Item 1. Business.
GENERAL DEVELOPMENT OF BUSINESS
General Description of Business
Nordson Corporation (the "Company") was formed in 1954. The Company engineers, manufactures and markets sophisticated systems that apply liquid and powder coatings, sealants and adhesives to consumer and industrial products during manufacturing processes. In the foreseeable future, the Company expects to continue to operate primarily within the industrial application systems business.
Corporate Purpose
The Company strives to be a vital, self-renewing, worldwide organization which, within the framework of ethical behavior and enlightened citizenship, grows and produces wealth for its customers, employees, shareholders and communities.
Overall Strategy
The Company offers its customers a Package of Values(TM) which includes carefully engineered, durable products, strong service support, the backing of a well-established worldwide company with financial and technical strengths, and a commitment to deliver what was promised. These features provide genuine customer satisfaction, the foundation of continued growth.
Growth is achieved by seizing opportunities to sell existing products into new markets, developing new products and investing in systems to maximize productivity. This strategy is augmented through engineering, research and development, product-line additions, and business acquisitions that can serve multi-national industrial markets.
Complementing the Company's business strategy is the objective to provide opportunities for employee self-fulfillment, growth, security, recognition and equitable compensation.
Finally, the Company is committed to contributing an average of 5 percent of domestic pretax earnings to human services, health, education and other charitable activities, particularly in communities where the Company has major facilities.
Share Repurchase Program
The share repurchase program, which commenced in 1984, continued through 1993. The primary purpose of this program is to provide shares for the Company's Long-Term Performance Plan which provides for the granting of stock options, stock appreciation rights, restricted stock, stock purchase rights, stock equivalent units, cash awards, and other stock or performance-based incentives. During fiscal 1993, the Company repurchased 299,149 common shares and issued 272,873 common shares from treasury under company stock and employee benefit programs.
FINANCIAL INFORMATION ABOUT INDUSTRY SEGMENT, FOREIGN AND DOMESTIC OPERATIONS, AND EXPORT SALES
Pursuant to the Financial Accounting Standards Board Statement No. 14, "Financial Reporting for Segments of a Business Enterprise", the Company has reported in Note 12 of Notes to Consolidated Financial Statements on pages 34 and 35 of the 1993 Annual Report, incorporated herein by reference thereto, information about the Company's single industry segment and its foreign and domestic operations. Export sales amounted to $109,371,000, $104,646,000, and $103,947,000 in 1993, 1992, and 1991, respectively.
NARRATIVE DESCRIPTION OF BUSINESS
Principal Products, Markets, and Methods of Distribution
The Company offers a full range of industrial equipment to apply liquid and powder coatings, thermo-plastic adhesives and sealants, as well as special "performance compounds" and other technology-oriented materials. Equipment ranges from low-volume, manually-operated systems to sophisticated programmable automated systems. The following presents the Company's various products and their uses, arranged by the markets which they serve:
Packaging - Automated adhesive dispensing systems for sealing corrugated cases and paperboard cartons and stabilizing pallets in the food, beverage, agriculture, cosmetics, and pharmaceuticals industries.
Product Assembly - Adhesive and sealant dispensing systems for bonding or sealing plastic, metal and wood products in the appliance, automotive, book binding, building/construction, cosmetics, electronics, furniture, and telecommunications industries.
Nonwovens - Automated equipment for applying adhesives, superabsorbent powders, liquids and fibers to assemble baby diapers, feminine hygiene products, adult incontinence products, and bedpads.
Converting - Coating and laminating systems for applying hot melt adhesives onto continuous webs such as paper and film label stocks, board stocks, surgical drapes, fabrics, interlinings, and automotive textiles.
Advanced Gasketing - Automated equipment for dispensing foamed adhesives and sealants to make form-in-place gaskets for automotive components, appliances and electrical enclosures.
Powder Coating - Electrostatic spray equipment for applying powder paints and coatings to appliances, automotive components, metal office furniture/storage shelving, electrical transformers, and recreational equipment.
Liquid Finishing - Electrostatic spray systems for applying liquid paints and coatings to plastic, metal and wood products such as automotive components, furniture, kitchen and bath cabinets, doors and frames, and pipes and tubing.
Automotive - Liquid and powder finishing systems for spraying powder primers and anti-chip coatings to automobile body panels and applying basecoats and clearcoats; adhesive and sealant dispensing systems for bonding and sealing glass and interior seams.
Container Coating - Automated equipment for applying liquid and powder coatings to the interiors and ends of metal containers in the food and beverage industries.
Electronics - Automated conformal coating equipment for applying protective materials to printed circuit boards and electronic assemblies in the appliance, automotive, avionics, defense, electrical/electronics, and telecommunications industries.
The Company markets its products in the United States and forty-nine other countries, primarily through a direct sales force, and in nine countries through qualified distributors. With approximately sixty percent of the Company's business attributable to international sales, the Company has built a worldwide reputation for its creativity and expertise in the design and engineering of high-technology application equipment which meets the specific needs of its customers.
Manufacturing and Raw Materials
The manufacturing operations of the Company consist of machining and finishing specially designed parts and assembling components into finished equipment. Many of the components are manufactured in standard modules, to permit one component to be used interchangeably in more than one product and to permit the ready assembly of components in different combinations for a variety of equipment models. Manufacturing operations are located in Amherst, Ohio; Elyria, Ohio; Norcross, Georgia; Sand City, California; Luneberg, Germany and Stenungsund, Sweden.
The principal raw materials used in the manufacture of the Company's products include metals and plastics in the form of sheets, bar stock, castings, forgings and tubing. The Company also purchases many electrical and electronic components, fabricated and semi-fabricated metal parts, high-pressure fluid hoses, packings, seals and other items.
The Company's policy is to select suppliers based on the competitive value offered in terms of total cost and quality. Substantially all of its materials are available through multiple sources.
The Company maintains an extensive quality control program for all its equipment and machinery. This program is supervised by the Company's Vice President, Manufacturing.
Because of varying degrees of availability of natural gas and other fuels, the Company has developed standby capacity to utilize other energy sources as an alternative. No material adverse effect on its business has resulted or is anticipated to result from energy shortages.
Patents and Trademarks
The Company follows the practice of maintaining trademark and patent protection both domestically and internationally. No aspect of the Company's business is materially dependent upon any one or more of the patents or on patent protection in general.
Seasonal Variation in Business
There is no significant seasonal variation in the Company's business.
Working Capital Practices
The Company has no special or unusual practices affecting working capital items. However, for customized equipment and systems, the Company generally requires substantial advance payments as deposits and, in certain cases, progress payments during the manufacturing process. A significant part of the Company's Package of Values(TM) is service, including service in the form of a very high level of product availability at the time of order entry, which requires a relatively high investment in inventory.
Customers
The Company has a large number of customers representing a wide variety of industries and geographic regions. The loss of a single or a few customers would not have a materially adverse effect on the Company's business. No single customer accounted for 5 percent or more of sales in the year ended October 31, 1993.
Backlog
The Company's backlog of orders has increased to $43,213,000 at October 31, 1993 as compared to $40,751,000 at November 1, 1992. All orders included in the October 1993 backlog are expected to be shipped to customers in fiscal 1994.
Government Contracts
The Company's business does not include, and does not depend upon, a significant amount of governmental contracts or sub-contracts. Therefore, no material part of the Company's business is subject to renegotiation or termination at the option of the government.
Competitive Conditions
The Company maintains competitive advantage through leadership in the areas of product innovation, quality, delivery and performance as well as customer service. Although material applications vary, all Nordson systems provide one or more customer benefits in terms of: ease of application; increased productivity; labor, material and energy savings; reduced space requirements; improved plant environmental conditions; greater operating efficiencies; lower maintenance costs; and stronger, more attractive products.
The industrial application systems business is highly competitive. The Company's equipment is sold in competition with a wide variety of alternative bonding, sealing, caulking, assembly, finishing and coating techniques. Any production process involving the application of a material to a substrate or surface represents a potential use of the Company's equipment. The Company is a leading producer of powder coating systems as well as equipment for applying hot melt adhesives. The Company depends upon the quality and features of its equipment and its marketing techniques to maintain its market position.
Research and Development
The Company places strong emphasis on the development of new products and improvement of existing products through its own research staff. The Company's expenditures for research and development were approximately $19,655,000 in fiscal 1993 as compared to approximately $18,431,000 in fiscal 1992 and $17,999,000 in fiscal 1991, and as a percentage of net sales were approximately 4.3 percent for fiscal 1993, 4.3 percent for fiscal 1992 and 4.6 percent for fiscal 1992.
Environmental Compliance
Compliance by the Company with federal, state and local environmental protection laws during fiscal 1993 had no material effect on capital expenditures, earnings or the competitive position of the Company. No material effect is anticipated for fiscal 1994.
Employees
As of October 31, 1993, the Company has approximately 3,102 employees, which includes each person employed on a full-time basis as one unit and all part- time personnel (the number of which is not material) stated in equivalent units.
Item 2.
Item 2. Properties.
The following table summarizes the principal properties of the Company.
Several of these properties are pledged as security for industrial revenue bonds and mortgage notes payable.
Other properties at international subsidiary locations and at branch locations within the United States are leased. Lease terms do not exceed twenty-five years and generally contain a provision for cancellation with some penalty at an earlier date.
In addition, the Company leases equipment under various operating and capitalized leases. Information about leases is reported in Note 13 of Notes to Consolidated Financial Statements on page 36 of the 1993 Annual Report, incorporated herein by reference thereto.
Item 3.
Item 3. Legal Proceedings.
The Company is involved in legal proceedings incidental to its business, none of which is material to the results of operations in the opinion of management.
Item 4.
Item 4. Submission of Matters to a Vote of Security Holders.
None.
Executive Officers of the Company.
The executive officers of the Company as of December 31, 1993 were as follows:
Mr. Eric T. Nord, age 76, joined the predecessor of the Company in 1939 and was Chairman of the Board and Chief Executive Officer prior to his retirement in 1982. He has continued to serve as Chairman of the Board after his retirement.
Mr. Madar, age 54, joined the Company in 1986 as President and Chief Executive Officer. From 1986 until 1989, he also served as Treasurer.
Mr. Bohm, age 54, has been employed by the Company for 22 years. In 1986 he was elected a Vice President, responsible for directing activities of the European Division.
Mr. Bunch, age 49, joined the Company in 1983. Since 1986, he has served as Vice President, Manufacturing.
Mr. Campbell, age 44, joined the Company in 1988 as a Vice President, responsible for overseeing corporate research and business development activities, along with information service operations. In 1989 he assumed additional responsibilities for overseeing the manufacturing and human resources functions.
Mr. Fields, age 42, joined the Company in 1988 as Human Resources Manager for the Application Equipment Division. He was appointed Director, Human Resources in 1989 and was elected Vice President, Human Resources in 1992.
Mr. Jackson, age 48, joined the Company as Vice President - Operations in 1986 and was later elected Vice President, responsible for the Application Equipment Division. During 1989, he assumed responsibility for the operations of the North American Division.
Dr. Klein, age 51, has been employed by the Company for thirteen years. He has served as Vice President, Corporate Research & Technology since 1986.
Mr. McLane, age 50, has been employed by the Company for 19 years. Since 1986, he has served as Vice President, responsible for directing the activities of the Pacific South Division.
Mr. Miyahara, age 56, has been employed by the Nordson organization for over 20 years and served as Managing Director of Nordson K.K. (a wholly-owned Japanese subsidiary). In 1987, he was appointed President of the Japanese Division and Chief Executive Office of Nordson K.K. In 1989 he was elected a Vice President of the Company with continuing responsibility to direct the activities of the Japanese Division.
Mr. Moorhead, age 57, joined the Company in 1969, and has served as Vice President - Law and Assistant Secretary since 1981.
Mr. Pellecchia, age 48, joined the Company in 1981 and was elected Vice President - Finance in 1986. In 1989, he assumed the additional responsibilities of Treasurer.
Mr. Thayer, age 62, has been employed by the Company for 29 years. He was elected a Vice President in 1978. In 1986, he assumed responsibility for directing activities of the North American Division. In 1989, he assumed responsibility for overseeing product development and sales activities of Nordson's businesses directed toward the nonwovens and converting markets. In 1989 and 1990, he also directed the operations and integration of the German-based Meltex business, acquired in 1989.
Mr. Ginn, age 70, has been Of Counsel to the law firm of Thompson, Hine and Flory, Cleveland, Ohio since January 1993. Prior to that time, he had been a Partner with Thompson, Hine and Flory since 1959. He has been Secretary of the Company since 1966.
Messrs. Eric T. Nord and Evan W. Nord (director and retired officer) are brothers. No other directors and officers are related.
PART II
Item 5.
Item 5. Market for the Company's Common Equity and Related Stockholder Matters.
Market Information and Dividends.
The Company's common shares are listed on the NASDAQ National Market System. The information appearing under the caption "Investor Information" on page 44 of the 1993 Annual Report is incorporated herein by reference thereto.
Holders.
The approximate number of holders of record of each class of equity securities of the Company as of December 31, 1993 was as follows:
Item 6.
Item 6. Selected Financial Data.
The Company incorporates herein by reference the information as to each of the Company's last five fiscal years appearing under the caption "Eleven-Year Summary" on pages 40 and 41 of the 1993 Annual Report.
Item 7.
Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations.
The Company incorporates herein by reference the information appearing under the caption "Management's Discussion and Analysis" on pages 18 and 19 of the 1993 Annual Report.
Item 8.
Item 8. Financial Statements and Supplementary Data.
The information required by this item appears on pages 20 through 38 of the 1993 Annual Report, incorporated herein by reference thereto.
Item 9.
Item 9. Changes In and Disagreements With Accountants on Accounting and Financial Disclosure.
None.
PART III
Item 10.
Item 10. Directors and Executive Officers of the Company.
The Company incorporates herein by reference the information appearing under the caption "Election of Directors" on pages 1 through 5 of the Company's definitive Proxy Statement to be filed with the Securities and Exchange Commission by January 31, 1994.
Executive officers of the Company serve for a term of one year from date of election to the next organizational meeting of the Board of Directors and until their respective successors are elected and qualified, except in the case of death, resignation or removal. Information concerning executive officers of the Company is contained in Part I of this report under the caption "Executive Officers of the Company."
Item 11.
Item 11. Executive Compensation.
The Company incorporates herein by reference the information appearing under the caption "Compensation of Directors" located on page 5 and information pertaining to compensation of officers located on pages 8 through 25 of the Company's definitive Proxy Statement to be filed with the Securities and Exchange Commission by January 31, 1994.
Item 12.
Item 12. Security Ownership of Certain Beneficial Owners and Management.
The Company incorporates herein by reference the information appearing under the caption "Ownership of Nordson Common Shares" on pages 6 through 8 of the Company's definitive Proxy Statement to be filed with the Securities and Exchange Commission by January 31, 1994.
Item 13.
Item 13. Certain Relationships and Related Transactions.
William D. Ginn, a director and Secretary of the Company, is Of Counsel to Thompson, Hine and Flory, a law firm which has in the past provided and continues to provide legal services to the Company.
PART IV
Item 14.
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K.
(a)(1), (a)(2) and (d). Financial Statements and Financial Statement Schedules.
The financial statements and financial statement schedules listed in the accompanying index to financial statements and financial statement schedules are filed as part of this Annual Report on Form 10-K.
(a)(3) and (c). Exhibits.
The exhibits listed on the accompanying index to exhibits are filed as part of this Annual Report on Form 10-K.
(b) Reports on Form 8-K.
None.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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.
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated.
NORDSON CORPORATION
ANNUAL REPORT ON FORM 10-K
ITEM 14(a)(1), (2) and (3), (c) and (d)
AND FINANCIAL STATEMENT SCHEDULES
FINANCIAL STATEMENT SCHEDULES
INDEX TO EXHIBITS
CERTAIN EXHIBITS
FISCAL YEAR ENDED OCTOBER 31, 1993
NORDSON CORPORATION
AND FINANCIAL STATEMENT SCHEDULES
(Item 14(a)(1) AND (2))
All other schedules for the Registrant have been omitted since the required information is not present or not present in amounts sufficient to require submission of the schedule, or because the information required is included in the financial statements, including the notes thereto.
The consolidated financial statements of the Registrant listed in the preceding index, which are included in the 1993 Annual Report, are incorporated herein by reference. With the exception of the pages listed in the above index and information incorporated by reference elsewhere herein, the 1993 Annual Report is not to be deemed filed as part of this report.
NORDSON CORPORATION
SCHEDULE X - SUPPLEMENTARY INCOME STATEMENT INFORMATION
Years Ended October 31, 1993, November 1, 1992 and November 3, 1991 (In Thousands)
Note: Information regarding maintenance and repairs, amortization of intangible assets, taxes other than payroll and income taxes, and royalties are not presented because each item does not exceed one percent of total sales.
REPORT OF INDEPENDENT AUDITORS
We have audited the consolidated financial statements of Nordson Corporation as of October 31, 1993 and November 1, 1992 and for each of the three years in the period ended October 31, 1993 and have issued our report thereon dated December 7, 1993 [incorporated by reference elsewhere in this Annual Report (Form 10-K)]. Our audits also included the consolidated financial statement schedules of Nordson Corporation as of October 31, 1993 and November 1, 1992 and for each of the three years in the period ended October 31, 1993, listed in item 14(a) of this Annual Report (Form 10-K). These schedules are the responsibility of the Company's management. Our responsibility is to express an opinion based on our audits.
In our opinion, the consolidated financial statement schedules referred to above, when considered in relation to the basic financial statements taken as a whole, present fairly in all material respects the information set forth therein.
*Indicates management contract or compensatory plan, contract or arrangement in which one or more directors and/or executive officers of Nordson Corporation may be participants.