This report contains
13 pages.
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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 the Quarter Ended October 28, 1995
Commission File Number 0-3947
HACH COMPANY
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(Exact name of registrant as specified in its charter)
Delaware 42-0704420
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(State of other jurisdiction of (I.R.S.Employer Identification Number)
incorporation or organization)
5600 Lindbergh Drive, Loveland, CO 80537
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(Address of principal executive office) (Zip Code)
Registrant's telephone number, including area code (303) 669-3050
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N/A
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(Former name, former address, and former fiscal year, if changed since last
report)
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 twelve months (or such shorter period that the
registrant was required to file such reports) and (2) has been subject to the
filing requirements for the past 90 days.
YES X NO
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At December 8, 1995 the registrant had 11,362,754 shares of its common stock
outstanding.
Index of Exhibits - See Page 10 .
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PART I - FINANCIAL INFORMATION
ITEM I - SUMMARIZED FINANCIAL STATEMENTS
Companies for which report is filed: Hach Company and Subsidiaries
The accompanying Consolidated Balance Sheet as of October 28, 1995,
and the Consolidated Statements of Income and Retained Earnings for
the quarters and the six months ended October 28, 1995 and October 29,
1994 and the Consolidated Statements of Cash Flow for the six months
ended October 28, 1995 and October 29, 1994 are unaudited; however, in
the opinion of management all adjustments (consisting only of normal
recurring adjustments) considered necessary for a fair presentation of
the results of such periods have been made. The results of operations
for the quarters and six months ended October 28, 1995 and October 29,
1994 are not necessarily indicative of the results of operations to be
expected for the full year.
The financial data included herein pursuant to Rule 10-01 of
Regulation S-X has been subjected to a review by Coopers & Lybrand
LLP, the Registrant's independent accountants.
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HACH COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME AND RETAINED EARNINGS
(THOUSANDS OF DOLLARS EXCEPT SHARE DATA)
(UNAUDITED)
QUARTER ENDED SIX MONTHS ENDED
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10/28/95 10/29/94 10/28/95 10/29/94
----------------- ----------------- --------------- ----------------
Net sales $ 28,717 $ 26,082 $ 55,905 $ 51,154
Cost of sales 14,347 12,817 27,785 25,128
----------------- ----------------- --------------- ----------------
Gross profit 14,370 13,265 28,120 26,026
Selling, general and administrative expense 8,351 7,973 16,519 15,742
Research and development expense 1,860 1,677 3,660 3,326
----------------- ----------------- --------------- ----------------
Income from operations 4,159 3,615 7,941 6,958
Interest income 378 105 614 212
Interest expense (1) (1) (3) (1)
----------------- ----------------- --------------- ----------------
Income before income taxes 4,536 3,719 8,552 7,169
Income tax expense 1,596 1,294 3,002 2,494
----------------- ----------------- --------------- ----------------
Net income 2,940 2,425 5,550 4,675
Retained earnings, beginning of period 60,467 52,884 58,425 51,090
Cash dividends (569) (456) (1,137) (912)
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Retained earnings, end of period $ 62,838 $ 54,853 $ 62,838 $ 54,853
----------------- ----------------- --------------- ----------------
----------------- ----------------- --------------- ----------------
Net income per common share $ 0.26 $ 0.21 $ 0.49 $ 0.41
----------------- ----------------- --------------- ----------------
----------------- ----------------- --------------- ----------------
Dividends per common share $ 0.05 $ 0.04 $ 0.10 $ 0.08
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----------------- ----------------- --------------- ----------------
Weighted average shares outstanding 11,367,754 11,394,015 11,368,085 11,395,481
----------------- ----------------- --------------- ----------------
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The accompanying notes are an integral part of the consolidated financial
statements.
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HACH COMPANY AND SUBSIDARIES
CONSOLIDATED BALANCE SHEETS
(THOUSANDS OF DOLLARS)
OCTOBER 28,1995 APRIL 30, 1995
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(UNAUDITED)
ASSETS
Current assets:
Cash and cash equivalents $ 9,207 $ 13,050
Marketable securities, held to maturity 8,899 3,925
Accounts receivable, less reserves
of $258 and $247, respectively 16,056 16,336
Inventories 12,556 11,731
Prepaid expenses and other
current assets 3,333 4,414
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Total current assets 50,051 49,456
Property, plant and equipment at cost:
Buildings and improvements 23,299 23,387
Machinery and equipment 42,453 42,305
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65,752 65,692
Less allowance for depreciation
and amortization 37,238 37,586
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28,514 28,106
Land 1,000 1,022
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Net property, plant and equipment 29,514 29,128
Marketable securities, held to maturity 7,920 4,385
Other assets 1,475 1,289
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Total assets $ 88,960 $ 84,258
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The accompanying notes are an integral part of the consolidated financial
statements.
Continued
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HACH COMPANY AND SUBSIDARIES
CONSOLIDATED BALANCE SHEETS
(THOUSANDS OF DOLLARS)
OCTOBER 28,1995 APRIL 30, 1995
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(UNAUDITED)
LIABILITIES
Current liabilities:
Accounts payable $ 3,444 $ 2,835
Accrued liabilities:
Compensation 477 381
Compensated absenses 3,603 3,487
Profit sharing 1,641 2,435
Other 2,381 1,474
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Total current liabilities 11,546 10,612
Deferred income taxes 2,123 2,070
Long term liabilities 252 248
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Total liablities 13,921 12,930
STOCKHOLDERS' EQUITY
Common stock, $1 par value; authorized
40,000,000 shares; issued 11,622,953 shares 11,623 11,623
Capital contributed in excess of par value 218 148
Retained earnings 62,838 58,425
Cumulative currency translation adjustment 2,058 2,405
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76,737 72,601
Less: Shares held in treasury at cost:
(260,199 at October 28, 1995 and
246,479 at April 30, 1995) (1,698) (1,273)
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Total Liabilities and Stockholders' Equity $ 88,960 $ 84,258
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The accompanying notes are an integral part of the consolidated financial
statements.
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HACH COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(THOUSANDS OF DOLLARS)
(UNAUDITED)
SIX MONTHS ENDED SIX MONTHS ENDED
OCTOBER 28, 1995 OCTOBER 29, 1994
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Cash flows from operating activities:
Net income $ 5,550 $ 4,675
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation & amortization 2,963 2,799
Provision for deferred income taxes 53 20
(Gain) loss on disposal of property, plant & equipment 71 (18)
Decrease in accounts receivable 280 49
(Increase) in inventories (875) (1,056)
(Increase) decrease in prepaid expenses & other assets 1,081 (1,152)
Increase in accounts payable 609 471
Increase (decrease) in accrued liabilities 329 (758)
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Net cash provided by operating activities 10,061 5,030
Cash flows from investing activities:
Proceeds from sale of property, plant & equipment 254 52
Capital expenditures (3,679) (2,925)
Purchases of investments held-to-maturity (11,440) (2,042)
Proceeds from the maturity of short-term investments 2,931 910
(Increase) in long-term assets (186) (39)
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Net cash used by investing activities (12,120) (4,044)
Cash flows from financing activities:
Payments on capital lease obligations - (2)
Dividends paid (1,137) (912)
Purchases of treasury stock (388) (215)
Exercise of stock options 33 22
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Net cash used by financing activities (1,492) (1,107)
Effects of exchange rate changes (292) 576
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Net increase (decrease) in cash & cash equivalents (3,843) 455
Cash & cash equivalents at the beginning of the period 13,050 9,037
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Cash & cash equivalents at the end of the period $ 9,207 $ 9,492
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Supplemental disclosures of cash flow information:
Cash paid during the year for income taxes $ 1,861 $ 3,184
The accompanying notes are an integral part of the consolidated financial
statements.
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HACH COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. The consolidated balance sheet at October 28, 1995, and the consolidated
statements of income and retained earnings, cash flows, and stockholders' equity
for the interim periods ended October 28, 1995 and October 29, 1994, have been
prepared by the Company, without audit. In the opinion of management, all
adjustments, consisting only of normal recurring adjustments, necessary to
present fairly the consolidated financial position, results of operations and
cash flows have been made. The results of operations for the interim periods
are not necessarily indicative of the operating results for a full year or of
future operations.
Certain amounts in the financial statements for April 30, 1995 have been
reclassified to conform with the current periods presentation.
2. INVENTORIES
The components of inventories are:
(Thousands of Dollars)
October 28, 1995 April 30, 1995
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Raw materials and purchased parts $ 2,593 $ 2,832
Work-in-process 1,997 1,785
Manufactured finished goods 7,094 6,635
Purchased for resale 872 479
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$12,556 $11,731
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3. INCOME TAXES
For both periods presented, the provision for income taxes is based upon an
expected annual effective income tax rate. The rates utilized for the quarter
ended October 28, 1995 and October 29, 1994 were 35.1% and 34.8% respectively.
4. NET INCOME PER COMMON SHARE
Net income per common share is based on the weighted average number of
common shares outstanding during the period. Common stock equivalents do not
have a dilutive effect on net income per common share.
5. RECENTLY ISSUED FINANCIAL ACCOUNTING STANDARDS
The Financial Accounting Standards Board issued Statement of Financial
Accounting Standards No. 123 "Accounting for Stock-Based Compensation" in
October 1995. This statement, which is required to be adopted in fiscal year
1997, introduces a fair-value based method of accounting for stock-based
compensation. The Company has not yet adopted the statement, and has not yet
determined the impact it may have on the Company's financial statements or on
the financial statement disclosures.
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Item 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS:
ANALYSIS OF FINANCIAL CONDITION:
There was no material change in the liquidity of the Company during the quarter
ended October 28, 1995. Cash and short-term investments increased $766,000
during the quarter to $18,106,000.
The Company monitors cash flow and capital expenditures in great detail as part
of its total budgeting process. Capital needs in the near future will be for
production equipment and computer and peripheral equipment to support
production, research and development, and administration.
In September, 1994, the Company's Board of Directors authorized the Company to
repurchase up to $2,000,000 in value of the Company's common stock.
On November 21, 1995, the Company's Board of Directors voted to increase the
Company's regular quarterly cash dividend from 5 cents per share to 6 cents per
share effective with the January 30, 1996 dividend.
The Company intends to finance its capital projects, dividend payments, and
stock buy back through existing cash and cash equivalents, short-term
investments and projected cash flow from operations.
RESULTS OF OPERATIONS: Quarter ended October 28, 1995 compared to quarter ended
October 29, 1994.
Net sales increased 10% to $28,717,000 from $26,082,000. The Company's domestic
net sales increased 7% while its international net sales increased 17%. Both
the domestic and international net sales increases were due primarily to unit
volume increases in most of the Company's major product lines.
Cost of sales increased 12% to $14,347,000 from $12,817,000. This item,
composed of material, labor and product overhead, increased primarily because of
unit volume increases. The gross profit percent decreased to 50% from 50.9%.
The gross profit percent for the company's wholly owned subsidiary, Hach Europe,
increased due to favorable exchange rates, while the gross profit percent for
the remainder of the Company's operations decreased due to the mix of products
sold.
Selling, general and administrative expense increased 4.7% to $8,351,000 from
$7,973,000. The increase was primarily due to normal wage and salary increases,
costs associated with the increased sales volume.
Research and development expense increased 11% to $1,860,000 from $1,677,000.
The increase was due to an increased emphasis on research and development
efforts.
Interest income increased to $378,000 from $105,000. The increase was due to
higher average investment balances and higher interest rates in the current
quarter.
The effective income tax rate was 35.2% in the current period compared to 34.8%
in the prior year's second quarter.
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RESULTS OF OPERATIONS: Six months ended October 28, 1995 compared to six months
ended October 29, 1994.
Net sales increased 9.3% to $55,905,000 from $51,154,000. The Company's
domestic net sales increased 6.7% while its international net sales increased
14.7%. The international net sales increase was due primarily to unit volume
increases in most of the Company's major product lines.
Cost of sales increased 10.6% to $27,785,000 from $25,128,000. This item,
composed of material, labor and product overhead, increased primarily because of
unit volume increases. The gross profit percent decreased to 50.3% from 50.9%.
The gross profit percent for the company's wholly owned subsidiary, Hach Europe,
increased due to favorable exchange rates, while the gross profit percent for
the remainder of the Company's operations decreased due to the mix of products
sold.
Selling, general and administrative expense increased 5% to $16,519,000 from
$15,742,000. The increase was primarily due to normal wage and salary increases,
costs associated with the increased sales volume and increased advertising
costs.
Research and development expense increased 10% to $3,660,000 from $3,326,000.
The increase was due to and increased emphasis on research and development
efforts.
Interest income increased to $614,000 from $212,000. The increase was due to
higher average investment balances and higher interest rates in the current
period.
The effective income tax rate was 35.1% in the current period compared to 34.8%
in the prior year's first six months.
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INDEX OF EXHIBITS
Page
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Report of Independent Accountants 12
Awareness Letter of Independent Accountants 13
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PART II - OTHER INFORMATION
Item 6: Exhibits and Reports on Form 8-K
(a) Exhibits
Report of Independent Accountants
Awareness Letter of Independent Accountants
(b) Reports on Form 8-K
During the quarter ended October 28, 1995 the Registrant filed no
report on Form 8-K.
SIGNATURES
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 thereunder duly authorized.
HACH COMPANY
Registrant
DATED: December 8, 1995 BY: Bruce J. Hach /s/
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Bruce J. Hach
President and Chief Operating Officer
DATED: December 8, 1995 BY: Gary R. Dreher /s/
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Gary R. Dreher
Vice President and Chief Financial
Officer
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