Nordson Corporation (NDSN)

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Nordson Corporation (NDSN)

F4Q09 Earnings Call

December 17, 2009 8:30 am ET


James Jaye - Director Investor Relations

Edward Campbell - Chairman, President and Chief Executive Officer

Greg Thaxton - Vice President and Chief Financial Officer


Charlie Brady – BMO Capital Markets

Matt Summerville – Keybanc Capital Markets

Gregory Macosko – Lord Abbett

John Franzreb – Sidoti and Company



Welcome everyone to the Nordson fourth quarter and FY 2009 results conference call. (Operator instructions) Mr. Jim Jaye, Director of Communications and Investor Relations, you may now begin your conference.

James Jaye

Good morning. Thank you. This is Jim Jaye, Director of Communications and Investor Relations for Nordson. I am here with Ed Campbell, Chairman, President and Chief Executive Officer and Greg Thaxton, Vice President and Chief Financial Officer.

We would like to welcome you to our conference call today, Thursday, December 17, 2009 on Nordson's fourth quarter and fiscal year 2009 results. Our conference call is being broadcast live on our web page at www.nordson.com and will be available for 14 days. There will be a telephone replay of our conference call available until midnight Thursday, December 24th by calling 1-800-642-1687. You will need to reference ID number 44672558.

Our attorneys have requested we open this call with a cautionary statement under the Safe Harbor provisions of the Private Securities Litigation Reform Act of 1995. During this conference call forward-looking statements may be made regarding our future performance based on Nordson’s current expectations. These statements may involve a number of risks, uncertainties and other factors as discussed in the company's filings with the Securities and Exchange Commission that could cause actual results to differ. After our remarks we will have a question and answer session.

I would like to now turn the call over to Edward Campbell for an overview of our fourth quarter and fiscal year 2009 results and Nordson's future outlook. Ed?

Edward Campbell

Thank you, Jim and good morning to all of you on the call. Thank you for attending Nordson's conference call discussing our 2009 fourth quarter and full year results. Our comments this morning will provide highlights of strong operational performance in the fourth quarter as well as some perspective relative to our outlook for the first quarter of fiscal year 2010.

Relative to the fourth quarter I am pleased with the strong performance delivered in the quarter with sales, operating profit and earnings per share all improving sequentially when considered before the impairment charges booked in the quarter. The impairment charges obviously had a big impact on the reported results and we will talk more about these charges as we get into details of the fiscal fourth quarter but as you all know these are non-cash charges that have no impact on the organization’s ability to serve our customers or deliver results to our shareholders going forward.

Operating margin performance in the quarter at 20% excluding impairment charges underscores the strong performance in the quarter. In terms of our outlook for the coming year there are positive indicators the global economy is improving and we are seeing positive signs specifically related to Nordson’s businesses as well. I will be speaking more directly to current trends and our outlook for the first quarter of fiscal 2010 but before that I will turn the call over to Greg Thaxton, our Chief Financial Officer, who will provide a summary of our fourth quarter results.

Greg Thaxton

Thank you Ed and good morning to those listening. Regarding the fourth quarter results, sales were $237 million, down 20% from the prior year with volume down 21% from favorably currency effects of 1%. I will remind you we are comparing to a prior-year fourth quarter that was an all-time record for Nordson.

Looking at sales on a segment basis, adhesive dispensing sales volume was down 14% in the quarter as compared to the prior-year fourth quarter and advanced technology and industrial coating sales volumes were down 22% and 39% respectively. I will also make the point here to highlight we have changed the name of the industrial coating and automotive systems segment to industrial coating systems which we believe more accurately reflects the composition of this segment’s revenue and customer base.

As we look at our sales performance on a sequential basis, that is a fourth quarter 2009 as compared to third quarter 2009, sales are up 15% comprised of 12% volume growth and 3% favorable currency effect. Each of the three segments delivered sequential volume growth with industrial coating up 25%; adhesive dispensing up 14% and advanced technology up 5%.

Looking at the 25% sequential growth in industrial coating, this growth reflects improvement we have seen in this segment since orders bottomed in the third quarter as well as some reduction in backlog associated with year-end shipments. With regards to the adhesive dispensing segment, all product lines within this segment were up sequentially with the non-woven’s product line being the largest contributor of growth. As to the advanced technology sequential improvement, we noted back in our second quarter earnings conference call we were seeing improving trends in certain end markets associated with semiconductor and consumer electronics and we delivered third quarter sequential growth of 38% over the second quarter. These favorable order trends have continued but I am highlighting here our fourth quarter sequential performance is comparing against a relatively strong third quarter.

Moving down the income statement, gross margin in the quarter is 58% which is strong on a historical basis due to favorable product line mix, a higher composition of spare parts and consumables and a reduction in manufacturing overhead. As we look at operating performance in the quarter obviously the impairment charges have a big impact on reported performance but as Ed noted earlier, these charges are non-cash and do not impact our ability to execute going forward.

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