Add
NDSN to Portfolio
Set Alert
Email to a
Friend
| |||
|
|
Quotes & Info
|
| NDSN > SEC Filings for NDSN > Form 10-Q on 7-Mar-2013 | All Recent SEC Filings |
7-Mar-2013
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.
Results of Operations
Sales
Worldwide sales for the three months ended January 31, 2013 were $347,043, a 25.8% increase from sales of $275,836 for the comparable period of 2012. Sales volume increased 26.2%, consisting of organic growth of 7.8% and 18.4% from acquisitions. Unfavorable currency effects reduced sales by 0.4%.
Sales of the Adhesive Dispensing Systems segment for the three months ended January 31, 2013 were $183,378, an increase of 31.8% from the comparable period of 2012. Sales volume increased 32.8%, consisting of 33.1% from the first-year effect of the EDI and Xaloy acquisitions, partially offset by a decline of 0.3% in organic volume. Unfavorable currency translation effects reduced sales by 1.0%. Growth in consumer non-durables end markets was offset by softness in plastics processing and consumer durable goods end markets. Sales volume, inclusive of acquisitions, increased in all geographic regions and was most pronounced in the United States, Asia Pacific and the Americas.
Advanced Technology Systems segment sales for the three months ended January 31, 2013 were $108,709 compared to $100,107 in the comparable period of 2012, an 8.6% increase. Sales volume increased 8.1%, and favorable currency effects added 0.5%. Semi-automated dispensing, test and inspection and fluid management products lines drove the growth, as demand in mobile electronic device, medical and other niche markets remained strong. Within this segment, sales volume increases in the United States, the Americas and Japan were offset by slight decreases in Europe and Asia Pacific.
Nordson Corporation
Sales of the Industrial Coating Systems segment for the three months ended January 31, 2013 were $54,956, an increase of 50.3% from the three months ended January 31, 2012. Sales volume growth of 50.9% consisted of 38.2% organic growth and 12.7% from the first-year effect of the SEE acquisition. Unfavorable currency effects reduced sales by 0.6%. Sales growth was driven by customers investing in production efficiency and plant expansion programs. Sales volume increased by double-digit percentages in all geographic regions.
Sales outside the United States accounted for 67.9% of sales in the three months ended January 31, 2013, compared to 72.7% in the comparable period of 2012. On a geographic basis, sales in the United States increased 48.0% for the three months ended January 31, 2013 compared to the three months ended January 31, 2012. The increase in sales volume consisted of 10.9% organic growth and 37.1% from acquisitions. Sales volume in the Americas region was up 37.1%, and currency effects were neutral. This increase in sales volume consisted of 17.5% organic growth and 19.6% from acquisitions. Sales in Europe increased of 9.3%, which consisted of a volume increase of 9.0% and 0.3% from favorable currency effects. This increase in sales volume consisted of 0.1% organic growth and 8.9% from acquisitions. Sales in Japan for the three months ended January 31, 2013 increased 18.5% from the comparable period of the prior year, which consisted of volume of 26.2%, offset by unfavorable currency effects that reduced sales by 7.7%. This increase in sales volume consisted of 14.5% organic volume and 11.7% from acquisitions. Asia Pacific sales increased 21.9% consisting of volume of 20.3% and 1.6% from favorable currency effects. This increase in sales volume consisted of 8.2% organic volume and 12.1% from acquisitions.
Operating Profit
Cost of sales for the three months ended January 31, 2013 were $149,814, up from $106,490 in 2012, an increase of 40.7%. The gross profit percentage was 56.8% for the three months ended January 31, 2013, compared to 61.4% in 2012. The decrease in gross margin was primarily due to the lower product line margin of the 2012 acquisitions, as well as product line and geographic mix within our Adhesive Dispensing Systems segment.
Selling and administrative expenses, excluding severance and restructuring costs, for the three months ended January 31, 2013 were $135,079, compared to $112,048 for the comparable period of 2012. This represented an increase of $23,031, or 20.6%, which was primarily due to the first year effect of 2012 acquisitions, higher compensation expenses related to increased employment levels and spending for initiatives to generate future growth and improve performance. Selling and administrative expenses for the three months ended January 31, 2013 as a percent of sales decreased to 38.9% from 40.6% for the comparable period of 2012. The decrease was due to better absorption of fixed costs.
During the three months ended January 31, 2013, we recognized severance costs of $258 in the Adhesive Dispensing Systems segment and $328 in the Advanced Technology Systems segment, both as a result of implementing certain restructuring initiatives to optimize global operations. Severance costs associated with these initiatives is expected to be approximately $370 for the last three quarters of 2013. During the three months ended January 31, 2012, severance and restructuring cost of $811 were recognized in connection with 2011 restructuring initiatives in the Adhesive Dispensing Systems segment.
Operating profit as a percentage of sales was 17.7% in the three months ended January 31, 2013 compared to 20.5% for the comparable period in 2012. The decrease was primarily due to a decrease in the gross profit percentage as mentioned above for 2012 acquisitions and the Adhesive Dispensing Systems segment, first year effect in expenses for our 2012 acquisitions, and the impact of negative organic sales growth of our Adhesive Dispensing Systems segment.
Operating profit for the three months as a percent of sales for the Adhesive Dispensing Systems segment decreased to 23.8% for the three months ended January 31, 2013 compared to 33.9% for the comparable period of the prior year. The decrease was primarily due to the dilutive effect of 2012 acquisitions. For the Advanced Technology Systems segment, operating profit for the first three months as a percent of sales increased to 19.1% in the current year from 16.0% in the first three months of 2012. The increase was primarily due to charges in 2012 for short-term purchase accounting valuation adjustments and expenses associated with the termination of a pension plan. Operating profit as a percent of sales for the Industrial Coating Systems segment was 13.0% for the three months ended January 31, 2013, up from 3.1% in the same period of 2012. The increase was primarily due to better absorption of fixed expenses, as well as the first-year effect of the SEE acquisition.
Nordson Corporation
Interest and Other Income (Expense)
Interest expense for the three months ended January 31, 2013 was $4,080, up from $1,968 for the three months ended January 31, 2012, due to higher borrowing levels resulting primarily from acquisitions in 2012.
Other expense was $1,200 for the three months ended January 31, 2013, compared to other income of $992 for the three months ended January 31, 2012. Foreign exchange losses included in other expense in 2013 were $1,515, compared to foreign exchange gains of $175 in 2012.
Income Taxes
The effective tax rates for the three months ended January 31, 2013 was 25.5%, compared to 31.1% for the three months ended January 31, 2012. During the three months ending January 31, 2013, we recorded a favorable adjustment to unrecognized tax benefits of $900 primarily related to expiration of certain foreign statutes of limitations. On January 2, 2013, the American Taxpayer Relief Act of 2012 was enacted which retroactively reinstated and extended the Federal Research and Development Tax Credit (Federal R&D Tax Credit) from January 1, 2012 to December 31, 2013 and extended certain other tax provisions. As a result, our income tax provision for the three months ended January 31, 2013 included a discrete tax benefit of $1,700 related to 2012. During the three months ending January 31, 2012, we recorded tax expense of $325 related to an adjustment of deferred taxes resulting from a tax rate reduction in Japan.
Net Income
Net income for the three months ended January 31, 2013 was $42,011, or $0.65 per share on a diluted basis, compared to $38,338 or $0.58 per share on a diluted basis in 2012. This represented a 9.6% increase in net income and a 12.1% increase in earnings per share.
Foreign Currency Effects
In the aggregate, average exchange rates for the three months ended January 31, 2013 used to translate international sales and operating results into U.S. dollars were slightly unfavorable compared with average exchange rates existing during the comparable 2012 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 structure in each country in which we operate. However, if transactions for the three months ended January 31, 2013 were translated at exchange rates in effect during the same period of 2012, sales would have been approximately $1,064 higher while third-party costs and expenses would have been approximately $934 higher.
Nordson Corporation
Financial Condition
During the three months ended January 31, 2013, cash and cash equivalents increased $13,193. Cash provided by operations during this period was $39,755, compared to $44,310 for the three months ended January 31, 2012. Cash of $60,592 was generated from net income adjusted for non-cash income and expenses as compared to $50,335 last year. Changes in operating assets and liabilities and the effect of the tax benefit from the exercise of stock options used $20,837 of cash in the current year, compared to $6,025 in 2012. The primary reason for the increase was a decrease in income taxes payable in the current year first quarter as compared to an increase in the prior year first quarter related to the timing of tax payments.
Cash used in investing activities was $8,729 for the three months ended January 31, 2013, compared to $8,566 in the comparable period of the prior year. Capital expenditures in the current year were $7,524, and cash of $1,231 was used for the acquisition of certain assets of Kodama Chemical Industry Co., Ltd a licensed distributor of our EDI business in Japan.
Cash used in financing activities was $18,816 for the three months ended January 31, 2013, compared to $23,114 for the three months ended January 31, 2012. Principal uses of cash in the current year were $10,477 for the net repayment of long-term borrowings and $9,641 for dividend payments.
The following is a summary of significant changes in balance sheet captions from the end of 2012 to January 31, 2013. Receivables decreased $42,833 due to lower sales in the first quarter of 2013 compared to the fourth quarter of 2012, which is consistent with the seasonality of our business. Inventories increased $13,830 due to the higher level of business activity expected in the second quarter of 2013 as compared to the first quarter. Prepaid expenses increased $2,372 primarily due to annual insurance payments made in the first quarter of the year. The decrease of $5,233 in intangible assets - net was primarily due to amortization, partially offset by intangibles added as a result of a 2013 acquisition. The decrease of $5,856 in accounts payable reflected the lower level of business activity in the first quarter of 2013 compared to the fourth quarter of 2012. The decrease of $10,230 in income taxes payable was primarily due to the timing of required tax payments. The decrease of $33,733 in accrued liabilities was primarily due to payments of annual incentive compensation in the first quarter and a donation to the Nordson Corporation Foundation. The increase of $5,152 in long-term deferred income taxes was primarily due to amortization of goodwill for tax purposes and the tax effect of pension and postretirement amounts recorded in other comprehensive income.
In March 2012 the board of directors approved a repurchase program of up to $100,000, of which $84,883 is available as of January 31, 2013. Uses for repurchased shares include the funding of benefit programs including stock options, nonvested stock and 401(k) matching. Shares purchased are treated as treasury shares until used for such purposes. The repurchase program is being funded using cash from operations and proceeds from borrowings under our credit facilities. No shares were repurchased under this program during the three months ended January 31, 2013.
In 2012, we entered into a Note Purchase Agreement with a group of insurance companies under which we sold $200,000 of Senior Notes. The notes mature between July 2017 and July 2025 and bear interest at fixed rates between 2.27% and 3.13%. We were in compliance with all covenants at January 31, 2013.
In 2012, we entered into a $250,000 Credit Agreement with PNC Bank. The agreement provides for a delayed draw term loan facility that matures 364 days after the date of the agreement. We borrowed $250,000 under this agreement for the EDI and Xaloy acquisitions in 2012 and repaid $200,000 using proceeds of the Senior Notes described above, leaving a balance of $50,000 outstanding at January 31, 2013. No additional borrowings can be made under this agreement, and any future repayment will reduce the maximum borrowing amount by the amount of the repayment. We were in compliance with all covenants at January 31, 2013.
Nordson Corporation
In 2011, we entered into a $500,000 five-year, unsecured multicurrency credit facility with a group of banks that may be increased from $500,000 to $750,000 under certain conditions. This facility contains customary events of default and covenants related to limitations on indebtedness and the maintenance of certain financial ratios. At January 31, 2013, $252,000 was outstanding under this facility, compared to $262,450 outstanding at October 31, 2012. We were in compliance with all debt covenants at January 31, 2013, and the amount we could borrow under the facility would not have been limited by any debt covenants.
In 2011, we entered into a $150,000 three-year Private Shelf Note agreement with New York Life Investment Management LLC. Borrowings under the agreement may be up to 12 years, with an average life of up to 10 years and are unsecured. The interest rate on each borrowing can be fixed or floating and is based upon the market rate at the borrowing date. This agreement contains customary events of default and covenants related to limitations on indebtedness and the maintenance of certain financial ratios. At January 31, 2013 and October 31, 2012, $69,445 was outstanding under this facility at a fixed rate of 2.21 percent per annum. We were in compliance with all covenants at January 31, 2013, and the amount we could borrow would not have been limited by any debt covenants. Effective February 12, 2013, the amount of the facility was increased from $150,000 to $175, 000.
In 2008, we entered into a $50,000 Senior Note Purchase Agreement with Prudential Investment Management, Inc. The Note bears interest at a rate of 4.98 percent and is unsecured. The Agreement contains customary events of default and covenants related to limitations on indebtedness and the maintenance of certain financial ratios. We were in compliance with all covenants at January 31, 2013. This Note matured on February 22, 2013 and was repaid.
Critical Accounting Policies
Our condensed consolidated financial statements and accompanying notes have been prepared in accordance with accounting principles generally accepted in the United States for interim financial information. 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, 2012. There were no material changes in these policies during the three months ended January 31, 2013.
Outlook
We move forward with caution in our approach to 2013, given persistent uncertainties related primarily to European sovereign debt issues, US deficit reduction issues, and prospects for slowing growth in Asian markets. Though the near-term global macroeconomic outlook remains unclear, our growth potential has been demonstrated over time from our capacity to build and enhance our core businesses by entering emerging markets and pursuing market adjacencies. We drive value for our customers through our application expertise, differentiated technology, and direct sales and service support. Our priorities also are focused on continued operational improvements by employing continuous improvement methodologies in our business processes. We expect these efforts will continue to provide more than sufficient cash from operations for meeting our liquidity needs and paying dividends to common shareholders as well as enabling us to invest in the development of new applications and markets for our technologies. Our available borrowing capacity primarily will enable us to make other strategic investments.
For the second quarter of 2013, sales are expected to increase in the range of 18% to 23% compared to the same period a year ago, including 16% growth from the first-year effect of acquisitions, organic growth of 3% to 8%, and a negative 1% currency translation impact. Diluted earnings per share are expected in the range of $0.78 to $0.87.
Nordson Corporation
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-Q 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, 2012.
|
|