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 August 4, 1996
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OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
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Commission file number 0-7977
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NORDSON CORPORATION
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(Exact name of registrant as specified in its charter)
Ohio 34-0590250
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(State or other jurisdiction of (I.R.S Employer Identification No.)
incorporation or organization)
28601 Clemens Road, Westlake, Ohio 44145
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (216) 892-1580
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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 AUGUST 4, 1996: 17,853,896
Page 1
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NORDSON CORPORATION
INDEX
Part I - Financial Information Page Number
Condensed Consolidated Statement of Income -
Third Quarter and Three Quarters Ended
August 4, 1996 and July 30, 1995 3
Condensed Consolidated Balance Sheet -
August 4, 1996 and October 29, 1995 4
Condensed Consolidated Statement of Cash
Flows - Three Quarters Ended August 4,
1996 and July 30, 1995 5
Notes to Condensed Consolidated Financial
Statements 6-7
Management's Discussion and Analysis of
Financial Condition and Results of Operations 8-10
Part II - Other Information
Item 6, Exhibits and Reports on Form 8-K 11
Signature 12
Exhibit Index 13
2
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<TABLE>
<CAPTION>
Part I - Financial Information
NORDSON CORPORATION
CONDENSED CONSOLIDATED STATEMENT OF INCOME
(Dollars and shares in thousands except for per share amounts)
Third Quarter Ended Three Quarters Ended
August 4, July 30, August 4, July 30,
1996 1995 1996 1995
---------- --------- ---------- ---------
<S> <C> <C> <C> <C>
Sales $146,699 $155,152 $429,905 $421,704
Cost of sales 61,290 66,318 176,676 177,788
Selling &
administrative
expenses 66,708 65,429 198,102 185,602
-------- -------- -------- --------
Operating profit 18,701 23,405 55,127 58,314
Other income (expense):
Interest expense (1,259) (1,143) (3,954) (3,337)
Interest and
investment income 236 194 582 586
Other - net 335 170 1,658 346
-------- -------- -------- --------
Income before income
taxes 18,013 22,626 53,413 55,909
Income taxes 6,144 7,779 18,534 19,428
-------- -------- -------- ---------
Net income $ 11,869 $ 14,847 $ 34,879 $ 36,481
======== ======== ======== ========
Weighted average common
shares and common
share equivalents 18,227 18,514 18,275 18,652
======== ======== ======== ========
Primary earnings
per share $ .65 $ .80 $ 1.91 $ 1.96
======== ======== ======== ========
Dividends per
common share $ .18 $ .16 $ .54 $ .48
======== ======== ======== ========
<FN>
See accompanying notes.
</TABLE>
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<TABLE>
<CAPTION>
NORDSON CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEET
(Dollars in thousands)
August 4, 1996 October 29, 1995
-------------- ----------------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 7,907 $ 359
Marketable securities 310 1,225
Receivables 130,613 146,846
Inventories 118,442 110,198
Deferred income taxes 23,700 21,858
Prepaid expenses 4,237 5,455
-------- --------
Total current assets 285,209 285,941
Property, plant and equipment 200,577 188,295
Less accumulated depreciation and
amortization of property, plant
and equipment (97,576) (88,796)
Intangible assets - net 44,369 31,768
Other assets 19,704 17,502
-------- --------
$452,283 $434,710
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Notes payable $ 60,282 $ 43,197
Accounts payable 28,020 28,250
Current portion of long-term debt 5,531 6,465
Other current liabilities 66,436 77,467
-------- --------
Total current liabilities 160,269 155,379
Long-term debt 18,305 17,134
Other liabilities 32,984 30,867
Shareholders' equity:
Common shares 12,253 12,253
Other shareholders' equity 228,472 219,077
-------- --------
Total shareholders' equity 240,725 231,330
-------- --------
$452,283 $434,710
======== ========
<FN>
See accompanying notes.
</TABLE>
4
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<TABLE>
<CAPTION>
NORDSON CORPORATION
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
(Dollars in thousands)
Three Quarters Ended
August 4, 1996 July 30, 1995
-------------- -------------
<S> <C> <C>
Cash flows from operating activities:
Net income $34,879 $36,481
Changes in operating assets and
liabilities ( 9,872) (15,113)
Other - net 14,798 7,819
------- -------
39,805 29,187
Cash flows from investing activities:
Additions to property, plant
and equipment (15,113) (15,624)
Proceeds from sale of property,
plant and equipment 21 1,702
Acquisition of new businesses (11,693) (4,116)
Proceeds from sale of marketable
securities 915 4,461
------- -------
(25,870) (13,577)
Cash flows from financing activities:
Net proceeds from notes payable 18,335 15,765
Proceeds from long-term debt 2,620 651
Payment of long-term debt (4,721) (4,600)
Issuance of common shares 2,050 1,111
Purchase of treasury shares (14,271) (20,366)
Dividends paid (9,675) (8,777)
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(5,662) (16,216)
Effect of exchange rate changes on cash (725) 1,162
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Increase in cash 7,548 556
Cash and cash equivalents
Beginning of fiscal year 359 4,578
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End of period $ 7,907 $ 5,134
======= =======
<FN>
See accompanying notes.
</TABLE>
5
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NORDSON CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
August 4, 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 three quarters ended August
4, 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.
The fiscal year for the Company's domestic operations ends on the Sunday
closest to October 31 and in 1996, 1995 and 1994 contains 53, 52 and 52
weeks, respectively. Each quarter contains 13 weeks, except the third
quarter of 1996 which contains 14 weeks. For international operations, the
Company's fiscal year ends on September 30. Each quarter contains 3
calendar months.
2. INVENTORIES Inventories consisted of the following (in thousands of
dollars):
August 4, 1996 October 29, 1995
-------------- ----------------
Finished goods $ 43,150 $ 42,246
Work-in-process 17,856 14,355
Raw materials and
finished parts 57,436 53,597
-------- --------
$118,442 $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.
6
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On August 16, 1996, subsequent to the end of the third quarter, the Company
acquired Asymptotic Technologies, Inc. (known as Asymtek), a privately-held
company headquartered in Carlsbad, California, through a cash merger with a
subsidiary. Asymtek specializes in automated fluid dispensing technologies
that allow manufacturers of semi-conductors, circuit boards, and medical
devices to increase productivity by automatically applying a broad range of
fluids during the manufacturing process. Sales for the year ended June 30,
1996 were approximately $20 million. The acquisition, which was financed
with primarily short-term borrowings, will be accounted for as a purchase.
Costs in excess of businesses acquired for these and other acquisitions are
amortized over periods not exceeding 30 years. Assuming that these
acquisitions had taken place at the beginning of 1996 and 1995, pro forma
results for 1996 and 1995, respectively, would not be materially different.
7
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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 1996 decreased 5.4% over the comparable period
of 1995. Volume declines, primarily in North America, accounted for a .5%
decrease and unfavorable currency effects resulting from a stronger dollar
contributed the remainder. For the first three quarters of fiscal 1996,
sales increased 1.9% over 1995. Worldwide sales volume was up 3.8%, while
unfavorable currency exchange rates, primarily for the Japanese Yen,
reduced reported sales by 1.9%.
In the third quarter, sales volume in North America declined 13.3%
primarily due to reduced activity in sales of large custom-engineered
systems. Sales volume in Europe increased 9.8% due to growth in our
nonwoven business, as well as sales of ultraviolet curing systems. In the
Pacific South, volume increased 25.4% due to increased demand in our
packaging and powder markets. In Japan, local shipments were down 2.1%
although we continued to realize steady growth in our core packaging market
there.
For the year-to-date period, increased sales volume in Europe, Japan and
the Pacific South was offset by a decline in North American activity.
Sales volume in Europe rose 11.4%, reflecting strong activity in powder
coating, nonwovens and converting businesses. Sales of ultraviolet curing
systems also contributed to European growth. Local volume in Japan was up
12.7%, driven by sales growth in the container and packaging markets. In
the Pacific South region, local volume rose 26.1%, led by activity in our
Mexican and Asian operations. North American sales were 9.4% below prior
year levels, due to reduced sales of large custom-engineered systems.
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 1996 comprised approxi-
mately 64.4% 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 4.9% for the third quarter and
1.9% 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 1996, operating profit, as a percentage of sales,
decreased to 12.7% from 15.1% for the same period of 1995. Year-to-date
operating profit decreased to 12.8% of sales for 1996 from 13.8% in 1995.
8
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As a percentage of sales, gross margins increased slightly for both the
third quarter and year-to-date periods of 1996 as compared to the same
periods in 1995. These increases can be attributed to the mix of products
sold, offset by unfavorable currency effects.
Selling and administrative expenses increased 2.0% in the third quarter and
6.7% for the first three quarters over the comparable periods in the prior
year. Spending growth reflects changes in sales volume, operating expenses
of recent acquisitions and continuing programs for product and market
expansion.
NET INCOME
- ----------
For the third quarter of 1996, net income, as a percentage of sales, was
8.1%, compared with 9.6% for the same period of 1995. Year-to-date income
was 8.1% of sales in 1996 and 8.7% in 1995.
In addition to the factors impacting operating profit discussed above, the
Company recognized currency gains in the third quarter and through three
quarters of 1996 compared to smaller currency gains and small currency
losses in the respective periods of 1995. Also, the income tax rate was
lowered in the third quarter of 1996 and 1995 to reflect a year-to-date
effective rate of 34.7% and 34.8%, respectively.
FOREIGN CURRENCY EFFECTS
- ------------------------
In the aggregate, average exchange rates for the third 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 structure in each country in which the Company
operates. However, if transactions for the third quarter 1996 were
translated at exchange rates in effect during 1995, sales would have been
approximately $7,700,000 higher while third-party costs and expenses would
have been $4,800,000 higher. If transactions for year-to-date 1996 were
translated at exchange rates in effect during 1995, sales would have been
approximately $7,800,000 higher and third-party costs and expenses would
have been $3,800,000 higher.
FINANCIAL CONDITION
During the first three quarters of 1996, net assets increased $9,395,000.
This increase is primarily due to earnings of $34,879,000, offset by net
repurchases of Nordson stock totalling $12,220,000, the payment of
$9,675,000 in dividends and a decrease of $4,506,000 from translating
foreign net assets at the end of the third quarter when the U.S. dollar was
stronger against other currencies than at the prior year end.
9
<PAGE>
Cash and cash equivalents increased $7,548,000 during the first three
quarters of 1996. Uses for cash included outlays for capital expenditures,
net repurchases of Nordson stock, the acquisition of Spectral and
dividends. Cash from operations and net proceeds from notes payable were
used 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.
Working capital, as of the end of the quarter, decreased $5,622,000 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 third 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.
Property, plant and equipment increased due to facilities expansion and
improvements, primarily at our domestic locations. The acquisition of
Spectral also contributed to this increase, as well as to the increase in
intangible assets - net.
10
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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 August 4, 1996.
11
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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 13, 1996 Nordson Corporation
/s/ Nicholas D. Pellecchia
----------------------------
Vice President-Finance
and Controller
(Principal Financial Officer
and Chief Accounting Officer)
12
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NORDSON CORPORATION
EXHIBIT INDEX
Page Number
Exhibit 11 Calculation of Earnings Per Share 14
Exhibit 27 Financial Data Schedule 15
13
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<CAPTION>
Exhibit 11
NORDSON CORPORATION
CALCULATION OF EARNINGS PER SHARE
(Dollars and shares in thousands except for per share amounts)
Third Quarter Ended Three Quarters Ended
Aug 4, 1996 July 30, 1995 Aug 4, 1996 July 30, 1995
----------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
PRIMARY:
Weighted average number
of common shares
outstanding during
the period 17,903 18,147 17,931 18,273
Effect of Company
stock plans based on
the treasury stock
method 324 367 344 379
------- ------- ------- -------
Total weighted average
common shares and
common share
equivalents 18,227 18,514 18,275 18,652
======= ======= ======= =======
Net income $11,869 $14,847 $34,879 $36,481
======= ======= ======= =======
Earnings per share $ .65 $ .80 $ 1.91 $ 1.96
======= ======= ======= =======
FULLY DILUTED:
Weighted average number
of common shares
outstanding during
the period 17,903 18,147 17,931 18,273
Effect of Company
stock plans based on
the treasury stock
method 324 367 360 379
------- ------- ------- -------
Total weighted average
common shares and
common share
equivalents 18,227 18,514 18,291 18,652
======= ======= ======= =======
Net income $11,869 $14,847 $34,879 $36,481
======= ======= ======= =======
Earnings per share $ .65 $ .80 $ 1.91 $ 1.96
======= ======= ======= =======
14
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> NOV-03-1996
<PERIOD-END> AUG-04-1996
<CASH> 7907
<SECURITIES> 310
<RECEIVABLES> 134450
<ALLOWANCES> 3837
<INVENTORY> 118442
<CURRENT-ASSETS> 285209
<PP&E> 200577
<DEPRECIATION> 97576
<TOTAL-ASSETS> 452283
<CURRENT-LIABILITIES> 160269
<BONDS> 0
0
0
<COMMON> 12253
<OTHER-SE> 228472
<TOTAL-LIABILITY-AND-EQUITY> 452283
<SALES> 429905
<TOTAL-REVENUES> 429905
<CGS> 176676
<TOTAL-COSTS> 176676
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 559
<INTEREST-EXPENSE> 3954
<INCOME-PRETAX> 53413
<INCOME-TAX> 18534
<INCOME-CONTINUING> 34879
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 34879
<EPS-PRIMARY> 1.91
<EPS-DILUTED> 1.91
</TABLE>
