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 April 28, 1996 ---------------- 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 APRIL 28, 1996: 17,909,027 Page 1
NORDSON CORPORATION INDEX Part I - Financial Information Page Number Condensed Consolidated Statement of Income - Thirteen and Twenty-Six Weeks ended April 28, 1996 and April 30, 1995 3 Condensed Consolidated Balance Sheet - April 28, 1996 and October 29, 1995 4 Condensed Consolidated Statement of Cash Flows - Twenty-Six Weeks ended April 28, 1996 and April 30, 1995 5 Notes to Condensed Consolidated Financial Statements 6 Management's Discussion and Analysis of Results of Operations and Financial Condition 7-9 Part II - Other Information Item 4, Submission of Matters to a Vote of Security Holders 10 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 Twenty-Six Weeks Ended April 28, 1996 April 30, 1995 April 28, 1996 April 30, 1995 -------------- -------------- -------------- -------------- <S> <C> <C> <C> <C> Sales $151,324 $143,075 $283,206 $266,552 Cost of sales 61,236 59,364 115,386 111,470 Selling & administrative expenses 68,507 62,816 131,394 120,173 -------- -------- -------- -------- Operating profit 21,581 20,895 36,426 34,909 Other income (expense): Interest expense (1,491) (1,223) (2,695) (2,194) Interest and investment income 165 204 346 392 Other - net 854 (349) 1,323 176 -------- -------- -------- -------- Income before income taxes 21,109 19,527 35,400 33,283 Income taxes 7,388 6,834 12,390 11,649 -------- -------- -------- -------- Net income $ 13,721 $ 12,693 $ 23,010 $ 21,634 ======== ======== ======== ======== Weighted average common shares and common share equivalents 18,271 18,654 18,298 18,720 ======== ======== ======== ======== Primary earnings per share $ .75 $ .68 $ 1.26 $ 1.16 ======== ======== ======== ======== Dividends per common share $ .18 $ .16 $ .36 $ .32 ======== ======== ======== ======== <FN> See accompanying notes. </TABLE> 3
<TABLE> <CAPTION> NORDSON CORPORATION CONDENSED CONSOLIDATED BALANCE SHEET (Dollars in thousands) April 28, 1996 October 29, 1995 -------------- ---------------- <S> <C> <C> ASSETS Current assets: Cash and cash equivalents $ 5,942 $ 359 Marketable securities 710 1,225 Receivables 136,283 146,846 Inventories 116,829 110,198 Deferred income taxes 23,820 21,858 Prepaid expenses 4,498 5,455 -------- -------- Total current assets 288,082 285,941 Property, plant and equipment 199,208 188,295 Less accumulated depreciation and amortization of property, plant and equipment (94,939) (88,796) Intangible assets - net 43,902 31,768 Other assets 19,306 17,502 -------- -------- $455,559 $434,710 ======== ======== LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities: Notes payable $ 69,797 $ 43,197 Accounts payable 27,264 28,250 Current portion of long-term debt 5,581 6,465 Other current liabilities 66,545 77,467 -------- -------- Total current liabilities 169,187 155,379 Long-term debt 16,483 17,134 Other liabilities 32,021 30,867 Shareholders' equity: Common shares 12,253 12,253 Other shareholders' equity 225,615 219,077 -------- -------- Total shareholders' equity 237,868 231,330 -------- -------- $455,559 $434,710 ======== ======== <FN> See accompanying notes. </TABLE> 4
<TABLE> <CAPTION> NORDSON CORPORATION CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS (Dollars in thousands) Twenty-Six Weeks Ended April 28, 1996 April 30, 1995 -------------- -------------- <S> <C> <C> Cash flows from operating activities: Net income $23,010 $21,634 Changes in working capital (10,703) (8,880) Other - net 6,451 6,706 ------- ------- 18,758 19,463 Cash flows from investing activities: Additions to property, plant and equipment (11,667) (9,932) Proceeds from sale of property, plant and equipment 10 1,700 Acquisition of new businesses (11,647) (4,097) Proceeds from sale of marketable securities 515 2,961 ------- ------- (22,789) ( 9,368) Cash flows from financing activities: Proceeds from notes payable 27,448 15,007 Payment of long-term debt (2,922) (3,148) Issuance of common shares 1,833 967 Purchase of treasury shares (9,890) (13,510) Dividends paid (6,460) (5,868) ------- ------- 10,009 ( 6,552) Effect of exchange rate changes (395) 616 ------- ------- Increase in cash 5,583 4,159 Cash and cash equivalents Beginning of fiscal year 359 4,578 ------- ------- End of period $ 5,942 $ 8,737 ======= ======= <FN> See accompanying notes. </TABLE> 5
NORDSON CORPORATION NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS April 28, 1996 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 twenty-six week period ended April 28, 1996 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 29, 1995. 2. INVENTORIES. Inventories consisted of the following (in thousands of dollars): April 28, 1996 October 29, 1995 -------------- ---------------- Finished goods $ 39,856 $ 42,246 Work-in-process 19,891 14,355 Raw materials and finished parts 57,081 53,597 -------- -------- $116,829 $110,198 ======== ======== 3. ACQUISITIONS. On January 29, 1996, the Company acquired the shares of Spectral Technology Group Limited ("Spectral"), Slough, England. Spectral, which has annual sales of approximately $13 million, designs, manufactures and markets ultraviolet curing systems used to accelerate the drying of inks and coatings in the printing, packaging, metal decorating, wood finishing, electronics and plastics industries. The acquisition, which was financed through a combination of short-term and long-term borrowing, was accounted for as a purchase. Costs in excess of businesses acquired for this and other acquisitions are amortized over periods not exceeding 20 years. Assuming that the acquisition had taken place at the beginning of 1996 and 1995, pro forma results for 1996 and 1995, respectively, would not be materially different. 6
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION The following is Management's discussion and analysis of certain significant factors affecting the Company's results of operations and financial condition for the periods included in the accompanying condensed consolidated financial statements. RESULTS OF OPERATIONS SALES - ----- Sales for the second quarter and year-to-date 1996 increased 5.8% and 6.2%, respectively, over the comparable 1995 periods as a result of price/volume gains, which were offset by unfavorable currency effects. In the second quarter, price/volume changes accounted for a 6.8% increase in sales, while for the year-to-date, they accounted for a 6.3% increase. In both the second quarter and year-to-date periods, the Company experienced volume gains in three of its four geographic regions. In Europe, sales volume was up 10.6% over the second quarter of 1995 and increased 12.4% over the first half of 1995. Results in Europe were influenced by very strong activity in the Company's powder and nonwoven businesses, along with steady improvement in its packaging and product assembly businesses. Sales of ultraviolet curing equipment also contributed to European growth during the second quarter. Local sales volume in Japan rose 14.0% and 20.5% over the second quarter and year-to-date periods, respectively, of 1995. Growth in Japan resulted from improvements across most of the Company's businesses. In the Pacific South region, local sales volume for the second quarter and first half of 1996 increased 26.7% and 26.4%, respectively, over the prior year periods. Growth in Mexico and continued expansion in Asia were significant contributors to this performance. North American sales volume in the second quarter and first half of 1996 decreased 2.6% and 7.0%, respectively, from the comparable 1995 periods due primarily to reduced demand for engineered systems. Price increases averaging 0.6% 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 1996 comprised approximately 64.9% of total sales. Translating international sales at exchange rates reflecting a generally stronger U.S. dollar as compared to the prior year had the effect of decreasing sales by 1.0% for the second quarter and 0.1% for the first half of 1996. 7
OPERATING PROFIT - ---------------- For the second quarter of 1996, operating profit, as a percent of sales, decreased to 14.3% from 14.6% in 1995. Year-to-date operating profit declined to 12.9% of sales for 1996, from 13.1% in the same period in 1995. As a percent of sales, gross margins increased for both the second quarter and year-to-date periods of 1996 as compared to 1995. These increases can be attributed to the mix of products sold, offset by unfavorable currency effects. Selling and administrative expenses for the second quarter and first half of 1996 increased 9.1% and 9.3%, respectively. These increases are due to higher sales volumes, operating expenses of recent acquisitions and continuing programs for product and market expansion. NET INCOME - ---------- For the second quarter of 1996, net income, as a percent of sales, increased to 9.1% from 8.9% for the same period of 1995. Year-to-date income was 8.1% of sales, unchanged from 1995. In addition to the factors impacting operating profit discussed above, the Company experienced currency exchange gains in the current year compared with currency exchange losses in the prior year. Currency exchange gains and losses are included in other-net. Also, interest expense increased due to higher average outstanding short-term borrowings. FOREIGN CURRENCY EFFECTS - ------------------------ In the aggregate, average exchange rates for second quarter and year-to-date 1996 used to translate international sales and operating results into U.S. dollars compared unfavorably with average exchange rates existing during the comparable 1995 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 structures in each country in which the Company operates. However, if transactions for the second quarter 1996 were translated at exchange rates in effect during 1995, sales would have been approximately $1,400,000 higher while third-party costs and expenses would have been $300,000 higher. If transactions for year-to-date 1996 were translated at exchange rates in effect during 1995, sales would have been approximately $200,000 higher and third-party costs and expenses $1,000,000 lower. FINANCIAL CONDITION During the first half of 1996, net assets increased $6,538,000. This increase is primarily due to earnings of $23,010,000, offset by net repurchases of Nordson stock totalling $8,057,000, the payment of $6,460,000 in dividends and a decrease of $2,811,000 from translating foreign net assets at the end of the second quarter when the U.S. dollar was stronger against other currencies than at the prior year-end. 8
Working capital, as of the end of the quarter, decreased $11,667,000 over the prior year-end. This change consisted primarily of a decrease in accounts receivable and increases in notes payable, offset by increases in cash and cash equivalents and inventories and a decrease in other current liabilities. Receivables decreased due to lower sales in the second quarter of 1996 as compared to the fourth quarter of 1995. Notes payable increased to meet current operating needs and to finance the acquisition of Spectral. Inventories grew in anticipation of increased demand for Nordson products. Other current liabilities decreased due to the payment of fiscal 1995 bonuses and other employee benefits accrued for at fiscal 1995 year-end. Cash and cash equivalents increased $5,583,000 during the first half of 1996. Uses for cash included outlays for capital expenditures, the acquisition of Spectral, repurchases of Nordson stock and dividends. Cash from operations and net proceeds from notes payable were used to finance the above cash uses. Available lines of credit are expected to be more than adequate to meet cash requirements for operations over the next year. The increase in intangible assets-net is primarily due to the acquisition of Spectral. 9
Part II - Other Information Item 4. Submission of Matters to a Vote of Security Holders The Annual Meeting of Shareholders of Nordson Corporation was held on March 7, 1996 for the purpose of electing three directors. All of management's nominees for directors, as listed in the proxy statement, were elected by the following votes: Dr. Glenn R. Brown: For 16,965,013 Withheld 57,533 Dr. Anne O. Krueger: For 16,964,677 Withheld 57,889 Eric T. Nord: For 16,962,481 Withheld 60,065 In addition to the above directors, the following directors' terms of office continued after the meeting: William W. Colville, William D. Ginn, Stephen R. Hardis, William P. Madar, Evan W. Nord and William L. Robinson. 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 April 28, 1996. 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: June 11, 1996 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