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.

Outlook

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 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 30 countries. Visit Nordson on the web at www.nordson.com, @Nordson_Corp, or www.facebook.com/nordson.

NORDSON CORPORATION

FINANCIAL HIGHLIGHTS

(Dollars in thousands except for per-share amounts)
       

THIRD QUARTER PERIOD

Period Ending July 31, 2015

(Unaudited)
 

CONSOLIDATED STATEMENT OF INCOME
Third Quarter Year-to-Date
2015 2014 2015 2014
 
Net sales $ 462,731 $ 458,550 $ 1,242,466 $ 1,235,431
Cost of sales 214,239 201,039 563,363 547,586
Selling & administrative expenses   145,642       143,056     437,021       426,697  
 
Operating profit 102,850 114,455 242,082 261,148
 
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
Income taxes   29,071     32,667     67,250     75,153  
 
Net Income $ 69,388   $ 77,879   $ 161,487   $ 174,693  
 
 
 
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)
61,099 64,141 61,759 64,519
 
Per share:
 
Basic earnings $ 1.15 $ 1.23 $ 2.64 $ 2.73
Diluted earnings $ 1.14 $ 1.21 $ 2.61 $ 2.71
 
Dividends paid $ .22 $ .18 $ .66 $ .54
 
Total dividends $ 13,350 $ 11,421 $ 40,466 $ 34,525
 

CONSOLIDATED BALANCE SHEET
   
July 31 October 31
2015 2014
 
Cash and marketable securities $ 61,000 $ 42,314
Receivables 375,752 365,844
Inventories 228,829 210,871
Other current assets   55,776   53,654
Total current assets 721,357 672,683
 
Property, plant & equipment - net 244,303 224,439
Other assets   1,350,697   1,383,008
$ 2,316,357 $ 2,280,130
 
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
 
Long-term debt 922,732 682,868
Other liabilities 312,585 321,597
Total shareholders' equity   820,425   904,797
$ 2,316,357 $ 2,280,130
 
         
 
Other information:
 
 
Employees 6,092 5,966
 
Common shares outstanding (000's) 60,263 62,435
 

NORDSON CORPORATION

FINANCIAL HIGHLIGHTS

(Dollars in thousands)
 
THIRD QUARTER PERIOD
Period Ending July 31, 2015
(Unaudited)
                 
 
 
Third Quarter % Growth over 2014 Year-to-Date % Growth over 2014

SALES BY BUSINESS SEGMENT
2015 2014 Volume Currency Total 2015 2014 Volume Currency Total
 
 
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 %
 
 
 
Third Quarter Year-to-Date

OPERATING PROFIT BY BUSINESS SEGMENT
2015 2014 2015 2014
 
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
Corporate   (8,963 )   (10,266 )   (30,706 )   (29,703 )
 
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
2015 2014 Volume Currency Total 2015 2014 Volume Currency Total
 
United States $ 129,290 $ 119,705 8.0 % - 8.0 % $ 392,144 $ 360,904 8.7 % - 8.7 %
Americas 34,929 31,296 24.2 % -12.6 % 11.6 % 94,225 89,705 14.3 % -9.3 % 5.0 %
Europe 120,580 126,639 12.4 % -17.2 % -4.8 % 334,244 365,172 6.7 % -15.2 % -8.5 %
Japan 26,647 34,593 -7.3 % -15.7 % -23.0 % 76,679 89,727 0.4 % -14.9 % -14.5 %
Asia Pacific   151,285     146,317   4.6 % -1.2 % 3.4 %   345,174     329,923   6.4 % -1.8 % 4.6 %
 
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 %
 
                                         
 
 
Third Quarter Year-to-Date

FREE CASH FLOW BEFORE DIVIDENDS
2015 2014 2015 2014
 
Net income $ 69,388 $ 77,879 $ 161,487 $ 174,693
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  
 

NORDSON CORPORATION
ORDER RATES FOR 12-WEEK PERIOD ENDING AUGUST 16, 2015
CHANGE FROM PRIOR YEAR
     
 

BUSINESS SEGMENT

% CHANGE

GEOGRAPHY

% CHANGE
 
Adhesive dispensing systems 12% United States -9%
Advanced technology systems 1% Americas 23%
Industrial coating systems -9% Europe 17%
Japan -13%
Total 5% Asia Pacific 8%
 
Total 5%
 
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 2014 and 2015 acquisitions were owned in both years.
 

NORDSON CORPORATION

RECONCILIATION OF NON-GAAP FINANCIAL MEASURES
     
THIRD QUARTER PERIOD

Period Ending July 31, 2015
(Unaudited)
 
Third Quarter Year-to-Date
2015 2014 2015 2014
 
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.

View source version on businesswire.com: http://www.businesswire.com/news/home/20150820006136/en/

Copyright Business Wire 2010