-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, CF1xiuxu1u9l0mcSjDOk9jBMvNgTrQqVQO9yiFek3Nxo5jsl36XDd6KztDkwJI2i aWwuHZz8e0rzy2L5+SsY2w== 0000072331-99-000001.txt : 19990317 0000072331-99-000001.hdr.sgml : 19990317 ACCESSION NUMBER: 0000072331-99-000001 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19990131 FILED AS OF DATE: 19990316 FILER: COMPANY DATA: COMPANY CONFORMED NAME: NORDSON CORP CENTRAL INDEX KEY: 0000072331 STANDARD INDUSTRIAL CLASSIFICATION: GENERAL INDUSTRIAL MACHINERY & EQUIPMENT, NEC [3569] IRS NUMBER: 340590250 STATE OF INCORPORATION: OH FISCAL YEAR END: 1103 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 000-07977 FILM NUMBER: 99566326 BUSINESS ADDRESS: STREET 1: 28601 CLEMENS RD CITY: WESTLAKE STATE: OH ZIP: 44145 BUSINESS PHONE: 2168921580 MAIL ADDRESS: STREET 1: 28601 CLEMENS ROAD CITY: WESTLAKE STATE: OH ZIP: 44145 10-Q 1 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 January 31, 1999 -------------------------- 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: (440) 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 JANUARY 31, 1999: 16,652,035 Page 1 NORDSON CORPORATION INDEX Part I - Financial Information Page Number Condensed Consolidated Statement of Income - Thirteen Weeks ended January 31, 1999 and February 1, 1998 3 Condensed Consolidated Balance Sheet - January 31, 1999 and November 1, 1998 4 Condensed Consolidated Statement of Cash Flows - Thirteen Weeks ended January 31, 1999 and February 1, 1998 5 Notes to Condensed Consolidated Financial Statements 6 Management's Discussion and Analysis of Financial Condition and Results of Operations 8 Part II - Other Information Item 6, Exhibits and Reports on Form 8-K 13 Signature 14 Exhibit Index 15 Page 2 Part I - Financial Information NORDSON CORPORATION CONDENSED CONSOLIDATED STATEMENT OF INCOME (Dollars and shares in thousands except for per share amounts) Thirteen Weeks Ended January 31, 1999 February 1, 1998 ------------------ ------------------ Sales $157,053 $139,226 Cost of sales 72,631 60,609 Selling & administrative expenses 72,200 69,731 -------- -------- Operating profit 12,222 8,886 Other income (expense): Interest expense (2,292) (2,291) Interest and investment income 206 115 Other - net 445 895 -------- -------- Income before income taxes 10,581 7,605 Income taxes 3,597 2,586 -------- -------- Net income $ 6,984 $ 5,019 ======== ======== Common Shares 16,666 16,749 Incremental common shares attributable to outstanding stock options, nonvested stock and deferred stock-based compensation 156 141 -------- -------- Common shares and common share equivalents 16,822 16,890 ======== ======== Earnings per share: Basic $ .42 $ .30 Diluted $ .42 $ .30 Dividends per common share $ .24 $ .22 See accompanying notes.
Page 3 NORDSON CORPORATION CONDENSED CONSOLIDATED BALANCE SHEET (Dollars in thousands) January 31, 1999 November 1, 1998 ---------------- ---------------- ASSETS Current assets: Cash and cash equivalents $ 11,178 $ 6,820 Marketable securities 30 30 Receivables 149,837 165,286 Inventories 128,452 124,352 Deferred income taxes 25,100 24,336 Prepaid expenses 6,441 7,652 -------- -------- Total current assets 321,038 328,476 Property, plant and equipment - net 107,370 101,183 Intangible assets - net 96,253 84,345 Other assets 24,770 24,940 -------- -------- $549,431 $538,944 ======== ======== LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities: Notes payable $118,656 $ 93,851 Accounts payable 29,579 33,753 Current portion of long-term debt 862 862 Other current liabilities 64,628 78,616 -------- -------- Total current liabilities 213,725 207,082 Long-term debt 71,814 70,444 Other liabilities 47,925 46,643 Shareholders' equity: Common shares 12,253 12,253 Capital in excess of stated value 94,053 92,030 Accumulated other comprehensive income (loss) (1,563) (4,792) Retained earnings 426,862 423,887 Common shares in treasury, at cost (315,341) (308,368) Deferred stock-based compensation (297) (235) -------- -------- Total shareholders' equity 215,967 214,775 -------- -------- $549,431 $538,944 ======== ======== See accompanying notes.
Page 4 NORDSON CORPORATION CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS (Dollars in thousands) Thirteen Weeks Ended January 31, 1999 February 1, 1998 ---------------- ---------------- Cash flows from operating activities: Net income $ 6,984 $ 5,019 Changes in operating assets and liabilities (2,456) (9,148) Other - net 6,960 6,906 ------- ------- 11,488 2,777 Cash flows from investing activities: Additions to property, plant and equipment (8,891) (4,127) Proceeds from sale of property, plant and equipment 100 -- Acquisition of new business (14,253) (504) Proceeds from sale of marketable securities -- 170 ------- ------- (23,044) (4,461) Cash flows from financing activities: Net proceeds from notes payable 24,478 17,713 Net proceeds (payment) of long-term debt 470 (1,020) Issuance of common shares 2,844 62 Purchase of treasury shares (7,917) (7,917) Dividends paid (4,008) (3,687) ------- ------- 15,867 5,151 Effect of exchange rate changes on cash 47 (875) ------- ------- Increase in cash 4,358 2,592 Cash and cash equivalents Beginning of fiscal year 6,820 1,517 ------- -------- End of period $11,178 $ 4,109 ======= ======= See accompanying notes.
Page 5 NORDSON CORPORATION NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS January 31, 1999 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 quarter ended January 31, 1999 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 1, 1998. 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. 3. INVENTORIES. Inventories consisted of the following (in thousands of dollars): January 31, 1999 November 1, 1998 ---------------- ---------------- Finished goods $ 48,123 $ 40,411 Work-in-process 19,955 24,914 Raw materials and finished parts 60,374 59,027 -------- -------- $128,452 $124,352 ======== ========
4. ACCOUNTING CHANGES. In the first quarter of 1999, the Company adopted Financial Accounting Standards Board Statement No. 130, "Reporting Comprehensive Income" (FAS 130). Comprehensive income includes net earnings and other revenues, expenses, gains and losses that are excluded from net earnings but included as a component of shareholders' equity. For the Company, the primary difference between net income and comprehensive income is foreign currency translation adjustments recorded in shareholders' equity. Page 6 The Company also adopted during the first quarter of 1999, Financial Accounting Standards Board Statement No. 131, "Disclosures about Segments of an Enterprise and Related Information" (FAS 131) and Statement No. 132, "Employers' Disclosures about Pensions and Other Postretirement Benefits" (FAS 132). The Company will include the required business segment and revised pension and other postretirement benefit disclosures in its October 31, 1999 Annual Report. The Financial Accounting Standards Board has issued the following statement which the Company has not yet adopted: Statement No. 133, "Accounting for Derivative Instruments and Hedging Activities" (FAS 133). FAS 133 establishes accounting and reporting standards for derivative instruments and hedging activities. The Company must adopt FAS 133 for fiscal year 2000. This statement is not expected to have a material effect on the financial statements. 5. COMPREHENSIVE INCOME. Comprehensive income for the thirteen weeks ended January 31, 1999 and February 1, 1998 is as follows: Thirteen Weeks Ended January 31, 1999 February 1, 1998 ---------------- ---------------- (in thousands) Net income $ 6,984 $ 5,019 Foreign currency translation adjustments 3,229 (2,513) ------- ------- Comprehensive income $10,213 $ 2,506 ======= =======
Accumulated other comprehensive income (loss), consisting entirely of accumulated foreign currency translation adjustments as of January 31, 1999 and February 1, 1998 is as follows: January 31, 1999 February 1, 1998 ---------------- ---------------- Beginning balance $(4,792) $ (977) Current-period change 3,229 (2,513) ------- ------- Ending balance $(1,563) $(3,490) ======= =======
6. ACQUISITIONS. Business acquisitions are accounted for as purchases, with the acquired assets and liabilities recorded at their fair value at the date of acquisition. The cost in excess of the net assets of the business acquired is included in intangible assets. In January, 1999, Nordson acquired a manufacturer of gas-plasma technology equipment located in St. Petersburg, Florida. Assuming the acquisition had taken place at the beginning of fiscal 1998, pro forma results would not be materially different. Page 7 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 Worldwide sales for the first quarter of 1999 were $157.1 million, a 12.8% increase over sales of $139.2 million for the comparable period of 1998. Price/volume gains increased 11.8% for the first quarter, while the effect of the weaker dollar on currency translations slightly increased reported sales by 1.0%. Sales to international customers for the first quarter of 1999 comprised approximately 55.9% of total sales, compared with 61.2% for the comparable period of 1998. Compared with the first quarter of 1998, sales volume in North America grew 27.6%, primarily due to strong sales in the Company's electronics and powder-coating businesses, along with a positive contribution from the fourth-quarter acquisition of J&M Laboratories, Inc. In Europe, local sales volume declined 5.9 percent, attributable to a softening of economic activity in this region that was evidenced across all of the Company's European businesses. Sales volume in Japan increased 6.6 percent, largely due to shipments deferred by customers from the fourth quarter of 1998. The Pacific South division displayed a sharp increase in sales, with volume for this division increasing 27.1 percent, resulting from strong activity in Australia, China and Mexico. Price increases averaging 2% were implemented on orders taken after the beginning of the year for standardized small systems and parts. Worldwide volume gains were driven by strong sales of electronics and powder-coating equipment, with a combined sales volume that increased 16.6% over the comparable period of 1998. Sales of non-woven equipment increased 68.2% over the prior year mainly as a result of the addition of J&M Laboratories, Inc. to this line of business. Liquid and converting equipment experienced increases over the prior year however shipments of adhesive dispensing systems for packaging and product assembly remained relatively constant when compared with the prior year as did shipments of container and ultra-violet curing equipment. OPERATING PROFIT Operating profit, as a percentage of sales, increased to 7.8% for the first quarter of 1999 from 6.4% for the first quarter of 1998. This rate of increase reflects the results of efforts to improve the efficiency and effectiveness of operations undertaken during the second and fourth quarters of fiscal 1998. Page 8 The gross margin rate decreased for the first quarter from 56.5% in 1998 to 53.8% in 1999. The influencing factors behind the lower margin for the first quarter were the mix of products sold, along with non-recurring costs associated with certain new products. Currency effects had a slightly favorable effect on gross margin. Selling and administrative expenses, excluding currency effects increased 2.6% over the comparable period in 1998. This rate of increase was well below the rate of increase in sales volume for the quarter. NET INCOME For the first quarter of 1999, net income, as a percentage of sales, increased to 4.4% from 3.6% for the same period of 1998. Foreign currency gains decreased 56.9% from the prior year while interest expense remained relatively constant. For the first quarter of 1999 and 1998, diluted earnings per share were $.42 and $.30, respectively. FOREIGN CURRENCY EFFECTS In the aggregate, average exchange rates for the first quarter 1999 used to translate international sales and operating results into U.S. dollars compared favorably with average exchange rates existing during the comparable 1998 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 first quarter 1999 were translated at exchange rates in effect during 1998, sales would have been approximately $1,331,000 lower while third-party costs and expenses would have been approximately $1,170,000 lower. FINANCIAL CONDITION During the first quarter of 1999, net assets increased $1,192,000. This marginal increase is primarily due to earnings of $6,984,000 and an increase of $3,229,000 from translating foreign net assets at the end of the first quarter when the U.S. dollar was weaker against other currencies than at the prior year end, offset by net repurchases of Nordson stock totaling $5,073,000 and the payment of $4,008,000 in dividends. Working capital, as of the end of the quarter, decreased $14,081,000 over the prior year-end. This change consisted primarily of increases in inventories and notes payable, offset by decreases in accounts receivable, accounts payable and other current liabilities. All changes include slight increases from the effects of translating into U.S. dollars current amounts denominated in generally stronger foreign currencies. Receivables decreased Page 9 from the collection of year-end receivables arising from strong sales in the fourth quarter of 1998 and notes payable increased to fund a variety of cash needs. Other current liabilities decreased as a result of orders invoiced during the first quarter of 1999 for customer advance payments acquired during the fourth quarter of 1998 in addition to the payment of fiscal 1998 bonuses and other employee benefits. Inventories increased in anticipation of demand for Nordson products and accounts payable decreased due to the payment of additional purchases at year-end. Cash and cash equivalents increased $4,358,000 during the first quarter of 1999. Cash used by operating activities was $23,044,000 and cash provided by net proceeds from notes payable was $24,478,000. Uses for cash included purchases of treasury shares, outlays for capital expenditures, dividends and business acquisitions. Available lines of credit continue to be more than adequate to meet additional cash requirements over the next year. Intangible assets increased $11,908,000 mainly as a result of the cost of business acquisitions being in excess of the net assets acquired. Net property, plant and equipment increased $6,187,000 primarily due to the capitalization of costs associated with the implementation of an enterprise management system. OUTLOOK Nordson faces a challenging environment in Europe and although it appears that the Asian situation has bottomed-out, it is difficult to predict the rate of recovery in this region. Therefore, operating efficiency improvements are critical, given this unsettled international economic picture. As evidenced by a 38 percent growth in first-quarter operating profits over the prior year, Nordson continues to progress toward the overall goal of improving its operating efficiency. THE EURO CONVERSION On January 1, 1999, eleven of the fifteen member countries of the European Union established fixed conversion rates between their existing sovereign currencies and the euro. The Company has recognized the need to ensure that its operations will not be adversely impacted by the introduction of this new currency. Nordson has determined that its information systems are capable of processing transactions denominated in the euro. Nordson does not expect the euro conversion to have a material effect on the Company's financial condition and results of operations. Page 10 YEAR 2000 READINESS Many computerized systems use only two digits, rather than four, to record the year in a date field. These systems may recognize the year 2000 as the year 1900 or some other date, causing systems to process incorrect data or simply shut down. Nordson is addressing this issue for its information systems, equipment (with embedded microprocessors), facilities, products, suppliers and vendors. Nordson's plan to resolve the Year 2000 issue involves the following four phases: assessment, remediation, testing and implementation. The assessment phase was completed as of the end of fiscal year 1998. The results of assessment indicated that most of the Company's significant information systems could be affected, including order-entry, manufacturing, distribution, invoicing and collection systems. The assessment phase also revealed that equipment and facilities used in operations are at risk. Based on a review of its product lines, Nordson has determined that only a few of the products it has sold and will continue to sell will require remediation to be Year 2000 ready. Efforts and costs associated with the remediation of these products are immaterial and will be addressed on an individual basis prior to the end of 1999. The Company has also gathered information regarding the Year 2000 readiness status of its major suppliers and customers and continues to monitor their readiness. Nordson has completed the remediation, testing and implementation phases of its Year 2000 readiness program for internal, mission-critical, information technology systems. Remediation of externally-purchased, payroll software is expected to be completed by April 1999. The completion date for testing and implementation of this software is anticipated for June 1999. Remediation of Nordson's operating equipment has been completed for its telecommunications equipment and is 70 percent complete for other operating equipment, mainly internal, local-area computer networks and computer workstations. The Company expects that remaining operating equipment will be remediated by June 1999. The anticipated completion date for testing and implementation of remaining operating equipment is September 1999. Nordson has made inquiries of its major suppliers as to the status of their Year 2000 readiness and has begun to conduct site visits of the largest ones. To date, Nordson is not aware of any third parties with a Year 2000 issue that would materially impact the Company's results of operations, liquidity or capital. However, the Company has no means of ensuring that third parties doing business with Nordson will be Year 2000 ready. Nordson will utilize both internal and external resources to reprogram or replace, test and implement the software and operating equipment for Year 2000 readiness. The total cost of the Company's Year 2000 readiness program is estimated at $6.0 million and is being funded through operating cash flows. Remaining readiness program costs are approximately $2.4 million of which $.8 million will be expensed, mainly for contracted labor costs, and the balance of $1.6 million capitalized for the purchases of Year 2000-ready personal computers and workstations. Page 11 Nordson believes that the steps referred to above will minimize its business risk related to the Year 2000. In the event that the Company makes no further progress on its Year 2000 readiness program, the Company would experience a minor lapse in customer service. The Company continues to maintain contingency plans for critical applications that include manual workarounds and staffing adjustments although Year 2000 readiness has been completed for all internal, mission-critical applications. For a listing of risks associated with the Year 2000, refer to the "Safe Harbor Statements Under the Private Securities Litigation Reform Act of 1995" disclosure which follows. SAFE HARBOR STATEMENTS UNDER THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995 The statements in the paragraphs titled "Outlook" and "Year 2000" that refer to anticipated trends, events or occurrences in, or expectations for, the future (generally indicated by the use of phrases such as "Nordson expects" or "Nordson believes" or words of similar import or by references to "risks") 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 the Company conducts business. In the case of Year 2000 issues, factors that could cause the Company's actual results to differ materially from the expected results are: the availability and retention of internal and external resources dedicated to the Company's Year 2000 readiness program, delayed or unsuccessful completion of planned activities of the Company, and delayed, unsuccessful or incompatible Year 2000 conversions by third parties of their products or systems on which the Company relies. Page 12 Part II - Other Information Item 6. EXHIBITS AND REPORTS ON FORM 8-K. (a) Exhibits - Exhibit 27 Financial Data Schedule (b) There were no reports on Form 8-K filed for the quarter ended January 31, 1999. Page 13 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 16, 1999 Nordson Corporation /s/ Nicholas D. Pellecchia -------------------------- Vice President, Finance and Controller (Principal Financial Officer and Chief Accounting Officer) Page 14 NORDSON CORPORATION EXHIBIT INDEX Page Number Exhibit 27 Financial Data Schedule 16 Page 15 EX-27 2 EXHIBIT 27
5 3-MOS OCT-31-1999 JAN-31-1999 11,178 30 152,873 3,036 128,452 321,038 234,566 127,196 549,431 213,725 0 0 0 12,253 203,714 549,431 157,053 157,053 72,631 72,631 0 329 2,292 10,581 3,597 6,984 0 0 0 6,984 .42 .42
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