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FORM 10-K
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE
ACT OF 1934 [FEE REQUIRED]
For the fiscal year ended April 30, 1996
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
For the transition period _________________ to _________________.
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 or Other jurisdiction of (IRS Employer
Incorporation or Organization) Identification No.)
5600 Lindbergh Drive
Loveland, Colorado 80537
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (970) 669-3050
Securities registered pursuant to Section 12 (b) of the Act: None.
Securities registered pursuant to Section 12 (g) of the Act:
COMMON STOCK, $1.00 PAR VALUE
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(Title of Class)
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 by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [X]
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As of June 28, 1996, 11,351,572 shares of Common Stock were outstanding. The
aggregate value of 5,676,158 shares of Common Stock held by non-affiliates
(based upon the last sales price of $16.00 on June 28, 1996 for the Registrant's
Common Stock listed in The WALL STREET JOURNAL in the NASDAQ National Market
System section on July 1, 1996) was approximately $90,819,000.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Hach Company Annual Report to Stockholders for the year ended
April 30, 1996 (the "1996 Annual Report") are incorporated by reference into
Parts I, II and IV.
Portions of the Hach Company Proxy Statement for the Annual Meeting of
Stockholders scheduled to be held August 27, 1996 (the "1996 Proxy Statement")
are incorporated by reference into Part III.
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PART I
ITEM 1. BUSINESS
The Registrant was incorporated in Iowa in 1951 and reincorporated in
Delaware on April 3, 1968.
Additional information required by this item appears under the heading
"Description of Business" on pages 17 and 18 of the 1996 Annual Report and as
Note 6 of the Notes to Consolidated Financial Statements, "Segment Information",
on pages 26 and 27 of the 1996 Annual Report, all of which is incorporated
herein by reference.
ITEM 2. PROPERTIES
The principal physical properties of the Registrant are as follows:
The Registrant owns a 150,000 square foot steel frame, concrete building
situated on 50 acres adjacent to the Loveland, Colorado airport at 5600
Lindbergh Drive in Loveland, Colorado. This building contains the Registrant's
executive and administrative offices and its research, development, engineering
and instrument manufacturing operations.
The Registrant also owns a 169,000 square foot building complex situated on
45 acres at 100 Dayton Avenue in Ames, Iowa. These facilities contain chemical
manufacturing operations, a chemical research laboratory, the home office
service function and the shipping department and warehouse for all of the
products manufactured and sold by the Registrant.
The Registrant also owns two buildings totaling 45,000 square feet located
in Loveland, Colorado. These buildings contain the Registrant's plastic
component manufacturing operation, part of the Registrant's component assembly
operation, and an employee training center.
The Registrant's wholly-owned subsidiary, Hach Europe, S.A., owns a
distribution and manufacturing plant containing approximately 44,000 square feet
in Namur, Belgium.
All of the Registrant's principal physical properties are modern and were
designed and constructed to the Registrant's specifications specifically for use
in its business.
ITEM 3. LEGAL PROCEEDINGS
None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to a vote of security holders in the fourth
quarter of the year ended April 30, 1996.
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EXECUTIVE OFFICERS OF REGISTRANT
NAME AGE
Kathryn Hach-Darrow 73 Chairman of the Board, Chief Executive Officer,
Chairman of the Executive Committee and Director
Bruce J. Hach 50 President and Chief Operating Officer and Director
Robert O. Case 74 Secretary and General Counsel
Gary R. Dreher 43 Vice President and Chief Financial Officer and
Director
Loel J. Sirovy 57 Senior Vice President, Operations
Jerry M. Churchill 56 Vice President, Domestic Sales and Director
Randall A. Petersen 44 Vice President, Human Resources
John C. Privette 41 Vice President, Sales and Marketing
Larry Thompson 52 Vice President, Ames Operation
Kenneth Ogan 51 Vice President, Research and Development and Chief
Technical Officer
Kathryn Hach-Darrow has been active in the business of the Registrant since
its inception. She has served on the Board of Directors and was responsible,
prior to May 6, 1977, as Executive Vice President for certain of the
Registrant's administrative and marketing matters. On May 5, 1977, the Board of
Directors elected Mrs. Hach-Darrow President and Chief Operating Officer. On
April 28, 1983, she was elected Vice Chairman of the Board of Directors and on
February 28, 1986 she was elected Chairman of the Board, Chief Executive Officer
and Chairman of the Executive Committee and Director, and has served in these
capacities since that date.
Bruce J. Hach, son of Kathryn Hach-Darrow, joined the Registrant November
1, 1970 and served the Company in various capacities. From August 27, 1985 to
February 28, 1986, he was an Assistant Vice President in charge of Human
Relations. He was elected Senior Vice President on February 28, 1986. On April
30, 1987, he was elected a Director of the Registrant, and he was elected
Executive Vice President of the Registrant on August 27, 1987. In August, 1988,
he was elected President and Chief Operating Officer of the Registrant, and has
served in these capacities since that date.
Robert O. Case has been Secretary of the Registrant since May 29, 1968. He
was named General Counsel to the Registrant on August 29, 1989. From September,
1989 to February, 1991, he was a shareholder of the Chicago, Illinois law firm
of Schuyler, Roche & Zwirner, Chicago, Illinois and a member of its management
committee. From February 1, 1991, to April 30, 1993, he was of counsel to
Schuyler, Roche & Zwirner. Mr. Case was a senior member of the law firm of
Walsh, Case & Brown for more than the previous two years prior to joining
Schuyler, Roche & Zwirner. Since May 1, 1993, Mr. Case has been of counsel to
McBride Baker & Coles, a Chicago, Illinois law firm. Mr. Case was a director of
the Registrant from May 29,
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1968 until his retirement as a Director of the Registrant effective at the
August 30, 1994 Annual Meeting of Shareholders.
Jerry M. Churchill joined the Registrant on December 1, 1977 as Marketing
Manager of Carle Instruments, Inc., which was a wholly-owned subsidiary of the
Registrant engaged in the manufacturing and sale of gas chromatographs. On
April 2, 1981, he was elected Vice President of Operations of Carle Instruments,
Inc. After Carle Instruments, Inc. was merged into Hach Company, Mr. Churchill
was made Assistant Vice President of Chromatography Operations on September 18,
1983. On February 28, 1986, he was elected Vice President of Domestic Sales and
Marketing. On February 27, 1990, he was elected Senior Vice President of
Marketing and Sales. On August 25, 1992, he was elected Senior Vice President,
Domestic Sales of the Registrant. On August 24, 1993 he was elected Vice
President, Sales of the Registrant. On November 22, 1994 he was named Vice
President, Domestic Sales of the Registrant and has served in that capacity
since that date. Mr. Churchill was a Director of the Registrant from August 28,
1990 until his retirement as a director or the Registrant effective at the
August 29, 1995 Annual Meeting of Shareholders.
Loel J. Sirovy joined the Registrant on October 19, 1972. He has held a
number of management positions in Production and Human Relations. On September
1, 1985, he was elected Vice President-Instrument Operations. On April 28,
1989, he was elected Senior Vice President, Manufacturing. On August 25, 1992,
he was elected Senior Vice President, Operations of the Registrant, and has
served in that capacity since that date.
Gary R. Dreher joined the Registrant on January 17, 1977. He has held a
variety of positions since then. In September, 1985 he was named Controller for
the Company. In August, 1990, he was elected Vice President and Controller. In
August, 1991, he was elected Vice President and Treasurer of the Registrant. He
was named Vice President and Chief Financial Officer on November 22, 1994 and
has served in that capacity since that date. He was elected a Director of the
Company at the Company's Annual Meeting of Shareholders on August 30, 1994.
Randall A. Petersen joined the Registrant October 14, 1974. He has held a
number of management positions in Manufacturing and Human Resources. On April
28, 1989, he was elected Vice President, Human Resources of the Registrant, and
has served in that capacity since that date.
John C. Privette joined the Registrant December 1, 1986. He has held a
number of positions in Marketing. In October, 1989 he was named Director of
Domestic Marketing. On August 25, 1992 he was elected Vice President, Marketing
of the Registrant. On November 22, 1994 he was elected Vice President, Sales
and Marketing of the Registrant and has served in that capacity since that date.
Larry Thompson joined the Registrant on April 6, 1964. He has held a
variety of positions in Chemical Operations since then. In April, 1991 he was
named Plant Manager of the Ames, Iowa facility. On August 25, 1992, he was
elected Vice President, Ames Operations of the Registrant, and has served in
that capacity since that date.
Kenneth Ogan, Ph.D., joined the Registrant in February, 1996 as Vice
President, Research and Development and Chief Technical Officer. He most
recently served as Principal Scientist, Sales and Marketing Division and, prior
to that, as Senior Manager, Advanced Technology Group for Hitachi Instruments,
Inc., where he was employed from 1989 through January, 1996. Prior to joining
Hitachi Instruments, Inc., he was a Group Manager in Instrumentation and
Research and Development for Perkin-Elmer Inc. Dr. Ogan earned his Ph.D. in
Physical Chemistry (Liquid Structures) from the University of California, Los
Angeles, California.
The officers of the Company serve at the pleasure of the Board of
Directors.
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PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
The information required by this item appears under the heading "Common
Stock Price Range and Dividends" on page 18 of the 1996 Annual Report, and is
incorporated herein by reference.
ITEM 6. SELECTED FINANCIAL DATA
The information required by this item appears under the heading the
"Comparative Financial Data - 10-Year Summary" on pages 14 and 15 of the 1996
Annual Report, and is incorporated herein by reference.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATION
The information required by this item appears in the Chairman's and
President's letter "To Our Fellow Shareholders" on pages 2, 3, and 4 of the 1996
Annual Report, and under the heading "Management's Discussion and Analysis of
Financial Condition and Results of Operations" on pages 16 and 17 of the 1996
Annual Report, all of which is incorporated herein by reference.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The information required by this item appears in the Consolidated Financial
Statements and the Notes thereto on pages 19 through 27 of the 1996 Annual
Report, and is incorporated herein by reference.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
Not applicable.
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PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The information required by this item appears under the heading "Election
of Directors" on pages 3 through 7 in the 1996 Proxy Statement and under the
caption "Executive Officers of the Registrant" at pages 4 and 5 at the end of
Part I of this Report, and is incorporated by reference.
ITEM 11. EXECUTIVE COMPENSATION
The information required by this item appears under the heading "Executive
Compensation" on pages 11 through 15 in the 1996 Proxy Statement, and is
incorporated herein by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The information required by this item appears under the headings "Security
Ownership of Certain Beneficial Owners and Management" at pages 2 and 3 and
"Election of Directors" on pages 3 through 7 in the 1996 Proxy Statement, and is
incorporated herein by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information required by this item appears under the headings "Certain
Transactions and Business Relationships " on page 7 of the 1996 Proxy Statement,
"Executive Employment Agreements" on page 15 of the 1996 Proxy Statement, and
"Compensation Committee Interlocks and Insider Participation" on page 21 of the
1996 Proxy Statement, and each is incorporated herein by reference.
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PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(a) The following documents are filed as part of this Report on Form 10-K:
1. FINANCIAL STATEMENTS: The information required by this item
appears on the pages listed below in the 1996 Annual Report, and is incorporated
by reference in response to Item 14(a)1.
Page No. in
1996 ANNUAL REPORT
Report of Independent Accountants .................................. 19
Financial Statements:
Consolidated statements of income for the
years ended April 30, 1996, 1995 and 1994 ............... 20
Consolidated balance sheets, April 30, 1996
and 1995 ................................................ 21
Consolidated statements of stockholders' equity
for the years ended April 30, 1996, 1995
and 1994 ................................................ 22
Consolidated statements of cash flows
for the years ended April 30, 1996, 1995
and 1994 ................................................ 23
Notes to consolidated financial statements ................ 24
2. FINANCIAL STATEMENT SCHEDULES: None.
3. EXHIBITS REQUIRED BY ITEM 601 OF REGULATION S-K: The following exhibits
are included in this Annual Report on Form 10-K. The items identified below as
Exhibits (10)c - (10)k are management contracts or compensatory plans required
to be filed as an Exhibit to this Annual Report on Form 10-K pursuant to Item
14(c) of Form 10-K.
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NO. ASSIGNED IN
EXHIBIT TABLE ON PAGE NO. IN
ITEM 601 OF REG. S-K EXHIBIT THIS REPORT
(3) a. Certificate of Incorporation of the
Registrant (as amended to date) --
hereby incorporated by reference to
Exhibit (3)a. to the Registrant's
Annual Report on Form 10-K for the
year ended April 30, 1993, Commission
File No. 0-3947
(3) b. By-laws of the Registrant, as amended through
April 30, 1995 -- hereby incorporated by reference
to Exhibit (3)b. to the Registrant's Annual Report
on Form 10-K for the year ended April 30, 1995,
Commission File No. 0-3947.
(10) c. Hach Company 1993 Stock Option Plan -- hereby
incorporated by reference to Exhibit (10)c. to the
Registrant's Annual Report on Form 10-K for the
year ended April 30, 1994, Commission File No.
0-3947
(10) d. Form of Stock Option Agreement under 1993 Stock
Option Plan - - hereby incorporated by reference
to Exhibit (10)d. to the Registrant's Annual
Report on Form 10-K for the year ended April 30,
1994, Commission File No. 0-3947
(10) e. Hach Company Restated 1983 Stock Option Plan --
hereby incorporated by reference to Exhibit (10)d.
to the Registrant's Annual Report on Form 10-K for
the year ended April 30, 1993, Commission File No.
0-3947
(10) f. Form of Stock Option Agreements for 1983 Stock
Option Plan -- hereby incorporated by reference to
Exhibit (10)e. of the Registrant's Annual Report
on Form 10-K for the fiscal year ended April 30,
1991, Commission File No. 0-3947
(10) g. Hach Company Restated Directors' Bonus
Compensation Plan -- hereby incorporated by
reference to Exhibit (10) f. of the Registrant's
Annual Report on Form 10-K for the fiscal year
ended April 30, 1991, Commission File No. 0-3947;
Fifth Amendment to Director's Bonus Compensation
Plan
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(10) h. Executive Employment Agreements between the
Company and each of Bruce J. Hach, Richard D.
Vanous, Loel J. Sirovy, Jerry M. Churchill, Gary
R. Dreher, Randall A. Petersen, Larry Thompson and
John C. Privette -- hereby incorporated by
reference to Exhibit 10(h.) to the Registrant's
Annual Report on Form 10-K for the year ended
April 30, 1994, Commission File No. 0-3947;
Executive Employment Agreement between the Company
and Kenneth Ogan
(10) i. Hach Company 1995 Employee Stock Purchase Plan --
hereby incorporated by reference to Exhibit (10)i.
of the Registrant's Annual Report on Form 10-K for
the fiscal year ended April 30, 1995, Commission
File No. 0-3947
(10) j. Hach Company Deferred Compensation Plan (as
amended through March 1, 1995) -- hereby
incorporated by reference to Exhibit (10)j. of the
Registrant's Annual Report on Form 10-K for the
fiscal year ended April 30, 1995, Commission File
No. 0-3947
(10) k. Trust Under Hach Company Deferred Compensation
Plan dated as of April 10, 1995 between the
Company and the Dauphin Deposit Bank and Trust
Company, as trustee hereby incorporated by
reference to Exhibit (10)k. of the Registrant's
Annual Report on Form 10-K for the fiscal year
ended April 30, 1995, Commission File No. 0-3947
(10) l. Hach Company 1995 Non-Employee Director Stock Plan
(13) m. Pages 2, 3, 4 and 14 through 27 of the
Registrant's Annual Report to Stockholders for the
year ended April 30, 1996
(21) n. Subsidiaries of the Registrant
(23) o. Consent of Coopers & Lybrand L.L.P.
(27) p. Financial Data Schedule (electronic filing only)
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(b) No reports on Form 8-K were filed during the
quarter ended April 30, 1996.
(c) and (d) The exhibits and financial statement schedules required to be
filed by this item are attached to or incorporated by reference in this report.
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SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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.
HACH COMPANY
By:/S/ Kathryn Hach-Darrow
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Kathryn Hach-Darrow, Chairman of
the Board of Directors and Chief
Executive Officer
Date: July 26, 1996
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.
/S/ Kathryn Hach-Darrow /S/ GARY R. DREHER
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Kathryn Hach-Darrow,Chairman of the Gary R. Dreher, Vice President and
Board, Chief Executive Officer and Chief Financial Officer, and Director
Director (principal financial and accounting
(principal executive officer) officer)
Date: July 26, 1996 Date: July 26, 1996
/S/ BRUCE J. HACH /S/ FRED W. WENNINGER
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Bruce J. Hach, Director Fred W. Wenninger, Director
Date: July 26, 1996 Date: July 26, 1996
/S/ JOSEPH V. SCHWAN /S/ JOHN N. MCCONNELL
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Joseph V. Schwan, Director John N. McConnell, Director
Date: July 26, 1996 Date: July 26, 1996
/S/ LINDA O. DOTY
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Linda O. Doty, Director
Date: July 26, 1996
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INDEX TO EXHIBITS
NO. ASSIGNED IN
EXHIBIT TABLE IN PAGE NO. IN
ITEM 601 OF REG. S-K EXHIBIT THIS REPORT
(3) a. Certificate of Incorporation of the Registrant (as amended
to date) -- hereby incorporated by reference to Exhibit
(3)a. to the Registrant's Annual Report on Form 10-K for the
year ended April 30, 1993, Commission File No. 0-3947
(3) b. By-laws of the Registrant, as amended through April 30, 1995
-- hereby incorporated by reference to Exhibit (3)b. of the
Registrant's Annual Report on Form 10-K for the fiscal year
ended April 30, 1995, Commission File No. 0-3947
(10) c. Hach Company 1993 Stock Option Plan - - hereby incorporated
by reference to Exhibit (10)c. to the Registrant's Annual
Report on Form 10-K for the year ended April 30, 1994,
Commission File No. 0-3947
(10) d. Form of Stock Option Agreement under 1993 Stock Option Plan
- - hereby incorporated by reference to Exhibit (10)c. to
the Registrant's Annual Report on Form 10-K for the year
ended April 30, 1994, Commission File No. 0-3947
(10) e. Hach Company Restated 1983 Stock Option Plan -- hereby
incorporated by reference to Exhibit (10) d. to the
Registrant's Annual Report on Form 10-K for the year ended
April 30, 1993, Commission File No. 0-3947
(10) f. Form of Stock Option Agreements for 1983 Stock Option Plan--
hereby incorporated by reference to Exhibit (10)e. of the
Registrant's Annual Report on Form 10-K for the fiscal year
ended April 30, 1991, Commission File No. 0-3947
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(10) g. Hach Company Restated Directors' Bonus Compensation Plan --
hereby incorporated by reference to Exhibit (10)f. of the
Registrant's Annual Report on Form 10-K for the fiscal year
ended April 30, 1991, Commission File No. 0-3947; Fifth
Amendment to Director's Bonus Compensation Plan
(10) h. Executive Employment Agreements between Company and each of
Bruce J. Hach, Loel J. Sirovy, Jerry M. Churchill, Gary R.
Dreher, Randall A. Petersen, Larry Thompson and John C.
Privette- - hereby incorporated by reference to Exhibit
10(h.) of the Registrant's Annual Report on Form 10-K for
the fiscal year ended April 30, 1991, Commission File No.
0-3947; Executive Employment Agreement between the Company
and Kenneth Ogan
(10) i. Hach Company 1995 Employee Stock Purchase Plan -- hereby
incorporated by reference to Exhibit (10)i. of the
Registrant's Annual Report on Form 10-K for the fiscal
year ended April 30, 1995, Commission File No. 0-3947
(10) j. Hach Company Deferred Compensation Plan (as amended through
March 1, 1995) -- hereby incorporated by reference to Exhibit
(10)j. of the Registrant's Annual Report on Form 10-K for the
fiscal year ended April 30, 1995, Commission File No. 0-3947
(10) k. Trust Under Hach Company Deferred Compensation Plan dated as
of April 10, 1995 between the Company and the Dauphin Deposit
Bank and Trust Company, as trustee -- hereby incorporated by
reference to Exhibit (10)k. of the Registrant's Annual
Report on Form 10-K for the fiscal year ended April 30, 1995,
Commission File No. 0-3947
(10) l. Hach Company 1995 Non-Employee Director Stock Plan
(13) m. Pages 2, 3, 4 and 14 through 27 of the Registrant's Annual
Report to Stockholders for the year ended April 30, 1996
(21) n. List of subsidiaries of the Registrant
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(23) o. Consent of Coopers & Lybrand L.L.P.
(27) p. Financial Data Schedule (electronic filing only)
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EXHIBIT (10)G.
(ITEM 601(10))
HACH COMPANY
FIFTH AMENDMENT TO
DIRECTORS' BONUS COMPENSATION PLAN
This Amendment is dated as of the 25th day of April 1996 pursuant to
Section 8 of the Restated Directors' Bonus Compensation Plan ("Plan"):
WHEREAS, on November 21, 1995 Hach Company ("Company") adopted, subject to
approval of stockholders at the next annual meeting, the HACH COMPANY 1995 NON-
EMPLOYEE DIRECTOR STOCK PLAN ("Stock Plan"); and
WHEREAS, in view of the adoption of the Stock Plan the Board of Directors
of the Company by resolution adopted April 25, 1996, directed that the Plan be
amended so as to freeze awards effective April 25, 1996 but to otherwise leave
the Plan in effect;
NOW THEREFORE, pursuant to the authority to amend given by Section 8 of the
Plan and the aforesaid resolution of the Board of April 25, 1996, Section 3 of
the Plan is amended to read as follows:
3. Awards. Effective April 25, 1996, no further awards of Stock Units
shall be made to any director, provided, however, such elimination of
annual Awards shall not be construed to preclude present director
participants in the Plan from receiving cash or stock dividends or
other distributions based on the number of Stock Units a director
presently owns or hereafter holds as provided in Section 4 of this
Plan or preclude or diminish the right of any such director from
receiving a distribution based on his or her holdings of Stock Units
by reason of a merger, reorganization or recapitalization as provided
in Section 9 of the Plan.
In all other respects said Plan shall remain in full force and effect.
For the Board of Directors.
/s/Robert O. Case
--------------------------
Robert O. Case, Secretary
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EXHIBIT (10)H.
(ITEM 601(10))
AGREEMENT
This Agreement, dated as of February 5, 1996, between Hach Company, a
Delaware corporation (hereinafter referred to as the "Company"), and Kenneth
Ogan (hereinafter referred to as the "Executive").
RECITALS
The Executive has recently been employed by the Company and currently
serves as a Vice-President. Because of the Executive's extensive experience and
his familiarity with the affairs of the Company, the Company wishes to assure
that, in the event of a "Change in Control" as hereinafter defined, it will
continue to have the Executive available to perform duties substantially similar
to those currently being performed by him and to continue to contribute to the
Company's growth and success. The Executive is willing to commit to continue in
the performance of his services for the Company upon the terms and conditions
set forth herein.
COVENANTS
NOW, THEREFORE, in consideration of the mutual promises herein contained
and other good and valuable consideration, the receipt and sufficiency of which
are hereby acknowledged, the parties hereto agree as follows:
1. EMPLOYMENT. The Company hereby agrees that, effective upon a "Change
in Control," and provided that Executive is still serving as an Executive of the
Company at that time, it will
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continue to employ Executive as a Vice-President of the Company to perform the
duties described herein, and Executive hereby accepts such employment on the
terms and conditions stated herein. It is understood that prior to such "Change
in Control," this Agreement shall confer no rights of employment or other
benefits (or obligations) whatsoever upon Executive, and that Executive shall
remain subject to termination at Will. For purposes of this Agreement, "Change
in Control" of the Company shall mean a change in control of a nature that would
be required to be reported in response to Item 6(e) of Schedule 14A of
Regulation 14A promulgated under the Securities Act of 1934.
2. TERM OF EMPLOYMENT. Subject to provisions for termination set forth
herein, the term of Executive's employment hereunder shall commence on the date
of a "Change of Control" and shall extend until three years after the date of
such "Change in Control." The Term of Employment shall be automatically renewed
at the end of the initial three year term and each extension thereof for an
additional year unless either the Executive or the Company gives written notice
not later than 6 months prior to the end of the initial term or any extension
thereof, stating that the Executive or the Company elects not to extend or
further extend the term of Executive's employment hereunder.
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3. DUTIES OF EXECUTIVE. Executive shall be a Vice-President of the
Company and shall perform such duties and responsibilities for the Company as
may be assigned to him by the Company and which are not unreasonably
inconsistent with the duties currently being performed by the Executive. During
the term of his employment, Executive shall devote substantially all of his
business time, attention and energy, and his reasonable best efforts, to the
interests and business of the Company and to the performance of his duties and
responsibilities on behalf of the Company.
4. COMPENSATION. Throughout the term of Executive's employment
hereunder, the Company shall pay Executive, for services to be rendered by him
hereunder, a guaranteed minimum salary at an annual rate equal to $135,000.00,
less all applicable federal and state income tax withholding, FICA taxes and
other payroll taxes. The guaranteed minimum salary shall be reviewed by the
Company on a yearly basis to ascertain if any upward adjustment in the annual
rate is in order, and if any increase is made, the new annual rate shall become
the guaranteed minimum salary under this section 4. Such compensation shall be
payable bi-weekly.
5. VACATION. During the period of Executive's employment hereunder,
Executive shall be entitled to the number of paid vacation days in each calendar
year, determined by the Company from
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time to time for its senior executive officers, but not less than that number of
weeks of vacation each year to which Executive is currently entitled. Executive
shall also be entitled to all paid holidays given by the Company to its senior
executive officers.
6. OTHER BENEFITS. During the period of Executive's employment hereunder,
the Company shall make available to the Executive such other benefits as it
makes available generally to senior executives of the Company, provided,
however, that in the event of a change in the form of benefits that are made
available to the Executive, as compared to the benefits made available to the
Executive on the date hereof, the Company agrees that the compensation and
benefits made available to the Executive shall in the aggregate be no less
favorable economically to the Executive than those made available to the
Executive on the date hereof, and the Company agrees to use all reasonable
efforts to achieve such economic equivalence.
7. EXPENSES. The Company shall pay or reimburse Executive for all
reasonable expenses actually incurred or paid by him in the performance of
services rendered by him pursuant to this Agreement. Such expenses shall be
supported by the documentary evidence required to substantiate them as income
tax deductions.
8. COVENANT RESTRICTING COMPETITION; NONDISCLOSURE OF CONFIDENTIAL
INFORMATION.
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(a) Executive acknowledges that his services are special and unique,
and of an unusual and extraordinary character which gives them peculiar value,
the loss of which cannot adequately be compensated in damages. Executive
further acknowledges that the Company has operations and sells products and
services throughout the United States and world-wide. Therefore, Executive
agrees that he will not, except with the written consent of the Company, for a
continuous period of twelve (12) months commencing immediately following
termination of Executive's employment, directly or indirectly engage or become
interested in, as a partner, director, officer, principal, agent or employee,
any business which competes with products produced, marketed or in development
by the Company (including its subsidiaries) at the time of such termination.
(b) Executive acknowledges that in his employment he is or will be
making use of, acquiring or adding to, confidential information of the Company,
and is or will be familiar with its businesses, activities, trade secrets,
formulas, employees, customer lists, suppliers and the like. Therefore, in
order to protect confidential information and to protect other employees who
depend upon the Company for regular employment, Executive agrees that, except in
connection with his employment by the Company or its subsidiaries, or with the
consent of the Company, he will not during or after the term of his employment
in any way utilize any
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of said confidential information and he will not copy, reproduce, or take with
him the original or any copies of said confidential information and will not
disclose any of said confidential information to anyone. This covenant shall be
in addition to, and not in limitation of, any existing agreement of Executive
regarding confidential information, which shall remain in full force and effect.
(c) In the event of a breach of the covenants contained in this
section 8, the Company shall be entitled to an injunction restraining such
breach in addition to any other remedies provided by law.
(d) If any provision of this Section 8 is adjudged by a court to be
invalid or unenforceable, the same will in no way affect any other provision of
this Section 8 or any other part of this Agreement, the application of such
provision in any other circumstances or the validity or enforceability of this
Agreement. If any such provision, or any part thereof, is held to be
unenforceable because of the duration of such provision or the area covered
thereby, the parties agree that the court making such determination will have
the power to reduce the duration and/or area of such provision, and/or to delete
specific words or phrases, and in its reduced form such provision will then be
enforceable and will be enforced.
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9. TERMINATION BY THE COMPANY.
(a) DISABILITY. The Company may terminate the active employment of
the Executive if, in the reasonable judgment of the board of directors of the
Company, he becomes unable to satisfactorily perform his duties and
responsibilities hereunder during the term of his employment because of mental
or physical disability. Upon such termination, the Executive shall be relieved
of all further obligations hereunder except obligations pursuant to Section 8.
In the event of such termination, the Company shall continue to pay to the
Executive, until the end of the term of his employment hereunder, a salary at a
rate equal to the annual rate in effect on the date of such termination (as set
forth in Section 4). Notwithstanding the foregoing, the amounts so payable
shall be reduced by any amounts payable to the Executive during the term of his
employment hereunder pursuant to any disability benefit, governmental benefit or
wage continuation plan of the Company in effect.
(b) DEATH. In the event of the death of the Executive during the
Term, the Company shall make, until the end of the term of employment hereunder,
payments at a rate equal to one-half of the annual rate in effect on the date of
death. The payments to be made under this Section 9(b) shall not be reduced by
reason of any insurance proceeds payable directly to the Executive's
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beneficiaries or estate pursuant to insurance carried or provided by the
Company, and shall be made to such beneficiary as the Executive may designate
for that purpose in written notice given to the Secretary of the Company prior
to his death, or if the Executive has not so designated, then to the personal
representative of his estate.
(c) TERMINATION FOR CAUSE. In the event of fraud, defalcation, or
other similar dishonesty of the Executive involving the operations, funds or
other assets of the Company or its subsidiaries is established, or Executive is
convicted of a crime involving moral turpitude, or Executive breaches the term
of this Agreement in any material respect, then the Company may terminate this
Agreement and the employment of the Executive upon giving written notice to the
Executive and thereafter, neither the Executive, his surviving spouse or his
estate shall be entitled to any further salary or compensation from the Company,
but the Executive's obligations under Section 8 shall remain in effect. The
parties agree that the provisions of this Section 9(c) shall not be utilized in
any manner by the Company to avoid, negate or frustrate application of the
provisions of Section 10 of this Agreement.
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10. TERMINATION BY EXECUTIVE.
(a) IF POSITION CHANGES. It is the intention of the parties that the
Executive will continue in his present position with the Company during the
entire Term. In the event that, at any time during the Term, Executive, without
his consent, does not hold such position with the Company or a position with
duties and responsibilities that would normally be expected of an officer of the
Company with that position (except by reason of termination under Section l0),
Executive may terminate his employment by giving to the Secretary of the Company
written notice of such termination within three months after this right to
terminate arises.
(b) IF LOCATION OF OFFICE CHANGES. In the event that, at any time
during the term of employment, the Company, without employee's consent, changes
the location of the Company's offices at which employee works to a location more
than 25 miles from its present location, the employee may terminate his
employment with the Company by giving to the Secretary of the Company notice in
writing within three months after this right to termination arises.
(c) LUMP SUM PAYMENT. In the event of termination pursuant to
subsection (a) or (b) (whether or not exercisable at the time) of this Section
10, the Company shall pay to the Executive, in a lump sum and within 30 days of
such termination, an amount equal to the aggregate cash compensation (based on
the
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annual rate in effect at the time of such termination) which would have been
payable to the Executive during the remaining portion of the Term had such
termination not occurred, including any benefits payable to Executive. The
amount payable to the Executive in connection with his participation in any
stock option plan or program of the Company (or any parent or affiliate of the
Company) shall be equal to the difference between the fair market value at the
effective date of termination of all outstanding options (whether or not
exercisable at the time) then held by the Executive less the aggregate option
price that would be payable by the Executive to acquire such shares. Such
amount may be paid to the Executive in cash, or at the Company's option, shall
be deemed to be received by the Executive if the Executive is given the
opportunity to make a "cashless exercise" of the vested portion of the shares.
11. ASSIGNMENT. This Agreement is binding upon and shall be for the
benefit of the successors and assigns of the Company, including any corporation
or any other form of business organization with which the Company may merge or
consolidate, or to which it may transfer substantially all of its assets.
Executive shall not assign his interest in this Agreement or any part thereof.
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12. CONSENT OF THE COMPANY. Any act, request, approval, consent or
opinion of the Company under this Agreement, must be in writing and may be
authorized, given or expressed only by resolution of the board of directors of
the Company, or by such other person as the board of directors of the Company
may designate.
13. NOTICES. Any notice required hereunder to be given shall be in
writing and if:
(a) by the Company to Executive shall be directed to him at his
address set forth below, or to such other address as he shall have furnished in
writing to the Company; or
(b) by Executive to the Company shall be directed to Hach Company,
5600 Lindbergh Drive, Loveland, Colorado 80537, Attn: Secretary, or to such
designee or other address as the board of directors shall name and have
furnished in writing to Executive.
14. GOVERNING LAW. This Agreement shall be governed by and construed in
accordance with the laws of the State of Colorado applicable to contracts made
and to be performed therein.
15. ENFORCEMENT EXPENSES AND ARBITRATION. The Company agrees to reimburse
the Executive for all costs and expenses incurred by him (including the
reasonable fees of his counsel) in successfully enforcing any of his rights
under this Agreement or any claim arising out of the breach thereof. In
addition, the
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parties acknowledge the relative economic power of the Company versus the
Executive, and the ability of the Company to resist the conclusion of litigation
should the Executive institute legal proceedings to enforce this Agreement or to
recover damages for the breach thereof. In recognition of this, any controversy
or claim arising out of or relating to this Agreement shall be settled by
arbitration in accordance with the Commercial Arbitration Rules of the American
Arbitration Association, at the sole election of the Executive; provided,
however, that an action by the Company to enforce its rights under Section 8
hereof shall be excluded from the arbitration provisions of this Section 15.
Any such election by Executive shall be made by written notice given to the
Company any time after such controversy or claim arises, and in the event
Executive is served with process relating to any court proceeding concerning any
such claim or controversy commenced by the Company, such election, to be
effective, shall be made by written notice within 15 days of the time Executive
is served with such process. Commencement of court proceedings by Executive
shall be deemed an election not to arbitrate. In the event the Company
commences court proceedings (other than an action by the Company solely to
enforce its rights under Section 8 hereof) and is given notice of the election
to arbitrate by the Executive within the time period set forth above, the
Company agrees to promptly dismiss such court
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proceedings and submit to arbitration. In the event of such arbitration,
judgment upon the award rendered by the arbitrators may be entered in any court
having jurisdiction thereof.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date first above written.
HACH COMPANY
By: /s/Bruce Hach
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Title: President
/s/ Kenneth Ogan
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3465 Lockwood #N61
Fort Collins, CO 80525
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Address
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EXHIBIT (10)L.
(ITEM 601(10))
HACH COMPANY
1995 NON-EMPLOYEE DIRECTOR STOCK PLAN
ARTICLE I - PURPOSE OF THE PLAN
The purpose of the Hach Company 1995 Non-Employee Director Stock Plan is to
promote the long-term growth of Hach Company by increasing the proprietary
interest of Non-Employee Directors in Hach Company and to attract and retain
highly qualified and capable Non-Employee Directors.
ARTICLE II - DEFINITIONS
Unless the context clearly indicates otherwise, the following terms shall
have the following meanings:
2.1 "ANNUAL RETAINER" means the annual cash retainer fee payable by the
Corporation to a Non-Employee Director for services as a director of the
Corporation, as such amount may be changed from time to time.
2.2 "AWARD" means an award granted to a Non-Employee Director under the
Plan in the form of Options or Shares, or any combination thereof.
2.3 "BOARD" means the Board of Directors of Hach Company.
2.4 "CORPORATION" means Hach Company.
2.5 "FAIR MARKET VALUE" shall mean the value of one Share of Hach stock
determined as follows:
(a) If the shares are traded on an exchange, the price at which
Shares traded at the close of business on the date of valuation; or
(b) If the Shares are traded over-the-counter on the NASDAQ System,
the closing price if one is available, or the mean between the bid and asked
prices on said System at the close of business on the date of valuation; or
(c) if neither (a) nor (b) above applies, the fair market value as
determined by the Board or the Committee in good faith. Such determination
shall be conclusive and binding on all persons.
2.6 "OPTION" means an Option to purchase Shares awarded under Article VIII
or IX which does not meet the requirements of Section 422 of the Internal
Revenue Code of 1986, as amended, or any successor law.
2.7 "OPTION GRANT DATE" means the date upon which an Option is granted to
a Non-Employee Director.
2.8 "OPTIONEE" means a Non-Employee Director of the Corporation to whom an
Option has been granted or, in the event of such Non-Employee Director's death
prior to the expiration of an Option, such Non-Employee Director's executor,
administrator, beneficiary or similar person, or, in the event of a transfer
permitted by Article VII hereof, such permitted transferee.
2.9 "NON-EMPLOYEE DIRECTOR" means a director of the Corporation who is not
an employee of the Corporation or any subsidiary of the Corporation.
2.10 "PLAN" means the Hach Company 1995 Non-Employee Director Stock Plan,
as amended and restated from time to time.
<PAGE>
2.11 "STOCK AWARD DATE" means the date on which Shares are awarded to a
Non-Employee Director.
2.12 "SHARES" means shares of the Common Stock, par value $1.00 per share,
of the Corporation.
2.13 "STOCK OPTION AGREEMENT" means a written agreement between a Non-
Employee Director and the Corporation evidencing an Option.
ARTICLE III - ADMINISTRATION OF THE PLAN
3.1 ADMINISTRATOR OF THE PLAN. The Plan shall be administered by a
Committee appointed by the Board and consisting of two or more Directors who are
not eligible to participate in the Plan ("Committee").
3.2 AUTHORITY OF COMMITTEE. Subject to the provisions of the Plan, the
Committee shall have full power and authority to: (i) interpret and construe
the Plan and adopt such rules and regulations as it shall deem necessary and
advisable to implement and administer the Plan and (ii) designate persons other
than members of the Committee to carry out its responsibilities, subject to such
limitations, restrictions and conditions as it may prescribe, such
determinations to be made in accordance with the Committee's best business
judgment as to the best interests of the Corporation and its stockholders and in
accordance with the purposes of the Plan, provided, however that the Committee
shall have no discretion with respect to the eligibility or selection of
Non-Employee Directors to receive options under the Plan, the number of shares
of stock subject to any such options or the Plan, or the purchase price
thereunder, nor shall the Committee have authority to take any action or make
any determination that would materially increase the benefits accruing to
participants under the Plan. The Committee may delegate administrative duties
under the Plan to one or more agents as it shall deem necessary or advisable.
3.3 DETERMINATIONS OF COMMITTEE. A majority of the Committee shall
constitute a quorum at any meeting of the Committee, and all determinations of
the Committee shall be made by a majority of its members. Any determination of
the Committee under the Plan may be made without notice or a meeting of the
Committee by a written consent signed by all members of the Committee.
3.4 EFFECT OF COMMITTEE DETERMINATIONS. No member of the Committee or the
Board shall be personally liable for any action or determination made in good
faith with respect to the Plan or any Award or to any settlement of any dispute
between a Non-Employee Director and the Corporation. Any decision or action
taken by the Committee or the Board with respect to an Award or the
administration or interpretation of the Plan shall be conclusive and binding
upon all persons.
ARTICLE IV - AWARDS UNDER THE PLAN
Awards in the form of Options shall be granted to Non-Employee Directors in
accordance with Article VIII. Awards in the form of Options or Shares, or a
combination thereof, may be granted to Non-Employee Directors in accordance with
Article IX. Each Option granted under the Plan shall be evidenced by a Stock
Option Agreement in such form and containing such terms and conditions (not
inconsistent with the Plan) as the Committee shall adopt.
ARTICLE V - ELIGIBILITY
Non-Employee Directors of the Corporation shall be eligible to participate
in the Plan in accordance with Articles VIII and IX.
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ARTICLE VI - SHARES SUBJECT TO THE PLAN
Subject to adjustment as provided in Article XII, the aggregate number of
Shares which may be issued upon the award of Shares and the exercise of Options
shall not exceed one hundred fifty thousand (150,000) Shares. To the extent
that Shares subject to an outstanding Option are not issued or delivered by
reason of the expiration, termination, cancellation or forfeiture of such Option
or by reason of the delivery of Shares (either actually or by attestation) to
pay all or a portion of the exercise price of such Option, then such Shares
shall again be available under the Plan.
ARTICLE VII - NON-TRANSFERABILITY OF OPTIONS
All Options granted under the Plan shall not be transferable by a Non-
Employee Director during his or her lifetime and may not be assigned, exchanged,
pledged, transferred or otherwise encumbered or disposed of except by court
order, will or by the laws of descent and distribution. Notwithstanding the
foregoing, in the event Options may be transferable without failing to comply
with Rule 16b-3 under the Securities Exchange Act of 1934, as amended, then each
Option shall be transferable to the extent set forth in the related Stock Option
Agreement, as determined by the Committee (provided that all Options granted
under Article VIII with the same Option Grant Date shall have identical
provisions relating to the transferability of such Options). In the event that
any Option is thereafter transferred as permitted by the preceding sentence, the
permitted transferee thereof shall be deemed the Optionee hereunder. Options
shall be exercisable during the Optionee's lifetime only by the Optionee or by
the Optionee's guardian, legal representative or similar person.
ARTICLE VIII - NON-ELECTIVE OPTIONS
Each Non-Employee Director shall be granted Options, subject to the
following terms and conditions.
8.1 TIME OF GRANT. On the date of the adoption of this Plan by the Board
each present Non-Employee Director shall be granted an Option to purchase Five
Thousand (5,000) Shares. Each Non-Employee Director who is first elected or
begins to serve as a Non-Employee Director after the adoption of this Plan by
the Board shall be granted an Option to purchase Two Thousand (2,000) Shares on
the date he or she is elected. On the first business day of September of each
year (or, if later, on the date on which a person is first elected or begins to
serve as a Non-employee director), each person who is a Non-Employee Director
shall be automatically granted an Option to purchase One Thousand (1,000) Shares
which number shall be pro-rated if such Non-Employee Director is first elected
or begins to serve as a Non-Employee Director on a date other than the date of
an annual meeting of stockholders.
8.2 PURCHASE PRICE. The purchase price per Share under each Option
granted pursuant to this Article shall be 100% of the Fair Market Value per
Share on the Option Grant Date.
8.3 EXERCISE OF OPTIONS. Each Option shall be fully exercisable on and
after that date which is six months after the Option Grant Date and, subject to
Article X, shall not be exercisable prior to such date. In no event shall the
period of time over which the Option may be exercised exceed ten years from the
Option Grant Date. An Option, or portion thereof, may be exercised in whole or
in part only with respect to whole Shares.
Shares shall be issued to the Optionee pursuant to the exercise of an
Option only upon receipt by the Corporation from the Optionee of payment in full
either in cash or by surrendering (or attesting to the ownership of) Shares
together with proof acceptable to the Committee that such Shares have been owned
by the Optionee for at least six months prior to the date of exercise of the
Option, or a combination of cash and Shares, in an amount or having a combined
value equal to the aggregate purchase price for the Shares subject to the Option
or portion thereof being exercised. The Shares issued to an Optionee for the
portion of any Option exercised by attesting to the ownership of Shares shall
not exceed the number of Shares issuable as a result of such exercise
(determined as though payment in full therefor were being made in cash) less the
number of Shares for which attestation of ownership is submitted. The value of
owned Shares submitted (directly or by attestation) in full or partial payment
<PAGE>
for the Shares purchased upon exercise of an Option shall be equal to the
aggregate Fair Market Value of such owned Shares on the date of the exercise of
such Option.
8.4 TERMINATION OF SERVICE. In the event of the termination of service on
the Board by the holder of any Option by reason of voluntary resignation, (other
than for disability or mandatory retirement) or failure, as a nominee, to be
elected at an annual meeting of stockholders, the then outstanding Options of
such holder shall be exercisable on their stated exercisable date and shall
expire three years after such termination, or on their stated expiration date,
whichever occurs first. In the case of removal for cause, the then outstanding
Options of such holder shall be exercisable only to the extent that they were
exercisable on the date of such removal and shall expire six months after such
removal or on their stated expiration date, whichever occurs first. Options
that are not exercisable on the date of such removal shall be forfeited.
8.5 RETIREMENT. In the event of termination of service by reason of
mandatory retirement pursuant to Board policy, the then outstanding Options
shall be exercisable on their stated exercisable dates and shall expire on their
stated expiration dates. In the case of retirement prior to the retirement date
required by mandatory Board policy, all Options outstanding on the retirement
date shall be exercisable on their stated exercisable date and shall be expire
three years after the retirement date, or on their stated expiration date,
whichever comes first.
8.6 DISABILITY. In the event of termination of service by reason of
disability (as defined herein), the outstanding Options shall be exercisable on
their stated exercisable dates and shall expire on their stated expiration
dates. "Disability" as used herein shall mean an Optionee's inability to engage
in any substantial gainful activity because of any medically determinable
physical or mental impairment which can be expected to result in death or which
has lasted, or can be expected to last, for a continuous period of six months or
longer.
8.7 DEATH. In the event of the death of the holder of any Option, each
of the then outstanding Options of such holder shall become immediately
exercisable, and shall be exercisable by the holder's beneficiary at any time
until the expiration date of the Option (as may be adjusted pursuant to Sections
8.4 or 8.5). Optionee shall designate beneficiaries in accordance with
procedures established by the Committee.
8.8 PAYMENT OF TAX WITHHOLDING. In order to enable the Corporation to
meet any applicable federal, state or local withholding tax requirements arising
as a result of the exercise of an Option, the Optionee shall pay the Corporation
the amount of tax to be withheld or may elect to satisfy such obligation by
delivering to the Corporation Shares owned by the Optionee for six months prior
to exercising the Option, or by making a payment to the Corporation consisting
of a combination of cash and such Shares. The value of any Share of common
stock delivered to the Corporation pursuant to this Section 8.8 shall be the
Fair Market Value on the date to be used to determine the amount of tax to be
withheld.
ARTICLE IX - ELECTIVE OPTIONS AND SHARES
Each Non-Employee Director shall be granted Options or Shares, or a
combination thereof, subject to the following terms and conditions:
9.1 TIME OF GRANT. On the first business day of September of each year,
Options or Shares, or a combination thereof, shall be granted to each
Non-Employee Director who, at least six months prior thereto, files with the
Committee or its designee a written election to receive Options or Shares, or a
combination thereof, in lieu of all or a portion of such Non-Employee Director's
Annual Retainer. In the event a Non-Employee Director does not file a written
election in accordance with the preceding sentence by reason of becoming a
Non-Employee Director after the date which is six months prior to the first
business day of September in any year, Options or Shares, or a combination
thereof, shall be granted to such Non-Employee Director on the first day (the
"Effective Date") which is six months after the date such Non-Employee Director
files with the Committee or its designee a written election to receive Options
or Shares, or a combination thereof, in lieu of all or a portion of such
Non-Employee Director's Annual Retainer; provided, however, that such election
may apply only to the portion of such
<PAGE>
Non-Employee Director's Annual Retainer determined by multiplying such
Non-Employee Director's Annual Retainer by a fraction, the numerator of which
is the number of days from and including the Effective Date to and including the
last day of the period for which such Annual Retainer would otherwise be
payable, and the denominator of which is 365 or 366, as the case may be.
An election pursuant to the first sentence of this Section 9.1 may be revoked or
changed only on or prior to the date which is six months prior to the first
business day of the following September. An election pursuant to the second
sentence of this Section 9.1 shall be irrevocable.
9.2 NUMBER AND TERMS OF OPTIONS. The number of Shares subject to an
Option granted pursuant to this Article shall be the number of whole Shares
equal to (i) the product of four (4) times the portion of the Annual Retainer
which the Non-Employee Director has elected pursuant to Section 9.1 shall be
payable in Options, divided by (ii) the Fair Market Value per Share on the
Option Grant Date. Any fraction of a Share shall be disregarded and the
remaining amount of such Annual Retainer shall be paid in cash. The purchase
price per share under each Option granted pursuant to this Article shall be 100%
of the Fair Market Value per Share on the Option Grant date. Each Option
granted pursuant to this Article shall be exercisable in accordance with and
subject to the terms and provisions of Article VIII other than Section 8.1
thereof.
9.3 NUMBER OF SHARES. The Number of Shares granted pursuant to this
Article shall be the number of whole Shares equal to (i) the portion of the
Annual Retainer which the Non-Employee Director has elected pursuant to Section
9.1 shall be payable in Shares, divided by (ii) the Fair Market Value per Share
on the Stock Award Date. Any fraction of a Share shall be disregarded and the
remaining amount of such Annual Retainer shall be paid in cash. Upon an Award
of Shares to a Non-Employee Director, the stock certificate representing such
Shares shall be issued and transferred to the Non-Employee Director, whereupon
the Non-Employee Director shall become a stockholder of the Corporation with
respect to such Shares and shall be entitled to vote the Shares.
<PAGE>
ARTICLE X - CHANGE OF CONTROL
10.1 EFFECT OF CHANGE OF CONTROL. Upon the occurrence of an event of
"Change of Control", as defined below, any and all outstanding Options shall
become immediately exercisable.
10.2 DEFINITION OF CHANGE CONTROL. A "Change of Control" shall occur when:
(a) the stockholders of the Corporation approve a definitive
agreement or plan to merge or consolidate the Corporation with or into another
corporation (other than a merger or consolidation which would result in the
Voting Stock (as defined below) of the Corporation outstanding immediately prior
thereto continuing to represent (either by remaining outstanding or by being
converted into voting securities of the surviving entity) more than fifty
percent of the combined voting power of the voting securities of the Corporation
or such surviving entity outstanding immediately after such merger or
consolidation), or to sell, or otherwise dispose of, all or substantially all of
the Corporation's property and assets, or to liquidate the Corporation; or
(b) the individuals who are Continuing Directors of the Corporation
(as defined below) cease for any reason to constitute at least a majority of the
Board of the Corporation.
The term "Continuing Director" means (i) any member of the Board who is a
member of the Board on September 1, 1995 or (ii) any person who subsequently
becomes a member of the Board whose nomination for election or election to the
Board is recommended or approved by a majority of the Continuing Directors. The
term "Voting Stock" means all capital stock of the Corporation which by its
terms may be voted on all matters submitted to stockholders of the Corporation
generally.
ARTICLE XI - AMENDMENT AND TERMINATION
The Board may amend the Plan from time to time or terminate the Plan at any
time; provided, however, that no action authorized by this Article shall
adversely change the terms and conditions of an outstanding Option without the
Optionee's consent and, subject to Article XII, the number of Shares subject to
an Option granted under Article VIII, the purchase price therefor, the date of
grant of any such Option and the termination provisions relating to such Option,
shall not be amended more than once every six months, other than to comply with
changes in the Internal Revenue Code of 1986, as amended, or any successor law,
or the Employee Retirement Income Security Act of 1974, as amended, or any
successor law, or the rules and regulations thereunder.
ARTICLE XII - ADJUSTMENT PROVISIONS
12.1 If the Corporation shall at any time change the number of issued
Shares without new consideration to the Corporation (such as by stock dividend,
stock split, recapitalization, reorganization, exchange of shares, liquidation,
combination or other change in corporate structure affecting the Shares) or make
a distribution of cash or property which has a substantial impact on the value
of issued Shares, the total number of Shares reserved for issuance under the
Plan shall be appropriately adjusted and the number of Shares covered by each
outstanding Option and the purchase price per Share under each outstanding
Option and the number of Shares underlying Options to be issued annually
pursuant to Section 8.1 shall be adjusted so that the aggregate consideration
payable to the Corporation and the value of each such Option shall not be
changed.
12.2 Notwithstanding any other provision of the Plan, and without affecting
the number of Shares reserved or available hereunder, the Committee shall
authorize the issuance, continuation or assumption of outstanding Options or
provide for other equitable adjustments after changes in the Shares resulting
from any merger, consolidation, sale of assets, acquisition of property or
stock, recapitalization, reorganization or similar occurrence in which the
Corporation is the continuing or surviving corporation, upon such terms and
conditions as it may deem necessary to preserve Optionees' rights under the
Plan.
<PAGE>
12.3 In the case of any sale of assets, merger, consolidation or
combination of the Corporation with or into another corporation other than a
transaction in which the Corporation is the continuing or surviving corporation
and which does not result in the outstanding Shares being converted into or
exchanged for different securities, cash or other property, or any combination
thereof (an "Acquisition"), any Optionee who holds an outstanding Option shall
have the right (subject to the provisions of the Plan and any limitation
applicable to the Option) thereafter and during the term of the Option, to
receive upon exercise thereof the Acquisition Consideration (as defined below)
receivable upon the Acquisition by a holder of the number of Shares which would
have been obtained upon exercise of the Option or portion thereof, as the case
may be, immediately prior to the Acquisition. The term "Acquisition
Consideration" shall mean the kind and amount of shares of the surviving or new
corporation, cash, securities, evidence of indebtedness, other property or any
combination thereof receivable in respect of one Share of the Corporation upon
consummation of an Acquisition.
ARTICLE XIII- COMPLIANCE WITH SEC REGULATIONS
It is the Corporation's intent that the Plan comply in all respects with
Rule 16b-3 under the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), and any related regulations. If any provision of this Plan is later
found not to be in compliance with such Rule and regulations, the provision
shall be deemed null and void. All grants and exercises of Options under this
Plan shall be executed in accordance with the requirements of Section 16 of the
Exchange Act and regulations promulgated thereunder.
ARTICLE XIV - MISCELLANEOUS PROVISIONS
14.1 RIGHTS AS STOCKHOLDER. An Optionee under the Plan shall have no
rights as a holder of Corporation common stock with respect to Option grants
hereunder, unless and until certificates for shares of such stock are issued to
the Optionee, or such shares are credited to the Optionee's Account.
14.2 COMPLIANCE WITH LEGAL REGULATIONS. During the term of the Plan and
the term of any Options granted under the Plan, the Corporation shall at all
times reserve and keep available such number of shares as may be issuable under
the Plan, and shall seek to obtain from any regulatory body having jurisdiction
any requisite authority required in the opinion of counsel for the Corporation
in order to grant Options to purchase Shares of Corporation common stock or to
issue such stock pursuant thereto. If in the opinion of counsel for the
Corporation the transfer, issue or sale of any shares of its stock under the
Plan shall not be lawful for any reason, including the inability of the
Corporation to obtain from any regulatory body having jurisdiction authority
deemed by such counsel to be necessary to such transfer, issuance or sale, the
Corporation shall not be obligated to transfer, issue or sell any such shares.
In any event, the Corporation shall not be obligated to transfer, issue or sell
any shares to any participant unless a registration statement which complies
with the provisions of the Securities Act of 1933, as amended (the "Securities
Act"), is in effect at the time with respect to such Shares or other appropriate
action has been take under and pursuant to the terms and provisions of the
Securities Act, or the Corporation receives evidence satisfactory to the
Committee that the transfer, issuance or sale of such shares, in the absence of
an effective registration statement or other appropriate action, would not
constitute a violation of the terms and provisions of the Securities Act.
14.3 COSTS AND EXPENSES. The costs and expenses of administering the Plan
shall be borne by the Corporation and not charged to any Option or to any
Non-employee Director receiving an Option.
ARTICLE XV - EFFECTIVE DATE
The Plan shall be submitted to the stockholders of the Corporation for
approval and, if approved by a majority of all the votes cast at the 1996 annual
meeting of stockholders, shall become effective as of the date of approval by
the Board. If stockholder approval is not obtained at the 1996 annual meeting
of stockholders, the Plan shall be nullified.
<PAGE>
TO OUR FELLOW SHAREHOLDERS
Fiscal year 1996 was an exciting and rewarding year for Hach Company. Not only
did we make significant improvements in our financial performance, we also did
much to ensure success in the years to come.
Our financial performance was highlighted by all-time records for net sales and
net income. For fiscal year 1996, net sales increased 9% to $114,285,000 while
net income increased 21% to $11,254,000. The prior year's net income was
adversely affected by a one-time charge of approximately $775,000 related to our
decision to discontinue the design and manufacture of electrochemical products.
Without this charge, fiscal year 1996 net income still increased 15% over the
1995 amount. As a percent of net sales, net income increased to 9.8% in 1996,
the highest amount recorded in recent history. The net sales increase was led
once again by international sales which increased 15% from the prior year. Sales
of our more expensive process instruments rebounded nicely, after a
disappointing year in 1995.
To help ensure our success in the years to come we have done several things.
First, throughout fiscal year 1996 we spent a great deal of time and effort
planning our strategy for the future. We engaged a nationally known strategic
analysis firm to assist in the planning process. During this process we
learned a great deal about our customers, competitors and the markets we
serve. From this planning process we have outlined several strategies we
believe will help us attain our long-term goals of consistent double digit
sales and income growth and improved shareholder value.
Second, we hired a new Vice-President for Research and Development. Dr.
Kenneth Ogan joined our senior management team in February 1996. Dr. Ogan
holds a Ph.D. in Chemistry and has over twenty years of work experience with
major international scientific instrument manufacturing companies. His
leadership and past experience will benefit this important area of the Company.
Third, we have made a decision to increase our investments in both the
Marketing and Research and Development areas. This increased investment will
allow us to further our efforts to simplify the technology within our product
offerings. In addition, by investing more resources in these areas we believe
we can bring more new products to market faster, and thus increase our growth
rate.
[BAR CHART] [BAR CHART] [BAR CHART] [BAR CHART]
Income per Share Sales per
$ Employee
($ thousands)
<PAGE>
[PICTURE]
Finally, in fiscal year 1996 we began using two performance measurement tools,
Economic Profit and Economic Value Added, to measure the value we are creating
for Hach shareholders. Economic Profit is defined as net operating profit
after taxes, in excess of a computed capital charge for average operating
capital employed. Economic Value Added represents the growth in Economic
Profit from year to year. We believe these measurement tools will provide an
accurate assessment of our performance. We have prepared a new corporate
measures brochure that explains Economic Profit and Economic Value Added as
well as two other corporate measures, Customer Value Added and Employee
Perception Measure. To obtain a copy of this brochure, see page 28.
As the worldwide demand for quality water continues to grow, we remain
confident of our abilities to meet the challenges we face. Through the
initiatives we have taken in 1996, we are well positioned to take advantage of
these opportunities.
During fiscal year 1996 we continued to focus on making the entire
organization more
[BAR CHART] [BAR CHART] [BAR CHART] [BAR CHART]
<PAGE>
efficient. Selling, general and administrative expenses increased by only 2%
in 1996 while sales increased 9%. Through normal attrition, our workforce
decreased by approximately 2% during fiscal year 1996. Sales per employee
increased by 10% to $132,200 compared to $120,000 for the previous year.
Our strong financial performance has put us in an enviable cash position.
During fiscal year 1996, cash and investment balances grew by more than
$9,000,000 to a year-end total in excess of $30,000,000 and we have remained
debt free. We continue to explore ways, including acquisitions of
complimentary product lines, to use these funds along with the cash we expect
to generate in the future.
In November of 1995, the Hach Board of Directors approved a 20% dividend
increase, raising our regular quarterly cash dividend to six cents per share.
This marks the 15th consecutive year dividends have increased.
We are grateful to the employees of Hach Company for their dedicated service.
Without their support and cooperation our success would not be possible. We
are confident their continued efforts will translate into increased
shareholder value.
Sincerely,
/s/ Kathryn Hach-Darrow
Kathryn Hach-Darrow
Chairman of the Board
and Chief Executive Officer
/s/ Bruce J. Hach
Bruce J. Hach
President
and Chief Operating Officer
<PAGE>
HACH COMPANY AND SUBSIDIARIES
COMPARATIVE FINANCIAL DATA--10-YEAR SUMMARY
(THOUSANDS OF DOLLARS EXCEPT RATIO AND SHARE DATA)
<TABLE>
<CAPTION>
SUMMARY OF OPERATIONS Years ended April 30, 1996 1995 1994 1993 1992 1991
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net sales:
United States . . . . . . . . . . . . $ 73,472 $ 69,867 $ 69,100 $ 62,497 $ 57,148 $ 50,476
International . . . . . . . . . . . . 40,813 35,402 31,269 31,504 27,591 21,844
- ----------------------------------------------------------------------------------------------------------------------------------
Worldwide . . . . . . . . . . . . . . 114,285 105,269 100,369 94,001 84,739 72,320
Cost of sales. . . . . . . . . . . . . 57,839 51,994 49,534 46,623 41,938 36,094
Selling, general and administrative
expense. . . . . . . . . . . . . . 33,000 32,240 30,802 28,685 25,936 22,360
Research and development expense . . . 7,464 6,875 6,586 5,752 4,951 4,372
Provision to reduce carrying value
of electrochemical assets. . . . . -- 775 -- -- -- --
Interest income. . . . . . . . . . . . 1,324 661 467 427 312 296
Interest expense . . . . . . . . . . . 6 1 12 48 119 177
Income taxes . . . . . . . . . . . . . 6,046 4,775 4,842 4,700 4,357 3,648
Net income . . . . . . . . . . . . . . 11,254 9,270* 9,508+ 8,620 7,750 5,965
Per share data:++
Net income. . . . . . . . . . . . . . 0.99 0.81* 0.84+ 0.76 0.68 0.53
Cash dividends. . . . . . . . . . . . 0.220 0.170 0.136 0.128 0.106 0.090
OTHER DATA
Current ratio. . . . . . . . . . . . . 4.70 4.55 4.14 3.49 2.72 2.79
Working capital. . . . . . . . . . . . $ 41,869 $ 38,596 $ 30,699 $ 25,124 $ 20,977 $ 17,631
Property, plant and equipment, net . . 29,112 29,128 28,903 29,270 28,094 25,024
Total assets . . . . . . . . . . . . . 93,295 84,258 74,358 66,971 61,619 52,849
Long-term liabilities. . . . . . . . . 1,347 2,070 2,081 2,246 2,104 2,593
Stockholders' equity . . . . . . . . . 78,820 71,328 62,497 54,651 47,301 40,401
Equity per share at year end++ . . . . 6.93 6.27 5.49 4.81 4.17 3.56
Sales per employee . . . . . . . . . . 132 120 112 105 98 .90
Weighted average shares outstanding++. 11,368,126 11,385,355 11,385,793 11,361,958 11,348,444 11,319,723
<CAPTION>
SUMMARY OF OPERATIONS Years ended April 30, 1990 1989 1988 1987
- -------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net sales:
United States . . . . . . . . . . . . $ 45,645 $ 40,598 $ 36,056 $ 32,0462
International . . . . . . . . . . . . 17,456 15,253 11,579 9,860
- -------------------------------------------------------------------------------------------------
Worldwide . . . . . . . . . . . . . . 63,101 55,851 47,635 41,906
Cost of sales. . . . . . . . . . . . . 32,193 27,392 23,698 21,444
Selling, general and administrative
expense. . . . . . . . . . . . . . 18,912 17,619 15,564 13,848
Research and development expense . . . 3,991 3,519 2,984 2,648
Provision to reduce carrying value
of electrochemical assets. . . . . -- -- -- --
Interest income. . . . . . . . . . . . 311 332 313 250
Interest expense . . . . . . . . . . . 244 283 322 367
Income taxes . . . . . . . . . . . . . 3,007 2,815 2,250 1,799
Net income . . . . . . . . . . . . . . 5,065 4,555 3,130 2,050
Per share data++
Net income. . . . . . . . . . . . . . 0.45 0.40 0.28 0.18
Cash dividends. . . . . . . . . . . . 0.077 0.065 0.052 0.044
OTHER DATA
Current ratio. . . . . . . . . . . . . 2.89 2.76 3.57 3.19
Working capital. . . . . . . . . . . . $ 16,546 $ 14,555 $ 15,293 $ 12,773
Property, plant and equipment, net . . 21,678 18,221 14,493 13,698
Total assets . . . . . . . . . . . . . 47,217 42,530 37,201 33,826
Long-term liabilities. . . . . . . . . 3,131 3,629 4,259 4,078
Stockholders' equity . . . . . . . . . 35,328 30,610 27,001 23,922
Equity per share at year end++ . . . . 3.12 2.71 2.40 2.13
Sales per employee . . . . . . . . . . 85 82 78 71
Weighted average shares outstanding++. 11,311,315 11,304,776 11,259,349 11,215,338
</TABLE>
*Net income for 1995 includes a one-time pretax charge of $775,000 or $.05 per
share after tax for the provision to reduce carrying value of electrochemical
assets.
+Net income for 1994 includes a benefit of $448,000 or $.04 per share for the
cumulative effect of a change in accounting for income taxes.
++All share and per share amounts have been restated to give effect to the
five-for-four stock split in April 1994, the three-for-two stock split in June
1992, and the five-for-four stock splits in fiscal 1991, 1990 and 1989. (See
Note 4 to the consolidated financial statements.)
14 [CENTER SPREAD] 15
<PAGE>
HACH COMPANY AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
RESULTS OF OPERATIONS:
1996 COMPARED TO 1995
Net sales were a record $114,285,000, an increase of 8.6% over 1995 net sales
of $105,269,000. The Company's domestic and international net sales increased
5.2% and 15.3% respectively. The domestic increase was due primarily to unit
volume increases in most of the Company's major product lines. The
international sales increase was due to unit volume increases and, to a lesser
degree, a weak U.S. dollar.
Cost of sales increased 11.2% to $57,839,000 from $51,994,000. This cost
item, composed of material, labor and product overhead, increased primarily
because of unit volume increases. The gross margin was 49.4% and 50.6% of net
sales for 1996 and 1995 respectively. The deterioration in gross margin was
due to the mix of products sold.
Selling, general and administrative expense increased 2.4% to $33,000,000 from
$32,240,000. The increase was due primarily to normal wage and salary
increases and costs associated with the increased sales volume.
Research and development expense increased 8.6% to $7,464,000 from $6,875,000.
The increase was primarily due to normal wage and salary increases and
increased emphasis on research and development efforts.
Interest income increased to $1,324,000 from $661,000. The increase was the
result of higher average investments in the current period.
The effective income tax rate was 35.0%, compared to 34.0% in 1995. The
increase in the effective income tax rate was due primarily to an expiration
of the research and experimentation tax credit.
Net dollar sales for the Company's European subsidiary increased 15.4% to
$17,290,000 from $14,989,000, due primarily to a weaker U.S. dollar. The
actual unit sales volume increased by 5.5% from that of the prior year. The
operating income increased 128% to $3,689,000 from $1,619,000. The increase
was due primarily to lower cost for U.S. goods, brought about by a weaker U.S.
dollar on a weighted average basis in fiscal year 1996 as compared to fiscal
year 1995, and lower operating costs resulting from efficiency improvements.
RESULTS OF OPERATIONS:
1995 COMPARED TO 1994
Net sales were a record $105,269,000, an increase of 4.9% over 1994 net sales
of $100,369,000. The Company's domestic net sales increased 1.1% while
international net sales increased 13.2%. The domestic sales increase, due to
strong demand for the Company's chemical products, was offset by weak demand
for the Company's more expensive process instruments. The international sales
increase was due primarily to unit volume increases in most of the Company's
major product lines and, to a lesser degree, a weak U.S. dollar.
Cost of sales increased 5.0% to $51,994,000 from $49,534,000. This cost item,
composed of material, labor and product overhead, increased because of unit
volume increases. The gross margin was 50.6% of net sales for both 1995 and
1994.
Selling, general and administrative expense increased 4.7% to $32,240,000 from
$30,802,000. Selling, general and administration expense for fiscal year 1994
included a one-time charge of approximately $500,000 for costs associated with
the terminated merger with Lawter International, Inc. Without these costs,
selling, general and administrative expense increased 6.4% from the prior
year. The increase was due primarily to normal wage and salary increases,
costs associated with the increased sales volume, and foreign exchange losses
of $401,000 in fiscal year 1995, compared to losses of $13,000 in fiscal year
1994. The foreign exchange loss in 1995 was due to a weaker U.S. dollar.
Research and development expense increased 4.4% to $6,875,000 from $6,586,000.
The increase was due primarily to normal wage and salary increases.
During the fourth quarter of fiscal year 1995, the Company's management
decided to begin out-sourcing the design and manufacture of the Company's
electrochemical products. Accordingly, the Company recorded a one-time pretax
charge of $775,000 for the provision to reduce carrying value of
electrochemical assets.
Interest income increased to $661,000 from $467,000. The increase was the
result of higher average investments and higher interest rates in the current
period, along with interest received on federal income tax refunds. The
refunds were attributable to research and experimentation tax credits.
The effective income tax rate was 34.0%, compared to 34.8% in 1994. The
decrease in the effective income tax rate was due primarily to an increase in
the research and experimentation tax credit.
Net dollar sales for the Company's European subsidiary increased 6.5% to
$14,989,000 from $14,078,000, due primarily to a weaker U.S. dollar. The
actual unit sales volume was approximately the same as that of the prior year.
The operating income increased 70% to $1,619,000 from $952,000. The increase
was due primarily to lower costs for U.S. goods, brought about by the weaker
U.S. dollar on a weighted average basis in fiscal year 1995 as compared to
fiscal year 1994.
CAPITAL RESOURCES AND LIQUIDITY
The Company's liquidity showed continued improvement as reflected by an
increase of $3,290,000 or 8.5% in working capital. Capital resources were
strengthened further as reflected by an increase of $7,492,000 or 10.5% in
stockholders' equity. The Company expects to continue to pay cash dividends
in the future. Company cash dividends paid in 1996, 1995 and 1994 were
$2,502,000, $1,935,000 and $1,548,000, respectively. The Company intends to
continue to increase cash dividend payments, provided long-term growth is not
jeopardized.
The Company monitors cash flow and capital expenditures in great detail as
part of its total budgeting process. During fiscal year 1996, the Company
spent approximately $6,490,000 on capital equipment. During fiscal year 1997,
the Company expects to spend approximately $6,500,000 on capital equipment --
consisting primarily of production equipment and computer and peripheral
equipment to support production, research and development and administration.
Throughout most of the world, the Company transacts business in U.S. dollars.
In Europe, the Company's foreign subsidiary, Hach Europe, transacts business
primarily in Belgium francs. The change in the cumulative currency
translation adjustment in fiscal year 1996 was due primarily to a stronger
U.S. dollar at April 30, 1996, compared to April 30, 1995.
During the fiscal year 1995, the Company's Board of Directors authorized the
Company to repurchase up to $2,000,000 in value of the Company's common stock.
As of April 30, 1996, the Company has repurchased approximately 78,600 shares
at an average cost of $15.00 per share. The Company intends to finance its
capital projects, working capital needs and stock buy-back through existing
cash and cash equivalents, short-term investments and projected cash flow from
operations.
16
<PAGE>
HACH COMPANY AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS (CONTINUED)
EFFECTS OF INFLATION ON THE COMPANY
The Company is affected by inflation to about the same degree as other
American companies. The Company sells a great variety of products and has a
relatively small order size and short production runs. This causes a higher
ratio of support or overhead personnel in the factory, research and selling
functions. Thus, the impact of wage increases is somewhat greater than what
would be typical. As the rate of inflation has declined in recent years, the
impact of inflation on the Company has lessened. However, inflation continues
to increase costs to the Company, including the costs of material, labor and
overhead.
HACH COMPANY AND SUBSIDIARIES
DESCRIPTION OF BUSINESS
GENERAL NATURE AND SCOPE OF BUSINESS
Hach Company is engaged predominantly in a single industry segment
encompassing laboratory instruments, process analyzers and test kits which are
used to analyze the chemical content and other properties of water and other
aqueous solutions. This segment encompasses the analytical reagents and
chemicals manufactured and sold by the Company. The Company manufactures and
sells a small amount of chemicals for uses not associated with the Company's
analytical systems for water analysis.
SALES BY PRINCIPAL PRODUCT GROUP
(percent of net sales) 1996 1995 1994
- -----------------------------------------------------------------
- -----------------------------------------------------------------
Analytical Reagents and Chemicals 30.9% 31.3% 30.5%
Laboratory and Portable Instruments 29.7% 29.1% 28.9%
Continuous Reading Process Analyzers 16.8% 16.6% 19.3%
Portable Test Kits and Replacements 13.2% 13.7% 12.2%
Other 9.4% 9.3% 9.1%
- -----------------------------------------------------------------
- -----------------------------------------------------------------
Total 100% 100% 100%
- -----------------------------------------------------------------
- -----------------------------------------------------------------
Analytical reagents and chemicals are manufactured and sold to support the
Hach testing systems of laboratory and portable instruments, process analyzers
and portable test kits. More stringent water quality standards and a
worldwide direction toward better control of processes--exhibited by ISO
(International Organization for Standardization) 9000 registration of many
industrial companies--drive the demand for the Company's products and their
continued use.
Laboratory and portable instruments consist of Hach-manufactured analytical
instruments in the following categories: spectrophotometers and colorimeters,
turbidimeters, Ion Selective Electrodes, COD (chemical oxygen demand)
apparatus, digestion apparatus, and precision reagent-dispensing devices.
These products are sold to municipal water and wastewater utilities, chemical
manufacturers, industrial water conditioning firms and organizations, power
utilities, commercial analytical laboratories, and government agencies for the
testing and monitoring of controlled impurities in water systems.
Continuous-reading process analyzers consist of Hach-manufactured products in
the following categories: colorimetric analyzers, process turbidimeters, pH
controllers, and analyzer accessories. These products are sold to
municipalities for monitoring and controlling drinking water quality and to
ensure that wastewater treatment procedures comply with government
regulations. Steam-generating plants, including operations at electrical
utilities, petrochemical processors, heavy industry installations, and pulp
and paper factories, use the Company's continuous-reading process analyzers
for on-line monitoring of cooling-tower and boiler-feedwater quality. The
microelectronics industry uses the Company's trace silica analyzers to monitor
ultrapure water systems used in processing electronic components.
Hach offers more than 200 different test kits for 12 different application
areas ranging from agriculture to water quality. These portable test kits are
recognized worldwide for ease of use, innovative chemistry, field-oriented
design and rugged construction. Test kits are sold to municipalities for use
in monitoring drinking water distribution systems; to conservation groups to
monitor for influences impacting the environment; to educators for use in
teaching environmental awareness; to customers monitoring industrial
processes; to the water-conditioning industry to use in testing water quality;
and to environmental regulatory authorities for use in checking compliance
requirements.
No material part of the business of the Company is dependent upon a single
product or any customer or a small group of customers.
DISTRIBUTION
Hach Company sells its analytical systems throughout the United States by
direct marketing. The Company has Regional Sales Managers located across the
country and responsive telemarketing Customer Service Representatives in the
Loveland facility selling its products. The Company directly distributes
products to customers in the United States through a modern distribution
facility in Ames, Iowa.
Independent distributors and sales representatives, who frequently handle
complementary and/or competitive product lines, are used to sell and
distribute the Company's products to international customers. Customers in
Canada are supported directly by a sales and service office in Winnipeg,
Manitoba.
Hach Company operates a facility in Namur, Belgium, for the marketing and
distribution of its products to the European market. The Namur facility
primarily services the Company's European independent distributors and, to a
lesser extent, distributors and sales agents in Mediterranean Africa, and the
Middle East.
AVAILABILITY OF MATERIALS
The Company has developed close working relationships with many of its key
vendors to assure an adequate and continuous supply of materials for the
Company's products. There are some unique components that would cause
temporary stoppage of specific products if these components were not
available. However, since the Company could obtain alternate sources of supply
after a reasonable period of time, the temporary stoppage would not have a
material adverse effect on the Company.
17
<PAGE>
HACH COMPANY AND SUBSIDIARIES
DESCRIPTION OF BUSINESS (CONTINUED)
COMPETITION
The Company competes domestically with a fairly large number of companies.
These companies range in size from a few which are larger than Hach and sell,
primarily, laboratory and portable instruments, to numerous smaller companies
which sell products competitive with only a few of Hach's products. The
Company is not aware of any company which competes with it across the full
range of products sold by it or which competes with it in all major product
lines.
Different competitive factors are of greater or lesser importance with respect
to each of the Company's product lines although, overall, technical
sophistication, reliability, quality, relative ease of operation and price
probably are most important. The Company believes that it has no competitive
disadvantages with respect to any of these factors. In many instances the
Company has a competitive advantage due to the relative ease with which
individuals without technical backgrounds can use the Company's products to
perform analyses. Hach Company's competition in international markets is
comparable to its competition in domestic markets. However, the international
competition, particularly from Europe, appears to be growing more aggressive
and competes across a broader range of products.
RESEARCH
During fiscal 1996, 1995 and 1994, the Company spent $7,464,000, $6,875,000,
and $6,586,000, respectively, on Company-sponsored research and development
activities.
PATENTS
The Company owns a number of patents. While the company regards its patents
as valuable, it does not consider any of its business materially dependent
upon any single patent.
BACKLOG
The dollar amounts of backlogged orders at May 24, 1996 and May 26, 1995 were
$4,227,000 and $4,134,000, respectively. During the current fiscal year the
Company expects to fill all of the orders which were backlogged at May 24,
1996.
EMPLOYEES
At April 30, 1996, the Company employed approximately 865 people. The Company
is not a party to any collective bargaining agreements.
HACH COMPANY AND SUBSIDIARIES
COMMON STOCK PRICE RANGE AND DIVIDENDS
Cash
Fiscal Sale Dividends
Year Quarter High Low Per Share
- -------------------------------------------------------------------
1996 Fourth . . . . 17 3/4 16 1/4 .06
Third. . . . . 17 1/2 15 .06
Second . . . . 20 3/8 12 3/4 .05
First. . . . . 16 12 3/4 .05
1995 Fourth . . . . 16 14 1/2 .05
Third. . . . . 15 3/4 12 3/4 .04
Second . . . . 16 13 1/4 .04
First. . . . . 16 1/4 13 5/8 .04
*All share and per-share amounts have been restated to give effect to the
five-for-four stock split in April 1994.
The company's common stock trades on the Nasdaq Stock Market under the symbol
HACH. The preceding table sets for the daily high and low last sales prices
for the company's common stock for the periods indicated, as reported in the
WALL STREET JOURNAL, together with the amounts of dividends paid for the
fiscal years ended April 30, 1996 and 1995. These prices represent quotations
between dealers in securities, do not include retail markdowns or commissions
and do not necessarily represent actual transactions. The current quoted
price of the stock is listed daily in the WALL STREET JOURNAL in the Nasdaq
National Market System section. On April 30, 1996 there were 833 holders of
record of the Company's Common Stock.
18
<PAGE>
HACH COMPANY AND SUBSIDIARIES
MANAGEMENT'S REPORT AND REPORT OF INDEPENDENT ACCOUNTANTS
STOCKHOLDERS OF HACH COMPANY:
The information presented in this Annual Report was prepared by your Company's
management. The financial statements were prepared in accordance with
generally accepted accounting principles applied on a consistent basis. These
principles require choices among alternatives and numerous estimates of
financial matters. We believe that the accounting principles chosen are
appropriate in the circumstances and the estimates and judgments involved in
Hach's financial reporting are reasonable and conservative. All other
financial and operating data included in this Annual Report are presented to
provide information we believe useful to investors.
Management recognizes its responsibility for the integrity and objectivity of
the information presented. To meet this responsibility, management maintains a
system of internal accounting controls designed to provide reasonable
assurance that the financial reports are fairly presented and that our
employees comply with our stated policies and procedures, including policies
on the ethical conduct of business.
The Audit Committee recommended and the Board of Directors approved the
appointment of Coopers & Lybrand L.L.P. as independent auditor for the
Company. The Coopers & Lybrand L.L.P. report on the financial statements is
presented in this Annual Report.
Audit and related activities of Coopers & Lybrand L.L.P. are conducted
throughout the year for the purposes of the annual audit and limited reviews
of interim financial statements. The audit of the financial statements is
conducted in accordance with generally accepted auditing standards and
includes tests of internal controls and accounting records as deemed necessary.
The Audit Committee of the Board of Directors, which is composed solely of
outside directors, performs an oversight role relating to Hach's public
financial reporting. The Audit Committee meets at least two times a year with
management and Coopers & Lybrand L.L.P., both privately and collectively, to
discuss internal accounting control and financial reporting matters. Coopers &
Lybrand L.L.P. has access to the Audit Committee to discuss any matter.
KATHRYN HACH-DARROW
Chairman of the Board
GARY R.DREHER
Vice President and
Chief Financial Officer
To the Stockholders and Board of Directors of Hach Company:
We have audited the accompanying consolidated balance sheets of Hach Company
and Subsidiaries as of April 30, 1996 and 1995, and the related consolidated
statements of income, stockholders' equity, and cash flows for each of the
three years in the period ended April 30, 1996. These financial statements are
the responsibility of the Company's management. Our responsibility is to
express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial position
of Hach Company and Subsidiaries as of April 30, 1996 and 1995, and the
consolidated results of their operations and their cash flows for each of the
three years in the period ended April 30, 1996, in conformity with generally
accepted accounting principles.
As discussed in Note 1 to the consolidated financial statements, the Company
changed its method of accounting for income taxes in 1994.
COOPERS & LYBRAND L.L.P.
Denver, Colorado
June 7, 1996
19
<PAGE>
HACH COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
FOR THE YEARS ENDED APRIL 30, 1996, 1995 AND 1994
(THOUSANDS OF DOLLARS EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
1996 1995 1994
- ------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net sales $114,285 $105,269 $100,369
Cost of sales 57,839 51,994 49,534
- ------------------------------------------------------------------------------------------
Gross profit 56,446 53,275 50,835
Selling, general and administrative expense 33,000 32,240 30,802
Research and development expense 7,464 6,875 6,586
Provision to reduce carrying value of
electrochemical assets --- 775 ---
- ------------------------------------------------------------------------------------------
Income from operations 15,982 13,385 13,447
Interest income 1,324 661 467
Interest expense (6) (1) (12)
- ------------------------------------------------------------------------------------------
Income before income taxes and cumulative
effect of accounting change 17,300 14,045 13,902
Income tax expense 6,046 4,775 4,842
- ------------------------------------------------------------------------------------------
Income before cumulative effect of
accounting change 11,254 9,270 9,060
Cumulative effect of change in accounting for
income taxes --- --- 448
- ------------------------------------------------------------------------------------------
Net income $11,254 $ 9,270 $ 9,508
- ------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------
Net income per common share:
Before cumulative effect of accounting change $ 0.99 $ 0.81 $ 0.80
Cumulative effect of change in accounting for
income taxes --- --- 0.04
- ------------------------------------------------------------------------------------------
Net income $ 0.99 $ 0.81 $ 0.84
- ------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------
Weighted average shares outstanding 11,368,126 11,385,355 11,385,793
- ------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
20
<PAGE>
HACH COMPANY AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
APRIL 30, 1996 AND 1995
(THOUSANDS OF DOLLARS EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
1996 1995
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 8,487 $ 13,050
Marketable securities, held to maturity 12,804 3,925
Accounts receivable, less reserves of $248 and $247, respectively 15,846 16,336
Inventories, net 12,769 11,731
Deferred tax assets and other current assets 3,277 4,414
- --------------------------------------------------------------------------------------------------------------
Total current assets 53,183 49,456
- --------------------------------------------------------------------------------------------------------------
Property, plant and equipment, at cost:
Buildings and improvements 23,557 23,387
Machinery and equipment 43,129 42,305
- --------------------------------------------------------------------------------------------------------------
66,686 65,692
Less: allowance for depreciation and amortization 38,571 37,586
- --------------------------------------------------------------------------------------------------------------
28,115 28,106
Land 997 1,022
- --------------------------------------------------------------------------------------------------------------
Net property, plant and equipment 29,112 29,128
- --------------------------------------------------------------------------------------------------------------
Marketable securities, held to maturity 9,316 4,385
Other assets 1,684 1,289
- --------------------------------------------------------------------------------------------------------------
Total assets $93,295 $84,258
- --------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------
LIABILITIES
Current liabilities:
Accounts payable $ 2,826 $ 2,835
Accrued liabilities:
Compensation 731 381
Compensated absences 3,500 3,487
Profit sharing 3,069 2,435
Property taxes 487 485
Other 701 989
- --------------------------------------------------------------------------------------------------------------
Total current liabilities 11,314 10,612
- --------------------------------------------------------------------------------------------------------------
Long term liabilities 1,347 248
Deferred income taxes 1,814 2,070
- --------------------------------------------------------------------------------------------------------------
Total liabilities 14,475 12,930
- --------------------------------------------------------------------------------------------------------------
Commitments and contingencies (Note 5)
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 of common stock 316 148
Retained earnings 67,177 58,425
Cumulative currency translation adjustment 1,636 2,405
- --------------------------------------------------------------------------------------------------------------
80,752 72,601
Less: shares held in treasury, at cost (258,881 in 1996 and 246,479 in 1995) (1,932) (1,273)
- --------------------------------------------------------------------------------------------------------------
Total stockholders' equity 78,820 71,328
- --------------------------------------------------------------------------------------------------------------
Total liabilities and stockholders' equity $93,295 $84,258
- --------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
21
<PAGE>
HACH COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
FOR THE YEARS ENDED APRIL 30, 1996, 1995 AND 1994
(THOUSANDS OF DOLLARS EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
Common Capital Retained Cumulative Shares held Total
stock, $1 contributed in earnings currency in stockholders'
par value excess of par translation treasury, equity
value of adjustment at cost
common stock
<S> <C> <C> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------------------
Balance April 30, 1993 $ 9,298 $ 143 $45,187 $772 $(749) $54,651
Net income --- --- 9,508 --- --- 9,508
Cash dividends, $.136 per share --- --- (1,548) --- --- (1,548)
Five-for-four stock split 2,325 (268) (2,057) --- --- ---
Stock options exercised --- 156 --- --- 5 161
Foreign currency
translation adjustment --- --- --- (275) --- (275)
- ------------------------------------------------------------------------------------------------------------------------------------
Balance April 30, 1994 $11,623 $ 31 $51,090 $497 $(744) $62,497
Net income --- --- 9,270 --- --- 9,270
Cash dividends, $.17 per share --- --- (1,935) --- --- (1,935)
Purchase of treasury
stock (30,922 shares), net --- --- --- --- (445) (445)
Stock options exercised --- 117 --- --- (84) 33
Foreign currency
translation adjustment --- --- --- 1,908 --- 1,908
- ------------------------------------------------------------------------------------------------------------------------------------
Balance April 30, 1995 $11,623 $ 148 $58,425 $2,405 $(1,273) $71,328
Net income --- --- 11,254 --- --- 11,254
Cash dividends, $.22 per share --- --- (2,502) --- --- (2,502)
Purchase of treasury
stock (47,638 shares) --- --- --- --- (736) (736)
Stock options exercised, net --- 168 --- --- 77 245
Foreign currency
translation adjustment --- --- --- (769) --- (769)
- ------------------------------------------------------------------------------------------------------------------------------------
Balance April 30, 1996 $11,623 $ 316 $67,177 $1,636 $(1,932) $78,820
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
22
<PAGE>
HACH COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE YEARS ENDED APRIL 30, 1996, 1995 AND 1994
(THOUSANDS OF DOLLARS)
<TABLE>
<CAPTION>
1996 1995 1994
- -------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income $ 11,254 $ 9,270 $ 9,508
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 6,049 5,769 5,704
Benefit for deferred income taxes (277) (559) (165)
Loss on disposal of equipment 63 177 112
Provision to reduce carrying value of
electrochemical assets -- 775 --
(Increase) decrease in accounts receivable 490 (393) (1,198)
(Increase) in inventories (1,038) (362) (841)
(Increase) decrease in deferred tax assets
and other current assets 1,158 (1,509) 877
Increase (decrease) in accounts payable (9) 385 (707)
Increase in accrued liabilities 1,810 695 509
- -------------------------------------------------------------------------------------------------
Net cash provided by operating activities 19,500 14,248 13,799
- -------------------------------------------------------------------------------------------------
Cash flows from investing activities:
Proceeds from sale of equipment 271 62 61
Capital expenditures (6,488) (6,445) (5,553)
Purchases of investments held-to-maturity (23,397) (4,723) (4,514)
Proceeds from maturities of short-term investments 9,587 2,241 1,517
(Increase) in other assets (395) (573) (92)
- -------------------------------------------------------------------------------------------------
Net cash used by investing activities (20,422) (9,438) (8,581)
- -------------------------------------------------------------------------------------------------
Cash flows from financing activities:
Payments on long-term debt -- --- (100)
Payments on capital lease obligations (6) (6) (14)
Dividends paid (2,502) (1,935) (1,548)
Purchases of treasury stock (736) (445) --
Exercise of stock options 245 33 167
- -------------------------------------------------------------------------------------------------
Net cash used by financing activities (2,999) (2,353) (1,495)
Effects of exchange rate changes (642) 1,556 (220)
- -------------------------------------------------------------------------------------------------
Net increase (decrease) in cash and
cash equivalents (4,563) 4,013 3,503
Cash and cash equivalents at the
beginning of the year 13,050 9,037 5,534
- -------------------------------------------------------------------------------------------------
Cash and cash equivalents at the end of the year $ 8,487 $13,050 $ 9,037
- -------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------
Supplemental disclosures of cash flow information:
Cash paid during the year for:
Income taxes $ 5,028 $ 6,422 $ 4,283
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
23
<PAGE>
HACH COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of the Company and
its wholly owned subsidiaries. All significant intercompany transactions and
account balances have been eliminated in consolidation.
Certain amounts in the financial statements for prior years have been
reclassified to conform with the current year's presentation.
CASH EQUIVALENTS AND CONCENTRATIONS OF CREDIT RISK
Cash and cash equivalents include currency on hand, demand deposits with banks
or other financial institutions, and other highly liquid securities purchased
with a maturity of three months or less. Financial instruments which
potentially subject the Company to concentrations of credit risk consist
principally of cash and cash equivalents. The Company places its cash and cash
equivalents with high-credit-quality financial institutions. At times, these
deposits may exceed federally insured limits. The Company has not experienced
any losses in such accounts.
The Company's concentration of credit risk with respect to accounts receivable
is limited due to a large customer base and its geographic dispersion.
INVESTMENTS
In December 1991, the Financial Accounting Standards Board (FASB) issued SFAS
No. 107, "Disclosures about Fair-Value of Financial Instruments." This
accounting standard, which the Company adopted in fiscal year 1996, requires
companies to disclose the fair value of certain financial instruments, as well
as the methods and assumptions used to estimate fair value. The Company uses
the amortized cost method of accounting for investments in held-to-maturity debt
securities for which it has the positive intent and ability to hold to maturity.
Of these securities, $12,804,000 have contracted maturities within one year, and
$9,316,000 within one to five years. The carrying amount of these securities
approximated the fair value at April 30, 1996.
INVENTORIES
Inventories are valued at the lower of cost or market. The cost of United States
inventories is based on the last-in, first-out (LIFO) method; all other
inventories are based on the average cost method.
PROPERTY, PLANT AND EQUIPMENT
The property, plant and equipment are stated at cost. Depreciation and
amortization are computed by using the straight-line method based on
estimated useful lives of the related assets or the lease term. Estimated
useful lives range from three to 30 years.
Maintenance and repairs are charged to expense as incurred while major renewals
and improvements are capitalized.
The cost and related allowances for depreciation of assets sold or otherwise
disposed of are deducted from the related accounts and resulting gains or losses
are reflected in operations.
INCOME TAXES
Effective May 1, 1993, the Company adopted Statement of Financial Accounting
Standards No. 109 (FAS 109) Accounting for Income Taxes. The adoption of FAS109
changed the Company's method of accounting for income taxes from the deferred
method (APB 11)to an asset and liability approach. Previously the Company
deferred the past tax effects of timing differences between financial
reporting and taxable income. The asset and liability approach requires the
recognition of deferred tax liabilities and assets for the expected future tax
consequences of temporary differences between the carrying amounts and the tax
bases of those assets and liabilities.
FOREIGN CURRENCY TRANSLATION
Foreign asset and liability accounts are converted into U.S. dollars using the
exchange rate in effect at the end of the year, and revenue and expense accounts
are converted at the average exchange rate in effect during the year.
Unrealized gains and losses are recognized as an adjustment of stockholders'
equity; realized gains and losses are recognized in the statement of income.
The Company's European subsidiary enters into foreign exchange forward contracts
in an attempt to mitigate risk of currency fluctuations on a portion of the
anticipated inventory purchases to be made from Hach Company. As of
April 30, 1995, the Company had several forward contracts to sell Belgium francs
in exchange for $3.5 million, which matured up through November 1995. Gains and
losses on these contracts are included in the determination of net income. As of
April 30, 1996, the Company had no forward contracts to sell Belgium francs.
REVENUE RECOGNITION
The Company sells a large number of different tangible products and the average
size of a customer order is relatively small. Revenue is recognized upon
shipment of products to customers. Customers purchasing products from the
Company may return the products within a 30-day period if they are not
satisfied. Estimated returns are charged against earnings in the period the
original sale occurred.
The Company does not warrant products for an extended period of time. Warranty
claims historically have been minor. Known warranty claims are accrued in the
period they become known.
EARNINGS PER SHARE
Earnings per share are computed using the weighted average number of shares
outstanding during each year. Stock options outstanding do not have a material
dilutive effect on earnings per share. Shares used in computing per share
amounts give a retroactive effect in all periods to the stock splits described
in Note 4.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect amounts reported therein. Due to the inherent uncertainty involved in
making estimates, actual results reported in future periods may be based upon
amounts which differ from those estimates.
24
<PAGE>
2. INVENTORIES
Components of inventory at April 30 were:
(THOUSANDS OF DOLLARS)
1996 1995
- ---------------------------------------------------------------------------
Raw materials and purchased parts $2,977 $ 3,311
Work in process 2,030 1,785
Finished goods 7,762 6,635
- ---------------------------------------------------------------------------
Inventories, net $12,769 $11,731
- ---------------------------------------------------------------------------
- ---------------------------------------------------------------------------
Inventory Valuation Allowances at April 30, 1996, 1995 and 1994 were $188,000,
$505,000 and $203,000 respectively.
Management believes the LIFO method, which results in better matching of current
costs with current revenues, minimizes inflation-induced inventory profits and
thus more clearly reflects the results of operations. The cost of United States
inventories stated under the LIFO method for 1996 and 1995 was approximately 80%
of total inventories.
For purposes of comparison to companies not utilizing the LIFO method, the
following information is presented. If all inventories had been determined using
the current replacement cost at April 30, 1996 and 1995, reported inventories
would have been $2,819,000 and $2,667,000 higher, respectively. Reported net
income would have been $94,000 ($.01 per common share) higher for fiscal 1996,
$208,000 ($.02 per common share) higher for fiscal 1995, and $113,000 ($.01 per
common share) lower for fiscal year 1994. The impact on reported net income
utilizing LIFO, as opposed to the current replacement cost method, has been
computed by taking the change from year to year in the difference between the
inventory valuation under LIFO and the inventory valuation under current
replacement costs and tax affecting such difference by 38% in 1996, and 36% for
1995, and 1994, the approximate incremental tax rate for each year.
3. INCOME TAXES
Income before income tax expense consisted of the following:
(THOUSANDS OF DOLLARS)
1996 1995 1994
- --------------------------------------------------------------------------------
Income before income taxes:
Domestic $13,386 $12,352 $12,836
Foreign 3,914 1,693 1,066
- --------------------------------------------------------------------------------
$17,300 $14,045 $13,902
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Income tax expense:
Current:
Federal $ 4,122 $ 4,045 $ 3,819
State 631 606 553
Foreign 1,570 683 406
- --------------------------------------------------------------------------------
6,323 5,334 4,778
Deferred:
Federal $ (227) (496) 27
State (46) (69) 7
Foreign (4) 6 30
- --------------------------------------------------------------------------------
(277) (559) 64
Total $ 6,046 $ 4,775 $ 4,842
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Components of the 1996 and the 1995 net deferred tax assets and the 1994 net
deferred tax liability resulting from differences in book and tax accounting
methods are as follows:
NET DEFERRED TAX ASSET AND LIABILITY (THOUSANDS OF DOLLARS)
1996 1995 1994
- --------------------------------------------------------------------------------
Deferred tax assets:
Vacation pay 1,087 1,055 1,016
Inventory capitalization 527 484 462
Write-off of electrochemical assets --- 233 ---
Deferred compensation 376 208 152
Intercompany profits 120 117 141
Marketable securities 108 75 ---
Employee benefit plans 83 53 ---
Other 122 175 102
- --------------------------------------------------------------------------------
Total deferred tax assets 2,423 2,400 1,873
Deferred tax liabilities:
Accelerated depreciation $ 1,749 $ 1,998 $ 2,015
Foreign deferrals 91 95 89
Employee benefit plans --- --- 22
- --------------------------------------------------------------------------------
Total deferred tax liabilities 1,840 2,093 2,126
Net deferred tax asset (liability) $ 583 $ 307 $ (253)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Current deferred income tax asset 2,397 2,377 1,828
Noncurrent deferred income tax liability 1,814 $ 2,070 $ 2,081
- --------------------------------------------------------------------------------
Net deferred tax asset (liability) $ 583 $ 307 $ (253)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
The Company believes, based upon past earnings, that all of the deferred tax
assets will be realized. Accordingly, no valuation allowance has been provided.
Effective tax rates on income before income taxes for the years ended
April 30, 1996, 1995 and 1994 were 35%, 34% and 35%, respectively. The
effective income tax rate for the years ended April 30 varies from the statutory
Federal income tax rate as follows:
(THOUSANDS OF DOLLARS)
1996 1995 1994
- --------------------------------------------------------------------------------
Computed statutory expense $5,882 $4,775 $4,727
State income tax, net 443 386 361
Prior year's tax accrual adjustment --- 284 ---
Difference between U.S.
statutory rates and foreign
effective rates 235 114 74
Foreign sales corporation (136) (95) (90)
Tax credits, net (306) (185) (158)
Prior year's amended tax
credits, net --- (418) ---
Other, net (72) (86) (72)
- --------------------------------------------------------------------------------
$6,046 $4,775 $4,842
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Undistributed earnings intended to be reinvested indefinitely by the foreign
subsidiaries totaled $6,825,000 at April 30, 1996. These earnings would become
taxable upon the sale or liquidation of the foreign subsidiaries or upon the
remittance of dividends. The determination of the deferred tax liability
related to these undistributed earnings is not practicable and, accordingly, no
U.S. deferred income tax has been recorded.
25
<PAGE>
HACH COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
4. COMMON STOCK
In April 1994, the Company effected a five-for-four stock split in the form of a
25% stock dividend. Capital contributed in excess of par value of common stock
and retained earnings has been charged and common stock has been credited for
the par value of the 2,324,591 shares issued in connection with the split based
upon those outstanding shares at March 18, 1994.
5. EMPLOYEE BENEFITS
EMPLOYEE PROFIT SHARING AND SAVINGS PLANS
The Company has an employee profit-sharing plan covering substantially all
regular employees of the Company with the maximum contribution limited to the
amount allowable for federal tax purposes. Each year the Company's Board of
Directors approves an amount the Company will contribute to the plan. The
Company has a savings plan which qualifies under Section 401(k) of the Internal
Revenue Code. Eligible employees may contribute from 1% to 10% of their income
on a pretax basis to this savings plan. The Company matches 50% of the first 4%
of the employee's contribution. The Company's annual contributions under these
Plans were $2,385,000 in 1996, $1,967,000 in 1995, and $1,941,000 in 1994.
EMPLOYEE STOCK OWNERSHIP PLAN
The Company has an Employee Stock Ownership Plan (ESOP) which is a
noncontributory plan established to acquire shares of the Company's common stock
for the benefit of all eligible employees. The Company accounts for the ESOP
under Employers' Accounting for Employee Stock Ownership Plans (SOP 93-6). Each
year the Company's Board of Directors approves an amount the Company will
contribute to the plan. The Company contributions to the Plan were $829,000 in
1996, $650,000 in 1995, and $649,000 in 1994. ESOP stock purchases are made
from the open market. As of April 30, 1996, all shares in the ESOP plan were
allocated to participants.
STOCK OPTION PLANS
The Company has two active stock option plans. Under the 1993 Stock Option Plan
the Company periodically grants certain officers and key employees incentive
stock options to purchase common stock. A total of 625,000 shares of the
Company's common stock have been reserved for option at a price not less than
the market price on the date of grant. Options granted under the plan may not
be exercised until one year after the date of grant. Options are exercisable
in installments on a cumulative basis beginning in the second year after grant
and expiring not later than ten years from the date of grant. At
April 30, 1996, a total of 278,750 shares was available for future grants under
the 1993 plan.
On November 21, 1995, the Board of Directors, subject to stockholders' approval
at the August 27, 1996 annual meeting, approved the 1995 Non-Employee Director
Stock Plan. Under the 1995 Plan, 150,000 shares of the Company's common stock
have been reserved for option. The option price per share is equal to the fair
market value of a company share on the date of grant. The term of each option
may not exceed ten years, and an option first becomes exercisable six months
after the option grant date.
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 this statement, and has not yet
determined the impact it may have on the Company's financial statements or on
the financial statement disclosures.
A summary of stock option information follows:
Number of Price per Shares
shares share exercisable
- --------------------------------------------------------------------------------
April 30, 1993 206,110 $8.96-21.80 44,235
Granted 131,250 16.20 ---
Exercised (26,713) 8.96 ---
Cancelled (7,344) 8.96 ---
- --------------------------------------------------------------------------------
April 30, 1994 303,303 8.96-21.80 96,632
Granted --- --- ---
Exercised (25,101) 8.96 ---
Cancelled --- --- ---
- --------------------------------------------------------------------------------
April 30, 1995 278,202 8.96-21.80 152,992
Granted 245,000 16.125-16.75 ---
Exercised (33,827) 8.96 ---
Cancelled (20,000) 16.20-21.80 ---
- --------------------------------------------------------------------------------
April 30, 1996 469,375 16.125-21.80 183,962
- --------------------------------------------------------------------------------
EMPLOYEE STOCK PURCHASE PLAN
The Company has an employee stock purchase plan for all eligible employees.
Under the plan, shares of the Company's common stock may be purchased at
six-month intervals at 85% of the lower of the fair market value on the first or
the last day of each six-month period. Employees may purchase shares having a
value not exceeding 10% of their gross compensation during an offering period.
During 1996, employees purchased 13,510 shares at a price of $11.47 per share.
At April 30, 1996, 486,490 shares were reserved for future issuance.
DEFERRED COMPENSATION PLAN
The Company has a Deferred Compensation Plan which permits eligible employees to
defer a portion of their compensation. The deferred compensation, together with
a Company contribution and accumulated earnings is accrued but unfunded. At
April 30, 1996 the liability for the deferred compensation is $1,087,000 and is
included with long-term liabilities.
6. SEGMENT INFORMATION
The Company operates primarily in a single industry segment encompassing
laboratory instruments, process analyzers and test kits which analyze the
chemical content and other properties of water and other aqueous solutions.
This segment also encompasses the chemicals manufactured and sold by the
Company, most of which are used with the instruments and test kits manufactured
by the Company.
Sales for the Company's European subsidiary are made to European dealers and to
customers in the Middle East and Mediterranean Africa in Belgium francs and U.S.
dollars, respectively. Payments from the European subsidiary to the U.S. parent
are made in U.S. dollars and are subject to the exchange rate in effect at the
time of payment. Export transactions made to all other parts of the world by
the international staff based in Loveland, Colorado, are conducted primarily in
U.S. dollars.
The amount of sales made into the international marketplace is influenced to
some degree by the strength of the U.S. dollar against other currencies. Other
conditions which to some extent affect the sales of the Company's products in
international markets include restrictive tariff and trade policies imposed by
foreign countries, and domestic and foreign tax and economic policies.
26
<PAGE>
The table below summarizes certain financial information by
geographic segments:
<TABLE>
<CAPTION>
GEOGRAPHIC SEGMENT INFORMATION (THOUSANDS OF DOLLARS) 1996 1995 1994
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net Sales to Unaffiliated Customers:
United States:
Domestic $ 73,472 $ 69,867 $ 69,100
- ------------------------------------------------------------------------------------------------------------------------------
Export:
Canada 4,840 3,951 3,724
Asia 9,388 7,414 6,077
Australia/Oceania 1,496 1,212 1,134
Mexico/Central America/Caribbean 2,738 2,924 2,804
South America 3,313 3,023 2,133
Other 1,748 1,889 1,319
- ------------------------------------------------------------------------------------------------------------------------------
23,523 20,413 17,191
- ------------------------------------------------------------------------------------------------------------------------------
96,995 90,280 86,291
Europe 17,290 14,989 14,078
- ------------------------------------------------------------------------------------------------------------------------------
114,285 105,269 100,369
- ------------------------------------------------------------------------------------------------------------------------------
Net Sales to European Subsidiaries:
United States 10,140 8,310 9,868
Eliminations (10,140) (8,310) (9,868)
- ------------------------------------------------------------------------------------------------------------------------------
$114,285 $105,269 $100,369
- ------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------
Income from Operations:
United States $ 12,293 $ 11,766 $ 12,495
Europe 3,689 1,619 952
- ------------------------------------------------------------------------------------------------------------------------------
$ 15,982 $ 13,385 $ 13,447
- ------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------
Identifiable Assets:
United States $ 49,384 $ 48,795 $ 48,383
Europe 8,342 8,401 8,036
- ------------------------------------------------------------------------------------------------------------------------------
57,726 57,196 56,419
Corporate Assets 35,569 27,062 17,939
- ------------------------------------------------------------------------------------------------------------------------------
$ 93,295 $ 84,258 $ 74,358
- ------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------
</TABLE>
7. UNAUDITED SUMMARY OF QUARTERLY FINANCIAL INFORMATION
(THOUSANDS OF DOLLARS EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
First Second Third Fourth
Quarter Quarter Quarter Quarter
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Fiscal Year 1996:
Net sales $27,188 $28,717 $27,999 $30,381
Gross profit 13,750 14,370 13,737 14,589
Net income 2,610 2,940 2,750 2,954
Net income per common share 0.23 0.26 0.24 0.26
Fiscal Year 1995:
Net sales $25,072 $26,082 $25,953 $28,162
Gross profit 12,761 13,265 13,177 14,072
Net income 2,250 2,425 2,285 2,310*
Net income per common share 0.20 0.21 0.20 0.20*
</TABLE>
*Includes a one-time pretax charge of $775,000 or $.05 per share after tax for
provision to reduce the carrying value of electrochemical assets.
27
<PAGE>
EXHIBIT (21)N.
(ITEM 601(21))
SUBSIDIARIES OF THE REGISTRANT
Jurisdiction
of
SUBSIDIARY INCORPORATION
Hach Europe, S.A./N.V. Belgium
Hach (Barbados) FSC, Inc. Barbados
Hach Sales & Service Canada Ltd. Canada
<PAGE>
Exhibit (23)o.
(Item 601(23))
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in the registration statement of
Hach Company on Form S-8 (File No. 333-39019), Form S-8 (File No. 33-90584),
and Form S-8 (File No. 33-64793) of our reports dated June 7, 1996, on our
audits of the consolidated financial statements of Hach Company as of April
30, 1996 and 1995, and for each of the three years in the period ended
April 30, 1996, which reports are included or incorporated by reference in
this Annual Report on Form 10-K.
/s/ Coopers & Lybrand L.L.P.
Denver, Colorado
July 25, 1996
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE 1996
ANNUAL REPORT FOR THE YEAR ENDED APRIL 30, 1996 AND IS QUALIFIED IN ITS ENTIRETY
BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<CIK> 0000044764
<NAME> HACH COMPANY
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> APR-30-1996
<PERIOD-START> MAY-01-1995
<PERIOD-END> APR-30-1996
<CASH> 8,487
<SECURITIES> 22,120
<RECEIVABLES> 16,094
<ALLOWANCES> 248
<INVENTORY> 12,769
<CURRENT-ASSETS> 53,183
<PP&E> 67,683
<DEPRECIATION> 38,571
<TOTAL-ASSETS> 93,295
<CURRENT-LIABILITIES> 11,314
<BONDS> 0
0
0
<COMMON> 11,623
<OTHER-SE> 67,197
<TOTAL-LIABILITY-AND-EQUITY> 93,295
<SALES> 114,285
<TOTAL-REVENUES> 114,285
<CGS> 57,839
<TOTAL-COSTS> 57,839
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 17,300
<INCOME-TAX> 6,046
<INCOME-CONTINUING> 11,254
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 11,254
<EPS-PRIMARY> .99
<EPS-DILUTED> .99
</TABLE>
