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 January 31, 1996 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 March 5, 1996
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Common Stock, $1 par value 7,841,737
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NCH CORPORATION
INDEX
Page No.
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Part I. Financial Information:
Consolidated Balance Sheets --
January 31, 1996 and April 30, 1995 3
Consolidated Statements of Income --
Three Months and Nine Months
Ended January 31, 1996 and 1995 4
Consolidated Statements of Cash Flows --
Nine Months Ended January 31, 1996 and 1995 5
Notes to Consolidated Financial Statements 6
Management's Discussion and Analysis of
Financial Condition and Results of Operations 7 - 10
Part II. Other Information 11
NCH CORPORATION AND SUBSIDIARIES
Consolidated Balance Sheets
(In Thousands Except Share and Per Share Data)
(Unaudited)
January 31, April 30,
1996 1995
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Assets
Current Assets
Cash and cash equivalents $ 34,685 $ 16,264
Marketable securities 81,328 112,074
Accounts receivable, net 147,447 147,333
Inventories 109,772 105,864
Prepaid expenses 9,842 6,669
Deferred income taxes 16,952 15,853
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Total Current Assets 400,026 404,057
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Property, Plant and Equipment 196,845 187,030
Accumulated depreciation 108,993 101,812
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87,852 85,218
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Deferred Income Taxes 25,580 23,940
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Other 15,625 15,922
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Total $529,083 $529,137
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Liabilities and Stockholders' Equity
Current Liabilities
Notes payable to banks $ 7,857 $ 5,405
Current maturities of
long-term debt 3,725 2,203
Accounts payable 57,469 54,330
Accrued expenses 32,507 27,464
Income taxes payable 17,527 24,148
Dividends payable 2,390 2,493
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Total Current Liabilities 121,475 116,043
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Long-term Debt, less
current maturities 97 4,761
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Retirement and Deferred
Compensation Plans 98,135 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 7,971 7,348
Retained earnings 421,701 410,932
Foreign currency translation
adjustment (17,698) (18,412)
Unrealized (losses) gains on
investments 591 (255)
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424,334 411,382
Less treasury stock
(3,801,242 and 3,458,202
shares) 114,958 95,206
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309,376 316,176
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Total $529,083 $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 Nine Months
Ended January 31, Ended January 31,
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1996 1995 1996 1995
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Net Sales $195,679 $186,562 $582,256 $549,931
-------- -------- -------- --------
Operating Expenses
Cost of sales, including
warehousing and
commissions 102,388 98,778 306,790 291,513
Marketing & administrative
expenses 79,808 75,308 230,656 216,096
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182,196 174,086 537,446 507,609
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Operating Income 13,483 12,476 44,810 42,322
Other (Expenses) Income
Loss on revaluation of
foreign currencies (610) (775) (672) (456)
Net interest 63 459 671 2,182
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Income before Income
Taxes 12,936 12,160 44,809 44,048
Provision for Income
Taxes 5,667 5,124 18,749 18,482
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Net Income $ 7,269 $ 7,036 $26,060 $ 25,566
======== ======== ======== ========
Weighted Average Number of
Shares Outstanding 8,032 8,302 8,141 8,294
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Earnings Per Share $ .90 $ .85 $3.20 $3.08
===== ===== ===== =====
Cash Dividend Paid Per
Share $1.30 $1.30 $1.90 $1.80
===== ===== ===== =====
Cash Dividend Declared
Not Paid $ .30 $ .30 $ .30 $ .30
===== ===== ===== =====
The accompanying notes are an integral part of these financial
statements.
NCH CORPORATION AND SUBSIDIARIES
Consolidated Statements of Cash Flows
(In Thousands)
(Unaudited)
Nine Months Ended
January 31,
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1996 1995
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Cash Flows from Operating Activities
Net income $ 26,060 $25,566
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 10,965 10,256
Provision for losses on accounts
receivable 6,142 6,478
Deferred income taxes (3,224) (2,807)
Retirement and deferred
compensation plans 5,880 4,833
Other non-cash items 575 (965)
Change in assets and liabilities,
excluding net assets acquired in the
purchase of businesses:
Accounts receivable (4,192) (4,071)
Inventories (3,417) (16,319)
Prepaid expenses (3,112) (1,863)
Current liabilities, accounts payable,
accrued expenses and income taxes
payable 467 13,592
Other non-current assets (1,012) (850)
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Net cash provided by operating
activities 35,132 33,850
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Cash Flows from Investing Activities
Sales of property, plant and equipment 534 1,755
Purchases of property, plant and equipment (13,365) (9,840)
Redemptions of marketable securities 41,420 43,039
Purchases of marketable securities (9,372) (40,496)
Other (1,012) (1,018)
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Net cash provided (used) in investing
activities 18,205 (6,560)
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Cash Flows from Financing Activities
Proceeds from notes payable 7,855 3,754
Payments of notes payable (5,495) (10,465)
Additional long term debt - 27
Payments of long-term debt (3,245) (1,750)
Borrowing of cash surrender values 1,887 1,708
Payments of dividends (15,394) (14,925)
Purchase of treasury stock (20,395) -
Proceeds from exercise of stock options 1,060 1,609
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Net cash used in financing activities (33,727) (20,042)
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Effect of Exchange Rate Changes on Cash
and Cash Equivalents (1,189) 814
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Net Increase in Cash and Cash Equivalents 18,421 8,062
Cash and Cash Equivalents at Beginning of Year 16,264 18,754
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Cash and Cash Equivalents at End of Period $ 34,685 $ 26,816
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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 January
31, 1996, and April 30, 1995, the results of its operations for
the nine months ended January 31, 1996 and 1995, and cash flows
for the nine 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 nine month period ended January
31, 1996, 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):
January 31, April 30,
1996 1995
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Raw Materials $14,616 $15,551
Finished Goods 92,222 88,089
Sales Supplies 2,934 2,224
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$109,772 $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 nine months ended January 31,
1996 and 1995, were approximately $1,940,000 and $2,771,000,
respectively. Cash payments for income taxes were approximately
$27,781,000 and $19,134,000 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 nine months ended January 31, 1996, working capital
decreased to $278.6 million from $288.0 million at April 30,
1995, and the current ratio decreased to 3.3 to 1 at January 31,
1996 compared to 3.5 to 1 at April 30, 1995. The total of cash,
cash equivalents and marketable securities decreased by $12.3
million in the first nine months to $116.0 million at January 31,
1996. Net cash flow from operations totaled $35.1 million.
Principal uses of cash consisted of treasury stock purchases of
$20.4 million, payment of dividends of $15.4 million and net
capital expenditures of $12.8 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 as a result of the change in the Company's
composite spot rate at November 30, 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 a $17.7 million
reduction of equity at January 31, 1996.
Accounts receivable increased by $.1 million, and
inventories increased by $3.9 million in the nine months ended
January 31, 1996, 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 nine 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 $2.0 million and inventories increasing by $3.4
million during the nine months ended January 31, 1996. The
decrease in accounts receivable was due primarily to decreased
domestic accounts receivable, as a result of lower domestic sales
in the third quarter compared to the fourth quarter of the prior
year. This decrease was partially offset, however, by an
increase in international accounts receivable, as a result of
higher international sales in the third quarter compared to the
fourth quarter of the prior year. Inventory levels increased in
both the domestic and international operations, due to higher
inventory requirements as a result of a trend of increasing sales
and new products within existing product lines in several of the
Company's domestic operations.
Accounts payable, accrued expenses and income taxes payable
were similarly affected by currency translation. These
liabilities increased by $.5 million when measured exclusive of
the effect of exchange rate changes, and increased by $1.6
million as reported on the Consolidated Balance Sheets. The
increase in accounts payable and accrued expenses occurred in
both the domestic and international operations, as a result of
increased inventory purchases and timing of certain payments,
and was partially offset by a decrease in income taxes payable.
The decrease in income taxes payable occurred in both the
domestic and international operations, due to 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 $12.8 million for the nine months ended January 31, 1996, 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 $.9 million
during the nine months ended January 31, 1996. The decrease was
due primarily to the final payment on a French Franc denominated
loan made in the U.S., and a payment on the industrial revenue
bond, offset somewhat by borrowings in several of the European
operations. The bank indebtedness presented in the Consolidated
Balance Sheets was also affected by currency translation, showing
a decrease of $.7 million.
On January 23, 1996, the directors of the Company declared a
regular quarterly dividend of $.30 per share of common stock
payable March 15, 1996, to shareholders of record March 1, 1996.
Cash dividends paid during the first nine months of the fiscal
year amounted to $15.4 million.
Operating Results
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Third Quarter Comparison - Prior Year
Net sales for the third quarter increased 5% to $195.7
million in the current year as compared with $186.6 million
reported in the same quarter of the last fiscal year.
Domestically, net sales were even with the prior year.
International net sales increased 10% as reported in U.S. dollars
and were positively affected by changes in currency translation
rates. International net sales, when measured on a local
currency basis, increased approximately 5%.
Operating expenses, as a percent of net sales, decreased
slightly in the current quarter to 93.1% compared to 93.3% in the
third quarter last year. Operating expenses decreased as a
percent of net sales primarily due to improved operating ratios
in the Company's international operations. As a result,
operating income before other expenses and income taxes for the
quarter ended January 31, 1996, was 6.9% of net sales compared to
6.7% of net sales for the quarter ended January 31, 1995.
In the quarter ended January 31, 1996, net interest income
was $.1 million compared to $.5 million in the same quarter of
the prior year. Loss on revaluation of foreign currencies
amounted to $.6 million in the third quarter of the current year
compared to of $.8 million in the same period of the prior year.
Provision for income taxes was 43.8% of pre-tax income in
the third quarter of the current year compared to 42.1% of pre-
tax income in the prior year. The increase in the overall tax
rate was due to the impact of variations in individual country
income levels and tax rates on combined international results.
Net income for the quarter ended January 31, 1996, was 3.7% of
net sales compared to 3.8% of net sales in the quarter ended
January 31, 1995.
Third Quarter Comparison - Preceding Quarter
Net sales of $195.7 million for the third quarter of fiscal
1996 were 1% higher than the $194.4 million reported in the
second quarter. Domestic net sales were 13% lower in the third
quarter compared to the second quarter as a result of normal
quarter-to-quarter sales fluctuations. International net sales
in the third quarter were 19% higher compared to the second
quarter as a result of normal quarter-to-quarter sales
fluctuations. Operating expenses were 93.1% of net sales in the
current quarter compared to 90.9% of net sales in the second
quarter, primarily as a result of normal quarter-to-quarter
operating ratio fluctuations in the Company's domestic
operations. As a result, operating income before other expenses
and income taxes for the quarter ended January 31, 1996, was 6.9%
of net sales compared to 9.1% of net sales for the quarter ended
October 31, 1995.
Net interest income for the three months ended January 31,
1996, amounted to $.1 million compared to $.4 million for the
three months ended October 31, 1995. Loss on revaluation of
foreign currencies amounted to $.6 million in the third quarter
compared to $.2 million reported in the second quarter, due
primarily to a loss on translation in some of the hyper-
inflationary countries as a result of changes in their net
financial positions.
Provision for income taxes in the quarter ended January 31,
1996, amounted to 43.8% of pre-tax income compared to 41.1% of
pre-tax income in the quarter ended October 31, 1995. Net income
for the quarter ended January 31, 1996, was 3.7% of net sales
compared to 5.4% of net sales in the quarter ended October 31,
1995.
Nine Months Comparison - Prior Year
Net sales for the nine months ended January 31, 1996,
increased 6% to $582.3 million as compared with $549.9 million
reported in the first nine months of the last fiscal year.
Domestically, net sales increased 1% in the nine months compared
to a year ago. International net sales increased 12% as reported
in U.S. dollars and were positively affected by changes in
currency translation rates. International net sales, when
measured on a local currency basis, increased approximately 7%.
Operating expenses, as a percent of net sales, remained even
at 92.3% for the nine months of the current year compared to the
same period of the prior year. In the international operations,
operating expenses as a percent of net sales decreased due to
increased sales volume. As a result, operating income before
other expenses and income taxes, was 7.7% of net sales for both
the nine months ended January 31, 1996 and 1995.
In the nine months ended January 31, 1996, net interest
income was $.7 million compared to $2.2 million in the first nine
months of the prior year. Loss on revaluation of foreign
currencies amounted to $.7 million in the first nine months of
the current year compared to $.5 million in the same period of
the prior year.
Provision for income taxes was 41.8% of pre-tax income in
the first nine months of the current year compared to 42.0% of
pre-tax income in the prior year. Net income for the nine months
ended January 31, 1996, was 4.5% of net sales compared to 4.6% of
net sales for the nine months ended January 31, 1995.
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
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(a) Exhibit 27 - Financial Data Schedule
(b) Reports on Form 8-K -- There were no reports on Form 8-K
filed for the nine months ended January 31, 1996.
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 March 11, 1996 /s/ Tom Hetzer
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Tom Hetzer
Vice President - Finance
(Principal Accounting Officer)