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THE SECRET TO OUR success NORDSON CORPORATION 2015 ANNUAL REPORT THE SECRET TO OUR SUCCESS IS our people 1 FINANCIAL OVERVIEW 2 LETTER TO SHAREHOLDERS 8 TECHNOLOGY 10 MANUFACTURING 12 CUSTOMER SERVICE More Than 14 PHILANTHROPY 6,000 Strong 16 ACROSS THE GLOBE 18 11 YEAR SUMMARY 20 SHAREHOLDER INFORMATION 21 10-K INSIDE BACK COVER EXECUTIVE OFFICERS, BOARD OF DIRECTORS, BUSINESS PROFILE “Take special note of the most vital asset Nordson has to offer – its people.” - Eric Nord, co-founder Nordson Corporation strives to be a vital, self-renewing, worldwide organization which, within the framework of ethical behavior and enlightened citizenship, grows and produces wealth for our customers, employees, shareholders and communities. Nordson operates to create balanced, long-term benefits for all our constituencies. Founded in 1954, we engineer, manufacture and market differentiated products and systems used for precision dispensing and control of adhesives, polymers, coatings, lubricants, sealants, fluids and biomaterials, with related products for testing and inspection, and surface treatment. We serve customers in a diverse set of consumer durable goods, non-durable goods and technology end markets. We support our products and systems with application expertise and a direct global sales and service organization. Headquartered in Westlake, Ohio, with direct operations in more than 30 countries, we are everywhere our customers need us. Our principal facilities are located in Brazil, Germany, India, Japan, the Netherlands, the People’s Republic of China, Thailand, the United Kingdom and the USA. NORDSON CORPORATION 2015 ANNUAL REPORT financial overview 2015 2014 2013 2012 2011 OPERATIONS Sales $ 1,688,666 $ 1,704,021 $ 1,542,921 $ 1,409,578 $ 1,233,159 Operating profit $ 317,730 $ 367,105 $ 323,849 $ 335,480 $ 315,543 Net income $ 211,111 $ 246,773 $ 221,817 $ 224,829 $ 222,364 Diluted earnings per share $ 3.45 $ 3.84 $ 3.42 $ 3.45 $ 3.25 Free cash flow before dividends $ 200,461 $ 244,904 $ 225,004 $ 249,559 $ 226,649 Dividends per share $ 0.90 $ 0.76 $ 0.63 $ 0.525 $ 0.44 FINANCIAL POSITION Working capital $ 420,815 $ 301,815 $ 365,269 $ 242,939 $ 294,796 Total assets $ 2,360,444 $ 2,280,130 $ 2,053,179 $ 1,829,515 $ 1,304,450 Long-term debt $ 1,092,643 $ 682,868 $ 638,158 $ 528,041 $ 313,459 Shareholders’ equity $ 660,016 $ 904,797 $ 887,863 $ 669,770 $ 571,323 RATIOS Current 2.45 1.81 2.54 1.71 2.62 Net debt to EBITDA 2.78 1.78 1.61 1.58 0.81 Operating margin 19 % 22 % 21 % 24 % 26 % Return on average shareholders’ equity 26 % 27 % 29 % 38 % 39 % Return on average total capital 13 % 17 % 18 % 23 % 35 % Dividend payout ratio 26 % 20 % 18 % 15 % 14 % Dollar amounts in thousands except for per share amounts. Free Cash Flow Before Dividends Dividends Per Share Uses of Cash 2011-2015 $ in millions $ in millions $300 Net Income $0.90 Acquisitions Free Cash Flow Before Dividends 8% Dividends $250 $0.80 $207 46% Share $1,173 Repurchases $200 $0.70 Working Capital $150 $0.60 32% Property, Plant $810 & Equipment/ $100 $0.50 Capital Leases 8% $220 6% $50 $0.40 $153 11 12 13 14 15 11 12 13 14 15 $1 BILLION+ TO SHAREHOLDERS VIA STRONG CASH CONVERSION DIVIDENDS INCREASE 105% 1 SHARE REPURCHASES AND DIVIDENDS letter to shareholders Nordson delivered solid organic sales growth and performance in fiscal 2015 despite moderating growth rates in several emerging markets, a cautious investment approach among many customers in more developed markets, and very significant negative currency translation headwinds driven by the strong U.S. dollar. MICHAEL F. HILTON, President and Chief Executive Officer As you’ll see throughout this annual report, Nordson employees were undaunted by these macroeconomic challenges. They delivered solid results and began executing on a series of specific initiatives that should drive an improvement of two percentage points to normalized operating margin over the next two years. At more than 6,000 strong, these hard working men and women are the secret to Nordson’s success around the globe, finding ways to deliver more value by working faster, better and smarter every day. They are taking care of our customers, helping them to be more productive, efficient and profitable. They are committed to continuous improvement, driving Nordson to higher performance throughout the enterprise. And they are generous, providing financial support and thousands of hours of their time to charitable causes around the world. The following pages describe some of our team’s highlights from the past year, along with our expectations for fiscal 2016 and beyond. 2 NORDSON CORPORATION 2015 ANNUAL REPORT Fiscal Year 2015 Highlights Sales Dilluted EPS Nordson’s ability to serve customers globally remains a competitive advantage and a FY15 U.S. GAAP $ 1,688,666 $ 3.45 cornerstone of our long-term strategy. Approximately 69 percent of our revenues are Negative Currency Translation Impact $ 114,844 $ 0.54 generated outside of the U.S. In a year where FY15 Excluding Negative Currency $ 1,803,510 $ 3.99 the U.S. dollar strengthened dramatically, negative currency translation had a large effect FY14 U.S. GAAP $ 1,704,021 $ 3.84 on our results. Excluding this negative impact, Dollar amounts in thousands except diluted EPS. Nordson delivered record results in 2015 as shown at right. New products, new applications and emerging market penetration enabled us to generate organic volume growth of more than 3 percent, a level outpacing growth in global GDP. This solid organic growth was also in comparison to a strong fiscal 2014 where we generated 6 percent organic growth in a similar low growth macroeconomic environment. In addition to these solid fundamentals, we can report that: Full-year gross margin as reported was 54 percent. Excluding the effects of negative currency translation, gross margin for the year was approximately 55 percent, a continued strong level. Full-year operating margin as reported was 19 percent. Excluding one-time items and the approximate effects of unfavorable currency translation compared to the prior year, total company operating margin was 21 percent for the year. Free cash flow before dividends was $200 million or 95 percent of net income, representing very good cash conversion. Our balance sheet remains strong with significant capacity to support organic and acquisitive growth. Net debt at the end of the year was 2.8 times trailing four quarter EBITDA. Our strong cash generation enables us to de-lever quickly. We continued our balanced approach to capital allocation: We increased our annual dividend for the 52nd consecutive year, distributing $55 million to shareholders for a payout ratio of 26 percent. We invested $382 million to repurchase shares during the year, offsetting the dilutive effect of benefits programs and buying additional shares opportunistically. We completed three acquisitions within the targeted spaces we have previously identified. Liquidyn adds to our fluid dispensing portfolio, WAFO adds to our polymer processing product line, and MatriX expands our test and inspection platform. We distributed $7 million to charity, and employees volunteered thousands of hours through our Time ‘n Talent program. Sustained Long-Term Performance Comparison of Cumulative Total Return Regardless of naturally occurring business cycles or the challenging $600 Assumes $100 invested on Nov. 1, 2005 macroeconomic environment of any given year, Nordson remains focused Assumes dividend reinvested $500 Fiscal year ending Oct. 31, 2015 on delivering strong long-term returns to our shareholders. Our time-tested, Source: Zacks Investment Research high-value business model includes: $400 • Real technology differentiation and the most robust products available $300 • Application know-how to solve the most challenging customer problems • Global direct sales and service to provide the best customer experience $200 • A continuous improvement mindset driven by the Nordson $100 Business System $0 We apply our model in diverse and growing consumer non-durable, durable and technology end markets. Over the last decade, we have 05 06 07 08 09 10 11 12 13 14 15 outperformed relevant indices and our industrial peers by a Nordson Corporation S&P 500 Index S&P Midcap 400 Peer Group substantial margin. 3 PEER GROUP includes: AIN, AME, ATU, B, CLC, DCI, ENTG, ESL, FLIR, GGG, GTLS, IEX, ITT, LECO, ROP, TER, WTS, WWD Adhesive Dispensing Systems (ADS) Sales in ADS were $836 million in fiscal year 2015, ADS’ leadership position with organic volume growth of 2 percent being offset by negative currency translation effect of 9 percent as compared in consumer non-durable to the prior year. Operating profit was $196 million and operating margin was 23 percent. end markets should continue Within this segment’s hot melt dispensing offering, organic growth was strongest in product lines serving to provide growth and disposable hygiene end markets. Nordson aided customers in recapitalization of installed production lines and stability for Nordson over implementation of new lines with application expertise and winning technology such as our Duet™ and Trio™ the long term. variable dispense applicators. We also generated organic growth in rigid packaging and general product assembly end markets, where technology such as our next generation Spectra™ 30 pattern Polymer highlights from the year include control system the world’s first nine-manifold simplifies set-up and extrusion die, patent operation to improve pending SmartGap™ production efficiency technology which eases and product quality, the process of changing and our EF 60 V plastic sheet and film applicator systems thickness, and new enable cost-efficient sealing technology production of wood for slide-plate screen panels for high-quality changers, which enables them SmartGap™ extrusion die technology finished edges in Spectra™ 30 pattern control system to provide reliable leak-proof furniture production.