<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, 2000 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 June 20, 2000
----- ------------------------ ----------------
Common Stock, $1 Par Value $ 86,512,000 5,350,723
*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 June 20, 2000.
DOCUMENTS INCORPORATED BY REFERENCE:
Portions of the Registrant's 2000 Annual Report to the Shareholders and
definitive Proxy Statement relating to the Registrant's 2000 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 42 of the 2000
Common Equity and Related Shareholder Annual Report.
Matters.
Item 6 - Selected Financial Data. Page 16 of the 2000
Annual Report.
Item 7 - Management's Discussion and Pages 16-21 of the 2000
Analysis of Financial Condition and Annual Report.
Results of Operations.
Item 8 - Financial Statements and Pages 22-42 of the 2000
Supplementary Data. Annual Report.
PART III
Item 10 - Directors and Executive Pages 2-4 and 9-10 of the
Officers of the Registrant. Company's Proxy Statement
dated June 27, 2000,
in connection with its
Annual Meeting to be
held on July 27, 2000.
Item 11 - Executive Compensation. Pages 4-7 of the
Company's Proxy
Statement dated June
27, 2000, in
connection with its
Annual Meeting to
be held on July 27,
2000.
Item 12 - Security Ownership of Certain Pages 9-10 of the
Beneficial Owners and Management. Company's Proxy Statement
dated June 27, 2000, in
connection with its
Annual Meeting to be
held on July 27, 2000.
Item 13 - Certain Relationships and Pages 2-3 and 10 of the
Related Transactions. Company's Proxy
Statement dated June
27, 2000, in connection
with its Annual Meeting to
be held on July 27, 2000.
<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. NCH products include chemical
specialties, fasteners, welding alloys, plumbing parts and direct broadcast
satellite equipment. These products are marketed principally through the
Company's own sales force. Since the Resource Electronics segment was sold
during the current year, electronic components are no longer included in the
Company's product offerings. There have been no other 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 5% of net sales. However, in
the Plumbing Products Group, major home building supply centers account for 30%
of that segment's sales. Of the sales to home building supply centers, 63%
represents one customer, which results in increased pricing pressure for the
plumbing products. Also, the sales for the DBS Services Group are governed by an
agreement with a major satellite service provider, and are dependent on the
growth of the consumer direct-broadcast satellite market. The service provider
can cancel its agreement with the DBS Services Group at any time, with 90 days
notice. However, the Company has not received any indication that this agreement
would be canceled in the near future.
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 80%. The annual cost of
recruiting and training sales representatives over the past three years has
averaged approximately $36 million per year.
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.
As of the end of its last fiscal year the Company employed 9,330 persons.
The Company employs 66 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, 2000, 1999 and 1998,
were $5.1 million, $5.3 million and $5.5 million, respectively. All laboratory
costs, including research and development, are expensed as incurred.
Incorporated herein by reference is the footnote entitled "Segment and
Geographic Information" of the Consolidated Financial Statements in the NCH
Corporation Annual Report for the year ended April 30, 2000 (2000 Annual
Report), filed as an exhibit to this report. NCH has six segments: Chemical
Specialties, Plumbmaster Group, Partsmaster Group, Landmark Direct, DBS Services
Group, and Other Product Lines.
International sales, primarily for Chemical Specialties and Partsmaster
Group, are conducted through subsidiaries in Europe, Canada, Latin America,
Australia and the Far East. 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.
The products that the Company markets in each of its segments 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 consolidated 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.
In each of its operating segments, the Company is subject to various
federal, state and local laws and regulations affecting businesses in general,
including environmental laws and regulations. All laws and regulations are
subject to change and the Company cannot predict what effect, if any, changes
might have on its business.
<PAGE>
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 19 manufacturing facilities in 7 states and
11 foreign countries, located in Canada, Europe, Latin America and the Far East,
containing approximately 1,118,000 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 748,000 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.
The Company also owns seven parcels of undeveloped land in 5 states.
During the last fiscal year the Company made investments, net of
dispositions, of $7,702,000 ($8,807,000 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.
<PAGE>
Item 3. Legal Proceedings
Contingent Liabilities and Environmental Matters, appearing on page 35 of
the 2000 Annual Report, is incorporated by reference herein.
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,
2000:
Name Office Age
---- ------ ---
Lester A. Levy Chairman of the Board; Director 77
Milton P. Levy, Jr. Chairman of the Executive Committee;
Director 74
Irvin L. Levy President; Director 71
John I. Levy Executive Vice President 38
Lester A. Levy, Jr. Executive Vice President 39
Robert M. Levy Executive Vice President 41
Walter M. Levy Executive Vice President 44
Joe Cleveland Vice President and Secretary 66
Tom Hetzer Vice President - Finance 63
Glen Scivally Vice President and Treasurer 59
Messrs. Lester A. Levy, Milton P. Levy, Jr. and Irvin L. Levy are brothers.
Messrs. Walter M. Levy and Lester A. Levy, Jr. are sons of Lester A. Levy.
Messrs. Robert M. Levy and John I. Levy are sons of Irvin L. Levy. Messrs.
Lester A. Levy, Jr., Walter M., Robert M, and John I. Levy were elected
Executive Vice Presidents of the Company effective May 1, 2000. Each has
served in senior management capacities of NCH from between 14 to 20 years.
Each of the remaining Company's executive officers has been an executive
officer of the registrant for more than five years as his principal
employment.
<PAGE>
PART II
Item 5. Market for the Registrant's Common Equity and Related Stockholder
Matters
Market and Dividend Information, appearing on page 42 of the 2000 Annual
Report, is incorporated by reference herein.
Item 6. Selected Financial Data
Selected Financial Data, appearing on page 16 of the 2000 Annual Report,
is incorporated by reference herein.
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 16-21 of the 2000 Annual Report, is incorporated
by reference herein.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk
The Company, through its foreign subsidiaries, manufactures and
distributes products worldwide. As a result, the Company is from time to time
exposed to market risk relating to the impact of foreign currency exchange
rates; however, this exposure has not been significant in the past and is not
expected to be significant in the future.
In addition, the Company maintains a portfolio of marketable securities,
the majority of which are debt securities issued by U.S. Government agencies. As
a result, the Company is exposed to market risk relating to interest rate
movements; however, a hypothetical 10% adverse movement in interest rates would
have no material impact on net income of the Company.
<PAGE>
Item 8. Financial Statements and Supplementary Data
The Financial Statements and Supplementary Data, appearing on pages 22-42
of the 2000 Annual Report, is incorporated by reference herein.
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure
Not applicable
<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 27, 2000, in connection with its Annual
Meeting to be held July 27, 2000, is incorporated by reference herein.
Information on executive officers of the registrant, found on pages 9-10
of the Company's Proxy Statement dated June 27, 2000, is incorporated by
reference herein.
Item 11. Executive Compensation
Information on executive compensation and transactions, found on pages 4-7
of the Company's Proxy Statement dated June 27, 2000, in connection with its
Annual Meeting to be held July 27, 2000, is incorporated by reference herein.
<PAGE>
Item 12. Security Ownership of Certain Beneficial Owners and Management
Information on security ownership of principal stockholders and
management, found on pages 9-10 of the Company's Proxy Statement dated June 27,
2000, in connection with its Annual Meeting to be held on July 27, 2000, 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 10 of the Company's Proxy Statement dated June 27, 2000, in
connection with its Annual Meeting to be held on July 27, 2000, 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 22-42 of the 2000 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 pages 19-20 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, 2000.
(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 2nd day of June, 2000.
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 2, 2000
-------------------------- Director
Lester A. Levy
/s/Milton P. Levy, Jr. Chairman of the Executive
-------------------------- Committee; Director June 2, 2000
Milton P. Levy, Jr.
/s/Irvin L. Levy President; Director
---------------------------- (Principal Executive Officer) June 2, 2000
Irvin L. Levy
/s/Tom Hetzer Vice President - Finance June 2, 2000
----------------------------- (Princial Accounting Officer)
Tom Hetzer
/s/Robert L. Blumenthal Director June 2, 2000
-----------------------------
Robert L. Blumenthal
/s/Rawles Fulgham Director June 2, 2000
-----------------------------
Rawles Fulgham
/s/Jerrold M. Trim Director June 2, 2000
-----------------------------
Jerrold M. Trim
/s/Thomas B. Walker Jr. Director June 2, 2000
-----------------------------
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 22-42 of the 2000 Annual
Report.
Consolidated Financial Statements:
Statements of Income, Years Ended April 30, 2000, 1999 and 1998
Balance Sheets, April 30, 2000 and 1999
Statements of Cash Flows, Years Ended April 30, 2000, 1999 and 1998
Statements of Stockholders' Equity, Years Ended April 30, 2000, 1999 and 1998
Notes to Consolidated Financial Statements
Independent Auditors' Report
Selected Unaudited Quarterly Data, Years Ended April 30, 2000 and 1999
<PAGE>
The following consolidated financial statement schedule of the registrant and
its subsidiaries is included in Item 14(a)(2):
Page
Consolidated Financial Statement Schedule
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 May 31, 2000, we reported on the consolidated balance sheets
of NCH Corporation and subsidiaries as of April 30, 2000 and 1999, 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, 2000, as
contained in the 2000 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, 2000. 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 consolidated 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 LLP
Dallas, Texas
May 31, 2000
<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, 2000 $17,016 $5,318 $ (1,162) $5,072 $16,100
======= ====== ========= ====== =======
Year Ended April 30, 1999 $15,331 $5,721 $ (126) $3,910 $17,016
======= ====== ========= ====== =======
Year Ended April 30, 1998 $15,330 $5,311 $ (770) $4,540 $15,331
======= ====== ========= ====== =======
</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 (7) Credit Agreement among NCH Corporation
as Borrower, Chase Bank of Texas,
National Association, as Agent, and
the Lenders Named herein, dated
August 7, 1998
Exhibit 10.3 (7) First Amendment to Credit Agreement
among NCH Corporation as Borrower,
Chase Bank of Texas, National Association,
as Agent, dated May 28, 1999
Exhibit 10.4 (8) Asset Purchase Agreement by and among
Carlton-Bates Company, NCH Corporation
and Resource Electronics, Inc. dated as of
October 29, 1999
Exhibit 10.5 (1) (3) Form of Non-Qualified Stock Option
Agreement
Exhibit 10.6 (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 (3) (6) Fourth, Fifth and Sixth Amendments to Deferred
Compensation Agreements with Messrs. Irvin, Lester,
and Milton Levy
Exhibit 21 (2) Subsidiaries of the Registrant
Exhibit 23 (2) Independent Auditors' Consent
Exhibit 27 (2) Financial Data Schedule
<PAGE>
(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.
(6) 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, 1997, filed with the Securities and Exchange
Commission.
(7) 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, 1999, filed with the Securities and Exchange
Commission.
(8) Incorporated herein by reference to the exhibit with the same exhibit
number and designation in the Registrant's report on Form 10-Q for the
three and six months ended October 31, 1999, filed with the Securities and
Exchange Commission.
<PAGE>
NCH CORPORATION AND SUBSIDIARIES
EXHIBIT 13
ANNUAL REPORT FOR THE YEAR ENDED APRIL 30, 2000
<TABLE>
Selected Financial Data
NCH Corporation and Subsidiaries
(In Thousands Except Per Share Data)
Years Ended April 30,
<CAPTION>
2000 1999 1998 1997 1996
--------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
Net Sales $ 728,210 $ 723,225 $ 715,466 $ 704,464 $ 715,051
Income from
Continuing Operations $ 21,201 $ 25,532 $ 35,097 $ 34,421 $ 35,827
Earnings Per Share from
Continuing Operations
Basic $3.92 $4.47 $4.90 $4.70 $4.45
Diluted $3.92 $4.46 $4.88 $4.69 $4.45
Current Ratio 3.4 to 1 2.7 to 1 3.6 to 1 3.3 to 1 3.2 to 1
Total Assets $ 427,113 $ 430,603 $ 515,773 $ 493,563 $ 511,741
Long-Term Debt $ 12,049 $ 1,104 $ 1,400 $ 112 $ 49
Retirement and Deferred
Compensation Plans $ 115,344 $ 115,162 $ 111,088 $ 107,057 $ 99,915
Cash Dividends Declared
Per Share $1.40 $1.40 $1.35 $2.20 $2.20
Note: Amounts for prior years have been restated as applicable to reflect the sale of Resource Electronics, Inc.
</TABLE>
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
Liquidity and Capital Resources
In the fiscal year ended April 30, 2000, working capital increased to
$212.9 million from $182.3 million at April 30, 1999. The current ratio was 3.4
to 1 at April 30, 2000, compared to 2.7 to 1 at April 30, 1999. The total of
cash, cash equivalents and marketable securities increased by $29.6 million to
$52.6 million at April 30, 2000. Net cash flow from operating activities of
continuing operations totaled $41.2 million for fiscal 2000. Additional cash was
provided by the sale of the net assets of Resource Electronics of $12.7 million.
Principal uses of cash consisted of net purchases of marketable securities of
$17.0 million, net capital expenditures of $7.7 million, and payment of
dividends of $7.6 million. During the year, the Company purchased the assets of
two small businesses for $2.0 million. Management expects that operating cash
flows will continue to generate sufficient funds to finance operating needs,
capital expenditures and the payment of dividends.
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 February 29, 2000, compared to February
28, 1999. This is reflected by the foreign currency translation component of
accumulated other comprehensive loss, which changed from a $36.3 million
reduction of stockholders' equity at April 30, 1999, to a $42.5 million
reduction of stockholders' equity at April 30, 2000.
<PAGE>
As reported on the Consolidated Balance Sheets, accounts receivable
decreased by $5.3 million in the year ended April 30, 2000. 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, decreased by $.5
million compared to the end of the prior year. The decrease in accounts
receivable was primarily due to decreased sales in certain of the Company's
international operations during the current quarter.
As reported on the Consolidated Balance Sheets, inventories decreased by
$.7 million in the year ended April 30, 2000. Inventories decreased
internationally due to lower international sales and domestically due to
decreased inventory levels for the Plumbmaster Group. These decreases were
partially offset by increased inventory levels domestically due to higher
domestic sales in the current year and increases in product costs for the DBS
Services Group. 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 slightly in the same period.
Accounts payable, accrued expenses and income taxes payable decreased by
$24.3 million as reported on the Consolidated Balance Sheets. Income taxes
payable decreased due to the net loss in the fourth quarter in the current year
as compared to the prior year. Accrued expenses decreased due to decreased
international marketing costs. Accounts payable decreased as a result of normal
business activity associated with timing of payments.
Net capital expenditures for property, plant and equipment were $7.7
million for the year ended April 30, 2000. These consisted of the installation
and update of worldwide computer systems and normal additions of operating
equipment. Capital expenditures for the upcoming year are not expected to vary
significantly from the current year.
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.
<PAGE>
Total indebtedness, comprised of long-term debt, current maturities of
long-term debt and notes payable, increased $17.3 million as reported on the
Consolidated Balance Sheets. During the fourth quarter, an environmental
insurance policy was purchased and funded by a note payable in a non-cash
transaction. Of the $18.0 million in long-term debt, $16.9 is a note payable
related to the environmental insurance policy, and $1.1 million is a note
payable related to the purchase of a small domestic business in fiscal 1998. The
$6.0 million of notes payable to banks 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 2000, cash dividends paid amounted to $7.6 million
($1.40 per share) compared to $7.8 million in 1999 ($1.40 per share). On April
28, 2000, the directors of the Company declared a regular quarterly cash
dividend of $.35 per share of Common Stock to be paid June 15, 2000, to
shareholders of record June 1, 2000.
During the fiscal year 1999, the Company repurchased a total of 1,769,387
shares of NCH Common Stock for an aggregate price of $106.0 million. During
fiscal year 2000, the Company repurchased 71 shares for approximately three
thousand dollars.
In August 1998, the Company obtained a $50 million unsecured credit
facility from a group of banks which expires in August 2002, and is available
for acquisitions and general corporate purposes. During fiscal 2000, the Company
did not borrow any funds under this credit facility.
Subsequent Event
On May 9, 2000, the Company sold a parcel of surplus land for
approximately $6.9 million. The transaction involved approximately 142 acres of
undeveloped land in Coppell, Texas and will result in a pretax gain of $3.7
million ($2.4 million net of tax) in the quarter ending July 31, 2000.
<PAGE>
<TABLE>
Sales and Operating Income - Fiscal 2000 to Fiscal 1999
<CAPTION>
Net Sales Operating Income
------------------------ -------------------------
Years Ended April 30, Years Ended April 30,
------------------------ -------------------------
2000 1999 2000 1999
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
Chemical Specialties $ 409,476 $ 426,717 $ 13,534 $ 33,283
Plumbmaster Group 120,655 120,553 7,690 2,754
Partsmaster Group 85,806 85,250 10,973 8,378
Landmark Direct 35,081 28,281 519 1,193
DBS Services Group 21,038 16,530 4,594 4,824
Other Product Lines 56,154 45,894 4,207 2,282
Unallocated Corporate Expenses - - (2,559) (2,469)
--------- --------- --------- ---------
Total $ 728,210 $ 723,225 $ 38,958 $ 50,245
========= ========= ========= =========
</TABLE>
<PAGE>
Net sales from Continuing Operations were $728.2 million in fiscal 2000
compared to $723.2 million in fiscal 1999. Domestic net sales increased 7% from
fiscal 1999 to 2000. Net sales from total international operations decreased 3%
from fiscal 1999 to 2000 when measured on a local currency basis. Due to the
strengthening of the U.S. dollar, sales from international operations reflected
a decrease of 8% from fiscal 1999 to 2000 as reported in U.S. dollars, and
international sales are also lower due to continued difficult economic
conditions primarily in the European operations. Net sales for the Chemical
Specialties segment decreased $17.2 million, or 4% from fiscal 1999 to 2000 due
to a decrease in international sales, as measured in U.S. dollars, which offset
increased domestic sales. Net sales in the Plumbmaster Group increased slightly
from 1999 to 2000 as a result of increased domestic sales to major home building
supply centers and increased sales of plumbing components to OEM manufacturers,
partially offset by lower international sales. Net sales in the Partsmaster
Group increased slightly from 1999 to 2000, due to increased domestic sales,
partially offset by lower international sales. Net sales for Landmark Direct
increased $6.8 million, or 24%, from 1999 to 2000 primarily due to increased
sales of medical and first aid supplies. Net sales for DBS Services Group
increased $4.5 million, or 27% from 1999 to 2000 as a result of increased sales
of direct broadcast satellite equipment to retail dealers. Net sales in the
Other Product Lines increased $10.3 million, or 22%, primarily due to increased
sales of pet products to retail outlets and increased sales of apartment
maintenance products.
Operating income decreased to $39.0 million in fiscal 2000 from $50.2
million in 1999. Domestic operating margins decreased from fiscal 1999 to 2000,
primarily due to the accrual for increased environmental remediation expenses,
of which approximately $16.1 million was expensed in the fourth quarter of
fiscal 2000 and was partially offset by revisions of prior year liabilities of
approximately $4.2 million as a result of changes in management's estimates.
Internationally, operating margins increased due to lower cost of sales and
marketing costs in fiscal 2000 compared to 1999. In the Chemical Specialties
segment, operating income decreased $19.7 million, due to the environmental
costs discussed above and lower international sales. Operating income for the
Plumbmaster Group increased $4.9 million due to increased domestic sales and
cost saving strategies in domestic operations. Operating income for the
Partsmaster Group increased $2.6 million, or 31%, due to higher domestic and
international margins. Operating income for Landmark Direct decreased $.7
million due to increased sales into bid-dependent market channels, which have
historically lower gross margins. Operating income for the DBS Services Group
decreased slightly from fiscal 1999 to 2000. Operating income in the Other
Product Lines increased $1.9 million due to volume efficiencies gained in the
sale of pet products and apartment maintenance products.
<PAGE>
<TABLE>
Sales and Operating Income - Fiscal 1999 to Fiscal 1998
<CAPTION>
Net Sales Operating Income
------------------------ -------------------------
Years Ended April 30, Years Ended April 30,
------------------------ -------------------------
1999 1998 1999 1998
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
Chemical Specialties $ 426,717 $ 427,126 $ 33,283 $ 37,616
Plumbmaster Group 120,553 106,584 2,754 392
Partsmaster Group 85,250 79,739 8,378 10,142
Landmark Direct 28,281 20,332 1,193 (749)
DBS Services Group 16,530 12,336 4,824 1,485
Other Product Lines 45,894 69,349 2,282 3,827
Unallocated Corporate Expenses - - (2,469) (2,125)
--------- --------- --------- ---------
Total $ 723,225 $ 715,466 $ 50,245 $ 50,588
========= ========= ========= =========
</TABLE>
<PAGE>
Net sales from Continuing Operations were $723.2 million in fiscal 1999
compared to $715.5 million in fiscal 1998. Domestic net sales increased 3% from
fiscal 1998 to 1999. At the end of fiscal 1998, two domestic subsidiaries were
sold. Net sales in fiscal 1998 for these two subsidiaries amounted to $32.2
million. For comparison purposes, total net sales increased 6% in fiscal 1999
and domestic net sales increased 12% when the net sales for these two
subsidiaries are excluded from fiscal 1998. Net sales from total international
operations increased 2% from fiscal 1998 to 1999 when measured on a local
currency basis. Due to the strengthening of the U.S. dollar, sales from
international operations reflected a decrease of 1% from fiscal 1998 to 1999 as
reported in U.S. dollars. Fiscal 1999 international sales are also lower due to
the general economic downturn in Asia and in South America due to weak economies
in several major markets. In the Chemical Specialties segment, net sales
decreased slightly from fiscal 1998 to 1999 due to a decrease in international
sales, as measured in U.S. dollars, which offset increased domestic sales. An
estimated $8 million of the decrease in international sales is attributable to
the strength of the U.S. dollar in fiscal 1999 compared to 1998. Net sales in
the Plumbmaster Group increased $14.0 million, or 13%, from 1998 to 1999 as a
result of increased domestic sales to major home building supply centers. Net
sales in the Partsmaster Group increased $5.5 million, or 7%, from 1998 to 1999,
primarily due to increased domestic sales. Net sales for Landmark Direct
increased $7.9 million, or 39%, from 1998 to 1999 primarily due to the
acquisition of a small company in April 1998. Net sales for Landmark Direct
increased 10% without the acquisition. Net sales for DBS Services Group
increased $4.2 million, or 34%, from 1998 to 1999 as a result of increased
revenues from the sale of direct broadcast satellite equipment. Net sales in the
Other Product Lines decreased 34% primarily as a result of the sale of two
subsidiaries in April 1998, as discussed above.
Operating income decreased to $50.2 million in fiscal 1999 from $50.6
million in 1998. Excluding the results of the two subsidiaries sold in April
1998, operating income for fiscal 1998 would have been $47.3 million. Domestic
operating margins improved from fiscal 1998 to 1999 due to decreased marketing
costs, partially offset by increased cost of sales and administrative expenses.
Internationally, operating margins decreased due to increased cost of sales and
marketing costs in fiscal 1999 compared to 1998. In the Chemical Specialties
segment, operating income decreased 12%, due to decreases in international
margins. Of this decrease, approximately 3%, or one million dollars, is
attributable to the strength of the U.S. dollar in fiscal 1999 compared to 1998.
Operating income for the Plumbmaster Group increased $2.4 million due to
increased domestic sales and reductions in material costs for purchased goods.
Operating income for the Partsmaster Group decreased 17%, due to increased
international marketing costs. Operating income for Landmark Direct increased
$1.9 million due to the acquisition of a small company and decreased expenses
related to printing and mailing catalogs. DBS Services Group had an increase in
operating income of $3.3 million due to increased revenues from sales of direct
broadcast satellite equipment. Operating income in the Other Product Lines
decreased as a result of the sale of two subsidiaries in April 1998.
<PAGE>
Other Operating Results - Fiscal Years 2000, 1999 and 1998
In fiscal year 2000, interest expense was $5.6 million compared to $4.8
million for fiscal 1999 and $5.3 million for fiscal 1998. Interest income was
$2.0 million for fiscal 2000 as compared to $2.1 million for fiscal 1999 and
$4.9 million for fiscal 1998. The decrease in interest income from fiscal 1998
to fiscal 1999 is due to the reduction of marketable securities during 1999 as
compared to 1998.
Loss on revaluation of foreign currencies was $2.7 million in fiscal 2000
compared to $1.5 million in fiscal 1999. The current year loss is attributable
to foreign exchange expense in certain European subsidiaries and translation
losses in hyper-inflationary countries. In fiscal 1999, loss on currency
revaluation was $1.5 million compared to a loss of $2.3 million in 1998.
During fiscal 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 did not have a material impact on the Company's
operations.
The overall corporate tax rate for fiscal 2000 was 35.3% of pre-tax income
compared to 44.5% in 1999 and 40.3% in 1998. The decrease in fiscal year 2000 is
due to variations in individual country income levels, tax rates in the
international subsidiaries and to revisions of prior year estimated foreign tax
credits of $0.6 million utilized when the Company filed its 1999 federal income
tax return during the current year. A reconciliation of the effective tax rate
to the U.S. statutory rate is contained in the Notes to Consolidated Financial
Statements.
The sale of the net assets of Resource Electronics Inc. in fiscal 2000
resulted in a loss on disposition of discontinued operations of $3.3 million
(net of income taxes of $1.8 million) in fiscal 2000. The operating loss, net of
income taxes, for discontinued operations was $.9 million in fiscal 2000 as
compared to $1.2 million in fiscal 1999. Operating income, net of income taxes,
for discontinued operations was $.6 million in fiscal 1998.
<PAGE>
As a result of the preceding information, net income in fiscal year 2000,
including the results of discontinued operations, decreased to $17.0 million
from $24.4 million in 1999. Basic and Diluted earnings per share from continuing
operations decreased to $3.92 per share in fiscal 2000, due to the decrease in
net income, and was partially offset by the decrease in the weighted average
number of common shares outstanding during the current year. Basic and Diluted
earnings per share - net income decreased to $3.15 per share in fiscal 2000. Net
income in fiscal 1999 decreased to $24.4 million from $35.7 million in 1998.
Included in net income for the 1998 fiscal year are the sales and income of two
subsidiaries that were sold at the end of fiscal 1998. Net income for the two
subsidiaries, including the gain on the sale of the subsidiaries, amounted to
$8.9 million for the 1998 fiscal year. Basic earnings per share from continuing
operations decreased to $4.47 per share in fiscal 1999, due to the decrease in
net income, and was partially offset by the decrease in the weighted average
number of common shares outstanding during fiscal 1999. Diluted earnings per
share from continuing operations also decreased to $4.46 per share in fiscal
1999. Basic earnings per share - net income decreased to $4.27 per share in
fiscal 1999 and Diluted earnings per share - net income decreased to $4.25 per
share in fiscal 1999.
Year 2000 Compliance
The Company uses and relies on a wide variety of information technologies,
computer systems and scientific equipment containing computer-related
components. The Company did not experience any business interruptions related to
the Year 2000 Issue. The Company is continuing to monitor its computer systems
and equipment and expects that the Year 2000 Issue will not have a material
adverse effect on its business, financial condition, or results of operations.
<PAGE>
Euro Conversion
On January 1, 1999, 11 of the 15 member countries of the European Union
established fixed conversion rates between their existing currencies ("legacy
currencies") and one common currency - the euro. The euro is now trading on
currency exchanges and can 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 Company'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 Company
does not expect this conversion to have a material impact on its financial
condition or results of operations.
Recent Accounting Pronouncements
In December 1999, the SEC issued Staff Accounting Bulletin (SAB) No. 101,
"Revenue Recognition in Financial Statements," which must be adopted by July 31,
2000. We are currently assessing the impact of SAB 101 on our results of
operations.
Forward-Looking Information
Management's Discussion and Analysis of Financial Condition and Results of
Operations and other sections of this Annual 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>
<TABLE>
Consolidated Statements of Income
NCH Corporation and Subsidiaries
(In Thousands Except Per Share Data)
Years Ended April 30,
<CAPTION>
2000 1999 1998
---------- ---------- ---------
<S> <C> <C> <C>
Net Sales $ 728,210 $ 723,225 $ 715,466
---------- ---------- ---------
Operating Expenses
Cost of sales, including warehousing
and commissions 388,973 380,139 369,026
Marketing and administrative expenses 300,279 292,841 295,852
-------- -------- --------
689,252 672,980 664,878
-------- -------- --------
Operating Income 38,958 50,245 50,588
Other (Expenses) Income
Revaluation of foreign currencies (2,651) (1,515) (2,318)
Interest income 2,011 2,069 4,885
Interest expense (5,557) (4,790) (5,319)
Gain on sale of subsidiaries - - 10,972
-------- -------- --------
Income from Continuing Operations
before Income Taxes 32,761 46,009 58,808
Provision for Income Taxes 11,560 20,477 23,711
-------- -------- --------
Income from Continuing Operations 21,201 25,532 35,097
-------- -------- --------
Discontinued Operations:
Income/(Loss) from discontinued operations,
net of income taxes (859) (1,171) 598
Loss on disposition of discontinued operations,
net of income tax benefit of $1,782 (3,309) - -
-------- -------- --------
Net Income $ 17,033 $ 24,361 $ 35,695
======== ======== ========
Earnings Per Share from Continuing Operations
Basic $3.92 $4.47 $4.90
======== ======== ========
Diluted $3.92 $4.46 $4.88
======== ======== ========
Earnings Per Share - Net Income
Basic $3.15 $4.27 $4.98
======== ======== ========
Diluted $3.15 $4.25 $4.97
======== ======== ========
The accompanying notes are an integral part of these financial statements.
</TABLE>
<PAGE>
<TABLE>
Consolidated Balance Sheets
NCH Corporation and Subsidiaries
(In Thousands Except Share Data)
As of April 30,
<CAPTION>
2000 1999
-------- --------
<S> <C> <C>
Assets
Current Assets
Cash and cash equivalents $ 32,146 $ 19,814
Marketable securities 20,429 3,187
Accounts receivable (less allowance for
doubtful accounts of $16,100 and $17,016) 133,839 139,124
Inventories 93,536 94,191
Prepaid expenses 6,215 9,493
Deferred income taxes 13,691 21,454
--------- ---------
Total Current Assets 299,856 287,263
--------- ---------
Property, Plant and Equipment 190,475 192,927
Accumulated depreciation 120,242 116,678
--------- ---------
70,233 76,249
--------- ---------
Deferred Income Taxes 36,781 31,454
--------- ---------
Other 20,243 16,040
--------- ---------
Net assets of discontinued operations - 19,597
--------- ---------
Total $ 427,113 $ 430,603
========= =========
Liabilities and Stockholders' Equity
Current Liabilities
Notes payable to banks $ 5,956 $ 5,318
Current maturities of long-term debt 5,971 278
Accounts payable 40,196 44,376
Accrued expenses 26,766 29,128
Income taxes payable 6,176 23,930
Dividends payable 1,893 1,893
--------- ---------
Total Current Liabilities 86,958 104,923
--------- ---------
Long-Term Debt, less current maturities 12,049 1,104
--------- ---------
Retirement and Deferred Compensation Plans 115,344 115,162
--------- ---------
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 12,714 12,714
Retained earnings 501,146 491,685
Accumulated other comprehensive loss (42,389) (36,279)
--------- ---------
483,240 479,889
Less treasury stock
(6,361,081 and 6,361,010 shares) 270,478 270,475
--------- ---------
212,762 209,414
--------- ---------
Total $ 427,113 $ 430,603
========= =========
The accompanying notes are an integral part of these financial statements.
</TABLE>
<PAGE>
<TABLE>
Consolidated Statements of Cash Flows
NCH Corporation and Subsidiaries
(In Thousands)
Years Ended April 30,
<CAPTION>
2000 1999 1998
-------- -------- --------
<S> <C> <C> <C>
Cash Flows from Operating Activities
Income from Continuing Operations $ 21,201 $ 25,532 $ 35,097
Adjustments to reconcile income from Continuing
Operations to net cash provided by
Continuing Operations:
Depreciation and amortization 13,869 13,786 14,668
Gain on sale of subsidiaries - - (10,972)
Provision for losses on accounts receivable 5,318 5,721 5,311
Deferred income taxes 2,555 (3,152) (1,923)
Accrual of environmental expenses 16,138 - -
Retirement and deferred compensation plans 411 4,189 4,757
Other noncash items 1,069 (469) 206
Change in assets and liabilities, excluding
net assets acquired in the purchase of
businesses:
Accounts receivable (4,797) (12,470) (7,486)
Inventories (258) (3,147) (6,036)
Prepaid expenses 2,957 (444) (3,183)
Accounts payable, accrued expenses
and income taxes payable (14,816) 4,053 (509)
Other noncurrent assets (2,402) (686) (1,308)
-------- -------- --------
Net cash provided by Continuing Operations 41,245 32,913 28,622
-------- -------- --------
Operating cash flows from Discontinued Operations (1,274) 2,030 (874)
-------- -------- --------
Net cash provided by operating activities 39,971 34,943 27,748
-------- -------- --------
Cash Flows from Investing Activities
Sales of property, plant and equipment 1,105 1,034 1,342
Purchases of property, plant and equipment (8,807) (12,748) (13,935)
Redemptions of marketable securities 7,831 104,221 36,589
Purchases of marketable securities (24,865) (5,932) (68,407)
Acquisition of businesses (2,027) (2,773) (4,562)
Sale of subsidiaries 12,697 - 30,098
Other (1,005) (1,005) (886)
-------- -------- --------
Net cash provided by (used in) investing
activities (15,071) 82,797 (19,761)
-------- -------- --------
Cash Flows from Financing Activities
Proceeds from notes payable 5,221 2,346 5,172
Payments of notes payable (4,212) (4,266) (427)
Additional long-term debt - - 98
Payments of long-term debt (2,004) (310) (3,764)
Borrowing of cash surrender values 826 2,023 1,930
Surrender of insurance contracts 317 - -
Payments of dividends (7,572) (7,827) (9,313)
Purchases of treasury stock (3) (105,963) (9,054)
Proceeds from exercise of stock options - 1,200 7,259
-------- -------- --------
Net cash used in financing activities (7,427) (112,797) (8,099)
-------- -------- --------
Effect of Exchange Rate Changes on Cash
and Cash Equivalents (5,141) (2,268) (4,022)
-------- -------- --------
Net Increase (Decrease) in Cash and Cash Equivalents 12,332 2,675 (4,134)
Cash and Cash Equivalents at Beginning of Year 19,814 17,139 21,273
-------- -------- --------
Cash and Cash Equivalents at End of Year $ 32,146 $ 19,814 $ 17,139
======== ======== ========
The accompanying notes are an integral part of these financial statements.
</TABLE>
<PAGE>
<TABLE>
Consolidated Statements of Stockholders' Equity
NCH Corporation and Subsidiaries
(In Thousands Except Per Share Data)
<CAPTION>
Accumulated
Common Treasury Common Treasury Additional Other
Stock Stock Stock Stock Paid-In Retained Comprehensive
Shares Shares Amount Amount Capital Earnings Loss Total
------- ------- --------- ----------- -------- ---------- ---------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance, April 30, 1997 11,769 (4,607) $ 11,769 $ (160,695) $ 8,708 $ 448,513 $ (25,700) $ 282,595
------ ------ -------- ---------- -------- ---------- ---------- ---------
Comprehensive income:
Net income 35,695 35,695
Foreign currency
translation adjustment (8,046) (8,046)
Unrealized gains on
investments 71 71
---------
Comprehensive income 27,720
---------
Cash dividends on common
stock, $1.00 per share (7,164) (7,164)
Dividend declared, but not
paid, $.35 per share (2,504) (2,504)
Treasury stock acquired (137) (9,324) (9,324)
Treasury stock issued under
stock plans 128 4,500 3,581 8,081
------ ------ -------- ---------- -------- ---------- ---------- ---------
Balance, April 30, 1998 11,769 (4,616) 11,769 (165,519) 12,289 474,540 (33,675) 299,404
------ ------ -------- ---------- -------- ---------- ---------- ---------
Comprehensive income:
Net income 24,361 24,361
Foreign currency
translation adjustment (2,506) (2,506)
Unrealized losses on
investments (98) (98)
---------
Comprehensive income 21,757
---------
Cash dividends on common
stock, $1.05 per share (5,323) (5,323)
Dividend declared, but not
paid, $.35 per share (1,893) (1,893)
Treasury stock acquired (1,769) (105,963) (105,963)
Treasury stock issued under
stock plans 24 1,007 425 1,432
------ ------ -------- ---------- -------- ---------- ---------- ---------
Balance, April 30, 1999 11,769 (6,361) 11,769 (270,475) 12,714 491,685 (36,279) 209,414
------ ------ -------- ---------- -------- ---------- ---------- ---------
Comprehensive income:
Net income 17,033 17,033
Foreign currency
translation adjustment (6,245) (6,245)
Unrealized gains on
investments 135 135
---------
Comprehensive income 10,923
---------
Cash dividends on common
stock, $1.05 per share (5,679) (5,679)
Dividend declared, but not
paid, $.35 per share (1,893) (1,893)
Treasury stock acquired - (3) (3)
------ ------ -------- ---------- -------- ---------- ---------- ---------
Balance, April 30, 2000 11,769 (6,361) $ 11,769 $ (270,478) $ 12,714 $ 501,146 $ (42,389) $ 212,762
====== ====== ======== ========== ======== ========== ========== =========
The accompanying notes are an integral part of these financial statements.
</TABLE>
<PAGE>
Notes to Consolidated Financial Statements
NCH Corporation and Subsidiaries
Years Ended April 30, 2000, 1999, 1998
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
parts, and direct broadcast satellite equipment. 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 are included in the foreign currency translation
adjustment component of accumulated other comprehensive loss. 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.
<PAGE>
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.
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 goodwill, 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 $5.1 million in 2000, $5.3 million in 1999 and $5.5 million in
1998.
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 and foreign income taxes have
been included in the provision for income taxes and income taxes payable.
<PAGE>
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.
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. The Company applies 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 1996 through 2000, see footnote 8, "Capital Stock
and Options".
Revenue recognition - Sales are recognized upon shipment of products when
title transfers to customers.
Earnings per share - Basic earnings per share is computed by dividing net
income by the weighted-average number of shares outstanding. Diluted earnings
per share includes the dilutive effect of stock options.
Comprehensive income - SFAS No. 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.
Environmental costs - Liabilities for environmental costs are recorded
when it is probable that obligations have been incurred and the amounts can be
reasonably estimated. Any recorded liabilities would not be reduced by possible
recoveries from third parties and projected cash expenditures would not be
discounted unless fixed and determinable payment terms exist.
<PAGE>
Reclassifications - Certain prior year amounts have been reclassified to
conform with the current year presentation.
<PAGE>
2. Consolidated International Subsidiaries
At April 30, 2000 and 1999, the parent Company's investment in
consolidated international subsidiaries amounted to $48,589,000 and $47,342,000.
The current year consolidated financial statements include international
subsidiaries' assets of $137,471,000, liabilities of $55,629,000 and net income
of $7,185,000, after allocation of corporate expenses and excluding intercompany
sales and profits. For the prior year, these subsidiaries had assets of
$146,321,000, liabilities of $61,435,000 and net income of $4,516,000.
3. Income Taxes
Income taxes from continuing operations are as follows (in thousands of
dollars):
<TABLE>
<CAPTION>
Years Ended April 30,
-------------------------------------------
2000 1999 1998
-------- -------- --------
<S> <C> <C> <C>
U.S. Federal Current $ (3,042) $ 10,096 $ 10,438
Deferred 3,294 (2,695) (2,381)
Foreign Current 10,314 11,935 13,096
Deferred (739) (457) 458
State 1,733 1,598 2,100
-------- -------- --------
$ 11,560 $ 20,477 $ 23,711
======== ======== ========
</TABLE>
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):
<TABLE>
<CAPTION>
2000 1999
-------- --------
<S> <C> <C>
Deferred tax assets:
Allowance for doubtful accounts $ 3,162 $ 3,560
Inventory related 4,571 6,163
Insurance related 6,076 3,101
Accrued expenses 5,881 6,092
Retirement and deferred compensation plans 38,130 37,969
Foreign net operating loss carryforwards 3,058 2,036
Valuation allowance (3,058) (2,036)
Other - 2,284
-------- --------
57,820 59,169
-------- --------
Deferred tax liabilities:
Depreciation 4,544 4,537
Other 2,804 1,724
-------- --------
7,348 6,261
-------- --------
Net deferred tax asset $ 50,472 $ 52,908
======== ========
</TABLE>
<PAGE>
The following is a reconciliation of the difference between the U.S.
statutory income tax rate and the effective tax rate related to continuing
operations:
<TABLE>
<CAPTION>
Years Ended April 30,
----------------------------------
2000 1999 1998
------ ------ ------
<S> <C> <C> <C>
U.S statutory rate 35.0% 35.0% 35.0%
Tax exempt interest (0.1) (0.2) (1.7)
Other (0.2) .8 .8
Effect of international operations (2.8) 7.0 3.9
Effect of state income taxes 3.4 1.9 2.3
------ ------ ------
Effective tax rate 35.3% 44.5% 40.3%
====== ====== ======
</TABLE>
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
$8,261,000, which will expire between 2001 and 2006 and net operating loss
carryforwards totaling approximately $475,000 which have no expiration date. The
accumulated undistributed earnings of international subsidiaries not included in
the consolidated U.S. federal income tax return approximated $76,053,000 at
April 30, 2000, $78,157,000 at April 30, 1999 and $74,146,000 at April 30, 1998.
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. Income from continuing U.S. operations before
income taxes was $19,579,000 in 2000, $24,791,000 in 1999, and $29,521,000 in
1998. Income from foreign operations before income taxes for the same three
years was $13,182,000, $21,218,000, and $29,287,000, respectively. For 2000,
1999 and 1998, worldwide income tax payments amounted to $21,841,000,
$19,955,000 and $24,227,000, respectively.
<PAGE>
4. Inventories
A summary of inventories at April 30 follows (in thousands of dollars):
<TABLE>
<CAPTION>
2000 1999
-------- --------
<S> <C> <C>
Raw materials $ 16,137 $ 13,772
Finished goods 75,947 78,901
Sales supplies 1,452 1,518
-------- --------
$ 93,536 $ 94,191
======== ========
</TABLE>
5. Property, Plant and Equipment
Property, plant and equipment at April 30 consists of the following (in
thousands of dollars):
<TABLE>
<CAPTION>
2000 1999
-------- --------
<S> <C> <C>
Land $ 12,035 $ 12,182
Buildings 75,927 76,798
Equipment 102,513 103,947
-------- --------
$190,475 $192,927
======== ========
</TABLE>
Depreciation charged to income from continuing operations was $11,998,000,
$12,510,000 and $13,325,000 for each of the years ended April 30, 2000, 1999 and
1998, 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):
<TABLE>
<CAPTION>
2000 1999
-------- --------
<S> <C> <C>
Borrowed by domestic companies:
Note issued to provider of insurance
policy, at 7.91%, principal and interest
payable quarterly through 2003 (see
note 13). $ 16,913 $ -
Note issued to individual in connection with
purchase of business, at 4.93%,
principal and interest payable
annually through 2005. 1,071 1,286
Borrowed by international companies 36 96
-------- --------
18,020 1,382
Less current maturities 5,971 278
-------- --------
Long-term debt, less current maturities $ 12,049 $ 1,104
======== ========
</TABLE>
<PAGE>
Scheduled maturities of long-term debt for the years following April 30,
2000, are as follows:
2001 $ 5,971,000
2002 6,427,000
2003 5,193,000
2004 214,000
2005 215,000
--------------
Total $ 18,020,000
==============
In August 1998, the Company obtained a $50 million unsecured credit
facility from a group of banks which expires in August 2002, and is available
for acquisitions and general corporate purposes. Interest on the credit facility
is generally payable quarterly, and 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
April 30, 2000, the Company had not borrowed any amount under this credit
facility.
<PAGE>
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
$7,430,000, $8,872,000 and $9,433,000 in the years ended April 30, 2000, 1999
and 1998, respectively.
Postretirement benefits other than pensions - The Company and several of
its domestic subsidiaries have a postretirement health care benefit plan
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>
<TABLE>
<CAPTION>
2000 1999 1998
------ ------ ------
<S> <C> <C> <C>
Service cost - benefits earned during the year $ (103) $ 179 $ 11
Interest cost on accumulated postretirement
benefit obligation 292 262 244
Net amortization of prior service cost 176 176 176
------ ------ ------
Net postretirement benefit expense $ 365 $ 617 $ 431
====== ====== ======
</TABLE>
The reconciliation of changes in the benefit obligation is as follows (in
thousands of dollars):
<TABLE>
<CAPTION>
2000 1999
-------- --------
<S> <C> <C>
Postretirement benefit obligation, beginning
of period $ 3,848 $ 3,502
Service cost (103) 179
Interest cost 292 262
Benefits paid (106) (95)
-------- --------
Postretirement benefit obligation, year-end $ 3,931 $ 3,848
======== ========
</TABLE>
<PAGE>
The reconciliation of the accumulated postretirement benefit obligation to
the recorded liability at April 30 is as follows (in thousands of dollars):
<TABLE>
<CAPTION>
2000 1999
-------- --------
<S> <C> <C>
Accumulated postretirement benefit obligation $ 3,931 $ 3,848
Unrecognized prior service cost (587) (763)
-------- --------
Accrued postretirement benefit liability $ 3,344 $ 3,085
======== ========
</TABLE>
Measurement of the accumulated postretirement benefit obligation is based
on a 7% assumed discount rate for 2000 and 1999.
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. The provision for the estimated
liabilities arising from these plans was not significant.
<PAGE>
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 28, 2000, the directors of the Company declared a regular
quarterly cash dividend of $.35 per share of Common Stock to be paid June 15,
2000, to shareholders of record June 1, 2000.
At April 30, 2000, 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 plan. 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 SFAS 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>
<TABLE>
<CAPTION>
2000 1999 1998
-------- -------- --------
<S> <C> <C> <C>
Net Income
As Reported $ 17,033 $ 24,361 $ 35,695
Pro Forma $ 16,788 $ 24,188 $ 35,623
Earnings per share
As Reported
Basic $ 3.15 $ 4.27 $ 4.98
Diluted $ 3.15 $ 4.25 $ 4.97
Pro Forma
Basic $ 3.10 $ 4.24 $ 4.97
Diluted $ 3.10 $ 4.22 $ 4.96
</TABLE>
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, 2000, 1999 and 1998, 531,000, 531,000 and 552,000 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.
<PAGE>
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:
<TABLE>
<CAPTION>
2000 1999 1998
------ ------ ------
<S> <C> <C> <C>
Annual dividend yield 3.1% 2.7% 2.2%
Expected volatility 22.0% 20.8% 19.0%
Risk-free interest rates 6.3% 4.5% 5.3%
Expected lives (years) 5 5 5
</TABLE>
The annual dividend yield shown above is weighted over the expected life of the
options.
A summary of the status of the Company's stock option plan as of April 30,
2000, 1999, and 1998, and changes during the years ended on those dates is
presented below:
<PAGE>
<TABLE>
<CAPTION>
(In Thousands Except Per Share Data)
Years Ended April 30,
---------------------------------------------------------------------
2000 1999 1998
------------------- ------------------- ------------------
Average Average Average
Number Price Number Price Number Price
of Per of Per of Per
Shares Share Shares Share Shares Share
-------- ------- -------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
Outstanding at beginning
of period 317 $ 56.54 227 $ 58.97 284 $ 58.85
Granted 134 45.00 125 52.25 81 62.50
Exercised - - (21) 55.87 (125) 60.14
Canceled or expired (49) 58.62 (14) 58.85 (13) 67.22
---- -------- ---- -------- ---- --------
Outstanding at end
of period 402 $ 52.46 317 $ 56.54 227 $ 58.97
==== ======== ==== ======== ==== ========
Options exercisable
at year-end 169 $ 57.15 117 $ 58.44 70 $ 57.50
==== ======== ==== ======== ==== ========
</TABLE>
<PAGE>
Stock options outstanding at April 30, 2000 had a range in exercise
prices of $45.00 to $62.50 and an average remaining contractual life of 3.7
years. The weighted average fair value of options, calculated using the
Black-Scholes option pricing model, granted during the years ended April 30,
2000, 1999 and 1998 was $3.89, $4.15, and $6.30, respectively. At April 30,
2000, 1999 and 1998, 19,000 shares of Treasury Stock were reserved for issuance
to employees under a stock participation plan.
9. Comprehensive Income
Accumulated other comprehensive loss consists of the following (in
thousands of dollars):
<TABLE>
<CAPTION>
2000 1999 1998
--------- --------- ---------
<S> <C> <C> <C>
Unrealized gain on available-for-sale
securities $ 148 $ 13 $ 111
Foreign currency translation adjustment (42,537) (36,292) (33,786)
--------- --------- ---------
Accumulated other comprehensive loss $ (42,389) $ (36,279) $ (33,675)
========= ========= =========
</TABLE>
<PAGE>
A summary of the components of other comprehensive income for the years
ended April 30, 2000, 1999 and 1998 is as follows (in thousands of dollars):
<TABLE>
<CAPTION>
Before-Tax Income After-Tax
Amount Tax Amount
-------- ----- --------
<S> <C> <C>
2000
----
Unrealized gain on available-for-sale
securities $ 208 $ (73) $ 135
Net foreign currency translation (6,245) - (6,245)
-------- ----- --------
Other comprehensive income $ (6,037) $ (73) $ (6,110)
======== ===== ========
1999
----
Unrealized loss on available-for-sale
securities $ (151) $ 53 $ (98)
Net foreign currency translation (2,506) - (2,506)
-------- ----- --------
Other comprehensive income $ (2,657) $ 53 $ (2,604)
======== ===== ========
1998
----
Unrealized gain on available-for-sale
securities $ 109 $ (38) $ 71
Net foreign currency translation (8,046) - (8,046)
-------- ----- --------
Other comprehensive income $ (7,937) $ (38) $ (7,975)
========= ====== ========
</TABLE>
<PAGE>
10. Interest Costs
During the years ended April 30, 2000, 1999 and 1998, interest costs,
including interest expense on non-funded retirement plans, amounting to
$5,557,000, $4,790,000 and $5,319,000, respectively, were expensed as incurred.
For the same periods, interest payments were $4,087,000, $3,664,000 and
$3,067,000, respectively.
11. Leases
At April 30, 2000, the Company and its subsidiaries had a number of
noncancellable leases for various office and warehouse facilities. These
agreements expire at various times through 2005 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 2000, 1999
and 1998 (including operating leases on data processing equipment, trucks and
trailers, and office equipment) was approximately $10,608,000, $11,382,000 and
$11,275,000, respectively. The minimum aggregate rentals under the terms of
noncancellable operating leases for future years are:
2001 $ 7,781,000
2002 5,393,000
2003 4,111,000
2004 2,948,000
2005 3,796,000
12. Contingent Liabilities
The Company and its subsidiaries are engaged in a variety of legal
proceedings arising in the ordinary course of business. 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. See Note 13 for discussion of environmental matters.
At April 30, 2000 and 1999, the Company had standby letters of credit
outstanding totaling $4,823,000 and $5,290,000, respectively, which guarantee
payment to certain insurance carriers.
<PAGE>
13. Environmental Matters
The Company's operations are subject to comprehensive laws and
regulations relating to the management of hazardous substances and wastes and to
the remediation of contaminated sites. The Company regularly incurs costs to
comply with these laws and regulations. The amount of these costs varies each
year and could be substantial in any future year. The Company believes that it
is in substantial compliance with all material environmental laws and
regulations.
During the fourth quarter of the current year, the Company obtained
additional investigative findings related to a Company owned manufacturing site
which indicated further environmental remediation will be required. As a result,
the Company recorded an additional accrual of approximately $16.1 million, which
is included in marketing and administrative expenses on the Consolidated
Statements of Income. On March 10, 2000, the Company purchased an environmental
insurance policy to cover this site and one other Company property. This policy
covers all pollution remediation and site reclamation costs up to $40 million
for these two properties for the next ten years. The premium for this policy was
$18,638,000, of which $1,726,000 was paid on April 25, 2000 and the remainder
was funded in a non-cash transaction by a note payable to be paid quarterly
through fiscal year 2003.
Certain environmental laws, such as the federal Superfund law, can
impose liability for the entire cost of site remediation upon each of the
current or former owners or operators of a site or parties who arranged for
disposal of hazardous substances at a site where such substances were released
into the environment. This liability can attach regardless of fault or
lawfulness of the original activity. Generally, where there are a number of
potentially responsible parties ("PRPs") that are financially viable, liability
has been apportioned between the PRPs based on equitable factors such as the
type and amount of waste attributable to each party at the site, although no
assurance can be given as to how liability will be assigned on any particular
site.
The Company is one of three named parties in a civil lawsuit filed on
November 20, 1998, in the U.S. District Court, District of New Jersey, by the
U.S. Department of Justice on behalf of the U.S. Environmental Protection Agency
seeking reimbursement of approximately $15 million of costs associated with the
cleanup of a Superfund site in New Jersey. Although named as a PRP, the Company
contends that it did not arrange for the disposal of any materials at this site
and intends to vigorously defend this lawsuit. At this time, it is too early to
determine the likelihood of an adverse result or to quantify the Company's
likely exposure, if any.
<PAGE>
14. Fair Value of Financial Instruments
The carrying amounts of cash equivalents, accounts receivable, accounts
payable, and notes payable to banks 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.
15. Marketable Securities
Marketable securities which do not meet the definition of cash equivalents
are classified as marketable securities available-for-sale. These securities are
reported at fair value with unrealized gains and losses (net of deferred income
taxes) being recognized on the balance sheet as a component of accumulated other
comprehensive loss. Values are based on quoted market prices obtained from an
independent broker. Realized gains and losses are included in operating income
and are immaterial. The cost of securities sold is based on the specific
identification method.
<PAGE>
The following is a summary of available-for-sale marketable securities as of
April 30 (in thousands of dollars):
<TABLE>
<CAPTION>
Government
Bonds, Treasury Certificates
Notes and Bills of Deposit Total
-------------------- ----------- ----------
<S> <C> <C> <C>
2000
----
Cost $ 20,201 $ - $ 20,201
Gross Unrealized Gains 228 - 228
-------- ---- --------
Estimated Fair Value $ 20,429 $ - $ 20,429
======== ==== ========
1999
----
Cost $ 2,947 $220 $ 3,167
Gross Unrealized Gains 20 - 20
-------- ---- --------
Estimated Fair Value $ 2,967 $220 $ 3,187
======= ==== ========
</TABLE>
The contractual maturities of the marketable securities at estimated fair
value as of April 30, 2000 are as follows: 2001 - $19,663,000 and 2002 -
$766,000.
<PAGE>
16. Discontinued Operations
On October 29, 1999, the Company signed an asset purchase agreement to
sell substantially all the net assets of Resource Electronics Inc., a subsidiary
of the Company, to Carlton-Bates Company. This sale was closed on November 11,
1999. The net assets and liabilities that were transferred consisted primarily
of accounts receivable, inventories, fixed assets, and accounts payable. The
selling price for these net assets was $12,697,000 in cash and was received by
the Company in November 1999.
The consolidated financial statements for prior periods have been restated
and the financial position, operating results, and cash flows of Resource
Electronics are shown separately as discontinued operations.
Net sales of Resource Electronics for the years ended April 30, 2000,
1999, and 1998, were $32,493,000, $63,468,000, and $68,629,000, respectively. As
Resource Electronics was sold in the second quarter of the current year, the
above amount for fiscal year 2000 represents approximately six months of sales.
These amounts are not included in net sales in the accompanying Consolidated
Statements of Income.
<PAGE>
As shown on the accompanying Consolidated Statements of Income, amounts
relating to discontinued operations are as follows (in thousands except per
share amounts):
<TABLE>
<CAPTION>
2000 1999 1998
----------- ----------- -----------
<S> <C> <C> <C>
Loss from Discontinued
Operations before taxes $ (1,252) $ (1,740) $ 1,159
Income Taxes 393 569 (561)
-------- -------- --------
Loss from Discontinued
Operations $ (859) $ (1,171) $ 598
======== ======== ========
Loss on Disposition of
Discontinued Operations
before taxes $ (5,091) $ - $ -
Income Taxes 1,782 - -
-------- -------- --------
Loss on Disposition of
Discontinued Operations $ (3,309) $ - $ -
======== ======== ========
Per share - basic
Loss from Discontinued
Operations $ (0.16) $ (0.20) $ 0.08
Loss on Disposition of
Discontinued Operations $ (0.61) $ - $ -
-------- -------- --------
Total from Discontinued
Operations $ (0.77) $ (0.20) $ 0.08
======== ======== ========
Per share -diluted
Loss from Discontinued
Operations $ (0.16) $ (0.21) $ 0.09
Loss on Disposition of
Discontinued Operations $ (0.61) $ - $ -
-------- -------- --------
Total from Discontinued
Operations $ (0.77) $ (0.21) $ 0.09
======== ======== ========
</TABLE>
<PAGE>
17. Segment and Geographic Area Information
The Company's segments are based on the organization structure that is
used by management for making operating and investment decisions and for
assessing performance. Based on this management approach, the Company has six
segments: Chemical Specialties, Plumbmaster Group, Partsmaster Group, Landmark
Direct, DBS Services Group, and Other Product Lines. Chemical Specialties
manufacture and sell a broad line of chemical cleaning and maintenance products,
including water treatment and oil field production chemicals, to industrial and
institutional customers worldwide. The Plumbmaster Group markets products for
plumbing repair and replacement parts as well as parts for new building
construction. The majority of these products are purchased finished goods, but
the group also manufactures various products. These products are primarily sold
in the United States to the plumbing trade, construction contractors,
institutional and industrial customers, as well as to major home building supply
centers, hardware stores and other retail outlets. The Partsmaster Group sells
fasteners, cutting tools, electrical products, and welding alloys to industrial
customers worldwide. Landmark Direct markets first-aid supplies and business and
industrial products, such as safety signs, identification products and
productivity tools to customers in the United States. DBS Services Group
wholesales direct broadcast satellite equipment to retail consumer electronics
stores in the eastern United States. Other Product Lines consists of a variety
of products that are not similar to the other groups, such as pet products and
apartment maintenance products. Disclosures for previous years included the
Resource Electronics segment, which is now included in discontinued operations
and excluded from the segment disclosures. Additionally, DBS Services Group was
previously included in the Other Product Lines segment. Fiscal 1999 and 1998
information has been restated to conform to the current segment determination.
The accounting policies of the segments are the same as those described in
Note 1. The Company evaluates the performance of its segments primarily based on
operating profit. All intercompany transactions have been eliminated, and
intersegment revenues are not significant. In calculating operating profit for
individual segments, administrative expenses incurred at the Company's corporate
headquarters (Corporate) that are common to more than one segment are allocated
on a usage basis. Certain items are maintained at Corporate and are not
allocated to the segments. These are primarily marketable securities, certain
corporate costs, and other corporate assets. Although the Company allocates
deferred income tax assets to segments for balance sheet purposes, income tax
expense is not allocated in measuring performance of individual segments.
Segment information is as follows (in thousands of dollars):
<PAGE>
<TABLE>
<CAPTION>
Depreciation and
Net Sales Operating Income Amortization
------------------------------- --------------------------- ---------------------------
Years Ended April 30, Years Ended April 30, Years Ended April 30,
------------------------------- --------------------------- ---------------------------
2000 1999 1998 2000 1999 1998 2000 1999 1998
--------- --------- --------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Chemical Specialties $ 409,476 $ 426,717 $ 427,126 $ 13,534 $ 33,283 $ 37,616 $ 8,394 $ 8,495 $ 8,554
Plumbmaster Group 120,655 120,553 106,584 7,690 2,754 392 2,547 2,707 2,535
Partsmaster Group 85,806 85,250 79,739 10,973 8,378 10,142 1,414 1,352 1,268
Landmark Direct 35,081 28,281 20,332 519 1,193 (749) 421 373 261
DBS Services Group 21,038 16,530 12,336 4,594 4,824 1,485 138 73 37
Other Product Lines 56,154 45,894 69,349 4,207 2,282 3,827 955 786 2,013
--------- --------- --------- -------- -------- -------- -------- -------- --------
Total $ 728,210 $ 723,225 $ 715,466 $ 41,517 $ 52,714 $ 52,713 $ 13,869 $ 13,786 $ 14,668
========= ========= ========= ======== ======== ======== ======== ======== ========
</TABLE>
<TABLE>
<CAPTION>
Capital Expenditures Total Assets
------------------------------ ----------------------------
Years Ended April 30, As of April 30,
------------------------------ ----------------------------
2000 1999 1998 2000 1999 1998
-------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Chemical Specialties $ 5,644 $ 8,965 $ 9,163 $246,650 $259,930 $260,074
Plumbmaster Group 1,174 1,741 1,403 72,110 75,029 71,077
Partsmaster Group 938 886 1,291 27,637 29,736 28,642
Landmark Direct 372 403 165 10,342 9,143 7,537
DBS Services Group 114 95 18 13,680 3,488 2,979
Other Product Lines 630 515 1,569 20,795 20,443 18,839
-------- -------- -------- -------- -------- --------
Total $ 8,872 $ 12,605 $ 13,609 $391,214 $397,769 $389,148
======== ======== ======== ======== ======== ========
</TABLE>
<PAGE>
With respect to capital expenditures, the difference between the segment totals
and the consolidated totals relates to assets acquired in the purchases of
businesses.
A reconciliation of the segment information to the consolidated financial
statements is as follows:
<TABLE>
<CAPTION>
Years Ended April 30,
----------------------------------
2000 1999 1998
-------- -------- --------
<S> <C> <C> <C>
Total segment operating profit $ 41,517 $ 52,714 $ 52,713
Unallocated Corporate expenses (2,559) (2,469) (2,125)
Revaluation of foreign currencies (2,651) (1,515) (2,318)
Interest income 2,011 2,069 4,885
Interest expense (5,557) (4,790) (5,319)
Gain on sale of subsidiaries - - 10,972
-------- -------- --------
Income from Continuing Operations
before Income Taxes $ 32,761 $ 46,009 $ 58,808
======== ======== ========
</TABLE>
<TABLE>
<CAPTION>
As of April 30,
-----------------------------------
2000 1999 1998
--------- --------- ---------
<S> <C> <C> <C>
Total segment assets $ 391,214 $ 397,769 $ 389,148
Net assets of discontinued operations - 19,597 22,562
Unallocated assets:
Marketable securities 20,429 3,187 101,626
Other Corporate assets 15,470 10,050 2,437
--------- --------- ---------
Consolidated total assets $ 427,113 $ 430,603 $ 515,773
========= ========= =========
</TABLE>
Geographic information is as follows:
<PAGE>
<TABLE>
<CAPTION>
Net Sales Long-lived Assets
Years Ended April 30, As of April 30,
---------------------------------- ------------------------------
2000 1999 1998 2000 1999 1998
--------- --------- --------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
United States $ 429,647 $ 399,709 $ 388,591 $ 48,958 $ 51,033 $ 51,542
Europe 227,852 252,154 245,669 14,679 18,128 18,046
Pacific & Far East 27,353 24,977 30,738 2,210 2,377 2,398
Latin America & Canada 43,358 46,385 50,468 4,386 4,711 6,668
--------- --------- --------- -------- -------- --------
Total $ 728,210 $ 723,225 $ 715,466 $ 70,233 $ 76,249 $ 78,654
========= ========= ========= ======== ======== ========
</TABLE>
<PAGE>
18. Earnings Per Share
The following is a reconciliation of basic earnings per share to diluted
earnings per share for the years ended April 30, 2000, 1999, and 1998 (shares in
thousands):
<TABLE>
<CAPTION>
2000 1999 1998
------ ------ ------
<S> <C> <C> <C>
Basic earnings per share $ 3.15 $ 4.27 $ 4.98
====== ====== ======
Average shares outstanding - basic 5,408 5,708 7,163
Potential shares exercisable under stock option plan 134 220 228
Less: shares potentially repurchased under
treasury stock method (129) (200) (205)
------ ------ ------
Adjusted average shares outstanding - diluted 5,413 5,728 7,186
====== ====== ======
Diluted earnings per share $ 3.15 $ 4.25 $ 4.97
====== ====== ======
</TABLE>
Stock options are the Company's only potential dilutive securities and are
considered in the diluted earnings per share calculations if dilutive for those
periods. For the years ended April 30, 2000, and 1999, options totaling 268,000
and 97,000, respectively, were excluded as their effect would have been
antildilutive. For the year ended April 30, 1998, all options were included as
their effect was dilutive.
<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, 2000 and 1999, 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, 2000. 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 auditing standards generally accepted
in the United States of America. 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, 2000 and 1999, and the results of their operations
and their cash flows for each of the years in the three-year period ended April
30, 2000, in conformity with accounting principles generally accepted in the
United States of America.
/S/ KPMG LLP
Dallas, Texas
May 31, 2000
<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
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,
<TABLE>
<CAPTION>
Quarter
----------------------------------------------------------
First Second Third Fourth
---------- --------- --------- ---------
<S> <C> <C> <C> <C>
2000
----
Net Sales $ 184,296 $ 181,283 $ 183,252 $ 179,379
Operating Income (Loss) 12,442 14,276 14,628 (2,388)
Income (Loss) from Continuing Operations 6,438 7,907 8,678 (1,822)
Net Income (Loss) 6,261 3,916 8,678 (1,822)
Earnings Per Share from Continuing Operations
Basic $1.19 $1.46 $1.60 ($0.34)
Diluted $1.19 $1.46 $1.60 ($0.34)
Earnings Per Share - Net Income
Basic $1.16 $0.72 $1.60 ($0.34)
Diluted $1.16 $0.72 $1.60 ($0.34)
1999
----
Net Sales $ 181,851 $ 174,711 $ 184,866 $ 181,797
Operating Income 11,923 13,687 13,112 11,523
Income from Continuing Operations 6,450 6,434 7,097 5,551
Net Income 6,486 6,311 6,157 5,407
Earnings Per Share from Continuing Operations
Basic $1.06 $1.15 $1.27 $1.01
Diluted $1.06 $1.15 $1.26 $1.01
Earnings Per Share - Net Income
Basic $1.07 $1.13 $1.10 $0.99
Diluted $1.07 $1.12 $1.10 $0.99
</TABLE>
Basic earnings per share for each period is calculated based on the
weighted average number of shares outstanding during the period. Diluted
earnings per share includes the dilutive effect of stock options.
During the fourth quarter of the current year, the Company obtained
additional investigative findings related to a Company owned manufacturing site
which indicated further environmental remediation will be required. As a result,
the Company recorded an additional accrual of approximately $16.1 million, which
is included in marketing and administrative expenses on the Consolidated
Statements of Income.
<PAGE>
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, 2000, amounted
to $7.6 million compared to $7.8 million and $9.3 million in fiscal years 1999
and 1998, respectively. On April 28, 2000, a dividend of $.35 per share was
declared, payable June 15, 2000. A summary of the quarterly dividends per share
for the past two years is set forth in the schedule below.
<TABLE>
<CAPTION>
Common Stock Prices Dividends Per Share
-------------------------------------------- -----------------------------
2000 1999 Declared Paid
-------------------- -------------------- ------------- ------------
Quarter High Low High Low 2000 1999 2000 1999
-------- -------- -------- -------- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
First 56 1/4 49 73 7/8 60 7/8 $ .35 $ .35 $ .35 $ .35
Second 50 9/16 44 1/4 69 5/8 56 $ .35 $ .35 $ .35 $ .35
Third 48 1/4 42 7/16 69 51 15/16 - - $ .35 $ .35
Fourth 47 39 61 9/16 45 7/16 $ .70 $ .70 $ .35 $ .35
</TABLE>
As of June 1, 2000, there were 471 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 2,000 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 119 in foreign
countries. The Company is also the parent of several wholly-owned subsidiaries
that market various other products, and 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 May 31, 2000,
relating to the consolidated balance sheets of NCH Corporation and subsidiaries
as of April 30, 2000 and 1999, 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, 2000, which reports appear in
or are incorporated by reference in the April 30, 2000 annual report on Form
10-K of NCH Corporation.
/s/ KPMG LLP
Dallas, Texas
June 21, 2000
<PAGE>
NCH CORPORATION AND SUBSIDIARIES
EXHIBIT 99
DEFINITIVE PROXY STATEMENT
REGARDING THE COMPANY'S 2000 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 27, 2000
NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders of NCH
Corporation will be held in the Gourmet Room II of the Crescent Club, 17th
Floor, 200 Crescent Court (at the corner of Pearl and Cedar Springs Streets),
Dallas, Texas, on Thursday, the 27th day of July, 2000, at 10:00 a.m., Central
Daylight Time, for the following purposes:
1. To elect four 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 LLP, Certified Public Accountants, to
be the independent auditors of NCH for the fiscal year ending April 30, 2001.
3. To consider and act upon a proposal submitted by a stockholder.
4. 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 Thursday, June
1, 2000, 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 27, 2000
<PAGE>
1
[LOGO]
2727 Chemsearch Boulevard
Irving, Texas 75062
PROXY STATEMENT
For
ANNUAL MEETING OF STOCKHOLDERS
To Be Held on July 27, 2000
Dated: June 27, 2000
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 27, 2000 (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 second proposal and against the third proposal 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>
2
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 27, 2000.
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 1, 2000. On that date there
were 5,408,223 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
Effective June 1, 2000, NCH's Board of Directors unanimously voted to
increase the number of directors serving on the Board from seven members to ten
members, divided into three classes: Class I (three directors), Class II (three
directors), and Class III (four 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 2001 and 2002, respectively.
<PAGE>
NCH expects Mssrs. Milton P. Levy, Jr. and Lester A. Levy to tender their
resignations from the Board of Directors at the meeting of the Board of
Directors scheduled to take place on July 27, 2000. In accordance with NCH's
bylaws, the two vacant Class I director positions created by the expansion of
the Board of Directors and the resignation of Lester A. Levy, and the vacant
Class II director position created by the resignation of Milton P. Levy, Jr.
shall be filled by appointment by the existing directors, to occur at the July
27, 2000 meeting of the Board of Directors. At such time, the Board of Directors
expects to appoint Robert M. Levy and Lester A. Levy, Jr. as the new Class I
directors and John I. Levy as the new Class II director. At the April 28, 2000
meeting of the Board of Directors, the directors elected Irvin L. Levy to serve
as the Chairman of the Board of Directors, effective upon his re-election as a
Class III director by the NCH stockholders at the Meeting on July 27, 2000.
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 Jerrold M. Trim, Irvin L. Levy, Walter M. Levy and Ronald
G. Steinhart as the Class III directors. Messrs. Jerrold M. Trim, Irvin L.
Levy, Walter M. Levy and Ronald G. Steinhart have been nominated to stand for
election by the Board of Directors until their terms expire or until their
respective successors are duly elected and qualified. Messrs. Jerrold M.
Trim and Irvin L. Levy are presently directors of NCH.
Messrs. Irvin, Lester, and Milton Levy are brothers. Walter M. Levy
and Lester A. Levy, Jr. are the sons of Mr. Lester A. Levy. Robert M. Levy
and John I. Levy are the sons of Irvin L. Levy. 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, 72, has been a director of NCH since 1981. Mr. Fulgham
was an executive director of Merrill Lynch Private Capital Inc. from 1982
until 1989, and served as a Senior Advisor to Merrill Lynch & Co., Inc. from
1989 until 1998. He was also a director, the Chairman of the Board and Chief
Executive Officer of Global Industrial Technologies, Inc., located in Dallas,
Texas, until it was acquired by RHI-AG, located in Vienna, Austria, on
December 31, 1999. Mr. Fulgham also served on the Board of Directors of
BancTec, Inc. and currently serves on the Audit and Advisory Committees of
Dorchester Hugoton, Ltd. From 1975 through October 1998, he served on the
Board of Directors of Dresser Industries, Inc. until it was merged with
Halliburton Company. Mr. Fulgham is a member of the Audit Committee and the
Compensation Committee.
Lester A. Levy, 77, 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 a member of the Stock Option Committee and the Executive Committee.
At the meeting of the Board of Directors scheduled to take place on July
27, 2000, the directors expect to appoint Robert M. Levy and Lester A. Levy, Jr.
as new Class I directors. These appointments will fill the vacant Class I
director positions created by the expansion of the Board of Directors and the
resignation of Lester A. Levy, as described above.
<PAGE>
Robert M. Levy, 41, joined NCH in 1985 after attending business school at
the University of Texas at Austin. His initial responsibility was in domestic
chemical marketing, after which he served in management positions with
increasing responsibility in Europe and the United States. He is an officer
and/or director of several of NCH's subsidiaries.
Lester A. Levy, Jr., 39, joined NCH in 1985 after attending business
school at Northwestern University. His initial responsibility was in
domestic chemical sales, after which he served in management positions with
increasing responsibility in Europe and the United States. Mr. Levy is an
officer and/or director of several of NCH's subsidiaries.
Class II Directors
Robert L. Blumenthal, 69, 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., 76, has been a director of NCH since 1987. Mr.
Walker was a general partner of Goldman, Sachs & Co. from 1968 until 1984 and
a limited partner of The Goldman Sachs Group, L.P. ("Goldman Sachs") from
1984 through May 1999, when he assumed his current position as a Senior
Director to Goldman Sachs. Mr. Walker is also a director of Sysco
Corporation and Riviana Foods, Inc. He is a member of the Audit Committee
and the Compensation Committee.
Milton P. Levy, Jr., 74, 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.
At the meeting of the Board of Directors scheduled to take place on July
27, 2000, the directors expect to appoint John I. Levy as a new Class II
director in order to fill the vacant Class II director position created by the
resignation of Milton P. Levy, Jr., as described above.
John I. Levy, 38, joined NCH in 1985 after attending business school at
Southern Methodist University. His initial responsibility was in corporate
planning, after which he served in management positions with increasing
responsibility in Europe and the United States. Mr. Levy is currently an officer
and/or director of several of NCH's subsidiaries.
Class III Directors and Nominees
Jerrold M. Trim, 63, 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 a member of the Audit
Committee and the Compensation Committee.
Irvin L. Levy, 71, 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 re-elected as a Class
III director by the NCH stockholders at the Meeting on July 27, 2000, Mr. Levy
shall serve as Chairman of the Board of Directors of NCH.
<PAGE>
Walter M. Levy, 45, joined NCH in 1980 after attending business school at
the University of Virginia. His initial responsibility was in field sales, after
which he served in management positions with increasing responsibility in
Europe, Asia and the United States. He is currently an officer and/or director
of several of NCH's subsidiaries.
Ronald G. Steinhart, 60, is the Vice Chairman of the Board of Directors of
Bank One, Texas. He served as President and Chief Operating Officer of
InterFirst Corporation from 1981 through 1988, at which time he became Chairman
and Chief Executive Officer of Deposit Guaranty Bank (later renamed Team Bank).
After Team Bank's merger with Bank One, Texas in 1992, Mr. Steinhart was named
President and Chief Operating Officer. In 1995, Mr. Steinhart was appointed
Chairman and Chief Executive Officer of Bank One, Texas, and in 1996, he was
appointed Chairman and Chief Executive Officer of Bank One Corporation's
Commercial Banking Group. After the merger of Bank One Corporation with First
Chicago NBD Corporation in 1998, Mr. Steinhart was named to the Management
Committee, in which capacity he served until his retirement in January 2000. Mr.
Steinhart also serves as a Trustee of Prentiss Properties Trust, a
publicly-traded real estate investment trust.
If any 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 any 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 five 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 the members of the Executive Committee.
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 the members of the Executive
Committee. The Compensation Committee recommends to the Board annual base
compensation for the members of the Executive Committee and is responsible for
administering and approving incentive compensation for the members of the
Executive Committee. 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 those
executives whose compensation is determined by the Compensation Committee, 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.
<PAGE>
* 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.
Compensation for the Members of the Executive Committee
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, other than Lilly Industries
and Lubrizol Corporation, 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.
NCH has adopted a separate strategy with respect to the incentive
compensation of the Office of the Executive Committee, as currently composed.
Since these individuals are very significant long-term stockholders of NCH, some
of the typical approaches to executive compensation that exist in the
marketplace have not necessarily been 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 and Lester 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 ss. 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 ss.
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 2000, no
bonus was payable because NCH's net income did not increase by 10% or more over
its net income for fiscal 1999.
<PAGE>
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.
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 the members of the Executive Committee 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 comprised the Executive Committee, and to
NCH's two other most highly compensated executive officers (whose compensation
exceeded $100,000 in fiscal 2000) for services rendered in all capacities to NCH
during the fiscal years ended April 30, 2000, 1999, and 1998.
<PAGE>
SUMMARY COMPENSATION TABLE
Annual Compensation(1)
Name and Fiscal ---------------------- All Other
Principal Positions Year Salary(2) Bonus Compensation (3)
------------------------ ----- -------- ----- ----------------
Irvin L. Levy, President 2000 $916,505 -- $4,200
1999 913,106 -- 4,000
1998 889,420 -- 4,000
Lester A. Levy, 2000 $918,264 -- $3,200
Chairman of the Board 1999 918,667 -- 3,200
1998 894,087 -- 3,200
Milton P. Levy, Jr., 2000 $920,355 -- $3,200
Chairman of the Executive 1999 920,636 -- 3,200
Committee 1998 896,074 -- 3,200
Thomas F. Hetzer, 2000 $250,918 -- $4,200
Vice President - Finance 1999 235,995 $11,000 4,000
1998 221,331 28,000 4,000
Glen L. Scivally, 2000 $215,603 -- $4,200
Vice President and 1999 205,765 $6,000 4,000
Treasurer 1998 195,846 27,000 4,000
--------------------
(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.
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. Payment under these agreements is $500,000 per year
for each of Messrs. Irvin, Lester and Milton Levy, subject to adjustment each
year for increases in the United States Consumer Price Index for the preceding
year. The Board of Directors expects that Lester Levy shall retire as Chairman
of the Board of Directors effective as of the Meeting, and that Milton Levy
shall retire as Chairman of the Executive Committee effective as of the Meeting.
<PAGE>
Executive Vice Presidents
Mssrs. John I. Levy, Lester A. Levy, Jr., Robert M. Levy and Walter M.
Levy were each elected to serve as an Executive Vice-President of NCH by the
Board of Directors effective as of May 1, 2000.
FIVE YEAR COMPARISON OF CUMULATIVE TOTAL RETURN
The following graph presents NCH's cumulative stockholder return during
the period beginning April 30, 1995, and ending April 30, 2000. 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. ("Betz"), The Dexter Corporation,
Ecolab Inc., Lawson Products, Inc., Lilly Industries, Lubrizol Corporation,
Nalco Chemical Company ("Nalco"), National Service Industries, Inc., Petrolite
Corporation ("Petrolite"), Premier Industrial Corporation ("Premier"), Quaker
Chemical Corporation, Safety-Kleen Corporation, and Snap-On Tools Corporation.
During fiscal year 1997, Premier was acquired by another corporation. Since
Premier's shareholder return is no longer available, they were excluded from the
peer group for performance after 1996. During fiscal year 1998, Petrolite was
acquired by another corporation, and was excluded from the peer group for
performance after 1997. During fiscal year 1999, Betz was acquired by another
corporation, and was excluded from the peer group for performance after 1998.
During fiscal year 2000, Nalco was acquired by another corporation, and was
excluded from the peer group for performance after 1999. Each index assumes $100
invested at the close of trading on April 30, 1995, and is calculated assuming
quarterly reinvestment of dividends and quarterly weighting by market
capitalization.
[STOCK PERFORMANCE GRAPH FILED UNDER COVER OF FORM S-E]
1995 1996 1997 1998 1999 2000
---- ---- ---- ---- ---- ----
NCH Corporation 100 94 106 109 96 79
S&P 500 Index 100 130 163 230 280 308
Peer Group 100 114 143 174 170 140
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 1, 2000, 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 2000); and
(iv) all directors and executive officers of NCH as a group. Also included in
the table is the beneficial ownership of NCH's Common Stock as of June 1, 2000
by Mssrs. John I. Levy, Lester A. Levy, Jr., Robert M. Levy and Walter M. Levy,
who were each elected to serve as an Executive Vice-President of NCH by the
Board of Directors effective as of May 1, 2000. 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) 1,444,576 26.7%
Lester A. Levy (2)(4) 1,437,612 26.6%
Milton P. Levy, Jr. (2)(5) 44,000 *
John I. Levy (6) 84,234 1.6%
Lester A. Levy, Jr. (7) 23,942 *
Robert M. Levy (8) 69,220 1.3%
Walter M. Levy (9) 24,218 *
Glen L. Scivally 0 -
Ronald G. Steinhart 0 -
Jerrold M. Trim (10) 0 -
Thomas B. Walker, Jr. 10,000 *
All directors and executive 3,142,485 58.1%
officers as a group (14 people)
Dimensional Fund Advisors, Inc.(11) 340,200 6.3%
--------------------
* 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.
<PAGE>
(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 29,000 shares held as cotrustee with his
brothers for a family trust over which he shares voting and
investment power, the beneficial ownership of which Mr. Levy
disclaims.
(4) Lester A. Levy owns a life estate interest in 685,194 shares
included in the table over which he has sole voting and investment
power, and his children own a remainder interest in such 685,194
shares. The table includes 29,000 shares held as cotrustee with his
brothers for a family trust over which he shares voting and
investment power, the beneficial ownership of which Mr. Levy
disclaims.
(5) The table includes 29,000 shares held by Milton P. Levy, Jr. as
cotrustee with his brothers for a family trust over which he
shares voting and investment power, the beneficial ownership of
which Mr. Levy disclaims.
(6) The table includes 1,353 shares held by the wife of John I. Levy,
the beneficial ownership of which Mr. Levy disclaims, and 1,798
shares held by the children of John I. Levy, the beneficial
ownership of which Mr. Levy disclaims. The table also includes
options held by John I. Levy exercisable within 60 days to acquire
9,220 shares. John I. Levy and a trust for the benefit of Mr. Levy's
family additionally hold, in the aggregate, a remainder interest in
500,000 shares held by his father, Irvin L. Levy (see footnote (3)
above).
(7) The table includes options held by Lester A. Levy, Jr.
exercisable within 60 days to acquire 9,220 shares. Lester A.
Levy, Jr. additionally holds a remainder interest in 228,398
shares held by his father, Lester A. Levy (see footnote (4)
above).
(8) The table includes options held by Robert M. Levy exercisable within
60 days to acquire 9,220 shares. Robert M. Levy and a trust for the
benefit of Mr. Levy's family additionally hold, in the aggregate, a
remainder interest in 500,000 shares held by his father, Irvin L.
Levy (see footnote (3) above).
(9) The table includes 1,445 shares held by the wife of Walter M. Levy,
the beneficial ownership of which Mr. Levy disclaims, and 6,005
shares held by Walter M. Levy as trustee for family trusts for the
benefit of his children, the beneficial ownership of which Mr. Levy
disclaims. The table also includes options held by Walter M. Levy
exercisable within 60 days to acquire 9,220 shares. Walter M. Levy
(and entities controlled by Walter M. Levy) additionally holds a
remainder interest in 228,398 shares held by his father, Lester A.
Levy (see footnote (4) above).
(10) Windsor Association, Inc., of which Mr. Trim is President, has a
corporate policy against its employees owning any publicly traded
securities.
(11) The table sets forth Dimensional Fund Advisors, Inc.'s stockholding
based on its latest Schedule 13G filed with the SEC as of February
3, 2000. Dimensional Fund Advisors, Inc. reports its address as 1299
Ocean Avenue, 11th Floor, Santa Monica, California 90401. It has
sole dispositive power over 340,200 shares, shared dispositive power
over 0 shares, sole voting power over 340,200 shares, and shared
voting power over 0 shares.
INFORMATION WITH RESPECT TO STOCKHOLDER PROPOSAL
<PAGE>
William Steiner, 4 Radcliff Drive, Great Neck, New York 11024, a
stockholder of NCH , has notified NCH of his intention to introduce the
following proposal at the Meeting. Mr. Steiner's proposed resolution and
supporting statement, for which the Board of Directors and NCH accept no
responsibility, are set forth below. THE BOARD OF DIRECTORS OPPOSES THIS
PROPOSAL FOR THE REASONS STATED BELOW.
MAXIMIZE VALUE RESOLUTION
Resolved that the shareholders of NCH Corporation urge the NCH
Corporation Board of Directors to arrange for the prompt sale of NCH
Corporation to the highest bidder.
The purpose of the Maximize Value Resolution is to give all NCH
Corporation shareholders the opportunity to send a message to the NCH
Corporation Board that they support the prompt sale of the NCH Corporation
to the highest bidder. A strong and or majority vote by the shareholders
would indicate to the board the displeasure felt by the shareholders of
the shareholder returns over many years and the drastic action that should
be taken. Even if it is approved by the majority of the NCH Corporation
shares represented and entitled to vote at the annual meeting, the
Maximize Value Resolution will not be binding on NCH Corporation Board.
The proponent, however, believes that if this resolution receives
substantial support from the shareholders, the board may choose to carry
out the request set forth in the resolution:
The prompt auction of NCH Corporation should be accomplished by any
appropriate process the board chooses to adopt including a sale to the
highest bidder whether in cash, stock, or a combination of both. It is
expected that the board will uphold its fiduciary duties to the utmost
during the process.
The proponent further believes that if the resolution is adopted,
the management and the board will interpret such adoption as a message
from the company's stockholders that it is no longer acceptable for the
board to continue with its current management plan and strategies.
I URGE YOUR SUPPORT. VOTE FOR THIS RESOLUTION.
----------------------------------------------
The Board of Directors recommends a vote against this proposal. In the
judgement of the directors, the proposed action would not be timely nor in the
best interest of all of the stockholders.
SELECTION OF AUDITORS
The Board of Directors has appointed KPMG 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
2001 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 27, 2001, 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, 2000, 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, 2000, 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.
Irvin L. Levy,
President
Irving, Texas
Dated: June 27, 2000
<PAGE>
PROXY CARD
NCH CORPORATION
ANNUAL MEETING OF STOCKHOLDERS-JULY 27, 2000
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 1, 2000, as if the undersigned were personally
present and voting at the Company's annual meeting of stockholders to be
held on July 27, 2000, 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 AGAINST PROPOSAL 3, 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.
(Continued and to be signed on reverse side)
<PAGE>
FOR WITHHOLD AUTHORITY
1. Election of Directors / / / /
Nominees: Jerrold M. Trim, Irvin L. Levy, Walter M. Levy, and Ronald G.
Steinhart
---------------------------------------------------------------------
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 LP as independent auditors
of NCH Corporation.
FOR / / AGAINST / / ABSTAIN / /
3. Proposal submitted by a stockholder.
FOR / / AGAINST / / ABSTAIN / /
4. 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: , 2000
-------------------------------------------
-------------------------------------------
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>
