FORM 10-Q UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 (Mark One) X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended July 30, 1995 ------------- OR TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to ---------- ---------- Commission file number 0-7977 --------------- NORDSON CORPORATION --------------------------------------------------- (Exact name of registrant as specified in its charter) Ohio 34-0590250 ------------------------------ -------------------------------- (State or other jurisdiction of (I.R.S Employer Identification No.) incorporation or organization) 28601 Clemens Road, Westlake, Ohio 44145 -------------------------------------- ------------------------- (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code: (216) 892-1580 -------------- Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No ----- ----- Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date: Common Shares without par value as of July 30, 1995: 18,086,006 ---------------------------------------------------------------- Page 1
NORDSON CORPORATION INDEX Part I - Financial Information Page Number Condensed Consolidated Statement of Income - Thirteen Weeks and Thirty-Nine Weeks ended July 30, 1995 and July 31, 1994 3 Condensed Consolidated Balance Sheet - July 30, 1995 and October 30, 1994 4 Condensed Consolidated Statement of Cash Flows - Thirty-Nine Weeks ended July 30, 1995 and July 31, 1994 5 Notes to Condensed Consolidated Financial Statements 6 Management's Discussion and Analysis of Financial Condition and Results of Operations 7-9 Part II - Other Information Item 6, Exhibits and Reports on Form 8-K 10 Signature 11 Exhibit Index 12 2
<TABLE> <CAPTION> Part I - Financial Information NORDSON CORPORATION CONDENSED CONSOLIDATED STATEMENT OF INCOME (Dollars and shares in thousands except for per share amounts) Thirteen Weeks Ended Thirty-Nine Weeks Ended July 30, July 31, July 30, July 31, 1995 1994 1995 1994 ---------- ---------- ---------- ---------- <S> <C> <C> <C> <C> Sales $155,152 $133,438 $421,704 $359,620 Cost of sales 66,318 56,658 177,788 148,855 Selling & administrative expenses 65,429 55,375 185,602 159,666 --------- --------- --------- --------- Operating profit 23,405 21,405 58,314 51,099 Other income (expense): Interest expense (1,143) (1,203) (3,337) (3,430) Interest and investment income 194 161 586 661 Other - net 170 (491) 346 303 --------- ---------- --------- --------- Income before income taxes 22,626 19,872 55,909 48,633 Income taxes 7,779 6,754 19,428 16,965 --------- --------- --------- --------- Net income $ 14,847 $ 13,118 $ 36,481 $ 31,668 ========= ========= ========= ========= Weighted average common shares and common share equivalents 18,514 18,988 18,652 19,125 ========= ========= ========= ========= Primary earnings per share $ .80 $ .69 $ 1.96 $ 1.66 ========= ========= ========= ========= Dividends per common share $ .16 $ .14 $ .48 $ .42 ========= ========= ========= ========= <FN> See accompanying notes. </TABLE> 3
<TABLE> <CAPTION> NORDSON CORPORATION CONDENSED CONSOLIDATED BALANCE SHEET (Dollars in thousands) July 30, 1995 October 30, 1994 ------------- ---------------- <S> <C> <C> ASSETS Current assets: Cash and cash equivalents $ 5,134 $ 4,578 Marketable securities 2,025 6,486 Receivables 135,556 120,073 Inventories 115,698 93,615 Deferred income taxes 22,682 20,575 Prepaid expenses 4,040 4,980 -------- -------- Total current assets 285,135 250,307 Property, plant and equipment 183,336 167,611 Less accumulated depreciation and amortization of property, plant and equipment (88,196) (78,956) Intangible assets - net 32,812 29,900 Other assets 15,701 12,082 -------- -------- $428,788 $380,944 ======== ======== LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities: Notes payable $ 45,167 $ 26,917 Accounts payable 30,420 26,900 Current portion of long-term debt 5,896 5,723 Other current liabilities 71,496 63,771 -------- -------- Total current liabilities 152,979 123,311 Long-term debt 17,864 19,254 Other liabilities 29,835 25,955 Shareholders' equity: Common shares 12,253 12,253 Other shareholders' equity 215,857 200,171 -------- -------- Total shareholders' equity 228,110 212,424 -------- -------- $428,788 $380,944 ======== ======== <FN> See accompanying notes. </TABLE> 4
<TABLE> <CAPTION> NORDSON CORPORATION CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS (Dollars in thousands) Thirty-Nine Weeks Ended July 30, 1995 July 31, 1994 ------------- ------------- <S> <C> <C> Cash flows from operating activities: Net income $36,481 $31,668 Changes in working capital (16,305) (13,425) Other - net 9,011 13,432 -------- -------- 29,187 31,675 Cash flows from investing activities: Additions to property, plant and equipment (15,624) (13,359) Proceeds from sale of property, plant and equipment 1,702 35 Acquisition of new businesses (4,116) (1,518) Purchase of marketable securities - (3,605) Proceeds from sale of marketable securities 4,461 2,755 -------- -------- (13,577) (15,692) Cash flows from financing activities: Proceeds from notes payable 34,277 17,974 Payment of notes payable (18,512) (15,716) Proceeds from long-term debt 651 94 Payment of long-term debt (4,600) (5,043) Issuance of common shares 1,111 6,990 Purchase of treasury shares (20,366) (26,587) Dividends paid (8,777) (7,838) -------- -------- (16,216) (30,126) Effect of exchange rate changes 1,162 (21) -------- -------- Increase (decrease) in cash 556 (14,164) Cash and cash equivalents Beginning of fiscal year 4,578 18,128 -------- -------- End of period $ 5,134 $ 3,964 ======== ======== <FN> See accompanying notes. </TABLE> 5
NORDSON CORPORATION NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS July 30, 1995 1. BASIS OF PRESENTATION. The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the thirty-nine week period ended July 30, 1995 are not necessarily indicative of the results that may be expected for the full fiscal year. For further information, refer to the consolidated financial statements and footnotes thereto included in the Company's annual report on Form 10-K for the year ended October 30, 1994. 2. INVENTORIES. Inventories consisted of the following (in thousands of dollars): July 30, 1995 October 30, 1994 ------------- ---------------- Finished goods $44,051 $33,919 Work-in-process 18,829 10,579 Raw materials and finished parts 52,818 49,117 -------- ------- $115,698 $93,615 ======== ======= 3. ACCOUNTING CHANGES. Effective as of the beginning of fiscal 1995, the Company adopted Financial Accounting Standards Board Statement "Accounting for Certain Investments in Debt and Equity Securities" (FAS 115). Under FAS 115, the Company's marketable securities are classified as "available for sale" and recorded at current market value. Adoption of this statement did not have a material effect on the Company's con- solidated financial position or results of operations. 6
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The following is Management's discussion and analysis of certain significant factors affecting the Company's financial condition and results of operations for the periods included in the accompanying condensed consolidated financial statements. RESULTS OF OPERATIONS SALES ----- Sales for the third quarter and year-to-date 1995 increased 16.3% and 17.3%, respectively, over the comparable 1994 periods as a result of price/volume increases, combined with favorable currency effects. In the third quarter, price/volume changes accounted for a 9.3% increase in sales, while for the year-to-date, they accounted for an 11.5% increase. In the third quarter, the Company experienced volume gains in all geographic regions. In Japan, price adjustments offset volume increases so that local revenues were flat compared to the third quarter of the prior year. For the year-to-date period, sales volume in North America was up 15.5%, shipments in Europe were up 8.9%, and activity in the Pacific Rim countries and Latin America grew 23.0%, while in Japan, local revenues, net of volume increases and price adjustments, remained flat as compared to the prior year-to-date period. On a worldwide basis, price increases averaging 1.4% were implemented on orders taken after the beginning of the year on standardized small systems and parts. Sales to international customers for year-to-date 1995 comprised approxi- mately 59.4% of total sales. Translating international sales at exchange rates reflecting a generally weaker U.S. dollar as compared to the prior year had the effect of increasing sales by 7.0% for the third quarter and 5.8% for the year-to-date period. This effect on reported sales does not include the impact of local price adjustments associated with changes in currency exchange rates. OPERATING PROFIT ---------------- For the third quarter of 1995, operating profit, as a percentage of sales, decreased to 15.1% from 16.0% for the same period of 1994. Year-to-date operating profit decreased to 13.8% of sales for 1995 from 14.2% in 1994. As a percentage of sales, gross margins decreased slightly for both the third quarter and year-to-date periods of 1995 as compared to the same periods in 1994. These changes can be attributed to lower margins from the mix of products sold, offset by favorable currency effects. Product sales mix was influenced by the sales growth of large engineered powder coating systems sold into automotive and other industrial markets. Selling and administrative expenses increased 18.2% in the third quarter and 16.2% for the year-to-date over the comparable period in the prior year. Spending growth reflects increased sales volume, business acquisitions and currency effects. 7
NET INCOME ---------- For the third quarter of 1995, net income, as a percentage of sales, was 9.6%, compared with 9.8% for the same period of 1994. Year-to-date income was 8.7% of sales in 1995 and 8.8% in 1994. In addition to the factors impacting operating profit discussed above, the Company recognized other income in the third quarter of 1995 compared to other expense in the same period of 1994 related to non-recurring items. On a year-to-date basis, this improvement offset the effect of small currency exchange losses in 1995 compared to small gains in 1994. Also, the income tax rate was lowered in the third quarter of 1995 and 1994 to a year-to-date effective rate of 34.8% and 34.9%, respectively. FOREIGN CURRENCY EFFECTS ------------------------ In the aggregate, average exchange rates for third quarter and year-to-date 1995 used to translate international sales and operating results into U.S. dollars compared favorably with average exchange rates existing during the comparable 1994 periods. It is not possible to precisely measure the impact on operating results arising from foreign currency exchange rate changes, because of changes in selling prices, sales volume, product mix and cost structure in each country in which the Company operates. However, if trans- actions for the third quarter 1995 were translated at exchange rates in effect during 1994, sales would have been approximately $9,300,000 lower while third-party costs and expenses would have been $5,900,000 lower. If transactions for year-to-date 1995 were translated at exchange rates in effect during 1994, sales would have been approximately $20,800,000 lower and third-party costs and expenses would have been $13,100,000 lower. FINANCIAL CONDITION During the first three quarters of 1995, net assets increased $15,686,000. This increase is primarily due to earnings of $36,481,000 and an increase of $5,726,000 from translating foreign net assets at the end of the third quarter when the U.S. dollar was weaker against other currencies than at prior year end, offset by net repurchases of Nordson stock totalling $19,255,000 and the payment of $8,777,000 in dividends. Working capital, as of the end of the quarter, increased $5,160,000 over the prior year-end. This change consisted primarily of increases in receivables and inventories, offset by decreases in marketable securities and increases in notes payable and accrued liabilities. Receivables increased as a result of strong sales in the third quarter of 1995. Changes in inventories can be traced to increases in component inventory related to greater demand and in work-in-process associated with large engineered systems. Notes payable increased to meet current operating needs and to finance the acquisition of a new business, a European manufacturer of advanced liquid adhesive dispensing systems. Accrued liabilities increased due to an increase in customer advance payments. 8
Cash and cash equivalents increased $556,000 during the first nine months of 1995. Uses for cash included net repurchases of Nordson stock, outlays for capital expenditures, dividends, the acquisition of a new business, and net payments on long-term borrowings. Cash from operations, net proceeds from notes payable and proceeds from the sale of marketable securities were utilized to finance the above cash uses. Available lines of credit continue to be more than adequate to meet additional cash requirements over the next year. 9
Part II - Other Information Item 6. Exhibits and Reports on Form 8-K. (a) Exhibits - Exhibit 11 Calculation of Earnings Per Share Exhibit 27 Financial Data Schedule (b) There were no reports on Form 8-K filed for the quarter ended July 30, 1995. 10
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. Date: September 12, 1995 Nordson Corporation /s/ Nicholas D. Pellecchia Nicholas D. Pellecchia Vice President-Finance and Controller (Principal Financial Officer and Chief Accounting Officer) 11
NORDSON CORPORATION EXHIBIT INDEX Page Number Exhibit 11 Calculation of Earnings Per Share 13 Exhibit 27 Financial Data Schedule 14 12