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| NDSN > SEC Filings for NDSN > Form 10-Q on 8-Jun-2009 | All Recent SEC Filings |
8-Jun-2009
Quarterly Report
The following is Management's discussion and analysis of certain significant factors affecting our financial condition and results of operations for the periods included in the accompanying condensed consolidated financial statements.
Worldwide sales for the three months ended April 30, 2009 were $188.8 million, a 35.8% decrease from sales of $294.1 million for the comparable period of 2008. Of the decrease, 29.0% related to volume, and 6.8% resulted from the unfavorable effects of currency translations. Sales for the current year, particularly large, engineered systems, were negatively impacted by the global economic slowdown.
Sales of the Adhesive Dispensing Systems segment for the three months ended April 30, 2009 were $111.3 million, a decrease of $41.1 million, or 27.0% from the comparable period of fiscal 2008. Sales volume decreased 18.7%, and unfavorable currency translation effects reduced sales by 8.3%. The sales decrease was largely attributable to large-dollar system product lines, with sales to consumer non-durable end markets, such as packaging and nonwovens, remaining more stable. Within the segment, volume decreases occurred in all geographic regions.
Advanced Technology Systems segment sales for the three months ended April 30, 2009 were $50.0 million compared to $93.8 million in the comparable period of fiscal 2008, a 46.7% decrease. Volume decreased 41.0%, and currency translation effects reduced sales by 5.7%. Within the segment, volume decreases occurred in all geographic regions and was most pronounced in Asia Pacific due to reduced demand in semiconductor and consumer electronics end markets.
Sales of the Industrial Coating and Automotive Systems segment for the three months ended April 30, 2009 were $27.5 million, a decrease of $20.4 million, or 42.5% from the three months ended April 30, 2008. Volume declined 38.5% and currency translation effects reduced sales by 4.0%. The lack of capital spending in consumer durable end markets impacted sales within this segment. Volume decreases occurred in all geographic regions.
On a geographic basis, sales volume for the three months ended April 30, 2009 was down in all geographic regions in which we operate. Volume decreased 20.2% in the Americas, 22.7% in Europe, 30.7% in Japan, 34.7% in the United States and 36.2% in the Asia Pacific region. Sales in all international regions, except Japan, were negatively impacted by the stronger U.S. dollar.
Worldwide sales for the six months ended April 30, 2009 were $375.4 million, a 30.3% decrease from sales of $538.8 million for the comparable period of 2008. Of the decrease, 24.3% related to volume, and 6.0% resulted from the unfavorable effects of currency translations. Sales for the current year, particularly large, engineered systems, were negatively impacted by the global economic slowdown.
Sales of the Adhesive Dispensing Systems segment for the six months ended April 30, 2009 were $215.6 million, a decrease of $60.7 million, or 22.0% from the comparable period of fiscal 2008. Sales volume decreased 15.0%, and unfavorable currency translation effects reduced sales by 7.0%. Within the segment, volume decreases occurred in all geographic regions.
Nordson Corporation
Advanced Technology Systems segment sales for the six months ended April 30,
2009 were $106.5 million compared to $177.7 million in the comparable period
of fiscal 2008, a 40.0% decrease. Volume decreased 34.2%, and currency
translation effects reduced sales by 5.8%. Within the segment, volume
decreases occurred in all geographic regions and were most pronounced in
Asia Pacific due to reduced demand in semiconductor and consumer electronics
end markets.
Sales of the Industrial Coating and Automotive Systems segment for the six months ended April 30, 2009 were $53.3 million, a decrease of $31.5 million, or 37.2% from the six months ended April 30, 2008. Volume declined 33.7% and currency translation effects reduced sales by 3.5%. Within the segment, volume decreases occurred in all geographic regions.
On a geographic basis, sales volume for the six months ended April 30, 2009 was down in all geographic regions in which we operate. Volume decreased 15.7% in the Americas, 17.9% in Europe, 25.2% in Japan, 29.1% in the United States and 32.6% in the Asia Pacific region. Sales in all international regions, except Japan, were negatively impacted by the stronger U.S. dollar.
Cost of sales for the three months ended April 30, 2009 were $86.0 million, down from $128.2 million in 2008. Cost of sales for the six months ended April 30, 2009 were $165.3 million, down from $233.1 million in 2008. The decreases were primarily due to the decline in sales. The gross margin percentage was 54.5% for the three months ended April 30, 2009, as compared to 56.4% for the comparable period of fiscal year 2008. The gross margin percentage was 56.0% for the six months ended April 30, 2009, as compared to 56.7% for the comparable period of fiscal year 2008. Unfavorable currency effects decreased the fiscal 2009 gross margin rates by 1.3% and 1.0% for the three and six month periods, respectively, ended April 30, 2009 from the comparable periods of fiscal 2008. The gross margin percentages were also impacted by lower absorption of fixed overhead costs. A higher mix of part sales compared to engineered systems and mix between product lines partially offset these factors.
Selling and administrative expenses, excluding severance and restructuring costs, for the three months ended April 30, 2009 were $79.3 million, compared to $111.7 million for the comparable period of fiscal year 2008. This represented a decrease of $32.4 million, or 29.0%. Selling and administrative expenses, excluding severance and restructuring costs, for the six months ended April 30, 2009 were $165.3 million, compared to $215.0 million for the comparable period of fiscal year 2008. This represented a decrease of $49.7 million, or 23.1%. The decreases were largely due to reduced compensation expenses associated with lower employment levels, furloughs and lower incentive compensation and tightened control over discretionary spending. In addition, currency translation effects decreased selling and administrative costs by 6.7% for the three-month period and 6.2% for the six-month period.
Selling and administrative expenses for the three months ended April 30, 2009 as a percent of sales increased to 42.0% from 38.0% for the comparable period of fiscal year 2008. For the six months ended April 30, 2009, these expenses as a percent of sales increased to 44.0% from 39.9% for the comparable period of fiscal year 2008. The increases were primarily the result of lower sales in the current year.
In September 2008, we announced a cost reduction program that involved a combination of non-workforce related efficiencies and workforce reductions primarily in North America and Europe. In response to the continuing economic crisis, additional actions were taken in fiscal year 2009. It is anticipated that the total severance and related costs of these actions will be approximately $20 million of which $5.6 million occurred in fiscal year 2008, $8.1 million occurred in the three months ended January 31, 2009 and $5.1 million occurred in the three months ended April 30, 2009. The remainder will occur in the last two quarters of fiscal year 2009. The severance costs are being recorded in the Corporate segment.
Nordson Corporation
Operating profit as a percentage of sales was 9.8% for the three months
ended April 30, 2009, down from 18.4% for the comparable period in fiscal
year 2008. Operating profit as a percentage of sales was 8.4% for the six
months ended April 30, 2009, down from 16.8% for the comparable period in
fiscal year 2008. Excluding severance and restructuring costs, these
percentages were 12.5% and 11.9% for the three and six-month periods ended
April 30, 2009. The decreases are primarily due to operating costs
decreasing at a slower rate than sales.
Operating profit as a percent of sales for the Adhesive Dispensing Systems segment increased to 27.5% for the three months ended April 30, 2009 from 25.4% in 2008 and to 26.3% for the six months ended April 30, 2009 from 24.2% for the comparable period of 2008. The increases were primarily due to a higher mix of parts sales compared to system sales.
For the Advanced Technology Systems segment, operating loss as a percent of sales for the three months ended April 30, 2009 was 1.1% compared to an operating profit of 20.1% of sales in the comparable period of the prior year. For the six months ended April 30, 2009 operating profit as a percent of sales was 0.7%, down from 16.4% last year. The decreases were primarily due to sales volume decreasing at a higher rate than operating costs and to unfavorable currency effects.
The Industrial Coating and Automotive Systems segment reported an operating loss of 6.8% of sales in the three months ended April 30, 2009, compared to an operating profit of 9.4% in the same period of fiscal year 2008. For the six months ended April 30, 2009, the operating loss was 7.6% of sales, compared to an operating profit of 6.3% in the same period of fiscal year 2008. The changes were primarily due to sales volume decreasing at a higher rate than operating costs and to unfavorable currency effects.
Interest expense for the three months ended April 30, 2009 was $1.7 million, down 60.1% from $4.2 million for the three months ended April 30, 2008. Interest expense for the six months ended April 30, 2009 was $4.4 million, down 54.9% from $9.8 million for the six months ended April 30, 2008. The decreases were due to lower borrowings and reduced interest rates.
Other income was $521,000 for the three months ended April 30, 2009, and $1.0 million in the comparable period of the prior year. Included in those amounts were foreign exchange losses of $77,000 in 2009 and foreign exchange gains of $291,000 in 2008. Other income for the six months ended April 30, 2009 was $7.2 million, compared to $2.2 million for the six months ended April 30, 2008. The current year amount included a $5.0 million gain on the sale of real estate. Also, included were foreign exchange gains of $1.3 million in fiscal year 2009 and $1.0 million in fiscal year 2008.
Our effective tax rate was 21.0% and 27.9% for the three and six-month periods ending April 30, 2009, down from 35.5% and 35.0% for the comparable periods of fiscal 2008. The current year rate was impacted by a decrease of $2.5 million in unrecognized tax benefits, primarily due to remeasuring positions related to prior tax years.
Net income for the three months ended April 30, 2009 was $13.8 million, or $0.41 per share on a diluted basis, compared to $33.0 million, or $0.97 per share on a diluted basis in the same period of 2008. This represents a 58% decrease in both net income and earnings per share. For the six months ended April 30, 2009, net income was $25.0 million, or $0.74 per share on a diluted basis, compared to $54.4 million, or $1.59 per share for the six months ended April 30, 2008. This represents a 54% decrease in net income and a 53% decrease in earnings per share.
Nordson Corporation
Foreign Currency Effects
In the aggregate, average exchange rates for fiscal year 2009 used to translate international sales and operating results into U.S. dollars compared unfavorably with average exchange rates existing during fiscal year 2008. 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 we operate. However, if transactions for the three months ended April 30, 2009 were translated at exchange rates in effect during the same period of 2008, sales would have been approximately $19.9 million higher while third-party costs and expenses would have been approximately $13.9 million higher. If transactions for the six months ended April 30, 2009 were translated at exchange rates in effect during the same period of 2008, sales would have been approximately $32.5 million higher and third party costs would have been approximately $23.6 million higher.
During the six months ended April 30, 2009, cash and cash equivalents increased $7.9 million. Cash provided by operations during this period was $76.1 million, up from $64.3 million for the six months ended April 30, 2008. Cash of $35.2 million was generated from net income adjusted for non-cash income and expenses, and changes in operating assets and liabilities generated $40.9 million of cash.
Cash provided by investing activities was $737,000 for the six months ended April 30, 2009, compared to cash used in investing activities of $10.0 million in the comparable period of the prior year. The change was primarily the result of cash proceeds from the sale of real estate in fiscal year 2009.
Cash used in financing activities was $69.1 million for the six months ended April 30, 2009. Cash was used for net repayments of $47.2 million of short and long-term borrowings, to repurchase $7.0 million of common stock and for dividend payments of $12.2 million.
The following is a summary of other significant changes in balance sheet captions from the end of fiscal year 2008 to April 30, 2009. Receivables decreased $72.6 million due to lower sales in the second quarter of fiscal year 2009 compared to the fourth quarter of fiscal year 2008. Inventories decreased $10.1 million and accounts payable decreased $19.3 million as a result of a lower level of business activity in the second quarter of fiscal year 2009 compared to the fourth quarter of fiscal year 2008. Regarding the increase in income taxes payable, the balance at the end of fiscal year 2008 was reduced to record an expected refund that was received during fiscal year 2009. Accrued liabilities decreased $28.0 million primarily due to bonus and profit sharing payments during fiscal year 2009.
Our consolidated financial statements and accompanying notes have been prepared in accordance with accounting principles generally accepted in the United States. The preparation of these financial statements requires management to make estimates, judgments and assumptions that affect reported amounts of assets, liabilities, revenues and expenses. On an ongoing basis, we evaluate the accounting policies and estimates used to prepare financial statements. Estimates are based on historical experience and assumptions believed to be reasonable under current facts and circumstances. Actual amounts and results could differ from these estimates used by management.
Certain accounting policies that require significant management estimates and are deemed critical to the results of operations or financial position were discussed in Item 7 of the 10-K for the year ended October 31, 2008. There were no material changes in these policies during the three months ended April 30, 2009.
Nordson Corporation
Outlook
Global demand for capital goods is expected to remain weak during 2009, as falling demand and liquidity concerns continue to guide customer behavior. We remain hopeful that recent improvements in credit markets coupled with the cumulative effects of the massive stimulus programs being launched by governments worldwide will stem falling demand and create the conditions necessary for sequential improvement. With a strong balance sheet, solid margins, positive free cash flow and ample sources of credit, we are confident that Nordson remains well positioned to manage through these conditions.
Our liquidity needs arise from working capital requirements, capital expenditures and principal and interest payments on indebtedness. Primary sources of liquidity to meet these needs are cash provided by operations and borrowings under our loan agreements. We have various lines of credit with both domestic and foreign banks, including a $400 million unsecured, multicurrency credit facility with a group of banks that expires in fiscal year 2012. This facility may be increased to $500 million under certain conditions. At April 30, 2009, $161.8 million was outstanding under this facility. There are two primary financial covenants that must be met under this facility. The first covenant limits the amount of total indebtedness that can be incurred to 3.5 times consolidated trailing EBITDA (both indebtedness and EBITDA as defined in the credit agreement). The second covenant requires trailing consolidated EBITDA to be at least three times consolidated trailing interest expense (both as defined in the credit agreement). We were in compliance with all debt covenants at April 30, 2009.
For the third quarter of fiscal year 2009, sales are expected to be in the range of $192 million to $202 million, down 30% to 34% compared to the same period a year ago, including an estimated 6% negative effect associated with currency translation. Diluted earnings per share are expected in the range of $0.39 to $0.50, inclusive of a $0.03 per share charge associated with restructuring activities.
Safe Harbor Statements Under The Private Securities Litigation Reform Act Of 1995
This Form 10-Q, particularly "Management's Discussion and Analysis," contains forward-looking statements within the meaning of the Securities Act of 1933, as amended, the Securities Exchange Act of 1934, as amended, and the Private Securities Litigation Reform Act of 1995. Such statements relate to, among other things, income, earnings, cash flows, changes in operations, operating improvements, businesses in which we operate and the U.S. and global economies. Statements in this 10-K that are not historical are hereby identified as "forward-looking statements" and may be indicated by words or phrases such as "anticipates," "supports," "plans," "projects," "expects," "believes," "should," "would," "could," "hope," "forecast," "management is of the opinion," use of the future tense and similar words or phrases.
In light of these risks and uncertainties, actual events and results may vary significantly from those included in or contemplated or implied by such statements. Readers are cautioned not to place undue reliance on such forward-looking statements. These forward-looking statements speak only as of the date made. We undertake no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law.
Factors that could cause actual results to differ materially from the expected results are discussed in Item 1A, Risk Factors in our 10-K for the year ended October 31, 2008.
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