Quarterly Report

MANAGEMENT'S DISCUSSION AND ANALYSIS
OF RESULTS OF OPERATIONS AND
FINANCIAL CONDITION

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

RESULTS OF OPERATIONS

Compared with the first quarter of 1997, the pace of business activity in Europe accelerated substantially, with sales volume up 23% across all markets served. Sales volume in North America increased 8%, led by strong sales of powder coating and ultraviolet curing systems as well as automated fluid dispensing equipment to the electronics industry. Offsetting this growth in Europe and North America was a significant sales volume drop in Japan and the Asian markets, with unfavorable currency effects further reducing reported revenues. In Japan, sales volume was down 16% due to decreased demand from both local customers as well as customers who export goods to other Asian markets. In our Pacific South division, which spans the Pacific Rim, South Asia and Latin America, sales volume was down 19%. The sales activity in this division reflects a wide performance range, with weakness in Asia offset by strong performance in Latin America. Price increases averaging 2% were implemented on orders taken after the beginning of the year on standardized small systems and parts.

Sales to international customers for the first quarter of 1998 comprised 62% of total sales. Translating international sales at generally higher average exchange rates as compared to the same period in the prior year decreased reported sales by $8.1 million for the quarter.

In the first quarter of 1998, the Company adopted Financial Accounting Standards Board Statement No. 128, "Earnings per Share." Statement 128 replaced the previously reported primary and fully diluted earnings per share with basic and diluted earnings per share. Basic and diluted earnings per share were $.30 and $.30, respectively, for the first quarter of 1998 and $.53 and $.52, respectively, for the first quarter of 1997.

FINANCIAL CONDITION

During the first quarter of 1998, net assets decreased $8,956,000. This decrease is primarily attributable to net repurchases of Nordson stock amounting to $7,855,000, the payment of $3,687,000 in dividends, and a reduction of $2,513,000 from translating foreign net assets at the end of the first quarter when the U.S. dollar was generally stronger against other currencies than at the prior year end, offset by earnings of $5,019,000.

Working capital decreased $7,768,000 during the quarter. This change consisted primarily of decreases in receivables and increases in notes payable, offset by increases in inventories and decreases in accounts payable and other current liabilities. All balances reflect decreases from the effects of translating amounts denominated in generally weaker foreign currencies into U.S. dollars. In addition, receivables decreased from the collection of year-end receivables arising from strong sales in the fourth quarter of 1997, notes payable increased from net borrowings, inventories increased in anticipation of demand for Nordson products, accounts payable decreased from the repayment of additional purchases at year-end, and other current liabilities decreased due to the payment of fiscal 1997 bonuses and other employee benefits.

Cash and cash equivalents increased $2,592,000 during the quarter. Cash provided by the net proceeds from notes payable was $17,713,000. Uses for cash included purchases of treasury shares, outlays for capital expenditures, and dividends. Available lines of credit continue to be more than adequate to meet additional cash requirements over the next year.

OUTLOOK

Based on information available through the third week of February, order trends in our North American and European divisions are similar to those in the first quarter. In the Pacific South and Japan, there is slight improvement, but it is still too early to characterize this as a collective trend. In the second quarter, worldwide volume growth over the previous year is expected to be in the range of 10% to 12%. Gross margins, expressed as a percentage of sales, should be close to first quarter levels with the mix of products sold and currency effects continuing to be the major factors influencing the actual margin rate. The growth rate of selling and administrative expenses in the second quarter over the comparable period in the prior year should be lower than the sales growth rate.

On February 25, 1998, Nordson announced a company-wide program to reduce operating expense growth. Discretionary spending that is not critical to improvement, innovation and growth plans will be eliminated. An early retirement program is being offered to employees at some U.S. locations. Further staff reductions will be made across Nordson's worldwide operations by the end of the fiscal year, with the level of participation in the early retirement program influencing the scope of further reductions. This program will result in a one-time charge in the second quarter. We are also re- evaluating the valuation of inventories and certain long-lived assets. The outlook for gross margins and spending excludes the effect of any one-time charges.

Based on currency exchange rates through the third week of February, currency effects should continue to have negative effect on reported sales. Currency rates are expected to reduce the second quarter's reported sales by approximately $6 million.

SAFE HARBOR STATEMENT
UNDER THE PRIVATE SECURITIES
LITIGATION REFORM ACT OF 1995

The statements under the heading "Outlook" are "forward-looking statements" intended to qualify for the protection afforded by the Private Securities Litigation Reform Act of 1995. These forward-looking statements are based on current expectations and involve risks and uncertainties. Consequently the Company's actual results could differ materially from the expectations expressed in the forward-looking statements. Factors that could cause the Company's actual results to differ materially from the expected results include deferral of orders, delays in system installations, currency exchange rate fluctuations, a sales mix different from assumptions, and significant changes in local business conditions in geographic regions in which we conduct business.