Nordson Corporation

1909–1966

Nordson Corporation is a leading manufacturer of precision dispensing equipment that apply liquid and powder coatings, adhesives, and sealants to a wide variety of consumer and industrial products during the manufacturing process. Nordson-built machines are used in the appliance, automotive, bookbinding, construction, container, converting, electronics, food and beverage, furniture, medical, metal finishing, nonwovens, packaging, pharmaceutical, and various other industries. The company also manufactures systems that are used in curing and surface treatment processes. Nearly 50 percent of the company's annual sales stem from operations outside the United States, and Nordson products are found in 31 countries across the globe. The firm's manufacturing plants are located in Alabama, California, Florida, Georgia, New Jersey, Ohio, Rhode Island, Germany, The Netherlands, and the United Kingdom.

Origins

The firm traces its history to 1909 and the founding of U.S. Automatic Company in Amherst, Ohio, near Cleveland. The predecessor firm manufactured high-volume, low-cost screw machine parts for the emerging automobile industry. When the company went bankrupt in 1929, Walter G. Nord acquired control and in 1935 reorganized it as U.S. Automatic Corporation, shifting production emphasis to lower-volume precision parts, which proved vital to the U.S. armed forces during World War II. In the years following the war, Walter and his sons, Eric Nord and Evan Nord, acquired patents for the "hot airless" method of applying paint, coatings, and adhesives whereby machines sprayed materials through tiny openings at high pressure.

Walter's sons--Eric, who joined the firm in 1939 after earning a degree in mechanical engineering from Case Institute of Technology, and Evan--formed the Nordson Division of U.S. Automatic in 1954 to produce and market airless spray equipment. Evan ran the operations of the businesses, while Eric searched for the proprietary technology of the airless spray equipment, which became the basis of the new Nordson Division.

Expansion: 1960s to Mid-1980s

The Nordson Division expanded into thermoplastic adhesion in the early 1960s. Machines developed during this period applied hot glue for such packaging as cartons and boxes as well as product assembly. Nordson soon emerged as a leader in this industry, which eventually became one of its primary businesses. The subsidiary grew quickly during the early years of the decade, establishing European marketing branches and absorbing parent U.S. Automatic in 1966. Walter G. Nord died the following year, leaving a legacy of beneficence in the Nordson Foundation, which was endowed with 5 percent of the corporation's pretax earnings.

Eric Nord advanced to the company's presidency, a position he occupied for 20 years. He was later to be credited with guiding the company's growth and providing an example of innovative thinking; before he retired, Nord was granted more than 25 patents for inventions. One noteworthy Nordson innovation of the late 1960s was a device that recovered and recycled over-sprayed powder coatings, thereby eliminating solid waste and pollutants while simultaneously saving customers money.

By 1984, the company had over $30 million in cash and had reportedly been plied with several takeover and/or merger proposals.

1969–1985

Nordson established a foothold in the burgeoning Japanese manufacturing market with the founding of Nordson K.K. in 1969 to distribute American-made machinery. Over the course of the 1970s, the corporation also increased its domestic packaging operations through the purchase of Domain Industries Inc., a manufacturer of packaging machinery, and the acquisition of a controlling interest in American Packaging Corporation, producer of Ampak brand flexible film and die-cutting equipment. Technological advances in hot melt adhesives and other thermoplastic compounds expanded Nordson's client base during the late 1970s and early 1980s. Soon the company's devices were modified for many applications within the automotive, off-road equipment, appliance, and woodworking industries for joining, caulking, and sealing.

Not all of Nordson's ventures were successful, however. In 1978, the company began manufacturing industrial robots. These spray-painting machines, which were less costly than human labor and could work in hazardous environments, were expected to become a high-growth venture. However, after six years of intense marketing, including a 1982 agreement with two Japanese firms, the program was dropped due to the industry's high rate of obsolescence.

A shift in management in the early 1980s brought public speculation that Nordson was a candidate for takeover. In 1982, James E. Taylor advanced to the presidency and chief executive office, while Eric Nord retired from day-to-day operations, retaining his seat at the head of the board of directors. Taylor divested two non-core businesses to focus corporate energies on what had become Nordson's most significant and promising businesses--packaging and assembly equipment to apply adhesives, sealants, caulking, and other thermoplastic substances, and liquid and powder coating technology. By 1984, the company had over $30 million in cash and had reportedly been plied with several takeover and/or merger proposals. Although the majority of Nordson's stock was very closely held--the Nord family owned 40 percent, the Nordson Foundation retained 10 percent, and current and former managers held another 10 percent--shareholders instituted anti-takeover measures.

Speculation about the possibly of a takeover increased in 1985, when Taylor resigned, bringing Eric Nord back to the offices of president and CEO. Taylor and Nordson cited "philosophical differences" for the departure: while Taylor preferred a centralized management scheme, Nord and the board of directors feared that tight controls would stifle the creativity necessary for the company to maintain its technological lead. Sales flattened out at $140 million in 1984 and 1985, while profits declined during the last year of Taylor's tenure from $11.3 million to $9.7 million.

Restructuring: Mid-1980s to Early 1990s

After a six-month search, Nordson offered the top positions to William P. Madar, a 47-year-old executive of Standard Oil Co. (later renamed B.P. America, Inc.). Leaving a 20-year career at Standard Oil to capitalize on Nordson's untapped potential, Madar brought a new management style to the company, which he characterized as "professorial," that encouraged problem-solving through the Socratic method: Madar preferred not to give specific instructions but to ask questions that would allow employees to arrive at their own conclusions. This corporate culture gave employees--over half of whom lived outside North America--freedom to customize the company's systems to accommodate local clients' needs.

Madar also moved immediately to revitalize his new employer, commissioning a study of the 3R's: resource review and reallocation. The restructuring recommended in the review included decentralization through the creation of four geographical sales and service divisions for North America, Japan, Pacific/South America (including Brazil, China, and India), and Europe. A core manufacturing and product development division retained responsibility for product lines. Madar removed redundant management tiers and formed a business-opportunity group to seek out new applications for existing technologies.

1985–1994

In 1987, the company built a new, $9 million laboratory for product engineering and development near its Amherst headquarters and committed an average of 5 percent of sales annually to research and development. The investments kept Nordson ahead of its competition and marketplace needs through technology developments. Edward B. Keaney, an analyst with Newhard, Cook & Co. of St. Louis, told the Cleveland Plain Dealer in May 1988 that Nordson "tends to be the technology leader." This edge proved critical to the company's financial survival; had Nordson rested on its laurels, it would have quickly lost business. An estimated 20 percent of annual sales came from three- to four-year-old products, and by the late 1980s Nordson employees held over 1,000 patents and patent applications worldwide.

In interviews, Madar often used "leap frog" analogy to describe Nordson's development of new products, likening the application of existing technologies to new but closely related markets to "a frog leaping from one lily pad to the next." New markets, or lily pads, in turn, would become the foundation from which to make another technological leap. For example, the company adapted an electrostatic powder painting technique, commonly used on household appliances and other metal parts, to the strategic application of a superabsorbent polymer powder to gender-specific disposable diapers. Similarly, with different technology, Nordson applies high-speed liquid-paint spraying techniques, generally used to spray adhesives on food cans, to computer circuit boards. The precisely applied coatings protect hundreds of delicate circuits from moisture and dirt each minute. By making such incremental leaps, Nordson augments its knowledge and technology while keeping financial risks in check.

In 1987, the company introduced a new adhesive process that impregnated a standard adhesive with an inert gas to make a sealant that foamed as it was applied. The compound reduced the amount of glue needed and thereby lessened manufacturing costs. Nordson customers who purchased the new machines could expect to recover their costs within two years.

The results of Madar's restructuring were virtually immediate: his first annual report, in 1986, registered a new sales record of $168.7 million, a 20 percent increase from 1985. Operating profit increased 44 percent, and Nordson's average annual return on equity of 29 percent was double that of the overall capital goods industry. Exports increased even faster than domestic sales, contributing 66 percent of total sales by the early 1990s, with noteworthy growth in Australia, Canada, Europe, the Far East, and South America. Nordson's 1993 decision to obtain ISO 9000 certification from the International Organization of Standardization in Switzerland promised increased global competitiveness as well. By that time, the company had established a manufacturing facility in its European market to better serve that geographic region and had invested in an international communications network.

Value Line responded to the improved results by giving the company's stock its highest recommendation. Annual sales tripled from 1986 to 1993 under Madar's direction, from $140 million to $461 million. Profits jumped 79 percent in fiscal 1987 alone, to $24.7 million, and peaked at $46.6 million in 1994. Nordson recorded its 31st consecutive year of increases in the cash dividend, and noted that "more than 70% of employees are shareholders" in its 1994 annual report. Analyst Timothy P. Burns, of First Boston Corporation in Chicago, ascribed most of Nordson's success during the period to "management's well-crafted strategy, long-term investments, and the ability to find new ways to apply new glues, adhesives and other advanced materials." External factors, including rising automobile and appliance sales, as well as a weak dollar, also contributed to Nordson's early 1990s earnings boom.

Nordson's corporate tagline encouraged prospective clients to "Expect More." In 1994, company spokespersons indicated that they would expect more from themselves as well, predicting that earnings would more than double by the turn of the 21st century to over $1 billion. CEO Madar and Chairperson Nord prepared for this growth by setting up a "logical succession of leadership" and creating a new layer of management. Moreover, Nordson established the position of executive vice-president and chief operating officer, which was filled by Edward P. Campbell. Analyst Maureen P. Lentz, of Roulson Research Corporation in Cleveland, told the Cleveland Plain Dealer that Nordson's plans to double sales in five years were "do-able ... because of the recovery in overseas markets." The company also implemented a formal employee empowerment training program in an effort to maintain its innovative edge.

Strategic Acquisitions: Late 1990s

1994–2001

While Nordson had certainly improved operations during the late 1980s and into the early 1990s, it faced distinct economic challenges during the latter half of the decade that kept its sales goal out of reach. Revenues, however, did increase each year from 1994 to 2000 but failed to hit the planned $1 billion mark. Under the leadership of Campbell--named president and CEO in 1997--Nordson grew during this time period through a series of strategic acquisitions. In 1998, the firm purchased competitor J&M Laboratories Inc., a manufacturer of melt-blowing systems used to produce synthetic nonwoven fabrics. The company also manufactured adhesive dispensing equipment for diaper assembly, medical products, and feminine hygiene products.

In order to expand its hot melt adhesive dispensing business segment, Nordson also acquired Meltex of Germany and California-based Slautterback Corporation The firm added cold adhesive dispensing equipment to its product arsenal with the purchase of Veritec Technologies. Nordson also looked for key acquisitions to strengthen its presence in emerging high technology markets. As such, Spectral Technology Group, a United Kingdom-based ultraviolet curing systems manufacturer, was acquired along with New Jersey-based Horizon Lamps Inc. By the end of the decade, the company had also purchased glass plasma technology from March Instruments Inc. and Advanced Plasma Systems and had acquired California-based Asymtek, a manufacturer of dispensing equipment used in the electronics industry. Then, in late 2000, the company completed its purchase of EFD Inc., a manufacturer of industrial dispensing equipment.

Nordson entered the new millennium recording its 14th year of consecutive sales growth. While sales had reached $740.5 million in 2000, the company's growth had fallen short of expectations due to weakening economies in both Europe and Japan. To make matters worse, the U.S. economy was also beginning to falter. In response to the financial uncertainty, management implemented Action 2000, a two-year plan launched in late 1999 that was aimed at boosting financial growth and included the BEST program--a corporate strategy focused on three main ideas: improve, innovate, and grow.

Financial hardships continued into fiscal 2001. During that year, the company reported a slight decrease in sales while net income fell to $24.6 million, down from $54.6 million in 2000. In September 2001, the company announced it would cut its workforce by 10 percent as part of its cost cutting effort. By now, Nordson had also restructured its operations into three main business segments that included adhesive dispensing and nonwoven fiber systems, advanced technology systems, and coating and finishing systems.

Despite the turbulent economic outlook, Nordson management was confident that the firm would prosper well into the future. As in the mid-1990s, the company's strategy included doubling its sales over a five-year period by capitalizing on opportunities, investing in systems to maximize productivity, and continuing its expansion into growth markets. As a leader in nearly every market segment in which it operated, Nordson stood well positioned to withstand changing economies. Whether or not it would reach its five-year goal, however, remained to be seen.