<PAGE>
FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
QUARTERLY REPORT UNDER SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For quarter ended October 31, 1998 Commission file number 1-5838
---------------- ------
NCH CORPORATION
-----------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
DELAWARE 75-0457200
------------------------------- -----------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
P.O. Box 152170
2727 Chemsearch Blvd.
Irving, TX 75015-2170
------------------------------- -----------------------
(Address of principal (Zip Code)
executive offices)
Registrant's telephone number, include area code (972) 438-0211
--------------
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter
period that the registrant was required to file such reports), and
(2) has been subject to such filing requirements for the past 90
days. Yes X No
--- ---
Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practicable date.
Class Outstanding at December 7, 1998
-------------------------- -------------------------------
Common Stock, $1 par value 5,604,689
-------------------------- -------------------------------
<PAGE>
NCH CORPORATION
INDEX
Page No.
--------
Part I. Financial Information:
Consolidated Balance Sheets --
October 31, 1998 and April 30, 1998 3
Consolidated Statements of Income --
Three Months and Six Months Ended
October 31, 1998 and 1997 4
Consolidated Statements of Cash Flows --
Six Months Ended October 31, 1998 and 1997 5
Notes to Consolidated Financial Statements 6 - 8
Management's Discussion and Analysis of
Financial Condition and Results of Operations 9 - 22
Part II. Other Information 23
<PAGE>
<TABLE>
NCH CORPORATION AND SUBSIDIARIES
Consolidated Balance Sheets
(In Thousands Except Share and Per Share Data)
(Unaudited)
<CAPTION>
October 31, April 30,
1998 1998
-------- --------
<S> <C> <C>
Assets
Current Assets
Cash and cash equivalents $ 20,875 $ 17,139
Marketable securities 5,171 101,626
Accounts receivable, net 138,630 140,758
Inventories 111,442 108,478
Prepaid expenses 10,750 9,434
Deferred income taxes 20,233 19,099
-------- --------
Total Current Assets 307,101 396,534
-------- --------
Property, Plant and Equipment 193,313 191,514
Accumulated depreciation 115,110 112,353
-------- --------
78,203 79,161
-------- --------
Deferred Income Taxes 31,723 30,848
-------- --------
Other 14,582 13,161
-------- --------
Total $431,609 $519,704
======== ========
Liabilities and Stockholders' Equity
Current Liabilities
Notes payable to banks $ 5,093 $ 7,178
Current maturities of long-term debt 252 292
Accounts payable 44,425 49,083
Accrued expenses 31,212 28,019
Income taxes payable 20,887 20,736
Dividends payable 1,962 2,504
-------- --------
Total Current Liabilities 103,831 107,812
-------- --------
Long-term Debt, less current maturities 1,218 1,400
-------- --------
Retirement and Deferred
Compensation Plans 114,185 111,088
-------- --------
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 12,670 12,289
Retained earnings 483,959 474,540
Accumulated other comprehensive income (35,644) (33,675)
-------- --------
472,754 464,923
Less treasury stock
(6,164,620 and 4,615,605 shares) 260,379 165,519
-------- --------
212,375 299,404
-------- --------
Total $431,609 $519,704
======== ========
The accompanying notes are an integral part of these financial
statements.
</TABLE>
<PAGE>
<TABLE>
NCH CORPORATION AND SUBSIDIARIES
Consolidated Statements of Income
(In Thousands Except Per Share Amounts)
(Unaudited)
<CAPTION>
Three Months Ended Six Months Ended
October 31, October 31,
------------------ ------------------
1998 1997 1998 1997
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Net Sales $191,152 $193,621 $390,008 $391,617
-------- -------- -------- --------
Operating Expenses
Cost of sales, including
warehousing and
commissions 106,468 105,880 216,852 211,767
Marketing and administrative
expenses 71,124 72,303 147,551 151,612
-------- -------- -------- --------
177,592 178,183 364,403 363,379
-------- -------- -------- --------
Operating Income 13,560 15,438 25,605 28,238
Other Expenses
Revaluation of foreign
currencies (1,016) (508) (1,427) (1,041)
Net interest (982) (116) (1,103) (279)
-------- -------- -------- --------
Income before Income Taxes 11,562 14,814 23,075 26,918
Provision for Income Taxes 5,251 6,228 10,278 11,125
-------- -------- -------- --------
Net Income $ 6,311 $ 8,586 $ 12,797 $ 15,793
======== ======== ======== ========
Weighted Average Number of
Shares Outstanding
Basic 5,604 7,167 5,866 7,165
======== ======== ======== ========
Diluted 5,615 7,199 5,881 7,190
======== ======== ======== ========
Earnings Per Share
Basic $ 1.13 $ 1.20 $ 2.18 $ 2.20
======== ======== ======== ========
Diluted $ 1.12 $ 1.19 $ 2.18 $ 2.20
======== ======== ======== ========
Cash Dividend Paid Per Share $ .35 $ .30 $ .70 $ .60
======== ======== ======== ========
Cash Dividend Declared
Not Paid $ .35 $ .35 $ .35 $ .35
======== ======== ======== ========
The accompanying notes are an integral part of these financial
statements.
</TABLE>
<PAGE>
<TABLE>
NCH CORPORATION AND SUBSIDIARIES
Consolidated Statements of Cash Flows
(In Thousands)
(Unaudited)
<CAPTION>
Six Months Ended
October 31,
-------------------
1998 1997
-------- --------
<S> <C> <C>
Cash Flows from Operating Activities
Net Income $ 12,797 $ 15,793
Adjustments to reconcile net income to
net cash provided by operating
activities:
Depreciation and amortization 6,781 7,365
Provision for losses on accounts
receivable 2,732 3,180
Deferred income taxes (2,001) (3,960)
Retirement and deferred compensation plans 3,408 1,747
Other noncash items 521 210
Changes in assets and liabilities,
excluding net assets acquired in the
purchase of businesses:
Accounts receivable (2,610) (4,423)
Inventories (2,674) (8,258)
Prepaid expenses (1,736) (1,685)
Accounts payable, accrued expenses and
income taxes payable (520) 2,597
Other noncurrent assets (420) (264)
-------- --------
Net cash provided by operating
activities 16,278 12,302
-------- --------
Cash Flows from Investing Activities
Sales of property, plant and equipment 271 783
Purchases of property, plant and equipment (6,845) (7,971)
Redemptions of marketable securities 101,236 16,419
Purchases of marketable securities (4,942) (24,028)
Acquisitions of business (1,843) (2,944)
Other (1,005) (1,012)
-------- --------
Net cash provided (used) in
investing activities 86,872 (18,753)
-------- --------
Cash Flows from Financing Activities
Proceeds from notes payable 1,165 853
Payments of notes payable (3,231) (1,536)
Additional long term debt - 36
Payments of long term debt (204) (42)
Borrowing of cash surrender values 2,023 2,060
Payments of dividends (3,920) (4,299)
Purchase of treasury stock (95,319) (4,674)
Proceeds from exercise of stock options 514 4,468
-------- --------
Net cash used in financing activities (98,972) (3,134)
-------- --------
Effect of Exchange Rate Changes on Cash
and Cash Equivalents (442) (1,707)
-------- --------
Net Increase (Decrease) in Cash and
Cash Equivalents 3,736 (11,292)
-------- --------
Cash and Cash Equivalents at Beginning
of Year 17,139 21,273
-------- --------
Cash and Cash Equivalents at End of Period $ 20,875 $ 9,981
======== ========
The accompanying notes are an integral part of these financial
statements.
</TABLE>
<PAGE>
NCH CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(Unaudited)
1. Basis of Presentation
---------------------
In the opinion of management, the accompanying unaudited consolidated
financial statements contain all adjustments necessary (consisting of
only normal re-occurring accruals) to present fairly NCH Corporation's
financial position as of October 31, 1998, the results of its
operations for the three and six months ended October 31, 1998 and
1997, and cash flows for the six months then ended.
The accounting policies followed by the Company are set forth in Note
1 to the Company's consolidated financial statements in the 1998 NCH
Corporation Report to the Shareholders, which is included in Part II
of Form 10-K.
The results of operations for the three and six month periods ended
October 31, 1998, are not necessarily indicative of the results to be
expected for the full year.
2. Inventories
-----------
Inventories consisted of the following (in thousands of dollars):
October 31, April 30,
1998 1998
-------- --------
Raw Materials $ 12,576 $ 13,904
Finished Goods 97,144 92,795
Sales Supplies 1,722 1,779
-------- --------
$111,442 $108,478
======== ========
3. Earnings Per Common Share
-------------------------
Effective January 31, 1998, the Company adopted SFAS No. 128, "Earnings
per Share". SFAS No. 128 replaces the presentation of primary earnings
per share (EPS) with basic EPS and replaces fully diluted EPS with
diluted EPS. It also requires dual presentation of basic and diluted
EPS on the face of the income statement for all entities with complex
capital structures, and requires a reconciliation of the numerator and
denominator of the basic EPS computation to the numerator and
denominator of the diluted EPS computation. EPS for prior periods
have been restated to conform with this new statement.
<PAGE>
Basic earnings per share are computed by dividing net income for the
period by the weighted average number of shares of common stock
outstanding for the period. Diluted earnings per share are determined
by dividing net income by the weighted average number of shares of
common stock and common stock equivalents outstanding. Stock options
are the Company's only common stock equivalents and are considered in
the diluted earnings per share calculations if they would not have been
antidilutive for those periods. For the three month period ended
October 31, 1998, options totaling 77,324 were excluded as their effect
would have been antidilutive. For the six month period ended October
31, 1998, all options were included as their effect was dilutive for
that period. For the three and six month periods ended October 31,
1997, options totaling 20,351 were excluded as their effect would have
been antidilutive.
4. Comprehensive Income
--------------------
Effective May 1, 1998, the Company adopted Statement of Financial
Accounting Standards (SFAS) No. 130, "Reporting Comprehensive Income".
The adoption of this statement had no impact on the Company's net
income or stockholders' equity. SFAS 130 established new standards
for the reporting and display of comprehensive income and its
components. SFAS 130 requires foreign currency translation
adjustments and unrealized gains or losses on the Company's
available-for-sale securities to be included in the measure of
comprehensive income and segregated in stockholders' equity as
accumulated other comprehensive income. Amounts in prior year
financial statements have been reclassified to conform to SFAS 130.
The components of comprehensive income, net of related tax, for
the three-month and six-month periods ended October 31, 1998 and 1997
are as follows (in thousands):
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
October 31, October 31,
------------------- -------------------
1998 1997 1998 1997
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Net income $ 6,311 $ 8,586 $ 12,797 $ 15,793
Unrealized gain (loss)
on available-for-sale
securities:
Gain (loss) arising
during period 6 (44) 6 126
Reclassification
adjustment - - (111) -
Foreign currency translation
adjustment (1,953) (3,196) (1,864) (4,235)
-------- -------- -------- --------
Comprehensive income $ 4,364 $ 5,346 $ 10,828 $ 11,684
======== ======== ======== ========
</TABLE>
<PAGE>
The components of accumulated other comprehensive income, net of
related tax, at October 31, 1998 and April 30, 1998 are as follows
(in thousands):
October 31, April 30,
1998 1998
-------- --------
Unrealized gain on available-
for-sale securities $ 6 $ 111
Foreign currency translation
adjustment (35,650) (33,786)
-------- --------
Comprehensive income $(35,644) $(33,675)
======== ========
4. Supplemental Cash Flow Information
----------------------------------
Cash payments for interest for the six months ended October 31, 1998
and 1997, were approximately $1,790,000 and $845,000, respectively.
Cash payments for income taxes were approximately $12,110,000 and
$10,923,000 for the same periods, respectively.
<PAGE>
NCH CORPORATION AND SUBSIDIARIES
Management's Discussion and Analysis of
Financial Condition and Results of Operations
Liquidity and Capital Resources
-------------------------------
In the six months ended October 31, 1998, working capital decreased
to $203.3 million from $288.7 million at April 30, 1998, and the
current ratio was 3.0 to 1 at October 31, 1998, compared to 3.7 to 1
at April 30, 1998. The total of cash, cash equivalents and marketable
securities decreased by $92.7 million in the first six months to $26.0
million at October 31, 1998, as shown on the Consolidated Balance
Sheets. Net cash flows from operations totaled $16.3 million.
Additional cash was provided by the net redemptions of marketable
securities of $96.3 million, and the borrowing of cash surrender values
of company-owned life insurance policies on key employees of $2.0
million. Principal uses of cash consisted of treasury stock purchases
of $95.3 million, net capital expenditures of $6.6 million, payment of
dividends of $3.9 million, and net payments of notes payable and
long-term debt of $2.3 million. During the year, the Company
purchased the assets of two small businesses for $1.8 million.
Management expects that operating cash flows will continue to generate
sufficient funds to finance operating needs, capital expenditures and
the payment of dividends.
The Company's international subsidiaries operate on a fiscal year
ending on the last day of February. The reported values of both
assets and liabilities of the Company's international subsidiaries
decreased as a result of the change in the Company's composite spot
rate at August 31, 1998, compared to February 28, 1998. This is
reflected by the foreign currency translation component of accumulated
other comprehensive income, which changed from a $33.8 million
reduction of stockholders' equity at April 30, 1998, to a $35.7
million reduction of equity at October 31, 1998.
<PAGE>
Accounts receivable decreased by $2.1 million and inventories
increased by $3.0 million in the six months ended October 31, 1998, as
measured in U.S. dollars and reported on the Consolidated Balance
Sheets. As stated above, the result of exchange rate deviations from
the end of the previous year to the end of the first six months was to
decrease the reported U.S. dollar values of both assets and
liabilities. The change in accounts receivable shown in the
Consolidated Statements of Cash Flows is exclusive of the effect of
exchange rates on the reported asset values, and shows accounts
receivable decreasing slightly for the six month period. The decrease
in accounts receivable was primarily in the Company's international
subsidiaries due to a 9% sales decrease in the current quarter
compared to the fourth quarter of last year. The Consolidated
Statements of Cash Flows shows inventories increasing by $2.7 million
during the six months ended October 31, 1998, exclusive of the effect
of exchange rates. The increase in inventory was primarily in the
Company's domestic operation, due to the 4% increase in sales in
the current quarter over the previous quarter.
Accounts payable, accrued expenses and income taxes payable were
similarly affected by currency translation. These liabilities
decreased by $.5 million when measured exclusive of the effect of
exchange rate changes, but decreased by $1.3 million as reported on the
Consolidated Balance Sheets. This decrease was a result of the timing
of payments associated with normal business activity.
Net expenditures for property, plant and equipment amounted to $6.6
million for the six months ended October 31, 1998, and consisted of the
installation and update of worldwide computer systems and normal
additions of operating equipment. As with the other assets and
liabilities, the effect of currency translation on the reported U.S.
dollar values of property, plant and equipment was to decrease those
reported values.
Total bank indebtedness, comprised of long-term debt, current
maturities of long-term debt and notes payable, decreased, exclusive
of the effect of exchange rate changes, by $2.3 million during the six
months ended October 31, 1998. The decrease was due primarily to the
repayment of short-term loans in the Company's European subsidiaries.
The bank indebtedness shown on the Consolidated Balance Sheets was
slightly affected by currency translation, and shows a decrease of
$2.3 million.
The directors of the Company declared a regular quarterly dividend
of $.35 per share on September 16, 1998, payable December 15, 1998,
to shareholders of record December 1, 1998. Cash dividends paid
during the first six months of the fiscal year amounted to $3.9
million.
During April 1998, the Company sold two subsidiaries, resulting
in a gain of $11.0 million before taxes ($7.1 million after taxes).
Sales for these two subsidiaries were less than 5% of the Company's
consolidated annual sales, and therefore this transaction has not
had a material impact on the Company's continuing operations.
<PAGE>
On May 26, 1998, the Board of Directors authorized the repurchase
of an aggregate of 1,266,176 shares of NCH Corporation Common Stock
from the Milton P. Levy, Jr. family. These shares were acquired on
May 26, 1998 at $60.89 per share. The closing trading price of NCH
Common Stock on that date was $65.44 per share. In addition, the
Company purchased an additional 284,839 shares on the open market.
In these two transactions, the Company repurchased 1,551,015 shares
of NCH Common Stock for an aggregate price of $93.8 million.
In August 1998, the Company obtained a $50 million unsecured credit
facility from a group of banks which expires in August 2001, and is
available for acquisitions and general corporate purposes. Interest
on the credit facility is generally payable quarterly, at the Company's
option of the Eurodollar rate plus 0.6%, or the federal funds rate
plus 0.5% (which will not exceed the bank's prime rate). The credit
facility is governed by certain financial covenants, including
minimum tangible net worth and a maximum leverage ratio. At October
31, 1998, the Company had not borrowed any amount under this credit
facility.
Year 2000 Compliance
--------------------
The Company uses and relies on a wide variety of information
technologies, computer systems and scientific equipment containing
computer-related components. Some of the Company's older computer
software programs and equipment use two digit fields rather than four
digit fields to define the applicable year (i.e., "98" in the computer
code refers to the year "1998"). As a result, time-sensitive functions
of those software programs and equipment may misinterpret dates after
January 1, 2000 to refer to the twentieth century rather than to the
twenty-first century (i.e., "02" could be interpreted as "1902" rather
than "2002"). This condition is commonly referred to as the Year 2000
Issue. If the Year 2000 Issue is not resolved, it could have a
material adverse effect on the Company's business, financial condition
or results of operations.
The Company has developed a strategy to address the potential
exposures related to the Year 2000 Issue on its operations for the Year
2000 and beyond. A review of key financial, informational and
operational systems has been completed. Plans for implementation and
testing of necessary modifications to these key computer systems and
equipment to ensure that they are Year 2000 compliant have been or
are in the final stages of being developed to address computer system
and equipment problems as required by December 31, 1999. The Company
believes that with these plans and completed modifications, the Year
2000 Issue will not have a material adverse effect on its business,
financial condition or results of operations. However, there can be no
assurance that if these modifications are made in a timely fashion
that they will prevent a material adverse effect on the Company's
business, financial condition or results of operations. The financial
impact of any such material adverse effect cannot be estimated at this
time. The Company currently has no contingency plans to deal with
major Year 2000 failures, although such plans will be developed over
the coming quarters if they are deemed necessary.
<PAGE>
In addition to risks associated with the Company's own computer
systems and equipment, the Company has relationships with, and is to
varying degrees dependent upon, a large number of third parties that
provide information, goods and services to the Company. These include
corporate partners, suppliers, vendors, financial institutions and
governmental entities. There can be no assurance that the systems of
other organizations on which the Company may rely will adequately
address the Year 2000 Issue, or that the failure of other
organizations to address the Year 2000 Issue will not have a material
adverse effect on the Company's business, financial condition or
results of operations. The Company has contacted key third parties to
assess their readiness to address the Year 2000 Issue.
The total cost of systems assessments and modifications related to
the Year 2000 Issue is funded through operating cash flows and has not
been material to date. The Company is expensing these costs as
incurred. The Company has identified resources to address the Year
2000 Issue. The financial impact of making the required systems
changes cannot be known precisely at this time, but it is currently
expected to be less than $2.0 million. The actual financial impact
could, however, exceed this estimate.
Euro Conversion
---------------
On January 1, 1999, 11 of the 15 member countries of the European
Union are scheduled to establish fixed conversion rates between their
existing currencies ("legacy currencies") and one common currency - the
euro. The euro will then trade on currency exchanges and may be used
in business transactions. Beginning in January 2002, new euro-
denominated bills and coins will be issued, and legacy currencies
will be withdrawn from circulation. The Corporation's operating
subsidiaries affected by the euro conversion are developing plans
to address the systems and business issues affected by the euro
currency conversion. These issues include, among others, the need to
adapt computer and other business systems and equipment to accommodate
euro-denominated transactions. The Corporation does not expect this
conversion to have a material impact on its financial condition or
results of operations.
Forward-Looking Information
---------------------------
Management's Discussion and Analysis of Financial Condition and
Results of Operations and other sections of this Quarterly Report
contain forward-looking statements that are based on current
expectations, estimates and assumptions regarding the worldwide
economy, technological innovation, competitive activity, interest
rates, pricing, and currency movements. These statements are not
guarantees of future results or events, and involve certain risk
and uncertainties which are difficult to predict and many of which
are beyond the control of the Company. Actual results and events
could differ materially from those anticipated by the forward-looking
statements.
<PAGE>
Operating Results
-----------------
Second Quarter Comparison - Prior Year
--------------------------------------
Net sales for the second quarter of fiscal 1999 decreased 1% to
$191.2 million as compared with $193.6 million reported in the same
quarter of the last fiscal year. Domestically, net sales in the
second quarter of the current year decreased 2% over the same period
in the prior year. International net sales, measured on a local
currency basis, increased 5% compared to the second quarter of the
prior year, but decreased slightly when measured in U.S. dollars due
to the negative effects of changes in currency translation rates.
Net sales for the second quarter of fiscal 1999 would have increased
4% over sales reported in the same quarter of the last fiscal year,
excluding the results of the two subsidiaries sold in the prior fiscal
year.
Operating expenses as a percent of net sales increased in the current
quarter to 92.9% of net sales compared to 92.0% in the second quarter
of the prior year. The increase is due to higher international product
costs, partially offset by decreased domestic marketing costs and
decreased international administrative costs. As a result, operating
income before other expenses and income taxes was 7.1% of net sales for
the quarter ended October 31, 1998, compared to 8.0% of net sales for
the quarter ended October 31, 1997. Operating income before other
expenses and income taxes would have been 7.8% in the prior year,
excluding the results of the two subsidiaries sold in the prior fiscal
year.
In the quarter ended October 31, 1998, net interest expense was $1.0
million compared to $.1 million in the same quarter of the prior
year. Revaluation of foreign currencies resulted in a loss of $1.0
million in the second quarter of the current year compared to a loss
of $.5 million in the same period last year.
Provision for income taxes was 45.4% of pre-tax income in the second
quarter of the current year compared to 42.0% of pre-tax income in the
prior year. This increase is due to the reduction of marketable
securities during the current quarter, which reduced the amount of
tax-exempt interest income, and is also due to a higher proportional
share of domestic income in the current quarter, which is subject to
higher effective tax rates than international income. Net income was
3.3% of net sales for the quarter ended October 31, 1998, compared
to 4.4% of net sales in the quarter ended October 31, 1997.
<PAGE>
Second Quarter Comparison - Preceding Quarter
---------------------------------------------
Net sales of $191.2 million for the second quarter of fiscal 1998
were 4% lower than the $198.9 million net sales reported in the first
quarter. International net sales were 14% lower when measured in
U.S. dollars, as a result of normal quarter-to-quarter sales
fluctuations and the effect of exchange rate changes, while domestic
net sales were 4% higher than the previous quarter.
Operating expenses were 92.9% of net sales in the current quarter
compared to 93.9% in the first quarter. Operating expenses in the
domestic operations were lower as a percent of net sales due to normal
quarter-to-quarter sales and expense fluctuations. As a result,
operating income before other expenses and income taxes was 7.1% of
net sales for the quarter ended October 31, 1998, compared to 6.1% of
net sales for the quarter ended July 31, 1998.
Net interest expense amounted to $1.0 million in the three months
ended October 31, 1998, compared to $.1 million in the three months
ended July 31, 1998. The revaluation of foreign currencies resulted in
a loss of $1.0 million in current quarter compared to a loss of $.4
million in the previous quarter.
Provision for income taxes amounted to 45.4% of pre-tax income in the
quarter ended October 31, 1998, compared to 43.7% of pre-tax income in
the quarter ended July 31, 1998. This increase is due to the reduction
of marketable securities during the previous quarter, which reduced the
amount of tax-exempt interest income further in the current quarter.
Net income was 3.3% of net sales for both the quarter ended October 31,
1998, and the quarter ended July 31, 1998.
Six Months Comparison - Prior Year
----------------------------------
Net sales for the six months ended October 31, 1998, decreased
slightly to $390.0 million as compared with $391.6 million reported in
the first six months of the last fiscal year. Domestically, net sales
increased slightly in the six months compared to a year ago.
International net sales were negatively affected by changes in
currency translation rates and decreased 1% as reported in U.S.
dollars. When measured on a local country currency basis,
international net sales increased approximately 4%. Net sales for the
six months ended October 31, 1998 would have increased 4% over sales
reported in the first six months of the last fiscal year, excluding
the results of the two subsidiaries sold in the prior fiscal year.
<PAGE>
Operating expenses as a percent of net sales increased in the six
months this year to 93.4% of net sales compared to 92.8% for the six
month period ended October 31, 1997. The increase is due to higher
overall product costs, partially offset by decreased domestic
marketing costs and decreased international administrative costs. As
a result, operating income in the six months this year decreased to
6.6% of net sales from 7.2% of net sales in the six month period
ended October 31, 1997. Operating income before other expenses and
income taxes would have been 7.1% in the prior year, excluding the
results of the two subsidiaries sold in the prior fiscal year.
Net interest expense was $1.1 million in the six months ended October
31, 1998, compared to $.3 million in the first six months of the
prior year. Revaluation of foreign currencies resulted in a loss of
$1.4 million in the first six months of the current year compared to a
loss of $1.0 million in the same period of the prior year.
Provision for income taxes was 44.5% of pre-tax income in the first
six months of the current year compared to 41.3% of pre-tax income in
the prior year. This increase is due to the reduction of marketable
securities during the first six months of the current year, which
reduced the amount of tax-exempt interest income, and is also due to
a higher proportional share of domestic income in the period, which is
subject to higher effective tax rates than international income. Net
income was 3.3% of net sales for the six months ended October 31, 1998
compared to 4.0% of net sales for the six months ended October 31, 1997.
<PAGE>
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(b) Reports on Form 8-K -- There were no reports on Form 8-K
filed for the three months ended October 31, 1998. The Company
filed Form 8-K on June 3, 1998 announcing that its board of
directors authorized the repurchase of an aggregate of 1,266,176
shares of NCH Common Stock from Milton P. Levy, Jr., certain
members of his family, including his children, their spouses and
his grandchildren, and trusts for the benefit of his family
members.
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its
behalf by the undersigned thereunto duly authorized.
NCH Corporation
---------------
(Registrant)
Date December 9, 1998 /s/ Tom Hetzer
---------------- --------------
Tom Hetzer
Vice President - Finance
(Principal Accounting Officer)
<PAGE>
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0
0
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