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
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Commission file number 0-7977
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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
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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
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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 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
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<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
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<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
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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
<PAGE>
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
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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
<PAGE>
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
<PAGE>
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
<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: 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
<PAGE>
NORDSON CORPORATION
EXHIBIT INDEX
Page Number
Exhibit 11 Calculation of Earnings Per Share 13
Exhibit 27 Financial Data Schedule 14
12
<TABLE>
<CAPTION>
Exhibit 11
NORDSON CORPORATION
CALCULATION OF EARNINGS PER SHARE
(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>
PRIMARY:
Weighted average number
of common shares
outstanding during
the period 17,388 17,920 17,453 17,944
Effect of Company
stock plans based on
the treasury stock
method using average
market price 272 351 312 354
------- ------- ------- ------
Total weighted average
common shares and
common share
equivalents 17,660 18,271 17,765 18,298
======= ======= ======= ======
Net income $ 8,910 $13,721 $18,147 $23,010
======= ======= ======= =======
Earnings per share $ .50 $ .75 $ 1.02 $ 1.26
======= ======= ======= ======
FULLY DILUTED:
Weighted average number
of common shares
outstanding during
the period 17,388 17,920 17,453 17,944
Effect of Company
stock plans based on
the treasury stock
method using the
higher of ending or
average market price 272 399 346 378
------- ------- ------- ------
Total weighted average
common shares and
common share
equivalents 17,660 18,319 17,799 18,322
======= ======= ======= ======
Net income $ 8,910 $13,721 $18,147 $23,010
======= ======= ======= =======
Earnings per share $ .50 $ .75 $ 1.02 $ 1.26
======= ======= ======= ======
13
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> NOV-02-1997
<PERIOD-END> MAY-04-1997
<CASH> 6973
<SECURITIES> 210
<RECEIVABLES> 143790
<ALLOWANCES> 3245
<INVENTORY> 125747
<CURRENT-ASSETS> 304305
<PP&E> 208154
<DEPRECIATION> 103264
<TOTAL-ASSETS> 491768
<CURRENT-LIABILITIES> 209049
<BONDS> 0
0
0
<COMMON> 12253
<OTHER-SE> 213006
<TOTAL-LIABILITY-AND-EQUITY> 491768
<SALES> 293405
<TOTAL-REVENUES> 293405
<CGS> 123797
<TOTAL-COSTS> 123797
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 365
<INTEREST-EXPENSE> 4012
<INCOME-PRETAX> 27706
<INCOME-TAX> 9559
<INCOME-CONTINUING> 18147
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 18147
<EPS-PRIMARY> 1.02
<EPS-DILUTED> 1.02
</TABLE>
