Back to GetFilings.com

Table of Contents

FORM 10-K

x	ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended November 2, 2003

o	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from                 to                

Commission file number 0-7977

NORDSON CORPORATION

Securities registered pursuant to Section 12(b) of the Act:

Securities registered pursuant to Section 12(g) of the Act:

   Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x  No o

   Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. x

   Indicate by check mark whether the Registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act). Yes x  No o

   The aggregate market value of Common Stock, no par value per share, held by nonaffiliates (based on the closing sale price on the Nasdaq) as of May 2, 2003 was approximately $617,614,000.

   There were 34,602,416 shares of Common Shares outstanding as of December 12, 2003.

DOCUMENTS INCORPORATED BY REFERENCE:

Portions of the Proxy Statement for the 2004 Annual Meeting — Part III

Table of Contents

Table of Contents

PART I

Item 1. Business

General Description of Business

Nordson products are used in a diverse range of industries, including appliance, automotive, bookbinding, container, converting, electronics, food and beverage, furniture, medical, metal finishing, nonwovens, packaging, semiconductor and other diverse industries.

The Company’s formula for long-term growth is based on a customer-driven strategy that is global in scope. Headquartered in Westlake, Ohio, Nordson markets its products through a network of direct operations in 30 countries throughout North America, Europe, Japan, Asia, Latin America and Australia. Consistent with this strategy, more than 50 percent of the Company’s revenues are generated outside the United States.

Nordson has nearly 3,500 employees worldwide and has principal manufacturing facilities in Ohio, Georgia, Alabama, California, Rhode Island, China, Germany, The Netherlands, and the United Kingdom.

Corporate Purpose and Goals

Nordson operates for the purpose of creating balanced, long-term benefits for all of our constituencies: customers, employees, shareholders and communities.

Our corporate goal for growth is to double the value of the Company over a moving five-year period, with the primary measure of value set by the market for Company shares.

While external factors may impact value, the achievement of this goal will rest with earnings growth, capital and human resource efficiency, and positioning for the future.

Nordson does not expect every quarter to produce increased sales, earnings and earnings per share, or to exceed the comparative prior year’s quarter. We do expect to produce long-term gains. When short-term swings occur, we do not intend to alter our basic objectives in efforts to mitigate the impact of these natural occurrences.

Growth is achieved by seizing opportunities within existing markets, investing in new products and pursuing new markets. This strategy is augmented by the acquisition of companies that can serve multinational industrial markets.

We create benefits for our customers through 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 corporate commitment to deliver what was promised.

We strive to provide genuine customer satisfaction; it is the foundation upon which we continue to build our business.

Complementing our business strategy is the objective to provide opportunities for employee self-fulfillment, growth, security, recognition and equitable compensation.

This goal is met through employee training and the creation of on-the-job growth opportunities. The result is a highly qualified and professional management team capable of meeting corporate objectives.

2

Table of Contents

We recognize the value of employee participation in the planning process. Strategic and operating plans are developed by all business units and divisions, resulting in a sense of ownership and commitment on the part of employees in accomplishing company objectives.

Nordson Corporation is an equal opportunity employer.

Nordson is committed to contributing an average of five percent of domestic pretax earnings to human services, health, education and other charitable activities, particularly in communities where the Company has major facilities.

Financial Information About Operating Segment, Foreign and Domestic Operations, and Export Sales

Principal Products and Uses

A summary of the Company’s various products and examples of their uses are as follows:

1. Adhesive Dispensing and Nonwoven Fiber Systems

•	Packaging — Automated adhesive dispensing systems that seal corrugated cases and paperboard cartons, apply product labels and stabilize pallets.

•	Product Assembly — Adhesive and sealant dispensing systems for bonding or sealing plastic, metal and wood products.
•	Web Coating — Laminating and coating systems used to manufacture continuous-roll goods in the nonwovens, textile, paper and flexible-packaging industries.
•	Nonwovens — Systems for producing nonwoven fiber fabrics; equipment for applying adhesives, lotions, liquids and fibers to disposable nonwoven products.
•	Automotive — Adhesive and sealant dispensing systems for bonding and sealing window glass, body panels and structural components used on automobiles and trucks.

2. Coating and Finishing Systems

•	Powder Coating — Automated and manual spray systems used to apply powder paints and coatings to decorate and protect plastic, metal and wood products.

•	Liquid Finishing — Automated and manual spray systems that apply liquid paints and coatings to consumer and industrial products.
•	Container — Systems used to dispense and cure coatings used in the manufacture of metal and plastic containers.

3

Table of Contents

3. Advanced Technology Systems

•	Asymtek — Automated dispensing systems for high-speed, accurate application of a broad range of attachment, protection and coating fluids to semiconductor packages, printed circuit boards and electronic assemblies.

•	UV Curing — Drying and curing systems for graphic arts, finishing and product assembly operations.
•	March Plasma Systems — Systems for cleaning and modifying surfaces during the assembly of semiconductor devices, printed circuit boards, medical instruments and electronic products.
•	EFD, Inc. — Manual and automated dispensing units for the low-pressure application of fluid materials for the electronics, medical and automotive industries.

Nordson markets its products in the United States and fifty-six other countries, primarily through a direct sales force and also through qualified distributors. Nordson has built a worldwide reputation for its creativity and expertise in the design and engineering of high-technology application equipment that meets the specific needs of its customers.

Manufacturing and Raw Materials

Principal materials used to make Nordson products are metals and plastics, typically in sheets, bar stock, castings, forgings, and tubing. Nordson also purchases many electrical and electronic components, fabricated metal parts, high-pressure fluid hoses, packings, seals and other items integral to its products. Suppliers are competitively selected based on cost and quality. All significant raw materials that Nordson uses are available through multiple sources.

Nordson’s senior operating executives supervise an extensive quality control program for Nordson equipment, machinery and systems.

Natural gas and other fuels are primary energy sources for Nordson. However, standby capacity for alternative sources is available if needed.

Patents and Trademarks

Seasonal Variation in Business

Working Capital Practices

4

Table of Contents

Customers

Backlog

Government Contracts

Competitive Conditions

Many factors influence the Company’s competitive position, including pricing, product quality and service. Nordson enjoys a leadership position in the competitive industrial application systems business by delivering high-quality, innovative products and technologies, as well as after-the-sale service and technical support. Working with customers to understand their processes and developing the application solutions that help them meet their production requirements also contributes to Nordson’s leadership position. Nordson’s worldwide network of direct sales and technical resources also is a competitive advantage.

Risk factors associated with Nordson’s competitive position include the development and commercial acceptance of alternative processes or materials and the growth of local competitors serving specific markets.

Research and Development

Environmental Compliance

Employees

5

Table of Contents

Item 2. Properties

The following table summarizes the principal properties of the Company.

Business Segment — Property Identification Legend

(1)	Adhesive Dispensing and Nonwoven Fiber Systems
(2)	Coating and Finishing Systems
(3)	Advanced Technology Systems

The facilities listed above have adequate, suitable and sufficient capacity (production and non-production) to meet present and foreseeable demand for the Company’s products.

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 25 years and generally contain a provision for cancellation with some penalty at an earlier date.

6

Table of Contents

In addition, the Company leases equipment under various operating and capitalized leases. Information about leases is reported in Note 7 of Notes to Consolidated Financial Statements that can be found in Part II, Item 8 of this document.

Item 3. Legal Proceedings

The Company has been identified as a potentially responsible party (PRP) at a Wisconsin municipal landfill and has voluntarily agreed with other PRP’s to share costs associated with (1) a feasibility study and remedial investigation (“FS/RI”) for the site and (2) providing clean drinking water to the affected residential properties through completion of the FS/RI phase of the project. The FS/RI is expected to be completed in 2005. The Company is committing $700,000 towards completing the FS/RI phase of the project and providing clean drinking water. This amount has been recorded in the Company’s financial statements. Against this commitment, the Company has made payments of $325,000 through the end of 2003. The remaining amount of $375,000 is recorded in accrued liabilities in the November 2, 2003 Consolidated Balance Sheet. The total cost of the Company’s share for site remediation cannot be determined at this time, because the FS/RI is not expected to be completed until 2005. However, based upon current information, the Company does not expect that the costs associated with remediation will have a material effect on its financial condition or results of operations.

In addition, the Company is involved in various other legal proceedings arising in the normal course of business. Based on current information, the Company does not expect that the ultimate resolution of pending and threatened legal proceedings will have a material adverse effect on its financial condition or results of operations. The Company is not involved in any other legal proceedings that would be required to be disclosed pursuant to Item 103 of Regulation S-K.

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, 2003 were as follows:

7

Table of Contents

PART II

Market Information and Dividends

Additional Information

Equity Compensation Table

8

Table of Contents

Item 6. Selected Financial Data

Five-Year Summary

(a)	See accompanying Notes to Consolidated Financial Statements.

(b)	In 2002, the Company adopted Statement of Financial Accounting Standards No. 142, “Goodwill and Other Intangible Assets” and as a result no longer amortizes goodwill. Amounts represent net income without goodwill amortization.

(c)	Net income plus interest on long-term obligations net of income taxes as a percentage of total assets less current liabilities.

(d)	Net income as a percentage of shareholders’ equity.

(e)	Amounts adjusted for 2-for-1 stock split effective September 12, 2000.

(f)	2002 includes an inventory write-down of $11.4 million, which is included in cost of sales.

9

Table of Contents

Critical Accounting Policies and Estimates

Certain accounting policies that require significant management estimates and are deemed critical to the Company’s results of operations or financial position are discussed below. On a regular basis, the Company reviews critical accounting policies with the Audit Committee of the Board of Directors.

Revenue Recognition — Most of the Company’s revenues are recognized upon shipment, provided that persuasive evidence of an arrangement exists, the sales price is fixed or determinable, collectibility is reasonably assured, and title and risk of loss have passed to the customer. Revenues from contracts with multiple element arrangements, such as those including both installation and services, are recognized as each element is earned based on objective evidence of the relative fair value of each element. Amounts received in excess of revenue recognized are included as deferred revenue in the accompanying balance sheets. Revenues deferred in 2003 were not material. A limited number of the Company’s large engineered systems sales contracts are accounted for using the percentage-of-completion method. The amount of revenue recognized in any accounting period is based on the ratio of actual costs incurred through the end of the period to total estimated costs at completion. Cost estimates are updated on a quarterly basis. During 2003 and 2002, the Company recognized approximately $5 million and $20 million, respectively, of revenue under the percentage-of-completion method. The remaining revenues are recognized upon delivery.

Goodwill — Goodwill represents the excess of purchase price over the fair value of tangible and identifiable intangible net assets acquired. At November 2, 2003, goodwill represented approximately 43 percent of the Company’s total assets. The majority of the goodwill resulted from the acquisition of EFD, Inc. in 2001. In 2002, the Company adopted FASB Statement No. 142, “Goodwill and Other Intangible Assets,” which provides that goodwill should not be amortized but instead be tested for impairment annually at the reporting unit level. In accordance with No. 142, the Company completed a transitional goodwill impairment test that resulted in no impairment loss being recognized. Goodwill is tested for impairment on an annual basis and more often if indications of impairment exist. The estimated fair value of a reporting unit is determined by applying appropriate discount rates to estimated future cash flows and terminal value amounts for the reporting units. The results of the Company’s analyses indicated that no reduction of goodwill is required. In 2001, goodwill amortization was $15,446,000 ($11,243,000 on an after-tax basis, or $.34 per share).

Inventories — Inventories are valued at the lower of cost or market. Cost has been determined using the last-in, first-out method for 39 percent of the Company’s consolidated inventories at November 2, 2003, with the first-in, first-out method used for the remaining inventory. On an ongoing basis, the Company tests its inventory for technical obsolescence, as well as for future demand and changes in market conditions. The Company has historically maintained inventory reserves to reflect those conditions when the cost of inventory is not expected to be recovered. In the face of difficult economic conditions that accelerated the technical obsolescence of certain inventory and impacted the demand outlook for other inventory, the Company recognized an inventory write-down of $11.4 million in the fourth quarter of 2002 ($7.6 million on an after-tax basis, or $.23 per share). The addition of $11.4 million to the inventory obsolescence reserve brought the reserve balance to $23.1 million. During 2003, approximately $21.3 million of inventory was disposed of and charged against the reserve, and $2.2 million was added to the reserve. After a currency effect of $.5 million, the balance in the inventory obsolescence reserve was $4.5 million at November 2, 2003.

10

Table of Contents

Pension Plans and Other Postretirement Medical Plan — The measurement of liabilities related to the Company’s pension plans and postretirement medical plan is based on management’s assumptions related to future factors including interest rates, return on pension plan assets, compensation increases and health care cost trend rates.

The weighted-average discount rate (based on AA quality fixed income investments) used to determine the present value of the Company’s aggregate pension plan obligation was 5.9 percent at November 2, 2003, compared to 6.5 percent at November 3, 2002. The average expected rate of return (long-term investment rate) on pension assets was decreased to 8.1 percent in 2003 from 8.6 percent in 2002. The assumed rate of compensation increases was reduced from 3.7 percent in 2002 to 3.3 percent in 2003 to reflect an inflationary outlook consistent with the discount and long-term investment yield assumptions.

Annual expense amounts are determined based on the discount rate used at the end of the prior year. Differences between actual and assumed investment returns on pension plan assets result in actuarial gains or losses which are amortized into expense over a period of years.

With respect to the postretirement medical plan, the discount rate used to value the benefit obligation was 6.25 percent at November 2, 2003, a decrease from 6.75 at November 3, 2002. The annual rate of increase in the per capita cost of covered benefits (the health care trend rate) is assumed to be 7.8 percent in 2004, decreasing gradually to 5.0 percent in 2008. The health care cost trend rate assumption has a significant effect on the amounts reported. For example, a one-percentage point change in the assumed health care cost trend rate would have the following effects: