Nordson Corporation Reports Fiscal Year 2020 Third Quarter Results

WESTLAKE, Ohio--(BUSINESS WIRE)--August 19, 2020--Nordson Corporation (Nasdaq: NDSN) today reported results for the third quarter of fiscal year 2020. For the quarter ended July 31, 2020, sales were $538 million, a 4% decrease compared to the prior year’s third quarter sales of $560 million. The diversity of our end market exposure and broad global customer base contributed to the sales performance in the quarter. The sales decrease was primarily organic, as the benefits from the recent acquisition of Fluortek were offset by unfavorable currency impacts.

Operating profit in the quarter was $112 million, or 21% of sales. Excluding non-recurring charges associated with cost structure simplification actions and the amortization of the step-up in acquired inventory, adjusted operating profit was $120 million, a 9% decrease compared to the prior year’s adjusted operating profit. EBITDA, which is defined as adjusted operating profit plus depreciation and amortization, in the quarter totaled $148 million, or 28% of sales.

Net income was $87 million, and earnings per diluted share were $1.49. Adjusted earnings, which excludes non-recurring charges, discrete tax benefits of $12 million and a non-cash, non-operating pension settlement charge of $3 million, totaled $83 million, or $1.42 per share.

“Throughout the quarter, our team remained focused on protecting the health and safety of our employees and responding to the needs of our customers,” commented Sundaram Nagarajan, president and chief executive officer. “At the same time, we made solid progress on our long-term strategic priorities by acquiring Fluortek, a high-quality medical company, and leveraging the next generation of the Nordson Business System – the NBS Next growth framework – to prioritize investments that will drive profitable growth and identify opportunities to simplify our cost structure.”

Third Quarter Segment Results

Industrial Precision Solutions sales of $289 million decreased approximately 6% compared to the prior year’s third quarter. Stable performance of those product lines serving consumer non-durable end markets was offset by weakness in sales of product lines serving industrial end markets. Operating profit, which included $3 million in structural cost reduction actions, totaled $75 million. Adjusted operating profit was $78 million, or 27% of sales, a decrease of 13% from the prior year adjusted operating profit.

Advanced Technology Solutions sales of $249 million decreased approximately 2% compared to the prior year’s third quarter. The Fluortek acquisition increased sales approximately 2%, which was more than offset by organic volume declines and unfavorable currency impacts. Sales volume increases in test and inspection product lines serving electronics end markets and stable demand in medical product lines were offset by weakness in fluid dispense product lines serving industrial end markets. Operating profit, which included $3 million of structural cost reduction actions and the amortization of the step-up in acquired inventory, totaled $50 million. Adjusted operating profit was $53 million, or 21% of sales, which was in line with prior year profits.

Outlook

“Given the challenging macro-economic environment, I am very pleased with our performance in the quarter and the progress we are making in aligning the organization,” Nagarajan stated. “We will continue to invest in these uncertain times and remain optimistic about the potential of the highly diversified and differentiated Nordson portfolio.”

While the short-term environment remains difficult to predict, we expect fiscal fourth quarter revenue to be commensurate with to slightly better than fiscal third quarter revenue based on the current order entry trends and order backlog. Weekly order entry rates have improved from the lower levels experienced during the third quarter. Entering the fourth quarter, trailing four-week order entry is 93% of prior year levels and backlog totaled $423 million. Operating profit is forecasted to improve modestly in the fiscal fourth quarter compared to the third quarter, as cost reduction initiatives begin to deliver benefits.

Nordson management will provide additional commentary on these results and outlook during a conference call Thursday, August 20, 2020 at 8:30 a.m. eastern time, which can be accessed at https://investors.nordson.com. 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 Lara Mahoney, vice president, investor relations and corporate communications at (440) 204-9985 or lara.mahoney@nordson.com.

Certain statements contained in this release are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements may be identified by terminology such as "may," "will," "should," "could," "expects," "anticipates," "believes," "projects," "forecasts," “outlook,” “guidance,” "continue," “target,” or the negative of such terms or comparable terminology. These statements reflect management’s current expectations and involve a number of risks and uncertainties. These risks and uncertainties include, but are not limited to, U.S. and international economic conditions, financial, and market conditions, currency exchange rates and devaluations, possible acquisitions including the Company’s ability to successfully integrate acquisitions; the effects of changes in U.S. trade policy and trade agreements; the effects of changes in tax law; and the possible effects of events beyond our control, such as political unrest, acts of terror, natural disasters and pandemics, including the current coronavirus (COVID-19) pandemic and the other factors discussed in Item 1A (Risk Factors) in the Company’s most recently filed Annual Report on Form 10-K and on its Form 10-Q with the Securities and Exchange Commission, which should be reviewed carefully. The Company undertakes no obligation to update or revise any forward-looking statement in this press release.

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.

Attachment #1
NORDSON CORPORATION
CONSOLIDATED STATEMENTS OF INCOME
(Dollars in thousands except for per-share amounts)
THIRD QUARTER PERIOD
Period Ended July 31, 2020
(Unaudited)
CONSOLIDATED STATEMENTS OF INCOME
		Three Months Ended								Nine Months Ended
		July 31, 2020				July 31, 2019				July 31, 2020				July 31, 2019
Sales		$	538,181			$	559,746			$	1,562,575			$	1,608,775
Cost of sales			257,373				257,123				728,975				735,647
Gross margin			280,808				302,623				833,600				873,128
Gross profit %			52.2	%			54.1	%			53.3	%			54.3	%
Selling & administrative expenses			168,753				172,347				521,423				529,675
Operating profit			112,055				130,276				312,177				343,453
Interest expense - net			(6,880	)			(10,989	)			(24,047	)			(35,085	)
Other income (expense) - net			(9,668	)			210				(12,943	)			(4,546	)
Income before income taxes			95,507				119,497				275,187				303,822
Income taxes			8,526				25,569				44,123				69,404
Net Income		$	86,981			$	93,928			$	231,064			$	234,418
Weighted-average common shares outstanding:
Basic			57,693				57,395				57,679				57,463
Diluted			58,427				58,117				58,404				58,183
Earnings per share:
Basic		$	1.51			$	1.64			$	4.01			$	4.08
Diluted		$	1.49			$	1.62			$	3.96			$	4.03

Attachment #2
NORDSON CORPORATION
CONSOLIDATED BALANCE SHEET AND CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in thousands)
THIRD QUARTER PERIOD
Period Ended July 31, 2020
(Unaudited)
CONSOLIDATED BALANCE SHEET
		July 31, 2020			October 31, 2019
Cash and cash equivalents		$	221,783		$	151,164
Receivables - net			498,283			530,765
Inventories - net			310,557			283,399
Other current assets			50,075			45,867
Total current assets			1,080,698			1,011,195
Property, plant & equipment - net			414,982			398,895
Goodwill			1,701,914			1,614,739
Other assets			622,364			491,618
		$	3,819,958		$	3,516,447
Current maturities of long-term debt		$	43,598		$	168,738
Accounts payable and accrued liabilities			303,620			308,888
Total current liabilities			347,218			477,626
Long-term debt			1,221,082			1,075,404
Other liabilities			481,746			382,372
Total shareholders' equity			1,769,912			1,581,045
		$	3,819,958		$	3,516,447

	NORDSON CORPORATION
	CONSOLIDATED BALANCE SHEET AND CONSOLIDATED STATEMENTS OF CASH FLOWS
	(Dollars in thousands)
	THIRD QUARTER PERIOD
	Period Ended July 31, 2020
	(Unaudited)
	CONSOLIDATED STATEMENTS OF CASH FLOWS
			Nine Months Ended
			July 31, 2020				July 31, 2019
	Cash flows from operating activities:
	Net Income		$	231,064			$	234,418
	Depreciation and amortization			84,164				83,331
	Other non-cash items			8,751				14,699
	Changes in working capital			(14,021	)			(96,017	)
	Net cash provided by operating activities			309,958				236,431
	Cash flows from investing activities:
	Additions to property, plant and equipment			(36,096	)			(46,002	)
	Acquisitions			(125,260	)			(12,110	)
	Other - net			(1,836	)			193
	Net cash used in investing activities			(163,192	)			(57,919	)
	Cash flows from financing activities:
	Issuance (repayment) of long-term debt			1,740				36,009
	Repayment of finance lease obligations			(5,814	)			(4,442	)
	Dividends paid			(65,737	)			(60,325	)
	Issuance of common shares			46,304				17,275
	Purchase of treasury shares			(51,897	)			(118,124	)
	Net cash used in financing activities			(75,404	)			(129,607	)
	Effective of exchange rate change on cash			(743	)			3,262
	Net change in cash and cash equivalents			70,619				52,167
	Cash and cash equivalents:
	Beginning of period			151,164				95,678
	End of period		$	221,783			$	147,845

Attachment #3
NORDSON CORPORATION
SALES BY SEGMENT AND GEOGRAPHIC REGION
(Dollars in thousands)
THIRD QUARTER PERIOD
Period Ended July 31, 2020
(Unaudited)
		Three Months Ended						Sales Variance
SALES BY SEGMENT		July 31, 2020			July 31, 2019			Organic			Acquisition			Currency			Total
Industrial precision solutions		$	288,965		$	306,648		-4.5	%		-			-1.3	%		-5.8	%
Advanced technology solutions			249,216			253,098		-3.3	%		1.8	%		-			-1.5	%
Total sales		$	538,181		$	559,746		-4.0	%		0.8	%		-0.7	%		-3.9	%
		Three Months Ended						Sales Variance
SALES BY GEOGRAPHIC REGION		July 31, 2020			July 31, 2019			Organic			Acquisition			Currency			Total
United States		$	183,508		$	190,460		-4.4	%		0.8	%		-			-3.6	%
Americas			38,265			47,040		-17.5	%		4.2	%		-5.4	%		-18.7	%
Europe			132,107			143,449		-7.6	%		0.3	%		-0.6	%		-7.9	%
Japan			31,226			30,488		0.6	%		0.4	%		1.4	%		2.4	%
Asia Pacific			153,075			148,309		3.7	%		0.3	%		-0.8	%		3.2	%
Total sales		$	538,181		$	559,746		-4.0	%		0.8	%		-0.7	%		-3.9	%
		Nine Months Ended						Sales Variance
SALES BY SEGMENT		July 31, 2020			July 31, 2019			Organic			Acquisition			Currency			Total
Industrial precision solutions		$	835,038		$	871,925		-2.8	%		-			-1.4	%		-4.2	%
Advanced technology solutions			727,537			736,850		-2.1	%		1.1	%		-0.3	%		-1.3	%
Total sales		$	1,562,575		$	1,608,775		-2.5	%		0.5	%		-0.9	%		-2.9	%
		Nine Months Ended						Sales Variance
SALES BY GEOGRAPHIC REGION		July 31, 2020			July 31, 2019			Organic			Acquisition			Currency			Total
United States		$	560,941		$	551,510		1.2	%		0.5	%		-			1.7	%
Americas			106,021			123,159		-12.0	%		1.8	%		-3.7	%		-13.9	%
Europe			394,554			425,650		-6.0	%		0.5	%		-1.8	%		-7.3	%
Japan			90,353			89,566		-1.1	%		0.3	%		1.7	%		0.9	%
Asia Pacific			410,706			418,890		-1.3	%		0.3	%		-1.0	%		-2.0	%
Total sales		$	1,562,575		$	1,608,775		-2.5	%		0.5	%		-0.9	%		-2.9	%

Attachment #4
NORDSON CORPORATION
RECONCILIATION OF NON-GAAP MEASURES - ADJUSTED OPERATING PROFIT AND EBITDA
(Dollars in thousands)
THIRD QUARTER PERIOD
Period Ended July 31, 2020
(Unaudited)
			Three Months Ended												Nine Months Ended
			July 31, 2020						July 31, 2019						July 31, 2020						July 31, 2019
SALES BY SEGMENT
Industrial precision solutions			$	288,965					$	306,648					$	835,038					$	871,925
Advanced technology solutions				249,216						253,098						727,537						736,850
Total sales			$	538,181					$	559,746					$	1,562,575					$	1,608,775
OPERATING PROFIT
Industrial precision solutions			$	74,744					$	88,811					$	207,603					$	229,702
Advanced technology solutions				49,952						53,562						140,928						150,882
Corporate				(12,641	)					(12,097	)					(36,354	)					(37,131	)
Total operating profit			$	112,055					$	130,276					$	312,177					$	343,453
OPERATING PROFIT ADJUSTMENTS (1)
Industrial precision solutions			$	2,813					$	543					$	3,477					$	1,809
Advanced technology solutions				3,413						835						6,383						835
Corporate				1,387						-						1,387						192
Total adjustments			$	7,613					$	1,378					$	11,247					$	2,836
ADJUSTED OPERATING PROFIT (NON-GAAP)						% of Sales						% of Sales						% of Sales						% of Sales
Industrial precision solutions			$	77,557		27	%		$	89,354		29	%		$	211,080		25	%		$	231,511		27	%
Advanced technology solutions				53,365		21	%			54,397		21	%			147,311		20	%			151,717		21	%
Corporate				(11,254	)					(12,097	)					(34,967	)					(36,939	)
Total operating profit - adjusted			$	119,668		22	%		$	131,654		24	%		$	323,424		21	%		$	346,289		22	%
DEPRECIATION & AMORTIZATION
Industrial precision solutions			$	8,588					$	8,699					$	25,732					$	25,671
Advanced technology solutions				17,738						17,581						51,980						51,785
Corporate				2,174						1,563						6,452						5,875
Total depreciation & amortization			$	28,500					$	27,843					$	84,164					$	83,331
EBITDA (NON-GAAP)						% of Sales						% of Sales						% of Sales						% of Sales
Industrial precision solutions			$	86,145		30	%		$	98,053		32	%		$	236,812		28	%		$	257,182		29	%
Advanced technology solutions				71,103		29	%			71,978		28	%			199,291		27	%			203,502		28	%
Corporate				(9,080	)					(10,534	)					(28,515	)					(31,064	)
Total EBITDA			$	148,168		28	%		$	159,497		28	%		$	407,588		26	%		$	429,620		27	%

(1) Represents charges associated with our 2020 and 2019 acquisitions, and costs and adjustments related to cost structure simplification actions.
Adjusted operating profit and EBITDA are non-GAAP measures used by management to evaluate the Company's ongoing operations.
Adjusted operating profit is defined as operating profit plus certain adjustments, such as cost structure simplification actions, and non-cash inventory charges related to acquisitions. EBITDA is defined as adjusted operating profit plus depreciation and amortization.

Attachment #5
NORDSON CORPORATION
RECONCILIATION OF NON-GAAP MEASURES - PROFITABILITY
(Dollars in thousands)
THIRD QUARTER PERIOD
Period Ended July 31, 2020
(Unaudited)
			Three Months Ended								Nine Months Ended
GAAP AS REPORTED			July 31, 2020				July 31, 2019				July 31, 2020				July 31, 2019
Operating profit			$	112,055			$	130,276			$	312,177			$	343,453
Other / interest income (expense) - net				(16,548	)			(10,779	)			(36,990	)			(39,631	)
Net income				86,981				93,928				231,064				234,418
EPS diluted			$	1.49			$	1.62			$	3.96			$	4.03
Shares outstanding - diluted				58,427				58,117				58,404				58,183
OPERATING PROFIT ADJUSTMENTS
Inventory step-up amortization			$	1,229			$	188			$	1,229			$	188
Severance and other				6,384				1,190				10,018				2,648
NON-OPERATING EXPENSE ADJUSTMENTS
Pension settlement loss			$	2,508			$	-			$	2,508			$	-
Total adjustments			$	10,121			$	1,378			$	13,755			$	2,836
Adjustments net of tax			$	7,966			$	1,071			$	10,825			$	2,195
Other discrete tax items			$	(11,816	)		$	(1,068	)		$	(14,491	)		$	740
EPS effect of adjustments and other discrete tax items			$	(0.07	)		$	0.00			$	(0.06	)		$	0.05
NON-GAAP MEASURES - ADJUSTED PROFITABILITY
Operating profit			$	119,668			$	131,654			$	323,424			$	346,289
Operating profit % of sales				22.2	%			23.5	%			20.7	%			21.5	%
Net income			$	83,131			$	93,931			$	227,398			$	237,353
EPS diluted			$	1.42			$	1.62			$	3.89			$	4.08

Adjusted operating profit is defined as operating profit plus certain adjustments such as cost structure simplification actions and non-cash inventory charges related to acquisitions. Adjusted operating profit as a percentage of sales is defined as adjusted operating profit divided by sales.
Adjusted net income is defined as net income plus tax effected adjustments and other discrete tax items.
Adjusted EPS is defined as GAAP EPS adjusted for tax effected adjustments and other discrete tax items.
Management does not consider the effects of the adjustments identified above in evaluating the core operational activities of the Company. Management uses these non-GAAP measures internally to make strategic decisions, forecast future results, and evaluate the Company's current performance. Given management's use of these non-GAAP measures, the Company believes these measures are important to investors in understanding the Company's current and future operating results as seen through the eyes of management. In addition, management believes these non-GAAP measures are useful to investors in enabling them to better assess changes in the Company's core business across different time periods. Because non-GAAP financial measures are not standardized, it may not be possible to compare these financial measures to other companies' non-GAAP financial measures, even if they have similar names.
Amounts may not add due to rounding.