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FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
QUARTERLY REPORT UNDER SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For quarter ended January 31, 1995 Commission file number 1-5838
----------------- -------
NCH CORPORATION
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(Exact name of registrant as specified in its charter)
DELAWARE 75-0457200
- -------------------------------- -------------------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
P.O. Box 152170
2727 Chemsearch Blvd.
Irving, TX 75015-2170
- -------------------------------- -------------------------------
(Address of principal (Zip Code)
executive offices)
Registrant's telephone number, include area code (214) 438-0211
-----------------------
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act
of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. Yes X No
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Indicate the number of shares outstanding of each of the issuer's classes
of common stock, as of the latest practicable date.
Class Outstanding at March 8, 1995
- ------------------------------- ------------------------------
Common Stock, $1 par value 8,310,907
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NCH CORPORATION
INDEX
Page No.
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Part I. Financial Information:
Consolidated Balance Sheets --
January 31, 1995 and April 30, 1994 3
Consolidated Statements of Income --
Three Months and Nine Months
Ended January 31, 1995 and 1994 4
Consolidated Statements of Cash Flows --
Nine Months Ended January 31, 1995 and 1994 5
Notes to Consolidated Financial Statements 6 - 7
Management's Discussion and Analysis of
Financial Condition and Results of Operations 8 - 11
Part II. Other Information 12
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<TABLE>
NCH CORPORATION AND SUBSIDIARIES
Consolidated Balance Sheets
(In Thousands Except Share and Per Share Data)
(Unaudited)
<CAPTION>
January 31, April 30,
1995 1994
---------- ---------
<S> <C> <C>
Assets
Current Assets
Cash and cash equivalents $ 26,816 $ 18,754
Marketable securities 101,917 105,784
Accounts receivable, net 137,930 136,178
Inventories 101,339 83,634
Prepaid expenses 8,439 6,431
Deferred income taxes 15,052 12,990
-------- --------
Total Current Assets 391,493 363,771
-------- --------
Property, Plant and Equipment 186,906 177,999
Accumulated depreciation 101,714 93,892
-------- --------
85,192 84,107
-------- --------
Deferred Income Taxes 23,605 22,332
-------- --------
Other 14,625 15,013
-------- --------
Total $514,915 $485,223
======== ========
Liabilities and Stockholders' Equity
Current Liabilities
Notes payable to banks $ 3,379 $ 9,745
Current maturities of long-term debt 2,245 1,875
Accounts payable 52,082 46,775
Accrued expenses 30,153 22,784
Income taxes payable 21,671 18,117
Dividends payable 2,493 2,069
-------- --------
Total Current Liabilities 112,023 101,365
-------- --------
Long-term Debt, less current maturities 4,786 6,790
-------- --------
Retirement and Deferred Compensation Plans 89,270 83,986
-------- --------
Stockholders' Equity
Common stock, par value $1 per share, authorized
20,000,000 shares. Issued 11,769,304 shares 11,769 11,769
Additional paid-in capital 7,222 6,369
Unrealized loss on investments (779) -
Retained earnings 403,410 393,193
Foreign currency translation adjustment (17,549) (22,100)
-------- --------
404,073 389,231
Less treasury stock
(3,459,310 and 3,492,058 shares) 95,237 96,149
-------- --------
308,836 293,082
-------- --------
Total $514,915 $485,223
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</TABLE>
The accompanying notes are an integral part of these financial statements.
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<TABLE>
NCH CORPORATION AND SUBSIDIARIES
Consolidated Statements of Income
(In Thousands Except Per Share Amounts)
(Unaudited)
<CAPTION>
Three Months Ended Nine Months Ended
January 31, January 31,
-------------------- --------------------
1995 1994 1995 1994
-------- ------- ------- -------
<S> <C> <C> <C> <C>
Net Sales $186,562 $170,615 $549,931 $503,424
-------- -------- -------- --------
Operating Expenses
Cost of sales, including
warehousing & commissions 98,778 91,746 291,513 264,026
Marketing & administrative
expenses 75,308 69,573 216,096 203,149
--------- --------- --------- ---------
174,086 161,319 507,609 467,175
--------- --------- --------- ---------
Operating Income 12,476 9,296 42,322 36,249
Other (Expenses) Income
(Loss)/gain on revaluation of
foreign currencies (775) 104 (456) 96
Net interest income 459 208 2,182 1,263
--------- --------- --------- ---------
Income before Income Taxes 12,160 9,608 44,048 37,608
Provision for Income Taxes 5,124 3,882 18,482 15,054
--------- --------- --------- ---------
Net Income $ 7,036 $ 5,726 $ 25,566 $ 22,554
========= ========= ========= =========
Weighted Average Number of
Shares Outstanding 8,302 8,273 8,294 8,278
====== ====== ====== ======
Earnings Per Share $ .85 $ .69 $3.08 $2.72
====== ====== ====== ======
Cash Dividend Paid Per Share $1.30 $1.25 $1.80 $1.75
====== ====== ====== ======
Cash Dividend Declared Not Paid $ .30 $ .25 $ .30 $ .25
====== ====== ====== ======
</TABLE>
The accompanying notes are an integral part of these financial statements.
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<TABLE>
NCH CORPORATION AND SUBSIDIARIES
Consolidated Statements of Cash Flows
(In Thousands)
(Unaudited)
<CAPTION>
Nine Months Ended
January 31,
---------------------
1995 1994
-------- ---------
<S> <C> <C>
Cash Flows from Operating Activities
Net Income $ 25,566 $ 22,554
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 10,256 9,977
Provision for losses on accounts receivable 6,478 5,384
Deferred income taxes (2,807) (3,239)
Retirement and deferred compensation plans 4,833 5,399
Changes in assets and liabilities, excluding net
assets acquired in the purchase of businesses:
Accounts receivable (4,071) (5,200)
Inventories (16,319) (8,528)
Prepaid expenses (1,863) (1,352)
Current liabilities (except short-term debt) 13,592 1,207
Other (717) 1,103
-------- --------
Net cash provided by operating activities 34,948 27,305
-------- --------
Cash Flows from Investing Activities
Sales of property, plant and equipment 1,755 528
Purchases of property, plant and equipment (9,840) (10,919)
Redemptions of marketable securities 43,039 34,273
Purchases of marketable securities (40,496) (22,467)
Acquisitions of businesses - (3,654)
Purchases of intangible assets (1,098) (2,203)
Other - (25)
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Net cash used in investing activities (6,640) (4,467)
-------- --------
Cash Flows from Financing Activities
Proceeds from notes payable 3,754 1,635
Payments of notes payable (10,465) (2,436)
Additional long-term debt 27 -
Payments of long-term debt (1,750) (2,065)
Borrowing of cash surrender values 690 7,758
Payments of dividends (14,925) (14,475)
Purchase of treasury stock - (3,422)
Proceeds from exercise of stock options 1,609 222
-------- --------
Net cash used in financing activities (21,060) (12,783)
------- -------
Effect of Exchange Rate Changes on Cash
and Cash Equivalents 814 (2,701)
-------- --------
Net Increase in Cash and Cash Equivalents 8,062 7,354
Cash and Cash Equivalents at Beginning of Year 18,754 28,620
------- -------
Cash and Cash Equivalents at End of Period $ 26,816 $ 35,974
======== ========
</TABLE>
The accompanying notes are an integral part of these financial statements.
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NCH CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
1. Basis of Presentation
-----------------------
In the opinion of management, the accompanying unaudited consolidated
financial statements contain all adjustments necessary (consisting of only
normal re-occurring accruals) to present fairly NCH Corporation's financial
position as of January 31, 1995, and April 30, 1994, the results of its
operations for the nine months ended January 31, 1995 and 1994, and cash
flows for the nine months then ended.
The accounting policies followed by the Company are set forth in Note 1 to
the Company's financial statements in the 1994 NCH Corporation Report to the
Shareholders, which is included in Part II of Form 10-K.
The results of operations for the nine month period ended January 31, 1995,
are not necessarily indicative of the results to be expected for the full
year.
2. Inventories
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Inventories consisted of the following (in thousands of dollars):
January 31, April 30,
1995 1994
---------- ---------
Raw Materials $ 14,682 $13,849
Finished Goods 84,337 67,676
Sales Supplies 2,320 2,109
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$101,339 $83,634
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3. Earnings Per Common Share
---------------------------
Earnings per common share are based upon the weighted average number of
common shares outstanding during the period.
4. Supplemental Cash Flow Information
------------------------------------
Cash payments for interest for the nine months ended January 31, 1995 and
1994, were approximately $2,771,000 and $2,691,000, respectively. Cash
payments for income taxes were approximately $19,134,000 and $20,308,000 for
the same periods, respectively.
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5. Adoption of New Accounting Standards
--------------------------------------
The Company implemented Statement of Financial Accounting Standards No.
112, "Employers' Accounting for Postemployment Benefits" as of May 1, 1994.
This statement requires recognition of a liability for certain benefits
provided to former or inactive employees after employment but before
retirement. Implementation of this statement was immaterial to the
Company's financial position and results of operations.
The Company implemented Statement of Financial Accounting Standards No.
115, "Accounting for Certain Investments in Debt and Equity Securities" as
of May 1, 1994. This statement requires that certain debt and equity
security investments, other than investments accounted for by the equity
method and investments in consolidated subsidiaries, be categorized as
either trading securities, securities available-for-sale, or securities
held-to-maturity. The Company classifies all of its investments in
securities which do not meet the definition of cash equivalents as
marketable securities available-for-sale. Available-for-sale securities are
reported at fair value with unrealized gains and losses (net of deferred
income taxes) recognized on the balance sheet as a separate component of
stockholders' equity. Fair values are based on quoted market prices
obtained from an independent broker. Realized gains and losses are included
in other income. The cost of securities sold is based on the specific
identification method. In accordance with the provisions of this statement,
prior period financial statements have not been restated to reflect this
change in accounting principle.
The following is a summary of available-for-sale marketable securities as
of January 31, 1995 (in thousands of dollars):
Estimated Unrealized
Fair Gains
Value (Losses) Cost
--------- ---------- --------
U.S. Government Securities $ 2,976 $ 49 $ 2,927
State and Municipal Bonds 98,644 (1,248) 99,892
Certificates of Deposit 297 - 297
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$101,917 $(1,199) $103,116
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The contractual maturities of the marketable securities at estimated fair
value as of January 31, 1995 are as follows (in thousands of dollars): 1996-
$33,790; 1997-$32,453; 1998-$21,157; 1999-$12,308; and 2000-$2,209.
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NCH CORPORATION AND SUBSIDIARIES
Management's Discussion and Analysis of
Financial Condition and Results of Operations
Liquidity and Capital Resources
- ------------------------------------
In the nine months ended January 31, 1995, working capital increased
to $279.5 million from $262.4 million at April 30, 1994, and the current
ratio was 3.5 to 1 at January 31, 1995 compared to 3.6 to 1 at April 30,
1994. The total of cash, cash equivalents and marketable securities
increased by $4.2 million in the first nine months to $128.7 million at
January 31, 1995. Net cash flow from operations totaled $34.9 million.
Principal uses of cash consisted of payment of dividends of $14.9 million,
a net repayment of debt amounting to $8.4 million and net capital
expenditures of $8.1 million. Management expects that operating cash flows
will continue to generate sufficient funds to finance operating needs,
capital expenditures and the payment of dividends.
The Company's international subsidiaries operate on a fiscal year
ending on the last day of February. The reported values of both assets and
liabilities of the Company's international subsidiaries increased as a
result of the change in the Company's composite spot rate at November 30,
1994, compared to February 28, 1994. This is reflected by the foreign
currency translation component of stockholders' equity, which changed from
a $22.1 million reduction of equity at April 30, 1994, to a $17.5 million
reduction of equity at January 31, 1995.
Accounts receivable increased by $1.8 million, and inventories
increased by $17.7 million in the nine months ended January 31, 1995, as
measured in U.S. dollars and reported on the Consolidated Balance Sheets.
As stated above, the result of exchange rate deviations from the end of the
previous year to the end of the first nine months was to increase the
reported U.S. dollar values of both assets and liabilities. The change in
accounts receivable and inventories shown in the Consolidated Statements of
Cash Flows is exclusive of the effect of exchange rates on the reported
asset values, and shows accounts receivable decreasing by $2.4 million and
inventories increasing by $16.3 million during the nine months ended January
31, 1995. The decrease in accounts receivable was due primarily to
decreased domestic accounts receivable, as a result of traditionally lower
domestic sales in the third quarter compared to the fourth quarter of the
prior year. This decrease was partially offset, however, by an increase in
international accounts receivable, as a result of traditionally higher
international sales in the third quarter compared to the fourth quarter of
the prior year. Inventory levels increased in both the domestic and
international operations, due to higher inventory requirements as a result
of a trend of increasing sales and new products within existing product
lines in several of the Company's domestic operations.
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Accounts payable, accrued expenses and income taxes payable were
similarly affected by currency translation. These liabilities increased by
$13.6 million when measured exclusive of the effect of exchange rate
changes, and increased by $16.2 million as reported on the Consolidated
Balance Sheets. The increase in accounts payable and accrued expenses
occurred primarily in the domestic operations, as a result of increased
inventory purchases and timing of certain payments. The increase in income
taxes payable occurred primarily in the domestic operations due to timing
differences in the amounts of tax payments in the current quarter compared
to the fourth quarter of the prior year.
Net expenditures for property, plant and equipment, amounted to $8.1
million for the nine months ended January 31, 1995, and consisted of normal
additions of data processing and operating equipment. As with the other
assets and liabilities, the effect of currency translation on the reported
U.S. dollar values of property, plant and equipment was to increase those
reported values.
Total bank indebtedness, comprised of long-term debt, current
maturities of long-term debt and notes payable, decreased exclusive of the
effect of exchange rate changes by $8.4 million during the nine months ended
January 31, 1995. The decrease was due primarily to a scheduled payment on
a French Franc denominated loan made in the U.S., and to the maturation and
repayment of loans in two of the Company's European subsidiaries. The bank
indebtedness presented in the Consolidated Balance Sheets was also affected
by currency translation, showing a decrease of $8.0 million.
On January 18, 1995, the directors of the Company declared a regular
quarterly dividend of $.30 per share of common stock payable March 15, 1995,
to shareholders of record March 1, 1995. Cash dividends paid during the
first nine months of the fiscal year amounted to $14.9 million.
Operating Results
- --------------------
Third Quarter Comparison - Prior Year
Net sales for the third quarter increased 9% to $186.6 million in the
current year as compared with $170.6 million reported in the same quarter
of the last fiscal year. Domestically, net sales increased 6% from the
prior year. International net sales increased 13% as reported in U.S.
dollars and were positively affected by changes in currency translation
rates. International net sales, when measured on a local country currency
basis, increased approximately 8%.
Operating expenses, as a percent of net sales, decreased in the current
quarter to 93.3% compared to 94.6% in the third quarter last year.
Operating expenses decreased as a percent of net sales primarily due to
improved operating ratios in the Company's international operations. As a
result, operating income before other expenses and income taxes for the
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quarter ended January 31, 1995, was 6.7% of net sales compared to 5.4% of
net sales for the quarter ended January 31, 1994.
In the quarter ended January 31, 1995, net interest income was $.5
million compared to $.2 million in the same quarter of the prior year. The
revaluation of foreign currencies amounted to a loss of $.8 million in the
third quarter of the current year compared to a gain of $.1 million in the
same period of the prior year, due primarily to a loss on translation in
some of the hyper-inflationary countries as a result of changes in their net
financial positions.
Provision for income taxes was 42.1% of pre-tax income in the third
quarter of the current year compared to 40.4% of pre-tax income in the prior
year. The increase in the overall tax rate was due to the impact of
variations in individual country income levels and tax rates on combined
international results. Net income for the quarter ended January 31, 1995,
was 3.8% of net sales compared to 3.4% of net sales in the quarter ended
January 31, 1994.
Third Quarter Comparison - Preceding Quarter
Net sales of $186.6 million for the third quarter of fiscal 1995 were
1% higher than the $184.6 million reported in the second quarter. Domestic
net sales were 11% lower in the third quarter compared to the second quarter
as a result of normal quarter-to-quarter sales fluctuations. International
net sales in the third quarter were 18% higher compared to the second
quarter also as a result of normal quarter-to-quarter sales fluctuations.
Operating expenses were 93.3% of net sales in the current quarter compared
to 90.9% of net sales in the second quarter, primarily as a result of normal
quarter-to-quarter operating ratio fluctuations in the Company's domestic
operations. As a result, operating income before other expenses and income
taxes for the quarter ended January 31, 1995, was 6.7% of net sales compared
to 9.1% of net sales in the quarter ended October 31, 1994.
Net interest income in the three months ended January 31, 1995,
amounted to $.5 million compared to $1.1 million in the three months ended
October 31, 1994. The revaluation of foreign currencies amounted to a loss
of $.8 million in the third quarter compared to a gain of $.7 million
reported in the second quarter, due primarily to a loss on translation in
some of the hyper-inflationary countries as a result of changes in their net
financial positions.
Provision for income taxes in the quarter ended January 31, 1995,
amounted to 42.1% of pre-tax income compared to 42.5% of pre-tax income in
the quarter ended October 31, 1994. Net income for the quarter ended
January 31, 1995, was 3.8% of net sales compared to 5.8% of net sales in the
quarter ended October 31, 1994.
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Nine Months Comparison - Prior Year
Net sales for the nine months ended January 31, 1995, increased 9% to
$549.9 million as compared with $503.4 million reported in the first nine
months of the last fiscal year. Domestically, net sales increased 10% in
the nine months compared to a year ago. International net sales increased
8% as reported in U.S. dollars and were positively affected by changes in
currency translation rates. International net sales, when measured on a
local country currency basis, increased approximately 5%.
Operating expenses, as a percent of net sales, decreased to 92.3% for
the nine months of the current year compared to 92.8% for the nine months
of the prior year. In both the domestic and international operations,
operating expenses as a percent of net sales decreased due to increased
sales volume. As a result, operating income before other expenses and
income taxes for the nine months ended January 31, 1995, was 7.7% of net
sales compared to 7.2% of net sales for the nine months ended January 31,
1994.
In the nine months ended January 31, 1995, net interest income was $2.2
million compared to $1.3 million in the first nine months of the prior year.
The revaluation of foreign currencies amounted to a loss of $.5 million in
the first nine months of the current year compared to a gain of $.1 million
in the same period of the prior year, due primarily to a loss on translation
in some of the hyper-inflationary countries as a result of changes in their
net financial positions, offset somewhat by exchange gains in several of the
European subsidiaries.
Provision for income taxes was 42.0% of pre-tax income in the first
nine months of the current year compared to 40.0% of pre-tax income in the
prior year. A deferred tax asset rate adjustment was made in the second
quarter of the prior year, which reduced the provision for income taxes in
the prior year. Net income for the nine months ended January 31, 1995, was
4.6% of net sales compared to 4.5% of net sales for the nine months ended
January 31, 1994.
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PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
- ------------------------------------------
(b) Reports on Form 8-K -- There were no reports on Form 8-K filed for the
nine months ended January 31, 1995.
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
NCH Corporation
--------------------------------
(Registrant)
Date March 9, 1995 /s/Tom Hetzer
------------------- --------------------------------
Tom Hetzer
Vice President - Finance
(Principal Accounting Officer)
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WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<CURRENCY> U.S DOLLARS
<S> <C>
<PERIOD-TYPE> QTR-3
<FISCAL-YEAR-END> APR-30-1995
<PERIOD-START> NOV-01-1994
<PERIOD-END> JAN-31-1995
<EXCHANGE-RATE> 1.0
<CASH> 26,816
<SECURITIES> 101,917
<RECEIVABLES> 158,623
<ALLOWANCES> 20,693
<INVENTORY> 101,339
<CURRENT-ASSETS> 391,493
<PP&E> 186,906
<DEPRECIATION> 101,714
<TOTAL-ASSETS> 514,915
<CURRENT-LIABILITIES> 112,023
<BONDS> 0
<COMMON> 11,769
0
0
<OTHER-SE> 392,304
<TOTAL-LIABILITY-AND-EQUITY> 514,915
<SALES> 549,931
<TOTAL-REVENUES> 549,931
<CGS> 291,513
<TOTAL-COSTS> 291,513
<OTHER-EXPENSES> 216,096
<LOSS-PROVISION> 456
<INTEREST-EXPENSE> (2,182)
<INCOME-PRETAX> 44,048
<INCOME-TAX> 18,482
<INCOME-CONTINUING> 25,566
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 25,566
<EPS-PRIMARY> 3.08
<EPS-DILUTED> 3.08
</TABLE>
