Nordson : Delivers Record Fourth Quarter and Full Year Results

Nordson Corporation (Nasdaq: NDSN) today reported results for the fourth quarter of fiscal year 2014. For the quarter ending October 31, 2014, sales were $469 million, a 14 percent increase over the prior year’s fourth quarter. This increase in sales included a 13 percent increase in organic volume, a 3 percent increase related to the first year effect of acquisitions, and a 2 percent decrease related to the unfavorable effects of currency translation. Operating profit was $106 million, net income was $72 million, and GAAP diluted earnings per share were $1.13. Prior year fourth quarter sales, operating profit, net income and diluted earnings per share were $411 million, $87 million, $60 million and $0.92, respectively. A reconciliation of GAAP diluted EPS to normalized amounts and a calculation of free cash flow are included in the attached tables.

“Our global team met strong demand from across our diverse end markets to deliver 13 percent organic sales volume growth compared to the fourth quarter a year ago,” said Nordson President and CEO Michael F. Hilton. “Organic growth was broad based across all segments and geographies and drove record fourth quarter sales, operating profit and earnings per share. Operating margin in the quarter was 23 percent, two percentage points higher than the strong level delivered a year ago. Diluted earnings per share grew by 23 percent compared to the fourth quarter a year ago, significantly outpacing the strong top line growth we generated. Free cash flow in the quarter before dividends was $90 million. We maintained our balanced approach to capital deployment during the quarter, closing on the acquisitions of Avalon Laboratories and Dima Group B.V. which expand our position in medical and electronic end markets, respectively; distributing approximately $14 million in dividends; and investing $72 million for the repurchase of shares.” Following the end of the fourth quarter, Nordson’s Board of Directors authorized a new $300 million share repurchase program effective December 16, 2014 to replace the current $200 million repurchase authorization, under which approximately $199 million in Nordson shares have been repurchased through December 11.

Fourth Quarter Segment Results
Sales volume in the Adhesive Dispensing Systems segment improved 9 percent compared to the fourth quarter a year ago, inclusive of 7 percent organic growth and 2 percent growth from the first year effect of the Kreyenborg acquisition. “This segment generated organic growth in every product line, including disposable hygiene, rigid packaging, general product assembly and polymer processing, and in every region with the exception of the Americas,” said Hilton. The Adhesive Dispensing segment’s operating margin was 25 percent in the fourth quarter, inclusive of $1 million of one-time restructuring costs.

The Advanced Technology Systems segment generated fourth quarter sales volume growth of 28 percent over the prior year, inclusive of 21 percent organic growth and 7 percent growth from the first year effect of the Avalon and Dima acquisitions. “This segment delivered very strong organic growth in all product lines during the quarter, led by demand for automated dispensing equipment related to electronic mobile device assembly, as well as continued solid demand for our electronic test and inspection and surface treatment equipment,” said Hilton. “Demand was also very robust in medical and general industrial end markets which drove strong growth in our semi-automated dispensing systems and single use fluid management components.” Geographically, the segment delivered double digit organic volume growth in every region except the United States. The strong top line growth drove the segment’s operating margin to 26 percent in the fourth quarter, inclusive of a $1.4 million one-time charge related to the step-up in value of acquired inventory. Operating margin improved 5 percentage points over the same period a year ago.

Sales volume in the Industrial Coating Systems segment improved 16 percent compared to the fourth quarter a year ago. Growth was strongest in cold material dispensing equipment for automotive and industrial applications. Geographically, growth in the U.S., Europe and Asia Pacific was offset by flat conditions in Japan and softness in the Americas. “We leveraged the strong sales growth to deliver 22 percent operating margin in the quarter, a truly outstanding level for this business and an improvement of 5 percentage points over the prior year,” said Hilton.

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

Fiscal 2014 Full Year Results
Sales for the fiscal year ended October 31, 2014 were $1.7 billion, a 10 percent increase over the same period a year ago. This increase in sales included a 6 percent increase in organic volume, a 5 percent increase related to the first year effect of acquisitions, and a 1 percent decrease related to the unfavorable effects of currency translation. Full year operating profit was $367 million, net income was $247 million and GAAP diluted earnings per share were $3.84, all of which are full year records for Nordson. Prior year operating profit, net income and diluted earnings per share were $1.5 billion, $324 million, $222 million and $3.42, respectively. On a normalized basis to exclude non-recurring items in both years, diluted earnings per share for the year were $3.88 compared to $3.38 a year ago, an increase of 15 percent.

“Nordson delivered outstanding full year results, setting company records in sales, operating profit and earnings per share while executing on a variety of strategic initiatives that will help sustain our success. We generated these strong results in a global macroeconomic environment that remained challenging in many respects,” said Hilton. “I’m particularly pleased with our full year organic growth of 6 percent, reflecting our team’s continued ability to provide customers with the best technology, application expertise and global support.”

Order Rates and Backlog
Order rates for the 12-week period ending December 7, 2014, measured in constant currency, increased by 10 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 acquisitions were owned in both years.

Backlog for the quarter ended October 31, 2014 was approximately $223 million, an increase of 6 percent compared to the same period a year ago, and inclusive of 4 percent organic growth and 2 percent growth due to the Avalon and Dima acquisitions. Backlog amounts are calculated at October 31, 2014 exchange rates.

Outlook
For the first quarter of fiscal 2015, sales growth is expected to be in the range of 5 percent to 9 percent as compared to the first quarter a year ago. This growth is inclusive of organic volume growth of 6 percent to 10 percent, 3 percent growth from the first year effect of the Avalon and Dima acquisitions, and a negative 4 percent impact related to the unfavorable effects of currency translation based on the current exchange environment. GAAP diluted earnings per share are expected to be in the range of $0.60 to $0.70, inclusive of a $0.01 per share short term purchase accounting charge related to the step-up in value of acquired inventory.

“We are forecasting a solid first quarter that reflects our backlog, current 12 week order rates and typical seasonality,” said Hilton. “The midpoint of our guidance includes organic sales growth of 8 percent over the prior year’s first quarter. Diluted earnings per share at the midpoint of our guidance are expected to grow at more than two times that rate. As we begin fiscal year 2015, we continue to feel optimistic about the growth opportunities we see in the diverse consumer durable, non-durable, medical, electronics and industrial end markets we serve. We are well positioned in every geography, and our team remains focused on delivering value to customers, driving continuous improvement through the Nordson Business System, and providing strong returns for our shareholders.”

Nordson will broadcast its fourth quarter conference call on its web site at www.nordson.com/investors on Friday, December 12, 2014 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 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 delivers precision technology solutions that help customers succeed worldwide. The company engineers, manufactures and markets differentiated products and systems used for precision dispensing of adhesives, coatings, sealants, biomaterials, fluids and other materials, plastic extrusion and injection molding, electronics testing and inspecting, and surface preparation, 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, www.twitter.com/Nordson_Corp or www.facebook.com/nordson.