Nordson Corporation Reports Fiscal Year 2017 Fourth Quarter and Full Year Results

Nordson Corporation (Nasdaq: NDSN) today reported results for the fourth quarter of fiscal year 2017. For the quarter ending October 31, 2017, sales were $574 million, a 13 percent increase over the prior year’s fourth quarter. This change in sales included a 2 percent increase in organic volume, a 10 percent increase related to the first year effect of acquisitions, and a 1 percent increase related to the favorable effects of currency translation as compared to the prior year’s fourth quarter. Reported operating profit was $125 million, net income was $80 million, and GAAP diluted earnings per share were $1.37, inclusive of a $0.01 per share charge related to one-time items. Prior year fourth quarter sales, operating profit, net income and GAAP diluted earnings per share were $509 million, $111 million, $76 million and $1.31, respectively. A reconciliation of GAAP diluted EPS to adjusted diluted EPS is included in the attached financial exhibits.

Fourth quarter EBITDA increased 17 percent over the prior year fourth quarter to $150 million, or 26 percent of sales as compared to 25 percent in the prior year fourth quarter. Free cash flow before dividends was $111 million in the quarter, or 139 percent of net income. Calculations for EBITDA, adjusted EBITDA, free cash flow before dividends, and adjusted free cash flow before dividends are included in the attached exhibits.

"Nordson delivered strong results in the quarter against very challenging prior year comparisons where total company organic sales growth was 13 percent,” said Michael F. Hilton, Nordson President and Chief Executive Officer. "Driven largely by robust demand in electronics end markets within the Advanced Technology segment, results for the quarter exceeded our guidance.”

"This increase in volume, coupled with our continuous improvement initiatives, contributed to EBITDA margin improvement of 1 percentage point as compared to the prior year’s fourth quarter to 26 percent of sales,” Hilton added. "The current quarter’s reported diluted earnings per share and adjusted diluted earnings per share include intangible asset amortization expense of $6 million, or $0.07 per diluted share, related to fiscal 2017 acquisitions. These acquisitions continue to perform as expected and strengthen our position in various profitable growth sectors.”

Fourth Quarter Segment Results

Adhesive Dispensing Systems sales increased 6 percent compared to the prior year’s fourth quarter, inclusive of 4 percent organic growth and 2 percent related to the favorable effects of currency translation. "This marks the tenth consecutive quarter of organic growth in this segment. This is excellent performance, particularly against strong performance a year ago,” said Hilton. "All product lines and nearly every region contributed to the current quarter’s growth.” Reported operating margin in the segment improved 4 percentage points from the prior year to 28 percent in the quarter. The current quarter’s results for the segment include non-recurring restructuring charges of approximately $1 million related to a previously announced facility consolidation.

Advanced Technology Systems sales volume increased 29 percent compared to the prior year’s fourth quarter, including a 4 percent increase in organic volume and a 25 percent increase related to the first year effect of acquisitions. The effects of currency translation were immaterial. "Organic growth for this segment exceeded expectations in the current quarter and compares to an exceptional quarter a year ago where organic growth was 30 percent,” said Hilton. The quarter’s acquisitive growth includes one month of the fiscal 2016 LinkTech acquisition and the fiscal 2017 acquisitions of ACE, InterSelect, Plas-Pak and Vention Medical. Reported operating margin in the segment was 24 percent in the quarter, or 26 percent on an adjusted basis to exclude $6 million of intangible asset amortization expense related to current year acquisitions.

Industrial Coating Systems sales volume decreased 8 percent compared to the prior year’s fourth quarter, where organic growth was 12 percent. The effects of currency translation were immaterial. "Growth in most product lines was offset by strong prior year performance in our cold material product lines,” said Hilton. Reported operating margin in the segment was 18 percent.

Detailed results by operating segment and geography are included in the attached financial exhibits.

Fiscal 2017 Full Year Results

Sales for the fiscal year ended October 31, 2017 were $2.1 billion, an increase of 14 percent compared to the same period a year ago. This change in sales included organic volume growth of 8 percent and a 7 percent increase related to the first year effect of acquisitions, offset by a 1 percent impact due to the unfavorable effects of currency translation. Full year operating profit increased 18 percent to $458 million, net income was $296 million, and GAAP diluted earnings per share were $5.08, or $5.37 on a normalized basis to exclude one-time items. Prior year sales, operating profit, net income, and GAAP diluted earnings per share were $1.8 billion, $388 million, $272 million, and $4.73, respectively.

"Full year organic growth of 8 percent against a very challenging prior year where we generated organic growth of 7 percent is outstanding performance and reflective of both the value we bring to our customers and the quality of the global Nordson team,” said Hilton. "In addition to executing on driving growth initiatives we also delivered on increasing performance where, excluding one-time charges highlighted in the EPS reconciliation financial exhibit and approximately $15 million of intangible asset amortization expense for fiscal 2017 acquisitions, operating margin improved from 22 percent to 24 percent.”

Full year EBITDA increased 19 percent to $547 million and adjusted EBITDA increased 22 percent to $565 million, both compared to the prior year. EBITDA margin and adjusted EBITDA margin were 26 percent and 27 percent, respectively, both up over 100 basis points as compared to the prior year. Free cash flow before dividends of $282 million is 95 percent of net income, or 100 percent on an adjusted free cash flow basis. In addition to funding organic and acquisitive growth initiatives, Nordson paid $64 million in dividends for a full year payout ratio of 22 percent and reduced leverage on the balance sheet to just under 2.5 times trailing-twelve-months EBITDA.

Backlog

Backlog for the quarter ended October 31, 2017 was approximately $402 million, an increase of 45 percent compared to the same period a year ago, inclusive of 28 percent organic growth and 17 percent growth due to acquisitions. Backlog amounts are calculated at October 31, 2017 exchange rates.

Outlook

For the first quarter of fiscal 2018, sales are expected to increase 30 percent to 34 percent compared to the first quarter a year ago. This growth includes organic volume up 15 percent to 19 percent, 11 percent growth from the first year effect of acquisitions, and a positive currency effect of 4 percent based on the current exchange rate environment. At the midpoint of this outlook, operating margin is expected to be approximately 22 percent and GAAP diluted earnings per share are expected to be in the range of $1.29 to $1.39, inclusive of $6 million or $0.07 per diluted share of intangible asset amortization expense related to fiscal 2017 acquisitions. EBITDA and EBITDA margin are expected to be $146 million and 27 percent at the midpoint of the guidance, respectively.

"Our first quarter guidance is very strong, reflective of our current backlog, and is largely driven by the Advanced Technology segment, where strong demand in electronics and medical end markets is driving performance,” said Hilton. "This exceptional growth against very challenging comparisons to the same period a year ago where we generated 10 percent total company organic growth is a result of our technology leadership and diversification efforts. The short cycle nature of our end markets does not provide much visibility beyond a fiscal quarter, however, we do expect growth rates to moderate beyond our first quarter, particularly when you consider our challenging comparisons to prior year.”

Nordson management will provide additional commentary on these results and outlook during a conference call Thursday, December 14, 2017 at 8:30 a.m. eastern time which can be accessed at www.nordson.com/investors. 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 Gregory A. Thaxton, Senior Vice President and Chief Financial Officer at (440) 414-5388 or greg.thaxton@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 35 countries. Visit Nordson on the web at http://www.nordson.com, @Nordson_Corp, or www.facebook.com/nordson.

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