Nordson Corporation — FY2021 Form 10-K Summary
Reporting period: Fiscal year ended October 31, 2021. The filing is an annual report, not a quarterly report. Unless stated otherwise, financial figures below are in U.S. dollars; reported financial statement amounts are in thousands.
Business context
Nordson designs and manufactures precision dispensing, processing, testing, inspection and medical products for industrial, packaging, electronics, medical and other markets. It reports two segments: Industrial Precision Solutions (IPS) and Advanced Technology Solutions (ATS). About 66.6% of FY2021 sales were generated outside the United States; no customer accounted for 10% or more of sales.
Key financial metrics
| Metric | FY2021 | FY2020 |
|---|---|---|
| Sales | $2,362.2 million | $2,121.1 million |
| Gross margin | 56.1% | 53.3% |
| Operating profit / margin | $615.1 million / 26.0% | $349.5 million / 16.5% |
| Net income | $454.4 million | $249.5 million |
| Diluted EPS | $7.74 | $4.27 |
| Operating cash flow | $545.9 million | $502.4 million |
| Capital expenditures | $38.3 million | $50.5 million |
| Cash and cash equivalents at year-end | $300.0 million | $208.3 million |
| Debt and notes payable at year-end | $815.9 million | $1,106.0 million |
Cash flow from operations less capital expenditures was approximately $507.6 million. Current assets were $1,164.8 million and current liabilities were $445.4 million. Approximately 55% of year-end cash was held at foreign subsidiaries. Nordson reported $57.1 million of unused foreign bank lines and no borrowings on its $850 million revolving facility.
Material changes versus FY2020
- Sales rose 11.4%, reflecting 11.3% higher volume and a 2.7% favorable currency effect, partly offset by a net 2.6% decrease from acquisitions and divestitures.
- Gross margin improved 2.8 percentage points, aided by product mix—principally the screws and barrels product-line divestiture—and higher-volume leverage. Selling and administrative expense declined to 30.0% of sales from 32.7%.
- FY2020 results included an $87.4 million non-cash impairment charge related to the planned sale of the screws and barrels product line. The after-tax charge was $72.1 million; its absence, alongside stronger sales and mix, materially contributed to FY2021 profit growth.
- IPS sales increased 9.1% to $1,246.9 million; segment operating margin rose to 33.2% from 18.2%. ATS sales increased 14.1% to $1,115.3 million; segment operating margin rose to 24.4% from 19.6%.
- Debt declined by about $290 million, principally following repayment of the term loan. Cash used for dividends was $97.7 million; dividends declared increased to $1.69 per share from $1.53.
Outlook, commentary and risks
- Management expected sales and earnings to increase in FY2022 compared with FY2021, but provided no numerical guidance. It cited recurring parts and consumables revenue, direct sales, product innovation and the new Ascend growth strategy as supports for longer-term profitable growth.
- Supply-chain constraints, logistics delays and higher freight rates continued; the company also cited pandemic-related manufacturing inefficiencies and cost increases. It warned that supply availability, input-cost inflation and the timing of passing costs to customers could affect margins and cash flows.
- COVID-19, economic and end-market cyclicality, foreign exchange, trade policy and tariffs, cybersecurity, talent retention, acquisitions and integration, goodwill impairment, environmental regulation, pension assumptions and interest rates were identified as risks.
- On November 1, 2021, after fiscal year-end, Nordson completed its approximately $180 million cash acquisition of NDC Technologies. The transaction was funded from cash from operations and was not expected to have a material impact on consolidated financial statements.
- Nordson reported no goodwill impairment in FY2021. It accrued $319,000 for a known landfill remediation matter and stated that pending litigation and environmental matters were not expected to have a material adverse effect. Final court approval of a previously agreed labor-class-action settlement was received in November 2021.
- The financial statement audit opinion was unqualified, and management and the auditor concluded internal control over financial reporting was effective as of October 31, 2021.
Important facts for investors to verify
- How much of FY2022 growth and margin performance came from underlying volume and pricing versus currency, mix and acquisition effects.
- Whether supply-chain, logistics and inflation pressures ease, and whether Nordson can recover related costs through pricing without weakening demand.
- The post-close contribution, integration progress and actual financial impact of NDC, including the effect of the $180 million cash outlay on liquidity and debt.
- Debt maturities, interest-rate exposure and available borrowing capacity; approximately 38% of debt was floating-rate, and management disclosed sensitivity to higher rates.
- The assumptions supporting goodwill valuations, particularly given goodwill of approximately $1.7 billion and the filing’s sensitivity to future market conditions and cash-flow estimates.