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 February 2, 1997
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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 no. 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 FEBRUARY 2, 1997: 17,464,702
Page 1
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NORDSON CORPORATION
INDEX
Part I - Financial Information Page Number
Condensed Consolidated Statement of Income -
Thirteen Weeks Ended February 2, 1997 and
January 28, 1996 3
Condensed Consolidated Balance Sheet -
February 2, 1997 and November 3, 1996 4
Condensed Consolidated Statement of Cash
Flows - Thirteen Weeks Ended February 2, 1997
and January 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 6, Exhibits and Reports on Form 8-K 10
Signature 11
Exhibit Index 12
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)
Thirteen Weeks Ended
February 2, 1997 January 28, 1996
---------------- ----------------
<S> <C> <C>
Sales $137,261 $131,882
Cost of sales 55,461 54,150
Selling & administrative expenses 66,230 62,887
------- -------
Operating profit 15,570 14,845
Other income (expense):
Interest expense (1,918) (1,204)
Interest and investment income 215 181
Other - net 236 469
------- -------
Income before income taxes 14,103 14,291
Income taxes 4,866 5,002
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Net income $ 9,237 $ 9,289
======= =======
Weighted average common shares and
common share equivalents 17,870 18,317
======= =======
Primary earnings per share $ .52 $ .51
======= =======
Dividends per common share $ .20 $ .18
======= =======
<FN>
See accompanying notes.
</TABLE>
3
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<TABLE>
<CAPTION>
NORDSON CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEET
(Dollars in thousands)
February 2, 1997 November 3, 1996
---------------- ----------------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 4,748 $ 9,221
Marketable securities 210 310
Receivables 146,026 159,573
Inventories 128,301 118,388
Deferred income taxes 24,781 23,368
Prepaid expenses 6,592 6,842
-------- --------
Total current assets 310,658 317,702
Property, plant and equipment 209,420 207,080
Less accumulated depreciation and
amortization of property, plant
and equipment (102,697) (100,062)
Intangible assets - net 64,167 65,282
Other assets 20,566 20,491
-------- --------
$502,114 $510,493
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Notes payable $114,452 $ 97,688
Accounts payable 26,145 35,022
Current portion of long-term debt 5,249 5,152
Other current liabilities 59,220 69,354
-------- --------
Total current liabilities 205,066 207,216
Long-term debt 20,247 20,562
Other liabilities 38,677 37,418
Shareholders' equity:
Common shares 12,253 12,253
Capital in excess of stated value 68,192 63,996
Cumulative translation adjustments 6,939 7,392
Retained earnings 387,173 381,436
Common shares in treasury, at cost (235,857) (219,398)
Deferred stock-based compensation (576) (382)
-------- --------
Total shareholders' equity 238,124 245,297
-------- --------
$502,114 $510,493
======== ========
<FN>
See accompanying notes.
</TABLE>
4
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<TABLE>
<CAPTION>
NORDSON CORPORATION
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
(Dollars in thousands)
Thirteen Weeks Ended
February 2, 1997 January 28, 1996
---------------- ----------------
<S> <C> <C>
Cash flows from operating activities:
Net income $ 9,237 $ 9,289
Changes in operating assets
and liabilities (15,230) (12,010)
Other - net 4,722 5,594
------- -------
(1,271) 2,873
Cash flows from investing activities:
Additions to property, plant
and equipment (3,509) (5,169)
Proceeds from sale of marketable
securities 100 515
------- -------
(3,409) (4,654)
Cash flows from financing activities:
Net proceeds from notes payable 17,695 13,961
Payment of long-term debt (1,123) (1,179)
Issuance of common shares 1,529 159
Purchase of treasury shares (14,066) (6,918)
Dividends paid (3,500) (3,237)
------- -------
535 2,786
Effect of exchange rate changes (328) (209)
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Increase (decrease) in cash (4,473) 796
Cash and cash equivalents
Beginning of fiscal year 9,221 359
------- -------
End of period $ 4,748 $ 1,155
======= =======
<FN>
See accompanying notes.
</TABLE>
5
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NORDSON CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
February 2, 1997
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 thirteen week period ended February 2, 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):
February 2, 1997 November 3, 1996
---------------- ----------------
Finished goods $ 49,057 $ 43,818
Work-in-process 16,575 14,083
Raw materials and
finished parts 62,669 60,487
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$128,301 $118,388
======== ========
6
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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 first quarter of 1997 increased 4% over the comparable 1996
period. Price/volume gains of 7% were partially offset by unfavorable
currency effects. Our North American and Pacific South divisions experienced
double-digit sales growth, while revenues from our operations in Europe and
Japan reflected the combined effects of slower economic growth and a stronger
U.S. dollar.
Price/volume gains were experienced in three of our four geographic regions.
Gains in North America were 14% over the first quarter of 1996. Results in
North America were attributed in part to strong sales of automated fluid
dispensing equipment, as well as increased sales of adhesive dispensing
systems for packaging and product assembly applications. Activity in the
Pacific Rim countries and Latin America grew 17% due primarily to strong
performance in China and South America. Shipments were up 2% in Europe and
down 1% in Japan. These results were impacted by generally slow economic
activity across a number of countries in these regions, as well as specific
customer delays in order placement. Price increases averaging 2% 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 1997 comprised approxi-
mately 63% of total sales. Translating international sales at generally
higher average exchange rates as compared to the same period in the prior
year decreased sales by 3% for the first quarter.
OPERATING PROFIT
- ----------------
Operating profit, as a percentage of sales was 11.3% for both the first
quarter 1997 and the first quarter 1996. Compared to the first quarter of
the prior year, gross margins, expressed as a percentage of sales, increased
to 59.6% from 58.9%. The increase in margins is attributable to changes in
the mix of products sold, offset by unfavorable currency effects. The
increase in selling and administrative expenses over the first quarter 1996
of 5.3% can be attributed to increased sales volume.
7
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NET INCOME
- ----------
Net income, as a percentage of sales, decreased from 7.0% to 6.7% for first
quarter 1997 as compared to first quarter 1996. This decrease results from
the factors discussed above, as well as increased interest expense. Interest
expense increased $714,000 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 first quarter 1997 used to
translate international sales and operating results into U.S. dollars
compared unfavorably with average exchange rates which existed during the
comparable 1996 period. 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, the
Company estimates that first quarter sales would have been approximately
$3,400,000 higher and third-party costs would have been $2,400,000 higher if
exchange rates for 1996 had been in effect during 1997.
FINANCIAL CONDITION
During the first quarter of 1997, net assets decreased $7,173,000. This
decrease is primarily attributable to net repurchases of Nordson stock
amounting to $12,537,000, the payment of $3,500,000 in dividends, and a
reduction of $453,000 from translating foreign net assets at the end of the
first quarter when the U.S. dollar was generally stronger against other
currencies than at the prior year end, offset by earnings of $9,237,000.
Working capital decreased $4,894,000 during the quarter. This change
consisted primarily of decreases in cash and cash equivalents and receivables
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 increased 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 $4,473,000 during the quarter. Cash
provided by the net proceeds from notes payable was $17,695,000. 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 additional cash requirements over the next year.
8
<PAGE>
OUTLOOK
Based on information available through the second week of February, our
outlook for the second quarter is that the trend in worldwide local sales
volume is improving. Worldwide volume growth from the second quarter of the
previous year is expected to be in the range of 12% to 14%. Gross margins,
expressed as a percentage of sales, are expected to be lower in the second
quarter than in the first quarter of the year, due primarily to the mix of
products sold and currency effects. The growth rate of selling and
administration expenses in the second quarter over the comparable period in
the prior year should be lower than the sales growth rate. However, based on
currency exchange rates through the second week of March, currency effects
should continue to have a negative impact on reported results. Currency
rates are expected to reduce reported sales by approximately $7 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, 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
<PAGE>
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
February 2, 1997.
10
<PAGE>
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: March 18, 1997 Nordson Corporation
/s/ Nicholas D. Pellecchia
---------------------------
Nicholas D. Pellecchia
Vice President, Finance
and Controller
(Principal Financial Officer
and Chief Accounting
Officer)
11
<PAGE>
NORDSON CORPORATION
EXHIBIT INDEX
Page Number
Exhibit 11 Calculation of Earnings Per Share 13
Exhibit 27 Financial Data Schedule 14
12
Exhibit 11
NORDSON CORPORATION
CALCULATION OF EARNINGS PER SHARE
(Dollars and shares in thousands except for per share amounts)
Thirteen Weeks Ended
February 2, 1997 January 28, 1996
---------------- ----------------
PRIMARY:
Weighted average number of common
shares outstanding during the
period 17,518 17,960
Effect of Company stock plans
based on the treasury stock
method using average market
price 352 357
------ ------
Total weighted average common shares
and common share equivalents 17,870 18,317
====== ======
Net income $9,237 $9,289
====== ======
Earnings per share $ .52 $ .51
====== ======
FULLY DILUTED:
Weighted average number of common
shares outstanding during the
period 17,518 17,960
Effect of Company stock plans
based on the treasury stock
method using the higher of
ending or average market
price 420 357
------ ------
Total weighted average common shares
and common share equivalents 17,938 18,317
====== ======
Net income $9,237 $9,289
====== ======
Earnings per share $ .51 $ .51
====== ======
13
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> NOV-02-1997
<PERIOD-END> FEB-02-1997
<CASH> 4748
<SECURITIES> 210
<RECEIVABLES> 149527
<ALLOWANCES> 3501
<INVENTORY> 128301
<CURRENT-ASSETS> 310658
<PP&E> 209420
<DEPRECIATION> 102697
<TOTAL-ASSETS> 502114
<CURRENT-LIABILITIES> 205066
<BONDS> 0
0
0
<COMMON> 12253
<OTHER-SE> 225871
<TOTAL-LIABILITY-AND-EQUITY> 502114
<SALES> 137261
<TOTAL-REVENUES> 137261
<CGS> 55461
<TOTAL-COSTS> 55461
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 109
<INTEREST-EXPENSE> 1918
<INCOME-PRETAX> 14103
<INCOME-TAX> 4866
<INCOME-CONTINUING> 9237
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 9237
<EPS-PRIMARY> .52
<EPS-DILUTED> .51
</TABLE>
