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Nordson Corporation Reports Record Second Quarter Revenue, Operating Profit and Diluted Earnings per Share

Nordson Corporation (Nasdaq: NDSN) today reported results for the second quarter of fiscal year 2014. For the quarter ending April 30, 2014, sales were $417 million, a 9 percent increase over the prior year’s second quarter. This increase in sales included a 4 percent increase in organic volume and a 5 percent increase related to the first year effect of acquisitions. The effect of currency translation compared to the same period a year ago was not material. Operating profit was $93 million, net income was $62 million, and diluted earnings per share were $0.96. Prior year second quarter sales, operating profit, net income and diluted earnings per share were $382 million, $82 million, $55 million and $0.84, respectively. A reconciliation of GAAP diluted EPS to normalized amounts and a calculation of free cash flow are included in the attached tables.

“Our global team delivered excellent results in the quarter, as innovative products and a strong focus on meeting customer needs helped drive solid organic growth in sales in the majority of our product lines and regions,” said Nordson President and Chief Executive Officer Michael F. Hilton. “Sales, operating profit, and earnings per share were all second quarter records for Nordson. On a sequential basis, we leveraged strong top line growth of 16 percent to generate incremental operating margin of 67 percent. We also executed on our strategy of returning value to our shareholders by investing $53 million for the repurchase of shares and by distributing approximately $12 million in dividends during the quarter. Free cash flow in the quarter before dividends was $46 million and our balance sheet has significant capacity for ongoing investments.”

Second Quarter Segment Results

Sales volume in Adhesive Dispensing Systems improved 18 percent compared to the second quarter a year ago, inclusive of 8 percent organic growth and 10 percent growth from the first year effect of the Kreyenborg acquisition. “The organic growth was driven by rigid packaging, general product assembly, disposable hygiene and polymer processing end markets, and by growth in every geography, with the exception of Japan which was flat,” said Hilton. The Adhesive Dispensing segment’s operating margin was 27 percent, up 4 percentage points from the first quarter and up 1 percentage point over the prior year’s second quarter.

In Advanced Technology Systems, second quarter sales volume decreased 3 percent over the prior year. “Similar to conditions we reported last quarter, solid organic growth in products for electronics test and inspection and fluid management, along with surface treatment markets, was offset by softness in demand for automated dispensing equipment in selected mobile electronic device end markets,” said Hilton. “Encouragingly, we have begun to see an increase in orders for these automated systems in recent weeks and we expect to generate solid sales growth in our third quarter within this segment.” Geographically, organic sales growth in the second quarter over the prior year in the U.S. and Europe was offset by softness in other regions. Operating margin for the Advanced Technology segment was 24 percent in the second quarter, up 13 percentage points from the first quarter.

Industrial Coating Systems sales volume increased 4 percent compared to the second quarter a year ago. “Nordson generated strong organic growth in most all product lines, driven by demand in consumer durable and industrial end markets, food and beverage end markets, and UV curing systems for industrial and electronics end markets,” said Hilton. “The organic growth was broad based, with increases in all regions except the Americas as compared to the same period a year ago. Overall segment operating margin was 16 percent in the second quarter, an increase of 7 percentage points compared to the first quarter and 1 percentage point over the prior year’s second quarter.

Detailed results by operating segment and geography are included in the attached tables, as is an earnings per share reconciliation table.

Fiscal Year-to-Date Results

For the first half of fiscal year 2014, sales were $777 million, a 7 percent volume increase over the prior year’s first half. This increase in sales included a 1 percent increase in organic volume and a 6 percent increase related to the first year effect of acquisitions. The effect of currency translation compared to the same period a year ago was not material. First half operating profit was $147 million, net income was $97 million and GAAP diluted earnings per share were $1.50. Prior year first half sales, operating profit, net income and diluted earnings per share were $729 million, $144 million, $97 million and $1.49, respectively.

“After a soft start to our year, Nordson began to gain momentum during our second quarter, a trend we expect to continue as the year progresses,” said Hilton. “Sequential sales volume improvement drove improved profitability while we continued to execute on initiatives that will drive growth, performance and sustainable competitive advantage over the long term.”

Order Rates and Backlog

Order rates for the 12-week period ending May 18, 2014, measured in constant currency, increased by 9 percent over the same period a year ago. Order rates by segment and geography are provided in the accompanying financial tables, with pro-forma growth in order rates calculated as though fiscal year 2013 acquisitions were owned in both years.

Backlog for the quarter ended April 30, 2014 was approximately $247 million, an increase of 25 percent compared to the same period a year ago, and inclusive of 10 percent organic growth and 15 percent growth due to the Kreyenborg acquisition. Current backlog increased 7 percent compared to the first quarter ended January 31, 2014. Backlog amounts are calculated at April 30, 2014 exchange rates.

Outlook

For the third quarter of fiscal 2014, sales growth is expected to be in the range of 9 percent to 13 percent as compared to the third quarter a year ago. This growth is inclusive of organic volume growth of 3 to 7 percent, 5 percent growth from the first year effect of acquisitions, and a positive 1 percent currency translation effect based on the current exchange rate environment. GAAP diluted earnings per share are expected to be in the range of $1.06 to $1.16.

“Based on our backlog and current 12 week order rates, the midpoint of our sales guidance includes organic growth of 5 percent over the prior year’s third quarter, a strong level given the current macroeconomic environment,” said Hilton. “This growth is being driven by the value we provide to our customers and the many opportunities in the diverse end markets we serve. At the midpoint of our guidance we are forecasting operating margin of about 24 percent in the third quarter, an improvement both on a year-over-year and sequential basis. Our global team can be counted on to continue executing at a high level, and we expect our ongoing focus on customer satisfaction, global support, differentiated technology and continuous improvement should result in strong long-term returns for our shareholders.”

Nordson will broadcast its second-quarter conference call on its web site at www.nordson.com/investors on Friday, May 23, 2014 at 8:30 a.m. eastern time. For persons unable to listen to the live broadcast, a replay will be available for 14 days after the event. Information about Nordson’s investor relations and shareholder services is available from James R. Jaye, Director of Communications & Investor Relations at (440) 414-5639 or [email protected].

Except for historical information and comparisons contained herein, statements included in this release may constitute “forward-looking statements,” as defined by the Private Securities Litigation Reform Act of 1995. These statements involve a number of risks, uncertainties and other factors, as discussed in the company’s filing with the Securities and Exchange Commission that could cause actual results to differ.

Nordson Corporation engineers, manufactures and markets differentiated products and systems used for the precision dispensing of adhesives, coatings, sealants, biomaterials, polymers, plastics and other materials, fluid management, test and inspection, UV curing and plasma surface treatment, all supported by application expertise and direct global sales and service. Nordson serves a wide variety of consumer non-durable, durable and technology end markets including packaging, nonwovens, electronics, medical, appliances, energy, transportation, construction, and general product assembly and finishing. Founded in 1954 and headquartered in Westlake, Ohio, the company has operations and support offices in more than 30 countries. Visit Nordson on the web at http://www.nordson.com, @Nordson_Corp, or www.facebook.com/nordson.

NORDSON CORPORATION

FINANCIAL HIGHLIGHTS

(Dollars in thousands except for per-share amounts)

       

SECOND QUARTER PERIOD

Period Ending April 30, 2014

(Unaudited)

 
 

CONSOLIDATED STATEMENT OF INCOME

Second Quarter Year-to-Date
2014 2013 2014 2013
 
Net sales $ 417,461 $ 382,100 $ 776,881 $ 729,143
Cost of sales 181,909 165,162 346,547 314,976
Selling & administrative expenses   142,718       134,736     283,641       270,401  
 
Operating profit 92,834 82,202 146,693 143,766
 
Interest expense - net (3,315 ) (3,518 ) (6,778 ) (7,500 )
Other expense - net   (406 )   (565 )   (615 )   (1,765 )
 
Income before income taxes 89,113 78,119 139,300 134,501
Income taxes   27,179     23,514     42,486     37,885  
 
Net Income $ 61,934   $ 54,605   $ 96,814   $ 96,616  
 
 
 
Return on sales 15 % 14 % 12 % 13 %
Return on average shareholders' equity 27 % 30 % 21 % 27 %
 
 
 
 
 
 
                 
 
Average common shares outstanding (000's) 63,964 64,320 64,095 64,296

Average common shares and common share equivalents (000's)

64,557 64,970 64,711 64,959
 
Per share:
 
Basic earnings $ .97 $ .85 $ 1.51 $ 1.50
Diluted earnings $ .96 $ .84 $ 1.50 $ 1.49
 
Dividends paid $ .18 $ .15 $ .36 $ .30
 
Total dividends 11,543 9,667 23,104 19,308
 

CONSOLIDATED BALANCE SHEET

 

April 30

 

October 31

2014 2013
 
Cash and marketable securities $ 49,732 $ 42,375
Receivables 327,391 308,707
Inventories 206,438 198,401
Other current assets 55,191 51,087
Total current assets 638,752 600,570
 
Property, plant & equipment - net 206,840 200,979
Other assets 1,233,466 1,240,740
$ 2,079,058 $2,042,289
 
Notes payable and debt due within one year $ 19,149 $ 14,436
Accounts payable and accrued liabilities 217,404 221,035
Total current liabilities 236,553 235,471
 
Long-term debt 636,587 638,158
Other liabilities 282,695 280,797
Total shareholders' equity 923,223 887,863
$ 2,079,058 $2,042,289
 
         
 
 
Other information:
 
 
Employees 5,760 5,801
 
Common shares outstanding (000's) 63,664 64,218
 

NORDSON CORPORATION

FINANCIAL HIGHLIGHTS

(Dollars in thousands)

       

SECOND QUARTER PERIOD

Period Ending April 30, 2014

(Unaudited)

 
Second Quarter % Growth over 2013 Year-to-Date % Growth over 2013

SALES BY BUSINESS SEGMENT

2014   2013 Volume   Currency   Total 2014   2013 Volume   Currency   Total
 
 
Adhesive dispensing systems $ 231,954 $ 196,380 18.4 % -0.3 % 18.1 % $ 441,425 $ 379,758 17.1 % -0.9 % 16.2 %
Advanced technology systems 127,628 130,001 -2.6 % 0.8 % -1.8 % 225,169 238,710 -6.0 % 0.3 % -5.7 %
Industrial coating systems   57,879     55,719   4.3 % -0.4 % 3.9 %   110,287     110,675   0.4 % -0.8 % -0.4 %
 
Total sales by business segment $ 417,461   $ 382,100   9.2 % 0.1 % 9.3 % $ 776,881   $ 729,143   7.0 % -0.5 % 6.5 %
 
 
 
Second Quarter Year-to-Date

OPERATING PROFIT BY BUSINESS SEGMENT

2014 2013 2014 2013
 
Adhesive dispensing systems $ 62,699 $ 51,339 $ 110,619 $ 95,013
Advanced technology systems 30,842 33,112 41,220 53,845
Industrial coating systems 9,335 8,150 14,291 15,311
Corporate   (10,042 )   (10,399 )   (19,437 )   (20,403 )
 
Total operating profit by business segment $ 92,834   $ 82,202   $ 146,693   $ 143,766  
 
 
 
Second Quarter % Growth over 2013 Year-to-Date % Growth over 2013

SALES BY GEOGRAPHIC REGION

2014 2013 Volume Currency Total 2014 2013 Volume Currency Total
 
United States $ 125,693 $ 114,813 9.5 % - 9.5 % $ 241,199 $ 226,117 6.7 % - 6.7 %
Americas 31,144 36,147 -9.7 % -4.1 % -13.8 % 58,409 63,834 -4.6 % -3.9 % -8.5 %
Europe 122,058 99,196 18.5 % 4.5 % 23.0 % 238,533 193,831 19.6 % 3.5 % 23.1 %
Japan 28,889 31,614 -2.4 % -6.2 % -8.6 % 55,134 67,210 -7.6 % -10.4 % -18.0 %
Asia Pacific   109,677     100,330   10.0 % -0.7 % 9.3 %   183,606     178,151   3.6 % -0.5 % 3.1 %
 
Total Sales by Geographic Region $ 417,461   $ 382,100   9.2 % 0.1 % 9.3 % $ 776,881   $ 729,143   7.0 % -0.5 % 6.5 %
 
                                         
 
 
Second Quarter Year-to-Date

FREE CASH FLOW BEFORE DIVIDENDS

2014 2013 2014 2013
 
Net income $ 61,934 $ 54,605 $ 96,814 $ 96,616
Depreciation and amortization 14,743 13,140 29,231 26,189
Other non-cash charges 4,631 4,891 10,304 10,423
Changes in operating assets and liabilities   (26,806 )   (9,762 )   (34,160 )   (30,599 )
Net cash provided by operating activities 54,502 62,874 102,189 102,629
 
Additions to property, plant and equipment (8,603 ) (16,190 ) (16,494 ) (23,714 )
Proceeds from the sale of property, plant and equipment   86     4     99     30  
 
Free cash flow before dividends $ 45,985   $ 46,688   $ 85,794   $ 78,945  
 

NORDSON CORPORATION

ORDER RATES FOR 12-WEEK PERIOD ENDING MAY 18, 2014
CHANGE FROM PRIOR YEAR
         
 

BUSINESS SEGMENT

% CHANGE

GEOGRAPHY

% CHANGE

 
Adhesive dispensing systems 7% United States 10%
Advanced technology systems 14% Americas 3%
Industrial coating systems 4% Europe -
Japan 15%
Total 9% Asia Pacific 16%
 
Total 9%
 
Notes:
1. Numbers in this table are unaudited and exclude the effects of currency movements.

2. Pro-forma changes in order rates were calculated as though 2013 acquisitions were owned in both years.

 

NORDSON CORPORATION

RECONCILIATION OF NON-GAAP FINANCIAL MEASURES

   

SECOND QUARTER PERIOD

Period Ending April 30, 2014

(Unaudited)

 
Second Quarter Year-to-Date
2014   2013 2014   2013
 
Diluted EPS as reported (U.S. GAAP) $ 0.96 $ 0.84 $ 1.50 $ 1.49
 
Short-term inventory purchase accounting adjustments - - 0.02 -
Severance and restructuring 0.01 - 0.01 0.01
Discrete tax items   -   -   -   (0.04 )
 
Diluted EPS as adjusted (Non-GAAP) $ 0.97 $ 0.84 $ 1.53 $ 1.46  
 

Adjusted EPS is not a measurement of financial performance under GAAP, and should not be considered as an alternative to EPS determined in accordance with GAAP. Management believes that EPS as adjusted to exclude the items in the table above assist in understanding the results of Nordson Corporation. Our calculation of this non-GAAP measure may not be comparable to the calculation of a similarly titled measure reported by other companies.

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