Consumables

NORDSON CORPORATION REPORTS STRONGEST QUARTERLY RESULTS IN COMPANY HISTORY; GUIDES TO RECORD FULL-YEAR PERFORMANCE

Tuesday 21. August 2012 - Third quarter sales grow 22 percent to $380 million over the same period a year ago including a 16 percent increase in organic volume

Third quarter operating profit increases 25 percent to $99 million; 26 percent operating margin surpasses previous year level
Third quarter EPS increases 26 percent to record $1.03
Fourth quarter guidance: sales expected to increase 23 to 27 percent over prior year; diluted EPS in the range of $0.96 to $1.04
Nordson Corporation (Nasdaq: NDSN) today reported the strongest quarterly sales, operating profit, net income and diluted EPS in its history. For the quarter ending July 31, 2012, sales expanded to $380 million, a 22 percent increase over the prior year’s third quarter sales. This increase in sales included a 16 percent increase in organic volume, a 10 percent increase related to the first year effect of acquisitions, and a negative 4 percent impact related to unfavorable effects of currency translation. Third quarter operating profit was $99 million, a record for any quarter, and operating margin reached 26 percent, an increase from the strong level in the same period a year ago. Third quarter net income and diluted earnings per share were both records at $67 million and $1.03, respectively, and compared to $57 million and $0.82 a year ago. Diluted earnings per share in the current quarter include a $0.01 per share one-time tax benefit, a $0.02 per share charge for short-term purchase accounting related to the step-up in value of inventory from the EDI and Xaloy acquisitions, and a $0.02 per share charge for acquisition related costs. A table highlighting one-time items in the quarter and year-to-date is included with this news release.
“Broad based demand across our business combined with the outstanding effort and execution of our global team resulted in another excellent quarter for Nordson,” said Nordson President and Chief Executive Officer Michael F. Hilton. “Organic sales volume was strong across all segments as customers continued to respond to our value proposition of best in class technology, application expertise and global support. We added to our momentum in the quarter with the acquisitions of EDI and Xaloy, two high-quality companies that together provide Nordson with a new growth platform in the plastics processing industry. The robust top line growth, coupled with our ongoing continuous improvement efforts, drove operating income, net income and diluted earnings per share to the highest levels in Nordson history. Operating margin in the quarter was 26 percent, which exceeded the high level of a year ago, and performance in the quarter excluding the acquisitions was in line with our operating margin guidance. We continued to generate high levels of free cash flow which will enable us to invest in strategic opportunities.
Third Quarter Segment and Regional Results
“Nordson delivered year-over-year organic sales volume increases in all three business segments and in every geographic region compared to the third quarter a year ago,” said Hilton. “Total sales volume in Adhesive Dispensing Systems grew 21 percent over the prior year’s third quarter, as solid growth in consumer non-durables end markets drove a 4 percent increase in organic volume, with the remainder of the increase coming from acquisitions. Operating margin in the segment was 30 percent, a very strong level that includes acquisitions made during the quarter and the short term purchase accounting impacts associated with acquired inventory. In Advanced Technology Systems, organic sales volume increased by 33 percent, and acquisitions added 6 percent. Strong broad based demand for dispensing and test and inspection in electronics end markets, especially for mobile device applications, along with continued penetration of niche applications drove the increase. The excellent top line growth, solid execution and operational efficiencies enabled us to drive segment operating margin to 33 percent, five percentage points higher than the level of a year ago. Industrial Coating Systems’ sales volume increased by 12 percent over the previous year and was driven by durable goods manufacturers’ demand for our coating and cold material system solutions. The segment delivered operating margin of 14 percent in the quarter. On a sequential basis, operating profit excluding one-time charges in both quarters expanded at nearly twice the rate as sales, reflecting strong leverage within the business.”
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 2012, sales were $971 million, operating profit was $232 million and net income was $157 million. First-nine-months earnings per share on a diluted basis are $2.41 and include one-time charges of $0.12 per diluted share as described on the attached earnings per share reconciliation table. Prior year first-nine-months revenue, operating profit, net income and diluted earnings per share were $902 million, $237 million, $168 million and $2.44, respectively, inclusive of one-time gains of $0.07 and one-time charges of $0.05, both per diluted share.
“Our year-to-date results have played out much as we expected, with overall demand increasing more recently after a relatively softer start to the year,” said Hilton. “On a sequential basis, sales, operating profit, operating margin, net income and diluted earnings per share have increased every quarter. Our team delivered these results as we continued to execute on our acquisition strategy, fund investments in technology, add customer facing resources to capture future demand, and implement continuous improvement initiatives that should have long term benefits on our performance.”
Order Rates and Backlog
Order rates for the 12-week period ending August 12, 2012, measured in constant currency, increased 15 percent over the same period a year ago. Order rates by segment and geography are provided in the accompanying financial tables. Pro-forma changes in order rates exclude 2012 acquisitions not owned for the full 12 week period and were calculated as though 2011 acquisitions were owned in both years.
Backlog at the end of the third quarter was approximately $251 million, an increase of 49 percent compared to the end of the third quarter a year ago, and an increase of 29 percent compared to the end of the second quarter of fiscal 2012. Backlog amounts are calculated at July 31, 2012 exchange rates.
Outlook
For the fourth quarter of fiscal 2012, sales are expected to be in the range of $408 million to $422 million, an increase of 23 to 27 percent as compared to the fourth quarter a year ago. This growth is inclusive of organic volume up 11 to 15 percent, 16 percent growth from the first year effect of acquisitions, and a negative 4 percent currency translation effect based on the current exchange rate environment. Diluted earnings per share are expected to be in the range of $0.96 to $1.04, inclusive of a $0.01 per share gain on the sale of a facility related to restructuring initiatives and $0.03 per share charge for short term purchase accounting related to the step up in value of inventory from acquisitions.
“Our current order rates are very healthy and have led us to forecast an excellent fourth quarter, which is expected to complete another record year for Nordson,” said Hilton. “At the same time, we remind investors that Nordson is not immune from macroeconomic trends over the longer term. While most economists continue to project growth going forward, many have softened their outlook, and the level of economic uncertainty has not diminished. Countering these factors is our view that Nordson is built to deliver excellent results over the long term. Our global team has few peers in terms of execution, and the fundamentals of our business are strong and intact. These fundamentals include innovative and differentiated technology, direct sales and service, global reach, market leading positions, outstanding margins, a consistent parts and consumables revenue stream, and a culture of continuous improvement. We remain well positioned to capture growth in a variety of niches in both developed and emerging markets, and our recently completed acquisitions provide us with additional growth opportunities in attractive markets. Overall, we remain focused on delivering precision technology solutions that enable our customers to succeed at the highest levels, and our outlook is for continued solid growth and performance.”