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 3 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 4 Key Statistics 5 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 6 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% 7 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% 8 Standard Product 36% Japan 10% Recognized Leader Across Industries 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 9 Diversified Customer Portfolio No customer accounts for more than 5% of sales 10 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 • • • • • • • • • • • • 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 • • • • • 11 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: 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: Semiconductors Electronic assembly systems Life sciences General industrial assembly Solar Aerospace Specialty Drivers of growth: 12 12 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: Appliance Office furniture Outdoor products Automobile assembly Food & beverage containers Disposable batteries Applications: Drivers of growth: 13 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 14 Nordson DAGE – x-ray inspection system Nordson Today Who We Are Financials Profitable Future Growth 15 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 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 21 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 23 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 24 *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 26 Nordson Today Who We Are Financials Profitable Future Growth 27 Growth: Organic and Acquisitions Organic New applications New product innovation Globalization Customer service Acquisitions Market leaders Strong financial performers Complementary technologies Fund Increased Investments Through LEAN 28 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 29 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 30 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! 31 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: 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 34 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 35 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! 36 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%