<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended April 30, 1997 Commission file number 1-5838
-------------- ------
NCH CORPORATION
----------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
DELAWARE 75-0457200
---------------------------------------- ---------------------------------
(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
P.O. Box 152170
2727 Chemsearch Boulevard
Irving, Texas 75015
---------------------------------------- ---------------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (972)438-0211
-------------------------
Securities registered pursuant to Section 12(b) of the Act:
Name of each exchange on
Title of each class which registered
------------------- ----------------
COMMON STOCK, $1 PAR VALUE NEW YORK STOCK EXCHANGE
Securities registered pursuant to Section 12(g) of the Act: NONE
----------------
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 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)
Indicate the number of shares outstanding of each of the registrant's
classes of common stock, as of the latest practicable date:
Approximate Aggregate
Market Value* Total Shares
of Shares Held by Outstanding
Class Non-affiliates at July 11, 1997
-------------------------- -------------- ---------------
COMMON STOCK, $1 PAR VALUE $ 192,630,400 7,167,476
-------------------------- -------------- ---------------
*The approximate aggregate market value of the common stock held by non-
affiliates is based on the closing price of these shares on the New York
Stock Exchange on July 11, 1997.
DOCUMENTS INCORPORATED BY REFERENCE:
Portions of the Registrant's 1997 Annual Report to the Shareholders and
definitive Proxy Statement relating to the Registrant's 1997 Annual
Shareholders Meeting are incorporated by reference in Parts II and III of
this Form 10-K.
<PAGE>
DOCUMENTS INCORPORATED BY REFERENCE
Location in Form 10-K Incorporated Document
PART II
Item 5 - Market for the Registrant's Page 28 of the 1997
Common Equity and Related Shareholder Annual Report.
Matters.
Item 6 - Selected Financial Data. Page 14 of the 1997
Annual Report.
Item 7 - Management's Discussion and Pages 14-16 of the 1997
Analysis of Financial Condition and Annual Report.
Results of Operations.
Item 8 - Financial Statements and Pages 17-28 of the 1997
Supplementary Data. Annual Report.
PART III
Item 10 - Directors and Executive Pages 2-4 and 11 of the Company's
Officers of the Registrant. Proxy Statement dated June
24, 1997, in connection with
its Annual Meeting to be held
on July 24, 1997.
Item 11 - Executive Compensation. Pages 4-8 of the Company's
Proxy Statement dated June
24, 1997, in connection with
its Annual Meeting to be held
on July 24, 1997.
Item 12 - Security Ownership of Certain Pages 11-12 of the Company's
Beneficial Owners and Management. Proxy Statement dated June
24, 1997, in connection with
its Annual Meeting to be held
on July 24, 1997.
Item 13 - Certain Relationships and Pages 2-3 and 9 of the Company's
Related Transactions. Proxy Statement dated June
24, 1997, in connection with
its Annual Meeting to be held
on July 24, 1997.
<PAGE>
PART I
Item 1. Business
--------
NCH Corporation, a Delaware corporation, and its subsidiaries (herein
collectively referred to as the "Company" or "NCH" unless the context
requires differently) markets an extensive line of maintenance, repair
and supply products to customers throughout the world. Products include
specialty chemicals, fasteners, welding supplies, plumbing and electronic
parts, and safety supplies. These products are marketed principally
through the Company's own sales force. There have been no significant
changes in the kind of products produced or marketed by the Company since
the beginning of the last fiscal year, although individual products are
continually added to and deleted from the product line. Sales are
generally consistent throughout the year, with no significant seasonal
fluctuations.
Competitive conditions in the industry involved are severe and the
Company believes that no one enterprise or group of enterprises has a
dominant or preeminent position in the market. Further, the Company
believes that no enterprise has a significant percentage of the market.
No informative statement can be made as to the Company's rank in its
industry. Not only do other concerns compete in the broad general range of
maintenance, repair or supply products, but there are also many competitors
who produce one or more products which compete with specific products sold
by the Company. Competition in the industry is primarily on the basis of
price, service and product performance. The Company's main emphasis is on
service and product performance rather than price. Sales of Company
products are not dependent upon a limited number of customers, and no
particular customer accounts for more than 3% of net sales.
Qualified sales representatives are crucial to the Company's
operations. In addition to industry competition, the Company competes with
the entire business community for qualified sales representatives. This
competition has been, and remains, severe. The Company has a required
formal training program for its sales representatives consisting of in-house
and field training. Based on the Company's experience in the last three
years, turnover of new sales representatives in the first year is estimated
to be 81%. The annual cost of recruiting and training sales
representatives over the past three years has averaged approximately $44
million per year.
The products that the Company markets are readily available from
numerous sources. The Company buys raw materials and finished products from
a large number of suppliers, none of whom would materially impact the sales
or earnings of the Company should they cease to be a source of supply. In
some foreign countries, licensees manufacture specialty chemical products
for marketing by the Company's subsidiaries.
Patents, franchises and concessions have not played an important role
in the Company's business. Trademarks are extensively used on products, and
are useful but not of paramount importance.
<PAGE>
As of the end of its last fiscal year the Company employed 10,458
persons. The Company employs 83 professional or technical persons on its
laboratory staff ranging from Ph.D's to nongraduate chemical technicians.
Although the laboratory staff spends time on research activities relating to
the development of new products or services and the improvement of existing
products or services, the staff is also engaged in quality control and
customer service activities. Costs cannot be broken down between these
various activities. The approximate amounts spent on laboratory operations
in the years ended April 30, 1997, 1996 and 1995, were $5.0 million, $4.6
million and $4.6 million, respectively. All laboratory costs, including
research and development, are expensed as incurred.
The Company is subject to various federal, state and local laws and
regulations affecting businesses in general, including environmental laws
and regulations. Complying with all laws and regulations has not materially
affected the Company's competitive position, earnings or capital
expenditures. All laws and regulations are subject to change and the
Company cannot predict what effect, if any, changes might have on its
business.
International sales are conducted through subsidiaries in Europe,
Canada, Latin America, Australia and the Far East. Intercompany sales and
profits have been eliminated from the following schedule. Corporate
expenses are allocated between the geographic areas. Identifiable assets
are those identified with the operations in each geographic area. Corporate
assets include portions of cash and cash equivalents and marketable
securities.
Financial information by geographic area, in thousands of dollars,
follows for the years ended April 30:
Latin
United Pacific & America Consoli-
States Europe Far East & Canada dated
-------- -------- -------- -------- --------
1997
Net Sales $417,411 $266,263 $34,313 $48,774 $766,761
Net Income 21,809 11,686 86 1,094 34,675
Identifiable Assets 267,639 114,486 17,476 23,325 422,926
Corporate Assets 74,665
1996
Net Sales $412,027 $275,353 $35,727 $49,727 $772,834
Net Income 20,341 15,247 247 472 36,307
Identifiable Assets 256,625 126,041 17,789 21,094 421,549
Corporate Assets 92,855
1995
Net Sales $408,668 $244,517 $31,837 $50,076 $735,098
Net Income (Loss) 22,294 13,354 313 (379) 35,582
Identifiable Assets 246,926 123,659 17,792 20,383 408,760
Corporate Assets 120,377
Sales between geographic areas and export sales from the United States
are immaterial and are therefore not included in net sales disclosed in the
above table.
<PAGE>
In the Company's experience, other than currency fluctuations, the
overall risk of international operations has not been appreciably higher
than domestic operations, although the risk of operations in any one country
may be greater than in the United States. The Company is subject to the
risks inherent in operating in foreign countries, including government
regulation, currency restrictions and other restraints, risk of
expropriation and burdensome taxes.
Item 2. Properties
----------
The Company owns its world headquarters and domestic administrative
center complex in Irving, Texas, containing approximately 319,000 square
feet.
The Company owns and operates 20 manufacturing facilities in 7 states
and 11 foreign countries, located in Canada, Europe, Latin America and the
Far East, containing approximately 1,234,000 square feet. These facilities
also include related office and warehouse space.
The Company owns and occupies a total of 17 office or office/warehouse
combinations in 3 states and 6 foreign countries, located in Europe and
Latin America, containing approximately 773,000 square feet.
In addition, the Company leases additional warehouse space,
manufacturing plants, and office space at various locations in the United
States and abroad, none of which is material in relation to the Company's
overall assets.
During the last fiscal year the Company made investments, net of
dispositions, of $16,018,000 ($17,659,000 gross) in property, plant and
equipment.
The plants and properties owned and operated by the Company are
maintained in good condition and are believed to be suitable and adequate
for the next several years.
Item 3. Legal Proceedings
-----------------
There are no material pending legal proceedings, other than ordinary
routine litigation incidental to the business, to which the Company or any
of its subsidiaries is a party or of which any of their property is subject.
From time to time, the Company is named as a potentially responsible
party in proceedings involving compliance with environmental laws and
regulations. Currently, there are no such proceedings involving monetary
sanctions pending against the Company, or proceedings, singularly or in the
aggregate, involving potential damages or expenditures in excess of 10% of
the current assets of the Company.
Item 4. Submission of Matters to a Vote of Security Holders
---------------------------------------------------
No matters were submitted to a vote of security holders during the
fourth quarter of the fiscal year covered by this report.
<PAGE>
Executive Officers of the Registrant
-----------------------------------
The following are the executive officers of the Company as of
June 1, 1997:
Name Office Age
---- ------ ---
Lester A. Levy Chairman of the Board; Director 74
Milton P. Levy, Jr. Chairman of the Executive Committee;
Director 71
Irvin L. Levy President; Director 68
Earl Nicholson Senior Vice President 75
James A. Stone Senior Vice President 75
Joe Cleveland Vice President and Secretary 63
Tom Hetzer Vice President - Finance 60
Glen Scivally Vice President and Treasurer 56
Messrs. Lester A. Levy, Milton P. Levy, Jr. and Irvin L. Levy are brothers.
Each of the Company's executive officers has been an executive officer of
the registrant for more than five years as his principal employment.
PART II
Item 5. Market for the Registrant's Common Equity and
---------------------------------------------
Related Stockholder Matters
---------------------------
Market and Dividend Information, appearing on page 28 of the 1997
Annual Report, is incorporated by reference herein.
Item 6. Selected Financial Data
-----------------------
Selected Financial Data, appearing on page 14 of the 1997 Annual
Report, is incorporated by reference herein.
<PAGE>
Item 7. Management's Discussion and Analysis of
---------------------------------------
Financial Condition and Results of Operations
---------------------------------------------
Management's Discussion and Analysis of Financial Condition and Results
of Operations, appearing on pages 14-16 of the 1997 Annual Report, is
incorporated by reference herein.
Item 8. Financial Statements and Supplementary Data
-------------------------------------------
The Financial Statements and Supplementary Data, appearing on pages
17-28 of the 1997 Annual Report, is incorporated by reference herein.
Item 9. Changes in and Disagreements with Accountants on
------------------------------------------------
Accounting and Financial Disclosure
-----------------------------------
None
<PAGE>
PART III
Item 10. Directors and Executive Officers of the Registrant
--------------------------------------------------
Information on directors of the registrant, found on pages 2-4 of the
Company's Proxy Statement dated June 24, 1997, in connection with its Annual
Meeting to be held July 24, 1997, is incorporated by reference herein.
Information on executive officers of the registrant, found on page 11
of the Company's Proxy Statement dated June 24, 1997, is incorporated by
reference herein.
Item 11. Executive Compensation
----------------------
Information on executive compensation and transactions, found on pages
4-8 of the Company's Proxy Statement dated June 24, 1997, in connection with
its Annual Meeting to be held July 24, 1997, is incorporated by reference
herein.
Item 12. Security Ownership of Certain Beneficial Owners and Management
--------------------------------------------------------------
Information on security ownership of principal stockholders and
management, found on pages 11-12 of the Company's Proxy Statement dated
June 24, 1997, in connection with its Annual Meeting to be held on
July 24, 1997, is incorporated by reference herein.
Item 13. Certain Relationships and Related Transactions
----------------------------------------------
Information on certain relationships and related transactions, found
on pages 2-3 and 9 of the Company's Proxy Statement dated June 24, 1997, in
connection with its Annual Meeting to be held on July 24, 1997, is
incorporated by reference herein.
<PAGE>
PART IV
Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K
----------------------------------------------------------------
(a)(1) and (2): The response to this portion of Item 14 is submitted as a
separate section of this report on pages 15-16. The information set forth
on pages 15-16 of this report is incorporated by reference. The
consolidated financial statements set forth on page 15 of this report are
filed as part of this Form 10-K by incorporation by reference to pages 17-28
of the 1997 Annual Report.
(a)(3) and (c): Exhibits. For a list of the exhibits filed as a part of
this report, see the Index to Exhibits on page 19 of this report, which is
incorporated by reference.
(b) Reports on Form 8-K: No reports on Form 8-K were filed during the
quarter ended April 30, 1997.
(d) Not applicable.
<PAGE>
SIGNATURES
The Issuer
----------
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, NCH Corporation has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized, in the
City of Irving, and the State of Texas, on this 6th day of June, 1997.
NCH CORPORATION, Registrant
By /s/ Irvin L. Levy
-------------------------------
Irvin L. Levy, President
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of NCH
Corporation and in the capacities and on the date indicated.
Signature Capacity at Registrant Date
--------- ---------------------- ----
/s/Lester A. Levy Chairman of the Board; June 6, 1997
------------------------ Director
Lester A. Levy
/s/Milton P. Levy, Jr. Chairman of the Executive June 6, 1997
------------------------ Committee; Director
Milton P. Levy, Jr.
/s/Irvin L. Levy President; Director June 6, 1997
------------------------ (Principal Executive Officer)
Irvin L. Levy
/s/Tom Hetzer Vice President - Finance June 6, 1997
------------------------ (Principal Accounting Officer)
Tom Hetzer
/s/Robert L. Blumenthal Director June 6, 1997
------------------------
Robert L. Blumenthal
/s/Rawles Fulgham Director June 6, 1997
------------------------
Rawles Fulgham
/s/Jerrold M. Trim Director June 6, 1997
------------------------
Jerrold M. Trim
/s/Thomas B. Walker Jr. Director June 6, 1997
------------------------
Thomas B. Walker Jr.
<PAGE>
NCH CORPORATION
AND SUBSIDIARY COMPANIES
FORM 10-K
ITEMS 8, 14(a)(1) and (2) and (a)(3) and (c)
INDEX OF FINANCIAL STATEMENTS, SCHEDULES AND EXHIBITS
The following consolidated financial statements are filed as part of
this Form 10-K by incorporation by reference to pages 17-28 of the 1997
Annual Report.
Consolidated Financial Statements:
Statements of Income, Years Ended April 30, 1997, 1996 and 1995
Balance Sheets, April 30, 1997 and 1996
Statements of Cash Flows, Years Ended April 30, 1997, 1996 and 1995
Statements of Stockholders' Equity, Years Ended April 30, 1997, 1996
and 1995
Notes to Consolidated Financial Statements
Independent Auditors' Report
Selected Unaudited Quarterly Data, Years Ended April 30, 1997 and 1996
The following consolidated financial statement schedules of the
registrant and its subsidiaries are included in Item 14(a)(2):
Page
----
Consolidated Financial Statement Schedules
Independent Auditors' Report 17
II - Valuation and Qualifying Accounts 18
Schedules other than those listed above are omitted because they are
not required or are not applicable, the information required is immaterial
in relation to the registrant's consolidated financial statements, or the
required information is shown in the consolidated financial statements or
notes thereto. Columns omitted from schedules filed have been omitted
because the information is not applicable.
<PAGE>
INDEPENDENT AUDITORS' REPORT
The Stockholders and Board of Directors
NCH Corporation:
Under date of June 3, 1997, we reported on the consolidated balance
sheets of NCH Corporation and subsidiaries as of April 30, 1997 and 1996,
and the related consolidated statements of income, stockholders' equity
and cash flows for each of the years in the three-year period ended
April 30, 1997, as contained in the 1997 Annual Report to Shareholders.
These consolidated financial statements and our report thereon are
incorporated by reference in the annual report on Form 10-K for the year
ended April 30, 1997. In connection with our audits of the aforementioned
consolidated financial statements, we also audited the related consolidated
financial statement schedule as listed in the accompanying index. This
consolidated financial statement schedule is the responsibility of the
Company's management. Our responsibility is to express an opinion on this
consolidated financial statement schedule based on our audits.
In our opinion, such financial statement schedule, when considered in
relation to the basic consolidated financial statements taken as a whole,
presents fairly, in all material respects, the information set forth
therein.
/s/ KPMG Peat Marwick LLP
Dallas, Texas
June 3, 1997
<PAGE>
<TABLE>
NCH CORPORATION AND SUBSIDIARIES
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
(In Thousands)
<CAPTION>
Balance at Charged to Foreign Deductions-- Balance
Beginning Costs and Currency Accounts at End of
Description of Period Expenses Translation Written-Off Period
-------------------------------- --------- ---------- ----------- ----------- ----------
<S> <C> <C> <C> <C> <C>
Reserves Deducted in the Balance
Sheet from Assets to Which They
Apply
Allowances for Doubtful Accounts
Year Ended April 30, 1997 $16,259 $6,939 $(1,311) $6,263 $15,624
======= ====== ======= ====== =======
Year Ended April 30, 1996 $16,879 $7,697 $ (284) $8,033 $16,259
======= ====== ======= ====== =======
Year Ended April 30, 1995 $16,469 $7,100 $ 713 $7,403 $16,879
======= ====== ======= ====== =======
</TABLE>
<PAGE>
INDEX TO EXHIBITS
-----------------
Exhibit Sequentially
Number Exhibit Numbered Page
------ ------- -------------
Exhibit 3.1 (1) Restated Certificate of Incorporation
Exhibit 3.2 (1) Bylaws, as amended
Exhibit 10.1 (1) (3) Form of 1980 Non-Qualified Stock Option
Plan, as amended
Exhibit 10.2 (1) (3) Form of Non-Qualified Stock Option
Agreement
Exhibit 10.5 (1) (3) Forms of Deferred Compensation
Agreements with Messrs. Irvin, Lester,
and Milton Levy
Exhibit 10.7 (3) (4) Fourth and Fifth Amendments to Deferred Compensation
Agreements with Messrs. Irvin, Lester,
and Milton Levy
Exhibit 10.8 (3) (5) Executive Committee Incentive Bonus Plan
Exhibit 10.9 (2) (3) Fourth, Fifth and Sixth Amendments to Deferred
Compensation Agreements with Messrs. Irvin, Lester,
and Milton Levy
Exhibit 13 (2) Annual Report for the year ended April 30, 1997
for information only and not filed
Exhibit 21 (2) Subsidiaries of the Registrant
Exhibit 23 (2) Independent Auditors' Consent
Exhibit 27 (2) Financial Data Schedule
Exhibit 99 (2) Definitive Proxy Statement regarding
the Company's 1997 Annual Meeting of
Stockholders
(1) Incorporated herein by reference to the exhibits with the same
exhibit number and designation in the Registrant's report on Form
10-K for the fiscal year ended April 30, 1987, filed with the
Securities and Exchange Commission.
(2) Filed herewith.
(3) Management contract or compensatory plan or arrangement required to
be filed as an exhibit to this report pursuant to Item 14(c) of Form
10-K.
(4) Incorporated herein by reference to the exhibit with the same
exhibit number and designation in the Registrant's report on Form
10-K for the fiscal year ended April 30, 1995, filed with the
Securities and Exchange Commission.
(5) Incorporated herein by reference to the exhibit with the same
exhibit number and designation in the Registrant's report on Form
10-K for the fiscal year ended April 30, 1994, filed with the
Securities and Exchange Commission.
<PAGE>
NCH CORPORATION AND SUBSIDIARIES
EXHIBIT 10.9 AMENDMENTS TO DEFERRED COMPENSATION AGREEMENTS
FOURTH AMENDMENT TO
DEFERRED COMPENSATION AGREEMENT
-------------------------------
STATE OF TEXAS
COUNTY OF DALLAS
THIS FOURTH AMENDMENT to that certain agreement between the parties
heretofore dated September 11, 1985 (the "Agreement") is made by and between
NCH Corporation, a Delaware corporation (the "Corporation") and IRVIN L.
LEVY, an individual employee of the Corporation ("Levy"), executed as of
this 2nd day of April, 1997.
R E C I T A L S:
The following facts exist:
A. The parties hereto have previously entered into the Agreement
which has been amended by amendments dated July 20, 1988, January 1, 1989
and February 3, 1993. A purported amendment dated February 23, 1993 styled
Fifth Amendment should have correctly been the Third Amendment and, in fact,
there is no Fifth Amendment.
B. The parties desire to amend the Agreement to reflect a different
"Annual Amount" in the event of retirement, death or disability.
C. Except as amended herein, the terms of the Agreement shall remain
in full force and effect.
-----------------------------
NOW, THEREFORE, for and in consideration of the covenants and
agreements of the parties hereto and other good and valuable consideration
the sufficiency of which is hereby acknowledged, the parties hereby agree as
follows:
1. The first full paragraph of paragraph 2 (not including
subparagraphs (a) - (e)) of the Agreement is hereby deleted and the
following paragraph is substituted in its stead:
"2. Payment Upon Retirement, Death, or Disability. At any
time, Levy may retire from the active and daily service of the
Corporation. Commencing with the date of such retirement, the
Corporation shall pay to Levy an annual amount (the "Annual Amount") of
$500,000. The Annual Amount shall be increased for retirement in a
calendar year subsequent to 1997 by the increase in the United States
Consumer Price Index (All Urban Consumers - U.S. City Average) for the
preceding calendar year. The Annual Amount for each year shall be paid
in twelve (12) equal monthly installments (the "Monthly Payments"),
<PAGE>
with an installment payable on the first day of each month. The
Corporation shall continue to make such payments to Levy during his
lifetime, and additionally agrees as follows:"
IN WITNESS WHEREOF, the parties hereto have executed this Amendment as
of the day and year first above written.
NCH CORPORATION
ATTEST:
By:
/s/ Joe Cleveland
------------------
Secretary
/s/ Irvin L. Levy
-------------------
<PAGE>
FIFTH AMENDMENT TO
DEFERRED COMPENSATION AGREEMENT
-------------------------------
STATE OF TEXAS
COUNTY OF DALLAS
THIS FIFTH AMENDMENT to that certain agreement between the parties
heretofore dated September 11, 1985 (the "Agreement") is made by and between
NCH Corporation, a Delaware corporation (the "Corporation") and MILTON P.
LEVY, JR., an individual employee of the Corporation ("Levy"), executed as
of this 2nd day of April, 1997.
R E C I T A L S:
The following facts exist:
A. The parties hereto have previously entered into the Agreement
which has been amended four times, the latest amendment being as of March
16, 1995.
B. The parties desire to amend the Agreement to reflect a different
"Annual Amount" in the event of retirement, death or disability.
C. Except as amended herein, the terms of the Agreement shall remain
in full force and effect.
-------------------------------
NOW, THEREFORE, for and in consideration of the covenants and
agreements of the parties hereto and other good and valuable consideration
the sufficiency of which is hereby acknowledged, the parties hereby agree
as follows:
1. The first full paragraph of paragraph 2 (not including
subparagraphs (a) - (e)) of the Agreement is hereby deleted and the
following paragraph is substituted in its stead:
"2. Payment Upon Retirement, Death, or Disability. At any
time, Levy may retire from the active and daily service of the
Corporation. Commencing with the date of such retirement, the
Corporation shall pay to Levy an annual amount (the "Annual Amount")
of $500,000. The Annual Amount shall be increased for retirement in
a calendar year subsequent to 1997 by the increase in the United States
Consumer Price Index (All Urban Consumers - U.S. City Average) for the
preceding calendar year. The Annual Amount for each year shall be paid
in twelve (12) equal monthly installments (the "Monthly Payments"),
with an installment payable on the first day of each month. The
Corporation shall continue to make such payments to Levy during his
lifetime, and additionally agrees as follows:"
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Amendment as
of the day and year first above written.
NCH CORPORATION
ATTEST:
By:
/s/ Joe Cleveland
------------------
Secretary
/s/ Milton P. Levy, Jr.
------------------------
<PAGE>
SIXTH AMENDMENT TO
DEFERRED COMPENSATION AGREEMENT
STATE OF TEXAS
COUNTY OF DALLAS
THIS SIXTH AMENDMENT to that certain agreement between the parties
heretofore dated September 11, 1985 (the "Agreement") is made by and between
NCH Corporation, a Delaware corporation (the "Corporation") and LESTER A.
LEVY, an individual employee of the Corporation ("Levy"), executed as of
this 2nd day of April, 1997.
R E C I T A L S:
The following facts exist:
A. The parties hereto have previously entered into the Agreement
which has been amended by amendments dated July 20, 1988, January 1, 1989,
February 23, 1993, and February 23, 1995. The 1995 amendment merely
changed the name of the Third Amendment to the Fifth Amendment as
inadvertently the Fifth Amendment was named the Third Amendment when it
should have been named the Fifth Amendment.
B. The parties desire to amend the Agreement to reflect a
different method of determining compensation in the event of retirement,
death or disability.
C. Except as amended herein, the terms of the Agreement shall remain
in full force and effect.
------------------------------
NOW, THEREFORE, for and in consideration of the covenants and
agreements of the parties hereto and other good and valuable consideration
the sufficiency of which is hereby acknowledged, the parties hereby agree
as follows:
1. The first full paragraph of paragraph 2 (not including
subparagraphs (a) - (e)) of the Agreement is hereby deleted and the
following paragraph is substituted in its stead:
"2. Payment Upon Retirement, Death, or Disability. At any
time, Levy may retire from the active and daily service of the
Corporation. Commencing with the date of such retirement, the
Corporation shall pay to Levy an annual amount (the "Annual Amount")
of $500,000. The Annual Amount shall be increased for retirement in
a calendar year subsequent to 1997 by the increase in the United
States Consumer Price Index (All Urban Consumers - U.S. City Average)
for the preceding calendar year. The Annual Amount for each year
shall be paid in twelve (12) equal monthly installments (the "Monthly
Payments"), with an installment payable on the first day of each
month. The Corporation shall continue to make such payments to Levy
during his lifetime, and additionally agrees as follows:"
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Amendment
as of the day and year first above written.
NCH CORPORATION
ATTEST:
By:
/s/ Joe Cleveland
------------------
Secretary
/s/ Lester A. Levy
-------------------
<PAGE>
NCH CORPORATION AND SUBSIDIARIES
EXHIBIT 13
ANNUAL REPORT FOR THE YEAR ENDED APRIL 30, 1997
Selected Financial Data
NCH Corporation and Subsidiaries
(In Thousands Except Per Share Data)
Years Ended April 30,
1997 1996 1995 1994 1993
-------- -------- -------- -------- --------
Net Sales $766,761 $772,834 $735,098 $679,987 $679,937
Net Income $ 34,675 $ 36,307 $ 35,582 $ 31,207 $ 37,613
Earnings Per
Share $4.73 $4.51 $4.29 $3.77 $4.53
Current Ratio 3.4 to 1 3.3 to 1 3.5 to 1 3.6 to 1 3.7 to 1
Total Assets $497,591 $514,404 $529,137 $485,223 $467,376
Long-Term
Debt $ 112 $ 49 $ 4,761 $ 6,790 $ 8,795
Retirement
and Deferred
Compensation
Plans $107,057 $ 99,915 $ 92,157 $ 83,986 $ 80,026
Cash Dividends
Declared
Per Share $2.20 $2.20 $2.15 $2.00 $2.00
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
---------------------------------------------------------------
RESULTS OF OPERATIONS
---------------------
Liquidity and Capital Resources
-------------------------------
In the fiscal year ended April 30, 1997, working capital decreased
to $260.1 million from $267.4 million at April 30, 1996. The current ratio
was 3.4 to 1 at April 30, 1997, compared to 3.3 to 1 at April 30, 1996.
The total of cash, cash equivalents and marketable securities decreased by
$12.9 million to $91.0 million at April 30, 1997. Net cash flow from
operations totaled $40.7 million for fiscal 1997. Principal uses of cash
consisted of treasury stock purchases of $30.1 million, payment of dividends
of $16.0 million and net capital expenditures of $16.0 million. Management
expects that operating cash flows will continue to generate sufficient funds
to finance operating needs, capital expenditures and the payment of
dividends. Long-term and short-term indebtedness has usually been limited
to the borrowing of local country currencies by the Company's international
subsidiaries to finance working capital requirements, although the Company
has incurred debt domestically at various times when financially
advantageous.
The Company's international subsidiaries operate on a fiscal year
ending on the last day of February. At February 28, 1997, the value of the
U.S. dollar had increased relative to most of the currencies in which the
Company's international subsidiaries operate. As a result, the reported
values of both assets and liabilities of the Company's international
subsidiaries decreased as a result of the change in the Company's composite
spot rate at February 28, 1997, compared to February 29, 1996. This is
reflected by the foreign currency translation component of stockholders'
equity, which increased $7.0 million to a $25.7 million reduction of
equity at April 30, 1997.
As reported on the Consolidated Balance Sheets, accounts receivable
decreased by $2.1 million in the year ended April 30, 1997. The change in
accounts receivable presented in the Consolidated Statements of Cash Flows
excludes the effect of exchange rates on the reported asset values and shows
that accounts receivable, net of the provision for losses, increased by $5.5
million compared to the end of the prior year. The difference is due to the
strength of the U.S. dollar at February 28, 1997, compared to February 29,
1996. The increase in accounts receivable, exclusive of exchange rates,
was primarily the result of strong sales in certain of the domestic
operations during the month of April.
As reported on the Consolidated Balance Sheets, inventories increased
by $.6 million in the year ended April 30, 1997. The change in inventories
presented in the Consolidated Statements of Cash Flows excludes the effect
of exchange rates on the reported asset values and shows that inventories
increased $2.4 million in the same period. Inventories increased in the
current year due to higher inventory requirements as a result of increasing
sales and new products in several of the Company's domestic operations.
<PAGE>
Accounts payable, accrued expenses and income taxes payable decreased
by $2.8 million as reported on the Consolidated Balance Sheets. Accounts
payable and accrued expenses decreased as a result of normal business
activity associated with timing of payments and was offset by an increase
in income taxes payable. Income taxes payable increased due to the timing
of payments in the current year as compared to the prior year and increased
pre-tax income during the current year in the domestic operations.
Net capital expenditures for property, plant and equipment were $16.0
million for the year ended April 30, 1997. These consisted of the
installation and update of worldwide computer systems, normal additions of
operating equipment, and continuing construction of a warehouse/office
facility for a domestic subsidiary. Capital expenditures for the upcoming
year are anticipated to be less than current year expenditures.
Other assets decreased $5.2 million as reported on the Consolidated
Balance Sheets. The decrease is due to the surrender of insurance contracts
during the year and is partially offset by increases in computer software,
patents and trademarks.
Deferred tax benefits represent future income tax deductions and,
therefore, impact future cash flows by reducing federal income taxes to be
paid in future years in which the temporary differences are expected to be
recovered or settled. Management believes the Company will have sufficient
future taxable income to make it more likely than not that the net deferred
tax assets will be realized.
Total bank indebtedness, comprised of long-term debt, current
maturities of long-term debt and notes payable, decreased $4.7 million as
reported on the Consolidated Balance Sheets. During the year, short-term
borrowings, primarily in Europe, were repaid, and annual debt payments on
domestic borrowings were made. Of the $3.9 million in long-term debt and
current maturities, $3.7 million is an industrial revenue bond, used for
the financing of a domestic facility. This industrial revenue bond is due in
2006, but is classified as a current liability due to redemption provisions
in the loan agreement. The remaining long-term debt and current maturities
and all $2.7 million of notes payable consist of international subsidiary
borrowings in local country currencies used primarily to finance working
capital requirements.
The retirement and deferred compensation plan liability on the
Consolidated Balance Sheets represents compensation deferred by employees
and accrued interest on such deferrals as well as accrued retirement
benefits under non-qualified retirement plans. Deferred compensation is
expensed as earned with a liability recorded for payment in future years.
During fiscal year 1997, cash dividends paid amounted to $16.0 million
($2.20 per share) compared to $17.7 million in 1996 ($2.20 per share). The
directors of the Company declared an extra cash dividend of $1.00 per share
on September 11, 1996, which was paid December 16, 1996. On April 2, 1997,
the directors of the Company declared a regular quarterly cash dividend of
$.30 per share of Common Stock to be paid June 16, 1997, to shareholders of
record June 2, 1997. As of April 30, 1997, dividends of $2.1 million had
been declared, but not paid.
<PAGE>
Operating Results
-----------------
Net sales of $766.8 million in fiscal 1997 were 1% lower than net sales
of $772.8 million in fiscal 1996. Net sales in fiscal year 1996 were 5%
higher than fiscal 1995 net sales of $735.1 million. Domestic net sales
increased 1% from fiscal 1995 to 1996, and 1% from fiscal 1996 to 1997.
Net sales from total international operations remained constant from fiscal
1996 to 1997 when measured on a local currency basis. Due to the
strengthening of the U.S. dollar, sales from international operations
reflected a decrease of 3% from fiscal 1996 to 1997 as reported in U.S.
dollars. Total international net sales in fiscal 1996 increased 11% from
1995 as reported in U.S. dollars and 6% when measured on a local currency
basis. Net sales in Europe remained constant on a local currency basis from
fiscal 1996 to 1997 as compared to a 5% increase in local currency net sales
from fiscal 1995 to 1996. When reported in U.S. dollars, net sales in
Europe decreased 3% from fiscal 1996 to 1997, as compared to a 13% increase
from fiscal 1995 to 1996. Net sales in the Pacific and Far East increased
7% on a local currency basis from fiscal 1996 to 1997 as compared to a 9%
increase in local currency net sales from fiscal 1995 to 1996. Net sales in
the Pacific and Far East decreased 4% from fiscal 1996 to 1997 as reported
in U.S. dollars as compared to a 12% increase from fiscal 1995 to 1996. Net
sales in Latin America and Canada decreased 12% on a local currency basis
from fiscal 1996 to 1997 compared to a 14% increase from 1995 to 1996. Net
sales in Latin America and Canada as reported in U.S. dollars decreased 3%
from fiscal 1996 to 1997 and decreased 1% from fiscal 1995 to 1996.
Operating income decreased to $56.3 million in fiscal 1997 compared
to $61.0 million in 1996. Domestic operating margins decreased slightly
from fiscal 1996 to 1997 reflecting higher marketing and administrative
expenses. Internationally, operating margins decreased slightly due to
increased administrative expenses in fiscal 1997 compared to 1996.
Operating income increased to $61.0 million in fiscal 1996 from $56.9
million in 1995. Domestically, operating margins in fiscal 1996 increased
from 1995 due to lower cost of sales and administrative expenses.
International operating margins in fiscal 1996 decreased slightly due to
increased cost of sales and administrative expenses.
In fiscal year 1997, the Company reported net interest income of $.8
million compared to net interest income of $1.2 million in 1996. There was
a reduction in marketable securities during the current fiscal year which
reduced interest income from the prior year. The $1.2 million in net
interest income in fiscal 1996 compared to net interest income of $2.5
million in 1995.
Loss on revaluation of foreign currencies was $2.4 million in fiscal
1997 compared to a loss of $.8 million in fiscal 1996. This loss is
attributable to foreign exchange expense in certain European subsidiaries
and translation losses in hyper-inflationary countries in 1997. In fiscal
1996, loss on currency revaluation was $.8 million compared to a negligible
gain in 1995. The Company enters into foreign exchange contracts and
foreign currency option contracts from time to time to manage its exposure
to foreign currency rate changes.
<PAGE>
During the year ended April 30, 1997, 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.
The overall corporate tax rate for fiscal 1997 was 40.4% of pre-tax
income compared to 40.9% in 1996 and 40.2% in 1995. A reconciliation of the
effective tax rates to U.S. statutory rates is contained in the Notes to
Consolidated Financial Statements.
Net income in fiscal year 1997 decreased 4% to $34.7 million from $36.3
million in 1996. Earnings per share increased 5% to $4.73 per share in
fiscal 1997, however, due to the decrease in the weighted average number of
common shares outstanding during the current year. Net income in fiscal
1996 was 2% higher than the $35.6 million reported in 1995. Earnings per
share in fiscal 1996 were $4.51, a 5% increase from the $4.29 reported in
1995, due to a decrease in the weighted average number of common shares
outstanding and an increase in net income during fiscal 1996.
On a geographic area basis, net income for the United States increased
7% to $21.8 million in fiscal year 1997, due to the sale of subsidiary
assets during the year and a lower effective income tax rate in 1997
compared to 1996. Net income of $20.3 million in fiscal 1996 was lower than
the $22.3 million reported in 1995, primarily due to lower interest income
and a higher effective income tax rate in 1996 compared to 1995.
Net income in Europe decreased 23% from $15.2 million in fiscal 1996
to $11.7 million in 1997. The decrease in net income from fiscal 1996 to
1997 was primarily attributable to decreased sales in certain European
countries plus the negative effect of the stronger U.S. dollar in 1997
compared to 1996. Net income in fiscal 1995 was $13.4 million. The
increase in net income from fiscal 1995 to 1996 was primarily attributable
to increased sales in 1996.
Net income in the Pacific and Far East operations was $.1 million in
fiscal 1997 compared to $.2 million in 1996. Net income of $.2 million in
fiscal 1996 compared to net income of $.3 million reported in 1995.
Latin America and Canada had net income of $1.1 million in fiscal 1997
compared to $.5 million in 1996. Net income of $.5 million in fiscal 1996
compared to a net loss of $.4 million reported in 1995. Income improvement
in this area is primarily the result of higher operating margins in certain
Latin American countries.
<PAGE>
Recent Accounting Pronouncements
--------------------------------
The Company implemented Statement of Financial Accounting Standards
(SFAS) No. 121, "Accounting for the Impairment of Long-Lived Assets and for
Long-Lived Assets to be Disposed Of" as of May 1, 1996. Implementation of
this statement was not material to the Company's financial position or
results of operations. This statement requires that long-lived assets be
reviewed for impairment whenever events or changes in circumstances
indicates that the carrying amount of the asset in question may not be
recoverable.
The Company also implemented SFAS No. 123, "Accounting for Stock-Based
Compensation" as of May 1, 1996. Implementation of this standard did not
affect the Company's financial position or results of operations. This
statement allows a company to continue to measure compensation cost for
employee stock compensation plans using the intrinsic value based method of
accounting prescribed by APB Opinion No. 25, "Accounting for Stock Issued
to Employees." Pro forma disclosures of net income and earnings per share
are required, however, using the fair value based method of accounting
defined in SFAS No. 123. Additional disclosures relating to implementation
of this statement are contained in the Notes to Consolidated Financial
Statements.
In February 1997, the Financial Accounting Standards Board issued
SFAS No. 128, "Earnings Per Share", which supersedes APB Opinion No. 15.
SFAS 128 requires dual presentation of basic and diluted earnings per share
("EPS") for complex capital structures on the face of the income statement.
Basic EPS is computed by dividing income by the weighted-average number of
common shares outstanding for the period. Diluted EPS reflects the
potential dilution from the exercise of conversion of securities, such as
stock options, into common stock. SFAS 128 is required to be adopted for
fiscal 1998, and after adoption, all prior period data presented will be
restated to conform with SFAS 128. The Company does not expect that basic
and diluted EPS measured under SFAS 128 will be materially different from
the current presentation of earnings per share measured under APB No. 15.
The Company will present both EPS measures on the face of the income
statement for fiscal year-end 1998.
<PAGE>
<TABLE>
Consolidated Statements of Income
NCH Corporation and Subsidiaries
(In Thousands Except Per Share Data)
Years Ended April 30,
<CAPTION>
1997 1996 1995
-------- -------- --------
<S> <C> <C> <C>
Net Sales $766,761 $772,834 $735,098
-------- -------- --------
Operating Expenses
Cost of sales, including
warehousing and commissions 403,317 407,141 388,620
Marketing and administrative
expenses 307,193 304,692 289,534
-------- -------- --------
710,510 711,833 678,154
Operating Income 56,251 61,001 56,944
Other (Expenses) Income
Revaluation of foreign currencies (2,373) (789) 41
Net interest 801 1,171 2,506
Gain on sale of subsidiary 3,536 - -
-------- -------- --------
Income before Income Taxes 58,215 61,383 59,491
Provision for Income Taxes 23,540 25,076 23,909
-------- -------- --------
Net Income $ 34,675 $ 36,307 $ 35,582
======== ======== ========
Earnings Per Share $4.73 $4.51 $4.29
===== ===== =====
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE>
<TABLE>
Consolidated Balance Sheets
NCH Corporation and Subsidiaries
(In Thousands Except Share Data)
As of April 30,
<CAPTION>
1997 1996
-------- --------
<C> <C>
<S>
Assets
Current Assets
Cash and cash equivalents $ 21,273 $ 21,806
Marketable securities 69,700 82,077
Accounts receivable (less allowance for
doubtful accounts of $15,624 and $16,259) 144,664 146,744
Inventories 107,502 106,907
Prepaid expenses 6,228 6,862
Deferred income taxes 18,579 18,471
-------- --------
Total Current Assets 367,946 382,867
-------- --------
Property, Plant and Equipment 202,830 199,700
Accumulated depreciation 114,330 110,983
-------- --------
88,500 88,717
-------- --------
Deferred Income Taxes 29,637 26,105
-------- --------
Other 11,508 16,715
-------- --------
Total $497,591 $514,404
======== ========
Liabilities and Stockholders' Equity
Current Liabilities
Notes payable to banks $ 2,694 $ 7,448
Current maturities of long-term debt 3,767 3,743
Accounts payable 51,057 54,194
Accrued expenses 28,286 29,824
Income taxes payable 19,874 17,997
Dividends payable 2,149 2,299
-------- --------
Total Current Liabilities 107,827 115,505
-------- --------
Long-Term Debt, less current maturities 112 49
-------- --------
Retirement and Deferred Compensation Plans 107,057 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 8,708 7,912
Retained earnings 448,513 429,687
Foreign currency translation adjustment (25,740) (18,720)
Unrealized gains on investments 40 110
-------- --------
443,290 430,758
Less treasury stock
(4,606,705 and 4,105,057 shares) 160,695 131,823
-------- --------
282,595 298,935
-------- --------
Total $497,591 $514,404
======== ========
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE>
<TABLE>
Consolidated Statements of Cash Flows
NCH Corporation and Subsidiaries
(In Thousands)
Years Ended April 30,
<CAPTION>
1997 1996 1995
-------- -------- --------
<C> <C> <C>
<S>
Cash Flows from Operating Activities
Net income $34,675 $36,307 $35,582
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 15,092 14,981 13,854
Gain on sale of subsidiary (3,536) - -
Provision for losses on accounts receivable 6,939 7,697 7,100
Deferred income taxes (3,723) (5,150) (4,229)
Retirement and deferred compensation plans 7,860 8,143 7,536
Other noncash items 546 (486) (2,120)
Change in assets and liabilities, excluding net assets
acquired in the purchase of business:
Accounts receivable (12,414) (5,824) (13,535)
Inventories (2,397) (995) (20,481)
Prepaid expenses (286) (183) (34)
Accounts payable, accrued expenses
and income taxes payable (381) (4,020) 15,395
Other noncurrent assets (1,704) (2,132) (1,079)
-------- -------- --------
Net cash provided by operating activities 40,671 48,338 37,989
-------- -------- --------
Cash Flows from Investing Activities
Sales of property, plant and equipment 1,641 823 1,880
Purchases of property, plant and equipment (17,659) (18,396) (13,455)
Redemptions of marketable securities 45,927 52,590 51,660
Purchases of marketable securities (33,657) (22,031) (58,468)
Acquisition of business (246) - -
Sale of subsidiary 7,932 - -
Other (1,012) (1,012) (1,547)
-------- -------- --------
Net cash provided by (used in) investing activities 2,926 11,974 (19,930)
-------- -------- --------
Cash Flows from Financing Activities
Proceeds from notes payable 2,296 2,487 106
Payments of notes payable (6,596) (480) (5,048)
Additional long-term debt 114 - 35
Payments of long-term debt (24) (3,275) (1,912)
Borrowing of cash surrender values 1,914 1,887 1,708
Surrender of insurance contracts 6,452 - -
Payments of dividends (15,999) (17,746) (17,419)
Purchases of treasury stock (30,052) (37,283) -
Proceeds from exercise of stock options 1,800 1,077 1,649
-------- -------- --------
Net cash used in financing activities (40,095) (53,333) (20,881)
-------- -------- --------
Effect of Exchange Rate Changes on Cash and Cash Equivalents (4,035) (1,437) 332
-------- -------- --------
Net Increase (Decrease) in Cash and Cash Equivalents (533) 5,542 (2,490)
Cash and Cash Equivalents at Beginning of Year 21,806 16,264 18,754
-------- -------- --------
Cash and Cash Equivalents at End of Year $21,273 $21,806 $16,264
======== ======== ========
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE>
<TABLE>
Consolidated Statements of Stockholders' Equity
NCH Corporation and Subsidiaries
(In Thousands Except Per Share Data)
<CAPTION>
Foreign Unrealized
Common Treasury Common Treasury Additional Currency Gains
Stock Stock Stock Stock Paid-In Retained Translation (Losses) on
Shares Shares Amount Amount Capital Earnings Adjustment Investments Total
------- ------- ------- ------- ------- ------- ---------- ---------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Balance, April 30, 1994 11,769 (3,492) $11,769 $(96,149) $6,369 $393,193 $(22,100) - $293,082
Net income 35,582 35,582
Cash dividends on common
stock, $1.85 per share (15,350) (15,350)
Dividend declared, but not
paid, $.30 per share (2,493) (2,493)
Treasury stock sold under
stock option plans 31 877 772 1,649
Treasury stock issued under
stock participation plan
and stock bonuses 3 66 207 273
Foreign currency translation
adjustment 3,688 3,688
Unrealized losses on investments $(255) (255)
------- ------- ------- ------- ------- ------- ---------- ---------- --------
Balance, April 30, 1995 11,769 (3,458) 11,769 (95,206) 7,348 410,932 (18,412) (255) 316,176
Net income 36,307 36,307
Cash dividends on common
stock, $1.90 per share (15,253) (15,253)
Dividend declared, but not
paid, $.30 per share (2,299) (2,299)
Treasury stock acquired (669) (37,283) (37,283)
Treasury stock sold under
stock option plans 20 574 503 1,077
Treasury stock issued under
stock participation plan
and stock bonuses 2 92 61 153
Foreign currency translation
adjustment (308) (308)
Unrealized gains on investments 365 365
------- ------- ------- ------- ------- ------- ---------- ---------- --------
Balance, April 30, 1996 11,769 (4,105) 11,769 (131,823) 7,912 429,687 (18,720) 110 298,935
Net income 34,675 34,675
Cash dividends on common
stock, $1.90 per share (13,700) (13,700)
Dividend declared, but not
paid, $.30 per share (2,149) (2,149)
Treasury stock acquired (537) (30,052) (30,052)
Treasury stock sold under
stock option plans 33 1,097 703 1,800
Treasury stock issued under
stock participation plan
and stock bonuses 2 83 93 176
Foreign currency translation
adjustment (7,020) (7,020)
Unrealized gains on investments (70) (70)
------- ------- ------- ------- ------- ------- ---------- ---------- --------
Balance, April 30, 1997 11,769 (4,607) $11,769 $(160,695) $8,708 $448,513 $(25,740) $ 40 $282,595
======= ======= ======= ======= ======= ======= ========== ========== ========
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE>
Notes to Consolidated Financial Statements
NCH Corporation and Subsidiaries
1. Summary of Significant Accounting Policies
Principles of consolidation - The consolidated financial statements
include the accounts of NCH Corporation and its majority owned subsidiaries
(the "Company"). Significant intercompany transactions and balances have
been eliminated. A February fiscal year-end is used for most international
subsidiaries in order to meet reporting requirements.
Nature of operations - The Company markets an extensive line of
maintenance, repair and supply products to customers throughout the world.
Products include specialty chemicals, fasteners, welding supplies, plumbing
and electronic parts and safety supplies. These products are marketed
principally through the Company's own sales force.
Use of estimates in the financial statements - The preparation of
financial statements in conformity with generally accepted accounting
principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements
and the reported amounts of revenues and expenses during the reporting
period. Actual results could differ from those estimates.
Foreign currency translation - With the exception of hyper-inflationary
countries, all assets and liabilities of operations outside the United
States are translated into U.S. dollars at period-end exchange rates, and
income and expenses are translated at average rates for the year. Gains
and losses resulting from translation, as well as gains and losses from
foreign exchange contracts hedging the net assets of foreign subsidiaries,
are included in the foreign currency translation adjustment component of
stockholders' equity. Gains and losses from foreign exchange contracts
hedging specific intercompany foreign currency commitments are deferred and
accounted for as part of the hedged transaction. The hyper-inflationary
countries have been translated into U.S. dollar equivalents as follows:
current assets (except for inventories), current liabilities, long-term debt
and other liabilities at period-end exchange rates; inventories, property,
other assets, capital stock and retained earnings at historical rates;
income and expense items at average rates for the year, except for cost of
sales and depreciation expense, which are translated at historical rates.
Gains and losses resulting from translation for hyper-inflationary countries
are recognized in the income statement as expense or income in the current
period. Exchange adjustments resulting from foreign currency transactions
are recognized as expense or income in the current period for all countries.
Cash and cash equivalents and marketable securities - Cash and cash
equivalents include cash on hand, cash in banks and all highly liquid
investments with a maturity of three months or less at the time of purchase.
Cash equivalents are stated at amortized cost plus accrued interest.
Marketable securities are stated at estimated fair value.
<PAGE>
Inventories - Raw materials, sales supplies and purchased finished
goods are stated at a moving average cost, which approximates cost on a
first-in, first-out basis and is not in excess of market value.
Manufactured finished goods are stated at an amount approximating cost of
manufacturing, which is not in excess of net realizable value.
Property, plant and equipment - These assets are recorded at cost.
When these assets are disposed of, the cost and related accumulated
depreciation are removed from the accounts, and any resulting gain or loss
is included in income during that year. The cost of maintenance and repairs
is charged to expense as incurred, whereas expenditures that substantially
increase the useful lives of plant or equipment are capitalized.
Depreciation - Depreciation on buildings and equipment is provided for
financial statement purposes using the straight-line method over the
estimated useful lives of the related assets. Depreciation on certain
buildings and equipment is provided for income tax purposes using
accelerated methods.
Intangible assets - Intangible assets are classified as other assets in
the consolidated financial statements and include patents, computer software
and trademarks. Intangible assets are amortized using the straight-line
method over their estimated useful lives, but not in excess of 40 years.
The unamortized cost of impaired intangible assets is charged to expense
when impairment occurs.
Research and development - Research and development costs, which are
included in the costs of laboratory operations, are charged to expense as
incurred. Research and development costs, however, cannot be separately
identified from the total laboratory costs. Total laboratory costs amounted
to approximately $5.0 million in 1997, $4.6 million in 1996 and $4.6 million
in 1995.
Income taxes - Deferred income taxes result from temporary differences
between the financial statement carrying amounts of existing assets and
liabilities and their respective tax bases. State income tax has been
included in the provision for income taxes and income taxes payable.
Treasury stock - Treasury stock is stated at cost.
Retirement plans - The Company's policy is to fund its qualified
retirement type plans as accrued. The cost of these retirement benefits for
past service has been fully funded. Non-qualified retirement plans are not
funded, but provision for the estimated liabilities arising from these plans
has been made in the consolidated financial statements.
Postretirement benefits other than pensions - The Company charges to
expense the estimated future costs of retiree health care benefits during
the years that employees render service. The postretirement health care
benefit plan is not funded.
<PAGE>
Stock options - The Company issues shares from its treasury as options
are exercised. When an option is exercised, treasury stock is credited with
the average cost of the treasury shares issued, and additional paid-in
capital is charged or credited for the difference between the option price
and the average cost of the treasury shares. No charge to income is made in
connection with the stock option plan. Effective May 1, 1996, the Company
adopted the disclosure provisions of Statement of Financial Accounting
Standards (SFAS) No. 123, "Accounting for Stock-Based Compensation". For
the impact of the fair value of employee stock options granted during fiscal
years 1997 and 1996, see footnote 8, "Capital Stock and Options".
Earnings per share - Earnings per share is computed by dividing net
income by the weighted average number of shares outstanding during each
year. The weighted average number of shares outstanding for the years ended
April 30, 1997, 1996 and 1995, was 7,326,000, 8,052,000 and 8,294,000
shares, respectively. Any dilution of earnings per share that might result
from the exercise of presently outstanding stock options is not material.
2. Consolidated International Subsidiaries
At April 30, 1997 and 1996, the parent Company's investment in
consolidated international subsidiaries amounted to $45,151,000 and
$43,931,000. The current year consolidated financial statements include
international subsidiaries' assets of $155,287,000, liabilities of
$60,914,000 and net income of $12,866,000, after allocation of corporate
expenses and excluding intercompany sales and profits. For the prior year
these subsidiaries had assets of $164,924,000, liabilities of $72,452,000
and net income of $15,966,000.
3. Income Taxes
The following are the components of the provision for income taxes (in
thousands of dollars):
1997 1996 1995
-------- -------- --------
U.S. Federal Current $11,425 $10,675 $ 9,810
Deferred (3,888) (4,075) (4,411)
Foreign Current 14,429 17,421 16,715
Deferred 165 (721) 182
State 1,409 1,776 1,613
-------- -------- --------
$23,540 $25,076 $23,909
======== ======== ========
Deferred tax assets and liabilities are measured using enacted tax
rates expected to apply to taxable income in the years in which those
temporary differences are expected to be recovered or settled.
<PAGE>
The components of deferred tax assets and liabilities as of April 30
are as follows (in thousands of dollars):
Deferred tax assets: 1997 1996
-------- --------
Allowance for doubtful accounts $ 3,916 $ 4,172
Inventory related 4,277 3,672
Insurance related 3,491 3,118
Accrued expenses 5,756 6,055
Retirement and deferred compensation plans 35,093 32,281
Marketable securities (22) (59)
Foreign operating loss carryforwards 1,026 760
Valuation allowance (55) (94)
-------- --------
53,482 49,905
-------- --------
Deferred tax liabilities:
Depreciation 4,403 4,372
Other 863 957
-------- --------
5,266 5,329
-------- --------
Net deferred tax asset $48,216 $44,576
======== ========
A valuation allowance has been provided for certain foreign net
operating loss carryforwards which are estimated to expire before they are
utilized. The decreases in the valuation allowance during the years ended
April 30, 1997, 1996, and 1995 were $39,000, $62,000 and $87,000,
respectively.
The following is a reconciliation of the difference between the U.S.
statutory income tax rate and the effective tax rate:
1997 1996 1995
------ ------ ------
U.S. statutory rate 35.0% 35.0% 35.0%
Tax exempt interest (1.8) (2.2) (2.5)
Other .5 .8 (.1)
Effect of international 5.2 5.5 6.1
operations
Effect of state income 1.5 1.8 1.7
taxes ------ ------ ------
Effective tax rate 40.4% 40.9% 40.2%
====== ====== ======
<PAGE>
The Company files a consolidated U.S. federal income tax return with
its domestic subsidiaries. International subsidiaries file tax returns in
countries of their incorporation. In addition, branches of certain U.S. and
international companies file tax returns in countries in which they conduct
business. Certain of these subsidiaries have operating loss carryforwards
totaling approximately $3,019,000, which will expire between 1998 and 2003.
The accumulated undistributed earnings of international subsidiaries not
included in the consolidated U.S. federal income tax return approximated
$74,834,000 at April 30, 1997, $69,286,000 at April 30, 1996 and $73,555,000
at April 30, 1995. No provision is made in the accompanying consolidated
financial statements for the estimated taxes that would result on
distribution of the accumulated undistributed earnings since the Company
intends to invest indefinitely in the operations of these subsidiaries. For
1997, 1996 and 1995, worldwide income tax payments amounted to $25,045,000,
$33,668,000 and $22,624,000, respectively.
4. Inventories
A summary of inventories at April 30 follows (in thousands of dollars):
1997 1996
-------- --------
Raw materials $ 14,580 $ 15,387
Finished goods 90,915 89,381
Sales supplies 2,007 2,139
-------- --------
$107,502 $106,907
======== ========
5. Property, Plant and Equipment
Property, plant and equipment at April 30 consists of the following
(in thousands of dollars):
1997 1996
-------- --------
Land $ 12,205 $ 12,047
Buildings 83,658 81,212
Equipment 106,967 106,441
-------- --------
$202,830 $199,700
======== ========
Depreciation charged to income was $13,882,000, $13,595,000 and
$12,452,000 for each of the years ended April 30, 1997, 1996 and 1995,
respectively. The estimated useful life of buildings is 25 to 40 years;
equipment is 3 to 10 years.
<PAGE>
6. Long-Term Debt
Long-term debt at April 30 consists of the following (in thousands of
dollars):
1997 1996
------ ------
Borrowed by domestic companies:
Variable interest industrial revenue bond, secured
by property, at 71.9% of prime. $3,700 $3,700
Other 20 40
------ ------
3,720 3,740
------ ------
Borrowed by international companies 159 52
------ ------
3,879 3,792
Less current maturities 3,767 3,743
------ ------
Long-term debt, less current maturities $ 112 $ 49
====== ======
Scheduled maturities of long-term debt for the years following
April 30, 1997, are as follows: 1998 - $67,000; 1999 - $86,000;
2000 - $15,000; 2001 - $11,000 and 2006 - $3,700,000. The industrial
revenue bond of $3,700,000 matures in 2006 and is classified as current
based on call provisions in the loan agreement.
7. Employee Benefits
Retirement plans - The parent and its domestic subsidiaries have
various qualified retirement type plans covering substantially all domestic
employees. None of these plans have defined benefits. Some of the
international subsidiaries also have non-defined benefit retirement plans.
These plans are funded on a current basis, and the cost of retirement
benefits for past service has been fully funded. In addition, the Company
has non-qualified deferred compensation plans for the primary purpose of
providing retirement benefits. These plans are not funded, but provision
for the estimated liabilities arising from these plans has been made in the
consolidated financial statements. Expenses for retirement plans, exclusive
of interest expense, were $13,316,000, $10,510,000 and $9,877,000 in the
years ended April 30, 1997, 1996 and 1995, respectively.
Postretirement benefits other than pensions - The Company and several
of its domestic subsidiaries initiated a postretirement health care benefit
plan in fiscal 1993, covering substantially all domestic employees.
Eligible retirees receive a specific contribution from the Company toward
the cost of the health plan, which is a supplement to Medicare. The amount
of the contribution is based on years of service with the Company at
retirement. The plan is not funded; retiree health benefits are paid as
covered expenses are incurred. Provision has been made in the accompanying
consolidated financial statements for the net postretirement benefit expense
of this plan. Net postretirement benefit expenses for the years ended April
30 are as follows (in thousands of dollars):
<PAGE>
1997 1996 1995
------ ------ ------
Service cost - benefits earned
during the year $ 23 $146 $ 98
Interest cost on accumulated
postretirement benefit obligation 226 202 179
Net amortization of prior service cost 176 176 176
------ ------ ------
Net postretirement benefit expense $425 $524 $453
====== ====== ======
The reconciliation of the accumulated postretirement benefit obligation
to the recorded liability at April 30 is as follows (in thousands of
dollars):
Accumulated postretirement benefit obligation 1997 1996
------ ------
Retirees $ 502 $ 291
Fully eligible active plan participants 1,478 1,422
Other active plan participants 1,338 1,396
------ ------
Total 3,318 3,109
Unrecognized prior service cost (1,115) (1,291)
------ ------
Accrued postretirement benefit liability $2,203 $1,818
====== ======
Measurement of the accumulated postretirement benefit obligation is
based on a 7% assumed discount rate for 1997 and 1996.
Certain of the Company's non-U.S. subsidiaries have health care plans
for retirees, although many retirees outside of the United States are
covered by government sponsored and administered programs.
8. Capital Stock and Options
None of the Company's authorized 500,000 shares of $1 par value
Preferred Stock has been issued.
On April 2, 1997, the directors of the Company declared a regular
quarterly cash dividend of $.30 per share of Common Stock to be paid
June 16, 1997, to shareholders of record June 2, 1997.
At April 30, 1997, the Company has a non-qualified stock option plan,
which is described below. The Company applies APB Opinion No. 25 and
related FASB Interpretations for its plans. No charge to income is made in
connection with the stock option plan. Had compensation cost for the
Company's stock option plan been determined consistent with FASB Statement
No. 123, the Company's net income and earnings per share would have been
reduced to the pro forma amounts indicated below (in thousands except per
share data):
<PAGE>
1997 1996
-------- --------
Net Income As Reported $34,675 $36,307
Pro Forma $34,642 $36,307
Earnings per share As Reported $ 4.73 $ 4.51
Pro Forma $ 4.73 $ 4.51
Pro forma net income reflects only options granted in fiscal year 1996.
Therefore, the full impact of calculating compensation cost for stock
options under SFAS No. 123 is not reflected in the pro forma net income
amounts presented above because compensation cost is reflected over the
options' vesting period and compensation cost for options granted prior to
May 1, 1995 is not considered.
Under the 1980 Non-Qualified Stock Option Plan, the Company may grant
options to its employees for up to 1.5 million shares of common stock. At
April 30, 1997, 1996 and 1995, 677,000, 710,000 and 730,000 shares of the
Company's Common Stock, respectively, were reserved for issuance under this
plan which grants options to key employees and officers. The purchase price
under the grant cannot be less than the market value at the date of grant.
The options under such plan are exercisable in equal amounts at the
beginning of the second, third and fourth year of their lives and expire
after five years.
The fair value of each option grant is estimated on the date of grant
using the Black-Scholes option pricing model with the following weighted-
average assumptions used for grants in 1997 and 1996, respectively; annual
dividend yield of 3.8 percent and 4.0 percent weighted over the effective
life of the options; expected volatility of 19.6 percent and 20.4 percent;
risk-free interest rates of 5.8 percent and 5.5 percent; and expected lives
of five years.
A summary of the status of the Company's stock option plan as of
April 30, 1997, 1996, and 1995, and changes during the years ended on those
dates is presented below:
<PAGE>
(In Thousands Except Per Share Data)
Years Ended April 30,
---------------------------------------------------
1997 1996 1995
--------------- --------------- ---------------
Average Average Average
Number Price Number Price Number Price
of Per of Per of Per
Shares Share Shares Share Shares Share
------ ------ ------ ------ ------ ------
Outstanding at beginning
of period 280 $58.81 243 $59.41 212 $57.97
Granted 78 57.25 72 55.25 64 61.00
Exercised (33) 55.23 (20) 54.00 (31) 53.12
Canceled or expired (41) 58.39 (15) 57.46 (2) 55.84
------ ------ ------ ------ ------ ------
Outstanding at end
of period 284 $58.85 280 $58.81 243 $59.41
====== ====== ====== ====== ====== ======
Options exercisable
at year-end 139 $60.53 145 $60.95 118 $59.53
====== ====== ====== ====== ====== ======
Stock options outstanding at April 30, 1997 had a range in exercise
prices of $53.75 to $68.75 and an average remaining contractual life of 3.4
years. The weighted average fair value of options, calculated using the
Black-Scholes option pricing model, granted during the years ended
April 30, 1997 and 1996 were $2.49 and $2.27, respectively. At April 30,
1997, 1996 and 1995, 19,000 shares of Treasury Stock, were reserved for
issuance to employees under a stock participation plan.
9. Interest Costs
During the years ended April 30, 1997, 1996 and 1995, interest costs,
including interest expense on non-funded retirement plans, amounting to
$4,383,000, $5,231,000 and $5,720,000, respectively, were expensed as
incurred. For the same periods, interest payments were $2,480,000,
$2,951,000 and $3,540,000, respectively.
10. Leases
At April 30, 1997, the Company and its subsidiaries had a number of
noncancellable leases for various office and warehouse facilities. The
majority of these agreements expire at various times through 2000, and
substantially all include renewal provisions. The amount of other
obligations assumed, such as payment of property taxes and maintenance,
is nominal. Total rent expense for 1997, 1996 and 1995 (including
operating leases on data processing equipment, trucks and trailers, and
office equipment) was approximately $11,393,000, $11,798,000 and
$9,035,000, respectively. The minimum aggregate rentals under the terms
of noncancellable operating leases for future years are: 1998 - $8,321,000;
1999 - $5,780,000; 2000 - $3,666,000; 2001 - $2,491,000; and a total of
$6,392,000 for 2002 and thereafter.
<PAGE>
11. Contingent Liabilities
The Company and its subsidiaries are engaged in a variety of legal
proceedings arising in the ordinary course of business, including some
concerning environmental matters. In the opinion of Management, the
ultimate liabilities resulting from these proceedings will not have a
material adverse effect on the Company's financial position or operating
results.
Gains or losses resulting from contracts hedging net foreign currency
positions have been included in the foreign currency translation adjustment
component of stockholders' equity. Gains and losses from all other
contracts are included in the Consolidated Statements of Income. There were
no such contracts at April 30, 1997 or 1996. In addition, at April 30, 1997
and 1996, the Company had standby letters of credit outstanding totaling
$5,878,000 and $5,300,000, respectively, which guarantee payment to certain
insurance carriers.
12. Fair Value of Financial Instruments
The carrying amounts of cash and cash equivalents, accounts receivable,
accounts payable, accrued expenses, notes payable to banks and current
maturities of long-term debt approximate fair value, because of the short
maturities of these financial instruments. The carrying amounts of
marketable securities approximate fair value and are based on quoted market
prices obtained from an independent broker. The carrying amounts of
long-term debt approximate fair value as estimated based on the discounted
value of future cash flows using the Company's current borrowing rate for
loans of comparable terms and maturities.
13. Marketable Securities
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
and are immaterial. The cost of securities sold is based on the specific
identification method.
The following is a summary of available-for-sale marketable securities
as of April 30 (in thousands of dollars):
<PAGE>
Government
Bonds, Treasury Certificates
Notes and Bills of Deposit Total
--------------- ---------- -------
1997
----
Cost $69,334 $304 $69,638
Gross Unrealized Losses (233) - (233)
Gross Unrealized Gains 295 - 295
-------- ---- --------
Estimated Fair Value $69,396 $304 $69,700
======== ==== ========
1996
----
Cost $81,608 $300 $81,908
Gross Unrealized Losses (261) - (261)
Gross Unrealized Gains 430 - 430
-------- ---- --------
Estimated Fair Value $81,777 $300 $82,077
======== ==== ========
The contractual maturities of the marketable securities at estimated
fair value as of April 30, 1997 are as follows: 1998-$29,874,000;
1999-$34,205,000; and 2000-$5,621,000.
14. Segment and Geographic Area Information
The Company's operations are predominantly within one business segment,
which includes specialty chemicals, fasteners, welding supplies, plumbing
and electronic parts, and safety supplies. Substantially all of these
products are sold for repair, maintenance or industrial supply use.
Financial information by geographic area, in thousands of dollars,
follows for the years ended April 30:
<PAGE>
Latin
United Pacific & America Consoli-
States Europe Far East & Canada dated
------- -------- --------- -------- -------
1997
----
Net Sales $417,411 $266,263 $34,313 $48,774 $766,761
Net Income 21,809 11,686 86 1,094 34,675
Identifiable Assets 267,639 114,486 17,476 23,325 422,926
Corporate Assets 74,665
1996
----
Net Sales $412,027 $275,353 $35,727 $49,727 $772,834
Net Income 20,341 15,247 247 472 36,307
Identifiable Assets 256,625 126,041 17,789 21,094 421,549
Corporate Assets 92,855
1995
----
Net Sales $408,668 $244,517 $31,837 $50,076 $735,098
Net Income (Loss) 22,294 13,354 313 (379) 35,582
Identifiable Assets 246,926 123,659 17,792 20,383 408,760
Corporate Assets 120,377
Intercompany sales and profits have been eliminated from the above
schedule. Corporate expenses were allocated between the geographic areas.
Identifiable assets are those identified with the operations in each
geographic area. Corporate assets consist primarily of portions of cash and
cash equivalents and marketable securities.
<PAGE>
INDEPENDENT AUDITORS' REPORT
The Stockholders and Board of Directors
NCH Corporation:
We have audited the accompanying consolidated balance sheets of NCH
Corporation and subsidiaries as of April 30, 1997 and 1996, and the related
consolidated statements of income, stockholders' equity, and cash flows for
each of the years in the three-year period ended April 30, 1997. These
consolidated financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these
consolidated 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 financial position of NCH
Corporation and subsidiaries as of April 30, 1997 and 1996, and the
results of their operations and their cash flows for each of the years in
the three-year period ended April 30, 1997, in conformity with generally
accepted accounting principles.
/s/ KPMG Peat Marwick LLP
Dallas, Texas
June 3, 1997
<PAGE>
RESPONSIBILITY FOR FINANCIAL REPORTING
The management of the Company is responsible for the financial
information and representations contained in the financial statements and
other sections of the annual report. The financial statements have been
prepared in conformity with generally accepted accounting principles, and
therefore include informed estimates and judgments.
The Company's system of internal control is designed to provide
reasonable, but not absolute, assurance as to the integrity, objectivity
and reliability of the financial records and the safeguarding of assets.
Management believes that, within a cost-effective framework, the Company's
accounting controls provide reasonable assurance that material errors or
irregularities are prevented or would be detected within a relatively short
period of time. The possibility exists, however, that errors or
irregularities may occur and not be detected. The Company has a program of
internal audits and follow-up, covering separate Company operations and
functions in the U.S. and its international subsidiaries.
The Board of Directors pursues its review of the audit function,
internal controls and the financial statements largely through its Audit
Committee, which consists solely of directors who are not employees of the
Company. The Audit Committee periodically meets with management, the
independent auditors and internal auditors with regard to their respective
responsibilities. Both KPMG Peat Marwick LLP and the internal auditors have
full access to the Audit Committee. They meet with the committee, without
management present, to discuss the scope and results of their examination,
including internal control and financial reporting matters.
Management also recognizes its responsibility for fostering a strong
ethical climate so that the Company's affairs are conducted according to the
highest standards of personal and corporate conduct. This responsibility is
characterized and reflected in the Company's code of corporate conduct,
which is publicized throughout the Company. The code of conduct addresses,
among other things, the necessity of ensuring open communication within the
Company; potential conflicts of interests; compliance with all domestic and
foreign laws, including those relating to financial disclosure; and the
confidentiality of proprietary information. The Company maintains a
systematic program to assess compliance with these policies.
/s/ Irvin L. Levy /s/ Tom Hetzer
------------------ ---------------
Irvin L. Levy Tom Hetzer
Chief Executive Officer Chief Financial Officer
<PAGE>
Selected Unaudited Quarterly Data
(In Thousands Except Per Share Data)
Years Ended April 30,
Quarter
----------------------------------------------
First Second Third Fourth
-------- -------- -------- --------
1997
----
Net Sales $192,536 $192,585 $193,291 $188,349
Operating Income 11,654 17,234 13,322 14,041
Net Income 6,666 12,042 7,738 8,229
Earnings Per Share $.88 $1.64 $1.07 $1.14
1996
----
Net Sales $192,153 $194,424 $195,679 $190,578
Operating Income 13,550 17,777 13,483 16,191
Net Income 8,203 10,588 7,269 10,247
Earnings Per Share $1.00 $1.30 $.90 $1.31
Earnings per share for each period is calculated based on the weighted
average number of shares outstanding during the period.
Market and Dividend Information
NCH Corporation stock is traded on the New York Stock Exchange. The
high and low prices by quarter are shown for the past two years in the
schedule below.
Cash dividends paid during the fiscal year ended April 30, 1997,
amounted to $16.0 million compared to $17.7 million and $17.4 million in
fiscal years 1996 and 1995, respectively. On April 2, 1997, a dividend of
$.30 per share was declared, payable June 16, 1997. A summary of the
quarterly dividends per share for the past two years is set forth in the
schedule below.
Common Stock Prices Dividends Per Share
---------------------------------- ----------------------------
1997 1996 Declared Paid
--------------- --------------- ------------- -------------
Quarter High Low High Low 1997 1996 1997 1996
------- ------ ------ ------ ------ ----- ----- ----- -----
First 65 53 3/4 64 1/4 54 1/2 $ .30 $ .30 $ .30 $ .30
Second 57 1/4 53 5/8 60 5/8 53 $1.30 $1.30 $ .30 $ .30
Third 60 1/2 55 58 1/4 52 3/4 $ .30 $ .30 $1.30 $1.30
Fourth 63 3/4 57 5/8 58 1/4 52 1/2 $ .30 $ .30 $ .30 $ .30
As of June 2, 1997, there were 606 holders of record of the Company's
Common Stock, which includes several brokerage firms that hold shares of the
Company's stock for an estimated 3,800 investors.
<PAGE>
NCH CORPORATION AND SUBSIDIARIES
EXHIBIT 21
SUBSIDIARIES OF THE REGISTRANT
NCH Corporation is the parent company of numerous wholly-owned
subsidiaries engaged in the business of marketing an extensive line of
maintenance, repair and supply products. At the close of the last fiscal
year, thirteen of these subsidiaries were operating domestically and 132
in foreign countries. The Company is also the parent of several
wholly-owned subsidiaries that market various other products. All such
subsidiaries considered in the aggregate as a single subsidiary would not
constitute a significant subsidiary of NCH Corporation, and therefore are
not listed here.
As of the close of the last fiscal year, the following corporation
was not wholly-owned by NCH Corporation:
Immediate Parent and Jurisdiction
Name of Subsidiary Percentage of Ownership of Incorporation
------------------ ----------------------- ----------------
NCH Hua Yang Ltd. 51% NCH Corporation People's Republic
of China
<PAGE>
NCH CORPORATION AND SUBSIDIARIES
EXHIBIT 23
INDEPENDENT AUDITORS' CONSENT
The Board of Directors
NCH Corporation:
We consent to incorporation by reference in the registration statement
(No. 33-65206) on Form S-8 of NCH Corporation of our reports dated June
3, 1997, relating to the consolidated balance sheets of NCH Corporation and
subsidiaries as of April 30, 1997 and 1996, and the related consolidated
statements of income, stockholders' equity, and cash flows and related
schedule for each of the years in the three-year period ended April 30,
1997, which reports appear in or are incorporated by reference in the
April 30, 1997 annual report on Form 10-K of NCH Corporation.
/s/ KPMG Peat Marwick LLP
Dallas, Texas
July 15, 1997
<PAGE>
NCH CORPORATION AND SUBSIDIARIES
EXHIBIT 23
DEFINITIVE PROXY STATEMENT
REGARDING THE COMPANY'S 1997 ANNUAL MEETING OF STOCKHOLDERS
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934
Filed by the Registrant [ X ]
Filed by a party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement [ ] Confidential, for Use of
the Commission Only (as
permitted by Rule
14a-6(e)(2))
[ X ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
NCH Corporation
---------------------------------------------------------------------
(Name of Registrant as Specified in Its Charter)
Payment of Filing Fee (Check the appropriate box):
[ X ] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4)
and 0-11.
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which transaction applies:
(3) Per unit price or other underlying value of transaction
computed pursuant to Exchange Act Rule 0-11 (Set forth the
amount on which the filing fee is calculated and state how
it was determined):
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the offsetting
fee was paid previously. Identify the previous filing by
registration statement number, or the Form or Schedule and the date
of its filing.
(1) Amount Previously Paid:
(2) Form, Schedule or Registration Statement No.:
(3) Filing Party:
(4) Date Filed:
<PAGE>
[LOGO]
2727 Chemsearch Boulevard
Irving, Texas 75062
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
To Be Held July 24, 1997
NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders of NCH
Corporation will be held in the Gourmet Rooms I and II of the Crescent Club,
17th Floor, 200 Crescent Court (at the corner of Pearl and Cedar Springs
Streets), Dallas, Texas, on Thursday, the 24th day of July, 1997, at
10:00 a.m., Central Daylight Time, for the following purposes:
1. To elect two Class III directors of NCH to hold office until the next
annual election of Class III directors by stockholders or until their
respective successors are duly elected and qualified.
2. To ratify the appointment of KPMG Peat Marwick LLP, Certified Public
Accountants, to be the independent auditors of NCH for the fiscal year
ending April 30, 1998.
3. To transact such other business as may properly come before the meeting
or any adjournments of the meeting.
The Board of Directors has fixed the close of business on Monday,
June 2, 1997, as the record date for determining stockholders entitled to
vote at and to receive notice of the annual meeting.
Whether or not you expect to attend the meeting in person, you are
urged to complete, sign, and date the enclosed form of proxy and return it
promptly so that your shares of stock may be represented and voted at the
meeting. If you are present at the meeting, your proxy will be returned to
you if you so request.
Joe Cleveland,
Secretary
Dated: June 24, 1997
<PAGE>
[LOGO]
2727 Chemsearch Boulevard
Irving, Texas 75062
PROXY STATEMENT
For
ANNUAL MEETING OF STOCKHOLDERS
To Be Held on July 24, 1997
Dated: June 24, 1997
SOLICITATION AND REVOCABILITY OF PROXIES
The accompanying proxy is solicited by the management of, and on behalf
of, NCH Corporation, a Delaware corporation ("NCH"), to be voted at the
Annual Meeting of the Stockholders of NCH, to be held Thursday, July 24,
1997 (the "Meeting"), at the time and place and for the purposes set forth
in the accompanying Notice of Annual Meeting. When properly executed
proxies in the accompanying form are received, the shares represented
thereby will be voted at the Meeting in accordance with the directions noted
on the proxies; if no direction is indicated, then such shares will be voted
for the election of the directors and in favor of the proposals set forth in
the Notice of Annual Meeting attached to this Proxy Statement.
The enclosed proxy confers discretionary authority to vote with respect
to any and all of the following matters that may come before the Meeting:
(1) matters that NCH's Board of Directors does not know a reasonable time
before the Meeting are to be presented at the Meeting; and (2) matters
incidental to the conduct of the Meeting. Management does not intend to
present any business for a vote at the Meeting other than the matters set
forth in the accompanying Notice of Annual Meeting, and it has no
information that others will do so. If other matters requiring the vote of
the stockholders properly come before the Meeting, then, subject to the
limitations set forth in the applicable regulations under the Securities
Exchange Act of 1934, it is the intention of the persons named in the
attached form of proxy to vote the proxies held by them in accordance with
their judgment on such matters.
Any stockholder giving a proxy has the power to revoke that proxy at
any time before it is voted. A proxy may be revoked by filing with the
Secretary of NCH either a written revocation or a duly executed proxy
bearing a date subsequent to the date of the proxy being revoked. Any
stockholder may attend the Meeting and vote in person, whether or not such
stockholder has previously submitted a proxy.
<PAGE>
In addition to soliciting proxies by mail, officers and regular
employees of NCH may solicit the return of proxies. Brokerage houses and
other custodians, nominees, and fiduciaries may be requested to forward
solicitation material to the beneficial owners of stock.
This Proxy Statement and the accompanying proxy are first being sent
or given to NCH's stockholders on or about June 24, 1997.
NCH will bear the cost of preparing, printing, assembling, and mailing
the Notice of Annual Meeting, this Proxy Statement, the enclosed proxy, and
any additional material, as well as the cost of forwarding solicitation
material to the beneficial owners of stock.
VOTING RIGHTS
The record date for determining stockholders entitled to notice of and
to vote at the Meeting is the close of business on June 2, 1997. On that
date there were 7,162,976 shares issued and outstanding of NCH's $1.00 par
value common stock ("Common Stock"), which is NCH's only class of voting
securities outstanding. Each share of NCH's Common Stock is entitled to
one vote in the matter of election of directors and in any other matter
that may be acted upon at the Meeting. Neither NCH's certificate of
incorporation nor its bylaws permits cumulative voting. The presence, in
person or by proxy, of the holders of a majority of the outstanding shares
of Common Stock entitled to vote at the Meeting is necessary to constitute
a quorum at the Meeting, but in no event will a quorum consist of less than
one-third of the shares entitled to vote at the Meeting. The affirmative
vote of a plurality of the shares of Common Stock represented at the Meeting
and entitled to vote is required to elect directors. All other matters to
be voted on will be decided by a majority of the shares of Common Stock
represented at the meeting and entitled to vote. Abstentions and broker
nonvotes are each included in determining the number of shares present at
the meeting for purposes of determining a quorum. Abstentions and broker
nonvotes have no effect on determining plurality, except to the extent that
they affect the total votes received by any particular candidate.
ELECTION OF DIRECTORS
NCH's Board of Directors consists of seven members, divided into three
classes: Class I (two directors), Class II (three directors), and Class III
(two directors). Only the Class III positions are due for nomination and
election at the Meeting. The Class I and Class II positions will be due for
nomination and election at the annual meetings of stockholders to be held in
1998 and 1999, respectively.
<PAGE>
The intention of the persons named in the enclosed proxy, unless such
proxy specifies otherwise, is to vote the shares represented by such proxy
for the election of Irvin L. Levy and Jerrold M. Trim as the Class III
directors. Messrs. Irvin L. Levy and Jerrold M. Trim have been nominated
to stand for re-election by the Board of Directors until their terms expire
or until their respective successors are duly elected and qualified.
Messrs. Irvin L. Levy and Jerrold M. Trim are presently directors of NCH.
Messrs. Irvin, Lester, and Milton Levy are brothers. Robert L. Blumenthal
is a first cousin of Messrs. Irvin, Lester, and Milton Levy. Certain
information regarding each nominee and director is set forth below.
The number of shares beneficially owned by each nominee is listed under
"Security Ownership of Principal Stockholders and Management."
Class I Directors
Rawles Fulgham, 69, has been a director of NCH since 1981. Mr. Fulgham
was an executive director of Merrill Lynch Private Capital Inc. from 1982
until 1989, when he assumed his current position as a Senior Advisor to
Merrill Lynch & Co., Inc. He is also a director of Dresser Industries,
Inc., Global Industrial Technologies, Inc., BancTec, Inc., and a member of
the Advisory and Audit Committees of Dorchester Hugoton, Ltd., all of which
are located in Dallas, Texas. He is a member of the Audit Committee and
the Compensation Committee.
Lester A. Levy, 74, has been a director and officer of NCH since 1947,
and since 1965 has served as Chairman of the Board of Directors of NCH. He
is either the president or a vice president of substantially all of NCH's
subsidiaries. Mr. Levy is also a director of A.H. Belo Corporation, located
in Dallas, Texas. Mr. Levy is a member of the Stock Option Committee and
the Executive Committee.
Class II Directors
Robert L. Blumenthal, 66, has engaged in the practice of law since
1957. He is a partner at the Dallas law firm of Carrington, Coleman,
Sloman & Blumenthal, L.L.P., which serves as NCH's legal counsel.
Thomas B. Walker, Jr., 73, has been a director of NCH since 1987.
He was a general partner of Goldman, Sachs & Co. from 1968 until 1984 when
he assumed his current position as a limited partner of The Goldman Sachs
Group, L.P. Mr. Walker is also a director of Sysco Corporation, A.H. Belo
Corporation, and Riviana Foods, Inc. He is a member of the Audit Committee
and the Compensation Committee.
Milton P. Levy, Jr., 71, has been a director and officer of NCH since
1947, and since 1965 has served as Chairman of the Executive Committee of
NCH. He is either the president or a vice president of substantially all of
NCH's subsidiaries. Mr. Levy is a member of the Stock Option Committee and
the Executive Committee.
<PAGE>
Class III Directors and Nominees
Jerrold M. Trim, 60, has been a director of NCH since 1980 and is the
president and majority shareholder of Windsor Association, Inc., which is
engaged primarily in investment consulting services. He is also a general
partner of Chiddingstone Management Company and The Penshurst Fund, which
are limited partnerships that invest in marketable securities. He is a
member of the Audit Committee and the Compensation Committee.
Irvin L. Levy, 68, has been a director and an officer of NCH since
1950, and has served as NCH's President since 1965. He is either president
or a vice president of substantially all of NCH's subsidiaries. Mr. Levy
is a member of the Stock Option Committee and the Executive Committee.
If either of the above nominees for Class III directors should become
unavailable to serve as a director, then the shares represented by proxy
will be voted for such substitute nominees as may be nominated by the Board
of Directors. NCH has no reason to believe that either of the above
nominees are, or will be, unavailable to serve as a director.
Meeting Attendance and Committees of the Board
NCH has audit, compensation, executive, and stock option committees of
the Board, whose members are noted above. During the last fiscal year, the
Board of Directors met on four occasions, the Compensation Committee met
once, the Audit Committee met once, the Executive Committee met at least 25
times, and the Stock Option Committee met once. NCH does not have a
standing nominating committee of the Board. Nominees to the Board are
selected by the entire Board.
The Audit Committee of the Board reviews the scope of the independent
auditors' examinations and the scope of activities of NCH's internal
auditors. Additionally, it receives and reviews reports of NCH's
independent auditors and internal auditors. The Audit Committee also meets
(without management's presence, if the Audit Committee so desires) with the
independent auditors and members of the internal auditing staff, receives
recommendations or suggestions for change, and may initiate or supervise any
special investigations it may choose to undertake.
The Compensation Committee recommends to the Board of Directors the
salaries of Messrs. Irvin, Lester, and Milton Levy.
The Executive Committee possesses all of the powers of the Board of
Directors between meetings of the Board.
The Stock Option Committee of the Board determines those employees of
NCH and its subsidiaries who will receive stock options and the amount of
such options.
<PAGE>
COMPENSATION OF DIRECTORS AND EXECUTIVE OFFICERS
Director Compensation
Directors who are not executive officers of NCH receive compensation
of $25,000 per annum and $1,000 for each meeting of the Board of Directors
or Board committee attended. All other directors receive $1,000 for each
such meeting attended. Members of the Stock Option Committee and Executive
Committee are not compensated separately for their services on such
committees.
Report on Executive Compensation
Responsibility for Executive Compensation
Three outside directors, as the Compensation Committee of NCH (Messrs.
Fulgham, Trim, and Walker), have primary responsibility for recommending to
the Board the executive compensation program for Messrs. Irvin, Lester, and
Milton Levy. The Compensation Committee recommends to the Board an annual
aggregate base compensation for the Office of the Executive Committee and
is responsible for administering and approving incentive compensation for
the Office of the Executive Committee. After Board approval of the
Compensation Committee's recommendation for aggregate base compensation
(with Messrs. Irvin, Lester, and Milton Levy abstaining), the Messrs. Levy
divide the compensation of the Executive Committee among themselves.
The Executive Committee is responsible for setting the compensation for all
other officers of NCH.
Executive Compensation Strategy
With respect to compensation of all key executives other than Messrs.
Irvin, Lester, and Milton Levy, NCH's strategy is generally as follows:
* Attract and retain key executives by delivering a market competitive
rate of base pay. Market competitive rates of pay are determined by
reviewing compensation data from other companies that resemble NCH in terms
of lines of business, size, scope, and complexity.
* Provide salary increases to key executives based on their individual
effort and performance. In addition to the individual's experience, job
duties, and performance, annual increases are influenced by NCH's overall
performance.
* Provide annual incentive opportunities based on objectives that NCH
feels are critical to its success during the year. Target incentive levels
are set on an individual basis and actual awards are made at the Executive
Committee's discretion.
* Provide long-term incentives to key employees so that employees are
focused on activities and decisions that promote NCH's long-term financial
and operational success. To meet this objective, NCH offers stock options
to certain key employees. Options are generally granted for a period of
five years at a price that is at least equal to the fair market value of
the Common Stock at the time of grant. Options vest in equal increments
over a three-year period from the time of grant.
<PAGE>
Compensation of Messrs. Irvin, Lester, and Milton Levy
In 1994, the Compensation Committee, with assistance from an outside
consulting firm, determined the competitiveness of the compensation for
the Office of the Executive Committee. Based on survey and proxy analyses
performed by the consulting firm, the Compensation Committee adopted the
incentive bonus plan described below. All of the companies in the peer
group in NCH's performance graph on page 9 of this Proxy Statement were
included in the analysis performed by the consulting firm.
Although no formula or preset goal is used in setting the base salary
for the Office of the Executive Committee, performance in sales and earnings
as well as the current economic and competitive environment is considered.
To maintain a competitive level of compensation, the Compensation Committee
increased the base salary for the Office of the Executive Committee
effective May 1, 1997.
NCH has adopted a separate strategy with respect to the incentive
compensation of the Office of the Executive Committee. Since these
individuals are very significant long-term stockholders of NCH, some of the
typical approaches to executive compensation that exist in the marketplace
are not necessarily relevant at NCH. Long-term incentive programs are
implemented for senior executives to create a link between the corporation's
performance and the executive's own personal wealth. In light of the
shareholding of Messrs. Irvin, Lester, and Milton Levy, they are already
significantly impacted financially by NCH's overall performance. The
Compensation Committee generally feels that in this situation any long-term
incentive program should be tied to salary or bonus.
To qualify all compensation paid to the Executive Committee of the
Board of Directors as a deductible expense under Section 162 of the Internal
Revenue Code (the "Code"), on April 28, 1994, the Compensation Committee
of the Board of Directors adopted an incentive bonus plan (the "Bonus
Plan"), for the Office of the Executive Committee, which was approved by
the stockholders at the 1994 Annual Meeting.
The Bonus Plan provides a formula for determining the amounts of annual
bonuses to be paid to each member of the Executive Committee. Bonus amounts
will depend on the amount by which NCH's net income after taxes, but before
accrual for any bonus under the Bonus Plan, for a particular fiscal year
increases over its net income before accrual for any bonus for the preceding
fiscal year. An amendment to the original formula for determining the
amounts of annual bonuses was adopted by the Compensation Committee on
June 7, 1996, which was approved by the stockholders at the 1996 Annual
Meeting, because the formula could have resulted in a member receiving over
$1 million in annual compensation, which amount in excess of $1 million
would not have been deductible by NCH under Section 162(m) of the Code. As
amended, the formula provides as follows. Increases from 10% to less than
15% will result in payment of a $225,000 bonus to each member of the
Executive Committee. Increases of 15% or greater will result in payment of
a $325,000 bonus to each Executive Committee member. For fiscal 1997, no
bonus was payable because NCH's net income did not increase by 10% or more
over its net income for fiscal 1996.
The Bonus Plan prohibits amendment of its terms to increase the cost of
the Bonus Plan to NCH or to change the persons to whom bonuses will be paid
under the Bonus Plan without a vote of NCH's stockholders.
<PAGE>
Conclusion
The Compensation Committee believes that current compensation
arrangements in place at NCH are reasonable and competitive given NCH's
size and status and the current regulatory environment surrounding executive
compensation. The base salary program allows NCH to attract and retain
management talent. In addition, for those employees who are incentive
eligible, such systems continue to provide the necessary link between the
attainment of NCH's performance objectives and the compensation received
by executives.
Executive Committee &
Compensation Committee Stock Option Committee
---------------------- ----------------------
Rawles Fulgham Irvin L. Levy
Jerrold M. Trim Lester A. Levy
Thomas B. Walker, Jr. Milton P. Levy, Jr.
The report on executive compensation will not be deemed to be
incorporated by reference into any filing by NCH under the Securities Act
of 1933 or the Securities Exchange Act of 1934, except to the extent that
NCH specifically incorporates the above report by reference.
Compensation Committee Interlocks and Insider Participation in Compensation
Decisions
Messrs. Irvin, Lester, and Milton Levy are members of the Executive
Committee of NCH's Board of Directors, which committee determines most
salaries and promotions with respect to officers of NCH and its
subsidiaries, and of the Stock Option Committee, which determines those
employees of NCH and its subsidiaries who will receive stock options and
the amount of such options. Messrs. Irvin, Lester, and Milton Levy are
executive officers and employees of NCH.
NCH's Board of Directors (with the subject members abstaining)
determines the salaries of Messrs. Irvin, Lester, and Milton Levy after
recommendation of the Compensation Committee, whose members are Rawles
Fulgham, Jerrold M. Trim, and Thomas B. Walker, Jr.
Executive Compensation
The following table summarizes the compensation paid to Messrs. Irvin,
Lester, and Milton Levy, who together hold the office of the Executive
Committee, and to NCH's two other most highly compensated executive
officers (whose compensation exceeded $100,000 in fiscal 1997) for services
rendered in all capacities to NCH during the fiscal years ended April 30,
1997, 1996, and 1995.
<PAGE>
SUMMARY COMPENSATION TABLE
Name and Annual Compensation(1) All Other
Principal Fiscal ---------------------- Compensa-
Positions Year Salary(2) Bonus tion (3)
----------------- ----- --------- -------- ---------
Irvin L. Levy,
President 1997 $862,282 $ - $3,700
1996 859,228 - 3,700
1995 857,539 300,000 3,700
Lester A. Levy,
Chairman
of the Board 1997 866,263 - 3,000
1996 863,430 - 3,000
1995 863,572 300,000 3,700
Milton P. Levy, Jr.,
Chairman of the
Executive Committee 1997 867,598 - 3,000
1996 865,281 - 3,700
1995 865,936 300,000 3,700
Thomas F. Hetzer,
Vice President
- Finance 1997 205,883 - 3,700
1996 192,204 - 3,700
1995 170,732 10,000 3,700
Glen L. Scivally,
Vice President
and Treasurer 1997 182,357 - 3,700
1996 175,114 - 3,700
1995 164,927 10,000 3,700
--------------------
(1) Certain of NCH's executive officers receive personal benefits in
addition to annual salary and bonus. The aggregate amounts of the personal
benefits, however, do not exceed the lesser of $50,000 or 10% of the total
of the annual salary and bonus reported for the named executive officer.
(2) Includes compensation for services as a director (other than Mr.
Hetzer and Mr. Scivally).
(3) The amounts included in this column were contributed to the accounts
of the executives included in the table under NCH's qualified profit sharing
and savings plan.
<PAGE>
Retirement Agreements
NCH has entered into retirement agreements allowing retirement at any
time after age 59-1/2 with Messrs. Irvin, Lester, and Milton Levy that
provide for lifetime monthly payments and guarantee 120 monthly payments
beginning at death, retirement, or disability. By decision of the Board of
Directors on April 2, 1997, payments under these agreements were increased
from $385,000 to $500,000 per year for Messrs. Irvin L. Levy and Lester A.
Levy and decreased from $535,000 to $500,000 per year for Mr. Milton P.
Levy, Jr., subject to adjustment each year for increases in the United
States Consumer Price Index for the preceding year.
CERTAIN TRANSACTIONS
In December of 1996, NCH turned in for their cash value the split
dollar life insurance policies it had purchased pursuant to agreements with
the sons and former son-in-law of Lester A. Levy and sons of Irvin L. Levy,
who are, or were, employees of NCH, insuring Irvin L. Levy, Lester A. Levy,
and Milton P. Levy, Jr. The insurance policies would have provided benefits
to the above indicated employees totalling $10,000,000 on the death of
combinations of insureds. NCH had been granted a security interest in the
cash value of each policy to the extent of the sum of premium payments made
by NCH. The Board of Directors has decided that it will no longer purchase
insurance on the lives of Messrs. Irvin, Lester, and Milton Levy for the
benefit of the employees.
<PAGE>
FIVE YEAR COMPARISON OF CUMULATIVE TOTAL RETURN
The following graph presents NCH's cumulative stockholder return during
the period beginning April 30, 1992, and ending April 30, 1997. NCH is
compared to the S&P 500 and a peer group consisting of companies that
collectively represent lines of business in which NCH competes. The
companies included in the peer group index are Betz Laboratories, Inc.,
The Dexter Corporation, Ecolab Inc., Lawson Products, Inc., Nalco Chemical
Company, National Service Industries, Inc., Petrolite Corporation, Premier
Industrial Corporation (Premier), Quaker Chemical Corporation, Safety-Kleen
Corp., and Snap-On Tools Corporation. Last year, the peer group index
included the previous companies as well as Premier. However, during fiscal
year 1997, Premier was acquired by another corporation. As a result,
Premier's shareholder return is no longer available, and therefore, Premier
was excluded from the peer group for performance after 1996. Each index
assumes $100 invested at the close of trading on April 30, 1992, and is
calculated assuming quarterly reinvestment of dividends and quarterly
weighting by market capitalization.
[STOCK PERFORMANCE GRAPH FILED UNDER COVER OF FORM S-E]
1992 1993 1994 1995 1996 1997
---- ---- ---- ---- ---- ----
NCH Corporation 100 100 101 111 104 118
S&P 500 Index 100 109 115 135 176 220
Peer Group 100 100 99 105 125 156
Data source: S&P Compustat, a division of McGraw-Hill, Inc.
The stock price performance depicted in the graph above is not
necessarily indicative of future price performance. The graph will not be
deemed to be incorporated by reference in any filing by NCH under the
Securities Act of 1933 or the Securities Exchange Act of 1934, except to
the extent that NCH specifically incorporates the graph by reference.
<PAGE>
SECURITY OWNERSHIP OF
PRINCIPAL STOCKHOLDERS AND MANAGEMENT
The following table sets forth certain information regarding the
beneficial ownership of NCH's Common Stock as of June 2, 1997, by: (i)
persons known to management to beneficially own more than 5% of NCH's
Common Stock; (ii) each director and nominee for director; (iii) the
three persons holding the office of the Executive Committee and NCH's two
other most highly compensated executive officers (whose compensation
exceeded $100,000 in fiscal 1997); and (iv) all directors and executive
officers of NCH as a group. Except as noted below, each person included
in the table has sole voting and investment power with respect to the
shares that the person beneficially owns.
Name of Amount & Nature
Beneficial Owner of Beneficial Ownership Percent of Class
-------------------- ----------------------- ----------------
Robert L. Blumenthal 2,683 *
Rawles Fulgham (1) 2,000 *
Thomas F. Hetzer 0 -
Irvin L. Levy (2)(3) 1,522,731 21.3%
Lester A. Levy (2)(4) 1,484,318 20.7%
Milton P. Levy, Jr. (2)(5) 1,112,059 15.5%
Glen L. Scivally 0 -
Jerrold M. Trim (6) 0 -
Thomas B. Walker, Jr. 10,000 *
All directors and executive 4,085,459 57.0%
officers as a group (12 people)
First Chicago NBD Corporation (7) 419,020 5.8%
--------------------
* Less than 1% of class.
(1) Of these shares, 700 are held by a Dallas bank in trust for the
retirement plan and benefit of Mr. Fulgham.
(2) The address of Messrs. Irvin, Lester, and Milton Levy is P.O. Box
152170, Irving, Texas 75015. The definition of beneficial ownership under
the rules and regulations of the Securities and Exchange Commission requires
inclusion of the same 29,000 shares held as cotrustees by Messrs. Irvin,
Lester, and Milton Levy for a family trust in the totals listed above for
each of Messrs. Irvin, Lester, and Milton Levy.
(3) Irvin L. Levy owns a life estate interest in 1,000,000 shares included
in the table over which he has sole voting and investment power, and his
children own a remainder interest in such 1,000,000 shares. The table
includes the following shares, beneficial ownership of which Irvin L. Levy
disclaims: 31,520 shares held as trustee for his grandnephews and grandniece
over which he has sole voting and investment power, and 29,000 shares held
as cotrustee with his brothers for a family trust over which he shares
voting and investment power.
<PAGE>
(4) Lester A. Levy owns a life estate interest in 625,194 shares included
in the table over which he has sole voting and investment power, and his
children own a remainder interest in such 625,194 shares. The table
includes the following shares, beneficial ownership of which Lester A. Levy
disclaims: 19,261 shares held as trustee for his grandnieces over which he
has sole voting and investment power, and 29,000 shares held as cotrustee
with his brothers for a family trust over which he shares voting and
investment power.
(5) The table includes the following shares beneficial ownership of which
Milton P. Levy, Jr. disclaims: 34,448 shares owned by his wife over which
he has no voting or investment power, 29,000 shares held as cotrustee with
his brothers for a family trust over which he shares voting and investment
power, and 2,106 shares held as cotrustee with his daughters for their
benefit over which he shares voting and investment power.
(6) Windsor Association, Inc., of which Mr. Trim is president, has a
corporate policy against its employees owning any publicly traded
securities.
(7) The table sets forth First Chicago NBD Corporation's stockholding
based on its latest Schedule 13G filed with the SEC dated as of February 4,
1997. First Chicago NBD Corporation reports its address as One First
National Plaza, Chicago, Illinois 60670. It has sole dispositive power
over 419,020 shares, shared dispositive power over 0 shares, sole voting
power over 411,220 shares, and shared voting power over 0 shares.
SELECTION OF AUDITORS
The Board of Directors has appointed KPMG Peat Marwick LLP, Certified
Public Accountants, to continue to be the principal independent auditors
of NCH, subject to stockholder ratification at the Meeting. A
representative of that firm has been requested to be present at the Meeting
and will have an opportunity to make a statement if the representative
desires to do so and to respond to appropriate questions.
PROPOSALS OF STOCKHOLDERS
Stockholders of NCH who intend to present a proposal for action at the
1998 Annual Meeting of Stockholders of NCH must notify NCH's management of
such intention by notice received at NCH's principal executive offices not
less than 120 days in advance of June 24, 1998, for such proposal to be
included in NCH's proxy statement and form of proxy relating to such
meeting.
ANNUAL REPORT
The Annual Report for the year ended April 30, 1997, is being mailed
to stockholders with this Proxy Statement. The Annual Report is not to be
regarded as proxy soliciting material. NCH will provide without charge to
each stockholder to whom this Proxy Statement and the accompanying form of
proxy are sent, on the written request of such person, a copy of NCH's
annual report on Form 10-K for the fiscal year ended April 30, 1997,
including the financial statements and the financial statement schedules,
required to be filed with the Securities and Exchange Commission. Requests
should be directed to NCH Corporation, Attention: Secretary, P. O. Box
152170, Irving, Texas 75015.
/s/ Irvin L. Levy
------------------
Irvin L. Levy,
President
Irving, Texas
Dated: June 24, 1997
<PAGE>
PROXY CARD
NCH CORPORATION
ANNUAL MEETING OF STOCKHOLDERS-JULY 24, 1997
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned, revoking all prior proxies, hereby appoints James H. Stone,
Tom Hetzer, and Joe Cleveland, and any one or more of them, proxy or
proxies, with full power of substitution in each, and hereby authorizes
them to vote for the undersigned and in the undersigned's name, all shares
of common stock of NCH Corporation (the "Company") standing in the name of
the undersigned on June 2, 1997, as if the undersigned were personally
present and voting at the Company's annual meeting of stockholders to be
held on July 24, 1997, in Dallas, Texas, and at any adjournment thereof,
upon the matters set forth on the reverse side hereof.
This proxy when properly executed will be voted in the manner directed
herein by the undersigned stockholder. IF NO DIRECTION IS MADE, THEN THIS
PROXY WILL BE VOTED FOR PROPOSALS 1 AND 2, AND IN THE PROXIES' DISCRETION
ON ALL OTHER MATTERS THAT MAY PROPERLY COME BEFORE THE ANNUAL MEETING,
INCLUDING MATTERS INCIDENT TO THE CONDUCT OF SUCH MEETING.
(Continue and to be signed on reverse side)
<PAGE>
FOR WITHHOLD AUTHORITY
1. Election of Directors / / / /
Nominees: Irvin L. Levy and Jerrold Trim
---------------------------------------------------------------------
Instruction: To withhold authority to vote for all nominees, mark the
Withhold Authority box. To withhold authority to vote for any individual
nominees, write the nominee's name on the line above.
2. Proposal to ratify the appointment of KPMG Peat Marwick LLP as
independent auditors of NCH Corporation.
FOR / / AGAINST / / ABSTAIN / /
3. In their discretion, the proxies are authorized to vote upon any other
matters that may properly come before the meeting or any adjournment
thereof, subject to the limitations set forth in the applicable regulations
under the Securities Exchange Act of 1934.
Dated: , 1997
-------------------------------------------
-------------------------------------------
Signature
-------------------------------------------
Signature if held jointly
NOTE: Please sign exactly as name appears hereon. Joint owner should each
sign. When signing as attorney, executor, administrator, trustee, guardian,
officer or partner, please indicate full title and capacity.
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<CURRENCY> U.S.
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> APR-30-1997
<PERIOD-START> MAY-01-1996
<PERIOD-END> APR-30-1997
<EXCHANGE-RATE> 1.00000
<CASH> 21,273
<SECURITIES> 69,700
<RECEIVABLES> 160,288
<ALLOWANCES> 15,624
<INVENTORY> 107,502
<CURRENT-ASSETS> 367,946
<PP&E> 202,830
<DEPRECIATION> 114,330
<TOTAL-ASSETS> 497,591
<CURRENT-LIABILITIES> 107,827
<BONDS> 0
<COMMON> 11,769
0
0
<OTHER-SE> 270,826
<TOTAL-LIABILITY-AND-EQUITY> 497,591
<SALES> 766,761
<TOTAL-REVENUES> 766,761
<CGS> 403,317
<TOTAL-COSTS> 710,510
<OTHER-EXPENSES> (1,163)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (801)
<INCOME-PRETAX> 58,215
<INCOME-TAX> 23,540
<INCOME-CONTINUING> 34,675
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 34,675
<EPS-PRIMARY> 4.73
<EPS-DILUTED> 4.73
</TABLE>
