<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-Q
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the quarter ended January 31, 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
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X No
Indicate the number of shares outstanding of each of the registrant's
classes of common stock, as of the latest practicable date:
Total Shares
Outstanding at
Class March 13, 2000
-------------------------- --------------
Common Stock, $1 Par Value 5,408,287
<PAGE>
NCH CORPORATION
INDEX
Page No.
Part I. Financial Information:
Consolidated Balance Sheets --
January 31, 2000 and April 30, 1999 3
Consolidated Statements of Income --
Three Months and Nine Months Ended
January 31, 2000 and 1999 4
Consolidated Statements of Cash Flows --
Nine Months Ended January 31, 2000 and 1999 5
Notes to Consolidated Financial Statements 6 - 11
Management's Discussion and Analysis of
Financial Condition and Results of Operations 12 - 23
Part II. Other Information 24
<PAGE>
<TABLE>
NCH CORPORATION AND SUBSIDIARIES
Consolidated Balance Sheets
(In Thousands Except Share and Per Share Data)
<CAPTION>
January 31, April 30,
2000 1999
----------- -----------
(Unaudited)
<S> <C> <C>
Assets
Current Assets
Cash and cash equivalents $ 38,092 $ 19,814
Marketable securities 22,200 3,187
Accounts receivable, net 134,940 139,124
Inventories 89,460 94,191
Prepaid expenses 7,992 9,493
Deferred income taxes 17,397 21,454
----------- -----------
Total Current Assets 310,081 287,263
----------- -----------
Property, Plant and Equipment 191,833 192,927
Accumulated depreciation 119,388 116,678
----------- -----------
72,445 76,249
----------- -----------
Deferred Income Taxes 32,371 31,454
----------- -----------
Other 19,072 16,040
----------- -----------
Net assets of discontinued operations - 19,597
----------- -----------
Total $ 433,969 $ 430,603
=========== ===========
Liabilities and Stockholders' Equity
Current Liabilities
Notes payable to banks $ 4,889 $ 5,318
Current maturities of long-term debt 248 278
Accounts payable 44,356 44,376
Accrued expenses 30,827 29,128
Income taxes payable 13,443 23,930
Dividends payable - 1,893
----------- -----------
Total Current Liabilities 93,763 104,923
----------- -----------
Long-term Debt, less current maturities 887 1,104
----------- -----------
Retirement and Deferred Compensation Plans 118,709 115,162
----------- -----------
Stockholders' Equity
Common stock, par value $1 per share,
authorized 20,000,000 shares.
Issued 11,759,304 shares 11,769 11,769
Additional paid-in capital 12,724 12,714
Retained earnings 506,754 491,685
Accumulated other comprehensive loss (40,162) (36,279)
----------- -----------
491,085 479,889
Less treasury stock
(6,361,016 and 6,361,010 shares) 270,475 270,475
----------- -----------
220,610 209,414
----------- -----------
Total $ 433,969 $ 430,603
=========== ===========
The accompanying notes are an integral part of these financial statements.
</TABLE>
<TABLE>
NCH CORPORATION AND SUBSIDIARIES
Consolidated Statement of Income
(In Thousands Except Per Share Amounts)
(Unaudited)
<CAPTION>
Three Months Ended Nine Months Ended
January 31, January 31,
-------------------- ---------------------
2000 1999 2000 1999
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
Net Sales $183,252 $184,866 $548,831 $541,428
--------- --------- --------- ---------
Operating Expenses
Cost of sales, including
warehousing and commissions 98,248 96,488 292,582 285,153
Marketing and administrative
expenses 70,376 75,266 214,903 217,553
-------- --------- --------- ---------
168,624 171,754 507,485 502,706
-------- --------- --------- ---------
Operating Income 14,628 13,112 41,346 38,722
Other Expenses
Revaluation of foreign currencies (893) 249 (1,796) (1,178)
Interest income 769 693 1,327 1,766
Interest expense (1,230) (1,478) (3,232) (3,654)
-------- --------- --------- ---------
Income from Continuing Operations
before Income Taxes 13,274 12,576 37,645 35,656
Provision for Income Taxes 4,596 5,479 14,622 15,675
-------- --------- --------- ---------
Income from Continuing Operations 8,678 7,097 23,023 19,981
-------- --------- --------- ---------
Discontinued Operations:
Loss from Discontinued Operations,
net of income taxes - (940) (859) (1,027)
Loss on Disposition of Discontinued
Operations, net of income tax
of $1,782 - - (3,309) -
-------- --------- --------- ---------
Net Income $ 8,678 $ 6,157 $ 18,855 $ 18,954
======== ========= ========= =========
Weighted Average Number of Shares
Outstanding
Basic 5,408 5,595 5,408 5,784
======== ========= ========= =========
Diluted 5,408 5,616 5,416 5,813
======== ========= ========= =========
Earnings Per Share from Continuing
Operations
Basic $ 1.60 $ 1.27 $ 4.26 $ 3.45
======== ========= ========= =========
Diluted $ 1.60 $ 1.26 $ 4.25 $ 3.44
======== ========= ========= =========
Total Earnings Per Share
Basic $ 1.60 $ 1.10 $ 3.49 $ 3.28
======== ========= ========= =========
Diluted $ 1.60 $ 1.10 $ 3.48 $ 3.26
======== ========= ========= =========
Cash Dividend Paid Per Share $ 0.35 $ 0.35 $ 1.05 $ 1.05
======== ========= ========= =========
Cash Dividend Declared Not Paid $ - $ - $ - $ -
======== ========= ========= =========
The accompanying notes are an integral part of these financial statements.
</TABLE>
<TABLE>
NCH CORPORATION AND SUBSIDIARIES
Consolidated Statements of Cash Flows
(In Thousands)
(Unaudited)
<CAPTION>
Nine Months Ended
January 31,
---------------------
2000 1999
--------- ---------
<S> <C> <C>
Cash Flows from Operating Activities
Income from Continuing Operations $23,023 $19,981
Adjustments to reconcile Income from
Continuing Operations to net cash
provided by Continuing Operations:
Depreciation and amortization 9,950 9,915
Provision for losses on accounts receivable 4,199 4,250
Deferred income taxes 3,283 (2,809)
Retirement and deferred compensation plans 3,651 5,903
Other noncash items 70 (317)
Changes in assets and liabilities, excluding
net assets acquired in the purchase
of businesses:
Accounts receivable (3,519) (9,203)
Inventories 3,760 (1,069)
Prepaid expenses 1,242 (771)
Accounts payable, accrued expenses and
income taxes payable (2,904) 5,634
Other noncurrent assets (1,230) (584)
--------- ---------
Net cash provided by Continuing Operations 41,525 30,930
--------- ---------
Cash flow from Discontinued Operations (865) 89
--------- ---------
Net cash provided by operating activities 40,660 31,019
--------- ---------
Cash Flows from Investing Activities
Sales of property, plant and equipment 1,038 660
Purchases of property, plant and equipment (6,520) (10,499)
Redemptions of marketable securities 3,985 103,224
Purchases of marketable securities (22,751) (5,932)
Acquisitions of businesses (2,027) (1,843)
Sale of discontinued operations 12,697 -
Other (1,005) (1,005)
--------- ---------
Net cash provided (used) in investing activities (14,583) 84,605
--------- ---------
Cash Flows from Financing Activities
Proceeds from notes payable 2,435 3,754
Payments of notes payable (2,519) (3,979)
Additional long term debt 5 -
Payments of long term debt (244) (243)
Borrowing of cash surrender values 826 2,023
Surrender of insurance contracts 317 -
Payments of dividends (5,679) (5,882)
Purchase of treasury stock - (97,203)
Proceeds from exercise of stock options - 1,200
--------- ---------
Net cash used in financing activities (4,859) (100,330)
--------- ---------
Effect of Exchange Rate Changes on Cash
and Cash Equivalents (2,940) (663)
--------- ---------
Net Increase in Cash and Cash Equivalents 18,278 14,631
Cash and Cash Equivalents at Beginning of Year 19,814 17,139
--------- ---------
Cash and Cash Equivalents at End of Period $38,092 $31,770
========= =========
The accompanying notes are an integral part of these financial statements.
</TABLE>
<PAGE>
NCH CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(Unaudited)
1. Basis of Presentation
In the opinion of management, the accompanying unaudited consolidated financial
statements contain all adjustments necessary (consisting of only normal
re-occurring accruals) to present fairly NCH Corporation's financial position as
of January 31, 2000, the results of its operations for the three and nine months
ended January 31, 2000 and 1999, and cash flows for the nine months then ended.
The accounting policies followed by NCH Corporation (the Company) are set forth
in Note 1 to the Company's consolidated financial statements in the 1999 NCH
Corporation Annual Report to Shareholders, which is included in Part II of Form
10-K.
The results of operations for the three and nine month periods ended January 31,
2000, are not necessarily indicative of the results to be expected for the full
year.
2. 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.
Operating results and cash flows of Resource Electronics for the three and nine
months ended January 31, 2000 and 1999, are shown separately in the accompanying
Consolidated Statements of Income and Consolidated Statements of Cash Flows. The
consolidated financial statements for prior periods have been restated and the
financial position, operating results, and cash flows of Resource Electronics
are also shown separately as discontinued operations.
Due to the sale of Resource Electronics in the second quarter of the current
year, there were no net sales related to Resource Electronics in the current
quarter. Net sales of Resource Electronics for the three months ended January
31, 1999 were $14,235,000. Net sales of Resource Electronics for the nine months
ended January 31, 2000 and 1999 were $32,493,000 and $47,681,000, respectively.
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>
Three Months Ended Nine Months Ended
January 31, January 31,
----------------------- -----------------------
2000 1999 2000 1999
----------- ----------- ---------- -----------
<S> <C> <C> <C> <C>
Loss from Discontinued $ - $(1,384) $(1,252) $(1,389)
Operations before taxes
Income Taxes - 444 393 362
----------- ----------- ---------- ----------
Loss from Discontinued
Operations $ - $(940) $(859) $(1,027)
=========== =========== ========== ===========
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 $ - $ (0.17) $ (0.16) $ (0.17)
Loss on Disposition of
Discontinued Operations $ - $ - $ (0.61) $ -
----------- ----------- ---------- -----------
Total from Discontinued
Operations $ - $ (0.17) $ (0.77) $ (0.17)
=========== =========== ========== ===========
Per share - diluted
Loss from Discontinued
Operations $ - $ (0.16) $ (0.16) $ (0.18)
Loss on Disposition of
Discontinued Operations $ - $ - $ (0.61) $ -
----------- ----------- ---------- -----------
Total from Discontinued
Operations $ - $ (0.16) $ (0.77) $ (0.18)
=========== =========== ========== ===========
</TABLE>
Net assets to be disposed of, at their expected net realizable values, have been
separately classified in the accompanying Consolidated Balance Sheet at April
30, 1999. These primarily consist of accounts receivable, inventories, and fixed
assets. The April 30, 1999 consolidated financial statements and footnotes have
been restated to conform with the current year's presentation.
<PAGE>
3. Inventories
Inventories consisted of the following (in thousands of dollars):
January 31, April 30,
2000 1999
------------ ------------
Raw Materials $14,179 $13,772
Finished Goods 73,712 78,901
Sales Supplies 1,569 1,518
------------ ------------
$89,460 $94,191
============ ============
4. Earnings Per Share
Basic earnings per share are computed by dividing net income for the period by
the weighted average number of shares of common stock outstanding for the
period. Diluted earnings per share are determined by dividing net income by the
weighted average number of shares of common stock and common stock equivalents
outstanding. Stock options are the Company's only potential common stock
equivalents and are considered in the diluted earnings per share calculations if
dilutive. For both the three and nine month periods ended January 31, 2000,
options totaling 284,474 were excluded as their effect would have been
antidilutive. For the three and nine month periods ended January 31, 1999,
options totaling 99,423 and 76,978, respectively, were excluded as their effect
would have been antidilutive.
<PAGE>
5. Comprehensive Income
The components of comprehensive income, net of related tax, for the three-month
and nine-month periods ended January 31, 2000 and 1999 are as follows (in
thousands):
<TABLE>
Three Months Ended Nine Months Ended
January 31, January 31,
----------------------- -----------------------
2000 1999 2000 1999
----------- ----------- ---------- -----------
<S> <C> <C> <C> <C>
Net income $ 8,678 $ 6,157 $18,855 $18,954
Unrealized gain (loss)
on avaliable-for-sale
securities 155 9 161 (96)
Foreign currency translation
adjustment (1,213) 2,971 (4,044) 1,107
----------- ----------- ---------- -----------
Comprehensive income $ 7,620 $ 9,137 $14,972 $19,965
=========== =========== ========== ===========
</TABLE>
The components of accumulated other comprehensive loss, net of related tax, at
January 31, 2000 and April 30, 1999, are as follows (in thousands):
January 31, April 30,
2000 1999
------------- ------------
Unrealized gain (loss) on
available-for-sale securities $ 174 $ 13
Foreign currency translation
adjustment (40,336) (36,292)
------------- ------------
Accumulated other
comprehensive loss $(40,162) $(36,279)
============= ============
<PAGE>
6. Segment Information
At April 30, 1999, the Company adopted Statement of Financial Accounting
Standards No. 131, "Disclosures about Segments of an Enterprise and Related
Information", which changed the way the Company externally reports information
about its operating segments. 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 five segments: Chemical Specialties, Plumbing Products
Group, Partsmaster Group, Landmark Direct Group, and Other Product Lines. 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 that are common to more than one segment are allocated on a usage
basis. Note that the previous year-end disclosures included the Resource
Electronics segment, which is now included in discontinued operations.
The following tables present a summary of the Company's segments for the
three-month and nine-month periods ended January 31, 2000 and 1999:
<TABLE>
Net Sales Net Sales
-------------------------- --------------------------
Three Months Ended Nine Months Ended
January 31, January 31,
-------------------------- --------------------------
2000 1999 2000 1999
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Chemical Specialties $104,993 $113,278 $310,192 $324,591
Plumbing Products Group 29,318 29,035 89,976 87,993
Partsmaster Group 22,604 22,359 64,787 62,535
Landmark Direct Group 7,678 6,021 27,302 21,933
Other Product Lines 18,659 14,173 56,574 44,376
------------ ------------ ------------ ------------
Net Sales $183,252 $184,866 $548,831 $541,428
============ ============ ============ ============
</TABLE>
<PAGE>
<TABLE>
Operating Profit Operating Profit
------------------------ -----------------------
Three Months Ended Nine Months Ended
January 31, January 31,
------------------------ -----------------------
2000 1999 2000 1999
------------ ----------- ---------- -----------
<S> <C> <C> <C> <C>
Chemical Specialties $ 7,869 $ 8,613 $22,189 $26,567
Plumbing Products Group 1,066 451 5,364 2,003
Partsmaster Group 3,531 2,710 7,911 6,615
Landmark Direct Group 385 44 1,368 1,143
Other Product Lines 2,100 1,802 6,456 4,171
------------ ----------- ---------- -----------
Total segment operating profit $14,951 $13,620 $43,288 $40,499
Unallocated Corporate expenses (323) (508) (1,942) (1,777)
Revaluation of foreign currencies (893) 249 (1,796) (1,178)
Interest income 769 693 1,327 1,766
Interest expense (1,230) (1,478) (3,232) (3,654)
------------ ----------- ---------- ------------
Income from Continuing Operations
before Income Taxes $13,274 $12,576 $37,645 $35,656
============ =========== ========== ============
</TABLE>
<PAGE>
7. Supplemental Cash Flow Information
Cash payments for interest for the nine months ended January 31, 2000 and 1999,
were approximately $772,000 and $1,512,000, respectively. Cash payments for
income taxes were approximately $18,547,000 and $16,007,000 for the same
periods, respectively.
<PAGE>
NCH CORPORATION AND SUBSIDIARIES
Management's Discussion and Analysis of
Financial Condition and Results of Operations
Liquidity and Capital Resources
In the nine months ended January 31, 2000, working capital increased to
$216.3 million from $182.3 million at April 30, 1999, and the current ratio was
3.3 to 1 at January 31, 2000, compared to 2.7 to 1 at April 30, 1999. The total
of cash, cash equivalents and marketable securities increased by $37.3 million
in the first nine months to $60.3 million at January 31, 2000, as shown on the
Consolidated Balance Sheets. Net cash flows from operating activities of
continuing operations totaled $41.5 million. Additional cash was provided by the
sale of discontinued operations of $12.7 million, and the borrowing of cash
surrender values of company-owned life insurance policies on key employees of
$.8 million. Principal uses of cash consisted of net purchases of marketable
securities of $18.8 million, payment of dividends of $5.7 million, and net
capital expenditures of $5.5 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 November 30, 1999, 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 $40.3 million
reduction of stockholders' equity at January 31, 2000.
Accounts receivable decreased by $4.2 million in the nine months ended
January 31, 2000 and inventories decreased by $4.7 million in the nine months
ended January 31, 2000, as measured in U.S. dollars and reported on the
Consolidated Balance Sheets. As stated above, the result of exchange rate
deviations from the end of the previous year to the end of the first nine months
was to decrease the reported U.S. dollar values of these assets. The change in
accounts receivable shown in the Consolidated Statements of Cash Flows is
exclusive of the effect of exchange rates on the reported asset values, and
shows accounts receivable (net of provisions for losses) decreasing by $.7
million for the nine month period. The decrease in accounts receivable,
exclusive of the effect of exchange rates, was due to a 5% sales decrease in the
international operations in the current quarter compared to the fourth quarter
of last year. The Consolidated Statements of Cash Flows shows inventories
decreasing by $3.8 million during the nine months ended January 31, 2000,
exclusive of the effect of exchange rates. The decrease in inventory was due to
the decreased demand in the current quarter as compared to the fourth quarter of
last year, primarily in the European operations.
<PAGE>
Accounts payable, accrued expenses and income taxes payable were similarly
affected by currency translation. These liabilities decreased by $2.9 million
when measured exclusive of the effect of exchange rate changes, but decreased by
$8.8 million as reported on the Consolidated Balance Sheets. This decrease was a
result of the timing of payments associated with normal business activity, and
the result of exchange rate deviations from the end of the previous year to the
end of the first nine months was to decrease the reported U.S. dollar values of
these assets.
Net expenditures for property, plant and equipment amounted to $5.5 million
for the nine months ended January 31, 2000, and consisted of the installation
and update of worldwide computer systems and normal additions of operating
equipment.
Total bank indebtedness, comprised of long-term debt, current maturities of
long-term debt and notes payable, exclusive of the effect of exchange rate
changes, decreased $.3 million during the nine months ended January 31, 2000.
The decrease was due primarily to the repayment of short-term loans in the
Company's European subsidiaries. The bank indebtedness shown on the Consolidated
Balance Sheets was slightly affected by currency translation, and shows a
decrease of $.7 million.
The directors of the Company declared a regular quarterly dividend of $.35
per share on February 2, 2000, payable March 15, 2000, to shareholders of record
March 1, 2000. No dividends were declared during the current quarter, and it is
expected that another dividend will be declared in the fourth quarter of the
current year. Cash dividends paid during the first nine months of the fiscal
year amounted to $5.7 million.
During the prior fiscal year, the Company repurchased a total of 1,769,387
shares (of which 1,569,080 were repurchased during the first nine months of the
prior fiscal year) of NCH Common Stock for an aggregate price of $106.0 million.
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, 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 January
31, 2000, the Company had not borrowed any amount under this credit facility.
Year 2000 Compliance
The Company uses and relies on a wide variety of information technologies,
computer systems and scientific equipment containing computer-related
components. 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 Corporation's operating
subsidiaries affected by the euro conversion are developing plans to address the
systems and business issues affected by the euro currency conversion. These
issues include, among others, the need to adapt computer and other business
systems and equipment to accommodate euro-denominated transactions. The
Corporation does not expect this conversion to have a material impact on its
financial condition or results of operations.
Operating Results
Third Quarter Comparison - Prior Year
Net sales from Continuing Operations for the third quarter of fiscal 2000
decreased 1% to $183.3 million as compared with $184.9 million in the same
quarter of the last fiscal year. Domestically, net sales in the third quarter of
the current year increased 10% over the same period in the prior year.
International net sales decreased 12% as reported in U.S. dollars and were
negatively affected by changes in currency translation rates. International net
sales, when measured on a local currency basis, decreased 5% compared to the
third quarter of the prior year, due to continued difficult economic conditions
primarily in the European operations. Net sales for the Chemical Specialties
Group decreased $8.3 million, or 7% from the third quarter of the prior year,
due to lower international sales, partially offset by higher domestic sales. Net
sales for the Plumbing Products Group increased slightly compared to the prior
year's third quarter, due to higher domestic sales, partially offset by lower
international sales. Partsmaster Group's net sales increased slightly as
compared to the same quarter last year due to increased domestic sales,
partially offset by lower international sales. Net sales for the Landmark Direct
Group increased $1.7 million, or 28%, from the prior year's third quarter, due
to increased sales of medical and first aid supplies. Net sales for Other
Product Lines increased $4.5 million, or 32% over the third quarter of last
year, primarily due to increased sales of direct broadcast satellite equipment
and pet products.
<PAGE>
Operating expenses as a percent of net sales were 92.0% in the current
quarter compared to 92.9% in the third quarter of the prior year. Consolidated
operating income before other expenses and income taxes was 8.0% of net sales
for the quarter ended January 31, 2000, compared to 7.1% of net sales for the
quarter ended January 31, 1999. Operating profit for the Chemical Specialties
Group decreased $.7 million, or 9% from the third quarter of last year due to
lower international sales. Operating profit for the Plumbing Products Group
increased $.6 million due to reduced losses in the Canadian operation and cost
saving strategies in domestic operations. Operating profit increased $.8
million, or 30% for the Partsmaster Group over the third quarter of last year
due to higher domestic and international margins. The Landmark Direct Group had
a $.3 million increase in operating profit as compared to the third quarter of
last year due to increased sales as discussed above. Operating profit for Other
Product Lines increased $.3 million due to increased pet product sales as
compared to last year's third quarter.
In the quarter ended January 31, 2000, interest expense was $1.2 million
compared to $1.5 million in the same quarter of the prior year. Interest income
was $.8 million in the quarter ended January 31, 2000 as compared to $.7 million
in the quarter ended January 31, 1999. Revaluation of foreign currencies
resulted in a loss of $.9 million in the third quarter of the current year
compared to a gain of $.2 million in the same period last year.
Provision for income taxes was 34.6% of income from continuing operations
before income taxes in the third quarter of the current year compared to 43.6%
of income from continuing operations before income taxes in the prior year. This
decrease 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 quarter. Income from continuing operations
was 4.7% of net sales for the quarter ended January 31, 2000, compared to 3.8%
of net sales in the quarter ended January 31, 1999.
The net assets of Resource Electronics Inc. were sold in the second quarter
of the current year. For the quarter ended January 31, 1999, the operating loss,
net of income taxes, for discontinued operations was $.9 million.
As a result of the preceding information, net income, including the results
of discontinued operations, was 4.7% of net sales for the current quarter as
compared to 3.3% for the third quarter of last year.
<PAGE>
Third Quarter Comparison - Preceding Quarter
Net sales from Continuing Operations of $183.3 million for the third
quarter of fiscal 2000 were 1% higher than the $181.3 million net sales for the
second quarter. International net sales were 16% higher when measured in U.S.
dollars, as a result of normal quarter-to-quarter sales fluctuations and the
effect of exchange rate changes, while domestic net sales were 8% lower than the
previous quarter. Net sales for the Chemical Specialties Group increased $5.2
million, or 5% from the second quarter due to higher international sales,
partially offset by lower domestic sales. Net sales for the Plumbing Products
Group decreased $.6 million, or 2% from the prior quarter due to lower domestic
sales. Partsmaster Group's net sales increased $2.2 million, or 11% as compared
to the second quarter due to higher international sales. Net sales for the
Landmark Direct Group decreased $3.1 million, or 29% from the second quarter due
to seasonal fluctuations in sales of medical and first aid supplies. Net sales
for Other Product Lines decreased $1.8 million, primarily due to decreased
availability of direct broadcast satellite equipment, decreased sales of pet
products, and decreased sales of apartment property products and services.
Operating expenses were 92.0% of net sales in the current quarter compared
to 92.1% in the second quarter. Consolidated operating income before other
expenses and income taxes was 8.0% of net sales for the quarter ended January
31, 2000, compared to 7.9% of net sales for the quarter ended October 31, 1999.
Operating profit for the Chemical Specialties Group increased $.5 million, or 6%
from the second quarter due to higher international sales and lower
international administrative expenses. Operating profit for the Plumbing
Products Group decreased $1.1 million as compared to the prior quarter due to
lower sales and higher operating expenses. Operating profit increased $1.2
million, or 49%, for the Partsmaster Group over the second quarter due to
increased international sales and higher international and domestic margins. The
Landmark Direct Group had a $.7 million decrease in operating profit as compared
to the second quarter due to seasonal sales fluctuations mentioned above.
Operating profit for other Product Lines increased slightly as compared to the
second quarter.
Interest expense amounted to $1.2 million in the three months ended January
31, 2000, compared to $.9 million in the three months ended October 31, 1999.
Interest income was $.8 million for the current quarter as compared to $.3
million for the prior quarter of this year. The revaluation of foreign
currencies resulted in a loss of $.9 million in current quarter compared to a
loss of $.1 million in the previous quarter.
Provision for income taxes amounted to 34.6% of income from continuing
operations before income taxes in the quarter ended January 31, 2000, compared
to 41.6% of income from continuing operations before income taxes in the quarter
ended October 31, 1999. This decrease 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 quarter.
Income from continuing operations was 4.7% of net sales for the quarter ended
January 31, 2000, compared to 4.4% of net sales for the quarter ended October
31, 1999.
<PAGE>
The sale of the net assets of Resource Electronics Inc. resulted in a loss
on disposition of discontinued operations of $3.3 million in the prior quarter,
as previously discussed. The operating loss, net of income taxes, for
discontinued operations was $.9 million for the prior quarter of the current
year.
As a result of the preceding information, net income, including the results
of discontinued operations, was 4.7% of net sales for the three months ended
January 31, 2000, as compared to 2.2% for the three months ended October 31,
1999.
Nine Months Comparison - Prior Year
Net sales from Continuing Operations for the nine months ended January 31,
2000, increased 1% to $548.8 million as compared with $541.4 million for the
first nine months of the last fiscal year. Domestically, net sales increased 9%
in the nine months compared to a year ago. International net sales were
negatively affected by changes in currency translation rates and decreased 7% as
reported in U.S. dollars. When measured on a local country currency basis,
international net sales decreased approximately 4%. Net sales for the Chemical
Specialties Group decreased $14.4 million, or 4%, from the nine month period
ended January 31, 1999, due to lower sales in the international operation and to
the effect of currency translation rates. Net sales for the Plumbing Products
Group increased $2.0 million, or 2%, as compared to the prior year nine-month
period due to higher domestic sales to major hardware retailers, partially
offset by lower international sales. Partsmaster Group's net sales increased
$2.2 million, or 4%, over the first nine months of the prior year due to higher
domestic sales. Net sales for the Landmark Direct Group increased $5.4 million,
or 24%, from the same period of the prior year due to increased sales of medical
equipment and first aid supplies. Net sales for Other Product Lines increased
$12.2 million, or 27% over the nine months ended January 31, 1999, primarily due
to increased sales of direct broadcast satellite equipment and increased sales
of pet products.
<PAGE>
Operating expenses as a percent of net sales decreased in the nine months
this year to 92.5% of net sales compared to 92.8% for the nine month period
ended January 31, 1999. Consolidated operating income in the nine months this
year increased to 7.5% of net sales from 7.2% of net sales in the nine month
period ended January 31, 1999. Operating profit for the Chemical Specialties
Group decreased $4.4 million, or 16% from the nine month period ended January
31, 1999 due to lower international sales. Operating profit for the Plumbing
Products Group increased $3.4 million as compared to the same period of last
year due to lower operating expenses and reduced losses in the Canadian
operation. Operating profit increased $1.3 million, or 20% for the Partsmaster
Group over the first nine months of the prior year due to increased sales and
higher domestic margins. Operating profit for the Landmark Direct Group
increased $.2 million, or 20% as compared to the nine months ended January 31,
1999, due to higher sales. Operating profit for Other Product lines increased
$2.3 million due to increased revenue from sales of direct broadcast satellite
equipment and increased sales of pet products.
Interest expense was $3.2 million in the nine months ended January 31,
2000, compared to $3.7 million in the first nine months of the prior year.
Interest income was $1.3 million in the nine months this year compared to $1.8
million for the nine month period ended January 31, 1999. Revaluation of foreign
currencies resulted in a loss of $1.8 million in the first nine months of the
current year compared to a loss of $1.2 million in the same period of the prior
year.
Provision for income taxes was 38.8% of income from continuing operations
before income taxes in the first nine months of the current year compared to
44.0% of income from continuing operations before income taxes in the prior
year. This decrease 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 quarter. Income from
continuing operations was 4.2% of net sales for the nine months ended January
31, 2000 compared to 3.7% of net sales for the nine months ended January 31,
1999.
The sale of the net assets of Resource Electronics Inc. resulted in a loss
on disposition of discontinued operations of $3.3 million as discussed earlier.
The operating loss, net of income taxes, for discontinued operations was $.9
million for the first nine months of the current year as compared to $1.0
million for the same period last year.
As a result of the preceding information, net income, including the results
of discontinued operations, was 3.4% of net sales for the nine months ended
January 31, 2000, as compared to 3.5% for the nine months ended January 31,
1999.
Forward-Looking Information
Management's Discussion and Analysis of Financial Condition and Results of
Operations and other sections of this Quarterly Report contain forward-looking
statements that are based on current expectations, estimates and assumptions
regarding the worldwide economy, technological innovation, competitive activity,
interest rates, pricing, and currency movements. These statements are not
guarantees of future results or events, and involve certain risk and
uncertainties which are difficult to predict and many of which are beyond the
control of the Company. Actual results and events could differ materially from
those anticipated by the forward-looking statements.
<PAGE>
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(b) Reports on Form 8-K -- There were no reports on Form 8-K filed for the
three or nine months ended January 31, 2000.
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
NCH Corporation
-----------------------------
(Registrant)
Date March 14, 2000 /s/ Tom Hetzer
--------------- --------------
Tom Hetzer
Vice President - Finance
(Principal Accounting Officer)
<PAGE>
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