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Item 2. Management’s Discussion and Analysis

2025-02-20 compared with 2024-08-22 · 95 added, 108 removed, 47 unchanged (81% of the section changed)

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Our products are marketed through a network of direct operations in more than 35 countries.

We have approximately 7,700 employees worldwide.

As of January 31, 2025, we had approximately 8,000 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.

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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% f or 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.

Below is a detailed comparison of our results of operations for the three months ended January 31, 2025 and January 31, 2024.

As used throughout this Quarterly Report on Form 10-Q, geographic regions include the Americas (United States, Canada, Mexico and Central and South America), Asia Pacific and Europe.

Effective November 1, 2024, the MCS division was transferred from the IPS segment to the ATS segment due to an organizational change and determination that the economic and business characteristics of MCS better aligned with the Company’s ATS segment.

Our segment reporting reflects this change and prior year financial information was revised to be comparable.

The MFS segment was unchanged.

Nordson Corporation

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 .

T he 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 .

T he 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% f or the nine months ended July 31, 2024 compared to 25.5% in the comparable period of 2023 .

Consolidated Financial Results

Consolidated financial results for the three months ended January 31, 2025 and January 31, 2024 were as follows:

Three Months Ended

(In thousands except for per-share amounts) January 31, 2025 January 31, 2024 Change

Sales $ 615,420 $ 633,193 (2.8) %

Cost of sales 279,524 284,766 (1.8) %

Gross margin 335,896 348,427 (3.6) %

Gross margin % 54.6 % 55.0 % (0.4) %

Selling and administrative expenses 194,949 188,992 3.2 %

Operating profit 140,947 159,435 (11.6) %

Interest expense (26,559) (21,442) 23.9 %

Interest and investment income 941 1,044 (9.9) %

Other - net 1,526 (338) (551.5) %

Income before income taxes 116,855 138,699 (15.7) %

Income tax expense 22,203 29,127 (23.8) %

Net income $ 94,652 $ 109,572 (13.6) %

Net sales for the IPS, MFS and ATS segments were as follows:

Three months ended Variance - Increase (Decrease)

Jan 31, 2025 % of Total Jan 31, 2024 % of Total Organic Acquisitions Currency Total

IPS $ 300,448 48.8% $ 337,742 53.3% (8.4) % — % (2.6) % (11.0) %

MFS 193,609 31.5% 159,526 25.2% (11.2) % 33.4 % (0.8) % 21.4 %

ATS 121,363 19.7% 135,925 21.5% (9.6) % — % (1.1) % (10.7) %

Total $ 615,420 $ 633,193 (9.4) % 8.4 % (1.8) % (2.8) %

The IPS organic sales decrease of 8.4 percent was driven primarily by weaker systems demand in polymer processing and industrial coatings product lines, which was partially offset by growth in systems and parts demand for adhesive product lines.

The MFS organic sales decrease of 11.2 percent was driven by lower demand and tough year-over-year comparisons in medical interventional solutions product lines, where customer destocking trends continued to impact demand.

The inorganic growth of MFS is due to the acquisition of Atrion.

The ATS organic sales decrease of 9.6 percent was driven by lower systems deliveries in electronics processing and x-ray product lines, partially offset by growth in optical sensors and measurement and control product lines.

Net Sales by region were as follows:

Three Months Ended Variance - Increase (Decrease)

Jan 31, 2025 % of Total Jan 31, 2024 % of Total Organic Acquisitions Currency Total

Americas $ 267,836 43.5% $ 274,012 43.3% (14.8) % 13.6 % (1.1) % (2.3) %

Europe 167,762 27.3% 179,310 28.3% (9.3) % 5.6 % (2.7) % (6.4) %

Asia Pacific 179,822 29.2% 179,871 28.4% (1.2) % 3.3 % (2.1) % — %

Total $ 615,420 $ 633,193 (9.4) % 8.4 % (1.8) % (2.8) %

Nordson Corporation

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 .

T he 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 .

T he improvement in operating margin was primarily due to improved factory efficiencies and cost controls.

Operating Profit

Operating profit for the IPS, MFS and ATS segments were as follows:

Three Months Ended

Jan 31, 2025 % of Sales Jan 31, 2024 % of Sales % of Sales Change Increase (Decrease)

IPS $ 95,712 31.9% $ 109,098 32.3% (0.4)% $ (13,386) (12.3) %

MFS 40,936 21.1% 46,100 28.9% (7.8)% (5,164) (11.2) %

ATS 18,123 14.9% 18,304 13.5% 1.4% (181) (1.0) %

Corporate (13,824) (14,067) 243 (1.7) %

Total $ 140,947 22.9% $ 159,435 25.2% (2.3)% $ (18,488) (11.6) %

Consolidated operating margin decreased by 230 basis points primarily driven by reduced sales leverage .

IPS operating margin declined 40 basis points, reflecting the impact of lower sales volumes .

MFS operating margin declined 780 basis points, reflecting the contribution from the Atrion acquisition offset by lower organic demand .

ATS operating margin improved by 140 basis points despite lower sales, due to strategic cost reduction actions and manufacturing footprint optimization actions .

Interest and Other expenses

Interest expense for the three months ended January 31, 2025 was $26,559, compared to $21,442 in the comparable period of 2024.

The increase, compared to the prior year period, was primarily due to higher average debt levels, driven by acquisitions.

Other income was $1,526 compared to $338 in the comparable period of 2024.

Included in 2025 other income were pension and postretirement income of $1,015 and $331 o f foreign currency gains.

Included in 2024 other expense were pension and postretirement income of $1,025 and $822 in foreign currency losses.

Income Tax Expense

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.

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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.

The effective tax rate for the three months ended January 31, 2025 was 19.0% compared to 21.0% for the three months ended January 31, 2024.

The effective tax rate for the three months ended January 31, 2025 is lower than the U.S.

tax rate of 21% primarily due to the foreign-derived intangible income deduction.

Net income was $94,652, or $1.65 per diluted share, for the three months ended January 31, 2025, compared to net income of $109,572, or $1.90 per diluted share, in the same period of 2024.

This represented a 13.6 percent decrease in net income and a 13.2 percent decrease in diluted earnings per share.

The decrease of $0.25 per diluted share was primarily driven by lower sales, higher selling & administrative expenses due to the first-year effect of acquisitions, and higher interest expense in the first quarter of 2025 compared to the first quarter of 2024.

Foreign Currency Effects

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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.

However, if transactions for the three months ended January 31, 2025 were translated at exchange rates in effect during the same period of 2024, we estimated that sales would have been approximately $12,000 higher while costs of sales and selling and administrative expenses would have been approximately $7,000 higher.

Nordson Corporation

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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.

Cash and cash equivalents increased $14,472 during the three months ended January 31, 2025.

Approximately 78 percent of our consolidated cash and cash equivalents were held at various foreign subsidiaries as of January 31, 2025.

A comparison of cash flow changes for the three months ended January 31, 2025 to the three months ended January 31, 2024 is as follows:

Three Months Ended

January 31, 2025 January 31, 2024 Increase (Decrease)

Net Income and non-cash items $ 134,843 $ 149,668 $ (14,825)

Changes in operating assets and liabilities 24,279 22,688 1,591

Net cash provided by operating activities 159,122 172,356 (13,234)

Additions to property, plant and equipment (21,399) (7,530) (13,869)

Other - net 7,123 1,805 5,318

Net cash used in investing activities (14,276) (5,725) (8,551)

Payments of long-term debt (22,563) (107,195) 84,632

Repayment of finance lease obligations (1,320) (1,488) 168

Dividends paid (44,602) (38,855) (5,747)

Issuance of common shares 1,001 14,418 (13,417)

Purchase of treasury shares (60,098) (7,371) (52,727)

Net cash used in financing activities $ (127,582) $ (140,491) $ 12,909

Additions to property, plant and equipment were largely driven by productivity and growth projects, including a new manufacturing facility.

We have a $1,150,000 unsecured multi-currency credit facility with a group of banks that provides for a term loan facility in the aggregate principal amount of $300,000, maturing in June 2026, and a multicurrency revolving credit facility in the aggregate principal amount of $850,000, maturing in June 2028.

At January 31, 2025, we had $280,000 outstanding on the term loan facility and $220,000 outstanding on the revolving credit facility.

Our operating performance, balance sheet position and financial ratios for 2025 remained strong.

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.

Our primary sources of capital to meet these needs, as well as other opportunistic investments, are a combination of cash on hand, which was $130,424 as of January 31, 2025, cash provided by operations, which was $159,122 for the three months ended January 31, 2025, and available borrowings under our loan agreements and unused bank lines of credit which totaled $808,808 as of January 31, 2025.

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

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These risks and uncertainties include, but are not limited to, U.S.

and international economic conditions;

and international economic and political 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;

possible acquisitions including the Company’s ability to complete and successfully integrate acquisitions, including the integration of Atrion;

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;

Nordson Corporation

effects of changes in U.S.

trade policy and trade agreements, including increased tariffs;

the effects of changes in tax law;

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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.

Nordson Corporation

Factors that could cause our actual results to differ materially from the expected results are discussed in Part I, Item 1A, Risk Factors in our 2024 Form 10-K.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 2. Management’s Discussion and Analysis