Nordson Corporation Reports Record Second Quarter Revenue, Operating Profit and Diluted Earnings per Share
Westlake, Ohio, USA --
- Sales increase 9 percent from prior year’s second quarter to $438 million, inclusive of 8 percent organic growth
- Operating profit grows to $102 million, a 33 percent increase compared to the prior year’s second quarter
- Operating margin expands to 23 percent of sales, a 4 percentage point improvement compared to the prior year’s second quarter
- GAAP diluted EPS grows to $1.23, a 54 percent increase compared to the prior year’s second quarter
- Free cash flow before dividends in the quarter is $65 million
- Pro-forma 12 week order rates increase 4 percent over same period a year ago
- Third quarter 2016 guidance: sales expected to increase 1 to 5 percent over prior year; GAAP diluted EPS in the range of $1.25 to $1.37
Nordson Corporation (Nasdaq: NDSN) today reported results for the second quarter of fiscal year 2016. For the quarter ending April 30, 2016, sales were $438 million, a 9 percent increase from the prior year’s second quarter. This change in sales included an 8 percent increase in organic volume, a 2 percent increase related to the first year effect of acquisitions, and a negative 1 percent impact related to the unfavorable effects of currency translation. Operating profit was $102 million, net income was $71 million, and diluted earnings per share were $1.23. Prior year second quarter sales, operating profit, net income and diluted earnings per share were $401 million, $76 million, $49 million and $0.80, respectively. A reconciliation of GAAP diluted EPS to normalized amounts and a calculation of free cash flow are included in the attached tables.
“Nordson’s global team delivered record second quarter sales, operating profit and diluted earnings per share,” said Nordson President and Chief Executive Officer Michael F. Hilton. “We generated outstanding organic growth of 8 percent in the quarter through our ongoing technology, application, product-tiering and segmentation initiatives and by meeting robust customer demand in consumer non-durable, electronics and medical end markets. We leveraged the strong top line growth and our continuous improvement efforts to drive reported operating margin to 23 percent in the quarter, an increase of 4 percentage points from the prior year, with incremental operating margin in the quarter of 69 percent and earnings growth of 54 percent over the prior year second quarter. We achieved these results in the quarter while continuing to execute on our longer term growth and margin enhancement initiatives.”
Second Quarter Segment Results
Adhesive Dispensing Systems organic sales volume increased 9 percent compared to the prior year’s second quarter, with additional volume growth of less than 1 percent related to the first year effect of the WAFO acquisition. “This is the fourth consecutive quarter of excellent organic growth in this segment,” said Hilton. “Growth in the current quarter was broad based as we generated strong organic growth in all product lines driven by consumer non-durable end markets. Geographically, Europe and the U.S. led the growth.” Reported operating margin in the segment improved 3 percentage points from the prior year to 28 percent in the quarter, or 29 percent on a normalized basis to exclude one-time charges related to restructuring initiatives.
Advanced Technology Systems sales volume increased 23 percent compared to the prior year’s second quarter, including a 20 percent increase in organic volume and a 3 percent increase related to the first year effect of acquisitions. “The momentum in order rates and project activity we described earlier this year resulted in robust organic growth and significantly improved operating margin in the current quarter compared to the same period a year ago,” said Hilton. “The growth was broad based with increased demand for automated dispensing and test and inspection solutions in electronic end markets, as well as continued strength in fluid management components for medical and industrial end markets. Customers in Asia Pacific, Europe and the Americas drove the growth.” Reported operating margin in the segment improved 5 percentage points from the prior year to 24 percent in the quarter, or 25 percent on a normalized basis to exclude one-time charges related to restructuring initiatives and short-term purchase accounting charges related to the step-up in value of acquired inventory.
Industrial Coating Systems sales volume decreased 13 percent from the prior year’s second quarter. “Sales in most product lines were impacted by very challenging comparisons to the prior year, where total segment volume was up 23 percent at this time a year ago,” said Hilton. “Softness in the U.S and Japan offset growth in Europe, Asia Pacific and the Americas. Sequentially, sales volume in the current quarter increased at a pace more typical of this segment than the accelerated rate of a year ago.” Reported operating margin improved by 1 percentage point from the prior year to 18 percent in the quarter, or 19 percent on a normalized basis to exclude non-recurring charges related to continuous improvement restructuring initiatives.
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 May 15, 2016, measured in constant currency, increased by 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 2015 acquisitions were owned in both years.
Backlog for the quarter ended April 30, 2016 was approximately $302 million, an increase of 5 percent compared to the same period a year ago, and inclusive of 3 percent organic growth and 2 percent growth due to acquisitions. Backlog amounts are calculated at April 30, 2016 exchange rates.
For the third quarter of fiscal 2016, sales are expected to increase 1 percent to 5 percent as compared to the third quarter a year ago. This growth includes organic volume down 1 percent to up 3 percent, 3 percent growth from the first year effect of acquisitions, and a negative currency effect of 1 percent based on the current exchange rate environment. At the midpoint of this outlook, operating margin is expected to be approximately 24 percent, and GAAP diluted earnings per share are expected to be in the range of $1.25 to $1.37.
“Our current backlog, recent order rates and project timing lead us to forecast modest organic volume growth at the midpoint of our third quarter guidance,” said Hilton. “This outlook compares against a period of strong organic growth a year ago and is against a current backdrop of continuing weakness in the global macroeconomic environment. Beyond this near term view, we’re continuing to execute on activities we expect will drive value for shareholders over the long term. Specifically, we continue to focus on innovative products, tiering, new applications and emerging market penetration to drive growth. We’re also pleased to report that we're making solid progress on our previously announced margin enhancement initiative using tools within the Nordson Business System and we remain on track to meet our goal of 200 basis points improvement to fiscal 2015 normalized operating margin by the end of fiscal 2017.”
Nordson will broadcast its second-quarter conference call on its web site at www.nordson.com/investors on Tuesday, May 24, 2016 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, Senior 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 35 countries. Visit Nordson on the web at http://www.nordson.com, @Nordson_Corp, or www.facebook.com/nordson.