Nordson Corporation Reports Fiscal Year 2015 Second Quarter Results

WESTLAKE, Ohio--(BUSINESS WIRE)--

Nordson Corporation NDSN today reported results for the second quarter of fiscal year 2015. For the quarter ending April 30, 2015, sales were $401 million, a 4 percent decrease from the prior year's second quarter. This change in sales included a 1 percent increase in organic volume, a 3 percent increase related to the first year effect of acquisitions, and a negative 8 percent impact related to the unfavorable effects of currency translation. Operating profit was $76 million, net income was $49 million, and diluted earnings per share were $0.80. Prior year second quarter sales, operating profit, net income and diluted earnings per share were $417 million, $93 million, $62 million and $0.96, 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 continued to execute in a challenging macroeconomic environment, and Nordson delivered a solid quarter with revenue, operating profit and earnings per share within our range of expectations," said Nordson President and Chief Executive Officer Michael F. Hilton. "Our underlying business remains sound and total company organic sales volume growth was positive in the quarter. On a sequential basis, our results demonstrate the continued strength of our business model, as we leveraged solid top line growth of 6 percent to generate incremental operating margin of 63 percent. Free cash flow in the quarter before dividends was $72 million and our balance sheet has significant capacity for ongoing investments. We returned value directly to our shareholders in the quarter by investing $66 million for the repurchase of shares and by distributing approximately $13 million in dividends. We also continued to develop and release innovative products during the quarter while maintaining our focus on a variety of continuous improvement initiatives. As we look ahead, our current backlog, order rates and project lists continue to support our view of strong organic growth in the third quarter."

Second Quarter Segment Results

Sales volume in Adhesive Dispensing Systems decreased 2 percent compared to the second quarter a year ago. "Strength in rigid packaging, nonwovens, injection molding and general assembly end markets was offset by softness in extrusion and pelletizing end markets," said Hilton. The Adhesive Dispensing segment's operating margin in the second quarter was 25 percent.

In Advanced Technology Systems, second quarter sales volume increased 5 percent over the prior year, inclusive of a 4 percent decrease in organic volume and a 9 percent increase related to the first year effect of acquisitions. "Strong demand for our surface treatment and test and inspection solutions in electronics end markets and fluid management components serving medical and industrial end markets was offset by lower demand for automated dispensing systems." Operating margin for the Advanced Technology segment was 19 percent in the second quarter.

Industrial Coating Systems organic sales volume increased 23 percent compared to the second quarter a year ago. "This segment generated strong organic growth in most all product lines, driven by consumer durable, automotive, industrial and food and beverage end markets," said Hilton. The Industrial Coatings segment's operating margin was 17 percent in the second quarter.

Negative currency translation effects reduced total company sales by $32 million, or 8 percent, and reduced overall operating margin by 2 percent, both as compared to the prior year's second quarter. On a company wide basis, Nordson delivered positive organic growth in all geographies with the exception of Asia Pacific. 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 2015, sales were $780 million, an increase of less than 1 percent over the prior year's first half. This increase in sales included a 4 percent increase in organic volume, a 3 percent increase related to the first year effect of acquisitions, and a negative 7 percent impact related to the unfavorable effects of currency translation. First half operating profit was $139 million, net income was $92 million and GAAP diluted earnings per share were $1.48. Prior year first half sales, operating profit, net income and diluted earnings per share were $777 million, $147 million, $97 million and $1.50, respectively. Through the first half of the year, unfavorable currency effects reduced sales by $50 million and reduced operating margin by 1 percent, both as compared to the prior year.

"Nordson delivered solid organic volume growth in the first half of this year in what continues to be a challenging macroeconomic environment," said Hilton. "This growth reflects the diversity of our end markets, geographic reach and the value we provide our customers. Sequential sales volume growth 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 10, 2015, measured in constant currency, increased by 3 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 2014 acquisitions were owned in both years.

Backlog for the quarter ended April 30, 2015 was approximately $287 million, an increase of 26 percent compared to the same period a year ago, and inclusive of 23 percent organic growth and 3 percent growth due to acquisitions. Current backlog increased 25 percent compared to the first quarter ended January 31, 2015. Backlog amounts are calculated at April 30, 2015 exchange rates.

Outlook

For the third quarter of fiscal 2015, sales growth is expected to be in the range of 2 percent to 6 percent as compared to the third quarter a year ago. This growth is inclusive of organic volume growth of 6 to 10 percent, 2 percent growth from the first year effect of acquisitions, and negative 6 percent currency translation effect based on the current exchange rate environment. At the midpoint of this outlook, operating margin is expected to be approximately 24 percent, and GAAP diluted earnings per share are expected to be in the range of $1.19 to $1.30.

"We are forecasting a very good start to the second half of our fiscal year based on our backlog and current 12 week order rates. The midpoint of our third quarter sales guidance includes organic growth of 8 percent over the same period a year ago, which is outstanding performance in a weak macroeconomic environment," said Hilton. "Clearly, Nordson's package of values, including innovative products backed with unmatched service, support and global availability, continues to resonate with our customers. The strength we are seeing is relatively broad based as order rates are positive in most product lines and geographies. Relative to our previous full year expectations, several major projects converted to orders during the quarter. Based upon changing customer requirements, a unique application that we had expected to become an order did not materialize. Consequently, we now expect full year organic growth to be in the mid single digit range. Overall, we continue to feel very good about the second half of our year, and we remain on pace to deliver excellent full year results."

Nordson will broadcast its second-quarter conference call on its web site at www.nordson.com/investors on Wednesday, May 20, 2015 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 jim.jaye@nordson.com.

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, 2015
(Unaudited)
CONSOLIDATED STATEMENT OF INCOME
		Second Quarter								Year-to-Date
		2015				2014				2015				2014
Net sales		$	400,727			$	417,461			$	779,735			$	776,881
Cost of sales			178,837				181,909				349,124				346,547
Selling & administrative expenses			145,476				142,718				291,379				283,641
Operating profit			76,414				92,834				139,232				146,693
Interest expense - net			(4,162	)			(3,315	)			(8,165	)			(6,778	)
Other income (expense) - net			(687	)			(406	)			(789	)			(615	)
Income before income taxes			71,565				89,113				130,278				139,300
Income taxes			22,351				27,179				38,179				42,486
Net Income		$	49,214			$	61,934			$	92,099			$	96,814
Return on sales			12	%			15	%			12	%			12	%
Return on average shareholders' equity			23	%			27	%			22	%			21	%
Average common shares outstanding (000's)			61,116				63,964				61,569				64,095
Average common shares and
common share equivalents (000's)			61,638				64,557				62,094				64,711
Per share:
Basic earnings		$	.81			$	.97			$	1.50			$	1.51
Diluted earnings		$	.80			$	.96			$	1.48			$	1.50
Dividends paid		$	.22			$	.18			$	.44			$	.36
Total dividends		$	13,481			$	11,543			$	27,116			$	23,104

CONSOLIDATED BALANCE SHEET
		April 30			October 31
		2015			2014
Cash and marketable securities		$	51,454		$	42,314
Receivables			316,091			365,844
Inventories			239,406			210,871
Other current assets			55,192			53,654
Total current assets			662,143			672,683
Property, plant & equipment - net			241,667			224,439
Other assets			1,346,427			1,383,008
		$	2,250,237		$	2,280,130
Notes payable and debt due within one year		$	68,491		$	116,932
Accounts payable and accrued liabilities			229,783			253,936
Total current liabilities			298,274			370,868
Long-term debt			819,203			682,868
Other liabilities			314,530			321,597
Total shareholders' equity			818,230			904,797
		$	2,250,237		$	2,280,130
Other information:
Employees			5,998			5,966
Common shares outstanding (000's)			60,833			62,435

NORDSON CORPORATION
FINANCIAL HIGHLIGHTS
(Dollars in thousands)
SECOND QUARTER PERIOD
Period Ending April 30, 2015
(Unaudited)
		Second Quarter								% Growth over 2014									Year-to-Date								% Growth over 2014
SALES BY BUSINESS SEGMENT		2015				2014				Volume			Currency			Total			2015				2014				Volume			Currency			Total
Adhesive dispensing systems		$	203,273			$	231,954			-2.3	%		-10.1	%		-12.4	%		$	397,486			$	441,425			-1.5	%		-8.5	%		-10.0	%
Advanced technology systems			129,482				127,628			5.3	%		-3.8	%		1.5	%			261,700				225,169			19.6	%		-3.4	%		16.2	%
Industrial coating systems			67,972				57,879			23.3	%		-5.9	%		17.4	%			120,549				110,287			14.1	%		-4.8	%		9.3	%
Total sales by business segment		$	400,727			$	417,461			3.6	%		-7.6	%		-4.0	%		$	779,735			$	776,881			6.9	%		-6.5	%		0.4	%
		Second Quarter																	Year-to-Date
OPERATING PROFIT BY BUSINESS SEGMENT		2015				2014													2015				2014
Adhesive dispensing systems		$	50,780			$	62,699												$	94,109			$	110,619
Advanced technology systems			24,770				30,842													51,588				41,220
Industrial coating systems			11,514				9,335													15,278				14,291
Corporate			(10,650	)			(10,042	)												(21,743	)			(19,437	)
Total operating profit by business segment		$	76,414			$	92,834												$	139,232			$	146,693
		Second Quarter								% Growth over 2014									Year-to-Date								% Growth over 2014
SALES BY GEOGRAPHIC REGION		2015				2014				Volume			Currency			Total			2015				2014				Volume			Currency			Total
United States		$	140,030			$	125,693			11.4	%		-			11.4	%		$	262,854			$	241,199			9.0	%		-			9.0	%
Americas			31,028				31,144			9.3	%		-9.7	%		-0.4	%			59,296				58,409			9.1	%		-7.6	%		1.5	%
Europe			105,097				122,058			3.9	%		-17.8	%		-13.9	%			213,663				238,533			3.8	%		-14.2	%		-10.4	%
Japan			28,499				28,889			15.6	%		-16.9	%		-1.3	%			50,032				55,134			5.1	%		-14.4	%		-9.3	%
Asia Pacific			96,073				109,677			-10.4	%		-2.0	%		-12.4	%			193,890				183,606			7.8	%		-2.2	%		5.6	%
Total Sales by Geographic Region		$	400,727			$	417,461			3.6	%		-7.6	%		-4.0	%		$	779,735			$	776,881			6.9	%		-6.5	%		0.4	%
		Second Quarter																	Year-to-Date
FREE CASH FLOW BEFORE DIVIDENDS		2015				2014													2015				2014
Net income		$	49,214			$	61,934												$	92,099			$	96,814
Depreciation and amortization			16,238				14,743													32,222				29,231
Other non-cash charges			4,386				4,631													11,251				10,304
Changes in operating assets and liabilities			21,686				(26,806	)												(18,136	)			(34,160	)
Net cash provided by operating activities			91,524				54,502													117,436				102,189
Additions to property, plant and equipment			(19,362	)			(8,603	)												(36,183	)			(16,494	)
Proceeds from the sale of property, plant and equipment			146				86													421				99
Free cash flow before dividends		$	72,308			$	45,985												$	81,674			$	85,794

NORDSON CORPORATION
ORDER RATES FOR 12-WEEK PERIOD ENDING MAY 10, 2015
CHANGE FROM PRIOR YEAR
BUSINESS SEGMENT		% CHANGE		GEOGRAPHY		% CHANGE
Adhesive dispensing systems		8%		United States		1%
Advanced technology systems		-10%		Americas		29%
Industrial coating systems		21%		Europe		21%
				Japan		-6%
Total		3%		Asia Pacific		-15%
				Total		3%

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 2014 acquisitions were owned in both years.

NORDSON CORPORATION
RECONCILIATION OF NON-GAAP FINANCIAL MEASURES
SECOND QUARTER PERIOD
Period Ending April 30, 2015
(Unaudited)
		Second Quarter						Year-to-Date
		2015			2014			2015				2014
Diluted EPS as reported (U.S. GAAP)		$	0.80		$	0.96		$	1.48			$	1.50
Short-term inventory purchase accounting adjustments			-			-			0.01				0.02
Severance and restructuring			-			0.01			-				0.01
Pension settlement expense			-			-			0.02				-
Discrete tax items			-			-			(0.03	)			-
Diluted EPS as adjusted (Non-GAAP)		$	0.80		$	0.97		$	1.48			$	1.53

Adjusted EPS and operating margin are not measurements of financial performance under GAAP, and should not be considered as alternatives to EPS and operating margin determined in accordance with GAAP. Management believes that EPS and operating margin as adjusted to exclude the items in the tables above assist in understanding the results of Nordson Corporation. Our calculations of these non-GAAP measures may not be comparable to the calculations of similarly titled measures reported by other companies.

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