1
Exhibit 13-f
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
NOTE 1 -- SIGNIFICANT ACCOUNTING POLICIES
FISCAL YEAR -- The fiscal year for the Company's domestic operations ends on
the Sunday closest to October 31, and in 1994, 1993 and 1992, contained 52
weeks. For international operations, the Company's fiscal year ends on
September 30.
CONSOLIDATION -- The consolidated financial statements include the accounts of
the Company and its majority-owned and controlled subsidiaries. All
significant intercompany accounts and transactions have been eliminated in
consolidation. Investments in non-controlled affiliates are accounted for by
the equity method.
CASH AND CASH EQUIVALENTS -- Highly liquid instruments with a maturity of 90
days or less at date of purchase are considered to be cash equivalents. Cash
and cash equivalents are carried at cost, which approximates market.
MARKETABLE SECURITIES -- Marketable securities, consisting primarily of
municipal and other short-term notes with maturities greater than 90 days at
date of purchase, are carried at cost, which approximates market.
INVENTORIES -- Inventories are valued at the lower of cost or market. Cost has
been determined using the last-in, first-out (LIFO) method for 55 percent of
consolidated inventories at October 30, 1994 (56 percent at October 31, 1993).
The first-in, first-out (FIFO) method is used for all other inventories.
Consolidated inventories would have been $9,960,000 and $10,752,000 higher than
reported at October 30, 1994 and October 31, 1993, respectively, had the
Company used the FIFO method, which approximates current cost, for valuation of
all inventories.
PROPERTY, PLANT AND EQUIPMENT AND DEPRECIATION -- Property, plant and equipment
is carried at cost. The Company capitalizes interest costs as part of the cost
of constructing major facilities and equipment. Capitalized interest costs were
$62,000 in 1994. No interest costs were capitalized in 1993 or 1992. Plant and
equipment is depreciated for financial reporting purposes using the
straight-line method over the estimated useful lives of the assets or, in the
case of property under capital leases, over the terms of the leases.
INTANGIBLE ASSETS -- Intangibles, consisting primarily of costs in excess of
net assets of acquired businesses, are amortized using the straight-line method
over the periods of expected benefit.
RESEARCH AND DEVELOPMENT -- Research and development costs are charged to
expense as incurred and amounted to $24,434,000 in 1994 ($20,521,000 in 1993
and $18,431,000 in 1992).
EARNINGS PER SHARE -- Earnings per common share are computed based on the
weighted average number of common shares and common share equivalents out-
standing during each year. Common share equivalents consist primarily of shares
issuable upon exercise of the Company's stock options and stock purchase
rights, computed using the treasury stock method.
PRESENTATION -- Certain 1993 and 1992 amounts have been reclassified to conform
with the 1994 presentation.
NOTE 2 -- ACCOUNTING CHANGES
Effective as of the beginning of 1993, Nordson adopted Financial Accounting
Standards Board Statements "Employers' Accounting for Postretirement Benefits
Other Than Pensions" (FAS 106), "Accounting for Income Taxes" (FAS 109), and
"Employers' Accounting for Postemployment Benefits" (FAS 112). The combined
cumulative effect of these changes in accounting principles was an aftertax
charge to first quarter 1993 earnings of $4,784,000 or $.25 per share. Aside
from the one-time charge, adoption of these statements was not material to 1993
results.
NOTE 3 -- ACQUISITIONS
During 1994, the Company acquired two U.S. manufacturers of coating application
equipment. During 1993, the Company acquired a distributor in Latin America.
The cost of acquisitions amounted to $4,533,000 in 1994 and $455,000 in 1993.
Assuming the acquisitions had taken place at the beginning of each year, the
effects on sales, net income and earnings per share for both years would have
been immaterial.
Business acquisitions have been accounted for as purchases, with the acquired
assets and liabilities recorded at their estimated fair value at the dates of
acquisition, and the related operating results included in the consolidated
financial statements from the dates of acquisition.
22
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NOTE 4 -- INCOME TAXES
Effective as of the beginning of 1993, the Company changed its method of
accounting for income taxes from the deferred method to the liability method
required by FAS 109. As permitted under the new rules, prior years' financial
statements have not been restated.
Income tax expense includes the following:
LIABILITY DEFERRED
METHOD METHOD
1994 1993 1992
- ------------------------------------------------------------------------------
(In thousands)
Current:
U.S. federal $16,655 $12,825 $ 9,705
State and local 2,726 2,684 1,849
Foreign 9,025 7,689 11,284
- ------------------------------------------------------------------------------
Total current 28,406 23,198 22,838
Deferred:
U.S. federal (2,346) (1,547) (138)
State and local (521) (140) (270)
Foreign (1,335) (38) (1,200)
- ------------------------------------------------------------------------------
Total deferred (4,202) (1,725) (1,608)
- ------------------------------------------------------------------------------
$24,204 $21,473 $21,230
==============================================================================
The reconciliation of the United States statutory federal income tax rate to
the worldwide consolidated effective tax rate follows:
LIABILITY DEFERRED
METHOD METHOD
1994 1993 1992
- ------------------------------------------------------------------------------
Statutory federal
income tax rate 35.0% 34.8% 34.0%
Foreign Sales Corporation
exemption (3.7) (3.8) (3.9)
Foreign tax rate variances,
net of foreign tax credits 1.0 1.7 2.6
State and local taxes, net
of federal income tax
benefit 2.0 2.7 1.7
Enacted rate changes -- (1.0) --
Other - net (.1) .1 .5
- ------------------------------------------------------------------------------
Effective tax rate 34.2% 34.5% 34.9%
==============================================================================
Earnings before income taxes of international operations
were $17,149,000, $16,884,000 and $20,431,000 in 1994, 1993 and 1992,
respectively. Deferred income taxes are not provided on undistributed earnings
(which aggregated approximately $22,515,000 at October 30, 1994) of inter-
national subsidiaries which are intended to be permanently invested in those
operations. Should those earnings be distributed, applicable foreign tax
credits would substantially offset U.S. taxes due upon the distribution.
Significant components of the Company's deferred tax assets and liabilities as
of October 30, 1994 and October 31, 1993 are as follows:
1994 1993
- -------------------------------------------------------------------------------
(In thousands)
Deferred tax assets:
Sales to international subsidiaries
and related consolidation
adjustments $14,185 $12,295
Accruals not currently deductible
for taxes 5,037 4,844
Employee benefits 9,548 7,542
Inventory adjustments 1,113 1,151
Translation of foreign currency
accounts 1,266 1,494
Other - net 344 360
- -------------------------------------------------------------------------------
Total deferred tax assets 31,493 27,686
Deferred tax liabilities:
Depreciation 3,216 3,458
Other - net 119 136
- -------------------------------------------------------------------------------
Total deferred tax liabilities 3,335 3,594
- -------------------------------------------------------------------------------
Net deferred tax assets $28,158 $24,092
===============================================================================
The components of the provision for deferred income taxes for 1992 are as
follows:
1992
- ------------------------------------------------------------------------------
(In thousands)
Sales to international subsidiaries
and related consolidation adjustments $ (721)
Declared repatriation of foreign
earnings net of foreign tax credit 913
Employee benefits (657)
Depreciation (180)
Inventory adjustments (253)
Translation of foreign currency accounts 218
Changes in accruals not currently
deductible for taxes (901)
Other - net (2)
- ------------------------------------------------------------------------------
Total $(1,608)
==============================================================================
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NOTE 5 -- RETIREMENT, PENSION AND OTHER
POSTRETIREMENT PLANS
RETIREMENT PLANS -- The parent company and certain subsidiaries have funded
contributory retirement plans covering certain employees. The Company's
contributions are primarily determined by the terms of the plans subject to the
limitation that they shall not exceed the amounts deductible for income tax
purposes. The Company also sponsors an unfunded contributory supplemental
retirement plan for certain employees. Generally, benefits under these plans
vest gradually over a period of approximately five years from date of
employment, and are based on the employee's contribution. The expense
applicable to retirement plans for 1994, 1993 and 1992 was approximately
$2,423,000, $1,988,000 and $1,756,000, respectively.
PENSION PLANS -- The Company has various pension plans which cover
substantially all employees. Pension plan benefits are generally based on years
of employment and, for salaried employees, the level of compensation. The
Company contributes actuarially determined amounts to domestic plans to provide
sufficient assets to meet future benefit payment requirements. The Company's
international subsidiaries fund their pension plans according to local
requirements. The Company also sponsors an unfunded supplemental pension plan
for certain employees.
Net pension cost for the Company's significant plans consists of the
following components:
1994 1993 1992
- --------------------------------------------------------------
(In thousands)
Service cost - benefits
earned during period $3,267 $2,893 $2,531
Interest cost on projected
benefit obligations 3,857 3,625 2,917
Actual return on assets (189) (5,654) (2,742)
Net amortization and
deferral (3,313) 2,572 (51)
- --------------------------------------------------------------
Net periodic pension cost $3,622 $3,436 $2,655
==============================================================
The following tables set forth the plans' funded status and amounts recognized
in the Company's balance sheet for its significant pension plans:
1994
- ----------------------------------------------------------------------
ASSETS ACCUMULATED
EXCEED BENEFITS
ACCUMULATED EXCEED
BENEFITS ASSETS
- ----------------------------------------------------------------------
(In thousands)
Actuarial present value of obligations:
Vested benefit obligations $28,579 $ 7,615
======================================================================
Accumulated benefit obligations $30,445 $12,331
======================================================================
Projected benefit obligations $38,489 $18,957
Plan assets at fair value 41,622 3,113
- ----------------------------------------------------------------------
Excess (deficiency) of assets over
projected benefit obligations 3,133 (15,844)
Unrecognized prior service costs 248 1,890
Unrecognized net (gain) loss (4,348) 5,495
Unrecognized net transition
(asset) obligation (2,459) 206
- ----------------------------------------------------------------------
Accrued pension costs $(3,426) $(8,253)
======================================================================
1993
- ----------------------------------------------------------------------
ASSETS ACCUMULATED
EXCEED BENEFITS
ACCUMULATED EXCEED
BENEFITS ASSETS
- ----------------------------------------------------------------------
(In Thousands)
Actuarial present value of obligations:
Vested benefit obligations $28,637 $ 6,413
======================================================================
Accumulated benefit obligations $30,559 $ 9,935
======================================================================
Projected benefit obligations $39,577 $15,381
Plan assets at fair value 40,851 2,513
- ----------------------------------------------------------------------
Excess (deficiency) of assets over
projected benefit obligations 1,274 (12,868)
Unrecognized prior service costs 1,205 2,168
Unrecognized net (gain) loss (3,292) 4,254
Unrecognized net transition
(asset) obligation (3,021) 178
- ----------------------------------------------------------------------
Accrued pension costs $(3,834) $(6,268)
======================================================================
Plans for which accumulated benefit obligations exceeded plan assets consist of
the unfunded supplemental plan and certain international plans, which are
partially unfunded by local practice.
24
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The actuarial present value of projected benefit obligations at the end of 1994
and 1993 was determined using a weighted average discount rate of 7.7 percent
and 7.5 percent, respectively, and a rate of increase in future compensation
levels of 5.0 percent and 4.6 percent, respectively. Plan assets consist
primarily of stocks and bonds. The expected long-term rate of return on plan
assets was 8.0 percent for 1994, 1993 and 1992.
POSTRETIREMENT BENEFIT PLAN -- The parent company has an unfunded
postretirement defined benefit plan covering substantially all employees. The
plan provides medical and life insurance benefits. The plan is contributory,
with retiree contributions adjusted annually, and contains other cost-sharing
features such as deductibles and coinsurance.
Effective as of the beginning of 1993, the Company adopted FAS 106, which
requires these benefits to be expensed during the employees' working careers.
Postretirement benefit expense for years prior to 1993, which was recorded when
the benefits were paid, has not been restated.
Net postretirement benefit cost includes the following components:
1994 1993 1992
- ----------------------------------------------------------------------
(In thousands)
Service cost - benefits
earned during period $ 396 $388 --
Interest cost on accumulated
benefit obligations 607 551 --
- ----------------------------------------------------------------------
Net periodic
postretirement
benefit cost $1,003 $939 $153
======================================================================
The following table sets forth the amount recognized in the Company's balance
sheet for its postretirement benefit plan:
1994 1993
- ----------------------------------------------------------------------
(In thousands)
Accumulated postretirement
benefit obligation:
Retirees $2,362 $2,339
Fully eligible active plan participants 1,732 1,687
Other active plan participants 3,779 3,762
- ----------------------------------------------------------------------
7,873 7,788
Unrecognized net gain (loss) 677 (38)
- ----------------------------------------------------------------------
Accrued postretirement benefit costs $8,550 $7,750
======================================================================
The discount rate used in determining the accumulated postretirement benefit
obligation at the end of 1994 and 1993 was 8.0 percent and 7.5 percent,
respectively. The annual rate of increase in the per capita cost of covered
benefits (the health care cost trend rate) was assumed to be 9.5 percent for
1995, decreasing gradually to 5.0 percent for 2001 and thereafter. The health
care cost trend rate assumption has a significant effect on the amounts
reported. For example, increasing the assumed health care cost trend rates by
one percentage point in each year would increase the net postretirement benefit
cost for 1994 by $201,000 and the accumulated postretirement benefit obligation
as of October 30, 1994 by $1,338,000.
NOTE 6 -- INCENTIVE COMPENSATION PLAN
The Company has an incentive compensation plan for executive officers.
Participants in the plan and payments under the plan are approved by a
committee appointed by the Board of Directors. Members of the committee are
directors and are not active officers of the Company. Amounts paid under the
plan are based on a percentage of the base salary of each participant.
Compensation expense attributable to the plan was $2,238,000 in 1994
($1,557,000 in 1993 and $1,843,000 in 1992).
NOTE 7 -- LINES OF CREDIT AND NOTES PAYABLE
At October 30, 1994, the Company had lines of credit with various domestic and
foreign banks aggregating $119,764,000. The unused portion of these credit
lines was $93,447,000. These lines, which can generally be withdrawn at the
option of the banks, do not require material compensating balances or
commitment fees.
The weighted average interest rate on notes payable was 5.0 percent and 8.7
percent at October 30, 1994 and October 31, 1993, respectively. The carrying
amount of the Company's notes payable approximates their fair value.
25
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NOTE 8 -- LONG-TERM DEBT
The long-term debt of the Company follows:
1994 1993
- -----------------------------------------------------------------
(In thousands)
Industrial revenue bonds --
City of Westlake, Ohio $ 6,800 $ 7,650
Industrial revenue bonds --
Gwinnett County, Georgia 6,000 6,000
State of Ohio loan 485 585
Guarantee of ESOP obligation 2,001 3,081
5.33% Mortgage note, payable in
semi-annual installments of
$161,000 through June 1996 645 971
5.50% Mortgage note, payable in
semi-annual installments of
$52,000 through June 1998 413 491
5.50% Mortgage note, payable in
semi-annual installments of
$54,000 through June 1998 435 518
4.70% Note, payable in semi-
annual installments of
$101,000 through June 1997 606 755
5.75% Note, payable in semi-
annual installments of
$55,000 through December 1996 274 364
Variable rate term loan -- 387
Other (primarily foreign currency borrowings) 21 39
- -----------------------------------------------------------------
17,680 20,841
Less current maturities 2,468 3,174
- -----------------------------------------------------------------
Total $15,212 $17,667
=================================================================
INDUSTRIAL REVENUE BONDS -- CITY OF WESTLAKE, OHIO -- These bonds were issued
in connection with the construction of the Company's world headquarters in
Westlake, Ohio. The bonds are due in annual installments of $850,000 extending
through 2002 with interest payable quarterly. The tax-free interest rate varies
weekly and was 3.50 percent at October 30, 1994. The bonds are secured by a
$7,091,000 standby letter of credit.
INDUSTRIAL REVENUE BONDS -- GWINNETT COUNTY, GEORGIA -- These bonds were issued
in connection with the acquisition and renovation of the Norcross Manufacturing
Facility in Gwinnett County, Georgia. These bonds are due in annual
installments of $600,000 beginning in 2000 and extending through 2009 with
interest payable quarterly. The tax-free interest rate varies weekly and was
3.55 percent at October 30, 1994. The bonds are secured by a $6,300,000 standby
letter of credit.
STATE OF OHIO LOAN -- This loan was issued for the construction of a sales and
demonstration facility in Amherst, Ohio. The loan is payable in annual
installments of $100,000 through 1998, with the final installment of $85,000
due in 1999. Interest is payable quarterly at a fixed rate of 5.00 percent. The
loan is secured by a $585,000 standby letter of credit.
GUARANTEE OF ESOP OBLIGATION -- The Company's Employee Stock Ownership Plan
(ESOP) has borrowed under a $10,000,000 revolving credit agreement. Since the
Company has unconditionally guaranteed the repayment of the ESOP's borrowings,
the loans are reported as long-term debt on the consolidated balance sheet. A
corresponding amount of deferred stock-based compensation is also charged to
shareholders' equity and subsequently credited when the shares are released for
allocation to plan participants. The obligation is payable in annual
installments of $570,000 to $770,000 through 1997 with interest payable
quarterly. Interest resets periodically at a rate approximately 20 percent
below generally available taxable rates (4.49 percent at October 30, 1994). The
ESOP will repay the loans plus interest using Company contributions and
dividends received on the shares of common stock that have not been allocated
to plan participants. Dividends on unallocated shares were $37,000, $49,000 and
$46,000 in 1994, 1993 and 1992, respectively.
MORTGAGE AND OTHER NOTES PAYABLE -- The mortgage and other notes are payable
primarily in deutsche marks. Assets with a net book value of $5,211,000 have
been pledged as security for certain notes.
FAIR VALUE -- The fair value of the Company's long-term debt, including current
maturities, at October 30, 1994, is approximately $16,280,000, estimated by
discounting future cash flows at currently available taxable rates for
borrowing arrangements with similar terms and conditions.
ANNUAL MATURITIES -- The annual maturities of long-term debt for the five years
subsequent to October 30, 1994 are as follows: $2,468,000 in 1995, $2,577,000
in 1996, $1,988,000 in 1997, $1,162,000 in 1998, and $935,000 in 1999.
26
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NOTE 9 -- LEASES
The Company has lease commitments expiring at various dates, principally for
warehouse and office space, automobiles and office equipment. Most leases
contain renewal options and some contain purchase options.
The Company has an operating lease for office space owned by a partnership in
which the Company is a partner. The lease ends in 2010 and contains a renewal
option and an option to purchase the property at fair market value in 2000.
Monthly rentals range from $54,000 to $97,000 and approximate market rates.
Rent expense for all operating leases was approximately $9,103,000 in 1994
($8,740,000 in 1993 and $6,784,000 in 1992).
Assets held under capitalized leases are included in property, plant and
equipment as follows:
1994 1993
- ------------------------------------------------------------------
(In thousands)
Transportation equipment $ 9,797 $ 9,438
Other 3,347 3,374
- ------------------------------------------------------------------
Total capitalized leases 13,144 12,812
Less accumulated amortization 5,852 5,203
- ------------------------------------------------------------------
Net capitalized leases $ 7,292 $ 7,609
==================================================================
At October 30, 1994, future minimum lease payments under noncancelable
capitalized and operating leases are as follows:
CAPITALIZED OPERATING
LEASES LEASES
- ------------------------------------------------------------------
(In thousands)
Fiscal Year Ending:
1995 $ 4,430 $ 8,997
1996 3,247 7,481
1997 1,774 6,112
1998 601 4,347
1999 86 1,628
Later years 2 14,589
- -----------------------------------------------------------------
Total minimum lease payments $10,140 $43,154
=======
Less amount representing
executory costs 1,083
- ---------------------------------------------
Net minimum lease payments 9,057
Less amount representing interest 1,760
- ---------------------------------------------
Present value of net minimum
lease payments 7,297
Less current portion 3,255
- ---------------------------------------------
Long-term obligations at
October 30, 1994 $ 4,042
=============================================
NOTE 10 -- OFF-BALANCE-SHEET RISK AND
CONCENTRATIONS OF CREDIT RISK
The Company uses foreign exchange contracts to hedge receivables and payables
denominated in foreign currencies. These contracts usually have maturities of
90 days or less and generally require the Company to exchange foreign
currencies for U.S. dollars at maturity, at rates agreed to at the inception of
the contracts. Gains and losses from changes in the market value of these
contracts offset foreign exchange losses and gains on the related asset or
liability. At October 30, 1994, the Company had $69,483,000 of contracts
outstanding, of which $49,654,000 were in European currencies and $16,862,000
were in Japanese yen. The carrying amount of the Company's foreign exchange
contracts approximates their market value.
At October 30, 1994, the Company had issued $5,290,000 of guarantees to support
the term borrowing facilities of an unconsolidated affiliate. The fair value of
these guarantees is not material.
Financial instruments which potentially subject the Company to concentrations
of credit risk consist principally of temporary cash investments and trade
receivables. The Company invests its excess cash in deposits with major banks
throughout the world and in securities with strong credit ratings. The
Company's customers represent a wide variety of industries and geographic
regions. As of October 30, 1994, there were no significant concentrations of
credit risk.
NOTE 11 -- CAPITAL SHARES
PREFERRED -- The Company has authorized 10,000,000 Series A convertible
preferred shares without par value. No preferred shares were outstanding in
1994, 1993 or 1992.
COMMON -- The Company has 80,000,000 authorized common shares without par
value. In March 1992, the shareholders adopted an amendment to the Company's
articles of incorporation which, when filed with the State of Ohio, would
increase the number of authorized common shares to 160,000,000. During 1994,
1993 and 1992, there were 24,506,000 common shares issued. At October 30, 1994
and October 31, 1993, the number of outstanding common shares, net of treasury
shares, was 18,399,000 and 18,726,000, respectively.
27
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NOTE 12 -- COMPANY STOCK PLANS
LONG-TERM PERFORMANCE PLAN -- The Company's long-term performance plan,
adopted in 1993, 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. The number of common
shares available for grant of awards is 3 percent of the number of common
shares outstanding as of the first day of each fiscal year, plus up to an
additional .5 percent, consisting of shares available, but not granted, in
prior years. At October 31, 1994, there were 644,000 shares available for grant
in 1995.
STOCK OPTIONS -- The Company may grant non-qualified or incentive stock options
to employees and directors of the Company. The exercise price of outstanding
stock options is the fair market value of the common shares at the date of
grant. Generally, the options may be exercised after one year from the date of
grant at a rate not exceeding 25 percent per year and expire 10 years from the
date of grant. Vesting accelerates upon the occurrence of events which involve
or may result in a change of control of the Company.
No charges have been made against income in accounting for stock options. Tax
benefits arising from the exercise of non-qualified stock options are
recognized when realized and credited to capital in excess of stated value.
Summarized transactions are as follows:
WEIGHTED
AVERAGE
NUMBER OF EXERCISE PRICE
OPTIONS PER SHARE
- -------------------------------------------------------------
Outstanding at
October 31, 1993 1,374,701 $30.16
Granted 317,600 $53.50
Exercised (151,117) $21.31
Forfeited (19,206) $38.63
- -------------------------------------------------------------
Outstanding at
October 30, 1994 1,521,978 $35.81
=============================================================
Exercisable at
October 30, 1994 769,693 $27.12
=============================================================
STOCK APPRECIATION RIGHTS -- The Company may grant stock appreciation rights to
employees. A stock appreciation right provides for a payment equal to the
excess of the fair market value of a common share when the right is exercised,
over its value when the right was granted. The Company accrues for these
payments over the periods in which the stock appreciation rights vest and are
exercisable. There were no stock appreciation rights outstanding during 1994,
1993 and 1992. Limited stock appreciation rights that become exercisable upon
the occurrence of events which involve or may result in a change of control of
the Company have been granted with respect to 1,460,000 shares.
RESTRICTED STOCK -- The Company may grant restricted stock to employees.
Generally, these shares may not be disposed of for a designated period of time
defined at the date of grant, and are to be returned to the Company if the
recipient's employment terminates during the restriction period. As shares are
issued, deferred stock-based compensation equivalent to the market value on the
date of grant is charged to shareholders' equity and subsequently amortized
over the restriction period. Net amortization was $443,000 in 1994 ($876,000 in
1993 and $1,443,000 in 1992). Tax benefits arising from the lapse of
restrictions on the stock are recognized when realized and credited to capital
in excess of stated value. In 1994, there were 8,400 restricted shares granted
and no restricted shares forfeited.
EMPLOYEE STOCK PURCHASE RIGHTS -- During 1994, the Company's stock purchase
programs were discontinued. Under these programs, eligible employees could
purchase common shares at specified times each year in an amount up to 15
percent of their annual compensation. For domestic employees, the purchase
price was equal to 95 percent of the fair market value of the common shares at
the date of purchase. Foreign employees could purchase shares at a price equal
to the lesser of: (a) 85 percent of the fair market value of the common shares
at the date of the employee's entry into the program, or (b) 85 percent of the
fair market value at the date of purchase. In 1994, there were 183,328 common
shares issued under these programs at an average price of $44.74 per share.
EMPLOYEE STOCK OWNERSHIP PLAN -- The Employee Stock Ownership Plan covers all
domestic employees. Company contributions are discretionary and funded annually
by a combination of cash and shares of the Company's common stock. Allocations
to the participants' accounts are made on December 31 on the basis of their
compensation for the year. Each participant vests in his account at a rate of
20 percent per year. Distribution of a participant's account occurs at
retirement, death, or termination of employment.
During 1994, $1,730,000 was charged to expense ($1,809,000 in 1993 and
$2,031,000 in 1992) using the shares-allocated method. These amounts include
$88,000, $128,000 and $131,000 in 1994, 1993 and 1992, respectively, charged
to interest expense related to the Company's guarantee of the plan's debt
obligation. Contributions to the plan were $1,567,000, $2,068,000 and $1,929,000
in 1994, 1993 and 1992, respectively.
28
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SHAREHOLDER RIGHTS PLAN -- In August 1988, the Board of Directors declared a
dividend of one common share purchase right for each common share outstanding
on September 9, 1988. Rights are also distributed with common shares issued by
the Company after that date. The rights may only be exercised if a party
acquires 20 percent or more of the Company's common shares, makes a tender
offer for at least 20 percent of the Company's common shares, or is declared
to be an "adverse person." The exercise price of each right is $100 per share.
The rights trade with the shares until the rights become exercisable.
If a party acquires at least 25 percent of the Company's common shares, is
declared to be an "adverse person," or attempts a "control share acquisition"
without complying with Ohio law, or if an acquiring party engages in certain
self-dealing actions ("flip-in" events), each right then becomes the right to
purchase two common shares of the Company for $.50 per share. In the event the
Company is acquired in a merger or other business combination ("flip-over"
events), each right entitles its holder to purchase, for $1, shares of the
surviving company having a market value equal to two common shares of Nordson.
The rights may be redeemed by the Company at a price of $.01 per right at any
time prior to the earlier of the "flip-in" or "flip-over" events, or expiration
of the rights on September 9, 1998.
SHARES RESERVED FOR FUTURE ISSUANCE -- At October 30, 1994, there were
42,961,000 shares reserved for future issuance through the exercise of
outstanding options or rights, including 40,906,000 shares under the
shareholder rights plan.
NOTE 13 -- DETAILS OF BALANCE SHEET
1994 1993
- ------------------------------------------------------------------------
(In thousands)
Receivables:
Accounts $105,336 $ 92,298
Notes 14,699 14,397
Other 2,941 3,347
- ------------------------------------------------------------------------
122,976 110,042
Allowance for doubtful accounts (2,903) (2,647)
- ------------------------------------------------------------------------
$120,073 $107,395
========================================================================
Inventories:
Finished goods $ 33,919 $ 30,747
Work in process 10,579 8,466
Raw materials and finished parts 49,117 45,448
- ------------------------------------------------------------------------
$ 93,615 $ 84,661
========================================================================
1994 1993
- ------------------------------------------------------------------------
(In thousands)
Property, plant and equipment:
Land $ 3,688 $ 3,655
Land improvements 2,358 2,342
Buildings 52,175 49,964
Machinery and equipment 81,735 68,560
Construction in progress 14,511 9,606
Leased property under
capitalized leases 13,144 12,812
- ------------------------------------------------------------------------
167,611 146,939
Accumulated depreciation
and amortization (78,956) (68,250)
- ------------------------------------------------------------------------
$ 88,655 $ 78,689
========================================================================
Intangibles:
Costs in excess of net assets of
acquired businesses $ 39,124 $ 34,064
Other 2,054 1,580
- ------------------------------------------------------------------------
41,178 35,644
Accumulated amortization (11,278) (8,393)
- ------------------------------------------------------------------------
$ 29,900 $ 27,251
========================================================================
Accrued liabilities:
Salaries and other compensation $ 21,173 $ 18,341
Pension and retirement 8,119 7,900
Taxes other than income taxes 3,143 2,802
Other 16,148 15,377
- ------------------------------------------------------------------------
$ 48,583 $ 44,420
========================================================================
NOTE 14 -- QUARTERLY FINANCIAL DATA (UNAUDITED)
1994 (BY QUARTER)
1 2 3 4
- ------------------------------------------------------------------------------
(In thousands except for per share amounts)
Sales $104,680 $121,502 $133,438 $147,072
Cost of sales 41,405 50,792 56,658 64,011
Net income 7,796 10,754 13,118 14,986
Earnings per share $.41 $.56 $.69 $.79
1993 (BY QUARTER)
1 2 3 4
- ------------------------------------------------------------------------------
(In thousands except for per share amounts)
Sales $100,300 $109,250 $123,341 $128,666
Cost of sales 40,318 44,564 52,748 53,945
Income before
cumulative effect of
accounting changes 6,683 8,787 12,075 13,230
Net income 1,899 8,787 12,075 13,230
Earnings per share:
Income before
cumulative effect of
accounting changes $.35 $.46 $.63 $.69
Net income .10 .46 .63 .69
29
9
NOTE 15 -- SUPPLEMENTAL INFORMATION FOR THE
STATEMENT OF CASH FLOWS
1994 1993 1992
- -------------------------------------------------------------
(In thousands)
Cash operating activities:
Interest paid $ 4,445 $ 6,351 $ 6,831
Income taxes paid 32,373 19,355 20,038
=============================================================
Noncash investing and
financing activities:
Capitalized lease
obligations incurred $ 3,938 $ 4,670 $ 6,061
Capitalized lease
obligations terminated 969 1,250 945
Shares acquired and
issued through
exercise of stock
options 4,873 3,613 2,965
=============================================================
Noncash assets and liabilities
of businesses acquired:
Working capital $ (115) $ (406) $ 883
Property, plant and
equipment 185 -- 411
Intangibles and other 4,173 861 7,103
Long-term debt and
other liabilities (310) -- (95)
- -------------------------------------------------------------
$ 3,933 $ 455 $ 8,302
=============================================================
NOTE 16 -- INDUSTRY SEGMENT AND GEOGRAPHIC
AREA DATA
INDUSTRY SEGMENT DATA -- The Company operates in one industry segment which
engages in developing, manufacturing and marketing industrial application
equipment. This equipment is used to apply adhesives, sealants, and liquid and
powder coatings to a broad range of consumer and industrial products during
manufacturing operations.
GEOGRAPHIC AREA DATA -- Financial data by geographic area is before elimination
of intercompany transactions. Geographic transfers are generally accounted for
at prices which approximate arm's-length wholesale market prices.
Operating profit is sales less operating expenses. In computing operating
profit, none of the following has been added or deducted: general corporate
expenses, other income and expense, and provision for income taxes.
Identifiable assets are those assets used in the operations of each geographic
area. Corporate assets are principally cash and cash equivalents, marketable
securities, and property, plant and equipment maintained for general corporate
purposes.
No single customer accounted for more than 5 percent of sales in 1994, 1993 or
1992.
The following table summarizes the Company's operations within geographic
areas:
1994 1993 1992
- -------------------------------------------------------------
(In thousands)
Sales to unaffiliated
customers:
North America $226,056 $197,708 $154,502
Europe 167,555 166,927 180,718
Japan 74,493 64,871 63,125
Pacific and
Latin America 38,588 32,051 27,273
- -------------------------------------------------------------
506,692 461,557 425,618
Transfers between
geographic areas:
North America 119,305 101,496 102,497
Europe 9,816 7,694 10,194
Japan 224 262 112
Pacific and
Latin America 627 354 60
Eliminations (129,972) (109,806) (112,863)
- -------------------------------------------------------------
Total sales $506,692 $461,557 $425,618
=============================================================
Operating profit:
North America $ 80,738 $ 68,169 $ 61,831
Europe 14,722 14,610 21,417
Japan 6,464 6,497 7,184
Pacific and
Latin America 2,759 2,067 2,867
Eliminations (3,031) 1,337 (902)
- -------------------------------------------------------------
Geographic
operating profit 101,652 92,680 92,397
General corporate
expenses (27,248) (25,306) (25,103)
Other expense - net (3,546) (5,126) (6,527)
- -------------------------------------------------------------
Income before income
taxes and cumulative
effect of accounting
changes $ 70,858 $ 62,248 $ 60,767
- -------------------------------------------------------------
Assets:
North America $178,364 $164,029 $147,737
Europe 115,792 112,892 133,655
Japan 53,933 47,176 40,376
Pacific and
Latin America 23,714 17,310 15,368
Corporate 20,576 32,140 25,900
Eliminations (11,435) (15,577) (16,739)
- -------------------------------------------------------------
Total assets $380,944 $357,970 $346,297
=============================================================
30