Market Overview

Nordson Corporation Reports Fiscal Year 2018 Third Quarter Results

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  • Sales were $581 million
  • Operating profit was $136 million, or 23 percent of sales
  • EBITDA was $163 million, or 28 percent of sales
  • GAAP diluted EPS was $1.61; adjusted diluted EPS was $1.60
  • Free cash flow before dividends was $118 million, or 124 percent of
    net income
  • Fourth quarter 2018 guidance: Sales expected to be in the range of
    flat to down 4 percent over prior year; GAAP diluted EPS in the range
    of $1.38 to $1.54; EBITDA in the range of $143 to $155 million
  • Full year organic revenue growth expected to be 2 percent at the
    midpoint of fourth quarter guidance

Nordson
Corporation
(NASDAQ:NDSN) today reported results for the
third quarter of fiscal year 2018. For the quarter ended July 31, 2018,
sales were $581 million, a 1 percent decrease compared to the prior
year's third quarter. This change in sales included a decrease of
approximately 3 percent in organic volume, growth related to the first
year effect of acquisitions of approximately 1 percent, and an increase
related to the favorable effects of currency translation as compared to
the prior year's third quarter of 1 percent. The prior year's third
quarter sales benefitted from strong organic sales growth in all
segments.

In the third quarter of fiscal year 2018, reported operating profit was
$136 million, net income was $95 million, and GAAP diluted earnings were
$1.61 per share. Free cash flow before dividends was $118 million in the
quarter, reflecting strong cash conversion of 124 percent of net income.
Prior year third quarter sales, operating profit, net income and GAAP
diluted earnings per share were $589 million, $153 million, $101 million
and $1.74, respectively. A reconciliation of GAAP diluted earnings per
share to adjusted diluted earnings per share and calculations for
EBITDA, adjusted EBITDA, free cash flow before dividends, and adjusted
free cash flow before dividends are included in the attached financial
exhibits.

Commenting on the third quarter fiscal year 2018 performance, Michael F.
Hilton, Nordson President and Chief Executive Officer, said, "Nordson
delivered solid results despite challenging comparisons to our prior
year's third quarter, where total company organic sales growth was 11
percent. Our commitment to delivering the best technology solutions
while employing continuous improvement initiatives drove bottom line
performance, generating operating margin of 23 percent and $118 million
of free cash flow before dividends. Our base business is strong, and we
remain focused on bringing value to our customers and the diverse end
markets we serve."

The current quarter's results include a non-recurring restructuring
charge of approximately $1 million, or $0.02 per diluted share.
Additionally, discrete tax benefits of approximately $2 million, or
$0.03 per diluted share, were recognized in the quarter.

Third Quarter Segment Results

Adhesive Dispensing Systems sales increased 5 percent compared to the
prior year's third quarter, inclusive of 3 percent organic volume growth
and a 2 percent increase related to the favorable effects of currency
translation as compared to the prior year. Reported operating margin in
the segment was 28 percent, or 29 percent on an adjusted basis to
exclude non-recurring restructuring charges of $1 million related to a
previously announced U.S. facility consolidation.

Advanced Technology Systems sales decreased 8 percent compared to the
prior year's third quarter, including an 11 percent decrease in organic
volume, a 2 percent increase related to the first year effect of
acquisitions, and a 1 percent increase related to the favorable effects
of currency translation as compared to the prior year. The third
quarter's acquisitive growth includes the fiscal 2018 acquisition of
Sonoscan. The third quarter of fiscal year 2017 benefitted from strong
electronics end market demand driving 18 percent organic sales growth
for this segment. Reported operating margin in the segment was 25
percent in the current quarter.

Industrial Coating Systems sales increased 6 percent compared to the
prior year's third quarter, including approximately 6 percent organic
growth and a less than 1 percent increase from the favorable effects of
currency translation as compared to the prior year. Compared to the
prior year's third quarter, reported operating margin in the segment
improved 160 basis points to 22 percent.

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

Backlog

Backlog for the quarter ended July 31, 2018 was approximately $428
million, an increase of 16 percent compared to the same period a year
ago, inclusive of 15 percent organic growth and 1 percent growth due to
acquisitions. Backlog amounts are calculated at July 31, 2018 exchange
rates and include acquisitions that closed prior to the end of the third
quarter of fiscal 2018.

Outlook

For the fourth quarter of fiscal 2018, sales are expected to be in the
range of flat to down 4 percent compared to the fourth quarter a year
ago. This outlook includes a range for organic volume to be up 1 percent
to down 3 percent, 1 percent growth from the first year effect of
acquisitions, and an unfavorable currency translation effect of 2
percent based on the current exchange rate environment as compared to
the prior year. At the midpoint of this outlook, operating margin is
expected to be approximately 22 percent. GAAP diluted earnings per share
are expected to be in the range of $1.38 to $1.54, with an estimated
effective tax rate of approximately 25 percent. At the midpoint of the
guidance, EBITDA and EBITDA margin are expected to be $149 million and
26 percent, respectively.

"Looking ahead to the fourth quarter, our guidance reflects our current
backlog, where organic volume is driven primarily by strength in
adhesive and medical product lines, offset primarily by lower demand for
Advanced Technology dispense product lines serving electronics end
markets and automotive cold materials product lines," said Hilton. "At
the midpoint of our guidance, we expect to generate total company
organic sales growth of 2 percent on a full year basis for fiscal 2018.
On top of 8 percent organic growth in fiscal 2017 and 7 percent organic
growth in fiscal 2016, delivering organic growth again this year
highlights the attractiveness of the end markets we serve and our
ability to continue to meet our customers' expectations. We remain
focused on delivering value to our shareholders, driving bottom line
results through continuous improvement initiatives utilizing the Nordson
Business System, and providing superior customer service."

Nordson management will provide additional commentary on these results
and outlook during a conference call Tuesday, August 21, 2018 at 8:30
a.m. eastern time which can be accessed at www.nordson.com/investors.
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 Lara
Mahoney, Vice President, Investor Relations & Corporate Communications
at (440) 414-5639 or lara.mahoney@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 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, 2018
(Unaudited)
     

CONSOLIDATED STATEMENT OF INCOME

  Third Quarter Year-to-Date
2018 2017 2018 2017
 
Net sales $ 581,243 $ 589,438 $ 1,685,373 $ 1,493,044
Cost of sales 260,847 263,173 757,146 666,130
Selling & administrative expenses   184,820     172,799     548,223     494,000  
 
Operating profit 135,576 153,466 380,004 332,914
 
Interest expense - net (13,409 ) (11,038 ) (36,345 ) (24,041 )
Other income (expense) - net   528     27     673     (1,452 )
 
Income before income taxes 122,695 142,455 344,332 307,421
Income taxes   27,811     40,999     53,658     91,454  
 
Net Income $ 94,884   $ 101,456   $ 290,674   $ 215,967  
 
 
Return on sales 16 % 17 % 17 % 14 %
Return on average shareholders' equity 39 % 28 % 30 % 45 %
 
                 
 

Average common shares outstanding (000's)

58,053 57,594 57,931 57,495

 

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

58,912 58,259 58,910 58,171
 
Per share:
 
Basic earnings $ 1.63 $ 1.76 $ 5.02 $ 3.76
Diluted earnings $ 1.61 $ 1.74 $ 4.93 $ 3.71
 
Dividends paid $ .30 $ .27 $ .90 $ .81
 
Total dividends $ 17,412 $ 15,550 $ 52,109 $ 46,549
 
   

CONSOLIDATED BALANCE SHEET

July 31 October 31
2018 2017
 
Cash and marketable securities $ 266,802 $ 90,383
Receivables 507,681 505,087
Inventories 271,360 264,266
Other current assets   31,978   28,636
Total current assets 1,077,821 888,372
 
Property, plant & equipment - net 356,777 346,411
Other assets   2,172,794   2,179,756
$ 3,607,392 $ 3,414,539
 
Notes payable and debt due within one year $ 33,729 $ 326,587
Accounts payable and accrued liabilities   307,375   321,159
Total current liabilities 341,104 647,746
 
Long-term debt 1,521,393 1,256,397
Other liabilities 321,979 354,903
Total shareholders' equity   1,422,916   1,155,493
$ 3,607,392 $ 3,414,539
 
         
 
Other information:
 
 
Employees 7,543 7,532
 
Common shares outstanding (000's) 58,149 57,715
 

 

NORDSON CORPORATION

FINANCIAL HIGHLIGHTS

(Dollars in thousands)

 

THIRD QUARTER PERIOD

Period Ending July 31, 2018

(Unaudited)

                   

 

Third Quarter % Growth over 2017 Year-to-Date % Growth over 2017

SALES BY BUSINESS SEGMENT

2018 2017 Volume Currency Total 2018 2017 Volume Currency Total
 
 
Adhesive dispensing systems $ 244,728 $ 233,367 3.4 % 1.5 % 4.9 % $ 704,367 $ 668,146 0.8 % 4.6 % 5.4 %
Advanced technology systems 266,595 290,406 -8.9 % 0.7 % -8.2 % 789,135 645,907 20.0 % 2.2 % 22.2 %
Industrial coating systems   69,920     65,665   5.7 % 0.8 % 6.5 %   191,871     178,991   4.5 % 2.7 % 7.2 %
 
Total sales by business segment $ 581,243   $ 589,438   -2.4 % 1.0 % -1.4 % $ 1,685,373   $ 1,493,044   9.6 % 3.3 % 12.9 %
 
Third Quarter Year-to-Date

OPERATING PROFIT BY BUSINESS SEGMENT

2018 2017 2018 2017
 
Adhesive dispensing systems $ 68,490 $ 66,451 $ 191,319 $ 185,226
Advanced technology systems 67,158 87,385 192,732 168,054
Industrial coating systems 15,179 13,192 36,911 30,529
Corporate   (15,251 )   (13,562 )   (40,958 )   (50,895 )
 
Total operating profit by business segment $ 135,576   $ 153,466   $ 380,004   $ 332,914  
 
Third Quarter % Growth over 2017 Year-to-Date % Growth over 2017

SALES BY GEOGRAPHIC REGION

2018 2017 Volume Currency Total 2018 2017 Volume Currency Total
 
United States $ 191,512 $ 182,953 4.7 % - 4.7 % $ 536,164 $ 464,569 15.4 % - 15.4 %
Americas 38,911 41,604 -4.1 % -2.4 % -6.5 % 112,149 107,971 3.8 % 0.1 % 3.9 %
Europe 150,710 133,846 9.4 % 3.2 % 12.6 % 447,384 381,473 8.2 % 9.1 % 17.3 %
Japan 28,367 41,472 -32.5 % 0.9 % -31.6 % 127,266 96,504 29.7 % 2.2 % 31.9 %
Asia Pacific   171,743     189,563   -10.8 % 1.4 % -9.4 %   462,410     442,527   1.6 % 2.9 % 4.5 %
 
Total Sales by Geographic Region $ 581,243   $ 589,438   -2.4 % 1.0 % -1.4 % $ 1,685,373   $ 1,493,044   9.6 % 3.3 % 12.9 %
 

 

NORDSON CORPORATION

RECONCILIATION OF NON-GAAP FINANCIAL MEASURES

(Dollars in thousands except for per-share amounts)

 

THIRD QUARTER PERIOD

Period Ending July 31, 2018

(Unaudited)

       
EBITDA Third Quarter Year-to-Date
2018 2017 2018 2017
 
Net income $ 94,884 $ 101,456 $ 290,674 $ 215,967
Adjustments:
Depreciation and amortization expense 27,321 25,954 81,037 65,366
Interest expense, net 13,409 11,038 36,345 24,041
Income taxes   27,811   40,999   53,658   91,454
EBITDA $ 163,425 $ 179,447 $ 461,714 $ 396,828
Adjustments:
Acquisition costs and adjustments (1)   -   2,252   3,484   17,898
EBITDA As Adjusted $ 163,425 $ 181,699 $ 465,198 $ 414,726
 
EBITDA per diluted share $ 2.77 $ 3.08 $ 7.84 $ 6.82
EBITDA As Adjusted per diluted share $ 2.77 $ 3.12 $ 7.90 $ 7.13

(1) Represents costs and adjustments associated with
our 2018 and 2017 acquisitions, including accounting adjustments
to inventory that were charged to cost of sales when the inventory
was sold; and transaction-related costs comprising of acquisition
fees, legal, financial and tax due diligence expenses, and
valuation costs that are required to be expensed as incurred.

 

EBITDA and EBITDA per diluted share are non-GAAP financial
measures used by management to evaluate the Company's ongoing
operations. EBITDA is defined as earnings before interest, taxes,
depreciation and amortization and EBITDA As Adjusted is defined as
EBITDA plus certain acquisition costs and adjustments. EBITDA per
diluted share is defined as EBITDA divided by the Company's
diluted weighted average shares outstanding. EBITDA As Adjusted
per diluted share is defined as EBITDA As Adjusted divided by the
Company's diluted weighted average shares outstanding.

 

  Third Quarter   Year-to-Date
2018   2017 2018   2017
 
Diluted EPS as reported (U.S. GAAP) $ 1.61 $ 1.74 $ 4.93 $ 3.71
 
Short-term inventory purchase accounting adjustments - 0.02 0.04 0.05
Acquisition costs - 0.01 - 0.17
Severance and restructuring 0.02 0.01 0.05 0.02
U.S. Tax Reform discrete item - - (0.37 ) -
Other discrete tax items   (0.03 )   -   (0.15 )   0.04
 
Diluted EPS as adjusted (Non-GAAP) $ 1.60   $ 1.78 $ 4.50   $ 3.99

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. Amounts may not
add due to rounding.

 

     
Free Cash Flow Before Dividends Third Quarter Year-to-Date
2018 2017 2018   2017
 
Net income $ 94,884 $ 101,456 $ 290,674 $ 215,967
Depreciation and amortization 27,321 25,954 81,037 65,366
Other non-cash charges 3,934 (8,592 ) (29,269 ) 3,041
Changes in operating assets and liabilities   4,477     (41,299 )   485     (62,583 )
Net cash provided by operating activities 130,616 77,519 342,927 221,791
 
Additions to property, plant and equipment (12,923 ) (22,295 ) (45,972 ) (49,324 )
Proceeds from the sale of property, plant and equipment   64     308     299     3,906  
 
Free cash flow before dividends $ 117,757   $ 55,532   $ 297,254   $ 176,373  
 
Adjustments:
Acquisition costs and adjustments, net of tax(1)   -     1,597     2,630     12,564  
Free cash flow before dividends, adjusted $ 117,757   $ 57,129   $ 299,884   $ 188,937  

(1) Represents costs and adjustments associated with
our 2018 and 2017 acquisitions, including accounting adjustments
to inventory that were charged to cost of sales when the inventory
was sold; and transaction-related costs comprising of acquisition
fees, legal, financial and tax due diligence expenses, and
valuation costs that are required to be expensed as incurred.

 

Free cash flow before dividends, a non-GAAP financial measure, is
defined as net cash provided by operating activities less
purchased property, plant and equipment and proceeds from the sale
of property, plant and equipment. It is a financial measure used
by management to assess its ability to generate cash in excess of
its operating needs. Therefore, the Company believes this
financial measure provides useful information to investors. Free
cash flow before dividends is not a measure of financial
performance under GAAP and should be considered in addition to,
and not as a substitute for, operating cash flows or other
financial measures prepared in accordance with GAAP. Our
calculations of non-GAAP measures may not be comparable to the
calculations of similarly titled measures reported by other
companies.

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