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Nordson Corporation Reports Fiscal Year 2015 First Quarter Results

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Nordson Corporation (Nasdaq: NDSN) today reported results for the first quarter of fiscal year 2015. For the quarter ending January 31, 2015, sales were $379 million, a 5 percent increase over the prior year’s first quarter sales. This sales improvement included an 8 percent increase in organic volume, a 3 percent increase related to the first year effect of acquisitions, and a negative 5 percent impact related to the unfavorable effects of currency translation. Operating profit for the quarter was $63 million, net income was $43 million, and first quarter diluted earnings per share were $0.69. Prior year first quarter sales, operating profit, net income and diluted earnings per share were $359 million, $54 million, $35 million and $0.54, respectively. Free cash flow before dividends in the quarter was $9 million. 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 excellent first quarter results highlighted by 8 percent organic sales volume growth over the same period a year ago,” said Nordson President and Chief Executive Officer Michael F. Hilton. “This organic growth included the majority of our product lines and geographies. Operating margin in the quarter improved by 2 percentage points compared to the prior year, and diluted EPS grew by 28 percent over the prior year, more than five times the rate of the strong top line growth we generated. Currency exchange rates negatively impacted Nordson in the quarter, as revenue and earnings per share would have been $18 million and $0.08 higher, respectively, on a year-over-year basis in constant currency, and operating margin for the quarter would have been a percentage point higher than reported. We continued our balanced approach to capital deployment in the quarter by distributing approximately $14 million in dividends and investing approximately $71 million for the repurchase of shares. Throughout the quarter, we continued to focus on delivering the best customer experience in the industries we serve and driving continuous improvement throughout the organization via the Nordson Business System.”

First Quarter Segment Results

Sales volume in the Adhesive Dispensing Systems segment decreased by less than 1 percent compared to the same period a year ago. “Solid organic growth in product lines serving disposable hygiene, general product assembly, rigid packaging and plastic injection end markets was offset by softness in products lines serving plastic extrusion, pelletizing and compounding end markets,” said Hilton. Segment operating margin was 22 percent.

Sales volume in the Advanced Technology Systems segment increased 38 percent compared to the first quarter a year ago, inclusive of 29 percent organic growth and the remainder from the first year effect of acquisitions. “Growth was strongest in our automated dispensing product lines serving mobile device, advanced semiconductor packaging, and other niche electronic end markets,” said Hilton. “Demand also was robust for semi-automated dispensing systems and fluid management components serving electronics, general industrial assembly, and medical end markets.” Segment operating margin was 20 percent in the quarter, an improvement of 9 percentage points over the previous year, reflecting strong operating leverage on the increased volume.

Sales volume in the Industrial Coating Systems segment increased 4 percent compared to the first quarter a year ago. “The growth was led by demand for cold material dispensing equipment for automotive end markets and powder coating equipment for a variety of durable goods end markets,” said Hilton. Operating margin in the quarter was 7 percent, reflecting the seasonally lower first quarter volume typical of this segment and a higher mix of engineered systems revenue compared to the same period a year ago.

Detailed results by operating segment and geography are included in the accompanying tables.

Order Rates and Backlog

Order rates for the 12-week period ending February 15, 2015, measured in constant currency, increased 14 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 acquisitions were owned in both years.

Backlog for the quarter ended January 31, 2015 was approximately $230 million, an increase of 8 percent compared to the same quarter a year ago, and inclusive of 6 percent organic growth and 2 percent growth due to acquisitions. Current backlog increased 8 percent compared to the end of the fourth quarter of fiscal 2014. Backlog amounts are calculated at January 31, 2015 exchange rates.

Outlook

For the second quarter of fiscal year 2015, sales are expected to be in the range of down 5 percent to down 1 percent compared to the second quarter a year ago. This is inclusive of organic growth of down 1 percent to up 3 percent, 3 percent growth from the first year effect of acquisitions, and a negative currency effect of 7 percent based on the current exchange environment. At the midpoint of this sales outlook, operating margin is expected to be approximately 20 percent. GAAP diluted earnings per share are expected to be in the range of $0.80 to $0.90.

“At the midpoint of our second quarter guidance, sequential sales growth would be about 7 percent, and we would expect to leverage this increased volume to deliver higher operating margin as compared to first quarter results,” said Hilton. “On a year over year basis, we expect currency to remain a significant headwind to revenue and earnings growth given current exchange rates. Excluding this currency translation effect, our underlying business remains sound, even in the challenging global macroeconomic environment. Our 12 week order rates are strong at up 14 percent. Organic volume growth at the midpoint of our forecast is expected to be approximately 1 percent, a level below what you might expect given our current backlog and pace of orders. Our current backlog does include orders that are expected to benefit the third quarter. In addition we are optimistic as to our success on various projects that will also benefit the second half of the year. So while we do not offer specific guidance beyond one quarter due to the short lead times of much of our business, we are optimistic that this current order and project momentum will drive double digit organic growth in the back half of this fiscal year, resulting in high single digit organic growth for the full year.

“Our longer term prospects remain robust in general. We remain committed to innovation, and our customers continue to respond to our steady stream of differentiated new products. We continue to believe in the strong growth opportunities afforded by our diverse end markets. Food and beverage packaging, disposable hygiene, medical fluid management, electronics, and other general industrial and assembly markets continue to have excellent prospects for growth, especially in emerging geographies where Nordson is well positioned. Our global team is well prepared to capture these opportunities, and we continue to operate from a mindset of continuous improvement worldwide.”

Nordson will broadcast its first quarter conference call on the investor relations page of its Web site, www.nordson.com/investors, on Wednesday, February 25, 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 engineers, manufactures and markets differentiated products and systems used to dispense, apply and control adhesives, coatings, polymers, sealants, biomaterials, and other fluids; to test and inspect for quality; and to treat and cure surfaces. 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, @Nordson_Corp or www.facebook.com/nordson.

NORDSON CORPORATION

FINANCIAL HIGHLIGHTS

(Dollars in thousands except for per-share amounts)

FIRST QUARTER PERIOD

Period Ending January 31, 2015

(Unaudited)

CONSOLIDATED STATEMENT OF INCOME

First Quarter
2015 2014
Net sales $ 379,008 $ 359,420
Cost of sales 170,287 164,638
Selling & administrative expenses 145,903 140,923
Operating profit 62,818 53,859
Interest expense – net (4,003 ) (3,463 )
Other income (expense) – net (102 ) (209 )
Income before income taxes 58,713 50,187
Income taxes 15,828 15,307
Net Income $ 42,885 $ 34,880
Return on sales 11 % 10 %
Return on average shareholders’ equity 20 % 16 %
Average common shares outstanding (000’s) 62,008 64,221

Average common shares and common share equivalents (000’s)

62,536 64,860
Per share:
Basic earnings $ .69 $ .54
Diluted earnings $ .69 $ .54
Dividends paid $ .22 $ .18
Total dividends $ 13,635 $ 11,561

NORDSON CORPORATION

FINANCIAL HIGHLIGHTS

(Dollars in thousands except for per-share amounts)

FIRST QUARTER PERIOD

Period Ending January 31, 2015

(Unaudited)

CONSOLIDATED BALANCE SHEET

January 31 October 31
2015 2014
Cash and marketable securities $ 40,926 $ 42,314
Receivables 348,316 365,844
Inventories 212,610 210,871
Other current assets 55,794 53,654
Total current assets 657,646 672,683
Property, plant & equipment 229,669 224,439
Other assets 1,354,386 1,383,008
$ 2,241,701 $ 2,280,130
Notes payable and debt due within one year $ 174,170 $ 116,932
Accounts payable and accrued liabilities 214,010 253,936
Total current liabilities 388,180 370,868
Long-term debt 699,132 682,868
Other liabilities 316,488 321,597
Total shareholders’ equity 837,901 904,797
$ 2,241,701 $ 2,280,130
Other information:
Employees 5,978 5,966
Common shares outstanding (000’s) 61,584 62,435

NORDSON CORPORATION

FINANCIAL HIGHLIGHTS

(Dollars in thousands)

FIRST QUARTER PERIOD

Period Ending January 31, 2015

(Unaudited)

First Quarter % Growth over 2014

SALES BY BUSINESS SEGMENT

2015 2014 Volume Currency Total
Adhesive dispensing systems $ 194,213 $ 209,471 -0.7 % -6.6 % -7.3 %
Advanced technology systems 132,218 97,541 38.4 % -2.8 % 35.6 %
Industrial coating systems 52,577 52,408 3.9 % -3.6 % 0.3 %
Total sales by business segment $ 379,008 $ 359,420 10.5 % -5.1 % 5.4 %
First Quarter

OPERATING PROFIT BY BUSINESS SEGMENT

2015 2014
Adhesive dispensing systems $ 43,327 $ 47,920
Advanced technology systems 26,818 10,378
Industrial coating systems 3,764 4,956
Corporate (11,091 ) (9,395 )
Total operating profit by business segment $ 62,818 $ 53,859
First Quarter % Growth over 2014

SALES BY GEOGRAPHIC REGION

2015 2014 Volume Currency Total
United States $ 122,824 $ 115,506 6.3 % 6.3 %
Americas 28,268 27,265 8.9 % -5.2 % 3.7 %
Europe 108,566 116,475 3.6 % -10.4 % -6.8 %
Japan 21,533 26,245 -6.3 % -11.7 % -18.0 %
Asia Pacific 97,817 73,929 34.8 % -2.5 % 32.3 %
Total Sales by Geographic Region $ 379,008 $ 359,420 10.5 % -5.1 % 5.4 %
First Quarter

FREE CASH FLOW BEFORE DIVIDENDS

2015 2014
Net income $ 42,885 $ 34,880
Depreciation and amortization 15,984 14,488
Other non-cash charges 6,865 5,673
Changes in operating assets and liabilities (39,822 ) (7,354 )
Net cash provided by operating activities 25,912 47,687
Additions to property, plant and equipment (16,821 ) (7,891 )
Proceeds from the sale of property, plant and equipment 275 13
Free cash flow before dividends $ 9,366 $ 39,809

NORDSON CORPORATION

ORDER RATES FOR 12-WEEK PERIOD ENDING FEBRUARY 15, 2015
CHANGE FROM PRIOR YEAR

BUSINESS SEGMENT

% CHANGE GEOGRAPHY % CHANGE
Adhesive dispensing systems 6% United States 12%
Advanced technology systems 18% Americas 9%
Industrial coating systems 39% Europe -1%
Japan 5%
Total 14% Asia Pacific 46%
Total 14%
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 acquisitions were owned in both years.

NORDSON CORPORATION

RECONCILIATION OF NON-GAAP FINANCIAL MEASURES

FIRST QUARTER PERIOD

Period Ending January 31, 2015

(Unaudited)

EARNINGS PER SHARE

First Quarter
2015 2014
Diluted EPS as reported (U.S. GAAP) $ 0.69 $ 0.54
Short-term inventory purchase accounting adjustments 0.01 0.02
Pension settlement expense 0.02
Discrete tax items (0.03 )
Diluted EPS as adjusted (Non-GAAP) $ 0.69 $ 0.56

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.

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