FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
QUARTERLY REPORT UNDER SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For quarter ended October 31, 1995 Commission file number 1-5838
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NCH CORPORATION
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(Exact name of registrant as specified in its charter)
DELAWARE 75-0457200
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
P.O. Box 152170
2727 Chemsearch Blvd.
Irving, TX 75015-2170
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(Address of principal (Zip Code)
executive offices)
Registrant's telephone number, include area code (214) 438-0211
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Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months
(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
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Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practicable date.
Class Outstanding at December 1, 1995
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Common Stock, $1 par value 8,039,514
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NCH CORPORATION
INDEX
Page No.
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Part I. Financial Information:
Consolidated Balance Sheets --
October 31, 1995 and April 30, 1995 3
Consolidated Statements of Income --
Three Months and Six Months
Ended October 31, 1995 and 1994 4
Consolidated Statements of Cash Flows --
Six Months Ended October 31, 1995 and 1994 5
Notes to Consolidated Financial Statements 6 - 7
Management's Discussion and Analysis of
Financial Condition and Results of Operations 8 - 12
Part II. Other Information 13
NCH CORPORATION AND SUBSIDIARIES
Consolidated Balance Sheets
(In Thousands Except Share and Per Share Data)
(Unaudited)
October 31, April 30,
1995 1995
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Assets
Current Assets
Cash and cash equivalents $ 23,763 $ 16,264
Marketable securities 93,727 112,074
Accounts receivable, net 145,646 147,333
Inventories 113,343 105,864
Prepaid expenses 9,438 6,669
Deferred income taxes 16,673 15,853
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Total Current Assets 402,590 404,057
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Property, Plant and Equipment 194,603 187,030
Accumulated depreciation 106,697 101,812
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87,906 85,218
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Deferred Income Taxes 24,489 23,940
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Other 16,005 15,922
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Total $530,990 $529,137
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Liabilities and Stockholders' Equity
Current Liabilities
Notes payable to banks $ 5,117 $ 5,405
Current maturities of
long-term debt 3,183 2,203
Accounts payable 51,980 54,330
Accrued expenses 29,963 27,464
Income taxes payable 20,535 24,148
Dividends payable 10,503 2,493
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Total Current Liabilities 121,281 116,043
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Long-term Debt, less
current maturities 3,797 4,761
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Retirement and Deferred
Compensation Plans 96,139 92,157
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Stockholders' Equity
Common stock, par value
$1 per share, authorized
20,000,000 shares. Issued
11,769,304 shares 11,769 11,769
Additional paid-in capital 7,522 7,348
Retained earnings 416,771 410,932
Foreign currency translation
adjustment (18,217) (18,412)
Unrealized (losses) gains on
investments 374 (255)
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418,219 411,382
Less treasury stock
(3,689,891 and 3,458,202
shares) 108,446 95,206
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309,773 316,176
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Total $530,990 $529,137
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The accompanying notes are an integral part of these financial
statements.
NCH CORPORATION AND SUBSIDIARIES
Consolidated Statements of Income
(In Thousands Except Per Share Amounts)
(Unaudited)
Three Months Six Months
Ended October 31, Ended October 31,
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1995 1994 1995 1994
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Net Sales $194,424 $184,641 $386,577 $363,369
-------- -------- -------- --------
Operating Expenses
Cost of sales, including
warehousing and
commissions 102,659 98,223 204,402 192,735
Marketing & administrative
expenses 73,988 69,632 150,848 140,788
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176,647 167,855 355,250 333,523
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Operating Income 17,777 16,786 31,327 29,846
Other (Expenses) Income
Revaluation of
foreign currencies (178) 738 (62) 319
Net interest 368 1,083 608 1,723
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Income before Income
Taxes 17,967 18,607 31,873 31,888
Provision for Income
Taxes 7,379 7,903 13,082 13,358
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Net Income $ 10,588 $ 10,704 $18,791 $ 18,530
======== ======== ======== ========
Weighted Average Number of
Shares Outstanding 8,140 8,286 8,194 8,283
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Earnings Per Share $1.30 $1.29 $2.29 $2.24
===== ===== ===== =====
Cash Dividend Paid Per
Share $ .30 $ .25 $ .60 $ .50
===== ===== ===== =====
Cash Dividend Declared
Not Paid $1.30 $1.30 $1.30 $1.30
===== ===== ===== =====
The accompanying notes are an integral part of these financial
statements.
NCH CORPORATION AND SUBSIDIARIES
Consolidated Statements of Cash Flows
(In Thousands)
(Unaudited)
Six Months Ended
October 31,
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1995 1994
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Cash Flows from Operating Activities
Net income $ 18,791 $18,530
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 7,048 6,761
Provision for losses on accounts
receivable 4,102 3,736
Deferred income taxes 1,358 (2,396)
Retirement and deferred compensation plans 777 2,715
Other non-cash items (307) (1,100)
Change in assets and liabilities,
excluding net assets acquired in the
purchase of businesses:
Accounts receivable (1,600) 288
Inventories (7,342) (12,357)
Prepaid expenses (2,744) (2,808)
Current liabilities, accounts payable,
accrued expenses and income taxes
payable (3,805) 6,891
Other non-current assets (1,160) (754)
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Net cash provided by operating
activities 15,118 19,506
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Cash Flows from Investing Activities
Sales of property, plant and equipment 350 1,320
Purchases of property, plant and equipment (9,397) (6,562)
Redemptions of marketable securities 24,390 20,733
Purchases of marketable securities (5,074) (28,477)
Other (1,012) (1,018)
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Net cash provided (used) in investing
activities 9,257 (14,004)
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Cash Flows from Financing Activities
Proceeds from notes payable 2,834 1,927
Payments of notes payable (3,202) (6,531)
Additional long term debt - 296
Payments of long-term debt (39) -
Borrowing of cash surrender values 1,887 1,708
Payments of dividends (4,942) (4,133)
Purchase of treasury stock (13,372) -
Proceeds from exercise of stock options 130 669
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Net cash used in financing activities (16,704) (6,064)
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Effect of Exchange Rate Changes on Cash
and Cash Equivalents (172) 1,113
Net Increase in Cash and Cash Equivalents 7,499 551
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Cash and Cash Equivalents at Beginning of Year 16,264 18,754
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Cash and Cash Equivalents at End of Period $ 23,763 $ 19,305
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The accompanying notes are an integral part of these financial
statements.
NCH CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
1. Basis of Presentation
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In the opinion of management, the accompanying unaudited
consolidated financial statements contain all adjustments
necessary (consisting of only normal re-occurring accruals) to
present fairly NCH Corporation's financial position as of October
31, 1995, and April 30, 1995, the results of its operations for
the six months ended October 31, 1995 and 1994, and cash flows
for the six months then ended.
The accounting policies followed by the Company are set forth in
Note 1 to the Company's financial statements in the 1995 NCH
Corporation Report to the Shareholders, which is included in
Part II of Form 10-K.
The results of operations for the six month period ended October
31, 1995, are not necessarily indicative of the results to be
expected for the full year.
2. Inventories
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Inventories consisted of the following (in thousands of dollars):
October 31, April 30,
1995 1995
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Raw Materials $14,562 $15,551
Finished Goods 96,488 88,089
Sales Supplies 2,293 2,224
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$113,343 $105,864
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3. Earnings Per Common Share
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Earnings per common share are based upon the weighted average
number of common shares outstanding during the period.
4. Supplemental Cash Flow Information
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Cash payments for interest for the six months ended October 31,
1995 and 1994, were approximately $1,340,000 and $2,168,000,
respectively. Cash payments for income taxes were approximately
$17,155,000 and $12,251,000 for the same periods,
respectively.
NCH CORPORATION AND SUBSIDIARIES
Management's Discussion and Analysis of
Financial Condition and Results of Operations
Liquidity and Capital Resources
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In the six months ended October 31, 1995, working capital
decreased to $281.3 million from $288.0 million at April 30,
1995, and the current ratio decreased to 3.3 to 1 at October 31,
1995, compared to 3.5 to 1 at April 30, 1995. The total of
cash, cash equivalents and marketable securities decreased by
$10.8 million in the first six months to $117.5 million at
October 31, 1995. Net cash flow from operations totaled $15.1
million. Principal uses of cash consisted of treasury stock
purchases of $13.4 million, net capital expenditures of $9.0
million and payment of dividends of $4.9 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 increased slightly as a result of the change in the
Company's composite spot rate at August 31, 1995, compared to
February 28, 1995. This is reflected by the foreign currency
translation component of stockholders' equity, which changed from
a $18.4 million reduction of equity at April 30, 1995, to an
$18.2 million reduction of equity at October 31, 1995.
Accounts receivable decreased by $1.7 million, and inventories
increased by $7.5 million in the six months ended October 31,
1995, as measured in U.S. dollars and reported on the
Consolidated Balance Sheets. As stated above, the result of
exchange rate deviations from the end of the previous year to the
end of the first six months was to increase the reported U.S.
dollar values of both assets and liabilities. The change in
accounts receivable and inventories shown in the Consolidated
Statements of Cash Flows is exclusive of the effect of exchange
rates on the reported asset values, and shows accounts
receivable decreasing by $2.5 million and inventories increasing
by $7.3 million during the six months. The decrease in accounts
receivable was primarily the result of routine seasonal
fluctuations in the Company's European operations. Inventory
levels increased in both the domestic and international
operations, due to higher inventory requirements as a result of a
long-term trend of increasing sales and expansion of the domestic
product line.
Accounts payable, accrued expenses and income taxes payable
were similarly affected by currency translation. These
liabilities decreased by $3.8 million when measured exclusive of
the effect of exchange rate changes, and decreased by $3.5
million as reported on the Consolidated Balance Sheets. This
decrease is primarily attributable to the decrease in domestic
income taxes payable, due to normal timing differences in the
amounts of tax payments in the current quarter compared to the
fourth quarter of the prior year.
Net expenditures for property, plant and equipment amounted to
$9.0 million for the six months ended October 31, 1995, and
consisted of the installation and update of worldwide computer
systems and other normal additions of data processing and
operating equipment. As with the other assets and liabilities,
the effect of currency translation on the reported U.S. dollar
values of property, plant and equipment was to increase those
reported values.
Total bank indebtedness, comprised of long-term debt, current
maturities of long-term debt and notes payable, decreased
exclusive of the effect of exchange rate changes by $.4 million
during the six months ended October 31, 1995. The decrease was
due primarily to the maturation and net repayment of short term
loans in the Company's European subsidiaries. The bank
indebtedness shown on the Consolidated Balance Sheets was also
affected by currency translation, showing a smaller decrease of
$.3 million.
The directors of the Company declared a regular quarterly
dividend of $.30 per share on September 13, 1995, payable
December 15, 1995, to shareholders of record December 1, 1995.
On September 13, 1995, the directors of the Company also declared
a special dividend of $1.00 per share of common stock payable
December 15, 1995, to shareholders of record December 1, 1995.
Cash dividends paid during the first six months of the fiscal
year amounted to $4.9 million.
Operating Results
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Second Quarter Comparison - Prior Year
Net sales for the second quarter increased 5% to $194.4 million
in the current year as compared with $184.6 million reported in
the same quarter of the last fiscal year. Domestically, net
sales increased 3% from the prior year. International net sales
increased 9% as reported in U.S. dollars, and when measured on a
local country currency basis.
Operating expenses, as a percent of net sales, remained the
same at 90.9% in the current quarter compared to the second
quarter of the prior year. Increases to cost of sales, as a
percent of sales, due primarily to increased sales of products
with lower profit margins in the international operations, were
offset by decreases to marketing and administrative expenses, as
a percent of sales, due primarily to increased sales volume. As a
result, operating income before other expenses and income taxes
was 9.1% of net sales for the quarters ended October 31, 1995
and 1994.
In the quarter ended October 31, 1995, net interest income was
$.4 million compared to $1.1 million in the same quarter of the
prior year. Revaluation of foreign currencies amounted to a loss
of $.2 million in the second quarter of the current year compared
to a gain of $.7 million in the same period of the prior year,
primarily due to changes in the net financial position of the
Company's Brazilian subsidiaries.
Provision for income taxes was 41.1% of pre-tax income in the
second quarter of the current year compared to 42.5% of pre-tax
income in the prior year. Net income for the quarter ended
October 31, 1995, was 5.4% of net sales compared to 5.8% of net
sales in the quarter ended October 31, 1994.
Second Quarter Comparison - Preceding Quarter
Net sales of $194.4 million for the second quarter of fiscal
1995 were 1% higher than the $192.2 million reported in the first
quarter. Domestic net sales were 12% higher in the second
quarter than in the first quarter as a result of normal
quarter-to-quarter sales fluctuations and strong sales activity
in some of the Company's domestic operations. International net
sales were 11% lower when measured in U.S. dollars, as a result
of normal quarter-to-quarter sales fluctuations. Operating
expenses, as a percent of net sales, were 90.9% in the current
quarter compared to 92.9% in the first quarter. Domestic
operating expenses decreased as a percent of net sales primarily
due to a seasonal reduction in marketing expenses in the current
quarter as compared to the first quarter. As a result, operating
income before other expenses and income taxes for the quarter
ended October 31, 1995, was 9.1% of net sales compared to 7.1% of
net sales for the quarter ended July 31, 1995.
Net interest income in the three months ended October 31, 1995,
amounted to $.4 million compared to $.2 million in the three
months ended July 31, 1995. Revaluation of foreign currency
amounted to a loss of $.2 million in the second quarter compared
to a gain of $.1 million reported in the first quarter.
Provision for income taxes in the quarter ended October 31,
1995, amounted to 41.1% of pre-tax income compared to 41.0% of
pre-tax income in the quarter ended July 31, 1995. Net income
for the quarter ended October 31, 1995, was 5.4% of net sales
compared to 4.3% of net sales for the quarter ended July 31,
1995.
Six Months Comparison - Prior Year
Net sales for the six months ended October 31, 1995, increased
6% to $386.6 million as compared with $363.4 million reported in
the first six months of the last fiscal year. Domestically, net
sales increased 1% in the six months compared to a year ago.
International net sales increased 13% as reported in U.S. dollars
and were positively affected by changes in currency translation
rates. International net sales, when measured on a local
country currency basis, increased approximately 9%.
Operating expenses, as a percent of net sales, increased
slightly to 91.9% for the six months of the current year compared
to 91.8% for the six months of the prior year. As a result,
operating income before other expenses and income taxes for the
six months ended October 31, 1995, was 8.1% of net sales
compared to 8.2% of net sales for the six months ended October
31, 1994.
In the six months ended October 31, 1995, net interest income
was $.6 million compared to $1.7 million in the first six months
of the prior year. Revaluation of foreign currencies amounted to
a loss of $.1 million in the first six months of the current year
compared to a gain of $.3 million in the same period of the prior
year.
Provision for income taxes was 41.0% of pre-tax income in the
first six months of the current year compared to 41.9% of pre-tax
income in the prior year. Net income for the six months ended
October 31, 1995 was 4.9% of net sales compared to 5.1% of net
sales for the six months ended October 31, 1994.
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
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(b) Reports on Form 8-K -- There were no reports on Form 8-K
filed for the six months ended October 31, 1995.
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned thereunto duly authorized.
NCH Corporation
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(Registrant)
Date December 8, 1995 /s/ Tom Hetzer
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Tom Hetzer
Vice President - Finance
(Principal Accounting Officer)