NDSN
$123.22
Nordson
$1.08
.88%
Earnings Details
3rd Quarter July 2017
Monday, August 21, 2017 8:55:29 PM
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Summary

Nordson Beats but Guides Lower

Nordson (NDSN) reported 3rd Quarter July 2017 earnings of $1.78 per share on revenue of $589.4 million. The consensus earnings estimate was $1.66 per share on revenue of $575.6 million. The Earnings Whisper number was $1.69 per share. Revenue grew 20.3% on a year-over-year basis.

The company said it expects fourth quarter earnings of $1.18 to $1.32 per share on revenue of $529.7 million to $550.0 million. The current consensus earnings estimate is $1.48 per share on revenue of $565.8 million for the quarter ending October 31, 2017.

Nordson Corp engineers, manufactures and markets differentiated products and systems used for adhesive, coating, sealant and biomaterial dispensing, fluid management, testing and inspection, curing, and surface treatment.

Results
Reported Earnings
$1.78
Earnings Whisper
$1.69
Consensus Estimate
$1.66
Reported Revenue
$589.4 Mil
Revenue Estimate
$575.6 Mil
Growth
Earnings Growth
Revenue Growth
Power Rating
Grade
Earnings Release

Nordson Corporation Reports Record Quarterly Revenue, Operating Profit, Diluted EPS and EBITDA in Third Quarter of Fiscal Year 2017

Operating profit increases 24 percent to $153 million and operating margin improves by 1 percentage point to 26 percent, both compared to the prior year’s third quarter and both inclusive of $6 million of intangible asset amortization expense for fiscal 2017 acquisitions

GAAP diluted EPS increases 19 percent to $1.74 and adjusted diluted EPS increases 21 percent to $1.78, both compared to the prior year’s third quarter

EBITDA increases 29 percent to $179 million, EBITDA margin improves 2 percentage points to 30 percent, and EBITDA per diluted share increases 27 percent to $3.08, all compared to the prior year’s third quarter

Free cash flow before dividends increases 14 percent compared to the prior year’s third quarter to $55 million

--Pro-forma 12 week order rates decrease 2 percent over same period a year ago

Fourth quarter 2017 guidance: sales expected to increase 4 to 8 percent over prior year; GAAP diluted EPS in the range of $1.18 to $1.32; EBITDA in the range of $133 to $144 million, or $2.27 to $2.46 per diluted share

Nordson Corporation (NDSN) today reported results for the third quarter of fiscal year 2017. For the quarter ending July 31, 2017, sales were $589 million, a 20 percent increase from the prior year’s third quarter. This change in sales included an 11 percent increase in organic volume, a 10 percent increase related to the first year effect of acquisitions, and a less than 1 percent decrease related to the unfavorable effects of currency translation as compared to the prior year’s third quarter. Reported operating profit was $153 million, net income was $101 million, and GAAP diluted earnings per share were $1.74. Prior year third quarter sales, operating profit, net income and diluted earnings per share were $490 million, $124 million, $84 million and $1.46, respectively. A reconciliation of GAAP diluted EPS to adjusted diluted EPS is included in the attached tables.

Third quarter EBITDA increased 29 percent to $179 million and EBITDA per diluted share increased 27 percent to $3.08, both compared to the prior year’s third quarter. Adjusted EBITDA increased 30 percent over the prior year third quarter. Free cash flow before dividends was $55 million in the quarter, an increase of 14 percent over the prior year. Calculations for EBITDA, adjusted EBITDA and free cash flow before dividends are included in the attached tables.

"Nordson delivered the strongest quarter in its history with excellent organic growth across the business, strong contributions from recent acquisitions, and continued execution by our global team," said Nordson President and Chief Executive Officer Michael F. Hilton. "Robust customer demand for our technology in all segments and nearly all geographies drove organic revenue growth of 11 percent in the third quarter compared to the prior year period, exceeding the high end of our expectations. EBITDA margin improved two percentage points to 30 percent, and adjusted diluted earnings per share grew by 21 percent in third quarter, both compared to the same period a year ago. The current quarter’s reported and adjusted diluted earnings per share include fiscal 2017 acquisition intangible asset amortization expense of $6 million or $0.07 per diluted share in the quarter. We remain pleased with these acquisitions, which are performing as expected and strengthen our position in multiple profitable growth markets. We also continued to execute on continuous improvement initiatives across the enterprise during the quarter employing tools from the Nordson Business System."

Third Quarter Segment Results

Adhesive Dispensing Systems sales volume increased 6 percent compared to the prior year’s third quarter. "Our team delivered excellent results this quarter against a strong quarter a year ago where organic growth was 4 percent," said Hilton. "Packaging, nonwovens and polymer product lines drove the current quarter’s growth and all regions were positive with the exception of Europe. This is the ninth consecutive quarter of organic growth in this segment, reflecting the general stability of the consumer non-durable end markets served." Reported operating margin in the segment improved 1 percentage point from the prior year to 28 percent in the quarter, including non-recurring restructuring charges of approximately $1 million related to previously announced facility consolidation.

Advanced Technology Systems sales volume increased 42 percent compared to the prior year’s third quarter, including an 18 percent increase in organic volume and a 24 percent increase related to the first year effect of acquisitions. "Organic growth in the current quarter for this segment was outstanding and compares to a strong quarter a year ago where organic growth was 6 percent," said Hilton. "All regions generated organic growth in the quarter compared to the prior year’s quarter, most by double digits. Customer demand for our automated dispensing, surface treatment and test and inspection solutions remained robust across multiple electronics end markets. Growth was also solid across multiple product lines in our growing medical portfolio." The quarter’s acquisitive growth includes the LinkTech, ACE, InterSelect, PlasPak and Vention Medical acquisitions. Reported operating margin in the segment was 30 percent in the quarter, or 33 percent on an adjusted basis to exclude approximately $2 million in purchase accounting charges for the step-up in value of acquired inventory and $6 million of intangible asset amortization expense related to current year acquisitions.

Industrial Coating Systems sales volume increased 3 percent compared to the prior year’s third quarter. "The sales volume increase was driven by our cold material, liquid painting and UV curing product lines, with the Americas and Asia Pacific being strongest regionally," said Hilton. Reported operating margin in the segment improved three percentage points to 20 percent in the quarter compared to the same period a year ago due to better product mix.

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 13, 2017, measured in constant currency, decreased by 2 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 2016 and 2017 acquisitions were owned in both years.

Backlog for the quarter ended July 31, 2017 was approximately $372 million, an increase of 10 percent compared to the same period a year ago and inclusive of 13 percent growth due to acquisitions offset by a 3 percent decrease in organic growth. Backlog amounts are calculated at July 31, 2017 exchange rates.

Outlook

For the fourth quarter of fiscal 2017, sales are expected to increase 4 percent to 8 percent compared to the fourth quarter a year ago. This growth includes organic volume down 3 percent to down 7 percent, 10 percent growth from the first year effect of acquisitions, and a positive 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 21 percent and GAAP diluted earnings per share are expected to be in the range of $1.18 to $1.32, inclusive of $6 million or $0.07 per diluted share of fiscal 2017 acquisition intangible asset amortization expense. EBITDA, EBITDA margin and EBITDA per diluted share are expected to be $138 million, 26 percent and $2.37 at the midpoint of the guidance, respectively.

"Our fourth quarter guidance reflects our backlog, current 12 week order rates, and very challenging comparisons to the same period a year ago where we generated 13 percent organic growth," said Hilton. "At the low end of our guidance, Nordson is on pace to deliver record full year performance for most metrics, including revenue, earnings and EBITDA. At the midpoint of this guidance, full year organic growth is 6 percent, well above most global GDP forecasts and against a robust prior year comparison where we delivered 7 percent organic growth. Adjusted diluted earnings per share at this midpoint is $5.24, an increase of 12 percent compared to fiscal 2016, and inclusive of intangible asset amortization expense related to this year’s four acquisitions of approximately $15 million or $0.18 per share. We expect to continue generating strong levels of free cash, enabling us to maintain our balanced and flexible approach to capital deployment, with de-leveraging likely to remain the near term priority. Overall, we remain well positioned across the diverse end markets we serve, and our global team remains focused on creating shareholder value by offering customers innovative technology solutions and outstanding support."

Nordson management will provide additional commentary on these results and outlook during a conference call Tuesday, August 22, 2017 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 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)
THIRD QUARTER PERIOD
Period Ending July 31, 2017
(Unaudited)
CONSOLIDATED STATEMENT OF INCOME
Third Quarter
Year-to-Date
2017
2016
2017
2016
Net sales
$ 589,438
$ 489,899
$ 1,493,044
$ 1,299,711
Cost of sales
263,173
216,679
666,130
581,179
Selling & administrative expenses
172,799
149,534
494,000
440,964
Operating profit
153,466
123,686
332,914
277,568
Interest expense - net
(11,038 )
(4,471 )
(24,041 )
(14,989 )
Other income (expense) - net
27
(1,978 )
(1,452 )
551
Income before income taxes
142,455
117,237
307,421
263,130
Income taxes
40,999
33,023
91,454
67,154
Net Income
$ 101,456
$
84,214
$
215,967
$
195,976
Return on sales
17 %
17 %
14 %
15 %
Return on average shareholders’ equity
28 %
44 %
45 %
37 %
Average common shares outstanding (000’s)
57,594
57,085
57,495
57,012
Average common shares and common share equivalents (000’s)
58,259
57,616
58,171
57,419
Per share:
Basic earnings
$
1.76
$
1.48
$
3.76
$
3.44
Diluted earnings
$
1.74
$
1.46
$
3.71
$
3.41
Dividends paid
$
.27
$
.24
$
.81
$
.72
Total dividends
$
15,550
$
13,690
$
46,549
$
41,008
NORDSON CORPORATION
FINANCIAL HIGHLIGHTS
(Dollars in thousands except for per-share amounts)
CONSOLIDATED BALANCE SHEET
July 31
October 31
2017
2016
Cash and marketable securities
$
110,705
$
67,239
Receivables
498,848
428,560
Inventories
275,705
220,361
Other current assets
34,901
29,415
Total current assets
920,159
745,575
Property, plant & equipment - net
335,680
273,129
Other assets
2,219,515
1,401,879
$
3,475,354
$
2,420,583
Notes payable and debt due within one year
$
127,540
$
40,234
Accounts payable and accrued liabilities
324,684
291,309
Total current liabilities
452,224
331,543
Long-term debt
1,569,680
942,771
Other liabilities
369,019
294,666
Total shareholders’ equity
1,084,431
851,603
$
3,475,354
$
2,420,583
Other information:
Employees
7,427
6,104
Common shares outstanding (000’s)
57,692
57,051
NORDSON CORPORATION
FINANCIAL HIGHLIGHTS
(Dollars in thousands)
THIRD QUARTER PERIOD
Period Ending July 31, 2017
(Unaudited)
Third Quarter
% Growth over 2016
Year-to-Date
% Growth over 2016
SALES BY BUSINESS SEGMENT
2017
2016
Volume
Currency
Total
2017
2016
Volume
Currency
Total
Adhesive dispensing systems
$ 233,367
$ 220,800
6.0 %
-0.3 %
5.7 %
$
668,146
$
645,269
4.5 %
-1.0 %
3.5 %
Advanced technology systems
290,406
205,372
41.8 %
-0.4 %
41.4 %
645,907
481,787
35.1 %
-1.0 %
34.1 %
Industrial coating systems
65,665
63,727
3.4 %
-0.4 %
3.0 %
178,991
172,655
4.9 %
-1.2 %
3.7 %
Total sales by business segment
$ 589,438
$ 489,899
20.7 %
-0.4 %
20.3 %
$ 1,493,044
$ 1,299,711
16.0 %
-1.1 %
14.9 %
Third Quarter
Year-to-Date
OPERATING PROFIT BY BUSINESS SEGMENT
2017
2016
2017
2016
Adhesive dispensing systems
$
66,451
$
60,423
$
185,226
$
173,760
Advanced technology systems
87,385
63,115
168,054
109,819
Industrial coating systems
13,192
10,612
30,529
25,082
Corporate
(13,562 )
(10,464 )
(50,895 )
(31,093 )
Total operating profit by business segment
$ 153,466
$ 123,686
$
332,914
$
277,568
Third Quarter
% Growth over 2016
Year-to-Date
% Growth over 2016
SALES BY GEOGRAPHIC REGION
2017
2016
Volume
Currency
Total
2017
2016
Volume
Currency
Total
United States
$ 182,953
$ 135,067
35.5 %
-
35.5 %
$
464,569
$
383,720
21.1 %
-
21.1 %
Americas
41,604
30,534
35.6 %
0.7 %
36.3 %
107,971
90,823
19.7 %
-0.8 %
18.9 %
Europe
133,846
128,583
4.0 %
0.1 %
4.1 %
381,473
374,234
4.2 %
-2.3 %
1.9 %
Japan
41,472
34,709
25.4 %
-5.9 %
19.5 %
96,504
83,578
16.1 %
-0.6 %
15.5 %
Asia Pacific
189,563
161,006
17.9 %
-0.2 %
17.7 %
442,527
367,356
21.6 %
-1.1 %
20.5 %
Total Sales by Geographic Region
$ 589,438
$ 489,899
20.7 %
-0.4 %
20.3 %
$ 1,493,044
$ 1,299,711
16.0 %
-1.1 %
14.9 %
Third Quarter
Year-to-Date
FREE CASH FLOW BEFORE DIVIDENDS
2017
2016
2017
2016
Net income
$ 101,456
$
84,214
$
215,967
$
195,976
Depreciation and amortization
25,954
17,662
65,366
52,824
Other non-cash charges
(8,592 )
4,455
3,041
13,213
Changes in operating assets and liabilities
(41,991 )
(38,485 )
(68,183 )
(67,279 )
Net cash provided by operating activities
76,827
67,846
216,191
194,734
Additions to property, plant and equipment
(22,295 )
(19,931 )
(49,324 )
(45,452 )
Proceeds from the sale of property, plant and equipment
308
173
3,906
1,044
Free cash flow before dividends
$
54,840
$
48,088
$
170,773
$
150,326
Adjustments:
Acquisition costs and adjustments, net of tax(1)
1,597
-
12,564
1,325
Free cash flow before dividends, adjusted
$
56,437
$
48,088
$
183,337
$
151,651
(1) Represents one-time costs, net of tax, associated
with our 2017 and 2016 acquisitions, including the step up in the
value of acquired inventory and acquisition transaction costs that
are required to be expensed as incurred.
NORDSON CORPORATION
ORDER RATES FOR 12-WEEK PERIOD ENDING AUGUST 13, 2017
CHANGE FROM PRIOR YEAR
BUSINESS SEGMENT
% CHANGE
GEOGRAPHY
% CHANGE
Adhesive dispensing systems
-1 %
United States
-6 %
Advanced technology systems
-3 %
Americas
5 %
Industrial coating systems
-4 %
Europe
12 %
Japan
-20 %
Total
-2 %
Asia Pacific
-6 %
Total
-2 %
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 our
2017 and 2016 acquisitions were owned in both years.
NORDSON CORPORATION
RECONCILIATION OF NON-GAAP FINANCIAL MEASURES
(Dollars in thousands except for per-share amounts)
THIRD QUARTER PERIOD
Period Ending July 31, 2017
(Unaudited)
EBITDA and EBITDA per diluted share
Third Quarter
Year-to-Date
2017
2016
2017
2016
Net income
$ 101,456
$
84,214
$ 215,967
$
195,976
Adjustments:
Depreciation and amortization expense
25,954
17,662
65,366
52,824
Interest expense, net
11,038
4,471
24,041
14,989
Income taxes
40,999
33,023
91,454
67,154
EBITDA
$ 179,447
$ 139,370
$ 396,828
$
330,943
Adjustments:
Acquisition costs and adjustments (1)
2,252
-
17,898
1,888
EBITDA As Adjusted
$ 181,699
$ 139,370
$ 414,726
$
332,831
EBITDA per diluted share
$
3.08
$
2.42
$
6.82
$
5.76
EBITDA As Adjusted per diluted share
$
3.12
$
2.42
$
7.13
$
5.80
(1) Represents one-time costs associated with our 2017
and 2016 acquisitions, including the step up in the value of
acquired inventory and acquisition transaction 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
2017
2016
2017
2016
Diluted EPS as reported (U.S. GAAP)
$ 1.74
$
1.46
$ 3.71
$
3.41
Short-term inventory purchase accounting adjustments
0.02
-
0.05
0.02
Acquisition costs
0.01
-
0.17
-
Severance and restructuring
0.01
0.02
0.02
0.05
Litigation settlement
-
-
-
(0.01 )
Discrete tax items
-
(0.03 )
0.04
(0.19 )
Other pre-tax items related to discrete tax benefits
-
0.02
-
(0.01 )
Diluted EPS as adjusted (Non-GAAP)
$ 1.78
$
1.47
$ 3.99
$
3.27
Adjusted Diluted 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 calculations
of this non-GAAP financial measure may not be comparable to the
calculations of similarly titled measures reported by other
companies.

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Nordson Corporation
James R. Jaye, 440-414-5639
Senior Director, Communications & Investor Relations
Jim.Jaye@nordson.com