NDSN
$121.02
Nordson
($.69)
(.57%)
Earnings Details
2nd Quarter April 2017
Monday, May 22, 2017 4:30:00 PM
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Summary

Nordson Beats

Nordson (NDSN) reported 2nd Quarter April 2017 earnings of $1.35 per share on revenue of $496.1 million. The consensus earnings estimate was $1.30 per share on revenue of $468.2 million. The Earnings Whisper number was $1.33 per share. Revenue grew 13.4% on a year-over-year basis.

The company said it expects third quarter earnings of $1.57 to $1.71 per share on revenue of $563.4 million to $583.0 million. The current consensus earnings estimate is $1.59 per share on revenue of $555.7 million for the quarter ending July 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
$1.35
Earnings Whisper
$1.33
Consensus Estimate
$1.30
Reported Revenue
$496.1 Mil
Revenue Estimate
$468.2 Mil
Growth
Earnings Growth
Revenue Growth
Power Rating
Grade
Earnings Release

Nordson Corporation Reports Fiscal Year 2017 Second Quarter Results Leading to Record First Half Revenue and Earnings Per Share

GAAP diluted EPS is $1.11; adjusted diluted EPS is $1.35 and an increase of 13 percent compared to the prior year’s second quarter

Fiscal year-to-date EBITDA increases 13 percent compared to prior year to $217 million; fiscal year-to-date free cash flow before dividends increases 13 percent compared to prior year to $116 million, or 101 percent of net income

--Pro-forma 12 week order rates increase 13 percent over same period a year ago

Third quarter 2017 guidance: sales expected to increase 15 to 19 percent over prior year, inclusive of 6 to 10 percent organic volume growth; GAAP diluted EPS in the range of $1.51 to $1.65, or $1.57 to $1.71 on an adjusted basis

Nordson Corporation (NDSN) today reported results for the second quarter of fiscal year 2017. For the quarter ending April 30, 2017, sales were $496 million, a 13 percent increase from the prior year’s second quarter. This change in sales included a 9 percent increase in organic volume, a 6 percent increase related to the first year effect of acquisitions, and a negative 2 percent impact related to the unfavorable effects of currency translation as compared to the prior year’s second quarter. Reported operating profit was $104 million, net income was $65 million, and GAAP diluted earnings per share were $1.11. Prior year second quarter sales, operating profit, net income and diluted earnings per share were $438 million, $102 million, $71 million and $1.23, respectively. A reconciliation of GAAP diluted EPS to adjusted diluted EPS is included in the attached tables.

"These results demonstrate the underlying strength of our base business, the strategic fit of our recent acquisitions, and strong execution across the enterprise by our global team," said Nordson President and Chief Executive Officer Michael F. Hilton. "Excluding the Vention Medical AT acquisition which was not included in our quarterly guidance, our performance exceeded the high end of our revenue expectations, and operating margin expanded by one percentage point above the prior year second quarter. Second quarter organic sales growth of 9 percent is against a very challenging prior year comparison and is the result of organic growth in all segments and geographies. We’re also pleased with the four acquisitions we have added fiscal year to date, including Vention which closed during the quarter, all of which are performing as expected and where integration efforts are proceeding as planned." Diluted earnings per share as adjusted grew 13 percent to $1.35 as compared to last year’s second quarter. Through the first six months of the fiscal year, EBITDA increased 13 percent compared to the prior year to $217 million, and free cash flow before dividends increased 13 percent to $116 million, representing strong cash conversion of 101 percent of net income. Adjusted EBITDA increased 20 percent and adjusted free cash flow before dividends increased 23 percent compared to the prior year. Calculations for EBITDA, adjusted EBITDA, free cash flow before dividends, and adjusted free cash flow before dividends are included in the attached tables.

Second Quarter Segment Results

Adhesive Dispensing Systems sales volume increased 5 percent compared to the prior year’s second quarter. "This is excellent organic growth for the segment against a challenging comparison, where organic growth was 9 percent in the same period last year," said Hilton. "Packaging, general product assembly and polymer processing product lines drove the current quarter’s growth, with Asia Pacific and the Americas being the strongest areas geographically." Reported operating margin in the segment was 29 percent in the quarter.

Advanced Technology Systems sales volume increased 34 percent compared to the prior year’s second quarter, including a 18 percent increase in organic volume and a 16 percent increase related to the first year effect of acquisitions. "The 18 percent organic volume growth is a very strong level against a very challenging prior year comparison where organic volume growth was 20 percent," said Hilton. "The current quarter’s organic growth was broad based and increased by double digits across our product lines serving electronics, medical and industrial end markets and in all geographies except the Americas." Reported operating margin in the segment improved 2 percentage points from the prior year to 26 percent in the quarter, or 27 percent when excluding short-term purchase accounting charges for the step-up in value of acquired inventory.

Industrial Coating Systems sales volume increased 3 percent compared to the prior year’s second quarter. "The sales volume increase was driven by our liquid painting and container coating product lines, with the U.S., Japan and Asia Pacific being strongest regionally," said Hilton. Reported operating margin in the segment was 17 percent in the quarter.

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 14, 2017, measured in constant currency, increased by 13 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 April 30, 2017 was approximately $403 million, an increase of 37 percent compared to the same period a year ago, and inclusive of 18 percent organic growth and 19 percent growth due to acquisitions. Backlog amounts are calculated at April 30, 2017 exchange rates.

Outlook

For the third quarter of fiscal 2017, sales are expected to increase 15 percent to 19 percent as compared to the third quarter a year ago. This growth includes organic volume up 6 percent to up 10 percent, 10 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 $1.51 to $1.65. This range of GAAP diluted earnings per share includes a charge of approximately $0.03 per share for previously announced restructuring related to facility consolidation within our Adhesive Dispensing segment, a charge of approximately $0.02 per share for short-term purchase accounting related to the step-up in value of acquired inventory, and an estimated corporate charge of $0.01 cent per share for acquisition transaction costs. EBITDA is expected to be approximately $164 million, an increase of 18 percent over the prior year.

"We are forecasting strong third quarter organic sales volume growth in each of our segments given the strength of our current backlog, recent order rates and project activity," said Hilton. "Our recent acquisitions add to our profitable growth opportunities, particularly Vention AT, which significantly expands our medical platform and remains on track to deliver $0.05 to $0.10 cents EPS accretion this fiscal year, excluding transaction costs. At the midpoint of our third quarter guidance, operating margin is expected to be approximately 24 percent, or 25 percent excluding the third quarter charges highlighted above. This is an excellent outlook that builds on our record first half performance. Our global team remains focused on creating shareholder value by offering customers the best technology solutions and outstanding support across the diverse end markets we serve."

Nordson management will provide additional commentary on these results and outlook during a conference call Tuesday, May 23, 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)
SECOND QUARTER PERIOD
Period Ending April 30, 2017
(Unaudited)
CONSOLIDATED STATEMENT OF INCOME
Second Quarter
Year-to-Date
2017
2016
2017
2016
Net sales
$ 496,137
$ 437,592
$ 903,607
$ 809,812
Cost of sales
220,625
189,187
402,957
364,500
Selling & administrative expenses
171,981
146,501
321,201
291,430
Operating profit
103,531
101,904
179,449
153,882
Interest expense - net
(7,635 )
(4,812 )
(13,003 )
(10,518 )
Other income (expense) - net
(1,323 )
1,727
(1,480 )
2,529
Income before income taxes
94,573
98,819
164,966
145,893
Income taxes
30,050
28,218
50,455
34,131
Net Income
$
64,523
$
70,601
$ 114,511
$ 111,762
Return on sales
13 %
16 %
13 %
14 %
Return on average shareholders’ equity
28 %
41 %
25 %
33 %
Average common shares outstanding (000’s)
57,545
56,952
57,445
56,975
Average common shares and common share equivalents (000’s)
58,232
57,334
58,126
57,320
Per share:
Basic earnings
$
1.12
$
1.24
$
1.99
$
1.96
Diluted earnings
$
1.11
$
1.23
$
1.97
$
1.95
Dividends paid
$
.27
$
.24
$
.54
$
.48
Total dividends
$
15,524
$
13,664
$
30,999
$
27,318
NORDSON CORPORATION
FINANCIAL HIGHLIGHTS
(Dollars in thousands except for per-share amounts)
CONSOLIDATED BALANCE SHEET
April 30
October 31
2017
2016
Cash and marketable securities
$
88,406
$
67,239
Receivables
428,733
428,560
Inventories
275,806
220,361
Other current assets
35,900
29,415
Total current assets
828,845
745,575
Property, plant & equipment - net
319,973
273,129
Other assets
2,230,427
1,401,879
$
3,379,245
$
2,420,583
Notes payable and debt due within one year
$
141,026
$
40,234
Accounts payable and accrued liabilities
315,467
291,309
Total current liabilities
456,493
331,543
Long-term debt
1,574,191
942,771
Other liabilities
386,292
294,666
Total shareholders’ equity
962,269
851,603
$
3,379,245
$
2,420,583
Other information:
Employees
7,213
6,104
Common shares outstanding (000’s)
57,636
57,051
NORDSON CORPORATION
FINANCIAL HIGHLIGHTS
(Dollars in thousands)
SECOND QUARTER PERIOD
Period Ending April 30, 2017
(Unaudited)
Second 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
$ 226,943
$ 221,030
4.8 %
-2.1 %
2.7 %
$ 434,780
$ 424,469
3.8 %
-1.4 %
2.4 %
Advanced technology systems
210,142
158,555
33.7 %
-1.2 %
32.5 %
355,502
276,415
30.0 %
-1.4 %
28.6 %
Industrial coating systems
59,052
58,007
3.4 %
-1.6 %
1.8 %
113,325
108,928
5.7 %
-1.7 %
4.0 %
Total sales by business segment
$ 496,137
$ 437,592
15.1 %
-1.7 %
13.4 %
$ 903,607
$ 809,812
13.1 %
-1.5 %
11.6 %
Second Quarter
Year-to-Date
OPERATING PROFIT BY BUSINESS SEGMENT
2017
2016
2017
2016
Adhesive dispensing systems
$
65,719
$
62,977
$ 118,775
$ 113,337
Advanced technology systems
54,306
38,731
80,669
46,704
Industrial coating systems
10,252
10,292
17,337
14,470
Corporate
(26,746 )
(10,096 )
(37,332 )
(20,629 )
Total operating profit by business segment
$ 103,531
$ 101,904
$ 179,449
$ 153,882
Second 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
$ 156,095
$ 131,262
18.9 %
-
18.9 %
$ 281,616
$ 248,653
13.3 %
-
13.3 %
Americas
36,326
33,582
8.3 %
-0.1 %
8.2 %
66,368
60,289
11.7 %
-1.6 %
10.1 %
Europe
128,468
125,933
6.6 %
-4.6 %
2.0 %
247,627
245,651
4.4 %
-3.6 %
0.8 %
Japan
30,855
29,366
4.9 %
0.2 %
5.1 %
55,032
48,869
9.4 %
3.2 %
12.6 %
Asia Pacific
144,393
117,449
24.2 %
-1.3 %
22.9 %
252,964
206,350
24.4 %
-1.8 %
22.6 %
Total Sales by Geographic Region
$ 496,137
$ 437,592
15.1 %
-1.7 %
13.4 %
$ 903,607
$ 809,812
13.1 %
-1.5 %
11.6 %
Second Quarter
Year-to-Date
FREE CASH FLOW BEFORE DIVIDENDS
2017
2016
2017
2016
Net income
$
64,523
$
70,601
$ 114,511
$ 111,762
Depreciation and amortization
20,915
17,952
39,412
35,162
Other non-cash charges
5,926
4,566
11,633
8,758
Changes in operating assets and liabilities
(30,007 )
(14,768 )
(26,192 )
(28,794 )
Net cash provided by operating activities
61,357
78,351
139,364
126,888
Additions to property, plant and equipment
(16,950 )
(14,428 )
(27,029 )
(25,521 )
Proceeds from the sale of property, plant and equipment
98
784
3,598
871
Free cash flow before dividends
$
44,505
$
64,707
$ 115,933
$ 102,238
Adjustments:
Acquisition costs and adjustments, net of tax(1)
10,986
246
11,093
1,325
Free cash flow before dividends, adjusted
$
55,491
$
64,953
$ 127,026
$ 103,563
(1) Represents costs and adjustments associated with
our fiscal 2017 and 2016 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.
NORDSON CORPORATION
ORDER RATES FOR 12-WEEK PERIOD ENDING MAY 14, 2017
CHANGE FROM PRIOR YEAR
BUSINESS SEGMENT
% CHANGE
GEOGRAPHY
% CHANGE
Adhesive dispensing systems
1 %
United States
6 %
Advanced technology systems
30 %
Americas
33 %
Industrial coating systems
4 %
Europe
-3 %
Japan
61 %
Total
13 %
Asia Pacific
25 %
Total
13 %
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)
SECOND QUARTER PERIOD
Period Ending April 30, 2017
(Unaudited)
EBITDA
Second Quarter
Year-to-Date
2017
2016
2017
2016
Net income
$
64,523
$
70,601
$ 114,511
$
111,762
Adjustments:
Depreciation and amortization expense
20,915
17,952
39,412
35,162
Interest expense, net
7,635
4,812
13,003
10,518
Income taxes
30,050
28,218
50,455
34,131
EBITDA
$ 123,123
$ 121,583
$ 217,381
$
191,573
Adjustments:
Acquisition costs and adjustments (1)
15,480
350
15,646
1,888
EBITDA As Adjusted
$ 138,603
$ 121,933
$ 233,027
$
193,461
(1) Represents costs and adjustments associated with
our 2017 and 2016 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.
Second Quarter
Year-to-Date
2017
2016
2017
2016
Diluted EPS as reported (U.S. GAAP)
$ 1.11
$
1.23
$ 1.97
$
1.95
Short-term inventory purchase accounting adjustments
0.03
-
0.03
0.02
Acquisition costs
0.16
-
0.16
-
Severance and restructuring
0.01
0.02
0.01
0.03
Litigation settlement
-
(0.01 )
-
(0.01 )
Discrete tax items
0.04
(0.02 )
0.04
(0.16 )
Other pre-tax items related to discrete tax benefits
-
(0.03 )
-
(0.03 )
Diluted EPS as adjusted (Non-GAAP)
$ 1.35
$
1.19
$ 2.21
$
1.80
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. Our calculations
of this non-GAAP 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