Nordson Corporation Reports Fiscal Year 2015 Third Quarter Results
By Business Wire News
By Business Wire News
Nordson Corporation(Nasdaq: NDSN) today reported results for the third quarter of fiscal year 2015. For the quarter ending July 31, 2015, sales were $463 million, a 1 percent increase over the prior year’s third quarter. This change in sales included a 6 percent increase in organic volume, a 2 percent increase related to the first year effect of acquisitions, and a negative 7 percent impact related to the unfavorable effects of currency translation. Operating profit was $103 million, net income was $69 million, and GAAP diluted earnings per share were $1.14. Prior year third quarter sales, operating profit, net income and diluted earnings per share were $459 million, $114 million, $78 million and $1.21, respectively. Diluted earnings per share in the current quarter include a $0.01 per share benefit related to a discrete tax item and a $0.03 per share charge related to restructuring and efficiency initiatives. A reconciliation of GAAP diluted EPS to normalized amounts and a calculation of free cash flow are included in the attached tables.
“Nordson delivered excellent organic growth of 6 percent in the third quarter compared to the prior year in a macroeconomic environment that remained challenging,” said Nordson President and Chief Executive Officer Michael F. Hilton. “Unfavorable currency translation continued to be a significant headwind given the strength of the U.S. dollar, negatively impacting revenue by 7 percent as compared to the prior year. From an operating perspective, we leveraged sequential revenue growth to generate operating margin of 22 percent in the third quarter, an increase of three percentage points compared to the second quarter. Earnings per share were impacted by one-time items related to operational and customer service continuous improvement initiatives within certain Advanced Technology segment product lines. Our approach to capital deployment in the quarter remained balanced, as we distributed approximately $13 million in dividends, invested $49 million for the repurchase of shares, and closed on the acquisition of Liquidyn, a German manufacturer of micro-dispensing valves that will add to our fluid management offering within the Advanced Technology segment.”
Third Quarter Segment Results
All segments and all geographies, with the exception of Japan, delivered organic sales volume growth in the third quarter compared to the same period a year ago.
Sales volume in Adhesive Dispensing Systems increased 4 percent compared to the third quarter a year ago. “Strength in rigid packaging, nonwovens, and general assembly product lines drove growth in the quarter, where our polymer product lines were essentially flat to the prior year,” said Hilton. The Adhesive Dispensing segment’s operating margin in the third quarter was 26 percent. Excluding the effect of negative currency translation in the quarter, the segment’s operating margin was 28 percent.
In Advanced Technology Systems, third quarter sales volume increased 8 percent over the prior year, inclusive of a 6 percent increase related to the first year effect of acquisitions. “Strong demand for our surface treatment and test and inspection solutions in electronics end markets and for fluid management components serving medical end markets was offset by lower demand for dispensing solutions. Operating margin for the Advanced Technology segment was 24 percent in the third quarter, or 25 percent excluding one-time items. The effects of currency as compared to the prior year were negligible.
Industrial Coating Systems organic sales volume increased 23 percent compared to the third quarter a year ago. “This segment delivered double digit organic growth in every product line, driven by consumer durable, automotive, industrial, electronic, and food and beverage end markets,” said Hilton. The Industrial Coatings segment’s operating margin was 19 percent in the third quarter. Excluding the effect of negative currency translation in the quarter, the segment’s operating margin was 21 percent.
Negative currency translation effects reduced total company sales by $33 million, or 7 percent, reduced both overall gross margin and operating margin by more than 1 percentage point, and reduced diluted earnings per share by $0.16, all compared to the prior year’s third quarter. Detailed results by operating segment and geography are included in the attached tables, as is an earnings per share reconciliation table.
Fiscal Year-to-Date Results
For the first nine months of fiscal year 2015, sales were $1,242.5 million, an increase of 1 percent over the prior year’s period. This increase in sales included a 5 percent increase in organic volume, a 3 percent increase related to the first year effect of acquisitions, and a negative 7 percent impact related to the unfavorable effects of currency translation. Year to date operating profit was $242 million, net income was $161 million and GAAP diluted earnings per share were $2.61. Prior year-to-date sales, operating profit, net income and diluted earnings per share were $1.235.4 million, $261 million, $175 million and $2.71, respectively. Through the first nine months of the year, unfavorable currency effects reduced sales by $83 million, operating margin by 1 percent, and diluted earnings per share by $0.39, all compared to the prior year.
“Nordson has delivered organic volume growth of 5 percent year to date, a strong level in the current macroeconomic environment, and we have leveraged sequential volume increases to improve operating margin in each quarter,” said Hilton. “Our global team has continued to focus on delivering technology and support to customers across our many end markets while executing on initiatives that will drive growth, performance and sustainable competitive advantage over the long term.”
Order Rates and Backlog
Order rates for the 12-week period ending August 16, 2015, measured in constant currency, increased by 5 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 2014 and 2015 acquisitions were owned in both years.
Backlog for the quarter ended July 31, 2015 was approximately $270 million, an increase of 10 percent compared to the same period a year ago, and inclusive of 6 percent organic growth and 4 percent growth due to acquisitions. Current backlog decreased 5 percent compared to the second quarter ended April 30, 2015. Backlog amounts are calculated at July 31, 2015 exchange rates.
At the midpoint of guidance for the fourth quarter of fiscal 2015, total sales volume is expected in the range of down 7 percent to down 3 percent compared to the prior year. This range is inclusive of organic volume down 1 percent to up 3 percent, 1 percent growth related to the first year effect of acquisitions, and negative 7 percent currency translation effect based on the current exchange rate environment. Operating margin is expected to be approximately 22 percent at this midpoint. GAAP diluted earnings per share are expected to be in the range of $1.00 to $1.12, inclusive of a $0.01 per share short term purchase accounting charge related to the step-up in value of acquired inventory. This outlook is also inclusive of an unfavorable currency translation effect of approximately $0.14 per share at current exchange rates.
“Given our backlog and current order rates, organic growth is positive at the midpoint of our fourth quarter guidance, even in a soft macroeconomic environment and against challenging comparisons, and would result in full year organic growth of approximately four percent. Looking further ahead, most economists at this time are not forecasting significant macroeconomic improvement heading into the coming year. Our own visibility over the longer term is also limited. Given this uncertain outlook, we are taking actions in areas we can control to improve normalized margins in 2016, independent of sales volume leverage. The actions taken in the third quarter to optimize certain Advanced Technology product lines are among the first of these steps. We also are implementing a more concentrated effort around multiple continuous improvement initiatives, accelerating footprint consolidation activities, limiting additions to headcount, and reducing other spending. Overall, our global team is committed to providing a best in class experience to customers and delivering solid long term returns to shareholders. We remain confident in our business model and our ability to capitalize on the many opportunities available to us in the diverse end markets we serve.”
Nordson will broadcast its third quarter conference call on its web site at www.nordson.com/investors on Friday, August 21, 2015 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, Director of Communications & Investor Relations at (440) 414-5639 or firstname.lastname@example.org.
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 30 countries. Visit Nordson on the web at www.nordson.com, @Nordson_Corp, or www.facebook.com/nordson.
(Dollars in thousands except for per-share amounts)
THIRD QUARTER PERIOD
Period Ending July 31, 2015
CONSOLIDATED STATEMENT OF INCOME
|Cost of sales||214,239||201,039||563,363||547,586|
|Selling & administrative expenses||145,642||143,056||437,021||426,697|
|Interest expense – net||(4,393||)||(3,673||)||(12,558||)||(10,451||)|
|Other income (expense) – net||2||(236||)||(787||)||(851||)|
|Income before income taxes||98,459||110,546||228,737||249,846|
|Return on sales||15||%||17||%||13||%||14||%|
|Return on average shareholders’ equity||34||%||33||%||25||%||25||%|
|Average common shares outstanding (000’s)||60,578||63,482||61,235||63,888|
Average common shares and common share equivalents (000’s)
CONSOLIDATED BALANCE SHEET
|July 31||October 31|
|Cash and marketable securities||$||61,000||$||42,314|
|Other current assets||55,776||53,654|
|Total current assets||721,357||672,683|
|Property, plant & equipment – net||244,303||224,439|
|Notes payable and debt due within one year||$||15,849||$||116,932|
|Accounts payable and accrued liabilities||244,766||253,936|
|Total current liabilities||260,615||370,868|
|Total shareholders’ equity||820,425||904,797|
|Common shares outstanding (000’s)||60,263||62,435|
(Dollars in thousands)
|THIRD QUARTER PERIOD|
|Period Ending July 31, 2015|
|Third Quarter||% Growth over 2014||Year-to-Date||% Growth over 2014|
SALES BY BUSINESS SEGMENT
|Adhesive dispensing systems||$||211,649||$||226,762||4.0||%||-10.7||%||-6.7||%||$||609,135||$||668,187||0.4||%||-9.2||%||-8.8||%|
|Advanced technology systems||184,888||174,636||8.4||%||-2.5||%||5.9||%||446,588||399,805||14.7||%||-3.0||%||11.7||%|
|Industrial coating systems||66,194||57,152||23.1||%||-7.3||%||15.8||%||186,743||167,439||17.2||%||-5.7||%||11.5||%|
|Total sales by business segment||$||462,731||$||458,550||8.1||%||-7.2||%||0.9||%||$||1,242,466||$||1,235,431||7.3||%||-6.7||%||0.6||%|
OPERATING PROFIT BY BUSINESS SEGMENT
|Adhesive dispensing systems||$||54,854||$||60,806||$||148,963||$||171,425|
|Advanced technology systems||44,633||56,444||96,221||97,664|
|Industrial coating systems||12,326||7,471||27,604||21,762|
|Total operating profit by business segment||$||102,850||$||114,455||$||242,082||$||261,148|
|Third Quarter||% Growth over 2014||Year-to-Date||% Growth over 2014|
SALES BY GEOGRAPHIC REGION
|Total Sales by Geographic Region||$||462,731||$||458,550||8.1||%||-7.2||%||0.9||%||$||1,242,466||$||1,235,431||7.3||%||-6.7||%||0.6||%|
FREE CASH FLOW BEFORE DIVIDENDS
|Depreciation and amortization||16,849||14,608||49,071||43,839|
|Other non-cash charges||3,264||3,003||14,515||13,307|
|Changes in operating assets and liabilities||(39,643||)||(14,721||)||(57,779||)||(48,881||)|
|Net cash provided by operating activities||49,858||80,769||167,294||182,958|
|Additions to property, plant and equipment||(12,715||)||(11,442||)||(48,898||)||(27,936||)|
|Proceeds from the sale of property, plant and equipment||67||179||488||278|
|Free cash flow before dividends||$||37,210||$||69,506||$||118,884||$||155,300|
|ORDER RATES FOR 12-WEEK PERIOD ENDING AUGUST 16, 2015|
|CHANGE FROM PRIOR YEAR|
|Adhesive dispensing systems||12%||United States||-9%|
|Advanced technology systems||1%||Americas||23%|
|Industrial coating systems||-9%||Europe||17%|
|1. Numbers in this table are unaudited and exclude the effects of currency movements.|
2. Pro-forma changes in order rates were calculated as though 2014 and 2015 acquisitions were owned in both years.
RECONCILIATION OF NON-GAAP FINANCIAL MEASURES
|THIRD QUARTER PERIOD|
Period Ending July 31, 2015
|Diluted EPS as reported (U.S. GAAP)||$||1.14||$||1.21||$||2.61||$||2.71|
|Short-term inventory purchase accounting adjustments||–||–||0.01||0.02|
|Severance and restructuring||0.03||–||0.03||0.01|
|Pension settlement expense||–||–||0.02||–|
|Discrete tax items||(0.01||)||(0.01||)||(0.04||)||(0.01||)|
|Diluted EPS as adjusted (Non-GAAP)||$||1.16||$||1.20||$||2.63||$||2.73|
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.
James R. Jaye, 440-414-5639
Director, Communications & Investor Relations