This report contains
38 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 26, 1996
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 (970) 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 9, 1996 the registrant had 11,363,058 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 26, 1996,
and the Consolidated Statements of Income and Retained Earnings for
the quarters and the six months ended October 26, 1996 and October 28,
1995 and the Consolidated Statements of Cash Flows for the six months
ended October 26, 1996 and October 28, 1995 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 26, 1996 and October 28,
1995 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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10/26/96 10/28/95 10/26/96 10/28/95
----------- ----------- ---------- -----------
Net sales $ 30,284 $ 28,717 $ 59,194 $ 55,905
Cost of sales 15,324 14,347 30,071 27,785
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Gross profit 14,960 14,370 29,123 28,120
Selling, general and administrative expense 8,244 8,351 16,253 16,519
Research and development expense 2,290 1,860 4,244 3,660
----------- ----------- ---------- -----------
Income from operations 4,426 4,159 8,626 7,941
Interest income 455 378 806 614
Interest expense (4) (1) (5) (3)
----------- ----------- ---------- -----------
Income before income taxes 4,877 4,536 9,427 8,552
Income tax expense 1,662 1,596 3,252 3,002
----------- ----------- ---------- -----------
Net income 3,215 2,940 6,175 5,550
Retained earnings, beginning of period 69,455 60,467 67,177 58,425
Cash dividends (682) (569) (1,364) (1,137)
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Retained earnings, end of period $ 71,988 $ 62,838 $ 71,988 $ 62,838
----------- ----------- ---------- -----------
----------- ----------- ---------- -----------
Net income per common share $ 0.28 $ 0.26 $ 0.54 $ 0.49
----------- ----------- ---------- -----------
----------- ----------- ---------- -----------
Dividends per common share $ 0.06 $ 0.05 $ 0.12 $ 0.10
----------- ----------- ---------- -----------
----------- ----------- ---------- -----------
Weighted average shares outstanding 11,363,058 11,367,754 11,359,657 11,368,085
----------- ----------- ---------- -----------
----------- ----------- ---------- -----------
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)
(UNAUDITED)
OCTOBER 26,1996 APRIL 30, 1996
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ASSETS
Current assets:
Cash and cash equivalents $ 7,945 $ 8,487
Marketable securities, held to maturity 16,812 12,804
Accounts receivable, less reserves
of $213 and $248, respectively 18,254 15,846
Inventories 12,955 12,769
Deferred taxes and other current assets 4,775 3,277
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Total current assets 60,741 53,183
Property, plant and equipment at cost:
Buildings and improvements 23,466 23,557
Machinery and equipment 44,994 43,129
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68,460 66,686
Less allowance for depreciation
and amortization 40,617 38,571
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27,843 28,115
Land 994 997
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Net property, plant and equipment 28,837 29,112
Marketable securities, held to maturity 8,175 9,316
Other assets 1,757 1,684
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Total assets $ 99,510 $ 93,295
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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)
(UNAUDITED)
OCTOBER 26,1996 APRIL 30, 1996
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LIABILITIES
Current liabilities:
Accounts payable $ 4,666 $ 2,826
Accrued liabilities:
Compensation 621 731
Compensated absenses 3,740 3,500
Profit sharing 1,775 3,069
Other 1,903 1,188
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Total current liabilities 12,705 11,314
Deferred income taxes 2,009 1,814
Long term liabilities 1,562 1,347
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Total liablities 16,276 14,475
STOCKHOLDERS' EQUITY
Common stock, $1 par value; authorized
25,000,000 shares; issued 11,622,953 shares 11,623 11,623
Capital contributed in excess of par value 381 316
Retained earnings 71,988 67,177
Cumulative currency translation adjustment 1,289 1,636
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85,281 80,752
Less: Shares held in treasury at cost:
(259,895 at October 26, 1996 and
258,881 at April 30, 1996) (2,047) (1,932)
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Total Liabilities and Stockholders' Equity $ 99,510 $ 93,295
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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 26, 1996 OCTOBER 28, 1995
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Cash flows from operating activities:
Net income $ 6,175 $ 5,550
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation & amortization 3,002 2,963
Provision for deferred income taxes 195 53
Loss on disposal of property, plant & equipment 16 71
(Increase) decrease in accounts receivable (2,408) 280
(Increase) in inventories (186) (875)
(Increase) decrease in prepaid expenses & other assets (1,498) 1,081
Increase in accounts payable 1,840 609
Increase (decrease) in accrued liabilities (234) 329
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Net cash provided by operating activities 6,902 10,061
Cash flows from investing activities:
Proceeds from sale of property, plant & equipment 7 254
Capital expenditures (2,812) (3,679)
Purchases of investments held-to-maturity (8,903) (11,440)
Proceeds from the maturity of short-term investments 6,037 2,931
(Increase) in long-term assets (73) (186)
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Net cash used by investing activities (5,744) (12,120)
Cash flows from financing activities:
Dividends paid (1,364) (1,137)
Purchases of treasury stock (206) (388)
Exercise of stock options 156 33
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Net cash used by financing activities (1,414) (1,492)
Effects of exchange rate changes (286) (292)
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Net (decrease) in cash & cash equivalents (542) (3,843)
Cash & cash equivalents at the beginning of the period 8,487 13,050
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Cash & cash equivalents at the end of the period $ 7,945 $ 9,207
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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 26, 1996, and the consolidated
statements of income and retained earnings, cash flows, and stockholders' equity
for the interim periods ended October 26, 1996 and October 28, 1995, 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, 1996 have been
reclassified to conform with the current periods presentation.
2. INVENTORIES
The components of inventories are:
(Thousands of Dollars)
October 26, 1996 April 30, 1996
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Raw materials and purchased parts $ 2,845 $ 2,977
Work-in-process 1,798 2,030
Finished goods 8,312 7,762
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$12,955 $12,769
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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 26, 1996 and October 28, 1995 were 34.1% and 35.2% respectively
and for the six months ended October 26, 1996 and October 28, 1995 were 34.5%
and 35.1% 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 materially dilutive effect on net income per common share.
5. CAPITAL STOCK
At the annual stockholders meeting on August 27, 1996, the stockholders
approved a reduction in the number of authorized shares form 40,000,000 to
25,000,000.
6. 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 of 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 decided to adopt the disclosure method for FAS
No. 123, however the Company 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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ANALYSIS OF FINANCIAL CONDITION:
There was no material change in the liquidity of the Company during the quarter
ended October 26, 1996. Cash and short-term investments increased $1,377,000
during the quarter and increased $3,466,000 during the six month period to
$24,757,000.
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.
The Company's Board of Directors authorized the Company to repurchase up to
$2,000,000 in value of the Company's common stock.
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 26, 1996 compared to quarter ended
October 28, 1995.
Net sales increased 5.5% to $30,284,000 from $28,717,000. The Company's
domestic net sales increased 4.2% while its international net sales increased
7.8%. 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 6.8% to $15,324,000 from $14,347,000. This item,
composed of material, labor and product overhead, increased primarily because of
unit volume increases. The gross profit percent decreased to 49.4% from 50% due
to the mix of products sold.
Selling, general and administrative expense decreased 1.3% to $8,244,000 from
$8,351,000. The decrease was primarily due to lower payroll and related expenses
due to a reduction in the number of employees.
Research and development expense increased 23% to $2,290,000 from $1,860,000.
The increase was due to an increased emphasis on research and development
efforts. This increased research and development spending will result in a
number of new products being introduced during the next six months.
Interest income increased to $455,000 from $378,000. The increase was due to
higher average investment balances and higher interest rates in the current
quarter.
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RESULTS OF OPERATIONS: Six months ended October 26, 1996 compared to six months
ended October 28, 1995.
Net sales increased 5.9% to $59,194,000 from $55,905,000. The Company's
domestic net sales increased 3.3% while its international net sales increased
10.8%. 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 8.2% to $30,071,000 from $27,785,000. This item,
composed of material, labor and product overhead, increased primarily because of
unit volume increases. The gross profit percent decreased to 49.2% from 50.3%
due to the mix of products sold.
Selling, general and administrative expense decreased 1.6% to $16,253,000 from
$16,519,000. The decrease was primarily due to lower payroll and related
expenses due to a reduction in the number of employees.
Research and development expense increased 16% to $4,244,000 from $3,660,000.
The increase was due to and increased emphasis on research and development
efforts. This increased research and development spending will result in a
number of new products being introduced during the next six months.
Interest income increased to $806,000 from $614,000. The increase was due to
higher average investment balances and higher interest rates in the current
period.
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INDEX OF EXHIBITS
Page
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Report of Independent Accountants 12
Awareness Letter of Independent Accountants 13
Restated Certificate of Incorporation 14
Revised By-Laws 22
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PART II - OTHER INFORMATION
Item 2: Changes in Securities
A certificate of Amendment was filed on September 12, 1996 in the
Office of the Secretary of State of Delaware, setting out the
amendment to Article Four of the Company's Certificate of
Incorporation which reduced the number of shares of capital stock
($1.00 par value) which the company may issue to 25,000,000 shares.
Prior to the amendment, the Company was authorized to issue a maximum
of 40,000,000 shares of its $1.00 par value common stock. See Item 4,
Part II of the 10Q report for the quarter ended July 27, 1996.
Item 6: Exhibits and Reports on Form 8-K
(a) Exhibits
Report of Independent Accountants
Awareness Letter of Independent Accountants
Restated Certificate of Incorporation
Revised By-Laws
(b) Reports on Form 8-K
During the quarter ended October 26, 1996 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 9, 1996 BY: Bruce J. Hach /s/
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Bruce J. Hach
President and Chief Operating Officer
DATED: December 9, 1996 BY: Gary R. Dreher /s/
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Gary R. Dreher
Vice President and Chief Financial
Officer
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