, the Company's compliance
with the applicable laws and regulations, and inquiries received
from regulators or governmental agencies.
Other Audit Committee Responsibilities
12. Annually prepare a report to shareholders as required by the
Securities and Exchange Commission. The report should be
included in the Company's annual proxy statement.
13. Perform any other activities consistent with this Charter, the
Company's by-laws, and governing law, as the Committee or the
Board deems necessary or appropriate.
14. Maintain minutes of meetings and periodically report to the
Board of Directors on significant results of the foregoing
activities.
PROXY CARD
NCH CORPORATION
ANNUAL MEETING OF STOCKHOLDERS-JULY 26, 2001
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned, revoking all prior proxies, hereby appoints Tom Hetzer and Joe
Cleveland, and any one or more of them, proxy or proxies, with full power of
substitution in each, and hereby authorizes them to vote for the undersigned and
in the undersigned's name, all shares of common stock of NCH Corporation (the
"Company") standing in the name of the undersigned on June 1, 2001, as if the
undersigned were personally present and voting at the Company's annual meeting
of stockholders to be held on July 26, 2001, in Dallas, Texas, and at any
adjournment thereof, upon the matters set forth on the reverse side hereof.
This proxy when properly executed will be voted in the manner directed herein by
the undersigned stockholder. IF NO DIRECTION IS MADE, THEN THIS PROXY WILL BE
VOTED FOR PROPOSALS 1 AND 2, AND IN THE PROXIES' DISCRETION ON ALL OTHER MATTERS
THAT MAY PROPERLY COME BEFORE THE ANNUAL MEETING, INCLUDING MATTERS INCIDENT TO
THE CONDUCT OF SUCH MEETING.
(Continued and to be signed on reverse side)
FOR WITHHOLD AUTHORITY
1. Election of Directors / / / /
Nominees: 01 RAWLES FULGHAM, 02 ROBERT M. LEVY AND 03 LESTER A. LEVY, JR.
- ---------------------------------------------------------------------
Instruction: To withhold authority to vote for all nominees, mark the
Withhold Authority box. To withhold authority to vote for any individual
nominees, write the nominee's name on the line above.
2. Proposal to ratify the appointment of KPMG LLP as independent auditors
of NCH Corporation.
FOR / / AGAINST / / ABSTAIN / /
3. In their discretion, the proxies are authorized to vote upon any other
matters that may properly come before the meeting or any adjournment
thereof, subject to the limitations set forth in the applicable regulations
under the Securities Exchange Act of 1934.
Dated: , 2001
-------------------------------------------
-------------------------------------------
Signature
-------------------------------------------
Signature if held jointly
NOTE: Please sign exactly as name appears hereon. Joint owner should each sign.
When signing as attorney, executor, administrator, trustee, guardian, officer or
partner, please indicate full title and capacity.
July 9, 2001
Securities and Exchange Commission
450 5th Street, N.W.
Judiciary Plaza
Washington, D.C. 20549
RE: NCH Corporation
Commission File Number 1-5838
Form 10-K for Fiscal Year Ended April 30, 2001
Ladies and Gentlemen:
Pursuant to the requirements of the Securities Exchange Act of 1934, we are
transmitting herewith the attached Form 10-K for filing by electronic
transmission pursuant to the Commission's EDGAR program.
Sincerely,
/S/ Tom Hetzer
Vice President-Finance