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 May 4, 1997 ----------------------- 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 May 4, 1997: 17,265,594 Page 1
NORDSON CORPORATION INDEX Part I - Financial Information Page Number Condensed Consolidated Statement of Income - Thirteen and Twenty-Six Weeks ended May 4, 1997 and April 28, 1996 3 Condensed Consolidated Balance Sheet - May 4, 1997 and November 3, 1996 4 Condensed Consolidated Statement of Cash Flows - Twenty-Six Weeks ended May 4, 1997 and April 28, 1996 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 May 4, April 28, May 4, April 28, 1997 1996 1997 1996 ----------- ----------- ----------- ---------- <S> <C> <C> <C> <C> Sales $156,144 $151,324 $293,405 $283,206 Cost of sales 68,336 61,236 123,797 115,386 Selling & administrative expenses 73,350 68,507 139,580 131,394 --------- --------- --------- -------- Operating profit 14,458 21,581 30,028 36,426 Other income (expense): Interest expense (2,094) (1,491) (4,012) (2,695) Interest and investment income 156 165 371 346 Other - net 1,083 854 1,319 1,323 -------- -------- -------- -------- Income before income taxes 13,603 21,109 27,706 35,400 Income taxes 4,693 7,388 9,559 12,390 -------- -------- -------- -------- Net income $ 8,910 $ 13,721 $ 18,147 $ 23,010 ======== ======== ======== ======== Weighted average common shares and common share equivalents 17,660 18,271 17,765 18,298 ======== ======== ======== ======== Primary earnings per share $ .50 $ .75 $ 1.02 $ 1.26 ======== ======== ======== ======== Dividends per common share $ .20 $ .18 $ .40 $ .36 ======== ======== ======== ======== <FN> See accompanying notes. </TABLE> 3
<TABLE> <CAPTION> NORDSON CORPORATION CONDENSED CONSOLIDATED BALANCE SHEET (Dollars in thousands) May 4, 1997 November 3, 1996 ------------- --------------- <S> <C> <C> ASSETS Current assets: Cash and cash equivalents $ 6,973 $ 9,221 Marketable securities 210 310 Receivables 140,545 159,573 Inventories 125,747 118,388 Deferred income taxes 23,958 23,368 Prepaid expenses 6,872 6,842 -------- -------- Total current assets 304,305 317,702 Property, plant and equipment 208,154 207,080 Less accumulated depreciation and amortization of property, plant and equipment (103,264) (100,062) Intangible assets - net 62,080 65,282 Other assets 20,493 20,491 -------- -------- $491,768 $510,493 ======== ======== LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities: Notes payable $112,067 $ 97,688 Accounts payable 30,035 35,022 Current portion of long-term debt 5,461 5,152 Other current liabilities 61,486 69,354 -------- -------- Total current liabilities 209,049 207,216 Long-term debt 18,174 20,562 Other liabilities 39,286 37,418 Shareholders' equity: Common shares 12,253 12,253 Capital in excess of stated value 69,890 63,996 Cumulative translation adjustments 1,554 7,392 Retained earnings 392,604 381,436 Common shares in treasury, at cost (250,550) (219,398) Deferred stock-based compensation (492) (382) -------- -------- Total shareholders' equity 225,259 245,297 -------- -------- $491,768 $510,493 ======== ======== <FN> See accompanying notes. </TABLE> 4
<TABLE> <CAPTION> NORDSON CORPORATION CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS (Dollars in thousands) Twenty-Six Weeks Ended May 4, 1997 April 28, 1996 ---------- ----------- <S> <C> <C> Cash flows from operating activities: Net income $18,147 $23,010 Changes in working capital (8,317) (10,703) Other - net 14,987 6,451 -------- -------- 24,817 18,758 Cash flows from investing activities: Additions to property, plant and equipment (7,676) (11,667) Proceeds from sale of property, plant and equipment 57 10 Acquisition of new businesses -- (11,647) Proceeds from sale of marketable securities 100 515 -------- -------- (7,519) (22,789) Cash flows from financing activities: Net proceeds from notes payable 17,378 27,448 Payment of long-term debt (3,571) (2,922) Issuance of common shares 2,569 1,833 Purchase of treasury shares (28,097) (9,890) Dividends paid (6,979) (6,460) -------- -------- (18,700) 10,009 Effect of exchange rate changes (846) (395) -------- -------- (Decrease) increase in cash (2,248) 5,583 Cash and cash equivalents Beginning of fiscal year 9,221 359 -------- -------- End of period $ 6,973 $ 5,942 ======== ======== <FN> See accompanying notes. </TABLE> 5
NORDSON CORPORATION NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS May 4, 1997 1. BASIS FOR 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 May 4, 1997 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 November 3, 1996. 2. USE OF ESTIMATES The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the amounts reported in the consolidated financial statements. Actual amounts could differ from these estimates. Estimates are reevaluated frequently, and changes in estimates are recorded throughout the year. During the first quarter of fiscal 1997, an accrual representing the Company's estimated annual obligation to its Employee Stock Ownership Plan was reduced by $1.4 million to reflect the actual amount contributed. 3. INVENTORIES Inventories consisted of the following (in thousands of dollars): May 4, 1997 November 3, 1996 -------------- ---------------- Finished goods $ 49,401 $43,818 Work-in-process 16,326 14,083 Raw materials and finished parts 60,020 60,487 -------- -------- $125,747 $118,388 ======== ======== 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 1997 increased 3% and 4%, respectively, over the comparable 1996 periods. Price/volume gains of 8% for both periods were partially offset by unfavorable currency effects. In both the second quarter and year-to-date periods, the Company experienced volume gains in all four of its geographic regions. In North America, sales volume for the second quarter and first half of 1997 increased 15% and 14%, respectively, over the prior year periods. Results in North America were primarily attributable to continued strong sales of automated fluid dispensing equipment. Local sales volume in the Pacific Rim countries and Latin America increased 3% and 9% over the prior year's second quarter and year-to-date periods, respectively, due primarily to growth in Brazil and China. European activity was up 4% over the second quarter of 1996 and rose 3% over the first half of 1996. Volume gains in Europe were driven by increased sales of adhesive dispensing equipment used in packaging and product assembly applications. Shipments in Japan increased 2% over the second quarter of 1996 and were up marginally over the first half of 1996. Gains were concentrated in packaging and product assembly system sales, as well as electronics sales. Sales to international customers for year-to-date 1997 comprised approxi- mately 61% 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 5% for the second quarter and 4% for the first half of 1997. OPERATING PROFIT - ---------------- For the second quarter of 1997, operating profit, as a percent of sales, decreased to 9.3% from 14.3% in 1996. Year-to-date operating profit declined to 10.2% of sales for 1997, from 12.9% in the same period in 1996. As a percent of sales, gross margins decreased for both the second quarter and year-to-date periods of 1997 as compared to 1996. These decreases can be attributed to the mix of products sold, as well as unfavorable currency effects. Selling and administrative expenses for the second quarter and first half of 1997 increased 7.1% and 6.2%, respectively, due to higher sales volumes and continuing programs for product and market expansion. 7
NET INCOME - ---------- For the second quarter of 1997, net income, as a percent of sales, decreased to 5.7% from 9.1% for the same period of 1996. Year-to-date income was 6.2% of sales, compared to 8.1% for the first half of 1997. In addition to the factors impacting operating profit discussed above, year-to-date interest expense increased $1,317,000 due to higher levels of short-term borrowing, driven primarily by the funding of two 1996 business acquisitions and continuing repurchases of Nordson stock. FOREIGN CURRENCY EFFECTS - ------------------------ In the aggregate, average exchange rates for second quarter and year-to-date 1997 used to translate international sales and operating results into U.S. dollars compared unfavorably with average exchange rates existing during the comparable 1996 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 1997 were translated at exchange rates in effect during 1996, sales would have been approximately $7,200,000 higher while third-party costs and expenses would have been $4,700,000 higher. If transactions for year-to-date 1997 were translated at exchange rates in effect during 1996, sales would have been approximately $10,600,000 higher and third-party costs and expenses $7,000,000 higher. FINANCIAL CONDITION During the first half of 1997, net assets decreased $20,038,000. This decrease is primarily attributable to net repurchases of Nordson stock amounting to $25,528,000, the payment of $6,979,000 in dividends, and a reduction of $5,838,000 from translating foreign net assets at the end of the second quarter when the U.S. dollar was generally stronger against other currencies than at the prior year end, offset by earnings of $18,147,000. Working capital, as of the end of the quarter, decreased $15,230,000 over the prior year-end. This change consisted primarily of decreases in cash and cash equivalents and accounts receivable and increases in notes payable, offset by increases in inventories and decreases in accounts payable and other current liabilities. All balances reflect decreases from the effects of translating amounts denominated in generally weaker foreign currencies into U.S. dollars. In addition, receivables decreased from the collection of year-end receivables arising from strong sales in the fourth quarter of 1996, notes payable increased from net borrowings, inventories grew in anticipation of demand for Nordson products, accounts payable decreased from the repayment of additional purchases at year end, and other current liabilities decreased due to the payment of fiscal 1996 bonuses and other employee benefits. Cash and cash equivalents decreased $2,248,000 during the first half of 1997. Cash provided by the net proceeds from notes payable was $17,378,000. Uses for cash included purchases of treasury shares, outlays for capital expenditures, and dividends. Available lines of credit continue to be more than adequate to meet cash requirements for operations over the next year. 8
OUTLOOK Although we are disappointed with sales performance for the first half of the year, we are encouraged by Nordson's current pace of business activity. Orders placed through the first half of the year are up 15 percent from the first half of 1996, and our backlog is at a record level. For the second half of 1997, worldwide volume growth over the comparable period in the prior year is expected to reach 15%. Gross margins, expressed as a percentage of sales, are expected to remain at first half levels. Selling and administrative expenses should grow at a lower rate than sales in the second half of 1997. Currency effects should continue to have a negative impact on reported sales and overall results. Currency effects are expected to reduce second half reported sales by approximately $17 million. SAFE HARBOR STATEMENT UNDER THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995 The statements in the preceding paragraph are "forward-looking statements" intended to qualify for the protection afforded by the Private Securities Litigation Reform Act of 1995. These forward-looking statements are based on current expectations and involve risks and uncertainties. Consequently, the Company's actual results could differ materially from the expectations expressed in the forward-looking statements. Factors that could cause the Company's actual results to differ materially from the expected results include deferral of orders, customer-requested delays in system installations, currency exchange rate fluctuations, a sales mix different from assumptions, and significant changes in local business conditions in geographic regions in which we conduct business. 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 13, 1997 for the purpose of electing four directors, and approving an amendment to the Nordson Corporation 1993 Long-Term Performance Plan. All of management's nominees for directors, as listed in the proxy statement, were elected by the following votes: Edward P. Campbell: For 16,104,977 Withheld 105,746 William W. Colville: For 16,104,430 Withheld 106,293 William P. Madar: For 16,097,021 Withheld 113,702 Evan W. Nord: For 16,099,161 Withheld 111,562 In addition to the above directors, the following directors' terms of office continued after the meeting: Dr. Glenn R. Brown, William D. Ginn, Stephen R. Hardis, Dr. Anne O. Krueger, Eric T. Nord and William L. Robinson. The Amendment to the Nordson Corporation 1993 Long-Term Performance Plan was approved by the following votes: For: 15,379,771 Against: 466,940 Abstain: 246,867 Non Vote: 117,145 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 May 4, 1997. 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 12, 1997 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