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

  • Sales increase 13 percent from prior year’s second quarter to $496 million, with all three segments contributing to 9 percent organic growth
  • 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

WESTLAKE, Ohio--()--Nordson Corporation (Nasdaq: 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.

Contacts

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

Release Summary

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

Contacts

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