Nordson Corporation Reports Fiscal 2016 Third Quarter Results with Record Revenue, Operating Profit and Diluted Earnings per Share

WESTLAKE, Ohio--(BUSINESS WIRE)--

Nordson Corporation NDSN today reported results for the third quarter of fiscal year 2016. For the quarter ending July 31, 2016, sales were $490 million, a 6 percent increase from the prior year's third quarter. This change in sales includes a 4 percent increase in organic volume, a 2 percent increase related to the first year effect of acquisitions, and less than 1 percent negative impact related to the unfavorable effects of currency translation. Operating profit was $124 million, net income was $84 million, and diluted earnings per share were $1.46. Prior year third quarter sales, operating profit, net income and diluted earnings per share were $463 million, $103 million, $69 million and $1.14, respectively. A reconciliation of GAAP diluted EPS to normalized amounts and a calculation of free cash flow are included in the attached tables.

"Nordson delivered record revenue and profitability in the third quarter as our global team continued meeting customer needs across our diverse end markets and driving efficiency throughout our operations," said Michael F. Hilton, Nordson President and Chief Executive Officer. "We generated very solid organic growth of 4 percent in the quarter compared to a period of robust growth a year ago, outperforming the continuing low-growth global macroeconomic environment. Operating margin in the quarter was 25 percent, a three percentage point improvement compared to the previous year's third quarter, with incremental operating margin in the quarter of 77 percent and earnings per share growth of 28 percent, both over the prior year third quarter. Shortly after the end of the quarter, Nordson's Board of Directors increased our dividend by 13 percent, marking the 53^rd consecutive year Nordson has raised its annual dividend."

Third Quarter Segment Results

Adhesive Dispensing Systems organic sales volume increased 4 percent compared to the prior year's third quarter, with additional volume growth of 1 percent related to the first year effect of the WAFO acquisition. "Strength in consumer non-durable and general product assembly markets in the current quarter helped drive excellent organic growth in this segment for the fifth straight quarter," said Hilton. Geographically, Europe and the U.S. led the growth. Reported operating margin in the segment was 27 percent in the quarter, or 28 percent on a normalized basis to exclude non-recurring charges related to restructuring initiatives.

Advanced Technology Systems organic sales volume increased 6 percent compared to the prior year's third quarter, with additional volume growth of 5 percent related to the first year effect of the Liquidyn and MatriX acquisitions. "We generated robust organic growth in the third quarter compared to the prior year based on strong demand for automated and semi-automated dispense equipment in electronic end markets and fluid management components for medical end markets," said Hilton. Geographically, Japan, Asia Pacific and the United States led the growth. Volume leverage, product mix and continuous improvement initiatives helped drive reported segment operating margin to 31 percent, an increase of seven percentage points compared to the same quarter a year ago.

Industrial Coating Systems sales volume decreased 3 percent from the prior year's third quarter. "Sales were impacted by very challenging comparisons to the prior year, where total segment volume was up 23 percent at this time a year ago," said Hilton. "Strength in powder and liquid coating product lines during the current quarter was offset by softness in other product lines. Growth in Europe and the United States was offset by other geographies." Reported operating margin was 17 percent in the quarter, or 18 percent on a normalized basis to exclude non-recurring charges related to restructuring initiatives.

Detailed results by operating segment and geography are included in the attached tables.

Order Rates and Backlog

Order rates for the 12-week period ending August 14, 2016, measured in constant currency, increased by 16 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 2015 acquisitions were owned in both years.

Backlog for the quarter ended July 31, 2016 was approximately $333 million, an increase of 22 percent compared to the same period a year ago, and inclusive of 20 percent organic growth and 2 percent growth due to acquisitions. Backlog amounts are calculated at July 31, 2016 exchange rates.

Outlook

For the fourth quarter of fiscal 2016, sales are expected to increase 6 percent to 10 percent as compared to the fourth quarter a year ago. This growth includes organic volume growth of 5 percent to 9 percent and 1 percent growth from the first year effect of acquisitions. The effect of currency translation is expected to be minimal compared to the prior year based on the current exchange rate environment. At the midpoint of this sales outlook and excluding any potential one-time charges associated with restructuring initiatives, operating margin is expected to be approximately 22 percent, and diluted earnings per share are expected to be in the range of $1.15 to $1.27.

"A strong backlog, solid order rates, and continued customer project activity lead us to forecast robust growth, improved operating margin and higher earnings per share in our fourth quarter compared to the prior year," said Hilton. "At the low end of our fourth quarter guidance, Nordson is on track to deliver full year records for revenue, operating profit and diluted earnings per share. We're on pace for full year organic growth of approximately 5 percent compared to the prior year, a strong level reflecting our ability to leverage our technology, service and global footprint in growth niches across the diverse end markets we serve. Over the long term, we remain focused on using tools within the Nordson Business System to drive growth, enhance margins and create sustained shareholder value."

Nordson will broadcast its third-quarter conference call on its web site at www.nordson.com/investors on Tuesday, August 23, 2016 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, Senior Director of Communications & Investor Relations at (440) 414-5639.

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 35 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)
THIRD QUARTER PERIOD
Period Ending July 31, 2016
(Unaudited)
CONSOLIDATED STATEMENT OF INCOME
		Third Quarter								Year-to-Date
		2016				2015				2016				2015
Net sales		$	489,899			$	462,731			$	1,299,711			$	1,242,466
Cost of sales			216,679				214,239				581,179				563,363
Selling & administrative expenses			149,534				145,642				440,964				437,021
Operating profit			123,686				102,850				277,568				242,082
Interest expense - net			(4,471	)			(4,393	)			(14,989	)			(12,558	)
Other income (expense) - net			(1,978	)			2				551				(787	)
Income before income taxes			117,237				98,459				263,130				228,737
Income taxes			33,023				29,071				67,154				67,250
Net Income		$	84,214			$	69,388			$	195,976			$	161,487
Return on sales			17	%			15	%			15	%			13	%
Return on average shareholders' equity			44	%			34	%			37	%			25	%
Average common shares outstanding (000's)			57,085				60,578				57,012				61,235
Average common shares and common share equivalents (000's)			57,616				61,099				57,419				61,759
Per share:
Basic earnings		$	1.48			$	1.15			$	3.44			$	2.64
Diluted earnings		$	1.46			$	1.14			$	3.41			$	2.61
Dividends paid		$	.24			$	.22			$	.72			$	.66
Total dividends		$	13,690			$	13,350			$	41,008			$	40,466

NORDSON CORPORATION
FINANCIAL HIGHLIGHTS
(Dollars in thousands except for per-share amounts)
THIRD QUARTER PERIOD
Period Ending July 31, 2016
(Unaudited)
CONSOLIDATED BALANCE SHEET
		July 31			October 31
		2016			2015
Cash and marketable securities		$	60,294		$	50,268
Receivables			412,605			389,550
Inventories			239,611			225,672
Other current assets			57,140			46,101
Total current assets			769,650			711,591
Property, plant & equipment - net			267,567			249,940
Other assets			1,372,308			1,398,913
		$	2,409,525		$	2,360,444
Notes payable and debt due within one year		$	17,615		$	23,950
Accounts payable and accrued liabilities			260,805			266,826
Total current liabilities			278,420			290,776
Long-term debt			1,026,553			1,092,643
Other liabilities			292,745			317,009
Total shareholders' equity			811,807			660,016
		$	2,409,525		$	2,360,444
Other information:
Employees			6,106			6,232
Common shares outstanding (000's)			57,192			57,358

NORDSON CORPORATION
FINANCIAL HIGHLIGHTS
(Dollars in thousands)
THIRD QUARTER PERIOD
Period Ending July 31, 2016
(Unaudited)
		Third Quarter								% Growth over 2015									Year-to-Date								% Growth over 2015
SALES BY BUSINESS SEGMENT		2016				2015				Volume			Currency			Total			2016				2015				Volume			Currency			Total
Adhesive dispensing systems		$	220,800			$	211,649			4.6	%		-0.3	%		4.3	%		$	645,269			$	609,135			8.5	%		-2.6	%		5.9	%
Advanced technology systems			205,372				184,888			11.4	%		-0.3	%		11.1	%			481,787				446,588			9.0	%		-1.1	%		7.9	%
Industrial coating systems			63,727				66,194			-2.6	%		-1.1	%		-3.7	%			172,655				186,743			-5.3	%		-2.2	%		-7.5	%
Total sales by business segment		$	489,899			$	462,731			6.3	%		-0.4	%		5.9	%		$	1,299,711			$	1,242,466			6.6	%		-2.0	%		4.6	%
		Third Quarter																	Year-to-Date
OPERATING PROFIT BY BUSINESS SEGMENT		2016				2015													2016				2015
Adhesive dispensing systems		$	60,423			$	54,854												$	173,760			$	148,963
Advanced technology systems			63,115				44,633													109,819				96,221
Industrial coating systems			10,612				12,326													25,082				27,604
Corporate			(10,464	)			(8,963	)												(31,093	)			(30,706	)
Total operating profit by business segment		$	123,686			$	102,850												$	277,568			$	242,082
		Third Quarter								% Growth over 2015									Year-to-Date								% Growth over 2015
SALES BY GEOGRAPHIC REGION		2016				2015				Volume			Currency			Total			2016				2015				Volume			Currency			Total
United States		$	135,067			$	129,290			4.5	%		-			4.5	%		$	383,720			$	392,144			-2.1	%		-			-2.1	%
Americas			30,534				34,929			-7.1	%		-5.5	%		-12.6	%			90,823				94,225			4.5	%		-8.1	%		-3.6	%
Europe			128,583				120,580			7.6	%		-1.0	%		6.6	%			374,234				334,244			15.9	%		-3.9	%		12.0	%
Japan			34,709				26,647			12.5	%		17.8	%		30.3	%			83,578				76,679			1.1	%		7.9	%		9.0	%
Asia Pacific			161,006				151,285			8.7	%		-2.3	%		6.4	%			367,356				345,174			9.4	%		-3.0	%		6.4	%
Total Sales by Geographic Region		$	489,899			$	462,731			6.3	%		-0.4	%		5.9	%		$	1,299,711			$	1,242,466			6.6	%		-2.0	%		4.6	%
		Third Quarter																	Year-to-Date
FREE CASH FLOW BEFORE DIVIDENDS		2016				2015													2016				2015
Net income		$	84,214			$	69,388												$	195,976			$	161,487
Depreciation and amortization			17,662				16,849													52,824				49,071
Other non-cash charges			4,455				3,264													13,213				14,515
Changes in operating assets and liabilities			(38,485	)			(39,643	)												(67,279	)			(57,779	)
Net cash provided by operating activities			67,846				49,858													194,734				167,294
Additions to property, plant and equipment			(19,931	)			(12,715	)												(45,452	)			(48,898	)
Proceeds from the sale of property, plant and equipment			173				67													1,044				488
Free cash flow before dividends		$	48,088			$	37,210												$	150,326			$	118,884

NORDSON CORPORATION
ORDER RATES FOR 12-WEEK PERIOD ENDING AUGUST 14, 2016
CHANGE FROM PRIOR YEAR
BUSINESS SEGMENT			% CHANGE			GEOGRAPHY		% CHANGE
Adhesive dispensing systems			2%			United States		9%
Advanced technology systems			29%			Americas		7%
Industrial coating systems			36%			Europe		-6%
						Japan		37%
Total			16%			Asia Pacific		46%
						Total		16%

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 2015 acquisitions were owned in both years.

NORDSON CORPORATION
RECONCILIATION OF NON-GAAP FINANCIAL MEASURES
THIRD QUARTER PERIOD
Period Ending July 31, 2016
(Unaudited)
		Third Quarter								Year-to-Date
		2016				2015				2016				2015
Diluted EPS as reported (U.S. GAAP)		$	1.46			$	1.14			$	3.41			$	2.61
Short-term inventory purchase accounting adjustments			-				-				0.02				0.01
Severance and restructuring			0.02				0.03				0.05				0.03
Litigation settlement			-				-				(0.01	)			-
Pension settlement expense			-				(0.01	)			-				0.02
Discrete tax items			(0.03	)			-				(0.19	)			(0.04	)
Other pre-tax items related to discrete tax benefits			0.02				-				(0.01	)			-
Diluted EPS as adjusted (Non-GAAP)		$	1.47			$	1.16			$	3.27			$	2.63

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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