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

Posted: May 23, 2016 8:59 pm (UTC)

Nordson Corporation reports record second quarter revenue, operating profit and diluted earnings per share

  • Sales increase 9 percent from prior year’s second quarter to $438 million, inclusive of 8 percent organic growth
  • Operating profit grows to $102 million, a 33 percent increase compared to the prior year’s second quarter
  • Operating margin expands to 23 percent of sales, a 4 percentage point improvement compared to the prior year’s second quarter
  • GAAP diluted EPS grows to $1.23, a 54 percent increase compared to the prior year’s second quarter
  • Free cash flow before dividends in the quarter is $65 million
  • Pro-forma 12 week order rates increase 4 percent over same period a year ago
  • Third quarter 2016 guidance: sales expected to increase 1 to 5 percent over prior year; GAAP diluted EPS in the range of $1.25 to $1.37

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

WESTLAKE, Ohio — (BUSINESS WIRE) —

Nordson Corporation (Nasdaq: NDSN) today reported results for the second quarter of fiscal year 2016. For the quarter ending April 30, 2016, sales were $438 million, a 9 percent increase from the prior year’s second quarter. This change in sales included an 8 percent increase in organic volume, a 2 percent increase related to the first year effect of acquisitions, and a negative 1 percent impact related to the unfavorable effects of currency translation. Operating profit was $102 million, net income was $71 million, and diluted earnings per share were $1.23. Prior year second quarter sales, operating profit, net income and diluted earnings per share were $401 million, $76 million, $49 million and $0.80, respectively. A reconciliation of GAAP diluted EPS to normalized amounts and a calculation of free cash flow are included in the attached tables.

“Nordson’s global team delivered record second quarter sales, operating profit and diluted earnings per share,” said Nordson President and Chief Executive Officer Michael F. Hilton. “We generated outstanding organic growth of 8 percent in the quarter through our ongoing technology, application, product-tiering and segmentation initiatives and by meeting robust customer demand in consumer non-durable, electronics and medical end markets. We leveraged the strong top line growth and our continuous improvement efforts to drive reported operating margin to 23 percent in the quarter, an increase of 4 percentage points from the prior year, with incremental operating margin in the quarter of 69 percent and earnings growth of 54 percent over the prior year second quarter. We achieved these results in the quarter while continuing to execute on our longer term growth and margin enhancement initiatives.”

Second Quarter Segment Results

Adhesive Dispensing Systems organic sales volume increased 9 percent compared to the prior year’s second quarter, with additional volume growth of less than 1 percent related to the first year effect of the WAFO acquisition. “This is the fourth consecutive quarter of excellent organic growth in this segment,” said Hilton. “Growth in the current quarter was broad based as we generated strong organic growth in all product lines driven by consumer non-durable end markets. Geographically, Europe and the U.S. led the growth.” Reported operating margin in the segment improved 3 percentage points from the prior year to 28 percent in the quarter, or 29 percent on a normalized basis to exclude one-time charges related to restructuring initiatives.

Advanced Technology Systems sales volume increased 23 percent compared to the prior year’s second quarter, including a 20 percent increase in organic volume and a 3 percent increase related to the first year effect of acquisitions. “The momentum in order rates and project activity we described earlier this year resulted in robust organic growth and significantly improved operating margin in the current quarter compared to the same period a year ago,” said Hilton. “The growth was broad based with increased demand for automated dispensing and test and inspection solutions in electronic end markets, as well as continued strength in fluid management components for medical and industrial end markets. Customers in Asia Pacific, Europe and the Americas drove the growth.” Reported operating margin in the segment improved 5 percentage points from the prior year to 24 percent in the quarter, or 25 percent on a normalized basis to exclude one-time charges related to restructuring initiatives and short-term purchase accounting charges related to the step-up in value of acquired inventory.

Industrial Coating Systems sales volume decreased 13 percent from the prior year’s second quarter. “Sales in most product lines 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. “Softness in the U.S. and Japan offset growth in Europe, Asia Pacific and the Americas. Sequentially, sales volume in the current quarter increased at a pace more typical of this segment than the accelerated rate of a year ago.” Reported operating margin improved by 1 percentage point from the prior year to 18 percent in the quarter, or 19 percent on a normalized basis to exclude non-recurring charges related to continuous improvement 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 May 15, 2016, measured in constant currency, increased by 4 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 April 30, 2016 was approximately $302 million, an increase of 5 percent compared to the same period a year ago, and inclusive of 3 percent organic growth and 2 percent growth due to acquisitions. Backlog amounts are calculated at April 30, 2016 exchange rates.

Outlook

For the third quarter of fiscal 2016, sales are expected to increase 1 percent to 5 percent as compared to the third quarter a year ago. This growth includes organic volume down 1 percent to up 3 percent, 3 percent growth from the first year effect of acquisitions, and a negative currency effect of 1 percent 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 $1.25 to $1.37.

“Our current backlog, recent order rates and project timing lead us to forecast modest organic volume growth at the midpoint of our third quarter guidance,” said Hilton. “This outlook compares against a period of strong organic growth a year ago and is against a current backdrop of continuing weakness in the global macroeconomic environment. Beyond this near term view, we’re continuing to execute on activities we expect will drive value for shareholders over the long term. Specifically, we continue to focus on innovative products, tiering, new applications and emerging market penetration to drive growth. We’re also pleased to report that we’re making solid progress on our previously announced margin enhancement initiative using tools within the Nordson Business System and we remain on track to meet our goal of 200 basis points improvement to fiscal 2015 normalized operating margin by the end of fiscal 2017.”

Nordson will broadcast its second-quarter conference call on its web site at www.nordson.com/investors on Tuesday, May 24, 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 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 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)

 

SECOND QUARTER PERIOD

Period Ending April 30, 2016

(Unaudited)

   

CONSOLIDATED STATEMENT OF INCOME

Second Quarter Year-to-Date
  2016     2015     2016     2015  
 
Net sales $ 437,592 $ 400,727 $ 809,812 $ 779,735
Cost of sales 189,187 178,837 364,500 349,124
Selling & administrative expenses   146,501       145,476     291,430       291,379  
 
Operating profit 101,904 76,414 153,882 139,232
 
Interest expense – net (4,812 ) (4,162 ) (10,518 ) (8,165 )
Other income (expense) – net   1,727     (687 )   2,529     (789 )
 
Income before income taxes 98,819 71,565 145,893 130,278
Income taxes   28,218     22,351     34,131     38,179  
 
Net Income $ 70,601   $ 49,214   $ 111,762   $ 92,099  
 
Return on sales 16 % 12 % 14 % 12 %
Return on average shareholders’ equity 41 % 23 % 33 % 22 %
                 
 
Average common shares outstanding (000’s) 56,952 61,116 56,975 61,569

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

57,334 61,638 57,320 62,094
 
Per share:
 
Basic earnings $ 1.24 $ .81 $ 1.96 $ 1.50
Diluted earnings $ 1.23 $ .80 $ 1.95 $ 1.48
 
Dividends paid $ .24 $ .22 $ .48 $ .44
 
Total dividends $ 13,664 $ 13,481 $ 27,318 $ 27,116
 
   

NORDSON CORPORATION

FINANCIAL HIGHLIGHTS
(Dollars in thousands except for per-share amounts)
 
SECOND QUARTER PERIOD
Period Ending April 30, 2016
(Unaudited)
 

CONSOLIDATED BALANCE SHEET

April 30 October 31
  2016   2015
 
Cash and marketable securities $ 47,919 $ 50,268
Receivables 382,813 389,550
Inventories 240,645 225,672
Other current assets   52,089   46,101
Total current assets 723,466 711,591
 
Property, plant & equipment – net 257,196 249,940
Other assets   1,391,522   1,398,913
$ 2,372,184 $ 2,360,444
 
Notes payable and debt due within one year $ 18,034 $ 23,950
Accounts payable and accrued liabilities   252,767   266,826
Total current liabilities 270,801 290,776
 
Long-term debt 1,054,981 1,092,643
Other liabilities 309,704 317,009
Total shareholders’ equity   736,698   660,016
$ 2,372,184 $ 2,360,444
         
 
Other information:
 
Employees 6,104 6,232
 
Common shares outstanding (000’s) 57,051 57,358
 
 

NORDSON CORPORATION

FINANCIAL HIGHLIGHTS
(Dollars in thousands)
 

SECOND QUARTER PERIOD

Period Ending April 30, 2016

(Unaudited)

         
Second 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 $ 221,030 $ 203,273 9.3 % -0.6 % 8.7 % $ 424,469 $ 397,486 10.6 % -3.8 % 6.8 %
Advanced technology systems 158,555 129,482 23.2 % -0.7 % 22.5 % 276,415 261,700 7.3 % -1.7 % 5.6 %
Industrial coating systems   58,007     67,972   -13.3 % -1.4 % -14.7 %   108,928     120,549   -6.8 % -2.8 % -9.6 %
 
Total sales by business segment $ 437,592   $ 400,727   10.0 % -0.8 % 9.2 % $ 809,812   $ 779,735   6.9 % -3.0 % 3.9 %
 
Second Quarter Year-to-Date

OPERATING PROFIT BY BUSINESS SEGMENT

  2016     2015     2016     2015  
 
Adhesive dispensing systems $ 62,977 $ 50,780 $ 113,337 $ 94,109
Advanced technology systems 38,731 24,770 46,704 51,588
Industrial coating systems 10,292 11,514 14,470 15,278
Corporate   (10,096 )   (10,650 )   (20,629 )   (21,743 )
 
Total operating profit by business segment $ 101,904   $ 76,414   $ 153,882   $ 139,232  
 
Second 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 $ 131,262 $ 140,030 -6.3 % -6.3 % $ 248,653 $ 262,854 -5.4 % -5.4 %
Americas 33,582 31,028 15.4 % -7.2 % 8.2 % 60,289 59,296 11.2 % -9.5 % 1.7 %
Europe 125,933 105,097 19.5 % 0.3 % 19.8 % 245,651 213,663 20.6 % -5.6 % 15.0 %
Japan 29,366 28,499 -3.2 % 6.2 % 3.0 % 48,869 50,032 -4.9 % 2.6 % -2.3 %
Asia Pacific   117,449     96,073   25.2 % -3.0 % 22.2 %   206,350     193,890   9.9 % -3.5 % 6.4 %
 
Total Sales by Geographic Region $ 437,592   $ 400,727   10.0 % -0.8 % 9.2 % $ 809,812   $ 779,735   6.9 % -3.0 % 3.9 %
                                           
 
Second Quarter Year-to-Date

FREE CASH FLOW BEFORE DIVIDENDS

  2016     2015     2016     2015  
 
Net income $ 70,601 $ 49,214 $ 111,762 $ 92,099
Depreciation and amortization 17,952 16,238 35,162 32,222
Other non-cash charges 4,566 4,386 8,758 11,251
Changes in operating assets and liabilities   (14,768 )   21,686     (28,794 )   (18,136 )
Net cash provided by operating activities 78,351 91,524 126,888 117,436
 
Additions to property, plant and equipment (14,428 ) (19,362 ) (25,521 ) (36,183 )
Proceeds from the sale of property, plant and equipment   784     146     871     421  
 
Free cash flow before dividends $ 64,707   $ 72,308   $ 102,238   $ 81,674  
 
 

NORDSON CORPORATION

ORDER RATES FOR 12-WEEK PERIOD ENDING MAY 15, 2016
CHANGE FROM PRIOR YEAR
     

BUSINESS SEGMENT

% CHANGE

GEOGRAPHY

% CHANGE

 
Adhesive dispensing systems 7 % United States 3 %
Advanced technology systems 4 % Americas -7 %
Industrial coating systems -3 % Europe 8 %
Japan -4 %
Total 4 % Asia Pacific 6 %
 
Total 4 %
 
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
 
SECOND QUARTER PERIOD

Period Ending April 30, 2016

(Unaudited)
 
Second Quarter Year-to-Date
  2016     2015   2016     2015  
 
Diluted EPS as reported (U.S. GAAP) $ 1.23 $ 0.80 $ 1.95 $ 1.48
 
Short-term inventory purchase accounting adjustments 0.02 0.01
Severance and restructuring 0.02 0.03
Litigation settlement (0.01 ) (0.01 )
Pension settlement expense 0.02
Discrete tax items (0.02 ) (0.16 ) (0.03 )
Other pre-tax items related to discrete tax benefits  

(0.03

)    

(0.03

)    
 
Diluted EPS as adjusted (Non-GAAP) $

1.19

  $ 0.80 $

1.80

  $ 1.48  

 

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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