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FORM 10-K

x	ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended November 3, 2002

o	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from                 to                

Commission file number 0-7977

NORDSON CORPORATION

Securities registered pursuant to Section 12(b) of the Act:

Securities registered pursuant to Section 12(g) 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 if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. o

   The aggregate market value of Common Stock, no par value per share, held by nonaffiliates (based on the closing sale price on the Nasdaq) as of December 6, 2002 was approximately $714,711,000.

   There were 33,617,486 shares of Common Shares outstanding as of December 6, 2002.

DOCUMENTS INCORPORATED BY REFERENCE:

Portions of the Proxy Statement for the 2003 Annual Meeting — Part III

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PART I

Item 1. Business

General Description of Business

Nordson products are used in a diverse range of industries, including appliance, automotive, bookbinding, circuit board assembly, electronics, food and beverage, furniture, medical, metal finishing, nonwoven products, packaging, semiconductor and telecommunications.

The Company’s formula for long-term growth is based on a customer-driven strategy that is global in scope. Headquartered in Westlake, Ohio, Nordson markets its products through a network of direct operations in 30 countries throughout North America, Europe, Japan, Asia, Latin America and Australia. Consistent with this strategy, more than 50 percent of the Company’s revenues are generated outside the United States.

Nordson has approximately 3,600 employees worldwide and has principal manufacturing facilities in Ohio, Georgia, Alabama, California, Rhode Island, Germany, the Netherlands, and the United Kingdom.

Corporate Purpose and Goals

Nordson operates for the purpose of creating balanced, long-term benefits for all of our constituencies: customers, employees, shareholders and communities.

Our corporate goal for growth is to double the value of the Company over a moving five-year period, with the primary measure of value set by the market for Company shares.

While external factors may impact value, the achievement of this goal will rest with earnings growth, capital and human resource efficiency, and positioning for the future.

Nordson does not expect every quarter to produce increased sales, earnings and earnings per share, or to exceed the comparative prior year’s quarter. We do expect to produce long-term gains. When short-term swings occur, we do not intend to alter our basic objectives in efforts to mitigate the impact of these natural occurrences.

Growth is achieved by seizing opportunities with existing products and markets, investing in systems to maximize productivity, and pursuing growth markets. This strategy is augmented through product line additions, engineering, research and development, and acquisition of companies that can serve multinational industrial markets.

We create benefits for our customers through a Package of Values^TM, which includes carefully engineered, durable products; strong service support; the backing of a well-established worldwide company with financial and technical strengths; and a corporate commitment to deliver what was promised.

We strive to provide genuine customer satisfaction; it is the foundation upon which we continue to build our business.

Complementing our business strategy is the objective to provide opportunities for employee self-fulfillment, growth, security, recognition and equitable compensation.

This goal is met through employee training and the creation of on-the-job growth opportunities. The result is a highly qualified and professional management team capable of meeting corporate objectives.

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We recognize the value of employee participation in the planning process. Strategic and operating plans are developed by all business units and divisions, resulting in a sense of ownership and commitment on the part of employees in accomplishing company objectives.

Nordson Corporation is an equal opportunity employer.

Nordson is committed to contributing an average of five percent of domestic pretax earnings to human services, health, education and other charitable activities, particularly in communities where the Company has major facilities.

Financial Information About Operating Segment, Foreign and Domestic Operations, and Export Sales

Principal Products and Uses

A summary of the Company’s various products and examples of their uses are as follows:

      1. Adhesive Dispensing and Nonwoven Fiber Systems

	•	Packaging — Automated adhesive dispensing systems that seal corrugated cases and paperboard cartons, apply product labels, and stabilize pallets.
	•	Product Assembly — Adhesive and sealant dispensing systems for bonding or sealing plastic, metal and wood products.
	•	Web Coating — Laminating and coating systems used to manufacture continuous-roll goods in the nonwovens, textile, paper and flexible packaging industries.
	•	Nonwovens — Systems for producing nonwoven fiber fabrics; equipment for applying adhesives, lotions, liquids and fibers to disposable nonwoven products.
	•	Automotive — Adhesive and sealant dispensing systems for bonding and sealing window glass, body panels and structural components used on automobiles and trucks.

      2. Coating and Finishing Systems

	•	Powder Coating — Automated spray systems used to apply powder paints and coatings to decorate and protect plastic, metal and wood products.
	•	Liquid Finishing — Automated and manual spray systems that apply liquid paints and coatings to consumer and industrial products.
	•	Container — Systems used to dispense and cure coatings used in the manufacture of metal, plastic and biodegradable containers.

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      3. Advanced Technology Systems

	•	Asymtek — Automated dispensing equipment for applying a broad range of fluids during the assembly of printed circuit boards and semiconductor packages; automated systems for applying conformal coatings to printed circuit boards and electronic assemblies.
	•	UV Curing — Drying and curing systems for graphic arts, finishing and product assembly operations.
	•	March Plasma Systems — Systems for modifying surfaces and cleaning components during manufacture of medical instruments, electronic products and printed circuit boards.
	•	EFD, Inc. — Manual and automated dispensing units for the low-pressure application of fluid materials for the electronics, medical and automotive industries.

Nordson markets its products in the United States and fifty-six other countries, primarily through a direct sales force and also through qualified distributors. Nordson has built a worldwide reputation for its creativity and expertise in the design and engineering of high-technology application equipment that meets the specific needs of its customers.

Manufacturing and Raw Materials

Principal materials used to make Nordson products are metals and plastics, typically in sheets, bar stock, castings, forgings, and tubing. Nordson also purchases many electrical and electronic components, fabricated metal parts, high-pressure fluid hoses, packings, seals and other items integral to its products. Suppliers are competitively selected based on cost and quality. All significant raw materials Nordson uses are available through multiple sources.

Nordson’s senior operating executives supervise an extensive quality control program for Nordson equipment, machinery and systems.

Natural gas and other fuels are primary energy sources for Nordson. However, standby capacity for alternative sources is available if needed.

Patents and Trademarks

Seasonal Variation in Business

Working Capital Practices

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Customers

Backlog

Government Contracts

Competitive Conditions

Many factors influence the Company’s competitive position, including pricing, product quality and service. Nordson enjoys a leadership position in the competitive industrial application systems business by delivering high-quality, innovative products and technologies, as well as after-the-sale service and technical support. Working with customers to understand their processes and developing the application solutions that help them meet their production requirements also contributes to Nordson’s leadership position. Nordson products help customers improve productivity, reduce raw material and energy consumption, lower maintenance costs, improve environmental conditions, and produce better performing finished products. Nordson’s worldwide network of direct sales and technical resources also is a competitive advantage.

Risk factors associated with Nordson’s competitive position include the development and commercial acceptance of alternative processes or materials and the growth of local competitors serving specific markets.

Research and Development

Environmental Compliance

Employees

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Item 2. Properties

The following table summarizes the principal properties of the Company.

Business Segment — Property Identification Legend

(1)	Adhesive Dispensing and Nonwoven Fiber Systems
(2)	Coating and Finishing Systems
(3)	Advanced Technology Systems

Several of these properties are pledged as security for industrial revenue bonds and mortgage notes payable.

Other properties at international subsidiary locations and at branch locations within the United States are leased. Lease terms do not exceed 25 years and generally contain a provision for cancellation with some penalty at an earlier date.

In addition, the Company leases equipment under various operating and capitalized leases. Information about leases is reported in Note 7 of Notes to Consolidated Financial Statements that can be found in Part II, Item 8 of this document.

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Item 3. Legal Proceedings

The Company has been identified as a potentially responsible party (PRP) at a Wisconsin municipal landfill and has voluntarily agreed with other PRP’s to share costs associated with a feasibility study and remedial investigation (“FS/RI”) for the site, with the Company committing up to $325,000 toward the FS/RI. This amount has been recorded in the Company’s financial statements. The FS/RI is expected to be completed in 2005. The total cost of the Company’s share for site remediation cannot be determined at this time but based on current information, the Company does not expect that the costs associated with remediation will have a material adverse effect on its financial condition or results of operations.

In addition, the Company is involved in various other legal proceedings arising in the normal course of business. Based on current information, the Company does not expect that the ultimate resolution of pending and threatened legal proceedings will have a material adverse effect on its financial condition or results of operations.

Item 4. Submission of Matters to a Vote of Security Holders

None.

PART II

Market Information and Dividends

Additional Information

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Equity Compensation Table

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Item 6. Selected Financial Data

Five-Year Summary

(a)	See accompanying Notes to Consolidated Financial Statements.

(b)	In 2002, the Company adopted Statement of Financial Accounting Standards No. 142, “Goodwill and Other Intangible Assets” and as a result no longer amortizes goodwill. Amounts represent net income without goodwill amortization.

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(c)	Income before cumulative effect of accounting changes and non-recurring charges plus interest on long-term obligations net of income taxes, as a percentage of total assets less current liabilities.

(d)	Income before cumulative effect of accounting changes and non-recurring charges, as a percentage of shareholders’ equity.

(e)	Amounts adjusted for 2-for-1 stock split effective September 12, 2000.
(f)	Diluted cash earnings per share consists of net earnings adjusted for goodwill amortization related to business acquisitions.
(g)	2002 includes an inventory write-down of $11.4 million, which is included in cost of sales and severance and restructuring costs of $2.7 million, of which $.2 million is included in cost of sales.

(h)	2001 includes a non-recurring charge of $14.0 million, consisting of severance and other charges of $13.3 million and inventory write-offs of $.7 million, which is included in cost of sales.

(i)	2000 operating profit includes a non-recurring charge of $9.0 million, which consists of severance payments.
(j)	1999 operating profit includes a non-recurring charge of $3.0 million, which consists of severance payments and supplemental pension obligations.

(k)

1998 cost of sales includes non-recurring charges related to inventory valuations of $6.9 million. Operating profit also includes non-recurring charges recorded below selling and administrative expenses and consists of $14.3 million for the portion of the purchase price paid for JM Laboratories, Inc. attributable to in-process research and development; $9.8 million for an early retirement program, involuntary severances and fixed-asset write-downs; and $2.0 million for costs associated with the consolidation of European operations.

Critical Accounting Policies and Estimates

Revenue Recognition — Most of the Company’s revenues are recognized upon shipment, provided that persuasive evidence of an arrangement exists, the sales price is fixed or determinable, collectibility is reasonably assured, and title and risk of loss have passed to the customer. A limited number of the Company’s large engineered systems sales contracts are accounted for using the percentage-of-completion method. The amount of revenue recognized in any accounting period is based on the ratio of actual costs incurred through the end of the period to total estimated costs at completion. During 2002, the Company recognized approximately $20 million of revenue under this method with respect to one contract, which was substantially completed prior to year-end. The remaining revenues are recognized upon delivery.

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Goodwill — Goodwill represents the excess of purchase price over the fair value of tangible and identifiable intangible net assets acquired. At November 3, 2002 goodwill represented approximately 43 percent of the Company’s total assets. The majority of the goodwill resulted from the acquisition of EFD, Inc. in 2001. In 2002, the Company adopted FASB Statement No. 142, “Goodwill and Other Intangible Assets,” which provides that goodwill should not be amortized but instead be tested for impairment annually at the reporting unit level. In accordance with No. 142, the Company completed a transitional goodwill impairment test that resulted in no impairment loss being recognized. Goodwill is tested for impairment on an annual basis and more often if indications of impairment exist. The estimated fair value of a reporting unit is determined by applying appropriate discount rates to estimated future cash flows and terminal value amounts for the reporting units. The results of the Company’s analyses indicated that no reduction of goodwill is required. In 2001, goodwill amortization was $15,446,000 ($11,243,000 on an after-tax basis, or $.34 per share). In 2000, goodwill amortization was $5,110,000 ($3,347,000 on an after-tax basis, or $.10 per share).

Inventories — Inventories are valued at the lower of cost or market. Cost has been determined using the last-in, first-out method for 38 percent of the Company’s consolidated inventories at November 3, 2002, with the first-in, first-out method used for the remaining inventory. On an ongoing basis, the Company tests its inventory for technical obsolescence, as well as for future demand and changes in market conditions. The Company has historically maintained inventory reserves to reflect those conditions when the cost of inventory is not expected to be recovered. In the face of difficult economic conditions that accelerated the technical obsolescence of certain inventory and impacted the demand outlook for other inventory, the Company recognized an inventory write-down of $11.4 million in the fourth quarter of 2002 ($7.6 million on an after-tax basis, or $.23 per share).

Pension Plans and Other Postretirement Benefit Plans — The measurement of liabilities related to pension plans and other postretirement benefit plans is based on management’s assumptions related to future events including interest rates, return on pension plan assets, compensation increases and health care cost trend rates. The discount rates used to determine the present value of future benefits are based on yields of AA quality or better fixed income investments. The weighted average discount rate used to value pension plan obligations was 6.5 percent at November 3, 2002, compared to 6.9 percent at October 28, 2001. The rate used to value the postretirement obligation was 6.75 percent at November 3, 2002, compared to 7.25 percent at October 28, 2001. Annual expense amounts are determined based on the discount rate at the end of the prior year. The expected rate of return on pension assets is designed to be a long-term assumption that will be subject to year-to-year variability. The rate for 2002 was decreased to 8.6 percent from 9.5 percent in 2001. During 2002, the fair market value of pension plan assets decreased. Actual pension plan asset performance will either reduce or increase unamortized losses, which will ultimately affect net income. The rate of compensation increases was reduced from 5.2 percent in 2001 to 3.7 percent in 2002 to reflect actual experience.

The rate of increase in medical costs over the next five years was increased to reflect actual experience. The health care cost trend rate assumption has a significant effect on the amounts reported. For example, a one-percentage point change in the assumed health care cost trend rate would have the following effects:

Employees hired after January 1, 2002 are not eligible to participate in the postretirement plan.

The overall effect of the assumption changes above will be to increase pension and postretirement expenses in fiscal 2003.

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Financial Instruments — Assets, liabilities and commitments that are to be settled in cash and are denominated in foreign currencies are sensitive to changes in currency exchange rates. The Company enters into foreign currency forward contracts, which are derivative financial instruments, to reduce the risk of foreign currency exposures resulting from the collection of receivables, payables and loans denominated in foreign currencies. The maturities of these contracts are usually less than 90 days. Forward contracts are marked to market each accounting period, and the resulting gains or losses are included in other income (expense) on the Consolidated Statement of Income.

Fiscal Years 2002 and 2001

Sales volume in the Company’s adhesive dispensing systems segment decreased 4 percent. Increases in packaging sales volume were more than offset by lower sales of nonwoven systems in North America. Advanced technology segment volume was down 29 percent, primarily due to the continuing global slowdown in the semiconductor and electronics industries. Coating and finishing systems segment sales volume was down 13 percent, influenced significantly by lower engineered systems sales in North America. It is estimated that the effect of pricing on total revenues was neutral relative to the prior year.

Nordson’s sales outside the United States accounted for 57 percent of total 2002 sales, compared with 54 percent for 2001. Sales volume decreased in all four of Nordson’s geographic regions. Volume decreased 17 percent in North America, 3 percent in Europe, 15 percent in Japan and 9 percent in the Pacific South region. The slowdown in advanced technology and capital goods sectors was felt across all of these regions.

Gross margins, before restructuring charges and inventory write-downs, expressed as a percentage of sales were 53.8 percent in 2002, compared with 54.0 percent in 2001. A change in the mix of products sold, pricing pressures and higher indirect costs caused the lower margins. The Company recognized a fourth quarter inventory write-down of $11.4 million ($7.6 million on an after-tax basis, or $.23 per share). Gross margins, including restructuring charges and inventory write-downs, were 52.1 percent in 2002, down from 53.9 percent in 2001.

Selling and administrative expenses, excluding goodwill amortization and severance and restructuring costs, were 43.5 percent of sales in 2002 and 41.8 percent in 2001. Spending for 2002 decreased 7.9 percent as a result of the Company’s organizational restructuring and facility consolidations. As a result of adopting FASB Statement No. 142 at the beginning of 2002, the Company no longer amortizes goodwill. Goodwill amortization was $15,446,000 in 2001.

As a result of the continuing economic slowdown during 2002, the Company recognized $2.7 million ($1.8 million on an after-tax basis, or $.05 per share) of non-recurring charges, consisting of severance and other costs associated with the combination of certain businesses. Of the total amount, $.2 million is included in cost of sales. It is anticipated that additional costs of approximately $2 million, primarily related to severance payments, will be incurred in fiscal 2003. Annualized savings from the Company’s restructuring actions that began in 2000 are projected to be in excess of $40 million.

Worldwide operating profits, expressed as a percentage of sales before the effects of non-recurring charges, were 10.4 percent in 2002, compared with 10.1 percent for 2001. Segment operating profit percentages in 2002 and 2001, excluding corporate expenses which are not allocated to segments, were as follows:

All segments were impacted by the global economic downturn.

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Interest expense of $21.7 million decreased $7.8 million from 2001, primarily due to lower borrowing levels. Other income decreased $5.5 million from 2001, which included a gain of $5.1 million on the sale of real estate. Nordson’s effective tax rate was 33.00 percent in 2002 compared with a rate of 34.75 percent in 2001.

The Company has been identified as a potentially responsible party (PRP) at a Wisconsin municipal landfill and has voluntarily agreed with other PRP’s to share costs associated with a feasibility study and remedial investigation (“FS/ RI”) for the site, with the Company committing up to $325,000 toward the FS/ RI. This amount has been recorded in the Company’s financial statements. The FS/ RI is expected to be completed in 2005. The total cost of the Company’s share for site remediation cannot be determined at this time but based on current information, the Company does not expect that the costs associated with remediation will have a material adverse effect on its financial condition or results of operations.

Net income in 2002 was $22.1 million, or $.66 per share on a diluted basis compared with $24.6 million, or $.74 per share on a diluted basis, in 2001. Excluding goodwill amortization, net income for 2001 was $35.9 million, or $1.08 per share. Excluding the effects of severance and restructuring costs and inventory write-downs, net income in 2002 was $31.5 million, or $.94 per share, compared with $33.8 million, or $1.02 per share for 2001 ($45.0 million or $1.36 per share without goodwill amortization). Severance and restructuring costs and inventory write-downs on an after-tax basis totaled $9.4 million, or $.28 per share for 2002, and $9.2 million, or $.28 per share on a diluted basis for 2001.

In August 2001, the FASB issued Statement No. 143, “Accounting for Asset Retirement Obligations.” No. 143 requires entities to record the fair value of a liability for an asset retirement obligation in the period in which it is incurred. When a liability is initially recorded, the entity capitalizes a cost by increasing the carrying value of the related long-lived asset. Over time, the liability is accreted to its present value each period, and the capitalized cost is depreciated over the useful life of the related asset. Upon settlement of the liability, an entity either settles the obligation for its recorded amount or incurs a gain or loss upon settlement. The Company is required to adopt No. 143 in fiscal 2003 and has not yet determined the impact of adoption on its consolidated financial position or results of operations.

In October 2001, the FASB issued Statement No. 144, “Accounting for the Impairment or Disposal of Long-Lived Assets.” No. 144, which supersedes No. 121, “Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed Of”, provides a single accounting model for long-lived assets to be disposed of. Although retaining many of the fundamental recognition and measurement provisions of No. 121, this Statement significantly changes the criteria that would have to be met to classify an asset as held-for-sale. This distinction is important because assets held-for-sale are stated at the lower of their fair values or carrying amounts, and depreciation is no longer recognized. The Company is required to adopt No. 144 in fiscal 2003 and has not yet determined the impact of adoption on its consolidated financial position or results of operations.

In May 2002, the FASB issued Statement No. 145, “Rescission of Statements No. 4, 44 and 64, Amendment of FASB Statement No. 13, and Technical Corrections.” This Statement eliminates the requirement that gains and losses on the early extinguishment of debt be classified as extraordinary items. It also provides guidance with respect to the accounting for gains and losses on capital leases that were modified to become operating leases. The Company is required to adopt No. 145 in 2003, and there will be no impact as a result of the adoption.

In June 2002, the FASB issued Statement No. 146, “Accounting for Costs Associated with Exit or Disposal Activities.” No. 146 requires companies to recognize costs associated with exit or disposal activities when they are incurred rather than at the date of a commitment to an exit or disposal plan. Examples of costs covered by the standard include lease termination costs and certain employee severance costs that are associated with a restructuring, discontinued operation, plant closing, or other exit or disposal activity. No. 146 is to be applied prospectively to exit or disposal activities initiated after December 31, 2002.

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Fiscal Years 2001 and 2000

Sales volume in the Company’s adhesive dispensing systems segment decreased 3 percent. Advanced technology segment volume was up 32 percent as a result of the EFD acquisition. Excluding EFD, sales volume for this segment was off 11 percent, primarily due to the global slowdown in the semiconductor and electronics industries. Coating and finishing systems sales volume was down 7 percent influenced by weak demand for powder engineered systems in the United States. It is estimated that the effect of pricing on total revenues was neutral relative to the prior year.

Nordson’s sales outside the United States accounted for 54 percent of total 2001 sales, compared with 55 percent for 2000. The addition of EFD resulted in volume gains in all of Nordson’s four geographic regions. Excluding EFD, volume decreased 7 percent in North America, 5 percent in Europe and 6 percent in the Pacific South region. The slowdown in advanced technology was felt across all of these regions. Sales volume rose 1 percent in Japan, aided by gains in the advanced technology segment.

Gross margins, before restructuring charges, expressed as a percentage of sales were 54.0 percent in 2001, compared with 55.1 percent in 2000. Unfavorable currency effects, a change in the mix of products sold, pricing pressures and higher indirect costs were partially offset by the higher margins reported by EFD.

Selling and administrative expenses, excluding goodwill amortization and severance and restructuring costs, were 41.8 percent of sales in 2001 and 40.8 percent in 2000. Spending for 2001 increased 1.2 percent. Excluding EFD, spending was down 5 percent with favorable currency translation effects accounting for more than one-half of the decline. Goodwill amortization increased as a result of the EFD acquisition.

During 2001, continuing activity related to the Company’s Action 2000 initiative resulted in the recognition of $14.0 million ($9.2 million on an after-tax basis, or $.28 per share) of non-recurring charges, consisting of severance and other costs associated with the combination of certain businesses. The amount related to inventory write-offs, $.7 million, is included in cost of sales.

Worldwide operating profits, expressed as a percentage of sales before the effects of non-recurring charges, were 10.1 percent in 2001, compared with 13.6 percent for 2000. Segment operating profit percentages in 2001 and 2000, excluding corporate expenses which are not allocated to segments, were as follows:

All segments were impacted by the global economic downturn. The addition of EFD had a positive effect on the profitability of the advanced technology segment.

Interest expense of $29.5 million increased $17.8 million over 2000, due to increased borrowing levels as a result of the EFD acquisition. Other income included a gain of $5.1 million on the sale of real estate. Nordson’s effective tax rate was 34.75 percent in 2001 compared with a rate of 34.50 percent in 2000.

Net income in 2001 was $24.6 million, or $.74 per share on a diluted basis compared with $54.6 million, or $1.67 per share on a diluted basis, in 2000. Excluding the effects of severance and restructuring costs, net income in 2001 was $33.8 million, or $1.02 per share, compared with $60.5 million, or $1.85 per share for 2000. Non-recurring charges on an after-tax basis totaled $9.2 million, or $.28 per share for 2001, and $5.9 million, or $.18 per share on a diluted basis for 2000.

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Liquidity, Capital Expenditures and Sources of Capital

Significant uses of cash included capital expenditures, dividends, and repayments of over $110 million of notes payable and long-term debt. Nordson concentrated the majority of its 2002 capital expenditures on information systems and lab equipment. Dividend payments to shareholders on a per-share basis increased 2 percent over 2001.

The following table summarizes the Company’s obligations as of November 3, 2002:

Nordson has various lines of credit with both domestic and foreign banks. At November 3, 2002, these lines totaled $309 million, of which $200 million was unused. Included in the total amount of $309 million is a $250 million facility with a group of banks that expires in 2006. The Company believes that the combination of present capital resources, internally generated funds, and unused financing sources are more than adequate to meet cash requirements for 2003. There are no significant restrictions limiting the transfer of funds from international subsidiaries to the parent Company.

The Company has an operating lease for office and manufacturing space with a partnership in which the Company is a partner. The lease contains an option to purchase the property at fair market value, and the Company intends to exercise the option in 2003. The amount of debt that would be assumed would be less than $11 million and is approximately equal to the current fair market value of the property.

Outlook

Effects of Foreign Currency

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In 2002 compared with 2001, the U.S. dollar was generally weaker against foreign currencies. If 2001 exchange rates had been in effect during 2002, sales would have been approximately $2.2 million lower and third-party costs would have been approximately $1.5 million lower. In 2001 compared with 2000, the U.S. dollar was generally stronger against foreign currencies. If 2000 exchange rates had been in effect during 2001, sales would have been approximately $25.4 million higher and third-party costs would have been approximately $15.5 million higher. These effects on reported sales do not include the impact of local price adjustments made in response to changes in currency exchange rates.

Item 7a. Quantitative and Qualitative Disclosures about Market Risk

The Company operates internationally and enters into transactions denominated in foreign currencies. Consequently, the Company is subject to market risk arising from exchange rate movements between the dates foreign currencies are recorded and the dates they are settled. Nordson regularly uses foreign exchange contracts to reduce its risks related to most of these transactions. These contracts, primarily Euro and Yen, usually have maturities of 90 days or less, and generally require the Company to exchange foreign currencies for U.S. dollars at maturity, at rates stated in the contracts. Gains and losses from changes in the market value of these contracts offset foreign exchange losses and gains, respectively, on the underlying transactions. The balance of transactions denominated in foreign currencies are designated as hedges of the Company’s net investments in foreign subsidiaries or are intercompany transactions of a long-term investment nature. As a result of the Company’s use of foreign exchange contracts on a routine basis to reduce the risks related to nearly all of the Company’s transactions denominated in foreign currencies as of November 3, 2002, the Company did not have a material foreign currency risk related to its derivatives or other financial instruments.

Note 10 to the financial statements contains additional information about the Company’s foreign currency transactions and the methods and assumptions used by the Company to record these transactions.

The Company finances a portion of its operations with short-term and long-term borrowings and is subject to market risk arising from changes in interest rates for most of its long-term debt.

The tables that follow present principal cash flows and related weighted-average interest rates by expected maturity dates of fixed-rate, long-term debt.

Expected maturity date November 3, 2002

Expected maturity date October 28, 2001

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Inflation

Trends

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

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Item 8. Financial Statements and Supplementary Data

Consolidated Statements of Income

Years ended November 3, 2002, October 28, 2001 and October 29, 2000

The accompanying notes are an integral part of the consolidated financial statements.

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Consolidated Balance Sheets

November 3, 2002 and October 28, 2001