Transcript Document

Nordson Corporation: The Global Leader in
Precision Technologies for Manufacturers
Dispensing – Surface Treatment – Test & Inspection
: NDSN
February 22, 2010 | 1st Quarter Fiscal Year 2010 Investor Presentation
Safe Harbor Statement Under the Private
Securities Litigation Reform Act of 1995
Information in this presentation may contain “forward-looking statements,” as defined by this
Reform Act. These statements are identified by words or phrases such as “are expected to,” “will
likely result,” “is anticipated,” “estimates,” “will continue,” “outlook,” “project,” or similar
expressions.
These forward looking statements are based on current expectations and involve risks and
uncertainties. Consequently, Nordson Corporation’s actual results could differ materially from the
expectations expressed in the forward-looking statements. Factors that could cause the
Company’s actual results to differ materially from the expected results include, but are not limited
to: fluctuations in currency exchange rates; a sales mix different from assumptions; deferral of
orders; customer-requested delays in system installations; and unanticipated delays.
DISCONTINUED OPERATIONS
All numbers for years prior to FY 2006 in this presentation include results from discontinued
operations unless otherwise noted.
2
Investment Highlights
Unusual Stability
 13% CAGR growth rate
over 50 years
 46 years of dividend
increases
Robust Business Model
 Customer Focus
 Application expertise
 Field service
 Direct sales
 Innovation
 Global presence
 Diverse end markets
 Stability: consumer nondurables
 Growth: technology
 Balanced product mix
 Parts & consumables
 Systems
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 New products
 New applications
 Technology leader
 Market leader
 Socially committed &
responsible
Strong Execution
 Excellent margins
 Strong free cash flow
 Lean culture
 Experienced management
Nordson Today
Who We Are
Financials
Profitable Future Growth
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Key Statistics
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Founded: 1954
FY2009 Sales: $819 million
Direct Operations: 30+ countries
Employees: 3,681
Customers: 25,000+
Headquartered in Cleveland, OH
Nordson: Focused on Precision Solutions for Manufacturers
Adjacent
competency
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Core Competency
Adjacent
competency
Surface
Treatment
& Preparation
Material
Dispensing
Testing &
Inspection
Cleaning
UV Curing
Activation
Modification
Plasma
Dispensing Coating
Finishing Spraying Painting
Underfilling
Detection
Verification
Physical
Optical
X-Ray
Markets Served – FY2009
Semiconductors
9%
Electronic
Components
5%
Medical
3%
Automotive
2%
Industrial
7%
Consumer
Durables
16%
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Appliances, Furniture
Doors/Windows
Etc.
Circuit Board
Assembly
5%
Consumer NonDurables
53%
Food Products
Diapers, Paper Goods
Etc.
Sales Distribution – FY2009
GEOGRAPHIC DISTRIBUTION
INDUSTRY SEGMENT
Americas
7%
Industrial Coating
13%
United States
29%
Advanced
Technology
31%
Europe
36%
Asia Pacific
18%
Adhesive
Dispensing
56%
PRODUCT TYPE
Engineered
Systems
17%
Parts &
Consumables
47%
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Standard
Product
36%
Japan
10%
Recognized Leader Across Industries
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Procter & Gamble Best Supplier Award
Industry Week Best Plant Winner***
PMT Packaging Line of the Year Supplier***
Circuits Assembly Service Excellence Award***
Global SMT & Packaging Technology Award ***
SMT China Vision Award***
Electronics Manufacturing Asia Innovation Award
***Note: recognized multiple years
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Diversified Customer Portfolio
No customer accounts for more than 5% of sales
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56% of FY09 sales
Adhesive Dispensing Systems
Twelve Months Ending 1/31/2010:
Sales: $473m
Operating Margin: 28%
Dispense and apply adhesives and other materials to a wide variety of products during
manufacturing processes
Applications
End markets
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Carton closing
Case sealing
Diaper assembly
Window/solar cell assembly
Bookbinding
Furniture assembly
Labeling
Food and beverage packaging
Nonwovens / disposable hygiene products
Wood products & windows
Paper converting
General industrial assembly
Drivers of growth
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Income growth in Asia, Latin America, East Europe
Increased use of disposable hygiene products
Increased use of processed and convenience foods
Productivity investments
Material, machinery and process innovations
31% of FY09 sales
Advanced Technology Systems
Twelve Months Ending 1/31/2010:
Sales $269m Operating Margin 14%*
*excludes non-cash charges for impairment of goodwill and other long-lived assets
High precision dispensing, test, inspection and surface treatment technologies for
electronics and other high tech markets.
Applications:
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Flip chip underfill
Semiconductor packaging
Flat panel displays
Printed circuit board assembly
Disk drive assembly
Semiconductor surface preparation
Medical device assembly
UV ink curing
Bond testers and x-ray inspection
Automated optical inspection (AOI)
Two component dispensing
End markets:
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Semiconductors
Electronic assembly systems
Life sciences
General industrial assembly
Solar
Aerospace
Specialty
Drivers of growth:
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Faster processors and memory chips
Circuit shrinkage in cell phones, PDA’s, etc.
Emerging consumers for products in BRIC countries
Growth in medical device market driven by aging population
Regulations eliminating lead solder
Alternative energy
13% of FY09 sales
Industrial Coating Systems
Twelve Months Ending 1/31/2010:
Sales $110m
Operating margin (2)%*
*excludes non-cash charge for impairment of goodwill and other long-lived assets
Equipment and systems to apply paints, sealants, coatings and other materials to a
wide range of products
End markets:
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Appliance
Office furniture
Outdoor products
Automobile assembly
Food & beverage containers
Disposable batteries
Applications:
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Drivers of growth:
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Environmental advantages of powder coatings
Productivity investments
Lean manufacturing
Growth in China
Powder finishing
Liquid finishing
Metal container inside coating
Battery inside coating
Control systems
Automobile sealing & bonding
Representative Products
Nordson EFD – use once and
dispose consumables
Powder coating booth systems
Standard adhesive dispensing systems
Nordson ASYMTEK –
automated dispensing system
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Nordson DAGE –
x-ray inspection system
Nordson Today
Who We Are
Financials
Profitable Future Growth
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Annual Sales
$1,200
CAGR 1955 – 2009 13%
Millions
$1,000
$800
$600
$400
$200
$0
16
'55 '58 '61 '64 '67 '70 '73 '76 '79 '82 '85 '88 '91 '94 '97 '00 '03 '06 '09
Annual Sales Growth
20%
15%
10%
5%
0%
-5%
-10%
-15%
-20%
-25%
-30%
'91 '92
$
17
.11
'93 '94 '95 '96
.05 (.10) .01
'97 '98 '99
'00
'01 '02 '03 '04 '05
.16 (.11 ) (.19) (.20) .04 (.10) (.20)
Volume Growth
Currency Effect
.01 .30
. 27
.11
EPS Currency Effect
'06 '07 '08
‘09
(.10) .18
(.23)
.29
Industry Leading Gross Margins
Nordson Gross Margin - 1999-2008
Nordson Gross
Margin – FY2002-FY2009
58%
56%
Long-term stability of
high gross margin
54%
52%
50%
48%
46%
44%
42%
40%
2002
2003
2004
2005
2006
2007
2008
2009
Gross Margin Comparison FY2009*
60%
50%
40%
30%
20%
Nordson outperforms
industrial indices
S&P400 Industrials - S&P 400 Industrial
Avg
Machinery - Avg
18
S&P 500 Industrial
Machinery
*Average TTM gross margin. source: Bloomberg December 10, 2009
Nordson
Operating Margin - 2001 to 2010
25%
20%
15%
10%
5%
0%
2001
2002
2003
2004
2005
2006
Q1 09
Sales
$186.6
Sequential Volume Growth
Operating Profit
19
2008
Q2 09
$13.1
7%
Q1 09 Q2 09 Q3 09 Q4 09* Q1 10
Q3 09
$188.8
3%
Sequential Growth
Operating Margin
2007
$18.6
Q4 09*
$206.3
9%
$37.2
Q1 10
$237.4
$220.6
15%
$46.4
42%
100%
25%
10%
18%
20%
*excludes non-cash charges for impairment of goodwill and other long-lived assets.
$36.3
16%
Diluted Earnings Per Share: 2002-2009
$3.50
Effects of acquisitions.
$3.00
$2.50
$2.00
$1.50
$1.00
$0.50
2002
20
2003
2004
2005
2006
2007
*excludes non-cash charges for impairment of goodwill and other long-lived assets.
2008
2009*
Lean Metrics
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Reduced inventory; improved customer service; reduced waste
Consolidation of product lines and business operations
Supply chain management integrated with suppliers
Simplification of business processes
Lean part of the culture: from “top-down” to “bottom-up”
Sales Per Em ployee 2002-2009
$300,000
Operating Profit Per Em ployee 2002-2009
$50,000
Annual Growth Rate: 3%
Annual
Growth
Rate:Rate:
10%20%
Annual
Growth
$45,000
$250,000
$40,000
$35,000
$200,000
$30,000
$150,000
$25,000
$20,000
$100,000
$15,000
$50,000
$10,000
$5,000
$2002
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2003
2004
2005
2006
2007
2008
Note: Based on average headcount per year
2009
$2002
2003
2004
2005
2006
2007
2008
2009
*Operating profit in FY2009 excludes non-cash charges for impairment of
goodwill and other long-lived assets.
Cash Flow
$170
Cash From Operations
Free Cash Flow
Annual Growth
Rate: 12%
Millions
$150
$130
Annual Growth
Rate: 13%
$110
$90
$70
Free Cash Flow/
Net Income:
22
2003
2004
2005
2006
2007
2008
2009
192%
149%
122%
110%
112%
77%
212%*
Free cash flow equals cash from operations less net capex.
*Net income is before non-cash charges for impairment of goodwill and other long-lived assets.
Uses of Cash – 2002 to 2009
Disciplined Capital Allocation
Acquisitions
30%
$338
Dividends
16%
Share
Repurchases
18%
$180
$147
$210
Property, Plant &
Equipment/
Capital Leases
13%
$268
Debt
23%
Total $1.1 billion
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NOTE: Working capital was a source of $64 million over the period.
Capital Management
NET DEBT TO CAPITAL
70%
DEBT MATURITY
EFD ’01
Acquisition
$400
Completed Four
Acquisitions
60%
Stock
Repurchase
50%
Prudential Sr Note
Senior Note
Revolver - drawn
$350
$300
$400 million committed facility
$250
40%
$200
30%
$150
$88
20%
$100
$50
10%
$50
0%
$0
$4
2001
2002
2003
2004
2005
2006
2007
2008
2009*
2009
2010
$14
2011
2012
2013
Note: Revolver – drawn shown as of Q4 FY09
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*includes non-cash charges for impairment of goodwill and other long-lived assets.
Consistent Dividend Record
$0.80
Dividend increased for 46 consecutive years
16th among US public companies
$0.70
$0.60
$0.50
$0.40
$0.30
$0.20
$0.10
$0.00
'63
25
'65
'67
'69
'71
'73
'75
'77
'79
'81
'83
'85
'87
'89
'91
'93
'95
'97
'99
'01
'03
'05
'07
'09
Fiscal 2010 Second Quarter Guidance
 Volume growth
21% to 25%
 Currency
 Sales growth
 Earnings per share*
5%
26% to 30%
$0.81 to $0.89
(vs. $0.41 in 2nd Quarter Fiscal 2009)
* includes an anticipated $0.01 per share charge for restructuring activities
Source: Nordson February 23, 2010 quarterly earnings conference call with security analysts
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Nordson Today
Who We Are
Financials
Profitable Future Growth
27
Growth: Organic and Acquisitions
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Organic
New applications
New product innovation
Globalization
Customer service
Acquisitions
 Market leaders
 Strong financial performers
 Complementary technologies
Fund Increased Investments
Through LEAN
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New Applications and Markets
 Rapidly growing demand in Asia Pacific
 Technology development in semiconductor and consumer electronics
end markets – packaging architectures, smart phones, netbooks, etc
 Life Science growth associated with catheters, stents, etc
 High speed piezo-electric jet dispensing
 Next generation flat panel displays (OLED and LCD)
 Systems offering Lean productivity - quick color change, material
reduction, etc.
 X-ray and automated optical inspection
 LED lighting, RFID, MEMS
 Solar energy
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Adhesive Systems - New Applications and Markets
Building & Construction
Woodworking
Windows
Sector
Expansion
Solar Panels
Wood Panels
Personal Care
Consumer Products
Hygienic
Packaging
Sector
Expansion
Wipes
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Surgical Tapes
Labeling
Book Binding
Advanced Technology - New Applications & Markets
Cell Phones
LED Lighting
Microprocessors
Alternative Energy
NEW!
NEW!
Core
Core
LCD/OLED
Life Science
NEW!
Dental
NEW!
NEW!
Aerospace
Pest Control
NEW!
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MEMS
NEW!
NEW!
Growth Driver: Migration to “flip chips“ in devices
OLD - wire bonding
Flip Chip Package Production
50.2%
CAAGR
Chips with a perimeter gold wire
connection to each pad
Millions of wafers
2000
NEW - flip chip
1500
1530
1000
500
200
0
2008
Flip Chip Advantages
Smaller Size
Higher Speed
Greatest I/O Flexibility
Most Rugged
Lower Cost at high I/O
Flip32chips “face down”, array connected onto circuit
boards or packages by conductive solder bumps
Source
2013
Growth Driver: Convergence of Devices
17 advanced packages in one device
5
 Today’s handheld
combines:
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Phone
WLAN
GPS
Blue Tooth
MP3
Camera
The more complexity,
the more underfill opportunities
for Nordson
Every chip can require underfill
33
7
6
1
8
4
3
9
14
10
2
15
13
17 16
11
12
Growth Opportunity: LED Market Outlook
Global LED Market Forecast by Segment
16
16
16000
24% CAGR
$14.9 billion in 2013
t
14 14
14000
Billions of $
12 12
12000
Other
10 10
10000
Lighting
Automotive
880008
Sign Display
Large LCD
660006
Handheld
40004
20002
0
2007
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1Source:
2Source:
2008
2009
2010
2011
2012
2013
Strategies Unlimited (Mountain View, CA) High-Brightness LED Market Review and Forecast—Sept 2009
Displaybank, LED Lighting Industry Growth Perspective - May 2009
Nordson Applications: LED Manufacturing
Application
Phase
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Encapsulation Encapsulation
Clear
Phosphor
Filled
Current
Current
Plate
Attachment
Underfill
Die Coat
Phosphor
Coat
Current
Emerging
New
Industrial Coating & Automotive Systems
New Applications and Markets
Fast Line Speeds
Quick Color Change
NEW!
NEW!
Colored Glass Manufacturing
NEW!
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Growth: Asia Pacific Sales 2002 to 2009
Sales
(Millions)
$200
 Company’s 40th year of operation
in Asia
 Direct in China for 15 years
 Percent of total revenue:
- 2002:
7%
- 2009:
18%
$180
$160
$140
$120
$100
$80
$60
$40
$20
37
09
20
08
20
07
20
06
20
05
20
04
20
03
20
20
02
$0
Investment Highlights
Unusual Stability
 13% CAGR growth rate
over 50 years
 46 years of dividend
increases
Robust Business Model
 Customer Focus
 Application expertise
 Field service
 Direct sales
 Innovation
 Global presence
 Diverse end markets
 Stability: consumer nondurables
 Growth: technology
 Balanced product mix
 Parts & consumables
 Systems
38
 New products
 New applications
 Technology leader
 Market leader
 Socially committed &
responsible
Strong Execution
 Excellent margins
 Strong free cash flow
 Lean culture
 Experienced management
Appendix: GAAP Reconciliation
FOURTH QUARTER PERIOD
Period Ending October 31, 2009
(Unaudited)
NORDSON CORPORATION
SUPPLEMENTAL FINANCIAL INFORMATION
RECONCILIATION OF NET LOSS TO EARNINGS AS ADJUSTED
(Dollars in thousands except for per-share amounts)
Earnings and operating profit as adjusted (Non-GAAP) are measures of income that differ from earnings and operating profit measured
in accordance with generally accepted accounting principles (“GAAP”). Earnings and operating profit as adjusted (Non-GAAP) are adjusted
for exclusion of goodwill and long-lived asset impairment charges. Management believes that operating profit, net income (loss) and earnings
as adjusted for exclusion of these charges assist in understanding the results of operations of Nordson Corporation.
In addition, Management and the Board evaluate results using operating profit, net (loss) income and earnings as adjusted.
Fourth Quarter 2009
Income (Loss) Income (Loss)
Before Taxes
After Taxes
Net loss
$
Goodwill and long-lived asset impairments
(197,491) $
243,043
Diluted Return
EPS On Sales
(209,033) $
237,927
(6.22)
-88%
Return
On Equity
-147%
Income (Loss) Income (Loss)
Before Taxes
After Taxes
$
7.08
Pro forma effect of dilution on earnings as adjusted *
Earnings as adjusted (Non-GAAP)
Year-to-Date 2009
(127,191) $
243,043
Diluted
Return
EPS On Sales
(160,055) $
237,927
45,552
$
28,894
$
0.85
-20%
-28%
10%
13%
7.09
(0.01)
$
(4.77)
Return
On Equity
(0.01)
12%
18%
$
115,852
$
77,872
$
2.31
* Our loss per share for generally accepted accounting principles (GAAP) does not allow for the inclusion of the dilutive effect of shares in the
denominator of our per share calculation since this effect would result in a reduction of the loss per share. The pro forma effect of dilution on earnings
as adjusted is included in the reconciliation of our Non-GAAP measure so that earnings as adjusted reflects the impact of any applicable dilutive shares.
OPERATING PROFIT (LOSS) BY BUSINESS SEGMENT
Fourth Quarter 2009
Operating
Operating
Profit
Profit (Loss)
(Loss)
Impairments As Adjusted
Fourth
Quarter
2008
Operating
Profit
(Loss)
Year-to-Date 2009
Operating
Operating
Profit
Profit (Loss)
(Loss)
Impairments As Adjusted
Yearto-Date
2008
Operating
Profit
(Loss)
Adhesive dispensing systems
Advanced technology systems
Industrial coating systems
Corporate
$
38,555 $
(227,611)
(1,866)
(5,717)
239,427
3,616
-
$
38,555
11,816
1,750
(5,717)
$ 38,081
16,243
5,124
(11,029)
$
127,589 $
(214,373)
(7,303)
(33,720)
239,427
3,616
-
$
127,589
25,054
(3,687)
(33,720)
$ 145,390
61,764
11,015
(27,831)
Total operating (loss) profit by business segment
$
(196,639) $
243,043
$
46,404
$ 48,419
$
(127,807) $
243,043
$
115,236
$ 190,338
Operating profit (loss) as a % of sales
39
-83%
20%
16%
-16%
14%
17%