Westlake, Ohio, USA – February 25, 2014 - Nordson Corporation (Nasdaq: NDSN) today reported results for the first quarter of fiscal year 2014. For the quarter ending January 31, 2014, sales were $359 million, a 4 percent increase over the prior year’s first quarter sales. This sales improvement included a 6 percent increase related to the first year effect of acquisitions, a 1 percent decrease in organic volume, and a negative 1 percent impact related to the unfavorable effects of currency translation. Operating profit for the quarter was $54 million, net income was $35 million, and first quarter diluted earnings per share as reported were $0.54. Free cash flow before dividends in the quarter was $40 million, or 114 percent of net income. A reconciliation of GAAP diluted EPS to normalized amounts and a calculation of free cash flow are included in the attached tables.
“Nordson’s first quarter performance reflects our normal seasonality, lower demand in selected technology end markets, and regional variations in the pace of macroeconomic growth,” said Nordson President and Chief Executive Officer Michael F. Hilton. “We delivered very solid organic volume growth over the prior year’s first quarter in our consumer non-durable end markets, though this was offset primarily by softness in some applications related to electronics end markets. Regionally, conditions were mixed, with organic volume growth in the U.S., Americas and Europe being offset by softness in Japan and Asia Pacific. We continue to monitor all of our end markets carefully and are making near-term adjustments to spending, where prudent. Overall, we continued to generate excellent levels of free cash flow in the quarter, and our balance sheet remains strong. Going forward, our team remains focused on best-in-class technology, global customer support, and continuous improvement, and we remain positioned better than our competitors to capture demand when and where it occurs.”
First Quarter Segment Results
“We are encouraged by solid organic growth in Adhesive Dispensing Systems, our largest segment, and portions of our other two segments, though softness in certain product lines and difficult comparisons to the prior year impacted overall growth,” said Hilton.
Sales volume in the Adhesive Dispensing Systems segment improved by 16 percent compared to the same period a year ago. “Organic volume grew by more than 4 percent, a solid level, with increases in almost all product lines, including polymer processing,” said Hilton. The remainder of the volume increase was due to the first year effect of the Kreyenborg acquisition. Segment operating margin was 23 percent. Excluding short-term purchase accounting charges associated with the step-up in value of acquired inventory, operating margin was 24 percent, equal to the level of the first quarter a year ago.
Sales volume in the Advanced Technology Systems segment decreased by 10 percent from the prior year’s first quarter. Growth was solid for fluid management components serving medical and general industrial end markets and for test and inspection equipment in electronics end markets. This growth was offset by softness in automated dispensing equipment for mobile device and other niche electronic end markets. “Visibility can be challenging in electronics markets in the short term, and the pace of orders for some product lines slowed as the quarter progressed,” said Hilton. “The long term view for these markets continues to be positive. Segment operating margin was 11 percent in the quarter, and we are adjusting spending on a targeted basis related to the near term-lower volume. We expect to leverage sequential sales volume growth to generate significantly improved operating margin performance as the year progresses.”
“Within the Industrial Coating Systems segment, sales volume decreased 3 percent compared to the first quarter a year ago, a period in which we delivered 38 percent organic growth,” said Hilton. “Growth in powder and liquid coating product lines for durable goods end markets was offset by softness in other product lines. Operating margin in the quarter was 9 percent, a number within our range of expectations for this segment given this quarter’s level of revenue and product mix.”
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 February 16, 2014, measured in constant currency, decreased 4 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 2013 acquisitions were owned in both years.
Backlog for the quarter ended January 31, 2014 was approximately $229 million, an increase of 23 percent compared with the end of the first quarter a year ago, and inclusive of 4 percent organic growth and 19 percent growth due to the Kreyenborg acquisition. Current backlog increased 5 percent compared to the end of the fourth quarter of fiscal 2013. Backlog amounts are calculated at January 31, 2014 exchange rates.
For the second quarter of fiscal 2014, sales growth is expected to be in the range of 5 percent to 9 percent compared to the second quarter a year ago. This overall growth is inclusive of organic growth of 0 percent to 4 percent, and 5 percent growth from the first year effect of acquisitions. The effect of currency translation is expected to be immaterial as compared to the prior year’s second quarter based on the current exchange rate environment. At the midpoint of this sales growth outlook, we would expect to generate operating margin of approximately 22 percent. GAAP diluted earnings per share are expected to be in the range of $0.85 to $0.94.
“At the midpoint of our second quarter guidance, sequential sales growth would be about 14 percent, and we would expect to leverage this increased volume to deliver significantly higher operating margin as compared to first quarter results,” said Hilton. “While this is encouraging, we recognize that year-over-year growth has been below our long term targets in recent quarters. In the near term, we are responding to fluctuating demand with appropriate spending adjustments, but remain focused on our long term success and optimistic about our prospects beyond the current quarter. A variety of new products introduced over the last 12 months are gaining traction, and the incremental R&D and localization investments made during 2013 are expected to begin generating returns this year. We also continue to identify and execute on continuous improvement opportunities, and our acquisition integration efforts remain on track. More fundamentally, we continue to believe in the strong long-term growth opportunities afforded by our diverse end markets. Food and beverage markets provide excellent prospects for our rigid and flexible packaging applications, especially in emerging regions. The same is true for our products serving disposable personal hygiene applications. Medical applications are among the fastest growing in the company. And while demand in electronics end markets can vary from quarter to quarter, industry and technology trends in this space remain in our favor over the next several years. Our customer value proposition of direct global service and differentiated products remains intact, and we expect to continue delivering long-term value to shareholders at a high level.”
Nordson will broadcast its first-quarter conference call on the investor relations page of its Web site, www.nordson.com/investors, on Wednesday, February 26, 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 engineers, manufactures and markets differentiated products and systems used for dispensing and processing adhesives, coatings, polymers, sealants and biomaterials; and for managing fluids, testing and inspecting for quality, treating surfaces and curing. These products are supported with extensive application expertise and direct global sales and service. We serve a wide variety of consumer non-durable, consumer durable and technology end markets including packaging, nonwovens, electronics, medical, appliances, energy, transportation, building and 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, or .