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Nordson Corporation Reports Fiscal Year 2015 Second Quarter Results

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Nordson Corporation (Nasdaq: NDSN) today reported results for the second quarter of fiscal year 2015. For the quarter ending April 30, 2015, sales were $401 million, a 4 percent decrease from the prior year’s second quarter. This change in sales included a 1 percent increase in organic volume, a 3 percent increase related to the first year effect of acquisitions, and a negative 8 percent impact related to the unfavorable effects of currency translation. Operating profit was $76 million, net income was $49 million, and diluted earnings per share were $0.80. Prior year second quarter sales, operating profit, net income and diluted earnings per share were $417 million, $93 million, $62 million and $0.96, 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 continued to execute in a challenging macroeconomic environment, and Nordson delivered a solid quarter with revenue, operating profit and earnings per share within our range of expectations,” said Nordson President and Chief Executive Officer Michael F. Hilton. “Our underlying business remains sound and total company organic sales volume growth was positive in the quarter. On a sequential basis, our results demonstrate the continued strength of our business model, as we leveraged solid top line growth of 6 percent to generate incremental operating margin of 63 percent. Free cash flow in the quarter before dividends was $72 million and our balance sheet has significant capacity for ongoing investments. We returned value directly to our shareholders in the quarter by investing $66 million for the repurchase of shares and by distributing approximately $13 million in dividends. We also continued to develop and release innovative products during the quarter while maintaining our focus on a variety of continuous improvement initiatives. As we look ahead, our current backlog, order rates and project lists continue to support our view of strong organic growth in the third quarter.”

Second Quarter Segment Results

Sales volume in Adhesive Dispensing Systems decreased 2 percent compared to the second quarter a year ago. “Strength in rigid packaging, nonwovens, injection molding and general assembly end markets was offset by softness in extrusion and pelletizing end markets,” said Hilton. The Adhesive Dispensing segment’s operating margin in the second quarter was 25 percent.

In Advanced Technology Systems, second quarter sales volume increased 5 percent over the prior year, inclusive of a 4 percent decrease in organic volume and a 9 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 fluid management components serving medical and industrial end markets was offset by lower demand for automated dispensing systems.” Operating margin for the Advanced Technology segment was 19 percent in the second quarter.

Industrial Coating Systems organic sales volume increased 23 percent compared to the second quarter a year ago. “This segment generated strong organic growth in most all product lines, driven by consumer durable, automotive, industrial and food and beverage end markets,” said Hilton. The Industrial Coatings segment’s operating margin was 17 percent in the second quarter.

Negative currency translation effects reduced total company sales by $32 million, or 8 percent, and reduced overall operating margin by 2 percent, both as compared to the prior year’s second quarter. On a company wide basis, Nordson delivered positive organic growth in all geographies with the exception of Asia Pacific. 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 2015, sales were $780 million, an increase of less than 1 percent over the prior year’s first half. This increase in sales included a 4 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. First half operating profit was $139 million, net income was $92 million and GAAP diluted earnings per share were $1.48. Prior year first half sales, operating profit, net income and diluted earnings per share were $777 million, $147 million, $97 million and $1.50, respectively. Through the first half of the year, unfavorable currency effects reduced sales by $50 million and reduced operating margin by 1 percent, both as compared to the prior year.

“Nordson delivered solid organic volume growth in the first half of this year in what continues to be a challenging macroeconomic environment,” said Hilton. “This growth reflects the diversity of our end markets, geographic reach and the value we provide our customers. Sequential sales volume growth 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 10, 2015, measured in constant currency, increased by 3 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 April 30, 2015 was approximately $287 million, an increase of 26 percent compared to the same period a year ago, and inclusive of 23 percent organic growth and 3 percent growth due to acquisitions. Current backlog increased 25 percent compared to the first quarter ended January 31, 2015. Backlog amounts are calculated at April 30, 2015 exchange rates.

Outlook

For the third quarter of fiscal 2015, sales growth is expected to be in the range of 2 percent to 6 percent as compared to the third quarter a year ago. This growth is inclusive of organic volume growth of 6 to 10 percent, 2 percent growth from the first year effect of acquisitions, and negative 6 percent currency translation effect 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 $1.19 to $1.30.

“We are forecasting a very good start to the second half of our fiscal year based on our backlog and current 12 week order rates. The midpoint of our third quarter sales guidance includes organic growth of 8 percent over the same period a year ago, which is outstanding performance in a weak macroeconomic environment,” said Hilton. “Clearly, Nordson’s package of values, including innovative products backed with unmatched service, support and global availability, continues to resonate with our customers. The strength we are seeing is relatively broad based as order rates are positive in most product lines and geographies. Relative to our previous full year expectations, several major projects converted to orders during the quarter. Based upon changing customer requirements, a unique application that we had expected to become an order did not materialize. Consequently, we now expect full year organic growth to be in the mid single digit range. Overall, we continue to feel very good about the second half of our year, and we remain on pace to deliver excellent full year results.”

Nordson will broadcast its second-quarter conference call on its web site at www.nordson.com/investors on Wednesday, May 20, 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 http://www.nordson.com, @Nordson_Corp, or www.facebook.com/nordson.

NORDSON CORPORATION

FINANCIAL HIGHLIGHTS
(Dollars in thousands except for per-share amounts)
SECOND QUARTER PERIOD
Period Ending April 30, 2015
(Unaudited)

CONSOLIDATED STATEMENT OF INCOME

Second Quarter Year-to-Date
2015 2014 2015 2014
Net sales $ 400,727 $ 417,461 $ 779,735 $ 776,881
Cost of sales 178,837 181,909 349,124 346,547
Selling & administrative expenses 145,476 142,718 291,379 283,641
Operating profit 76,414 92,834 139,232 146,693
Interest expense – net (4,162 ) (3,315 ) (8,165 ) (6,778 )
Other income (expense) – net (687 ) (406 ) (789 ) (615 )
Income before income taxes 71,565 89,113 130,278 139,300
Income taxes 22,351 27,179 38,179 42,486
Net Income $ 49,214 $ 61,934 $ 92,099 $ 96,814
Return on sales 12 % 15 % 12 % 12 %
Return on average shareholders’ equity 23 % 27 % 22 % 21 %
Average common shares outstanding (000’s) 61,116 63,964 61,569 64,095
Average common shares and
common share equivalents (000’s) 61,638 64,557 62,094 64,711
Per share:
Basic earnings $ .81 $ .97 $ 1.50 $ 1.51
Diluted earnings $ .80 $ .96 $ 1.48 $ 1.50
Dividends paid $ .22 $ .18 $ .44 $ .36
Total dividends $ 13,481 $ 11,543 $ 27,116 $ 23,104

CONSOLIDATED BALANCE SHEET

April 30 October 31
2015 2014
Cash and marketable securities $ 51,454 $ 42,314
Receivables 316,091 365,844
Inventories 239,406 210,871
Other current assets 55,192 53,654
Total current assets 662,143 672,683
Property, plant & equipment – net 241,667 224,439
Other assets 1,346,427 1,383,008
$ 2,250,237 $ 2,280,130
Notes payable and debt due within one year $ 68,491 $ 116,932
Accounts payable and accrued liabilities 229,783 253,936
Total current liabilities 298,274 370,868
Long-term debt 819,203 682,868
Other liabilities 314,530 321,597
Total shareholders’ equity 818,230 904,797
$ 2,250,237 $ 2,280,130
Other information:
Employees 5,998 5,966
Common shares outstanding (000’s) 60,833 62,435

NORDSON CORPORATION

FINANCIAL HIGHLIGHTS

(Dollars in thousands)

SECOND QUARTER PERIOD
Period Ending April 30, 2015
(Unaudited)
Second 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 $ 203,273 $ 231,954 -2.3 % -10.1 % -12.4 % $ 397,486 $ 441,425 -1.5 % -8.5 % -10.0 %
Advanced technology systems 129,482 127,628 5.3 % -3.8 % 1.5 % 261,700 225,169 19.6 % -3.4 % 16.2 %
Industrial coating systems 67,972 57,879 23.3 % -5.9 % 17.4 % 120,549 110,287 14.1 % -4.8 % 9.3 %
Total sales by business segment $ 400,727 $ 417,461 3.6 % -7.6 % -4.0 % $ 779,735 $ 776,881 6.9 % -6.5 % 0.4 %
Second Quarter Year-to-Date

OPERATING PROFIT BY BUSINESS SEGMENT

2015 2014 2015 2014
Adhesive dispensing systems $ 50,780 $ 62,699 $ 94,109 $ 110,619
Advanced technology systems 24,770 30,842 51,588 41,220
Industrial coating systems 11,514 9,335 15,278 14,291
Corporate (10,650 ) (10,042 ) (21,743 ) (19,437 )
Total operating profit by business segment $ 76,414 $ 92,834 $ 139,232 $ 146,693
Second 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 $ 140,030 $ 125,693 11.4 % 11.4 % $ 262,854 $ 241,199 9.0 % 9.0 %
Americas 31,028 31,144 9.3 % -9.7 % -0.4 % 59,296 58,409 9.1 % -7.6 % 1.5 %
Europe 105,097 122,058 3.9 % -17.8 % -13.9 % 213,663 238,533 3.8 % -14.2 % -10.4 %
Japan 28,499 28,889 15.6 % -16.9 % -1.3 % 50,032 55,134 5.1 % -14.4 % -9.3 %
Asia Pacific 96,073 109,677 -10.4 % -2.0 % -12.4 % 193,890 183,606 7.8 % -2.2 % 5.6 %
Total Sales by Geographic Region $ 400,727 $ 417,461 3.6 % -7.6 % -4.0 % $ 779,735 $ 776,881 6.9 % -6.5 % 0.4 %
Second Quarter Year-to-Date

FREE CASH FLOW BEFORE DIVIDENDS

2015 2014 2015 2014
Net income $ 49,214 $ 61,934 $ 92,099 $ 96,814
Depreciation and amortization 16,238 14,743 32,222 29,231
Other non-cash charges 4,386 4,631 11,251 10,304
Changes in operating assets and liabilities 21,686 (26,806 ) (18,136 ) (34,160 )
Net cash provided by operating activities 91,524 54,502 117,436 102,189
Additions to property, plant and equipment (19,362 ) (8,603 ) (36,183 ) (16,494 )
Proceeds from the sale of property, plant and equipment 146 86 421 99
Free cash flow before dividends $ 72,308 $ 45,985 $ 81,674 $ 85,794

NORDSON CORPORATION

ORDER RATES FOR 12-WEEK PERIOD ENDING MAY 10, 2015
CHANGE FROM PRIOR YEAR

BUSINESS SEGMENT

% CHANGE

GEOGRAPHY

% CHANGE

Adhesive dispensing systems 8% United States 1%
Advanced technology systems -10% Americas 29%
Industrial coating systems 21% Europe 21%
Japan -6%
Total 3% Asia Pacific -15%
Total 3%
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

SECOND QUARTER PERIOD

Period Ending April 30, 2015

(Unaudited)
Second Quarter Year-to-Date
2015 2014 2015 2014
Diluted EPS as reported (U.S. GAAP) $ 0.80 $ 0.96 $ 1.48 $ 1.50
Short-term inventory purchase accounting adjustments 0.01 0.02
Severance and restructuring 0.01 0.01
Pension settlement expense 0.02
Discrete tax items (0.03 )
Diluted EPS as adjusted (Non-GAAP) $ 0.80 $ 0.97 $ 1.48 $ 1.53

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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