<PAGE>
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 October 31, 1996 Commission file number 1-5838
---------------- ------
NCH CORPORATION
-----------------------------------------------------------------
(Exact name of registrant as specified in its charter)
DELAWARE 75-0457200
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
P.O. Box 152170
2727 Chemsearch Blvd.
Irving, TX 75015-2170
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(Address of principal (Zip Code)
executive offices)
Registrant's telephone number, include area code (214) 438-0211
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Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months
(or for such shorter period that the registrant was required to
file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X No
--- ---
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 December 2, 1996
-------------------------- -------------------------------
Common Stock, $1 par value 7,185,539
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<PAGE>
NCH CORPORATION
INDEX
Page No.
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Part I. Financial Information:
Consolidated Balance Sheets --
October 31, 1996 and April 30, 1996 3
Consolidated Statements of Income --
Three Months and Six Months Ended
October 31, 1996 and 1995 4
Consolidated Statements of Cash Flows --
Six Months Ended October 31, 1996 and 1995 5
Notes to Consolidated Financial Statements 6 - 7
Management's Discussion and Analysis of
Financial Condition and Results of Operations 8 - 16
Part II. Other Information 17
<PAGE>
<TABLE>
NCH CORPORATION AND SUBSIDIARIES
Consolidated Balance Sheets
(In Thousands Except Share and Per Share Data)
(Unaudited)
<CAPTION>
October 31, April 30,
1996 1996
----------- ---------
<C> <C>
<S>
Assets
Current Assets
Cash and cash equivalents $ 24,492 $ 21,806
Marketable securities 69,722 82,077
Accounts receivable, net 143,054 146,744
Inventories 106,816 106,907
Prepaid expenses 8,790 6,862
Deferred income taxes 19,635 18,471
-------- --------
Total Current Assets 372,509 382,867
-------- --------
Property, Plant and Equipment 202,366 199,700
Accumulated depreciation 111,748 110,983
-------- --------
90,618 88,717
-------- --------
Deferred Income Taxes 27,492 26,105
-------- --------
Other 16,576 16,715
-------- --------
Total $507,195 $514,404
======== ========
Liabilities and Stockholders' Equity
Current Liabilities
Notes payable to banks 1,761 7,448
Current maturities of
long-term debt 3,732 3,743
Accounts payable 50,725 54,194
Accrued expenses 32,199 29,824
Income taxes payable 21,990 17,997
Dividends payable 9,428 2,299
-------- --------
Total Current Liabilities 119,835 115,505
-------- --------
Long-Term Debt, less
current maturities 153 49
-------- --------
Retirement and Deferred
Compensation Plans 103,850 99,915
-------- --------
Stockholders' Equity
Common stock, par value
$1 per share, authorized
20,000,000 shares. Issued
11,769,304 shares 11,769 11,769
Additional paid-in capital 8,347 7,912
Retained Earnings 436,762 429,687
Foreign currency translation
adjustment (18,570) (18,720)
Unrealized (losses) gains on
investments 244 110
-------- --------
438,552 430,758
Less treasury stock
(4,516,765 and 4,105,057 shares) 155,195 131,823
-------- --------
283,357 298,935
-------- --------
Total $507,195 $514,404
======== ========
The accompanying notes are an integral part of these financial
statements.
</TABLE>
<PAGE>
<TABLE>
NCH CORPORATION AND SUBSIDIARIES
Consolidated Statements of Income
(In Thousands Except Per Share Amounts)
(Unaudited)
<CAPTION>
Three Months Six Months
Ended October 31, Ended October 31,
------------------ -----------------
1996 1995 1996 1995
-------- -------- -------- --------
<C> <C> <C> <C>
<S>
Net Sales $192,585 $194,424 $385,121 $386,577
-------- -------- -------- --------
Operating Expenses
Cost of sales, including
warehousing and
commissions 100,930 102,659 202,624 204,402
Marketing and
administrative
expenses 74,421 73,988 153,609 150,848
-------- -------- -------- --------
175,351 176,647 356,233 355,250
-------- -------- -------- --------
Operating Income 17,234 17,777 28,888 31,327
Other (Expenses) Income
Revaluation of
foreign currencies (286) (178) (563) (62)
Net interest 162 368 292 608
Gain on sale of
subsidiary 3,536 0 3,536 0
-------- -------- -------- --------
Income before Income
Taxes 20,646 17,967 32,153 31,873
Provision for Income
Taxes 8,604 7,379 13,445 13,082
-------- -------- -------- --------
Net Income $ 12,042 $ 10,588 $ 18,708 $ 18,791
======== ======== ======== ========
Weighted Average Number
of Shares Outstanding 7,350 8,140 7,455 8,194
===== ===== ===== =====
Earnings Per Share $1.64 $1.30 $2.51 $2.29
===== ===== ===== =====
Cash Dividend Paid Per
Share $ .30 $ .30 $ .60 $ .60
===== ===== ===== =====
Cash Dividend Declared
Not Paid $1.30 $1.30 $1.30 $1.30
===== ===== ===== =====
The accompanying notes are an integral part of these financial
statements.
</TABLE>
<PAGE>
<TABLE>
NCH CORPORATION AND SUBSIDIARIES
Consolidated Statements of Cash Flows
(In Thousands)
(Unaudited)
<CAPTION>
Six Months Ended
October 31,
--------------------
1996 1995
-------- --------
<C> <C>
<S>
Cash Flows from Operating Activities
Net Income $ 18,708 $ 18,791
Adjustments to reconcile net income to
net cash provided by operating
activities:
Depreciation and amortization 7,350 7,048
Gain on sale of subsidiary (3,536) -
Provision for losses on accounts
receivable 3,533 4,102
Deferred income taxes (2,641) 1,358
Retirement and deferred compensation
plans 3,998 777
Other noncash items 141 (307)
Changes in assets and liabilities,
excluding net assets acquired in the
purchase of businesses:
Accounts Receivable (1,484) (1,600)
Inventories 59 (7,342)
Prepaid Expenses (2,227) (2,744)
Accounts payable, accrued expenses
and income taxes payable 1,710 (3,805)
Other noncurrent assets (959) (1,160)
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Net cash provided by operating
activities 24,652 15,118
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Cash Flows from Investing Activities
Sales of property, plant and equipment 649 350
Purchases of property, plant and
equipment (10,473) (9,397)
Redemptions of marketable securities 24,367 24,390
Purchases of marketable securities (11,806) (5,074)
Acquisitions of businesses (246) -
Sale of subsidiary 7,932 -
Other (1,012) (1,012)
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Net cash provided by investing
activities 9,411 9,257
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Cash Flows from Financing Activities
Proceeds from notes payable 1,266 2,834
Payments of notes payable (6,804) (3,202)
Payments of long-term debt (10) (39)
Borrowing of cash surrender values 1,914 1,887
Payments of dividends (4,504) (4,942)
Purchases of treasury stock (23,102) (13,372)
Proceeds from exercise of stock options 46 130
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Net cash used in financing activities (31,194) (16,704)
Effect of Exchange Rate Changes on Cash
and Cash Equivalents (183) (172)
------- -------
Net Increase in Cash and Cash Equivalents 2,686 7,499
Cash and Cash Equivalents at Beginning of
Year 21,806 16,264
------- -------
Cash and Cash Equivalents at End of Period $ 24,492 $ 23,763
======= =======
The accompanying notes are an integral part of these financial
statements.
</TABLE>
<PAGE>
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 October
31, 1996, and April 30, 1996, the results of its operations for
the six months ended October 31, 1996 and 1995, and cash flows
for the six months then ended.
The accounting policies followed by the Company are set forth in
Note 1 to the Company's financial statements in the 1996 NCH
Corporation Report to the Shareholders, which is included in
Part II of Form 10-K.
The results of operations for the six month period ended October
31, 1996, are not necessarily indicative of the results to be
expected for the full year.
2. Inventories
-----------
Inventories consisted of the following (in thousands of dollars):
October 31, April 30,
1996 1996
---------- ---------
Raw Materials $16,366 $15,387
Finished Goods 88,220 89,381
Sales Supplies 2,230 2,139
-------- --------
$106,816 $106,907
======== ========
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 six months ended October 31,
1996 and 1995, were approximately $820,000 and $1,340,000,
respectively. Cash payments for income taxes were approximately
$11,813,000 and $17,155,000 for the same periods, respectively.
<PAGE>
NCH CORPORATION AND SUBSIDIARIES
Management's Discussion and Analysis of
Financial Condition and Results of Operations
Liquidity and Capital Resources
-------------------------------
In the six months ended October 31, 1996, working capital
decreased to $252.7 million from $267.4 million at April 30,
1996, and the current ratio was 3.1 to 1 at October 31, 1996,
compared to 3.3 to 1 at April 30, 1996. The total of cash,
cash equivalents and marketable securities decreased by $9.7
million in the first six months to $94.2 million at October
31, 1996, as shown on the Consolidated Balance Sheets. Net
cash flows from operations totaled $24.7 million. Additional
cash was provided by net redemptions of marketable securities
of $12.6 million and the sale of subsidiary assets of $7.9
million. Principal uses of cash consisted of treasury stock
purchases of $23.1 million, net capital expenditures of $9.8
million, net payments of notes payable and long term debt of
$5.5 million, and payment of dividends of $4.5 million.
Management expects that operating cash flows will continue to
generate sufficient funds to finance operating needs, capital
expenditures and the payment of dividends.
The Company's international subsidiaries operate on a fiscal
year ending on the last day of February. The reported values
of both assets and liabilities of the Company's international
subsidiaries increased slightly as a result of the change in the
Company's composite spot rate at August 31, 1996, compared to
February 29, 1996. This is reflected by the minimal change in
the foreign currency translation component of stockholders'
equity.
Accounts receivable decreased by $3.7 million and inventories
decreased by $.1 million in the six months ended October 31,
1996, 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 six 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 $2.0 million and inventories decreasing
by $.1 million during the quarter.
<PAGE>
Accounts payable, accrued expenses and income taxes payable
were similarly affected by currency translation. These
liabilities increased by $1.7 million when measured exclusive
of the effect of exchange rate changes, but increased by $2.9
million as reported on the Consolidated Balance Sheets. This
increase was primarily due to an increase in income taxes
payable in the Company's domestic and European operations, due
to normal timing differences in the amounts of tax payments in
the current quarter compared to the fourth quarter of the prior
year.
Net expenditures for property, plant and equipment amounted to
$9.8 million for the six months ended October 31, 1996, and
consisted of the installation and update of worldwide computer
systems, other normal additions of data processing and operating
equipment and continuing construction of a warehouse/office
facility for a domestic subsidiary. As with the other assets
and liabilities, the effect of currency translation on the
reported U.S. dollar values of property, plant and equipment was
to 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 $5.5 million
during the six months ended October 31, 1996. The decrease was
due primarily to the maturation and repayment of a short-term
loan in one of the Company's European subsidiaries. The bank
indebtedness shown on the Consolidated Balance Sheets was also
affected by currency translation, showing a larger decrease of
$ 5.6 million.
The directors of the Company declared a regular quarterly
dividend of $.30 per share on September 11, 1996, payable
December 16, 1996, to shareholders of record December 2, 1996.
On September 11, 1996, the directors of the Company also
declared a special dividend of $1.00 per share, payable
December 16, 1996 to shareholders of record December 2, 1996.
Cash dividends paid during the first six months of the fiscal
year amounted to $4.5 million.
Operating Results
-----------------
Second Quarter Comparison - Prior Year
Net sales for the second quarter of fiscal 1996 decreased 1%
to $192.6 million in the current year as compared with $194.4
million reported in the same quarter of the last fiscal year.
Domestically, net sales in the second quarter of the current
year decreased 1% over the second quarter of the prior year.
International net sales, when measured on a local currency
basis and when measured in U.S. dollars, decreased approximately
1% as compared to the second quarter of the prior year.
<PAGE>
Operating expenses as a percent of net sales increased slightly
in the current quarter to 91.1% of net sales compared to 90.9% in
the second quarter last year. As a result, operating income
before other expenses and income taxes for the quarter ended
October 31, 1996, was 8.9% of net sales compared to 9.1% of net
sales for the quarter ended October 31, 1995.
In the quarter ended October 31, 1996, net interest income was
$.2 million compared to $.4 million in the same quarter of the
prior year. Revaluation of foreign currencies was a loss of $.3
million in the second quarter of the current year compared to a
loss of $.2 million in the same period of the prior year. During
the quarter ended October 31, 1996, the Company sold subsidiary
assets, resulting in a gain of $3.5 million before taxes ($2.3
million after taxes). This subsidiary's sales during the year
ended April 30, 1996 were less than 1% of the Company's
consolidated annual sales, and therefore this transaction is not
expected to have a material impact on the Company's future
operations.
Provision for income taxes was 41.7% of pre-tax income in the
second quarter of the current year compared to 41.1% of pre-tax
income in the prior year. Net income for the quarter ended
October 31, 1996, was 6.3% of net sales compared to 5.4% of net
sales in the quarter ended October 31, 1995.
Second Quarter Comparison - Preceding Quarter
Net sales of $192.6 million for the second quarter of fiscal
1997 were slightly higher than the $192.5 million net sales
reported in the first quarter. International net sales were 10%
lower when measured in U.S. dollars, as a result of normal
quarter-to-quarter sales fluctuations and the effect of exchange
rate changes, while domestic net sales were 9% higher than the
previous quarter.
Operating expenses as a percent of net sales were 91.1% in the
current quarter compared to 93.9% in the first quarter.
Operating expenses in the domestic operations were lower as a
percent of net sales due to normal quarter-to-quarter sales and
expense fluctuations. As a result, operating income before
other expenses and income taxes for the quarter ended October
31, 1996, was 8.9% of net sales compared to 6.1% of net sales for
the quarter ended July 31, 1996.
Net interest income in the three months ended October 31, 1996,
amounted to $.2 million compared to $.1 million in the three
months ended July 31, 1996. The revaluation of foreign currencies
resulted in a loss of $.3 million in both the first and second
quarter of the current year. The sale of subsidiary assets in
the quarter ended October 31, 1996 resulted in a pre-tax gain of
$3.5 million ($2.3 million after tax).
<PAGE>
Provision for income taxes in the quarter ended October 31,
1996, amounted to 41.7% of pre-tax income compared to 42.1% of
pre-tax income in the quarter ended July 31, 1996. The lower
overall tax rate in the second quarter was due to the impact of
variations in individual country income levels and tax rates on
combined international results. Net income for the quarter ended
October 31, 1996, was 6.3% of net sales compared to 3.5% of net
sales in the quarter ended July 31, 1996.
Six Months Comparison - Prior Year
Net sales for the six months ended October 31, 1996, decreased
slightly to $385.1 million as compared with $386.6 million
reported in the first six months of the last fiscal year.
Domestically, net sales increased slightly in the six months
compared to a year ago. International net sales decreased 1% as
reported in U.S. dollars and were negatively affected by changes
in currency translation rates. International net sales, when
measured on a local country currency basis, increased
approximately 1%.
Operating expenses, as a percent of net sales, increased to
92.5% for the six months of the current year compared to 91.9%
for the first six months of the prior year. As a result,
operating income before other expenses and income taxes for the
six months ended October 31, 1996, was 7.5% of net sales compared
to 8.1% of net sales for the six months ended October 31, 1995.
In the six months ended October 31, 1996, net interest income
was $.3 million compared to $.6 million in the first six months
of the prior year. Revaluation of foreign currencies amounted
to a loss of $.6 million in the first six months of the current
year compared to a loss of $.1 million in the same period of the
prior year. The sale of subsidiary assets in the six months ended
October 31, 1996 resulted in a pre-tax gain of $3.5 million ($2.3
million after tax).
Provision for income taxes was 41.8% of pre-tax income in the
first six months of the current year compared to 41.0% of pre-tax
income in the prior year. Net income for the six months ended
October 31, 1996 was 4.9% of net sales compared to 4.9% of net
sales for the six months ended October 31, 1995.
<PAGE>
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 six months ended October 31, 1996.
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 December 12, 1996 /s/ Tom Hetzer
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Tom Hetzer
Vice President - Finance
(Principal Accounting Officer)
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> APR-30-1997
<PERIOD-START> MAY-01-1996
<PERIOD-END> OCT-31-1996
<EXCHANGE-RATE> 1.0
<CASH> 24,492
<SECURITIES> 69,722
<RECEIVABLES> 161,928
<ALLOWANCES> 18,874
<INVENTORY> 106,816
<CURRENT-ASSETS> 372,509
<PP&E> 202,366
<DEPRECIATION> 111,748
<TOTAL-ASSETS> 507,195
<CURRENT-LIABILITIES> 119,835
<BONDS> 0
0
0
<COMMON> 11,769
<OTHER-SE> 271,588
<TOTAL-LIABILITY-AND-EQUITY> 507,195
<SALES> 385,121
<TOTAL-REVENUES> 385,121
<CGS> 202,624
<TOTAL-COSTS> 356,233
<OTHER-EXPENSES> (2,973)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (292)
<INCOME-PRETAX> 32,153
<INCOME-TAX> 13,445
<INCOME-CONTINUING> 18,708
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 18,708
<EPS-PRIMARY> 2.51
<EPS-DILUTED> 2.51
</TABLE>
