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Nordson Corporation has reported sales of $589 million for the third quarter of fiscal year 2017, up by 20% from the same period in the prior year. This change in sales included an 11% increase in organic volume, a 10% increase related to the first year effect of acquisitions, and a less than 1% decrease related to the unfavorable effects of currency translation as compared to the prior year’s third quarter.
Reported operating profit was $153 million, net income was $101 million, and GAAP diluted earnings per share were $1.74. Prior year third quarter sales, operating profit, net income and diluted earnings per share were $490 million, $124 million, $84 million and $1.46, respectively.
Third quarter EBITDA increased 29% to $179 million and EBITDA per diluted share increased 27% to $3.08, both compared to the prior year’s third quarter. Adjusted EBITDA increased 30% over the prior year third quarter. Free cash flow before dividends was $55 million in the quarter, an increase of 14% over the prior year.
"Nordson delivered the strongest quarter in its history with excellent organic growth across the business, strong contributions from recent acquisitions, and continued execution by our global team," said Nordson President and Chief Executive Officer Michael F. Hilton. "Robust customer demand for our technology in all segments and nearly all geographies drove organic revenue growth of 11 percent in the third quarter compared to the prior year period, exceeding the high end of our expectations. EBITDA margin improved two percentage points to 30 percent, and adjusted diluted earnings per share grew by 21 percent in third quarter, both compared to the same period a year ago. The current quarter’s reported and adjusted diluted earnings per share include fiscal 2017 acquisition intangible asset amortization expense of $6 million or $0.07 per diluted share in the quarter. We remain pleased with these acquisitions, which are performing as expected and strengthen our position in multiple profitable growth markets. We also continued to execute on continuous improvement initiatives across the enterprise during the quarter employing tools from the Nordson Business System."
Third Quarter Segment Results
Adhesive Dispensing Systems sales volume increased 6 percent compared to the prior year’s third quarter. "Our team delivered excellent results this quarter against a strong quarter a year ago where organic growth was 4 percent," said Hilton. "Packaging, nonwovens and polymer product lines drove the current quarter’s growth and all regions were positive with the exception of Europe. This is the ninth consecutive quarter of organic growth in this segment, reflecting the general stability of the consumer non-durable end markets served."
Reported operating margin in the segment improved 1 percentage point from the prior year to 28% in the quarter, including non-recurring restructuring charges of approximately $1 million related to previously announced facility consolidation.
Advanced Technology Systems sales volume increased 42% compared to the prior year’s third quarter, including an 18% increase in organic volume and a 24% increase related to the first year effect of acquisitions.
"Organic growth in the current quarter for this segment was outstanding and compares to a strong quarter a year ago where organic growth was 6 percent,” said Hilton. "All regions generated organic growth in the quarter compared to the prior year’s quarter, most by double digits. Customer demand for our automated dispensing, surface treatment and test and inspection solutions remained robust across multiple electronics end markets. Growth was also solid across multiple product lines in our growing medical portfolio."
The quarter’s acquisitive growth includes the LinkTech, ACE, InterSelect, PlasPak and Vention Medical acquisitions. Reported operating margin in the segment was 30% in the quarter, or 33% on an adjusted basis to exclude approximately $2 million in purchase accounting charges for the step-up in value of acquired inventory and $6 million of intangible asset amortization expense related to current year acquisitions.
Industrial Coating Systems sales volume increased 3% compared to the prior year’s third quarter. "The sales volume increase was driven by our cold material, liquid painting and UV curing product lines, with the Americas and Asia Pacific being strongest regionally," said Hilton.
Reported operating margin in the segment improved three percentage points to 20% in the quarter compared to the same period a year ago due to better product mix.
Order Rates and Backlog
Order rates for the 12-week period ending August 13, 2017, measured in constant currency, decreased by 2 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 2016 and 2017 acquisitions were owned in both years.
Backlog for the quarter ended July 31, 2017 was approximately $372 million, an increase of 10% compared to the same period a year ago and inclusive of 13% growth due to acquisitions offset by a 3% decrease in organic growth. Backlog amounts are calculated at July 31, 2017 exchange rates.
For the fourth quarter of fiscal 2017, sales are expected to increase 4% to 8% compared to the fourth quarter a year ago. This growth includes organic volume down 3% to down 7%, 10% growth from the first year effect of acquisitions, and a positive currency effect of 1% based on the current exchange rate environment. At the midpoint of this outlook, operating margin is expected to be approximately 21% and GAAP diluted earnings per share are expected to be in the range of $1.18 to $1.32, inclusive of $6 million or $0.07 per diluted share of fiscal 2017 acquisition intangible asset amortization expense. EBITDA, EBITDA margin and EBITDA per diluted share are expected to be $138 million, 26% and $2.37 at the midpoint of the guidance, respectively.
“Our fourth quarter guidance reflects our backlog, current 12 week order rates, and very challenging comparisons to the same period a year ago where we generated 13A% organic growth,” said Hilton. “At the low end of our guidance, Nordson is on pace to deliver record full year performance for most metrics, including revenue, earnings and EBITDA. At the midpoint of this guidance, full year organic growth is 6%, well above most global GDP forecasts and against a robust prior year comparison where we delivered 7% organic growth. Adjusted diluted earnings per share at this midpoint is $5.24, an increase of 12% compared to fiscal 2016, and inclusive of intangible asset amortization expense related to this year’s four acquisitions of approximately $15 million or $0.18 per share. We expect to continue generating strong levels of free cash, enabling us to maintain our balanced and flexible approach to capital deployment, with de-leveraging likely to remain the near term priority. Overall, we remain well positioned across the diverse end markets we serve, and our global team remains focused on creating shareholder value by offering customers innovative technology solutions and outstanding support.”
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. Visit Nordson, click here.