NDSN
$125.41
Nordson
($2.87)
(2.24%)
Earnings Details
4th Quarter October 2018
Wednesday, December 12, 2018 4:30:00 PM
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Summary

Nordson Misses

Nordson (NDSN) reported 4th Quarter October 2018 earnings of $1.44 per share on revenue of $569.3 million. The consensus earnings estimate was $1.47 per share on revenue of $561.9 million. The Earnings Whisper number was $1.46 per share. Revenue fell 0.8% compared to the same quarter a year ago.

The company said it expects fiscal 2019 revenue of approximately $2.28 billion to $2.32 billion. The current consensus estimate is revenue of $2.30 billion for the year ending October 31, 2019.

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
$1.44
Earnings Whisper
$1.46
Consensus Estimate
$1.47
Reported Revenue
$569.3 Mil
Revenue Estimate
$561.9 Mil
Growth
Earnings Growth
Revenue Growth
Power Rating
Grade
Earnings Release

Nordson Corporation Reports Fiscal Year 2018 Fourth Quarter and Record Full Year Results

Fourth Quarter:

  • Sales were $569 million
  • Operating profit was approximately $115 million, or 20 percent of sales; excluding restructuring charges of $3 million, operating profit was $117 million, or 21 percent of sales
  • EBITDA was $143 million, or 25 percent of sales; excluding restructuring charges of $3 million, EBITDA was $146 million, or 26 percent of sales and equal to prior year’s fourth quarter
  • GAAP diluted EPS was $1.47; adjusted diluted EPS, which excludes restructuring charges and discrete tax benefits in the quarter, was $1.44
  • Free cash flow before dividends increased 5 percent over the prior year to $118 million, or 136 percent of net income

Full Year:

  • Full year sales, operating profit, GAAP diluted EPS, and EBITDA are company records
  • Sales of $2.3 billion included 2 percent organic growth, with operating profit and EBITDA growth over the prior year of 8 percent and 11 percent, respectively
  • GAAP diluted EPS increased 26 percent to $6.40, and adjusted diluted EPS increased 11 percent to $5.94, both compared to the prior year
  • Free cash flow before dividends increased 44 percent over the prior year to $415 million, or 110 percent of net income

Full Year 2019 Guidance:

  • Organic sales volume growth forecasted to be in the range of 3 to 5 percent compared to fiscal 2018
  • Operating margin and EBITDA margin forecasted to improve 100 to 150 basis points compared to fiscal 2018

WESTLAKE, Ohio--(BUSINESS WIRE)-- Nordson Corporation (Nasdaq: NDSN) today reported results for the fourth quarter of fiscal year 2018. For the quarter ended October 31, 2018, sales were $569 million, a 1 percent decrease compared to the prior year’s fourth quarter. This change in sales included a decrease of 1 percent in organic volume, growth related to the first year effect of acquisitions of approximately 1 percent, and a decrease related to the unfavorable effects of currency translation as compared to the prior year’s fourth quarter of 1 percent.

In the fourth quarter of fiscal year 2018, reported operating profit was $115 million, net income was $87 million, and GAAP diluted earnings per share were $1.47, inclusive of a $0.03 per share benefit related to one-time items. Free cash flow before dividends increased 5 percent over the prior year to $118 million in the quarter, reflecting strong cash conversion of 136 percent of net income. Prior year fourth quarter sales, operating profit, net income and GAAP diluted earnings per share were $574 million, $125 million, $80 million and $1.37, 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.

The current quarter’s results include a non-recurring restructuring charge of $3 million, or $0.04 per diluted share. Additionally, discrete tax benefits of $4 million, or $0.07 per diluted share, were recognized in the quarter.

Fourth Quarter Segment Results

Adhesive Dispensing Systems sales increased 1 percent compared to the prior year’s fourth quarter, inclusive of 3 percent organic growth and a 2 percent decrease related to the unfavorable effects of currency translation as compared to the prior year. Reported operating margin in the segment was 27 percent in the quarter, or 28 percent on an adjusted basis to exclude non-recurring restructuring charges of $2 million related to a previously announced facility consolidation. The adjusted fourth quarter fiscal 2018 margin performance was equal to the prior year’s fourth quarter.

Advanced Technology Systems sales decreased approximately 1 percent compared to the prior year’s fourth quarter, inclusive of a decrease in organic volume of approximately 2 percent, an increase of approximately 3 percent related to the first year effect of acquisitions, and a decrease of approximately 1 percent related to the unfavorable effects of currency translation as compared to the prior year. The fourth quarter’s acquisitive growth includes the fiscal 2018 acquisition of Sonoscan. Reported operating margin in the segment was 20 percent in the quarter. As compared to the prior year’s fourth quarter margin, acquisition dilution, product mix, and higher spending contributed to the margin decline.

Industrial Coating Systems sales volume decreased 8 percent compared to the prior year’s fourth quarter, inclusive of a decrease in organic volume of 7 percent and a 1 percent decrease related to the unfavorable effects of currency translation as compared to the prior year. Compared to the prior year’s fourth quarter, reported operating margin in the segment improved 200 basis points to 20 percent, driven by improved product mix and focus on continuous improvement initiatives.

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

“Despite tough comparisons to the prior year’s fourth quarter, Nordson delivered solid results,” said Michael F. Hilton, Nordson President and Chief Executive Officer. “Reported operating margin in the current quarter was negatively impacted by certain long-term investments, including facility consolidation efforts within the Adhesives segment and costs related to the launch of our new centralized shared service center in the United States. These investments will benefit both our customers and shareholders over the long-term.”

Fiscal 2018 Full Year Results

Sales for the fiscal year ended October 31, 2018 were $2.3 billion, an increase of 9 percent compared to the same period a year ago. This change in sales included organic volume growth of 2 percent, a 5 percent increase related to the first year effect of acquisitions, and a 2 percent increase due to the favorable effects of currency translation as compared to the prior year. Full year operating profit was $495 million, net income was $377 million, and GAAP diluted earnings per share were $6.40, or $5.94 on a normalized basis to exclude one-time items. Prior year sales, operating profit, net income, and GAAP diluted earnings per share were $2.1 billion, $458 million, $296 million, and $5.08, respectively.

“Our global Nordson team delivered full year organic sales growth of nearly 2.5 percent in the current year, against two challenging prior year comparisons where we generated organic sales growth of 8 percent and 7 percent in fiscal years 2017 and 2016, respectively,” said Hilton. “In fiscal 2018, sales, operating profit, GAAP diluted earnings per share, and EBITDA were company records, highlighting our continued commitment to deliver the best technology solutions to our customers and to generate growth through innovation and superior customer service.”

Full year EBITDA increased 11 percent to $605 million and adjusted EBITDA increased 8 percent to $609 million, both compared to the prior year. EBITDA margin and adjusted EBITDA margin were both 27 percent of sales. Free cash flow before dividends increased 44% over the prior year to $415 million, or 110 percent of net income. In addition to funding organic and acquisitive growth initiatives, Nordson returned value to its shareholders by distributing $72 million in dividends in the fiscal year 2018 and investing $19 million for the repurchase of shares during the fourth quarter. The company also reduced net debt leverage on the balance sheet to 2-times trailing-twelve-months EBITDA at the end of the fiscal year.

Backlog

Backlog for the quarter ended October 31, 2018 was approximately $394 million, a decrease of 1 percent compared to the same period a year ago, inclusive of a 3 percent decline in organic growth offset by 2 percent growth due to acquisitions. Backlog amounts are calculated at October 31, 2018 exchange rates.

Outlook

“We continue to diversify our business into more steady growth end-markets, and we have consistently delivered annual organic sales volume growth, as evidenced by the new exhibit included with this press release. We believe investors are best served by focusing on our annual growth performance,” said Hilton. “We are forecasting that the strength of our end markets and our ability to execute on our growth initiatives will enable another year of solid organic sales growth in fiscal 2019, recognizing that the first quarter faces a very challenging comparison. In addition to driving top line growth, we expect to leverage the Nordson Business System to generate further operational improvements over 2018.”

For the full year fiscal 2019, organic sales volume is forecasted to increase in the range of 3 to 5 percent compared to fiscal year 2018, offset by an unfavorable currency translation effect of 2 percent based on the current exchange rate environment as compared to the prior year. In addition to this sales growth, reported operating margin and EBITDA margin are forecasted to improve by approximately 100 to 150 basis points compared to fiscal 2018 results when excluding $3 million related to short-term purchase accounting for the step-up in value of acquired inventory and approximately $7 million of restructuring charges. For fiscal year 2019, the company expects interest expense to be approximately $45 million and maintenance capital expenditures to be approximately $50 million. The company’s estimated effective tax rate is approximately 23 percent.

Nordson management will provide additional commentary on these results and outlook during a conference call Thursday, December 13, 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 and 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)

 

FOURTH QUARTER PERIOD
Period Ended October 31, 2018
(Unaudited)
 

CONSOLIDATED STATEMENT OF INCOME

  Fourth Quarter Year-to-Date
2018 2017 2018 2017
 
Sales $ 569,295 $ 573,938 $ 2,254,668 $ 2,066,982
Cost of sales 261,557 261,850 1,018,703 927,981
Selling & administrative expenses   193,184       187,300     741,408       681,299  
 
Operating profit 114,554 124,788 494,557 457,702
 
Interest expense - net (11,847 ) (11,436 ) (48,192 ) (35,477 )
Other income (expense) - net   1,481     (482 )   2,154     (1,934 )
 
Income before income taxes 104,188 112,870 448,519 420,291
Income taxes   17,486     33,035     71,144     124,489  
 
Net Income $ 86,702   $ 79,835   $ 377,375   $ 295,802  
 
 
Return on sales 15 % 14 % 17 % 14 %
Return on average shareholders' equity 24 % 29 % 28 % 30 %
 
                 
 
Average common shares outstanding (000's) 58,085 57,643 57,970 57,533

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

58,994 58,301 58,931 58,204
 
Per share:
 
Basic earnings $ 1.49 $ 1.38 $ 6.51 $ 5.14
Diluted earnings $ 1.47 $ 1.37 $ 6.40 $ 5.08
 
Dividends paid $ .35 $ .30 $ 1.25 $ 1.11
 
Total dividends $ 20,334 $ 17,291 $ 72,443 $ 63,840
 
 

CONSOLIDATED BALANCE SHEET

  October 31   October 31
2018 2017
 
Cash and marketable securities $ 95,678 $ 90,383
Receivables 491,423 505,087
Inventories 264,477 264,266
Other current assets   32,524   28,636
Total current assets 884,102 888,372
 
Property, plant & equipment - net 386,666 346,411
Other assets   2,150,244   2,179,756
$ 3,421,012 $ 3,414,539
 
Notes payable and debt due within one year $ 28,734 $ 326,587
Accounts payable and accrued liabilities   321,546   321,159
Total current liabilities 350,280 647,746
 
Long-term debt 1,285,357 1,256,397
Other liabilities 334,634 354,903
Total shareholders' equity   1,450,741   1,155,493
$ 3,421,012 $ 3,414,539
 
         
 
 
Other information:
 
 
Employees 7,536 7,532
 
Common shares outstanding (000's) 58,037 57,715
 

 

NORDSON CORPORATION

FINANCIAL HIGHLIGHTS

(Dollars in thousands)

                   

FOURTH QUARTER PERIOD

Period Ended October 31, 2018

(Unaudited)

 
Fourth 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 $ 250,825 $ 247,873 3.3 % -2.1 % 1.2 % $ 955,192 $ 916,019 1.5 % 2.8 % 4.3 %
Advanced Technology Systems 250,231 251,716 0.2 % -0.8 % -0.6 % 1,039,366 897,623 14.5 % 1.3 % 15.8 %
Industrial Coating Systems   68,239     74,349   -7.0 % -1.2 % -8.2 %   260,110     253,340   1.1 % 1.6 % 2.7 %
 
Total sales by business segment $ 569,295   $ 573,938   0.6 % -1.4 % -0.8 % $ 2,254,668   $ 2,066,982   7.1 % 2.0 % 9.1 %
 
 
Fourth Quarter Year-to-Date

OPERATING PROFIT BY BUSINESS SEGMENT

2018 2017 2018 2017
 
Adhesive Dispensing Systems $ 68,174 $ 68,354 $ 259,493 $ 253,580
Advanced Technology Systems 50,791 60,008 243,523 228,062
Industrial Coating Systems 13,727 13,462 50,638 43,991
Corporate   (18,138 )   (17,036 )   (59,097 )   (67,931 )
 
Total operating profit by business segment $ 114,554   $ 124,788   $ 494,557   $ 457,702  
 
 
Fourth 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 $ 184,666 $ 183,088 0.9 % - 0.9 % $ 720,832 $ 647,657 11.3 % - 11.3 %
Americas 46,689 39,055 23.0 % -3.5 % 19.5 % 158,837 147,026 8.8 % -0.8 % 8.0 %
Europe 174,724 149,339 19.8 % -2.8 % 17.0 % 622,108 530,812 11.4 % 5.8 % 17.2 %
Japan 34,506 50,685 -31.5 % -0.4 % -31.9 % 161,771 147,189 8.6 % 1.3 % 9.9 %
Asia Pacific   128,710     151,771   -13.6 % -1.6 % -15.2 %   591,120     594,298   -2.2 % 1.7 % -0.5 %
 

Total Sales by Geographic Region

$ 569,295   $ 573,938   0.6 % -1.4 % -0.8 % $ 2,254,668   $ 2,066,982   7.1 % 2.0 % 9.1 %
 

 

NORDSON CORPORATION

FINANCIAL HIGHLIGHTS

 

       

FOURTH QUARTER PERIOD

Period Ended October 31, 2018

(Unaudited)

 

REPORTED REVENUE GROWTH

 
% Growth over Prior Year

Nordson Consolidated:

Organic Acquisitive Currency Total
2014 6.2% 4.7% -0.5% 10.4%
2015 3.4% 2.4% -6.7% -0.9%
2016 6.5% 2.0% -1.4% 7.1%
2017 7.9% 6.9% -0.5% 14.3%
2018 2.5% 4.6% 2.0% 9.1%

 

Adhesive Dispensing Systems:

Organic Acquisitive Currency Total
2014 6.2% 8.1% -0.9% 13.4%
2015 2.0% 0.3% -9.4% -7.1%
2016 6.2% 0.7% -1.7% 5.2%
2017 4.3% 0.0% -0.2% 4.1%
2018 1.5% 0.0% 2.8% 4.3%
 

Advanced Technology Systems:

Organic Acquisitive Currency Total
2014 6.8% 1.6% 0.4% 8.8%
2015 1.7% 6.9% -2.9% 5.7%
2016 10.1% 4.6% -0.8% 13.9%
2017 15.1% 18.3% -0.7% 32.7%
2018 3.8% 10.7% 1.3% 15.8%
 

Industrial Coating Systems:

Organic Acquisitive Currency Total
2014 4.7% 0.0% -0.7% 4.0%
2015 12.5% 0.0% -5.8% 6.7%
2016 -0.6% 0.0% -1.6% -2.2%
2017 0.8% 0.0% -0.7% 0.1%
2018 1.1% 0.0% 1.6% 2.7%
 

 

NORDSON CORPORATION

RECONCILIATION OF NON-GAAP FINANCIAL MEASURES

(Dollars in thousands except for per-share amounts)

       

FOURTH QUARTER PERIOD

Period Ended October 31, 2018

(Unaudited)

 
EBITDA Fourth Quarter Year-to-Date
2018 2017 2018 2017
 
Net income $ 86,702 $ 79,835 $ 377,375 $ 295,802
Adjustments:
Depreciation and amortization expense 27,370 25,488 108,407 90,854
Interest expense, net 11,847 11,436 48,192 35,477
Income taxes   17,486   33,035   71,144   124,489
EBITDA $ 143,405 $ 149,794 $ 605,118 $ 546,622
Adjustments:
Acquisition costs and adjustments (1)   -   -   3,484   17,898
EBITDA As Adjusted $ 143,405 $ 149,794 $ 608,602 $ 564,520
 
EBITDA per diluted share $ 2.43 $ 2.57 $ 10.27 $ 9.39
EBITDA As Adjusted per diluted share $ 2.43 $ 2.57 $ 10.33 $ 9.70

(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; 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.

 

   
Fourth Quarter Year-to-Date
2018   2017 2018   2017
 
Diluted EPS as reported (U.S. GAAP) $ 1.47 $ 1.37 $ 6.40 $ 5.08
 
Short-term inventory purchase accounting adjustments - - 0.05 0.05
Acquisition costs - - - 0.17
Severance and restructuring 0.04 0.01 0.08 0.03
U.S. Tax Reform discrete item (0.07 ) - (0.45 ) -
Other discrete tax items   -     -   (0.15 )   0.04
 
Diluted EPS as adjusted (Non-GAAP) $ 1.44   $ 1.38 $ 5.94   $ 5.37

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 Fourth Quarter Year-to-Date
2018   2017 2018   2017
 
Net income $ 86,702 $ 79,835 $ 377,375 $ 295,802
Depreciation and amortization 27,370 25,488 108,407 90,854
Other non-cash charges 20,243 23,644 (9,025 ) 26,685
Changes in operating assets and liabilities   27,396     5,994     27,881     (56,589 )
Net cash provided by operating activities 161,711 134,961 504,638 356,752
 
Additions to property, plant and equipment (43,818 ) (22,234 ) (89,790 ) (71,558 )
Proceeds from the sale of property, plant and equipment   159     101     458     4,007  
 
Free cash flow before dividends $ 118,052   $ 112,828   $ 415,306   $ 289,201  
 
Adjustments:
Acquisition costs and adjustments, net of tax(1)   -     -     2,658     12,695  
Free cash flow before dividends, adjusted $ 118,052   $ 112,828   $ 417,964   $ 301,896  

(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; 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.

 

Lara Mahoney
Vice President, Investor Relations & Corporate Communications
440.414.5639
Lara.Mahoney@nordson.com

Source: Nordson Corporation