Nordson Reports 35% Sales Increase in Q1 Fiscal 2018

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Nordson Corporation reported results for the first quarter of fiscal year 2018. For the quarter ending January 31, 2018, sales were $550 million, a 35% increase over the prior year’s first quarter. This change in sales included organic volume growth of approximately 19%, growth related to the first year effect of acquisitions of approximately 12%, and an increase related to the favorable effects of currency translation as compared to the prior year’s first quarter of approximately 5%. Reported operating profit was $118 million, net income was $105 million, and GAAP diluted earnings per share were $1.78, inclusive of a net $0.43 per diluted share benefit from one-time items mostly related to the impact of the U.S. tax reform. Prior year first quarter sales, operating profit, net income and GAAP diluted earnings per share were $407 million, $76 million, $50 million and $0.86, respectively. A reconciliation of GAAP diluted earnings per share to adjusted diluted earnings per share and calculations for EBITDA, adjusted EBITDA, free cash flow before dividends, and adjusted free cash flow before dividends are included in the attached financial exhibits.

“Our team delivered impressive sales, operating profit, diluted earnings per share, and EBITDA in the quarter against very challenging prior year comparisons, where total company organic sales growth was 10%,” said Michael F. Hilton, Nordson President and Chief Executive Officer. “Demand was robust in most all product lines, led by electronics and medical end markets within the Advanced Technology Systems segment. With this strong top line growth, Nordson delivered exceptional results for the quarter where EBITDA margin improved 250 basis points as compared to the prior year’s first quarter to 26% of sales,” Hilton added.

The current quarter’s results include incremental intangible asset amortization expense of $6 million over the prior year, or $0.08 per diluted share, and charges of $1 million, or $0.01 per diluted share, for short-term purchase accounting related to the step-up in value of acquired inventory and $1 million, or $0.01 per diluted share, of non-recurring restructuring charges. As a result of U.S. federal income tax reform legislation passed in 2017, a one-time discrete tax benefit of $22 million, or $0.37 per diluted share, was recognized in the quarter. This includes a benefit of $45 million related to the revaluation of net deferred tax liabilities and a charge of $23 million for the transition tax on deemed unrepatriated foreign earnings. Additionally, a discrete tax benefit of $5 million, or $0.08 per diluted share, was recognized in the quarter related to the adoption of a new accounting standard requiring excess tax benefits related to share-based payment transactions to be credited to income tax expense rather than equity.

First Quarter Segment Results

Adhesive Dispensing Systems sales increased 6% compared to the prior year’s first quarter, inclusive of less than 1% organic growth and a 6% increase related to the favorable effects of currency translation as compared to the prior year. Solid growth in most product lines was offset by softness in polymer processing product lines.  Reported operating margin in the segment was 24%, or 25% on an adjusted basis to exclude non-recurring restructuring charges of $1 million related to a previously announced U.S. facility consolidation.

Advanced Technology Systems sales increased 87% compared to the prior year’s first quarter, including a 50% increase in organic volume, a 33% increase related to the first year effect of acquisitions, and a 4% increase related to the favorable effects of currency translation as compared to the prior year. All product lines contributed to this growth.  The quarter’s acquisitive growth includes the fiscal 2017 acquisitions of ACE, InterSelect, Plas-Pak and Vention Medical, and one month of the fiscal 2018 acquisition of Sonoscan. Reported operating margin in the segment was 25% in the quarter, or 27% on an adjusted basis to exclude $6 million of incremental intangible asset amortization expense and $1 million of short-term purchase accounting charges related to the step-up in value of acquired inventory from the Sonoscan acquisition.

Industrial Coating Systems sales increased approximately 7% compared to the prior year’s first quarter, including 3% organic growth and a 3% increase due to the favorable effects of currency translation as compared to the prior year. Powder, container, and liquid finishing product lines drove the growth this quarter.  Reported operating margin in the segment was 18%, a 450 basis point improvement compared to the prior year’s first quarter.  

Detailed results by operating segment and geography are included in the attached financial exhibits.  “Excluding the one-time charges in both years and the incremental $6 million of intangible asset amortization expense in the current year’s first quarter, adjusted operating margin was 23% in the current quarter, up 420 basis points over the prior year, representing very strong first quarter performance,” said Hilton.

Backlog

Backlog for the quarter ended January 31, 2018 was approximately $405 million, an increase of 24% compared to the same period a year ago, inclusive of 9% organic growth and 15% growth due to acquisitions. Backlog amounts are calculated at January 31, 2018 exchange rates and include acquisitions that closed prior to the end of the first quarter of 2018.

Outlook

For the second quarter of fiscal 2018, sales are expected to increase 9% to 13% compared to the second quarter a year ago.  This outlook includes a range for organic volume to be down 3% to up 1%, 7% growth from the first year effect of acquisitions, and a positive currency effect of 5% based on the current exchange rate environment as compared to the prior year. At the midpoint of this outlook, operating margin is expected to be approximately 22%, or 23% excluding $6 million of incremental intangible amortization expense over the prior year. GAAP diluted earnings per share are expected to be in the range of $1.33 to $1.47, inclusive of $0.08 per diluted share of incremental intangible asset amortization expense over the prior year and an estimated effective tax rate of 25%. At the midpoint of the guidance, EBITDA and EBITDA margin are expected to be $149 million and 27%, respectively.

“Current backlog and project timing indicates more modest sales growth at the midpoint of our second quarter guidance, where prior year total company organic sales growth was 9%,” said Hilton. “We continue to focus our efforts on technology leadership, product-tiering, new applications, and market penetration to drive growth over the long term.”

About Nordson Corporation 

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. For more information, click here.