Nordson Corporation
Transcript of Nordson Corporation
: NDSN
A premier industrial technology company focused on
precision dispensing, fluid control and related processes
Investor PresentationNordson Corporation
August 20, 2018 | Fiscal 2018 3Q Results & 4Q Outlook
Safe Harbor Statement Under the Private Securities
Litigation Reform Act of 1995
Information in this presentation may contain “forward-looking statements” within the meaning of the U.S. Private Securities Litigation Reform Act of 1995. Forward-looking statements can be identified by words such as “may,” “will,” “should,” “expects,” “intends,” “plans,” “anticipates,” “believes,” “estimates,” “predicts,” “projects,” or “potential” or the negative of these words and phrases or similar words or phrases which are predictions of or indicate future events or trends and which do not relate solely to historical matters.
All statements regarding our future performance, earnings projections, events or developments are forward-looking statements. These forward-looking statements are made based on known events and circumstances at the time of release, and as such, are subject in the future to unforeseen uncertainties and risks that could cause actual results to differ materially from those contained in any forward-looking statement. Such risks and uncertainties are described under “Risk Factors” in Item 1A of our annual report on Form 10-K and any updates to those factors set forth in our subsequent quarterly reports on Form 10-Q or current reports on Form 8-K. We make these statements as of the date of this disclosure, and undertake no obligation to update them unless otherwise required by law.
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Nordson at a GlanceA premier industrial technology company focused on precision dispensing,
fluid control and related processes
▪ Founded in 1954
▪ FY17 sales = $2.1 billion
▪ 7,500 employees
▪ Direct presence in 35+ countries
▪ Best-in-class technology
▪ Founded in 1954
▪ FY17 sales = $2.1 billion
▪ 7,500 employees
▪ Direct presence in 35+ countries
▪ Best-in-class technology
▪ Diversified, growing end markets
▪ Market leading positions
▪ Sustained financial performance
▪ Outstanding long-term returns
▪ Diversified, growing end markets
▪ Market leading positions
▪ Sustained financial performance
▪ Outstanding long-term returns
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Product Type
High percentage of
recurring revenue
from parts and
consumables
Diversified Sources of RevenueFY2017 Profile - $2.1 billion
Geography
Nearly 70% of
revenue outside USA.
Direct presence in
over 35 countries.
Diverse End Markets
Consumer non-durables,
durables, industrial,
medical and technology
Operating Segments
Three segments with leading
product lines and brands
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Investment Highlights
8%
CAGR
2012-2017
Strong
growth:
organic and
acquisitive
Strong
growth:
organic and
acquisitive
Strong cash
returns to
shareholders
Strong cash
returns to
shareholders
Reliable and
consistent
dividend
Reliable and
consistent
dividend
Outstanding
long term
Total
Shareholder
Returns
Outstanding
long term
Total
Shareholder
Returns
$1.0 billion
Share
repurchases &
dividends
2012-2017
54 Yearsof annual
increases
(22% payout
ratio in 2017)
$1.5 billion
100% of
net income
2012-2017
High level of
free cash
flow before
dividends
High level of
free cash
flow before
dividends
122%
TSR*
2012-2017
Outstanding
gross
margins
Outstanding
gross
margins
56%
Gross
Margin
Average
2012-2017
*((Share Price at 10/31/2017 – Share Price at 10/31/2012 + dividends) / Share Price at 10/31/2012 ) = (($126.69 - $59.03 + $4.39) / $59.03 ) = 122%
Excellent
EBITDA
margins
Excellent
EBITDA
margins
25%
EBITDA
Margin
Average
2012-2017
5
Total Shareholder Return Above Our Peers
*Peer Group = AIN, AME, ATU, B, DCI, ENTG, ESL, FLIR, GGG, GTLS, IEX, ITT, KEYS, LECO, ROP, TER, WTS, WWD
Source:
2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
Nordson Corporation $100.00 $70.90 $105.80 $160.42 $194.33 $252.55 $311.36 $334.00 $314.64 $448.10 $572.29
S&P 500 Index $100.00 $63.90 $70.17 $81.76 $88.37 $101.81 $129.48 $151.84 $159.73 $166.93 $206.38
S&P MidCap 400 $100.00 $63.54 $75.09 $95.84 $104.03 $116.63 $155.68 $173.82 $179.77 $191.02 $235.87
S&P 500 Ind. Machinery $100.00 $57.23 $76.58 $97.99 $101.38 $121.33 $173.25 $195.37 $195.07 $222.74 $307.08
S&P MidCap 400 Ind. Machinery $100.00 $57.90 $71.57 $93.02 $105.80 $115.55 $160.42 $170.00 $142.30 $167.01 $239.53
Peer Group $100.00 $67.28 $72.96 $89.87 $100.94 $115.31 $160.25 $176.57 $169.73 $174.34 $261.11
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Why invest in Nordson?
Outstanding Culture and ValuesOutstanding Culture and Values
Leading Global BusinessesLeading Global Businesses
Clear Strategy and Goals
Strong Execution and PerformanceStrong Execution and Performance
Numerous Growth OpportunitiesNumerous Growth Opportunities
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Common Themes of our 2018–2023 Strategic Plan Continue to be a Premier Industrial Technology Company
▪ Product innovation
▪ New applications
▪ Emerging markets
▪ Recapitalize
installed base
▪ Segmentation
Accelerate
organic
growth
▪ Embed Nordson
Business System
▪ Expand margins
▪ Working capital
initiatives
▪ Drive synergies
with acquisitions
Further
optimize our
business
▪ Targeted spaces
▪ Growth and
technology
▪ Cultivate
proprietary deals
▪ Execute and close
deals effectively
▪ Disciplined pricing
▪ Fast integration
Add key
acquisitions
▪ Deepen bench
strength
▪ Leadership
development
▪ Rotational
assignments
▪ Diversity
Enhance
and expand
organization
capability
Deliver top quartile total shareholder returns
Support our communities & good corporate citizenship8
Revenue Operating Profit
2018–2023 Strategic Plan TargetsFocused initiatives drive premium sales growth and expand profitability
~2x global GDP%
Outpace Revenue
Growth %
Underlying
Markets
Growth
Initiatives
Continuous
Improvement
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The Nordson Business System Driving Continuous Improvement Across the Organization
Key Performance
Indicators
▪Growth Initiatives
▪Price Effectiveness
▪Cost Reduction Initiatives
▪Cost of Poor Quality
▪Customer Delivery
Performance
▪Days of Sales in Inventory
▪Productivity
▪Sales from New Products
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Why invest in Nordson?
Outstanding Culture and ValuesOutstanding Culture and Values
Leading Global BusinessesLeading Global Businesses
Clear Strategy and GoalsClear Strategy and Goals
Strong Execution and Performance
Numerous Growth OpportunitiesNumerous Growth Opportunities
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0%
5%
10%
15%
20%
25%
30%
'07 '08 '09* '10 '11 '12 '13 '14 '15 '16 '17
Strong Top Line Growthorganic, acquisitive, and currency
0%
10%
20%
30%
40%
50%
60%
70%
'07 '08 '09 '10 '11 '12 '13 '14 '15 '16 '17
Industry Leading Gross MarginsConsistently mid 50s and above
Mill
ions o
f $
Financial Highlights
*FY09 excludes non-cash charges for impairment of goodwill and other long-lived assets. FY15 results impacted by significant negative currency translation effects compared to the prior year. source – NDSN SEC filings
Strong Operating MarginsContinuous Improvement Initiatives
$1.00
$1.50
$2.00
$2.50
$3.00
$3.50
$4.00
$4.50
$5.00
$5.50
'07 '08 '09* '10 '11 '12 '13 '14 '15 '16 '17
EPS Growth Outpaces Sales Growth Over Time
Dilutive effect
of acquisitions
10 Year CAGR = 7.6%
10 Year CAGR = 14.3%
+14.3%
over FY16
+0.2 pts
over FY16
+0.7 pts
over FY16
+7.4%
over FY16
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currency
$-
$50,000
$100,000
$150,000
$200,000
$250,000
$300,000
$350,000
Free cash flow before dividends Net income
Strong Cash Generation Funds Growth and Returns to Shareholders
Strong Cash Conversion: 2007–2017Free cash flow before dividends = 102% of net income
Cash from Operations: 2007–2017> 10% as a % of sales every year
$000
$000
*FY09 excludes non-cash charges for impairment of goodwill and other long-lived assets. FY15 results impacted by significant negative currency translation effects compared to the prior year. source – NDSN SEC filings
$0
$50,000
$100,000
$150,000
$200,000
$250,000
$300,000
$350,000
$400,000
Net cash provided by operating activities
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$30.0
$49.2 $49.1 $66.7
$64.6
$72.8 $332.4
$441.7 $176.3
$186.4
$75.6
$42.7
$805.9
$1,728.6
$33.8 $40.5
$48.4
$54.8
$56.4
$63.8
$297.7
$88.5 $33.4
$166.4
$383.9
$33.4
$3.2
$708.8
$20.2 $25.8 $40.6 $37.7 $21.3
$61.0 $206.6
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
2012 2013 2014 2015 2016 2017 TOTAL
Disciplined Capital Deployment
PP&E/Leases 10%
Acquisitions 53%
Dividends 9%
Share Repur. 22%
Working Cap. 6%
31% or $1.0 billion
to shareholders via share repurchases
and dividends
31% or $1.0 billion
to shareholders via share repurchases
and dividends
▪ Self funding business model generates excess cash
▪ Low Working Capital Requirements
▪ Low Capital Expenditures (approx. 3% of sales)
▪ Strong free cash
▪ 54 consecutive years of dividend increases - 14th among publicly traded companies
▪ Self funding business model generates excess cash
▪ Low Working Capital Requirements
▪ Low Capital Expenditures (approx. 3% of sales)
▪ Strong free cash
▪ 54 consecutive years of dividend increases - 14th among publicly traded companies
$ millions
14
$100
$805
$47(b)
$157
$350
$100(a)
$850
$0
$100
$200
$300
$400
$500
$600
$700
$800
$900
$1,000
Private Placement(1) Term Loan A US(2) NYLIM Shelf(3) Private Placement(4) Private Placement(5) Syndicated Revolver(6)
Drawn Available
0.0
0.5
1.0
1.5
2.0
2.5
3.0
3.5
4.0
20
02
20
03
20
04
20
05
20
06
20
07
20
08
20
09
20
10
20
11
20
12
20
13
20
14
20
15
20
16
20
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Strong Capital Management
Four
Acquisitions
10% Outstanding
Stock Repurchase
Net Debt to EBITDA*Strong Cash Generation Lets Nordson
De-lever Quickly
EFD
Acquisition
(2001)
*Net Debt to EBITDA calculated net of cash
In m
illio
ns $
Acquisitions &
Share
Repurchases
at fiscal years ending 10/31
Debt Positionat 7/31/2018
At 7/31/2018
Net Debt to TTM EBITDA = 2.1 times
(1) Amortizing-avg rate – 3.04% Remaining Avg. life – 5.5 years
(2) -Term $100m – 5 years (Q2 FY20) at 92.5 bps over USD Libor
-Term $200m – 3 years (Q2 FY20) at 92.5 bps over USD Libor
-Term $200m – 4 years (Q4 FY21) at 87.5 bps over USD Libor
-Term $305m – 5 years (Q2 FY22) at 95 bps over USD Libor
(3) (a) $100m matures Oct 2026 at 125 bps over USD Libor
(b) $47m – 1.19 remaining avg life at 2.4%
(4) Amortizing-avg rate – 3.03% Remaining Avg. life – 3.71 years
(5) Amortizing-avg rate – 3.90% Remaining Avg. life – 7.3 years
(6) Ends Feb 2020 - 87.5 bps over USD Libor at 7/31/18
Vention
Acquisition
15
Fiscal Year 2018 3Q Results and Fiscal Year 2018 4Q Guidanceas reported in August 20-21, 2018 press release and webcast
Nordson Corporation Reports Record Third Quarter Results
▪ Sales were $581 million
▪ Operating profit was $136 million, or 23 percent of sales
▪ EBITDA was $163 million, or 28 percent of sales
▪ GAAP diluted EPS was $1.61; adjusted diluted EPS was $1.60
▪ Free cash flow before dividends was $118 million, or 124 percent of net income
Nordson Corporation Reports Record Third Quarter Results
▪ Sales were $581 million
▪ Operating profit was $136 million, or 23 percent of sales
▪ EBITDA was $163 million, or 28 percent of sales
▪ GAAP diluted EPS was $1.61; adjusted diluted EPS was $1.60
▪ Free cash flow before dividends was $118 million, or 124 percent of net income
Guidance
▪ Fourth quarter 2018 guidance: sales expected to be in the range of flat to down 4 percent over prior year; GAAP
diluted EPS in the range of $1.38 to $1.54; EBITDA in the range of $143 to $155 million
▪ Full year organic revenue growth expected to be 2 percent at the midpoint of fourth quarter guidance
Guidance
▪ Fourth quarter 2018 guidance: sales expected to be in the range of flat to down 4 percent over prior year; GAAP
diluted EPS in the range of $1.38 to $1.54; EBITDA in the range of $143 to $155 million
▪ Full year organic revenue growth expected to be 2 percent at the midpoint of fourth quarter guidance
See Nordson press release, conference call transcript, presentation Appendix, and SEC filings reconciling adjusted amounts to reported amounts16
Why invest in Nordson?
Outstanding Culture and ValuesOutstanding Culture and Values
Leading Global Businesses
Clear Strategy and GoalsClear Strategy and Goals
Strong Execution and PerformanceStrong Execution and Performance
Numerous Growth OpportunitiesNumerous Growth Opportunities
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We Win with Unique Competitive AdvantagesCommon across our businesses
Strategic Assets
▪ Customer relationships with leaders
▪ Product breadth
▪ Technology position
▪ Premier brand reputation
▪ Large installed product base
▪ Global footprint (distribution, support)
▪ Balance sheet / ability to scale production
Strategic Assets
▪ Customer relationships with leaders
▪ Product breadth
▪ Technology position
▪ Premier brand reputation
▪ Large installed product base
▪ Global footprint (distribution, support)
▪ Balance sheet / ability to scale production
Core Competencies
▪ Application development
▪ Precision manufacturing
▪ Engineering strength
▪ Technical expertise
▪ Direct global sales and service
▪ Customer “touch” / solutions provider
Core Competencies
▪ Application development
▪ Precision manufacturing
▪ Engineering strength
▪ Technical expertise
▪ Direct global sales and service
▪ Customer “touch” / solutions provider
Customer Value Proposition
▪ Product reliability = more uptime
▪ Speed = greater productivity and yield
▪ Efficiency = lower material usage
▪ Leading product features = ease of operation
▪ Unmatched global support
Lower Cost of
Ownership
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Industrial Coating Systems: durable goods and industrial market focusIndustrial Coating Systems: durable goods and industrial market focus
Advanced Technology Systems: electronics, medical and industrial market focusAdvanced Technology Systems: electronics, medical and industrial market focus
Adhesive Dispensing Systems: consumer non-durable market focusAdhesive Dispensing Systems: consumer non-durable market focus
Every Day You Experience the Value We Bring
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Nonwovens
Adhesive Dispensing Systems
What we do: Products to melt, filter, pump, transport, dispense and deposit adhesives,
polymers and other materials in the manufacturing of a wide range of goods.
Leader in recession-resistant, consumer non-durable end markets
Targeted organic growth rate: 1.5 to 2x global GDP
Growth Drivers
▪ Increased use of disposable
hygiene products (diapers,
fem care, etc)
▪ Increased use of packaged
convenience foods
▪ Increased use of plastics
▪ Emerging markets
▪ Product tiering
▪ Recapitalization of large
installed base
▪ Productivity investments
▪ Material, machinery and
process innovations
Growth Drivers
▪ Increased use of disposable
hygiene products (diapers,
fem care, etc)
▪ Increased use of packaged
convenience foods
▪ Increased use of plastics
▪ Emerging markets
▪ Product tiering
▪ Recapitalization of large
installed base
▪ Productivity investments
▪ Material, machinery and
process innovations
Key End Markets
▪ Food and beverage packaging
▪ Nonwovens / disposable
hygiene / diapers
▪ Furniture and building
products
▪ Macro electronics
▪ General industrial assembly
▪ Alternative energy
▪ Medical devices
▪ Labeling
▪ Transportation
Key End Markets
▪ Food and beverage packaging
▪ Nonwovens / disposable
hygiene / diapers
▪ Furniture and building
products
▪ Macro electronics
▪ General industrial assembly
▪ Alternative energy
▪ Medical devices
▪ Labeling
▪ Transportation
2012-17 Sales CAGR = 6.0%
2012-17 average annual operating margin = 26.6%
Polymer Processing
Packaging
Product Assembly
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Advanced Technology Systems
What we do: Precision dispensing, fluid management, test, inspection and
surface treatment products for electronics, medical and general industrial markets
Automated Dispensing
Semi Automated Dispensing
Leader in rapidly growing electronics, medical and related markets
Targeted organic growth rate: 2 to 3x global GDP
Growth Drivers
▪ Mobile computing –
smart phones, tablets
▪ Circuit shrinkage / new
architectures / flip chips
▪ Medical needs driven by aging
population
▪ Medical OEM outsourcing
▪ New consumers in emerging
markets
▪ Product tiering
▪ Internet of things
Growth Drivers
▪ Mobile computing –
smart phones, tablets
▪ Circuit shrinkage / new
architectures / flip chips
▪ Medical needs driven by aging
population
▪ Medical OEM outsourcing
▪ New consumers in emerging
markets
▪ Product tiering
▪ Internet of things
Key End Markets
▪ Semiconductor packaging
▪ Printed circuit board assembly
▪ General electronic assembly
▪ Medical devices
▪ Medical components
▪ General industrial assembly
▪ Automotive electronics
▪ MEMS, sensors, LEDs
▪ Solar
Key End Markets
▪ Semiconductor packaging
▪ Printed circuit board assembly
▪ General electronic assembly
▪ Medical devices
▪ Medical components
▪ General industrial assembly
▪ Automotive electronics
▪ MEMS, sensors, LEDs
▪ Solar
2012-17 Sales CAGR = 11.7%
2012-17 average annual operating margin = 24.1% Test & Inspection
Single Use Fluid Components
Surface Treatment
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Industrial Coating Systems
What we do: Precision equipment and systems to apply and cure paints, sealants,
coatings, cold materials and other materials to a wide range of products
Leader in consumer durable goods and industrial end markets
Targeted organic growth rate: global GDP+
Growth Drivers
▪ Growth in emerging markets
▪ Environmental advantages of
powder coatings
▪ Glues replacing mechanical
fasteners
▪ Light-weighting of vehicles
▪ Productivity investments
▪ Lean manufacturing
▪ Quick color change
▪ Product tiering
Growth Drivers
▪ Growth in emerging markets
▪ Environmental advantages of
powder coatings
▪ Glues replacing mechanical
fasteners
▪ Light-weighting of vehicles
▪ Productivity investments
▪ Lean manufacturing
▪ Quick color change
▪ Product tiering
Key End Markets
▪ Appliances
▪ Lawn and garden
▪ Food and beverage
▪ Automotive assembly
▪ Cold material dispensing
▪ Pipe coating and construction
▪ Woodworking
▪ General industrial
▪ Electronics / UV curing
Key End Markets
▪ Appliances
▪ Lawn and garden
▪ Food and beverage
▪ Automotive assembly
▪ Cold material dispensing
▪ Pipe coating and construction
▪ Woodworking
▪ General industrial
▪ Electronics / UV curing
2012-17 Sales CAGR = 3.9%
2012-17 average annual operating margin = 15.5%Container Coating
Powder Coating
Liquid Painting
Cold Material Dispensing
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Why invest in Nordson?
Outstanding Culture and ValuesOutstanding Culture and Values
Leading Global BusinessesLeading Global Businesses
Clear Strategy and GoalsClear Strategy and Goals
Strong Execution and PerformanceStrong Execution and Performance
Numerous Growth Opportunities
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0
5
10
15
20
Global GDP NDSN Annual Organic Growth Rate Target
Multiple Paths to Organic GrowthAnnual Target is ~2x global GDP
New Products
Recapitalize Installed Base
Emerging Markets
New Applications
Customer Product Changes
24
Innovation Drives Organic GrowthSteady stream of new products
44
67
6253
6263
51
35
45
55
65
75
$20,000
$25,000
$30,000
$35,000
$40,000
$45,000
$50,000
$55,000
2011 2012 2013 2014 2015 2016 2017
R&D Spend ($ 000) US Patents Granted
25
$-
$100,000
$200,000
$300,000
$400,000
$500,000
$600,000
$700,000
$800,000
2007 2012 2017
Asia Pacific Americas
Emerging Markets Drive Organic GrowthGrowing middle class drives increased consumption
▪ baby diapers, disposable hygiene products
▪ packaged foods, beverages, convenience items
▪ appliances and other durable goods
▪ electronic devices
▪ medical products
▪ plastic goods
Nordson Sales (000s)
• Americas reporting includes Canada, but not US -Asia Pacific excludes Japan -Eastern Europe, Middle East and Africa are reported in Europe and not broken out separately
26
▪ Biopharmaceuticals
▪ Orthobiologics
▪ Minimally invasive catheters
▪ Bottle labeling
▪ Pipe coating
▪ Flexible packaging
New Applications Drive Organic GrowthLeveraging our expertise – numerous emerging opportunities over last five years
▪ Sensor assembly
▪ LED assembly
▪ MEMS assembly
▪ Wafer level inspection
▪ Wearable electronics
▪ Micro-materials testing
▪ Aerospace assembly
27
Recapitalization Drives Organic GrowthLarge installed base of Nordson products worldwide provides
regular replacement and upgrade opportunities
▪ Packaging lines
▪ Nonwovens lines
▪ Powder coating lines
▪ Extrusion & injection molding lines
▪ Electronics assembly lines
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-25.0%
-15.0%
-5.0%
5.0%
15.0%
25.0%
35.0%
200
7
200
8
200
9
201
0
201
1
201
2
201
3
201
4
201
5
201
6
201
7
Organic Volume Acquisitions
Acquisitions Drive GrowthHigh quality properties supplement organic growth
Current Focus and Recent Transactions
Polymer
Processing
Polymer
Processing
Fluid Mgmt.
(medical)
Fluid Mgmt.
(medical)
Test &
Inspection
Test &
InspectionCold Material
Dispense
Cold Material
Dispense
Core Dispense
Portfolio
Core Dispense
Portfolio
Key Criteria
▪ Strategic fit
▪ Strong performers
▪ Growth rate at/above Nordson
▪ High % recurring revenue
▪ Reasonable multiples
▪ Revenue and cost synergies
Key Criteria
▪ Strategic fit
▪ Strong performers
▪ Growth rate at/above Nordson
▪ High % recurring revenue
▪ Reasonable multiples
▪ Revenue and cost synergies
2007–2017: 4.4% average annual growth from acquisitions
pause
during
recession
29
Why invest in Nordson?
Outstanding Culture and Values
Leading Global BusinessesLeading Global Businesses
Clear Strategy and GoalsClear Strategy and Goals
Strong Execution and PerformanceStrong Execution and Performance
Numerous Growth OpportunitiesNumerous Growth Opportunities
30
Strong Culture and ValuesRooted in the vision of our founders
Evan Nord
Eric Nord
“My hope for Nordson is that we continue to be a venturesome
company, operating somewhere out on the leading edge…
we must encourage innovators and entrepreneurs.”
“”To be truly fit, we must exercise our ‘giving’ muscles.”
31
Giving Back - Part of Who We Are~$53 million donated 2007-2017
Employees also volunteer thousands of hours via Time ‘n Talent program
$-
$2,000,000
$4,000,000
$6,000,000
$8,000,000
$10,000,000
Foundation Grants Corporate Donations
32
Investment SummaryProven Model for Long Term Value Creation
Outstanding Culture and Values
Leading Global Businesses
Clear Strategy and Goals
Strong Execution and Performance
Numerous Growth Opportunities
Strong
growth:
organic and
acquisitive
Strong
growth:
organic and
acquisitive
Excellent
EBITDA
margins
Excellent
EBITDA
margins
Strong cash
returns to
shareholders
Strong cash
returns to
shareholders
Reliable and
consistent
dividend
Reliable and
consistent
dividend
Outstanding
long term
Total
Shareholder
Returns
Outstanding
long term
Total
Shareholder
Returns
High level of
free cash
flow
High level of
free cash
flow
Outstanding
gross
margins
Outstanding
gross
margins
33
Financial Appendix
35
THIRD QUARTER PERIOD NORDSON CORPORATION
Period Ending July 31, 2018 FINANCIAL HIGHLIGHTS
(Unaudited) (Dollars in thousands except for per-share amounts)
CONSOLIDATED STATEMENT OF INCOME CONSOLIDATED BALANCE SHEET
Third Quarter Year-to-Date July 31 October 31
2018 2017 2018 2017 2018 2017
Net sales 581,243$ 589,438$ 1,685,373$ 1,493,044$ Cash and marketable securities 266,802$ 90,383$
Cost of sales 260,847 263,173 757,146 666,130 Receivables 507,681 505,087
Selling & administrative expenses 184,820 172,799 548,223 494,000 Inventories 271,360 264,266
Other current assets 31,978 28,636
Operating profit 135,576 153,466 380,004 332,914 Total current assets 1,077,821 888,372
Interest expense - net (13,409) (11,038) (36,345) (24,041) Property, plant & equipment - net 356,777 346,411
Other income (expense) - net 528 27 673 (1,452) Other assets 2,172,794 2,179,756
3,607,392$ 3,414,539$
Income before income taxes 122,695 142,455 344,332 307,421
Income taxes 27,811 40,999 53,658 91,454 Notes payable and debt due within one year 33,729$ 326,587$
Accounts payable and accrued liabilities 307,375 321,159
Net Income 94,884$ 101,456$ 290,674$ 215,967$ Total current liabilities 341,104 647,746
Long-term debt 1,521,393 1,256,397
Other liabilities 321,979 354,903
Return on sales 16% 17% 17% 14% Total shareholders' equity 1,422,916 1,155,493
Return on average shareholders' equity 39% 28% 30% 45% 3,607,392$ 3,414,539$
Average common shares outstanding (000's) 58,053 57,594 57,931 57,495
Average common shares and
common share equivalents (000's) 58,912 58,259 58,910 58,171
Per share: Other information:
Basic earnings 1.63$ 1.76$ 5.02$ 3.76$
Diluted earnings 1.61$ 1.74$ 4.93$ 3.71$ Employees 7,543 7,532
Dividends paid .30$ .27$ .90$ .81$ Common shares outstanding (000's) 58,149 57,715
Total dividends 17,412$ 15,550$ 52,109$ 46,549$
36
THIRD QUARTER PERIOD NORDSON CORPORATION
Period Ending July 31, 2018 FINANCIAL HIGHLIGHTS
(Unaudited) (Dollars in thousands)
Third Quarter % Growth over 2017 Year-to-Date % Growth over 2017
SALES BY BUSINESS SEGMENT 2018 2017 Volume Currency Total 2018 2017 Volume Currency Total
Adhesive dispensing systems 244,728$ 233,367$ 3.4% 1.5% 4.9% 704,367$ 668,146$ 0.8% 4.6% 5.4%
Advanced technology systems 266,595 290,406 -8.9% 0.7% -8.2% 789,135 645,907 20.0% 2.2% 22.2%
Industrial coating systems 69,920 65,665 5.7% 0.8% 6.5% 191,871 178,991 4.5% 2.7% 7.2%
Total sales by business segment 581,243$ 589,438$ -2.4% 1.0% -1.4% 1,685,373$ 1,493,044$ 9.6% 3.3% 12.9%
OPERATING PROFIT BY BUSINESS SEGMENT 2018 2017 2018 2017
Adhesive dispensing systems 68,490$ 66,451$ 191,319$ 185,226$
Advanced technology systems 67,158 87,385 192,732 168,054
Industrial coating systems 15,179 13,192 36,911 30,529
Corporate (15,251) (13,562) (40,958) (50,895)
Total operating profit by business segment 135,576$ 153,466$ 380,004$ 332,914$
Third Quarter % Growth over 2017 Year-to-Date % Growth over 2017
SALES BY GEOGRAPHIC REGION 2018 2017 Volume Currency Total 2018 2017 Volume Currency Total
United States 191,512$ 182,953$ 4.7% - 4.7% 536,164$ 464,569$ 15.4% - 15.4%
Americas 38,911 41,604 -4.1% -2.4% -6.5% 112,149 107,971 3.8% 0.1% 3.9%
Europe 150,710 133,846 9.4% 3.2% 12.6% 447,384 381,473 8.2% 9.1% 17.3%
Japan 28,367 41,472 -32.5% 0.9% -31.6% 127,266 96,504 29.7% 2.2% 31.9%
Asia Pacific 171,743 189,563 -10.8% 1.4% -9.4% 462,410 442,527 1.6% 2.9% 4.5%
Total Sales by Geographic Region 581,243$ 589,438$ -2.4% 1.0% -1.4% 1,685,373$ 1,493,044$ 9.6% 3.3% 12.9%
Third Quarter Year-to-Date
37
THIRD QUARTER PERIOD NORDSON CORPORATION
Period Ending July 31, 2018 RECONCILIATION OF NON-GAAP FINANCIAL MEASURES
(Unaudited) (Dollars in thousands except for per-share amounts)
EBITDA Third Quarter Year-to-Date
2018 2017 2018 2017
Net income 94,884$ 101,456$ 290,674$ 215,967$
Adjustments:
Depreciation and amortization expense 27,321 25,954 81,037 65,366
Interest expense, net 13,409 11,038 36,345 24,041
Income taxes 27,811 40,999 53,658 91,454
EBITDA 163,425$ 179,447$ 461,714$ 396,828$
Adjustments:
Acquisition costs and adjustments (1)
- 2,252 3,484 17,898
EBITDA As Adjusted 163,425$ 181,699$ 465,198$ 414,726$
EBITDA per diluted share 2.77$ 3.08$ 7.84$ 6.82$
EBITDA As Adjusted per diluted share 2.77$ 3.12$ 7.90$ 7.13$
(1) Represents costs and adjustments associated with our 2018 and 2017 acquisitions, including accounting adjustments to inventory
that were charged to cost of sales when the inventory was sold; and transaction-related costs comprising of acquisition fees, legal, financial
and tax due diligence expenses, and valuation costs that are required to be expensed as incurred.
EBITDA and EBITDA per diluted share are non-GAAP financial measures used by management to evaluate the Company's ongoing
operations. EBITDA is defined as earnings before interest, taxes, depreciation and amortization and EBITDA As Adjusted is defined as
EBITDA plus certain acquisition costs and adjustments. EBITDA per diluted share is defined as EBITDA divided by the Company's diluted
weighted average shares outstanding. EBITDA As Adjusted per diluted share is defined as EBITDA As Adjusted divided by the Company's
diluted weighted average shares outstanding.
Third Quarter Year-to-Date
2018 2017 2018 2017
Diluted EPS as reported (U.S. GAAP) 1.61$ 1.74$ 4.93$ 3.71$
Short-term inventory purchase accounting adjustments - 0.02 0.04 0.05
Acquisition costs - 0.01 - 0.17
Severance and restructuring 0.02 0.01 0.05 0.02
U.S. Tax Reform discrete item - - (0.37) -
Other discrete tax items (0.03) - (0.15) 0.04
Diluted EPS as adjusted (Non-GAAP) 1.60$ 1.78$ 4.50$ 3.99$
Adjusted EPS is not a measurement of financial performance under GAAP, and should not be considered as an alternative
to EPS determined in accordance with GAAP. Management believes that EPS as adjusted to exclude the items in the
table above assist in understanding the results of Nordson Corporation. Amounts may not add due to rounding.
Free Cash Flow Before Dividends Year-to-Date
2018 2017 2018 2017
Net income 94,884$ 101,456$ 290,674$ 215,967$
Depreciation and amortization 27,321 25,954 81,037 65,366
Other non-cash charges 3,934 (8,592) (29,269) 3,041
Changes in operating assets and liabilities 4,477 (41,299) 485 (62,583)
Net cash provided by operating activities 130,616 77,519 342,927 221,791
Additions to property, plant and equipment (12,923) (22,295) (45,972) (49,324)
Proceeds from the sale of property, plant and equipment 64 308 299 3,906
Free cash flow before dividends 117,757$ 55,532$ 297,254$ 176,373$
Adjustments:
Acquisition costs and adjustments, net of tax (1) - 1,597 2,630 12,564
Free cash flow before dividends, adjusted 117,757$ 57,129$ 299,884$ 188,937$
(1) Represents costs and adjustments associated with our 2018 and 2017 acquisitions, including accounting adjustments to inventory
that were charged to cost of sales when the inventory was sold; and transaction-related costs comprising of acquisition fees, legal, financial
and tax due diligence expenses, and valuation costs that are required to be expensed as incurred.
Free cash flow before dividends, a non-GAAP financial measure, is defined as net cash provided by operating activities less purchased property,
plant and equipment and proceeds from the sale of property, plant and equipment. It is a financial measure used by management to assess its
ability to generate cash in excess of its operating needs. Therefore, the Company believes this financial measure provides useful information to
investors. Free cash flow before dividends is not a measure of financial performance under GAAP and should be considered in addition to, and
not as a substitute for, operating cash flows or other financial measures prepared in accordance with GAAP. Our calculations of non-GAAP
measures may not be comparable to the calculations of similarly titled measures reported by other companies.
Third Quarter
-30%
-20%
-10%
0%
10%
20%
30%
$0.18 $0.29 ($0.23) $0.15 $0.16 ($0.11) ($0.09) ($0.06) ($0.54) ($0.19) ($0.03)
Appendix: Currency Impact Annual Sales Growth and EPS
Volume Growth
Currency Effect
EPS Currency Effect
’07 ’08 ’09 ’10 ’11 ’12 ’13 ’14 ’15 ‘16 ‘17
Numbers as reported and do not factor in stock splits
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