Nordson 10-Q 2024-07-31

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

For the quarterly period ended July 31, 2024

OR

For the transition period from to

Commission file number 0-7977

____________________________________________________

NORDSON CORPORATION

(Exact name of registrant as specified in its charter)

___________________________________________________

Ohio

(State or other jurisdiction of incorporation or organization)

28601 Clemens Road

Westlake, Ohio

(Address of principal executive offices)

34-0590250

(I.R.S. Employer Identification No.)

44145

(Zip Code)

(440) 892-1580

(Registrant's Telephone Number, Including Area Code)

Securities registered pursuant to Section 12(b) 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 whether the Registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the Registrant was required to submit such files). Yes x No o

Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

If an emerging growth company, indicate by check mark if the Registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o

Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No x

Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date: Common Shares, without par value as of August 20, 2024: 57,181,533

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Nordson Corporation

Part I – FINANCIAL INFORMATION

Condensed Consolidated Statements of Income

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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. Throughout this Quarterly Report on Form 10-Q, components may not sum to totals due to rounding.

Overview

Nordson is an innovative precision technology company that leverages a scalable growth framework to deliver top tier growth with leading margins and returns. We engineer, manufacture and market differentiated products and systems used for precision dispensing, applying and controlling of adhesives, coatings, polymers, sealants, biomaterials, and other fluids, to test and inspect for quality, and to treat and cure surfaces and various medical products such as: catheters, cannulas, medical balloons and medical tubing. These products are supported with extensive application expertise and direct global sales and service. We serve a wide variety of consumer non-durable, consumer durable and technology end markets including packaging, electronics, medical, appliances, energy, transportation, precision agriculture, building and construction, and general product assembly and finishing.

Our strategy for long-term growth is based on solving customers’ needs globally. We were incorporated in the State of Ohio in 1954 and are headquartered in Westlake, Ohio. Our products are marketed through a network of direct operations in more than 35 countries.

We have approximately 7,700 employees worldwide. Our principal manufacturing facilities are located in the United States, the People’s Republic of China, Germany, Ireland, Israel, Italy, Mexico, the Netherlands and the United Kingdom.

Critical Accounting Policies and Estimates

A comprehensive discussion of the Company’s critical accounting policies and management estimates and significant accounting policies followed in the preparation of the financial statements is included in Item 7 of our Annual Report on Form 10-K for the year ended October 31, 2023 (the "2023 Form 10-K"). There have been no significant changes in critical accounting policies, management estimates or accounting policies followed since the year ended October 31, 2023.

Results of Operations

Three Months Ended July 31, 2024

Worldwide sales for the three months ended July 31, 2024 were $661,604, an increase of 2.0% from sales of $648,677 for the comparable period of 2023. The increase included a 3.8% increase due to an acquisition and an unfavorable effect from currency translation of 0.9%. Organic sales decreased 0.9%, driven by lower demand in electronics and medical product lines, partially offset by growth in packaging, nonwovens, and optical sensors product lines.

In the Americas region, sales were $287,016 for the three months ended July 31, 2024, a decrease of 1.2% from the comparable period of 2023, consisting of an organic sales decrease of 3.4%, an increase due to an acquisition of 2.4%, and unfavorable currency effects of 0.2%. In the Asia Pacific region, sales were $195,218, an increase of 2.4% from the comparable period of 2023, consisting of an organic sales increase of 4.1% and a 0.8% increase due to an acquisition, partially offset by unfavorable currency effects of 2.5%. In Europe, sales were $179,370, an increase of 7.1% from the comparable period of 2023, consisting of an organic sales decrease of 2.0%, unfavorable currency effects of 0.7%, and a 9.8% increase due to an acquisition.

Cost of sales for the three months ended July 31, 2024 were $292,603, up from $288,357 in the comparable period of 2023. Gross profit, expressed as a percentage of sales, increased to 55.8% from 55.5% in the comparable period of 2023. The increase in gross profit was due to favorable mix overall.

Selling and administrative expenses for the three months ended July 31, 2024 were $201,943, up from $189,324 in the comparable period of 2023. The 6.7% increase was primarily driven by the first-year effect of an acquisition.

Operating profit decreased to $167,058 for the three months ended July 31, 2024, compared to $170,996 in the comparable period of 2023. Operating profit as a percentage of sales decreased to 25.3% for the three months ended July 31, 2024, compared to 26.4% in the comparable period of 2023. The 1.1 percentage-point decline in operating margin was primarily driven by reduced sales leverage on selling and administrative expenses, partially offset by improved gross margin percentage performance.

Interest expense for the three months ended July 31, 2024 was $18,803, compared to $12,089 in the comparable period of 2023. The increase, compared to the prior year period, was primarily due to higher average debt levels, driven by acquisitions. Other income was $152 compared to $2,542 in the comparable period of 2023. Included in 2024 other income were pension and postretirement income of $1,028 and $464 of foreign currency losses. Included in 2023 other income were pension and postretirement income of $1,343 and $886 in foreign currency losses.

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Net income for the three months ended July 31, 2024 was $117,327, or $2.04 per diluted share, compared to $127,891, or $2.22 per diluted share, in the same period of 2023. This change represents an 8.3% decrease in net income, and an 8.1% decrease in diluted earnings per share. The decrease in income reflects increased interest expense from prior year acquisitions and slightly lower overall operating margins.

Industrial Precision Solutions

Sales of the Industrial Precision Solutions segment were $370,561 in the three months ended July 31, 2024, an increase of 9.6% from sales of $338,257 for the comparable period of 2023. The increase consisted of an acquisition impact of 7.4% and an organic sales increase of 3.6%, partially offset by unfavorable currency effects of 1.4%. The organic sales increase was driven primarily by packaging and nonwovens product lines.

Operating profit as a percentage of sales decreased to 31.9% for the three months ended July 31, 2024 compared to 34.1% in the comparable period of 2023. The 2.2 percentage point decline in operating margin was primarily due to higher intangible asset amortization expense of $5,786 related to the ARAG acquisition.

Medical and Fluid Solutions

Sales of the Medical and Fluid Solutions segment were $166,737 in the three months ended July 31, 2024, a decrease of 2.4% from sales of $170,871 for the comparable period of 2023. The decrease consisted of an organic sales decrease of 2.0% and an unfavorable currency effect of 0.4%. The organic sales decrease was driven by lower demand in interventional solutions and fluid components product lines.

Operating profit as a percentage of sales decreased to 29.0% for the three months ended July 31, 2024 compared to 31.6% in the comparable period of 2023. The 2.6 percentage point decline in operating margin was primarily due to unfavorable mix.

Advanced Technology Solutions

Sales of the Advanced Technology Solutions segment were $124,306 in the three months ended July 31, 2024, a decrease of 10.9% from sales of $139,549 for the comparable period of 2023. The decrease consisted of an organic sales decrease of 10.2% and an unfavorable currency effect of 0.7%. The organic sales decrease was driven by softness in electronics processing and x-ray and test product lines, offset by growth in optical sensors product lines.

Operating profit as a percentage of sales decreased to 18.5% for the three months ended July 31, 2024 compared to 19.4% in the comparable period of 2023. The decrease in operating margin was primarily due to the decline in sales.

Nine Months Ended July 31, 2024

Worldwide sales for the nine months ended July 31, 2024 were $1,945,439, an increase of 1.9% from sales of $1,909,319 for the comparable period of 2023. The increase consisted of 4.5% increase due to acquisitions, partially offset by a 2.2% decrease in organic sales and an unfavorable effect from currency translation of 0.4%. The organic sales decrease was principally driven by the Advanced Technology Solutions segment, partially offset by organic sales increases in the Industrial Precision Solutions and Medical Fluid Solutions segments.

In the Americas region, sales were $855,456, an increase of 2.6% from the comparable period of 2023, consisting of an organic sales decrease of 0.3%, an increase of 2.7% due to an acquisition, and favorable currency effects of 0.2%. In the Asia Pacific region, sales were $549,233, a decrease of 4.8% from the comparable period of 2023, consisting of an organic sales decrease of 3.1% and unfavorable currency effects of 2.4%, partially offset by a 0.7% increase from an acquisition. In Europe, sales were $540,750, an increase of 8.5% from the comparable period of 2023, consisting of a 12.2% increase from an acquisition and favorable currency effects of 0.8%, partially offset by an organic sales decrease of 4.5%.

Cost of sales for the nine months ended July 31, 2024 were $862,134, down from $868,007 in the comparable period of 2023. Gross profit, expressed as a percentage of sales, increased to 55.7% from 54.5% in the comparable period of 2023. The 1.2 percentage point increase in gross margin was primarily driven by improved manufacturing efficiencies and favorable product mix.

Selling and administrative expenses for the nine months ended July 31, 2024 were $588,196, up from $553,590 in the comparable period of 2023. The 6.3% increase was primarily driven by the first-year effect of an acquisition, partially offset by improved cost controls.

Operating profit increased to $495,109 for the nine months ended July 31, 2024 compared to $487,722 in the nine months ended July 31, 2023. Operating profit as a percentage of sales was 25.4% for the nine months ended July 31, 2024 compared to 25.5% in the comparable period of 2023.

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Interest expense for the nine months ended July 31, 2024 was $60,354, compared to $32,532 in the comparable period of 2023. The increase was due primarily to higher average debt levels, driven by acquisitions. Other expense was $971 compared to $2,059 in the comparable period of 2023. Included in 2024 other expense were other pension and postretirement income of $3,085 and $2,411 of foreign currency losses. Included in 2023 other expense were pension and postretirement income of $4,044 and $7,625 of foreign currency losses.

Net income for the nine months ended July 31, 2024 was $345,116, or $5.99 per diluted share, compared to $359,715, or $6.24 per diluted share, in the same period of 2023. This change represents a 4.1% decrease in net income, and a 4.0% decrease in diluted earnings per share. The decrease in income was driven primarily by increased interest expense.

Industrial Precision Solutions

Sales of the Industrial Precision Solutions segment were $1,092,099 in the nine months ended July 31, 2024, an increase of 10.8% from sales in the comparable period of 2023 of $985,610. The increase was the result of higher organic sales of 2.5% and an increase of 8.8% due to an acquisition. Organic sales growth was driven primarily by the industrial coatings and packaging product lines.

Operating profit as a percentage of sales decreased to 31.5% for the nine months ended July 31, 2024 compared to 33.4% in the comparable period of 2023. The 1.9 percentage point decline in operating margin was primarily due to higher intangible asset amortization expense of $17,146 related to the ARAG acquisition.

Medical and Fluid Solutions

Sales of the Medical and Fluid Solutions segment were $495,229 in the nine months ended July 31, 2024, an increase of 0.7% from sales in the comparable period of 2023 of $491,683. The increase was the result of an organic sales increase of 0.9%. Sales growth occurred principally in the interventional solutions product line.

Operating profit as a percentage of sales increased to 29.0% for the nine months ended July 31, 2024 compared to 28.7% in the comparable period of 2023. The 0.3 percentage point improvement in operating margin was primarily due to the increase in sales and improved factory efficiencies.

Advanced Technology Solutions

Sales of the Advanced Technology Solutions segment were $358,111 in the nine months ended July 31, 2024, a decrease of 17.1% from sales in the comparable period of 2023 of $432,026. The decrease was the result of an organic sales decrease of 16.6% and unfavorable currency effects that decreased sales by 0.5%. The organic sales decrease was driven by weakness across the segment.

Operating profit as a percentage of sales increased to 17.0% for the nine months ended July 31, 2024 compared to 16.2% in the comparable period of 2023. The improvement in operating margin was primarily due to improved factory efficiencies and cost controls.

Income taxes

We record our interim provision for income taxes based on our estimated annual effective tax rate, as well as certain items discrete to the current period. Significant judgment is involved regarding the application of global income tax laws and regulations and when projecting the jurisdictional mix of income. We have considered several factors in determining the probability of realizing deferred income tax assets including forecasted operating earnings, available tax planning strategies and the time period over which the temporary differences will reverse. We review our tax positions on a regular basis and adjust the balances as new information becomes available. The effective tax rate for the three and nine months ended July 31, 2024 was 21.5% and 21.1%, respectively, compared to 21.1% and 20.9%, respectively, for the three and nine months ended July 31, 2023.

Foreign Currency Effects

In the aggregate, average exchange rates for 2024 used to translate international sales and operating results into U.S. dollars were generally unfavorable compared with average exchange rates existing during 2023. 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 July 31, 2024 were translated at exchange rates in effect during the same period of 2023, we estimated that sales would have been approximately $8,000 higher while costs of sales and selling and administrative expenses would have been approximately $5,000 higher. If transactions for the nine months ended July 31, 2024 were translated at exchange rates in effect during the same period of 2023, we estimated that sales would have been approximately $8,000 higher while costs of sales and selling and administrative expenses would have been approximately $5,000 higher.

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Nordson Corporation

Financial Condition

Liquidity and Capital Resources

During the nine months ended July 31, 2024, cash and cash equivalents increased $49,645. Cash provided by operations during this period was $459,812 compared to $478,072 for the nine months ended July 31, 2023. The primary sources were net income adjusted for non-cash income and expenses, which was $460,197, compared to $458,875 for the nine months ended July 31, 2023. Changes in operating assets and liabilities decreased cash by $385 in the nine months ended July 31, 2024 and increased cash by $19,197 in the comparable period of 2023. The change for the nine months ended July 31, 2024 was driven primarily by improvements in accounts receivable and inventory, principally offset by decreases in customer advance payments, accounts payable and accrued liabilities, including income taxes payable.

Cash used in investing activities was $34,890 for the nine months ended July 31, 2024, compared to $401,996 used in the comparable period of 2023. During the nine months ended July 31, 2024, cash of $43,786 was used for capital expenditures. During the nine months ended July 31, 2023, cash of $377,843 was used for the CyberOptics acquisition and $24,244 was used for capital expenditures.

Cash used in financing activities was $370,612 for the nine months ended July 31, 2024, compared to cash used of $102,074 in the comparable period of 2023. In the nine months ended July 31, 2024, cash of $116,789 was used for dividend payments and cash of $34,105 was used for the purchase of treasury shares, versus $111,547 and $78,163, respectively, in the comparable period of 2023. The nine months ended July 31, 2024 included net repayments of long-term debt of $244,355, compared to net borrowings of $73,956 during the nine months ended July 31, 2023.

The following is a summary of significant changes by balance sheet caption from October 31, 2023 to July 31, 2024. Receivables-net decreased $52,345, primarily due to higher collections from customers, and intangibles decreased by $43,980, principally due to amortization. Long-term debt also decreased $223,239 due to the use of operating cash flow to pay down debt balances.

The Company is well-positioned to manage liquidity needs that arise from working capital requirements, capital expenditures, and contributions related to pension and postretirement obligations, as well as principal and interest payments on our outstanding debt. Primary sources of capital to meet these needs, as well as other opportunistic investments, are a combination of cash provided by operations and borrowings under our loan agreements. Cash from operations, which when combined with our available borrowing capacity and ready access to capital markets, is expected to be more than adequate to fund our liquidity needs over the twelve months and the foreseeable future thereafter. The Company believes it has the ability to generate and obtain adequate amounts of cash to meet its long-term needs for cash. We were in compliance with all debt covenants as of July 31, 2024. Refer to our Long-term debt in the notes to our condensed consolidated financial statements for additional details regarding our debt outstanding and Term Facility.

Safe Harbor Statements Under the Private Securities Litigation Reform Act of 1995

This Quarterly Report on Form 10-Q, particularly “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” 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 United States and global economies. Statements in this Quarterly Report on Form 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. These forward-looking statements reflect management’s current expectations and involve a number of risks and uncertainties. These risks and uncertainties include, but are not limited to, U.S. and international economic conditions; financial and market conditions; currency exchange rates and devaluations; possible acquisitions including the Company’s ability to complete and successfully integrate acquisitions, including the integration of Atrion, the ARAG Group and CyberOptics; the Company’s ability to successfully divest or dispose of businesses that are deemed not to fit with its strategic plan; the effects of changes in U.S. trade policy and trade agreements; the effects of changes in tax law; and the possible effects of events beyond our control, such as political unrest, including the conflicts in Europe and the Middle East, acts of terror, natural disasters and pandemics.

In light of these risks and uncertainties, actual events and results may vary significantly from those included in or contemplated or implied by such forward-looking 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 Part I, Item 1A, Risk Factors in our 2023 Form 10-K.

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Information regarding our financial instruments that are sensitive to changes in interest rates and foreign currency exchange rates was disclosed under Part II, Item 7A, “Quantitative and Qualitative Disclosures About Market Risk” in our 2023 Form 10-K. The information disclosed has not changed materially in the interim period since then.

Our management with the participation of the principal executive officer (president and chief executive officer) and principal financial officer (executive vice president and chief financial officer) has reviewed and evaluated our disclosure controls and procedures (as defined in the Securities Exchange Act Rule 13a-15(e)) as of July 31, 2024. Based on that evaluation, our management, including the principal executive and financial officers, has concluded that our disclosure controls and procedures were effective as of July 31, 2024 in ensuring that information required to be disclosed in the reports that we file or submit under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission's rules and forms and is accumulated and communicated to management, including the principal executive officer and principal financial officer, as appropriate to allow timely decisions regarding required disclosure.

There were no changes in our internal control over financial reporting that occurred during the three months ended July 31, 2024 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

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Part II – OTHER INFORMATION

See our Contingencies Note to the condensed consolidated financial statements for a discussion of our contingencies and legal matters.

In addition to the other information set forth in this Quarterly Report on Form 10-Q, you should carefully consider the risk factors disclosed in “Item 1A. Risk Factors” of our 2023 Form 10-K. There have been no material changes to the risk factors described in the 2023 Form 10-K.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

The following table summarizes common shares repurchased by the Company during the three months ended July 31, 2024:

(1) Includes shares tendered for taxes related to stock option exercises and vesting of restricted stock.

(2) In December 2014, the board of directors authorized a $300,000 common share repurchase program. In August 2015, the board of directors authorized the repurchase of up to an additional $200,000 of the Company’s common shares. In August 2018, the board of directors authorized the repurchase of an additional $500,000 of the Company’s common shares. In September 2022, the board of directors authorized the repurchase of up to an additional $500,000 of the Company's common shares. Approximately $523,798 of the total $1,500,000 authorized remained available for share repurchases at July 31, 2024. Uses for repurchased shares include the funding of benefit programs including stock options and restricted stock. Shares purchased are treated as treasury shares until used for such purposes. The repurchase program will be funded using cash from operations and proceeds from borrowings under our credit facilities. The repurchase program does not have an expiration date.

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Trading Arrangements

During the three months ended July 31, 2024, any director or officer (as defined in Rule 16a-1(f) promulgated under the Exchange Act) of the Company that adopted or terminated any “Rule 10b5-1 trading arrangement” or any “non-Rule 10b5-1 trading arrangement,” as each term is defined in Item 408 of Regulation S-K, is disclosed below.

1 Each trading arrangement marked as a “Rule 10b5-1 Trading Arrangement” is intended to satisfy the affirmative defense of Rule 10b5-1(c), as amended (the “Rule”).

2 The aggregate number of securities may include common shares subject to restricted stock units previously granted to the reporting director or officer may vest and be released to the reporting director or officer on or after July 31, 2024 upon the satisfaction of the applicable service-based vesting conditions. The actual number of shares that will be released to the reporting director or officer pursuant to the restricted stock units and sold under the Rule 10b5-1 trading arrangement will be net of the number of shares withheld by the Company to satisfy tax withholding obligations arising from the vesting of such shares and is not yet determinable.

3 This figure includes an estimate of the number of shares issuable under performance share units ("PSUs") awarded under the Company's 2021 Stock Incentive and Award Plan ("SIAP") that may be sold under the trading arrangement; however, the actual number of shares that will be acquired through the SIAP may vary. In addition, the number of shares that may be sold under the trading arrangement includes the target number of shares issuable under Mr. Lovass' PSU award vesting during the term of the trading arrangement.

No other officers or directors, as defined in Rule 16a-1(f), adopted and/or terminated a “Rule 10b5-1 trading arrangement” or a “non-Rule 10b5-1 trading arrangement,” as each term is defined in Item 408 of Regulation S-K, during the three months ended July 31, 2024.

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** Schedules and attachments to this exhibit have been omitted pursuant to Regulation S-K, Item 601(a)(5). The Registrant will provide a copy of any omitted schedule to the SEC or its staff upon request.

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SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

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