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, 1997 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 February 28, 1997
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Common Stock, $1 par value 7,178,954
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NCH CORPORATION
INDEX
Page No.
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Part I. Financial Information:
Consolidated Balance Sheets --
January 31, 1997 and April 30, 1996 3
Consolidated Statements of Income --
Three Months and Nine Months Ended
January 31, 1997 and 1996 4
Consolidated Statements of Cash Flows --
Nine Months Ended January 31, 1997 and 1996 5
Notes to Consolidated Financial Statements 6 - 7
Management's Discussion and Analysis of
Financial Condition and Results of Operations 8 - 15
Part II. Other Information 16
NCH CORPORATION AND SUBSIDIARIES
Consolidated Balance Sheets
(In Thousands Except Share and Per Share Data)
(Unaudited)
January 31, April 30,
1997 1996
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Assets
Current Assets
Cash and cash equivalents $ 28,225 $ 21,806
Marketable securities 64,456 82,077
Accounts receivable, net 144,650 146,744
Inventories 105,606 106,907
Prepaid expenses 8,081 6,862
Deferred income taxes 18,910 18,471
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Total Current Assets 369,928 382,867
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Property, Plant and Equipment 204,997 199,700
Accumulated depreciation 114,585 110,983
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90,412 88,717
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Deferred Income Taxes 28,178 26,105
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Other 15,099 16,715
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Total $503,617 $514,404
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Liabilities and Stockholders' Equity
Current Liabilities
Notes payable to banks 1,692 7,448
Current maturities of
long-term debt 3,732 3,743
Accounts payable 51,646 54,194
Accrued expenses 32,944 29,824
Income taxes payable 20,448 17,997
Dividends payable 2,156 2,299
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Total Current Liabilities 112,618 115,505
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Long-Term Debt, less
current maturities 159 49
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Retirement and Deferred
Compensation Plans 106,247 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 8,466 7,912
Retained Earnings 442,432 429,687
Foreign currency translation
adjustment (19,251) (18,720)
Unrealized (losses) gains on
investments 239 110
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443,655 430,758
Less treasury stock
(4,583,750 and 4,105,057 shares) 159,062 131,823
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284,593 298,935
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Total $503,617 $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 Nine Months
Ended January 31, Ended January 31,
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1997 1996 1997 1996
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Net Sales $193,291 $195,679 $578,412 $582,256
-------- -------- -------- --------
Operating Expenses
Cost of sales, including
warehousing and
commissions 100,798 102,388 303,422 306,790
Marketing and
administrative
expenses 79,171 79,808 232,780 230,656
-------- -------- -------- --------
179,969 182,196 536,202 537,446
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Operating Income 13,322 13,483 42,210 44,810
Other (Expenses) Income
Revaluation of
foreign currencies (271) (610) (834) (672)
Net interest 252 63 544 671
Gain on sale of
subsidiary 0 0 3,536 0
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Income before Income
Taxes 13,303 12,936 45,456 44,809
Provision for Income
Taxes 5,565 5,667 19,010 18,749
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Net Income $ 7,738 $ 7,269 $ 26,446 $ 26,060
======== ======== ======== ========
Weighted Average Number
of Shares Outstanding 7,202 8,032 7,374 8,141
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Earnings Per Share $1.07 $0.90 $3.59 $3.20
===== ===== ===== =====
Cash Dividend Paid Per
Share $1.30 $1.30 $1.90 $1.90
===== ===== ===== =====
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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1997 1996
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Cash Flows from Operating Activities
Net Income $ 26,446 $ 26,060
Adjustments to reconcile net income to
net cash provided by operating
activities:
Depreciation and amortization 11,508 10,965
Gain on sale of subsidiary (3,536) 0
Provision for losses on accounts
receivable 5,750 6,142
Deferred income taxes (2,631) (3,224)
Retirement and deferred compensation
plans 6,588 5,880
Other noncash items (660) 575
Changes in assets and liabilities,
excluding net assets acquired in the
purchase of businesses:
Accounts Receivable (6,840) (4,192)
Inventories 1,038 (3,417)
Prepaid Expenses (1,705) (3,112)
Accounts payable, accrued expenses
and income taxes payable 2,666 467
Other noncurrent assets 1,142 (1,012)
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Net cash provided by operating
activities 39,766 35,132
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Cash Flows from Investing Activities
Sales of property, plant and equipment 726 534
Purchases of property, plant and
equipment (14,268) (13,365)
Redemptions of marketable securities 38,794 41,420
Purchases of marketable securities (20,974) (9,372)
Acquisitions of businesses (246) 0
Sale of subsidiary 7,932 0
Other (1,012) (1,012)
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Net cash provided by investing
activities 10,952 18,205
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Cash Flows from Financing Activities
Proceeds from notes payable 2,679 7,855
Payments of notes payable (8,287) (5,495)
Additional long-term debt 124 0
Payments of long-term debt (23) (3,245)
Borrowing of cash surrender values 1,914 1,887
Payments of dividends (13,844) (15,394)
Purchases of treasury stock (27,173) (20,395)
Proceeds from exercise of stock options 359 1,060
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Net cash used in financing activities (44,251) (33,727)
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Effect of Exchange Rate Changes on Cash
and Cash Equivalents (48) (1,189)
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Net Increase in Cash and Cash Equivalents 6,419 18,421
Cash and Cash Equivalents at Beginning of
Year 21,806 16,264
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Cash and Cash Equivalents at End of Period $ 28,225 $ 34,685
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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, 1997, and April 30, 1996, the results of its operations for
the nine months ended January 31, 1997 and 1996, 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 1996 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, 1997, 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,
1997 1996
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Raw Materials $ 15,001 $ 15,387
Finished Goods 88,289 89,381
Sales Supplies 2,316 2,139
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$105,606 $106,907
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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,
1997 and 1996, were approximately $1,112,000 and $1,940,000,
respectively. Cash payments for income taxes were approximately
$18,861,000 and $27,781,000 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, 1997, working capital
decreased to $257.3 million from $267.4 million at April 30,
1996, and the current ratio was 3.3 to 1 at January 31, 1997
and at April 30, 1996. The total of cash, cash equivalents
and marketable securities decreased by $11.2 million in the
first nine months to $92.7 million at January 31, 1997, as
shown on the Consolidated Balance Sheets. Net cash flows from
operations totaled $39.8 million. Additional cash was
provided by net redemptions of marketable securities of $17.8
million and the sale of subsidiary assets of $7.9 million.
Principal uses of cash consisted of treasury stock purchases
of $27.2 million, payment of dividends of $13.8 million, net
capital expenditures of $13.5 million, and net payments of notes
payable and long term debt of $5.5 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 slightly as a result of the change in the
Company's composite spot rate at November 30, 1996, compared to
February 29, 1996. This is reflected by the foreign currency
translation component of stockholders' equity, which changed from
a $18.7 million reduction of equity at April 30, 1996, to a $19.3
million reduction of equity at January 31, 1997.
Accounts receivable decreased by $2.1 million and inventories
decreased by $1.3 million in the nine months ended January 31,
1997, 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 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 $1.1 million and inventories increasing
by $1.0 million during the quarter.
Accounts payable, accrued expenses and income taxes payable
were similarly affected by currency translation. These
liabilities increased by $2.7 million when measured exclusive
of the effect of exchange rate changes, but increased by $3.0
million as reported on the Consolidated Balance Sheets. This
increase was primarily 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
$13.5 million for the nine months ended January 31, 1997, and
consisted of the installation and update of worldwide computer
systems, normal additions of 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 $5.5 million
during the nine months ended January 31, 1997. 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
$5.7 million.
The directors of the Company declared a regular quarterly
dividend of $.30 per share on January 22, 1997, payable March
17, 1997, to shareholders of record March 3, 1997. Cash dividends
paid during the first nine months of the fiscal year amounted to
$13.8 million.
Operating Results
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Third Quarter Comparison - Prior Year
Net sales for the third quarter decreased 1% to $193.3 million
in the current year as compared with $195.7 million reported in
the same quarter of the last fiscal year. Domestically, net sales
in the third quarter of the current year increased 1% over the
third quarter of the prior year. International net sales
decreased 4% as reported in U.S. dollars and were negatively
affected by changes in currency translation rates. International
net sales, when measured on a local currency basis, increased
approximately 2% as compared to the third quarter of the prior
year.
In the current quarter, operating expenses as a percent of net
sales, as compared to the third quarter last year, remained
constant at 93.1% of net sales. As a result, operating income
before other expenses and income taxes was 6.9% of net sales for
the quarter ended January 31, 1997, and also for the quarter ended
January 31, 1996.
In the quarter ended January 31, 1997, net interest income was
$.3 million compared to $.1 million in the same quarter of the
prior year. Revaluation of foreign currencies was a loss of $.3
million in the third quarter of the current year compared to a
loss of $.6 million in the same period of the prior year.
Provision for income taxes was 41.8% of pre-tax income in the
third quarter of the current year compared to 43.8% of pre-tax
income in the prior year. Net income for the quarter ended
January 31, 1997, was 4.0% of net sales compared to 3.7% of net
sales in the quarter ended January 31, 1996.
Third Quarter Comparison - Preceding Quarter
Net sales of $193.3 million for the third quarter of fiscal
1997 were slightly higher than the $192.6 million net sales
reported in the second quarter. International net sales were 16%
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 11% lower than the
previous quarter.
Operating expenses as a percent of net sales were 93.1% in the
current quarter compared to 91.1% in the second quarter.
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 January 31, 1997,
was 6.9% of net sales compared to 8.9% of net sales for the
quarter ended October 31, 1996.
Net interest income in the three months ended January 31, 1997,
amounted to $.3 million compared to $.2 million in the three
months ended October 31, 1996. The revaluation of foreign
currencies resulted in a loss of $.3 million in both the second
and third quarters of the current year. The sale of subsidiary
assets in the prior quarter resulted in a pre-tax gain of $3.5
million ($2.3 million after tax). This subsidiary's sales during
the year ended April 30, 1996 were less than 1% of the Company's
consolidated annual sales, and therefore this transaction is not
expected to have a material impact on the Company's future
operations.
Provision for income taxes in the quarter ended January 31,
1997, amounted to 41.8% of pre-tax income compared to 41.7% of
pre-tax income in the quarter ended October 31, 1996. The overall
tax rate in the third quarter 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, 1997, was 4.0% of net sales compared to 6.3% of net sales in
the quarter ended October 31, 1996.
Nine Months Comparison - Prior Year
Net sales for the nine months ended January 31, 1997, decreased
to $578.4 million as compared with $582.3 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 decreased 2% as reported in U.S. dollars
and were negatively affected by changes in currency translation
rates. International net sales, when measured on a local country
currency basis, increased approximately 1%.
Operating expenses, as a percent of net sales, increased to
92.7% for the nine months of the current year compared to 92.3%
for the first nine months of the prior year. As a result,
operating income before other expenses and income taxes for the
nine months ended January 31, 1997, was 7.3% of net sales compared
to 7.7% of net sales for the nine months ended January 31, 1996.
In the nine months ended January 31, 1997, net interest income
was $.5 million compared to $.7 million in the first nine months
of the prior year. Revaluation of foreign currencies amounted
to a loss of $.8 million in the first nine months of the current
year compared to a loss of $.7 million in the same period of the
prior year. The sale of subsidiary assets in the nine months ended
January 31, 1997 resulted in a pre-tax gain of $3.5 million ($2.3
million after tax).
Provision for income taxes was 41.8% of pre-tax income in the
first nine months of the current year and in the first nine months
of the prior year. Net income for the nine months ended January
31, 1997 was 4.6% of net sales compared to 4.5% of net sales for
the nine months ended January 31, 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 nine months ended January 31, 1997.
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 5, 1997 /s/ Tom Hetzer
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Tom Hetzer
Vice President - Finance
(Principal Accounting Officer)