<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 July 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 September 7, 2000
Common Stock, $1 Par Value 5,307,423
<PAGE>
NCH CORPORATION
INDEX
Page No.
Part I. Financial Information:
Consolidated Balance Sheets --
July 31, 2000 and April 30, 2000 3
Consolidated Statements of Income --
Three Months Ended
July 31, 2000 and 1999 4
Consolidated Statements of Cash Flows --
Three Months Ended July 31, 2000 and 1999 5
Notes to Consolidated Financial Statements 6 - 10
Management's Discussion and Analysis of
Financial Condition and Results of Operations 11 - 20
Part II. Other Information 21
<PAGE>
<TABLE>
NCH CORPORATION AND SUBSIDIARIES
Consolidated Balance Sheets
(In Thousands Except Share and Per Share Data)
<CAPTION>
July 31, April 30,
2000 2000
----------- -----------
(Unaudited)
<S> <C> <C>
Assets
Current Assets
Cash and cash equivalents $ 31,985 $ 32,146
Marketable securities 23,049 20,429
Accounts receivable, net 130,958 133,839
Inventories 95,388 93,536
Prepaid expenses 8,673 6,215
Deferred income taxes 13,614 13,691
----------- -----------
Total Current Assets 303,667 299,856
----------- -----------
Property, Plant and Equipment 185,113 190,475
Accumulated depreciation 119,247 120,242
----------- -----------
65,866 70,233
----------- -----------
Deferred Income Taxes 36,449 36,781
----------- -----------
Other 18,773 20,243
----------- -----------
Total $ 424,755 $ 427,113
=========== ===========
Liabilities and Stockholders' Equity
Current Liabilities
Notes payable to banks $ 1,662 $ 5,956
Current maturities of long-term debt 5,971 5,971
Accounts payable 41,946 40,196
Accrued expenses 27,488 26,766
Income taxes payable 8,396 6,176
Dividends payable 1,863 1,893
----------- -----------
Total Current Liabilities 87,326 86,958
----------- -----------
Long-term Debt, less current maturities 10,311 12,049
----------- -----------
Retirement and Deferred Compensation Plans 115,608 115,344
----------- -----------
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 508,356 501,146
Accumulated other comprehensive loss (47,652) (42,389)
----------- -----------
485,187 483,240
Less treasury stock
(6,445,581 and 6,361,081 shares) 273,677 270,478
----------- -----------
211,510 212,762
----------- -----------
Total $ 424,755 $ 427,113
=========== ===========
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
July 31,
--------------------
2000 1999
--------- ---------
<S> <C> <C>
Net Sales $ 181,328 $ 184,296
--------- ---------
Operating Expenses
Cost of sales, including warehousing and
commissions 99,130 97,013
Marketing and administrative expenses 69,486 74,841
--------- ---------
168,616 171,854
--------- ---------
Operating Income 12,712 12,442
Other Expenses
Revaluation of foreign currencies (174) (805)
Interest income 716 253
Interest expense (1,154) (1,061)
Gain on sale of land 2,836 -
--------- ---------
Income from Continuing Operations before
Income Taxes 14,936 10,829
Provision for Income Taxes 5,863 4,391
--------- ---------
Income from Continuing Operations 9,073 6,438
--------- ---------
Discontinued Operations:
Loss from Discontinued Operations, net
of income taxes - (177)
--------- ---------
Net Income $ 9,073 $ 6,261
========= =========
Weighted Average Number of Shares
Outstanding
Basic 5,367 5,408
========= =========
Diluted 5,367 5,408
========= =========
Earnings Per Share from Continuing
Operations
Basic $ 1.69 $ 1.19
========= =========
Diluted $ 1.69 $ 1.19
========= =========
Total Earnings Per Share
Basic $ 1.69 $ 1.16
========= =========
Diluted $ 1.69 $ 1.16
========= =========
Cash Dividend Paid Per Share $ 0.35 $ 0.35
========= =========
Cash Dividend Declared Not Paid $ 0.35 $ 0.35
========= =========
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>
Three Months Ended
July 31,
---------------------
2000 1999
--------- ---------
<S> <C> <C>
Cash Flows from Operating Activities
Income from Continuing Operations $ 9,073 $ 6,438
Adjustments to reconcile Income from
Continuing Operations to net cash
provided by Continuing Operations:
Depreciation and amortization 3,111 3,280
Provision for losses on accounts receivable 1,069 1,316
Deferred income taxes 509 245
Retirement and deferred compensation plans 30 1,042
Gain on sale of land (2,836) -
Other noncash items (54) 57
Changes in assets and liabilities, excluding net
assets acquired in the purchase of businesses:
Accounts receivable (2,951) (2,606)
Inventories (2,150) 315
Prepaid expenses (2,411) (721)
Accounts payable, accrued expenses and income
taxes payable 5,822 2,756
Other noncurrent assets (235) (435)
--------- ---------
Net cash provided by Continuing Operations 8,977 11,687
--------- ---------
Cash flow from Discontinued Operations 74 (89)
--------- ---------
Net cash provided by operating activities 9,051 11,598
--------- ---------
Cash Flows from Investing Activities
Sales of property, plant and equipment 6,268 453
Purchases of property, plant and equipment (2,734) (3,061)
Redemptions of marketable securities 3,391 1,085
Purchases of marketable securities (5,933) (981)
Acquisitions of businesses - (241)
Other (991) (1,005)
--------- ---------
Net cash provided (used) in investing activities 1 (3,750)
--------- ---------
Cash Flows from Financing Activities
Proceeds from notes payable 249 759
Payments of notes payable (4,152) (166)
Additional long term debt 132 -
Payments of long term debt (151) (154)
Borrowing of cash surrender values 2,436 1,143
Payments of dividends (1,893) (1,893)
Purchase of treasury stock (3,219) -
--------- ---------
Net cash used in financing activities (6,598) (311)
--------- ---------
Effect of Exchange Rate Changes on Cash
and Cash Equivalents (2,615) (1,176)
--------- ---------
Net Increase in Cash and Cash Equivalents (161) 6,361
Cash and Cash Equivalents at Beginning of Year 32,146 19,814
--------- ---------
Cash and Cash Equivalents at End of Period $31,985 $ 26,175
========= =========
The accompanying notes are an integral part of these financial statements.
</TABLE>
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 July 31, 2000, the results of its operations and cash flows for the three
months ended July 31, 2000 and 1999.
The accounting policies followed by NCH Corporation (the Company) are set forth
in Note 1 to the Company's consolidated financial statements in the 2000 NCH
Corporation Annual Report to Shareholders, which is included in Part II of Form
10-K.
The results of operations for the three month period ended July 31, 2000, are
not necessarily indicative of the results to be expected for the full year.
2. Discontinued Operations
In the second quarter of the prior year, the Company sold substantially all the
net assets of Resource Electronics Inc., a subsidiary of the Company. This sale
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 also shown separately as discontinued operations.
Due to the sale of Resource Electronics in the second quarter of the prior year,
there were no net sales related to Resource Electronics in the current year. Net
sales of Resource Electronics for the three months ended July 31, 1999 were
$15,938,000. This amount is 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>
Three Months Ended
July 31,
------------------------
2000 1999
----------- -----------
<S> <C> <C>
Loss from Discontinued $ - $(209)
Operations before taxes
Income Taxes - 32
----------- -----------
Loss from Discontinued
Operations $ - $(177)
=========== ===========
Per share - basic and diluted
Loss from Discontinued
Operations $ - $ (0.03)
=========== ===========
</TABLE>
3. Inventories
Inventories consisted of the following (in thousands of dollars):
<TABLE>
<CAPTION>
July 31, April 30,
2000 2000
------------ ------------
<S> <C> <C>
Raw Materials $13,928 $16,137
Finished Goods 80,188 75,947
Sales Supplies 1,272 1,452
------------ ------------
$95,388 $93,536
============ ============
</TABLE>
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 the three month periods ended July 31, 2000 and 1999, options
totaling 401,402 and 316,090, respectively, were excluded as their effect would
have been antidilutive.
5. Comprehensive Income
The components of comprehensive income, net of related tax, for the three-month
periods ended July 31, 2000 and 1999 are as follows (in thousands):
<TABLE>
<CAPTION>
Three Months Ended
July 31,
-----------------------
2000 1999
---------- -----------
<S> <C> <C>
Net income $ 9,073 $ 6,261
Unrealized gain (loss) on
available-for-sale securities 8
51
Foreign currency translation
adjustment
(5,314) (2,747)
---------- -----------
Comprehensive income $ 3,810 $ 3,522
========== ===========
</TABLE>
The components of accumulated other comprehensive loss, net of related tax, at
July 31, 2000 and April 30, 2000, are as follows (in thousands):
<TABLE>
<CAPTION>
July 31, April 30,
2000 2000
------------- ------------
<S> <C> <C>
Unrealized gain on
available-for-sale securities $ 199 $ 148
Foreign currency translation
adjustment (47,851) (42,537)
------------- ------------
Accumulated other
comprehensive loss $(47,652) $(42,389)
============= ============
</TABLE>
<PAGE>
6. Segment 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. 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 disclosures for the quarter ended July 31, 1999 included the Resource
Electronics segment, which is now included in discontinued operations.
Additionally, DBS Services Group was previously included in the Other Product
Lines segment. Information for the quarter ended July 31, 1999 has been restated
to conform to the current segment determination.
The following tables present a summary of the Company's segments for the
three-month period ended July 31, 2000 and 1999 (in thousands):
<TABLE>
<CAPTION>
Net Sales
-------------------------
Three Months Ended
July 31,
-------------------------
2000 1999
----------- -----------
<S> <C> <C>
Chemical Specialties $100,729 $105,394
Plumbmaster Group 28,514 30,779
Partsmaster Group 19,439 21,823
Landmark Direct 11,955 8,833
DBS Services Group 5,181 4,892
Other Product Lines 15,510 12,575
----------- -----------
Net Sales $181,328 $184,296
=========== ===========
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Operating Profit
-------------------------
Three Months Ended
July 31,
-------------------------
2000 1999
----------- -----------
<S> <C> <C>
Chemical Specialties $9,062 $7,123
Plumbmaster Group 2,448 2,025
Partsmaster Group 1,721 2,037
Landmark Direct (89) (97)
DBS Services Group 408 1,237
Other Product Lines 734 1,011
----------- -----------
Total segment operating profit $14,284 $13,336
Unallocated Corporate expenses (1,572) (894)
Revaluation of foreign currencies (174) (805)
Interest income 716 253
Interest expense (1,154) (1,061)
Gain on Sale of Land 2,836 -
----------- -----------
Income from Continuing Operations
before Income Taxes $14,936 $10,829
=========== ===========
</TABLE>
7. Supplemental Cash Flow Information
Cash payments for interest for the three months ended July 31, 2000 and 1999,
were approximately $578,000 and $330,000, respectively. Cash payments for income
taxes were approximately $3,149,000 and $3,797,000 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 three months ended July 31, 2000, working capital increased to
$216.3 million from $212.9 million at April 30, 2000, and the current ratio was
3.5 to 1 at July 31, 2000, compared to 3.4 to 1 at April 30, 2000. The total of
cash, cash equivalents and marketable securities increased by $2.5 million in
the first three months to $55.0 million at July 31, 2000, as shown on the
Consolidated Balance Sheets. Net cash flows from operating activities of
continuing operations totaled $9.0 million. Additional cash was provided by the
sales of property, plant, and equipment of $6.3 million (including the sale of
land of $6.0 million). Principal uses of cash consisted of net payments of notes
payable and long term debt of $3.9 million, purchases of treasury stock of $3.2
million, capital expenditures of $2.7 million, net purchases of marketable
securities of $2.5 million, and payment of dividends of $1.9 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 May 31, 2000, compared to February 29,
2000. This is reflected in the foreign currency translation component of
accumulated other comprehensive loss, which changed from a $42.5 million
reduction of stockholders' equity at April 30, 2000, to a $47.9 million
reduction of stockholders' equity at July 31, 2000.
Accounts receivable decreased by $2.9 million in the three months ended
July 31, 2000 and inventories increased by $1.9 million in the three months
ended July 31, 2000, as measured in U.S. dollars and reported on the
Consolidated Balance Sheets. 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) increasing by $1.9 million for the three month period.
The increase in accounts receivable, exclusive of the effect of exchange rates,
was due to an increase in sales in the domestic operations in the current
quarter compared to the fourth quarter of last year. The Consolidated Statements
of Cash Flows shows inventories increasing by $2.2 million during the three
months ended July 31, 2000, exclusive of the effect of exchange rates. The
increase in inventory was due to increased demand in the current quarter as
compared to the fourth quarter of last year, primarily in the domestic
operations.
<PAGE>
Accounts payable, accrued expenses and income taxes payable were similarly
affected by currency translation. These liabilities increased by $5.8 million
when measured exclusive of the effect of exchange rate changes, but increased by
$4.7 million as reported on the Consolidated Balance Sheets. Accounts payable
and accrued expenses increased as a result of normal business activity
associated with timing of payments. The increase in income taxes payable was
primarily due to normal timing differences in the amounts of tax payments in the
current quarter compared to the preceding quarter.
During the first quarter, the Company sold a parcel of surplus land for a
net sales price of approximately $6.0 million, resulting in a pretax gain of
$2.8 million. Expenditures for property, plant and equipment amounted to $2.7
million for the three months ended July 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 $5.6 million during the three months ended July 31, 2000. The
decrease was due to the repayment of short-term loans in the Company's European
subsidiaries and the repayment of domestic long-term debt. During the fourth
quarter of the prior year, an environmental insurance policy was purchased and
funded by a note payable in a non-cash transaction. Of the $16.3 million in
long-term debt, $15.2 is a note payable related to the environmental insurance
policy and $.9 million is a note payable related to the purchase of a small
domestic business in fiscal 1998. The $1.7 million of notes payable to banks
consist of international subsidiary borrowings in local country currencies used
primarily to finance working capital requirements. The bank indebtedness shown
on the Consolidated Balance Sheets was slightly affected by currency
translation, and shows a decrease of $6.0 million.
A regular quarterly dividend of $.35 per share, declared by the directors
of the Company on April 28, 2000, was paid on June 15, 2000, amounting to $1.9
million. The directors of the Company declared a regular quarterly dividend of
$.35 per share on July 27, 2000, payable September 15, 2000, to shareholders of
record September 1, 2000.
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. At July 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 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.
Subsequent Event
The Company has executed an agreement to sell the assets of a subsidiary.
This transaction is expected to close on September 30, 2000. This subsidiary's
sales for the last fiscal year were $29.5 million with operating profit of $.8
million. Financial results for this group are included in the Other Product
Lines segment, and financial statements will not be restated for prior periods
to reflect this transaction.
Operating Results
First Quarter Comparison - Prior Year
Net sales from Continuing Operations for the first quarter of fiscal 2000
decreased 2% to $181.3 million as compared with $184.3 million in the same
quarter of the last fiscal year. Domestically, net sales in the first quarter of
the current year increased 5% over the same period in the prior year.
International net sales decreased 10% 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 3% compared to the
first quarter of the prior year, due to continued difficult economic conditions
primarily in the European operations. Net sales for Chemical Specialties
decreased $4.7 million, or 4% from the first quarter of the prior year, due to
lower international sales, partially offset by higher domestic sales. Net sales
for the Plumbmaster Group decreased $2.3 million, or 7%, compared to the prior
year's first quarter, due to lower domestic and international sales. Partsmaster
Group's net sales decreased $2.4 million, or 11%, as compared to the same
quarter last year due to decreased international sales. Net sales for Landmark
Direct increased $3.1 million, or 35%, from the prior year's first quarter, due
to increased sales of medical and first aid supplies. Net sales for the DBS
Services Group increased 6%, due to increased sales of direct broadcast
satellite equipment. Net sales for Other Product Lines increased $2.9 million,
or 23% over the first quarter of last year, primarily due to increased sales of
pet products.
<PAGE>
Operating expenses as a percent of net sales were 93.0% in the current
quarter compared to 93.2% in the first quarter of the prior year. Consolidated
operating income before other expenses and income taxes was 7.0% of net sales
for the quarter ended July 31, 2000, compared to 6.8% of net sales for the
quarter ended July 31, 1999. Operating profit for the Chemical Specialties Group
was 27% above the first quarter of last year as a result of cost improvements in
both the domestic and international areas and higher domestic sales. Operating
profit for the Plumbmaster Group increased 21%, even though sales were down from
last year, as a result of reductions in marketing and administrative expenses.
Operating profit for the Partsmaster Group was down 16% from the prior year
primarily due to the 11% decrease in sales. Landmark Direct incurred an
operating loss in the first quarter due to higher cost of material, which is a
seasonal fluctuation. Increased administrative expenses in the quarter reduced
the operating profit of DBS Services Group. A portion of the increase in
administrative expenses was from one-time expenditures such as the cost of
relocating to new warehouse and office facilities. Operating profit for Other
Product Lines decreased $.3 million due to lower product margins.
In the quarter ended July 31, 2000, interest expense was $1.2 million
compared to $1.1 million in the same quarter of the prior year. Interest income
was $.7 million in the quarter ended July 31, 2000 as compared to $.3 million in
the quarter ended July 31, 1999. Revaluation of foreign currencies resulted in a
loss of $.2 million in the first quarter of the current year compared to a loss
of $.8 million in the same period last year. The sale of land in the current
quarter resulted in a gain of $2.8 million, as discussed above.
Provision for income taxes was 39.3% of income from continuing operations
before income taxes in the first quarter of the current year compared to 40.5%
of income from continuing operations before income taxes in the prior year. This
decrease is due to variations in individual country income levels and tax rates
in the international subsidiaries. Income from continuing operations was 5.0% of
net sales for the quarter ended July 31, 2000, compared to 3.5% of net sales in
the quarter ended July 31, 1999.
The net assets of Resource Electronics Inc. were sold in the second quarter
of the prior year. For the quarter ended July 31, 1999, the operating loss, net
of income taxes, for discontinued operations was $.2 million.
As a result of the preceding information, net income, including the results
of discontinued operations, was 5.0% of net sales for the current quarter as
compared to 3.4% for the first quarter of last year.
<PAGE>
First Quarter Comparison - Preceding Quarter
Net sales from Continuing Operations of $181.3 million for the first
quarter of fiscal 2001 were 1% higher than the $179.4 million net sales for the
fourth quarter of fiscal 2000. International net sales were 1% higher when
measured in U.S. dollars, and domestic net sales were also 1% higher than the
previous quarter. Net sales for Chemical Specialties increased $1.4 million, or
1% from the prior quarter due to higher international sales, partially offset by
lower domestic sales. Net sales for Plumbmaster Group decreased $2.2 million, or
7% from the prior quarter due to lower domestic sales. Partsmaster Group's net
sales decreased $1.6 million, or 8% as compared to the fourth quarter of the
prior year due to lower domestic and international sales. Net sales for Landmark
Direct increased $4.2 million, or 54% from the prior quarter due to seasonal
fluctuations in sales of medical and first aid supplies. Net sales for DBS
Services Group increased slightly from the prior quarter due to increased sales
of direct broadcast satellite equipment. Net sales for Other Product Lines
decreased slightly as compared to the prior quarter.
Operating expenses were 93.0% of net sales in the current quarter, and
consolidated operating income before other expenses and income taxes was 7.0% of
net sales for the current quarter. In the fourth quarter of the prior year,
operating expenses were approximately $181.2 million, resulting in a $2.4
million consolidated operating loss before other expenses and income taxes. The
increase in operating expenses for the fourth quarter of the prior year was due
to an accrual for increased environmental remediation expenses of approximately
$16.1 million. In the Chemical Specialties segment, operating income increased
$18.4 million as compared to the fourth quarter of the prior year due to the
environmental costs discussed above. Operating profit for the Plumbmaster Group
decreased $.3 million as compared to the prior quarter due to lower sales and
higher operating expenses. Operating profit decreased $1.2 million, or 40%, for
the Partsmaster Group over the fourth quarter due to decreased international and
domestic sales and lower domestic margins. Landmark Direct had a $.6 million
increase in operating profit as compared to the prior quarter due to seasonal
sales fluctuations mentioned above. Operating profit for DBS Services Group
decreased $.8 million due to increased product costs and administrative
expenses. Operating profit for Other Product Lines decreased $.7 million as
compared to the prior quarter due to lower product margins.
Interest expense amounted to $1.2 million in the three months ended July
31, 2000, compared to $2.3 million in the three months ended April 30, 2000.
Interest income was $.7 million for both the current quarter and the fourth
quarter of the prior year. The revaluation of foreign currencies resulted in a
loss of $.2 million in current quarter compared to a loss of $.9 million in the
previous quarter. The sale of land in the current quarter resulted in a gain of
$2.8 million, as discussed above.
<PAGE>
Provision for income taxes amounted to 39.3% of income from continuing
operations before income taxes in the quarter ended July 31, 2000. Net income
was 5.0% of net sales for the quarter ended July 31, 2000. Due to the
environmental costs discussed above, the net loss for the fourth quarter of the
prior fiscal year was $4.9 million.
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 months ended July 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: September 11, 2000 /s/ Tom Hetzer
------------------- ----------------------------------
Tom Hetzer
Vice President - Finance
(Principal Accounting Officer)
<PAGE>
