Consumables

Nordson Corporation Reports Record Second Quarter Revenue, Operating Profit and Diluted Earnings per Share

Monday 26. May 2014 - Sales grow 9 percent over prior year's second quarter to $417 million, inclusive of 4 percent organic growth

Operating profit increases 13 percent to $93 million compared to $82 million a year ago, with operating margin of 22 percent
GAAP diluted EPS increases 14% to $0.96 for the quarter compared to $0.84 a year ago
Pro-forma 12 week order rates increase 9 percent over same period a year ago
Third quarter 2014 guidance: sales expected to increase 9 to 13 percent over prior year, inclusive of 3 to 7 percent organic volume growth; GAAP diluted EPS in the range of $1.06 to $1.16
Nordson Corporation (Nasdaq: NDSN) today reported results for the second quarter of fiscal year 2014. For the quarter ending April 30, 2014, sales were $417 million, a 9 percent increase over the prior year’s second quarter. This increase in sales included a 4 percent increase in organic volume and a 5 percent increase related to the first year effect of acquisitions. The effect of currency translation compared to the same period a year ago was not material. Operating profit was $93 million, net income was $62 million, and diluted earnings per share were $0.96. Prior year second quarter sales, operating profit, net income and diluted earnings per share were $382 million, $82 million, $55 million and $0.84, 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 delivered excellent results in the quarter, as innovative products and a strong focus on meeting customer needs helped drive solid organic growth in sales in the majority of our product lines and regions,” said Nordson President and Chief Executive Officer Michael F. Hilton. “Sales, operating profit, and earnings per share were all second quarter records for Nordson. On a sequential basis, we leveraged strong top line growth of 16 percent to generate incremental operating margin of 67 percent. We also executed on our strategy of returning value to our shareholders by investing $53 million for the repurchase of shares and by distributing approximately $12 million in dividends during the quarter. Free cash flow in the quarter before dividends was $46 million and our balance sheet has significant capacity for ongoing investments.”
Second Quarter Segment Results
Sales volume in Adhesive Dispensing Systems improved 18 percent compared to the second quarter a year ago, inclusive of 8 percent organic growth and 10 percent growth from the first year effect of the Kreyenborg acquisition. “The organic growth was driven by rigid packaging, general product assembly, disposable hygiene and polymer processing end markets, and by growth in every geography, with the exception of Japan which was flat,” said Hilton. The Adhesive Dispensing segment’s operating margin was 27 percent, up 4 percentage points from the first quarter and up 1 percentage point over the prior year’s second quarter.
In Advanced Technology Systems, second quarter sales volume decreased 3 percent over the prior year. “Similar to conditions we reported last quarter, solid organic growth in products for electronics test and inspection and fluid management, along with surface treatment markets, was offset by softness in demand for automated dispensing equipment in selected mobile electronic device end markets,” said Hilton. “Encouragingly, we have begun to see an increase in orders for these automated systems in recent weeks and we expect to generate solid sales growth in our third quarter within this segment.” Geographically, organic sales growth in the second quarter over the prior year in the U.S. and Europe was offset by softness in other regions. Operating margin for the Advanced Technology segment was 24 percent in the second quarter, up 13 percentage points from the first quarter.
Industrial Coating Systems sales volume increased 4 percent compared to the second quarter a year ago. “Nordson generated strong organic growth in most all product lines, driven by demand in consumer durable and industrial end markets, food and beverage end markets, and UV curing systems for industrial and electronics end markets,” said Hilton. “The organic growth was broad based, with increases in all regions except the Americas as compared to the same period a year ago. Overall segment operating margin was 16 percent in the second quarter, an increase of 7 percentage points compared to the first quarter and 1 percentage point over the prior year’s second 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 half of fiscal year 2014, sales were $777 million, a 7 percent volume increase over the prior year’s first half. This increase in sales included a 1 percent increase in organic volume and a 6 percent increase related to the first year effect of acquisitions. The effect of currency translation compared to the same period a year ago was not material. First half operating profit was $147 million, net income was $97 million and GAAP diluted earnings per share were $1.50. Prior year first half sales, operating profit, net income and diluted earnings per share were $729 million, $144 million, $97 million and $1.49, respectively.
“After a soft start to our year, Nordson began to gain momentum during our second quarter, a trend we expect to continue as the year progresses,” said Hilton. “Sequential sales volume improvement drove improved profitability while we continued to execute 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 May 18, 2014, measured in constant currency, increased by 9 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 April 30, 2014 was approximately $247 million, an increase of 25 percent compared to the same period a year ago, and inclusive of 10 percent organic growth and 15 percent growth due to the Kreyenborg acquisition. Current backlog increased 7 percent compared to the first quarter ended January 31, 2014. Backlog amounts are calculated at April 30, 2014 exchange rates.
Outlook
For the third quarter of fiscal 2014, sales growth is expected to be in the range of 9 percent to 13 percent as compared to the third quarter a year ago. This growth is inclusive of organic volume growth of 3 to 7 percent, 5 percent growth from the first year effect of acquisitions, and a positive 1 percent currency translation effect based on the current exchange rate environment. GAAP diluted earnings per share are expected to be in the range of $1.06 to $1.16.
“Based on our backlog and current 12 week order rates, the midpoint of our sales guidance includes organic growth of 5 percent over the prior year’s third quarter, a strong level given the current macroeconomic environment,” said Hilton. “This growth is being driven by the value we provide to our customers and the many opportunities in the diverse end markets we serve. At the midpoint of our guidance we are forecasting operating margin of about 24 percent in the third quarter, an improvement both on a year-over-year and sequential basis. Our global team can be counted on to continue executing at a high level, and we expect our ongoing focus on customer satisfaction, global support, differentiated technology and continuous improvement should result in strong long-term returns for our shareholders.”