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 July 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 September 4,1996
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Common Stock, $1 par value 7,350,276
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NCH CORPORATION
INDEX
Page No.
Part I. Financial Information:
Consolidated Balance Sheets --
July 31, 1996 and April 30, 1996 3
Consolidated Statements of Income --
Three Months Ended July 31, 1996 and 1995 4
Consolidated Statements of Cash Flows --
Three Months Ended July 31, 1996 and 1995 5
Notes to Consolidated Financial Statements 6 - 7
Management's Discussion and Analysis of
Financial Condition and Results of Operations 8 - 13
Part II. Other Information 14
NCH CORPORATION AND SUBSIDIARIES
Consolidated Balance Sheets
(In Thousands Except Share and Per Share Data)
(Unaudited)
July 31, April 30,
1996 1996
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Assets
Current Assets
Cash and cash equivalents $ 24,056 $ 21,806
Marketable securities 74,369 82,077
Accounts receivable, net 144,450 146,744
Inventories 107,637 106,907
Prepaid expenses 9,705 6,862
Deferred income taxes 19,365 18,471
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Total Current Assets 379,582 382,867
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Property, Plant and Equipment 203,002 199,700
Accumulated depreciation 112,755 110,983
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90,247 88,717
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Deferred Income Taxes 26,829 26,105
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Other 15,886 16,715
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Total $512,544 $514,404
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Liabilities and Stockholders' Equity
Current Liabilities
Notes payable to banks $ 4,708 $ 7,448
Current maturities of long-term debt 3,747 3,743
Accounts payable 54,530 54,194
Accrued expenses 30,435 29,824
Income taxes payable 21,231 17,997
Dividends payable 2,259 2,299
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Total Current Liabilities 116,910 115,505
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Long-Term Debt, less current maturities 121 49
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Retirement and Deferred Compensation Plans 101,415 99,915
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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 8,342 7,912
Retained earnings 434,113 429,687
Foreign currency translation adjustment (20,263) (18,720)
Unrealized (losses) gains on investments 127 110
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434,088 430,758
Less treasury stock
(4,237,698 and 4,105,057 shares) 139,990 131,823
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294,098 298,935
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Total $512,544 $514,404
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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 Ended July 31,
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1996 1995
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Net Sales $192,536 $192,153
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Operating Expenses
Cost of sales, including
warehousing & commissions 101,694 101,743
Marketing & administrative expenses 79,188 76,860
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180,882 178,603
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Operating Income 11,654 13,550
Other (Expenses) Income
Revaluation of foreign currencies (277) 116
Net interest 130 240
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Income before Income Taxes 11,507 13,906
Provision for Income Taxes 4,841 5,703
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Net Income $ 6,666 $ 8,203
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Average Number of
Shares Outstanding 7,579 8,239
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Earnings Per Share $ 0.88 $ 1.00
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Cash Dividend Paid Per Share $ 0.30 $ .30
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Cash Dividend Declared Not Paid $ 0.30 $ .30
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The accompanying notes are an integral part of these financial statements.
NCH CORPORATION AND SUBSIDIARIES
Consolidated Statements of Cash Flows
(In Thousands)
(Unaudited)
Three Months Ended
July 31,
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1996 1995
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Cash Flows from Operating Activities
Net Income $ 6,666 $ 8,203
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 3,757 3,417
Provision for losses on accounts receivable 1,858 2,003
Deferred income taxes (1,590) (1,001)
Retirement and deferred compensation plans 1,675 2,027
Other noncash items 72 (112)
Change in assets and liabilities, excluding net
assets acquired in the purchase of businesses:
Accounts receivable (934) (1,630)
Inventories (1,098) (4,527)
Prepaid expenses (2,907) (4,441)
Accounts payable, accrued expenses and
income taxes payable 5,074 2,293
Other noncurrent assets (245) (552)
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Net cash provided by operating activities 12,328 5,680
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Cash Flows from Investing Activities
Sales of property, plant and equipment 232 221
Purchases of property, plant and equipment (5,550) (5,303)
Redemptions of marketable securities 13,315 17,468
Purchases of marketable securities (5,581) (2,132)
Other (1,012) (1,012)
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Net cash provided in investing activities 1,404 9,242
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Cash Flows from Financing Activities
Proceeds from notes payable 928 2,442
Payments of notes payable (3,509) (3,443)
Payments of long-term debt 76 -
Borrowing of cash surrender values 1,914 1,887
Payments of dividends (2,280) (2,493)
Purchases of treasury stock (7,897) (8,881)
Proceeds from exercise of stock options 46 37
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Net cash used in financing activities (10,722) (10,451)
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Effect of Exchange Rate Changes on Cash
and Cash Equivalents (760) 1,018
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Net Increase in Cash and Cash Equivalents 2,250 5,489
Cash and Cash Equivalents at Beginning of Year 21,806 16,264
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Cash and Cash Equivalents at End of Period $24,056 $21,753
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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
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 July 31, 1996, and April 30, 1996, the results of its
operations for the three months ended July 31, 1996 and 1995, and cash
flows for the three months then ended.
The accounting policies followed by the Company are set forth in Note 1 to
the Company's financial statements in the 1996 NCH Corporation Report to
the Shareholders, which is included in Part II of Form 10-K.
The results of operations for the three month period ended July 31, 1996,
are not necessarily indicative of the results to be expected for the full
year.
2. Inventories
Inventories consisted of the following (in thousands of dollars):
July 31, April 30,
1996 1996
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Raw Materials $ 15,406 $ 15,387
Finished Goods 90,144 89,381
Sales Supplies 2,087 2,139
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$107,637 $106,907
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3. Earnings Per Common Share
Earnings per common share are based upon the weighted average number of
common shares outstanding during the period.
4. Supplemental Cash Flow Information
Cash payments for interest for the three months ended July 31, 1996 and
1995, were approximately $564,000 and $607,000, respectively. Cash
payments for income taxes were approximately $3,062,000 and $8,771,000 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
In the fiscal quarter ended July 31, 1996, working capital decreased to
$262.7 million from $267.4 million at April 30, 1996, and the current ratio
was 3.2 to 1 at July 31, 1996, compared to 3.3 to 1 at April 30, 1996. The
total of cash, cash equivalents and marketable securities decreased by $5.5
million in the fiscal quarter to $98.4 million at July 31, 1996, as shown
on the Consolidated Balance Sheets. Net cash flows from operations totaled
$12.3 million and additional cash was provided by net redemptions of
marketable securities of $7.7 million. Principal uses of cash consisted of
treasury stock purchases of $7.9 million, net capital expenditures of $5.3
million, net payments of notes payable and long term debt of $2.5 million,
and payment of dividends of $2.3 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 May 31, 1996,
compared to February 28, 1996. This is reflected by the foreign currency
translation component of stockholders' equity, which changed from an $18.7
million reduction of equity at April 30, 1996, to a $20.3 million reduction
of equity at July 31, 1996.
Accounts receivable decreased by $2.3 million and inventories increased
by $.7 million in the quarter ended July 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 fiscal quarter was to decrease 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 $.9 million and
inventories increasing by $1.1 million during the quarter. Inventory levels
increased in the Company's domestic 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 increased by
$5.1 million when measured exclusive of the effect of exchange rate
changes, but increased by $4.2 million as reported on the Consolidated
Balance Sheets. This increase was primarily due to an increase in income
taxes payable in the Company's domestic and European operations, due to
normal timing differences in the amounts of tax payments in the current
quarter compared to the preceding quarter.
Net expenditures for property, plant and equipment amounted to $5.3
million for the quarter ended July 31, 1996, and consisted of the
installation and update of worldwide computer systems, other normal
additions of data processing and operating equipment and continuing
construction of a warehouse/office facility for a domestic subsidiary. 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
decrease 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 $2.5 million during the three months
ended July 31, 1996. The decrease was due primarily to the maturation and
repayment of a short-term loan in one of the Company's European
subsidiaries. The bank indebtedness shown on the Consolidated Balance
Sheets was also affected by currency translation, showing a larger decrease
of $2.7 million.
A regular quarterly dividend of $.30 per share, declared by the
directors of the Company on April 10, 1996, was paid on June 17, 1995,
amounting to $2.3 million. On July 25, 1996, the directors of the Company
declared a regular quarterly dividend of $.30 per share, payable September
16, 1996, to shareholders of record September 3, 1996.
Operating Results
First Quarter Comparison - Prior Year
Net sales for the first quarter of fiscal 1996 increased marginally to
$192.5 million in the current year as compared with $192.2 million reported
in the same quarter of the last fiscal year. Domestically, net sales in
the first quarter of the current year increased 2% over the first quarter
of the prior year. International net sales, when measured on a local
country currency basis, increased approximately 2%. When reported n U.S.
dollars, international net sales in the first quarter of the current year
decreased 2% as compared to the first quarter of the prior year.
Operating expenses as a percent of net sales increased 1% in the
current quarter to 93.9% of net sales compared to 92.9% in the first
quarter last year. As a result, operating income before other expenses and
income taxes for the quarter ended July 31, 1996, was 6.1% of net sales
compared to 7.1% of net sales for the quarter ended July 31, 1995.
In the three months ended July 31, 1996, net interest income was $.1
million compared to $.2 million in the same quarter of the prior year.
Revaluation of foreign currencies was a loss of $.3 million in the first
quarter of the current year compared to a gain of $.1 million in the same
period of the prior year.
Provision for income taxes was 42.1% of pre-tax income in the first
quarter of the current year compared to 41.0% of pre-tax income in the
prior year. Net income for the quarter ended July 31, 1996, was 3.5% of net
sales compared to 4.3% of net sales in the quarter ended July 31, 1995.
First Quarter Comparison - Preceding Quarter
Net sales of $192.5 million for the first quarter of fiscal 1997 were
slightly higher than the $190.6 million net sales reported in the fourth
quarter of fiscal 1996. International net sales were 3% higher when
measured in U.S. dollars, as a result of normal quarter-to-quarter sales
fluctuations and the effect of exchange rate changes, while domestic net
sales were marginally lower than the fourth quarter of the prior year.
Operating expenses as a percent of net sales were 93.9% in the current
quarter compared to 91.5% in the fourth quarter of the last fiscal year.
Operating expenses in the domestic operations were higher as a percent of
net sales due to normal quarter-to-quarter sales and expense fluctuations.
As a result, operating income before other expenses and income taxes for
the quarter ended July 31, 1996, was 6.1% of net sales compared to 8.5% of
net sales for the quarter ended April 30, 1996.
Net interest income in the three months ended July 31, 1996, amounted
to $.1 million compared to $.5 million in the three months ended April 30,
1996. The revaluation of foreign currencies resulted in a loss of $.3
million in the first quarter of the current year compared to a loss of $.1
million in the fourth quarter of the prior year.
Provision for income taxes in the quarter ended July 31, 1996, amounted
to 42.1% of pre-tax income compared to 38.2% of pre-tax income in the
quarter ended April 30, 1996. The lower overall tax rate in the fourth
quarter of the prior year 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 July 31, 1996, was 3.5% of net sales compared
to 5.4% of net sales in the quarter ended April 30, 1996.
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(b) Reports on Form 8-K -- There were no reports on Form 8-K filed for
the three months ended July 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 September 10, 1996 /s/ Tom Hetzer
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Tom Hetzer
Vice President - Finance
(Principal Accounting Officer)