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Nordson Corporation has reported results for the second quarter of fiscal year 2018. For the quarter ended April 30, 2018, sales were $554 million, a 12% increase over the prior year’s second quarter. This change in sales included a decrease of approximately 1% in organic volume, growth related to the first year effect of acquisitions of approximately 7%, and an increase related to the favorable effects of currency translation as compared to the prior year’s second quarter of 5%. Reported operating profit was $127 million, net income was $91 million, and GAAP diluted earnings were $1.55 per share. Prior year second quarter sales, operating profit, net income and GAAP diluted earnings per share were $496 million, $104 million, $65 million and $1.11, 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.
“These results highlight the strategic fit of our recent acquisitions, along with the resilient performance of our base business, particularly against very challenging prior year comparisons where total company organic sales growth was 9% in the second quarter,” said Michael F. Hilton, Nordson president and chief executive officer. “Our global team helped to deliver record second quarter sales, operating profit, diluted earnings per share, and EBITDA. Adjusted EBITDA margin improved about 100 basis points, as compared to the prior year’s second quarter adjusted EBITDA margin, to 29% of sales,” Hilton added.
The current quarter’s results include incremental intangible asset amortization expense of $4 million over the prior year second quarter, or $0.05 per diluted share, and charges of approximately $2 million, or $0.03 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. Additionally, a discrete tax benefit of approximately $2 million, or $0.04 per diluted share, was recognized in the quarter for excess tax benefits related to share-based payment transactions which are credited to income tax expense.
Second Quarter Segment Results
Adhesive Dispensing Systems sales increased 5% compared to the prior year’s second quarter, inclusive of a decrease of 2% in organic volume and a 7% increase related to the favorable effects of currency translation as compared to the prior year. Reported operating margin in the segment was 29%, or 30% 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 19% compared to the prior year’s second quarter, including a 1% decrease in organic volume, a 17% increase related to the first year effect of acquisitions, and a 3% increase related to the favorable effects of currency translation as compared to the prior year. The second quarter’s acquisitive growth includes a partial month of the fiscal 2017 acquisition of InterSelect GmbH, two months of the fiscal 2017 acquisition of Vention Medical, and the fiscal 2018 acquisition of Sonoscan. Reported operating margin in the segment was 23% in the quarter, or 26% on an adjusted basis to exclude $4 million of incremental intangible asset amortization expense and $2 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 9% compared to the prior year’s second quarter, including approximately 4% organic growth and approximately 4% increase due to the favorable effects of currency translation as compared to the prior year. Reported operating margin in the segment was 18%.
Detailed results by operating segment and geography are included in the attached financial exhibits.
“Sales growth for the quarter is reflective of a very strong prior year. I am pleased with our team’s operating performance, where each segment delivered strong operating margins, driving record total company second quarter operating profit,” said Hilton.
Backlog for the quarter ended April 30, 2018 was approximately $460 million, an increase of 11% compared to the same period a year ago, inclusive of 10% organic growth and 1% growth due to acquisitions. Backlog amounts are calculated at April 30, 2018 exchange rates and include acquisitions that closed prior to the end of the second quarter of fiscal 2018.
For the third quarter of fiscal 2018, sales are expected to be in the range of up 1% to down 3% compared to the third quarter a year ago. This outlook includes a range for organic volume to be down 2 to 6%, 1% growth from the first year effect of acquisitions, and a positive currency effect of 2% 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 23%. GAAP diluted earnings per share are expected to be in the range of $1.47 to $1.63, with an estimated effective tax rate of approximately 25%. At the midpoint of the guidance, EBITDA and EBITDA margin are expected to be $161 million and 28%, respectively.
“As with our recently completed quarter, we are up against very challenging comparisons to an exceptionally strong prior year third quarter, where total company organic sales growth was 11%,” said Hilton. “Our global team remains committed to delivering the best technology solutions while employing continuous improvement initiatives to drive bottom line results, and we expect to generate total company organic sales growth in the low single-digits on a full year basis for fiscal 2018.”
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.