NORDSON CORP - Quarter Report: 2013 January (Form 10-Q)

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FORM 10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

(Mark One)

For the quarterly period ended January 31, 2013

OR

For the transition period from                      to                     

Commission file number 0-7977

NORDSON CORPORATION

(Exact name of registrant as specified in its charter)

(440) 892-1580

(Telephone Number)

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

Common Shares without par value

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

None

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, and (2) has been subject to such filing requirements for the past 90 days.    Yes  x    No  ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the Registrant was required to submit and post such files).    Yes  x    No  ¨

Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See definition of “large accelerated filer,” “large accelerated filer” and “smaller reporting company” in
Rule 12b-2 of the Exchange Act. (Check one):

Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes  ¨    No  x

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date: Common Shares, without par value as of January 31, 2013: 64,498,940

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Part I – FINANCIAL INFORMATION

Condensed Consolidated Statements of Income

See accompanying notes.

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Condensed Consolidated Statements of Comprehensive Income

See accompanying notes.

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Condensed Consolidated Balance Sheets

See accompanying notes.

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Condensed Consolidated Statement of Cash Flows

See accompanying notes.

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Notes to Condensed Consolidated Financial Statements

January 31, 2013

NOTE REGARDING AMOUNTS AND FISCAL YEAR REFERENCES

In this quarterly report, all amounts related to United States dollars and foreign currency and to the number of Nordson Corporation’s common shares, except for per share earnings and dividend amounts, are expressed in thousands.

Unless otherwise noted, all references to years relate to our fiscal year ending October 31.

Basis of presentation. The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the three months ended January 31, 2013 are not necessarily indicative of the results that may be expected for the full year. For further information, refer to the consolidated financial statements and footnotes included in our annual report on Form 10-K for the year ended October 31, 2012.

Basis of consolidation. The consolidated financial statements include the accounts of Nordson Corporation and its majority-owned and controlled subsidiaries. Investments in affiliates and joint ventures in which our ownership is 50% or less or in which we do not have control but have the ability to exercise significant influence, are accounted for under the equity method. All significant intercompany accounts and transactions have been eliminated in consolidation.

Use of estimates. The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the amounts reported in the consolidated financial statements. Actual amounts could differ from these estimates.

Revenue recognition. Most of our 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 relative selling price hierarchy exists for determining the selling price of deliverables in multiple deliverable arrangements. Vendor specific objective evidence (VSOE) is used, if available. Third-party evidence (TPE) is used if VSOE is not available, and best estimated selling price (BESP) is used if neither VSOE nor TPE is available. Our multiple deliverable arrangements include installation, installation supervision, training, and spare parts, which tend to be completed in a short period of time, at an insignificant cost, and utilizing skills not unique to us, and, therefore, are typically regarded as inconsequential or perfunctory. Revenue for undelivered items is deferred and included within accrued liabilities in the accompanying balance sheet. Revenues deferred in 2013 and 2012 were not material.

Earnings per share. Basic earnings per share are computed based on the weighted-average number of common shares outstanding during each year, while diluted earnings per share are based on the weighted-average number of common shares and common share equivalents outstanding. Common share equivalents consist of shares issuable upon exercise of stock options computed using the treasury stock method, as well as nonvested (restricted) stock and deferred stock-based compensation. Options whose exercise price is higher than the average market price are excluded from the calculation of diluted earnings per share because the effect would be anti-dilutive. No options were excluded from the 2013 calculation of diluted earnings per share, and options for 299 common shares were excluded from the 2012 calculation of diluted earnings per share.

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In September 2011, the Financial Accounting Standards Board (FASB) issued guidance amending the way companies test for goodwill impairment. Companies will have the option to first assess qualitative factors to determine the existence of events or circumstances that lead to a determination that it is more likely than not that the fair value of a reporting unit is less than its carrying amount. If, after assessing the totality of events or circumstances, companies determine that it is more likely than not that the fair value of a reporting unit is greater than its carrying amount, then performing the two-step impairment test is unnecessary. This guidance is effective for us beginning in 2013. Adoption of this guidance could change our annual process for goodwill impairment testing, but will not impact the financial statements.

In February 2013, the FASB issued an Accounting Standards Update requiring new disclosures about reclassifications from accumulated other comprehensive income to net income. Companies are required to present these disclosures either on the face of the statement where net income is presented or in the notes to the consolidated financial statements. This guidance is effective for us beginning in the first quarter of 2014, with early adoption permitted. We do not believe the adoption of this standards update will have a material effect on the consolidated financial statements, as it will only be a change in disclosure.

2013 acquisition

On November 8, 2012, we purchased certain assets of Kodama Chemical Industry Co., Ltd., a Japanese licensed distributor of EDI Holdings, Inc, (EDI), which we acquired in 2012. This operation provides die sales to extrusion processors, web converters, and OEMs in Japan and Taiwan and carries out final manufacturing steps on new equipment to enhance die performance and accommodate local requirements. The acquisition date fair value was $1,335, which consisted of cash transferred of $1,231 and a holdback liability of $104. Based on the fair value of the assets acquired and the liabilities assumed, identifiable intangible assets of $912 were recorded. The identifiable intangible assets consist primarily of $847 of customer relationships that are being amortized over 9 years and $65 of technology being amortized over 9 years. This operation is being reported in our Adhesive Dispensing Systems segment. Assuming this acquisition had taken place at the beginning of 2012, pro-forma results would not have been materially different.

2012 acquisitions

On June 14, 2012, we acquired 100 percent of the outstanding shares of EDI, a provider of slot coating and flat polymer extrusion dies for plastic processors and web converters headquartered in Chippewa Falls, Wisconsin. EDI is being reported in our Adhesive Dispensing Systems segment.

On June 21, 2012, we acquired 100 percent of the outstanding shares of Xaloy Superior Holdings, Inc. (Xaloy), a manufacturer of melt delivery components for injection and extrusion machinery in the global plastic processing industry headquartered in New Castle, Pennsylvania. Xaloy is being reported in our Adhesive Dispensing Systems segment.

On August 1, 2012 we acquired 100 percent of the outstanding shares of Sealant Equipment & Engineering, Inc. (SEE), a manufacturer of precision dispense systems and fluid dispense valves headquartered in Plymouth, Michigan. SEE is being reported in our Industrial Coating Systems segment.

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The total purchase price of these acquisitions was allocated to the underlying assets acquired and liabilities assumed based upon management’s estimated fair values at the dates of acquisition. To the extent the purchase price exceeded the estimated fair value of the net identifiable tangible and intangible assets acquired, such excess was allocated to goodwill. The following table summarizes the combined preliminary purchase price allocation of the estimated fair values of the assets acquired and liabilities assumed at the transaction dates.

The intangible assets consist of customer lists of $48,350, which are being amortized over a weighted average life of 9 years; technology assets of $25,740 which are being amortized over a weighted average life of 15 years; trade names of $43,710 which are being amortized over a weighted average life of 15 years; and non-compete agreements of $4,416, which are being amortized over a weighted average life of 2 years. The goodwill of $23,627 associated with the SEE acquisition is tax deductible, and none of the goodwill associated with the EDI and Xaloy acquisitions is tax deductible.

At January 31, 2013 and October 31, 2012, inventories consisted of the following:

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Changes in the carrying amount of goodwill for the three months ended January 31, 2013 by operating segment are as follows:

The adjustments to goodwill for the Adhesive Dispensing Systems segment and the Industrial Coating Systems segment resulted from changes to the preliminary purchase price allocations of Xaloy and SEE, respectively.

Accumulated impairment losses were $232,789 at January 31, 2013 and October 31, 2012. Of these losses, $229,173 related to the Advanced Technology Systems segment, and $3,616 related to the Industrial Coating Systems segment.

Information regarding our intangible assets subject to amortization is as follows:

Amortization expense for the three months ended January 31, 2013 and 2012 was $5,801 and $2,667, respectively.

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The components of net periodic pension cost for the three months ended January 31, 2013 and January 31, 2012 were:

During the three months ended January 31, 2012, net periodic pension cost included a settlement loss of $682 as a result of the termination of a U.S. pension plan.

The components of other postretirement benefit cost for the three months ended January 31, 2013 and January 31, 2012 were:

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. The effective tax rate for the three months ended January 31, 2013 was 25.5%, compared to 31.1% for the three months ended January 31, 2012.

During the three months ending January 31, 2013, we recorded a favorable adjustment to unrecognized tax benefits of $900 primarily related to expiration of certain foreign statutes of limitations. On January 2, 2013, the American Taxpayer Relief Act of 2012 was enacted which retroactively reinstated and extended the Federal Research and Development Tax Credit (Federal R&D Tax Credit) from January 1, 2012 to December 31, 2013 and extended certain other tax provisions. As a result, our income tax provision for the three months ended January 31, 2013 included a discrete tax benefit of $1,700 related to 2012.

During the three months ending January 31, 2012, we recorded tax expense of $325 related to an adjustment of deferred taxes resulting from a tax rate reduction enacted in Japan.

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Accumulated other comprehensive loss at January 31, 2013 and October 31, 2012 consisted of:

The amended and restated 2004 long-term performance plan, approved by our shareholders in 2008, provides for the granting of stock options, stock appreciation rights, nonvested (restricted) stock, stock purchase rights, stock equivalent units, cash awards and other stock or performance-based incentives. The number of common shares available for grant of awards is 2.5 percent of the number of common shares outstanding as of the first day of each year.

Stock Options

Nonqualified or incentive stock options may be granted to our employees and directors. Generally, options granted to employees may be exercised beginning one year from the date of grant at a rate not exceeding 25 percent per year and expire 10 years from the date of grant. Vesting accelerates upon the occurrence of events that involve or may result in a change of control. Option exercises are satisfied through the issuance of treasury shares on a first-in first-out basis. We recognized compensation expense related to stock options of $1,204 and $955 in the three months ended January 31, 2013 and 2012, respectively.

The following table summarizes activity related to stock options for the three months ended January 31, 2013:

At January 31, 2013, there was $13,173 of total unrecognized compensation cost related to nonvested stock options. That cost is expected to be amortized over a weighted average period of approximately 2.0 years.

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The fair value of each option grant was estimated at the date of grant using the Black-Scholes option-pricing model with the following assumptions:

The weighted-average expected volatility used to value the 2013 and 2012 options was 46.3%, and 46.2%, respectively.

Historical information was the primary basis for the selection of the expected volatility, expected dividend yield and the expected lives of the options. The risk-free interest rate was selected based upon yields of U.S. Treasury issues with a term equal to the expected life of the option being valued.

The weighted average grant date fair value of stock options granted during the three months ended January 31, 2013 and 2012 was $24.11 and $17.03, respectively.

The total intrinsic value of options exercised during the three months ended January 31, 2013 and 2012 was $6,583 and $700, respectively. Cash received from the exercise of stock options for the three months ended January 31, 2013 and 2012 was $3,143 and $534, respectively. The tax benefit realized from tax deductions from exercises for the three months ended January 31, 2013 and 2012 was $2,076 and $243, respectively.

Nonvested Common Shares

We may grant nonvested (restricted) shares to our employees and directors. These shares may not be transferred for a designated period of time (generally one to three years) defined at the date of grant. For employee recipients, shares are forfeited on a pro-rata basis in the event employment is terminated as a consequence of the employee recipient’s early retirement prior to the lapse of any restrictions. Restrictions lapse in the event of a recipient’s retirement at or after normal retirement age, disability or death. Termination for any other reason prior to the lapse of any restrictions results in forfeiture of the shares. For non-employee directors, all restrictions lapse in the event of disability or death of the non-employee director. Termination of service as a director for any other reason within one year of date of grant results in a pro-rata forfeiture of shares.

As shares are issued, deferred share-based compensation equivalent to the fair market value on the date of grant is charged to shareholders’ equity and subsequently amortized over the restriction period. Tax benefits arising from the lapse of restrictions on the shares are recognized when realized and credited to capital in excess of stated value.

The following table summarizes activity related to nonvested shares during the three months ended January 31, 2013:

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As of January 31, 2013, there was $3,596 of unrecognized compensation cost related to nonvested common shares. The cost is expected to be amortized over a weighted average period of 2.0 years. The amount charged to expense related to nonvested common shares during the three months ended January 31, 2013 and 2012 was $581 and $411, respectively.

Directors Deferred Compensation

Non-employee directors may defer all or part of their compensation until retirement. Compensation may be deferred as cash or as share equivalent units. Deferred cash amounts are recorded as liabilities. Additional share equivalent units are earned when common share dividends are declared.

The following table summarizes activity related to director deferred compensation share equivalent units during the three months ended January 31, 2013:

The amount charged to expense related to director deferred compensation for the three months ended January 31, 2013 and 2012 was $56 for each year.

Long-Term Incentive Compensation Plan (LTIP)

Under the Long-Term Incentive Plan, executive officers and selected other key employees receive common share awards based on corporate performance measures over three-year performance periods. Awards vary based on the degree to which corporate performance exceeds predetermined threshold, target and maximum performance levels at the end of a performance period. No award will occur unless certain threshold performance objectives are exceeded.

The amount of compensation expense is based upon current performance projections for each three-year period and the percentage of the requisite service that has been rendered. The calculations are also based upon the grant date fair value determined using the closing market price of common stock at the grant date, reduced by the implied value of dividends not to be paid. This value was $59.59 per share for executive officers and selected other key employees for 2013, $42.12 per share for executive officers and selected other key employees for 2012 and $42.02 per share for executive officers and selected other key employees for 2011. During the three months ended January 31, 2013 and 2012, $1,613 and $1,000, respectively, was charged to expense. The cumulative amount recorded in shareholders’ equity at January 31, 2013 was $6,107.

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We offer warranty to our customers depending on the specific product and terms of the customer purchase agreement. A typical warranty program requires that we repair or replace defective products within a specified time period (generally one year) from the date of delivery or first use. We record an estimate for future warranty-related costs based on actual historical return rates. Based on analysis of return rates and other factors, the adequacy of our warranty provisions are adjusted as necessary. The liability for warranty costs is included in accrued liabilities in the Consolidated Balance Sheet.

Following is a reconciliation of the product warranty liability for the three months ended January 31, 2013 and 2012:

During the three months ended January 31, 2013, we recognized severance costs of $258 in the Adhesive Dispensing Systems segment and $328 in the Advanced Technology Systems segment, both as a result of implementing certain restructuring initiatives to optimize global operations. Severance costs associated with these initiatives are expected to be approximately $370 for the remainder of the current year.

In 2011, we announced a restructuring of the Georgia operations of our Adhesive Dispensing Systems segment in order to optimize operations and better serve our customers. The restructuring involved the expansion of our facility in Duluth and construction of a new facility in Swainsboro, where operations from our existing Swainsboro facility, as well as facilities in Norcross and Dawsonville, were transferred. Severance costs and other termination fees associated with this action were $687 during the three months ended January 31, 2012.

In order to optimize Adhesive Dispensing Systems segment operations in Germany, a restructuring initiative was taken in 2011 that resulted in severance costs of $124 during the three months ended January 31, 2012.

We conduct business across three primary business segments: Adhesive Dispensing Systems, Advanced Technology Systems, and Industrial Coating Systems. The composition of segments and measure of segment profitability is consistent with that used by our chief operating decision maker. The primary measure used by the chief operating decision maker for purposes of making decisions about allocating resources to the segments and assessing performance is operating profit, which equals sales less cost of sales and certain operating expenses. Items below the operating profit line of the Consolidated Statement of Income (interest and investment income, interest expense and other income/expense) are excluded from the measure of segment profitability reviewed by our chief operating decision maker and are not presented by operating segment. The accounting policies of the segments are generally the same as those described in Note 1, Significant Accounting Policies, of our annual report on Form 10-K for the year ended October 31, 2012.

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The following table presents information about our reportable segments:

A reconciliation of total segment operating income to total consolidated income before income taxes is as follows:

We have significant sales in the following geographic regions:

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The inputs to the valuation techniques used to measure fair value are classified into the following categories:

Level 1: Quoted market prices in active markets for identical assets or liabilities.

Level 2: Observable market based inputs or unobservable inputs that are corroborated by market data.

Level 3: Unobservable inputs that are not corroborated by market data.

The following table presents the classification of our assets and liabilities measured at fair value on a recurring basis at January 31, 2013:

We operate internationally and enter into intercompany transactions denominated in foreign currencies. Consequently, we are subject to market risk arising from exchange rate movements between the dates foreign currencies are recorded and the dates they are settled. We regularly use foreign currency forward contracts to reduce our risks related to most of these transactions. These contracts usually have maturities of 90 days or less and generally require us to exchange foreign currencies for U.S. dollars at maturity, at rates stated in the contracts. These contracts are not designated as hedging instruments.

Gains and losses on foreign exchange contracts are recorded in “Other – net” on the Consolidated Statement of Income together with the transaction gain or loss from the hedged balance sheet position. For the three months ended January 31, 2013, we recognized gains of $3,512 on foreign exchange contracts and losses of $5,027 from the change in fair value of balance sheet positions. For the three months ended January 31, 2012, we recognized losses of $976 on foreign exchange contracts and gains of $1,151 from the change in fair value of balance sheet positions. We do not use financial instruments for trading or speculative purposes.

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We had the following outstanding foreign currency forward contracts at January 31, 2013:

The carrying amounts and fair values of financial instruments at January 31, 2013, other than receivables and accounts payable, are shown in the table below. The carrying values of receivables and accounts payable approximate fair value due to the short-term nature of these instruments.

We used the following methods and assumptions in estimating the fair value of financial instruments:

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We are involved in pending or potential litigation regarding environmental, product liability, patent, contract, employee and other matters arising from the normal course of business. Including the environmental matter discussed below, it is our opinion, after consultation with legal counsel, that resolutions of these matters are not expected to result in a material effect on our financial condition, quarterly or annual operating results or cash flows.

We have voluntarily agreed with the City of New Richmond, Wisconsin and other Potentially Responsible Parties to share costs associated with the remediation of the City of New Richmond municipal landfill (the “Site”) and the construction of a potable water delivery system serving the impacted area down gradient of the Site. At January 31, 2013 and October 31, 2012 our accrual for the ongoing operation, maintenance and monitoring obligation at the Site was $750. The liability for environmental remediation represents management’s best estimate of the probable and reasonably estimable undiscounted costs related to known remediation obligations. The accuracy of our estimate of environmental liability is affected by several uncertainties such as additional requirements that may be identified in connection with remedial activities, the complexity and evolution of environmental laws and regulations, and the identification of presently unknown remediation requirements. Consequently, our liability could be greater than our current estimate. However, we do not expect that the costs associated with remediation will have a material adverse effect on our financial condition or results of operations.

We evaluated all events or transactions that occurred after January 31, 2013 through the date the financial statements were issued, and there were no material recognizable or non-recognizable subsequent events.

The following is Management’s discussion and analysis of certain significant factors affecting our financial condition and results of operations for the periods included in the accompanying condensed consolidated financial statements.

Results of Operations

Sales

Worldwide sales for the three months ended January 31, 2013 were $347,043, a 25.8% increase from sales of $275,836 for the comparable period of 2012. Sales volume increased 26.2%, consisting of organic growth of 7.8% and 18.4% from acquisitions. Unfavorable currency effects reduced sales by 0.4%.

Sales of the Adhesive Dispensing Systems segment for the three months ended January 31, 2013 were $183,378, an increase of 31.8% from the comparable period of 2012. Sales volume increased 32.8%, consisting of 33.1% from the first-year effect of the EDI and Xaloy acquisitions, partially offset by a decline of 0.3% in organic volume. Unfavorable currency translation effects reduced sales by 1.0%. Growth in consumer non-durables end markets was offset by softness in plastics processing and consumer durable goods end markets. Sales volume, inclusive of acquisitions, increased in all geographic regions and was most pronounced in the United States, Asia Pacific and the Americas.

Advanced Technology Systems segment sales for the three months ended January 31, 2013 were $108,709 compared to $100,107 in the comparable period of 2012, an 8.6% increase. Sales volume increased 8.1%, and favorable currency effects added 0.5%. Semi-automated dispensing, test and inspection and fluid management products lines drove the growth, as demand in mobile electronic device, medical and other niche markets remained strong. Within this segment, sales volume increases in the United States, the Americas and Japan were offset by slight decreases in Europe and Asia Pacific.

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Sales of the Industrial Coating Systems segment for the three months ended January 31, 2013 were $54,956, an increase of 50.3% from the three months ended January 31, 2012. Sales volume growth of 50.9% consisted of 38.2% organic growth and 12.7% from the first-year effect of the SEE acquisition. Unfavorable currency effects reduced sales by 0.6%. Sales growth was driven by customers investing in production efficiency and plant expansion programs. Sales volume increased by double-digit percentages in all geographic regions.

Sales outside the United States accounted for 67.9% of sales in the three months ended January 31, 2013, compared to 72.7% in the comparable period of 2012. On a geographic basis, sales in the United States increased 48.0% for the three months ended January 31, 2013 compared to the three months ended January 31, 2012. The increase in sales volume consisted of 10.9% organic growth and 37.1% from acquisitions. Sales volume in the Americas region was up 37.1%, and currency effects were neutral. This increase in sales volume consisted of 17.5% organic growth and 19.6% from acquisitions. Sales in Europe increased of 9.3%, which consisted of a volume increase of 9.0% and 0.3% from favorable currency effects. This increase in sales volume consisted of 0.1% organic growth and 8.9% from acquisitions. Sales in Japan for the three months ended January 31, 2013 increased 18.5% from the comparable period of the prior year, which consisted of volume of 26.2%, offset by unfavorable currency effects that reduced sales by 7.7%. This increase in sales volume consisted of 14.5% organic volume and 11.7% from acquisitions. Asia Pacific sales increased 21.9% consisting of volume of 20.3% and 1.6% from favorable currency effects. This increase in sales volume consisted of 8.2% organic volume and 12.1% from acquisitions.

Operating Profit

Cost of sales for the three months ended January 31, 2013 were $149,814, up from $106,490 in 2012, an increase of 40.7%. The gross profit percentage was 56.8% for the three months ended January 31, 2013, compared to 61.4% in 2012. The decrease in gross margin was primarily due to the lower product line margin of the 2012 acquisitions, as well as product line and geographic mix within our Adhesive Dispensing Systems segment.

Selling and administrative expenses, excluding severance and restructuring costs, for the three months ended January 31, 2013 were $135,079, compared to $112,048 for the comparable period of 2012. This represented an increase of $23,031, or 20.6%, which was primarily due to the first year effect of 2012 acquisitions, higher compensation expenses related to increased employment levels and spending for initiatives to generate future growth and improve performance. Selling and administrative expenses for the three months ended January 31, 2013 as a percent of sales decreased to 38.9% from 40.6% for the comparable period of 2012. The decrease was due to better absorption of fixed costs.

During the three months ended January 31, 2013, we recognized severance costs of $258 in the Adhesive Dispensing Systems segment and $328 in the Advanced Technology Systems segment, both as a result of implementing certain restructuring initiatives to optimize global operations. Severance costs associated with these initiatives is expected to be approximately $370 for the last three quarters of 2013. During the three months ended January 31, 2012, severance and restructuring cost of $811 were recognized in connection with 2011 restructuring initiatives in the Adhesive Dispensing Systems segment.

Operating profit as a percentage of sales was 17.7% in the three months ended January 31, 2013 compared to 20.5% for the comparable period in 2012. The decrease was primarily due to a decrease in the gross profit percentage as mentioned above for 2012 acquisitions and the Adhesive Dispensing Systems segment, first year effect in expenses for our 2012 acquisitions, and the impact of negative organic sales growth of our Adhesive Dispensing Systems segment.

Operating profit for the three months as a percent of sales for the Adhesive Dispensing Systems segment decreased to 23.8% for the three months ended January 31, 2013 compared to 33.9% for the comparable period of the prior year. The decrease was primarily due to the dilutive effect of 2012 acquisitions. For the Advanced Technology Systems segment, operating profit for the first three months as a percent of sales increased to 19.1% in the current year from 16.0% in the first three months of 2012. The increase was primarily due to charges in 2012 for short-term purchase accounting valuation adjustments and expenses associated with the termination of a pension plan. Operating profit as a percent of sales for the Industrial Coating Systems segment was 13.0% for the three months ended January 31, 2013, up from 3.1% in the same period of 2012. The increase was primarily due to better absorption of fixed expenses, as well as the first-year effect of the SEE acquisition.