NCH Corporation

NCH Corporation is a major international marketer of maintenance products, and one of the largest companies in the world to sell such products through direct marketing. NCH's products include specialty chemicals, fasteners, welding supplies, pet products, and plumbing parts. These products are sold through a number of wholly owned subsidiaries, many of which are engaged in the maintenance products business. Subsidiary companies in NCH's Chemical Specialties division produce a diverse array of maintenance chemicals that includes cleaners, degreasers, lubricants, grounds care, housekeeping, and water treatment products. Companies in the Partsmaster group offer a wide variety of items for maintenance and repair, including welding supplies and fasteners. The Plumbing Products Group provides plumbing supplies for the do-it-yourself retail consumer and the OEM market. The Retail Products Group markets a wide range of pet supplies. Other subsidiary groups under the NCH umbrella include X-Chem, an oil field services division, and Pure Solve, a partswashing service business. NCH has over 8,500 employees. Its branch offices and manufacturing plants are located on six continents, and its products are sold in over 50 different countries.

History

National Disinfectant Company, the original incarnation of NCH Corporation, was founded in Dallas, Texas, by Milton P. Levy in 1919. Leadership of the company has remained in the hands of the Levy family to this day. National Disinfectant's original line of products was fairly small; it included a coal tar disinfectant, an insecticide, and a liquid hand soap for institutional use. The company was a small, efficient operation, and orders received in the morning would be delivered in the afternoon of the same day. During the next couple of decades the company's offerings grew. One brand that appeared in the late 1930s was Everbrite, a heavy-duty industrial floor wax. Everbrite has continued to exist in varying forms since then, eventually evolving into a strong multi-purpose cleaner that kills bacteria.

Levy's three sons, Lester A., Milton P., Jr., and Irvin L., were involved in the company's operations from early on, working in the warehouse and shipping areas as teenagers and learning the business from the ground up. When the senior Levy died in 1946, the family was prepared to continue running National Disinfectant. Levy's widow, Ruth, took over as president of the company. Lester Levy was placed in charge of the company's small but growing sales crew. Milton, Jr., began to integrate the development of a sales territory in Austin, Texas, with the completion of his studies there at the University of Texas. Irvin, after working part-time as office manager while he finished school at Southern Methodist University, began developing another sales area in the Dallas-Fort Worth region. In 1947 company sales were $300,000. The Levy's were assisted in running the company by Jack Mann, National Disinfectant's top sales representative since joining the company in the 1920s. Mann, a former vaudeville entertainer and a close friend of Milton, Sr., would stay with the company for 40 years. The company's Mantek chemical division was named after him shortly after his death in 1968.

In the 1950s National Disinfectant began to integrate vertically and to expand its marketing area. The company began to reinvest a sizeable portion of its profits in manufacturing and research facilities in order to decrease its reliance on outside producers for its wares. One important acquisition that was made in the early 1950s was Certified Laboratories. Certified continued to operate as an independent company with its own brand name and its own sales force, but this wholly owned subsidiary was generating over one-fourth of the company's revenue within a few years. By the middle of the decade, National Disinfectant was shipping its products via rail to several points outside of Texas, with new concentrations of customers in Oklahoma, Louisiana, Arizona, and New Mexico. St. Louis was the site of the company's first branch office, established in 1956.

As demand for National Disinfectant's products grew, so did its sales force. A sales management team was created during this period, and the training of new sales representatives became more standardized. National Disinfectant manufacturing plants began to spring up across the United States, first in Texas, and later regional plants appeared in New Jersey, California, Puerto Rico, and Indiana.

In 1960 the company's name was changed to National Chemsearch Corp. in order to better reflect the expansion of its product line beyond disinfectants. National Chemsearch began to go international during the 1960s. Its first overseas sales endeavors were in the Caribbean. Sales efforts soon spread to Canada and to Central and South America. Eventually, the company landed in Europe as well. In 1962 the company's administrative offices, along with laboratories and manufacturing operations, were moved to a new headquarters located in Irving, Texas, a suburb of Dallas. National Chemsearch acquired two more subsidiaries in the first half of the 1960s. Hallmark Chemical Corp., which sold a line of building products, was acquired in 1962. Two years later, the company purchased Lamkin Brothers, Inc., a marketer of vitamin and mineral supplements for livestock. National Chemsearch offered its stock to the public for the first time in 1965. The Levy family retained control of 70 percent of the stock. By that time, Ruth Levy had retired, and a clear division of labor existed among the three brothers. Lester, chairman of the board, oversaw corporate planning and much of the company's financial dealings. Milton handled production, distribution, and product development as chairman of the executive committee. And company president Irvin was in charge of expanding the company's domestic and foreign sales efforts.

Between 1962 and 1966 National Chemsearch's sales grew at an average rate of 29 percent a year. By the end of that stretch, the company was earning $2.4 million on sales of $25 million. Much of the company's success was attributed to its direct sales methods, which eliminated the need for wholesalers or other intermediaries. By offering a broad range of products to a large number of customers (many of them relatively small shops and plants), National Chemsearch was able to compete favorably with larger companies that were concentrating on selling only very large orders.

By 1967, Chemsearch employed more than 600 sales representatives. None of the company's 40,000 customers accounted for even one percent of its sales. About 60 percent of these customers were industrial or commercial clients; the rest were institutions such as hospitals and schools. The greatest share of sales (over 60 percent) was still coming from cleaning chemicals at that time. Constant research was adding about 20 products a year to the line. Toward the end of the 1960s, the Plumbmaster and Partsmaster divisions were created. The establishment of these divisions meant that the growing number of newly acquired subsidiaries could be grouped according to the nature of their products.

In February 1969 National Chemsearch stock was listed on the New York Stock Exchange for the first time. In 1970 the company's product line included roughly 250 items, sold under the trade names "National Chemsearch," "Certified," "Mantek," and "Dyna Systems" (fasteners). Turf maintenance supplies, paints and sealers, and sewage treatment chemicals were among the items offered, in addition to the growing list of cleaning chemicals. Sales and profits continued to grow slowly but surely into the early 1970s. By 1971, sales had reached $69 million, with net income of $6.6 million. About 20 percent of the company's revenue was being generated through foreign sales by this time. Among National Chemsearch's acquisitions during this period were P & M Manufacturing Company of Los Angeles in 1970 and the Pennsylvania-based Daniel P. Creed Co., Inc., in 1972. P & M, with annual sales of about $1.5 million in the plumbing maintenance industry, was acquired for 8,686 shares of common stock. Daniel P. Creed, also in the plumbing supply business, was a cash purchase.

By 1973, sales at National Chemsearch had soared to $103 million. About 3,000 sales representatives were hawking the company's products by the middle of the 1970s. In 1977, specialty chemicals accounted for about 90 percent of sales. The remaining 10 percent was derived from the younger segments of the company, including fasteners, plumbing parts, and welding supplies. National Chemsearch's goal of reducing reliance on outside manufacturers had more or less been achieved by this time, as nearly all of the company's specialty chemicals were being fabricated at its own facilities, the exception being its turf maintenance products.

Annual sales doubled again by 1978, breaking $200 million for the first time. The company's name was changed to NCH Corporation that year. As was the case with the previous name change, the intent was to reflect the increasing diversity of the company's wares. NCH's acquisitions around this time included the 1978 purchase of Specialty Products Co., a manufacturer of specialty plumbing items. Specialty Products, based in Stanton, California, had yearly sales of about $4 million. The following year, NCH acquired the domestic assets of American Allsafe Co. This acquisition paved the way for the development of the company's safety equipment division, whose mission was to supply items such as eye and head protection gear to the increasingly safety-conscious industrial world. 1979 also marked the launch of Kernite SA, a new trading company set up by NCH in Belgium dealing in chemicals, petrochemicals, and lubricants.

NCH's previously steady growth in sales stalled somewhat in the first half of the 1980s. After reaching a high of $356 million in 1981, sales actually declined in each of the next three years, and did not surpass the 1981 figure until 1986, when $375 million in sales was reported. One obvious reason for this stagnation was a generally sluggish global economy, in which maintenance supplies were easy targets for the cost-cutting efforts of struggling industrial firms. Also, the first-year turnover rate among NCH sales representatives was much higher than usual due to slow sales accompanied by higher gas and car maintenance costs, which are borne by the sales personnel. The size of the sales force was stuck at about 4,000 throughout the first half of the decade.

In 1986 NCH added direct mail, telemarketing, and catalog sales to its arsenal of marketing techniques. Cornerstone Direct was formed for this purpose, offering material handling equipment, first-aid kits, and other industrial supplies. Sales growth returned in the second half of the 1980s, breaking $400 million in 1987 and $500 million in 1988. European operations contributed more and more to the company's sales and income during this period. With sales up and expenses down, NCH's earned income from Europe quadrupled between 1987 and 1989, from $4.8 million to $18.8 million. Another area that expanded significantly in the last few years of the decade was the company's Resource Electronics Division, with the acquisition of three electronic parts distributors between 1988 and 1990.

Sales and income reached new peaks of $677 million and $43 million in 1991, before dropping slightly in 1992. One major cost incurred by the company in 1992 was the restructuring of its Brazilian subsidiary, a downsizing made necessary by the phenomenal rate of inflation and general instability of the Brazilian economy. A new plant was built in Korea in 1992, making it possible to offer a broader range of products in the growing Asian market. Among NCH's acquisitions that year was a line of stainless steel flexible tubing connectors. These new products were marketed under the trade name Aqua-Flo. By the end of fiscal 1992, NCH's plumbing group was offering a total of more than 80,000 different parts. The Resource Electronics group's line had grown to over 40,000 parts by this time as well. The company also expanded its line of retail products, which by this time included Outright brand pet care products, Out! International pet odor eliminators, and Totally Toddler nursery care items. A variety of plumbing and hardware supplies for do-it-yourselfers also became available in retail outlets.

In 2002 the Levy Family committed to ensuring the long term stability of NCH by purchasing 100% of the public shares. This ended the company's 37 year history as a publicly traded company.

NCH Corporation's major strengths are the diversity and quality of its products, along with the well-planned organization of its huge army of direct sales representatives. The company has a history of choosing its acquisitions carefully, and of investing wisely in its manufacturing and research facilities, a crucial commitment given the competition NCH faces in the industrial supply business from larger corporations. Since NCH managed to thrive during several of the toughest years for industry in recent history, the company's continuing growth in the global market seems likely.

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