Good day, ladies and gentlemen, and welcome to the Nordson Corporation Webcast for First Quarter Fiscal Year 2015. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session and instructions will follow at that time. As a reminder, this conference call is being recorded. I would now like to turn the call over to Jim Jaye, Director of Investor Relations. Please begin.

Thank you, Latoya, and good morning. This is Jim Jaye, Nordson's Director of Investor Relations. I'm here with Mike Hilton, our President and Chief Executive Officer; and Greg Thaxton, our Senior Vice President and Chief Financial Officer. We'd like to welcome you to our conference call today, Wednesday, February 25, 2015, on Nordson's FY 2015 first quarter results and second quarter outlook. Our conference call is being broadcast live on our webpage at nordson.com/investors, and will be available there for 14 days. There will be a telephone replay of our conference call available until March 4, 2015, which can be accessed by calling 404-537-3406. You will need to reference ID number 797703908. 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'll have a question-and-answer session. I'll now turn the call over to Mike Hilton for an overview of our fiscal year 2015 first quarter results, and a bit about our second quarter outlook. Mike, please go ahead?

Thank you, Jim, and good morning, everyone. Thank you for attending Nordson's 2015 first quarter conference call. Nordson's team continue to perform at a high level and delivered record first quarter sales and earnings per share. I'm particularly pleased with the 8% organic sales volume growth we delivered in the quarter compared to the same period a year ago. This growth was broad-based across the majority of our product lines and geographies, and quite impressive given the challenges presented by a weak macroeconomic environment. Operating margin in the quarter improved 2 percentage points compared to the prior year, and diluted earnings per share grew 28% compared to the first quarter a year ago, the rate significantly outpacing the strong top line growth. While these results were strong, they were also impacted by the effect of negative currency translation compared to the first quarter a year ago. Looking ahead, our current backlog and order rates are very strong, up 14% for the latest 12 weeks as compared to prior year. We expect to see solid sequential revenue improvement in the second quarter, though year-over-year results will be impacted by currency headwinds, given the current exchange rates. I'll speak more about our outlook and current business trends in a few moments. But first, I'll turn the call over to Greg Thaxton, our Chief Financial Officer, who'll provide more detailed commentary on our current results and our second quarter guidance. Greg?

Thank you, and good morning to everyone. Sales in the quarter were $379 million, an increase of 5.4% over the prior year's first quarter. This sales improvement included, and I'm rounding here, an 8% increase in organic volume, a 3% increase related to the first year effective acquisitions, and a 5% decrease related to the unfavorable effects of currency translation. This strength of the organic growth in the quarter highlights the benefits of our business model, and the value that we bring to our customers. Looking at sales performance for the quarter by segment, Adhesive Dispensing segment sales volume decreased less than 1% as compared to the prior-year first quarter. Organic growth was solid in product lines serving disposable hygiene, general product assembly, rigid packaging, and plastic injection, end markets. We continue to see softness in plastic extrusion, and polymer compounding and palletizing end markets. Sales volume in the Advanced Technology segment increased 38% over the prior year first quarter. Organic volume growth was very strong at 29%, and the first year effect of the Avalon and Dima acquisitions added 10% growth. Organic growth was robust in automated dispensing product lines, serving mobile device end markets, and advanced semiconductor packaging applications, as well as our fluid management product lines serving electronics, general industrial assembly, and medical end markets. Sales volume in the Industrial Coating segment increased 4% compared to the first quarter a year ago. The growth was driven by demand for our cold materials and powder coating product lines. Gross margin for the total company in the first quarter was 55%, one percentage point higher than the level delivered in the prior year, primarily due to segment and product mix. Operating profit in the quarter was $63 million, an increase of 17% over the prior year, and operating margin…

Thank you, Greg. Before taking your questions, as Greg noted, I'd like to provide some additional comments on our recent performance and outlook. First, I want to thank our global team again for their hard work, their commitment to our customers propel Nordson to a very solid start to our year. At the midpoint of our second quarter guidance, we're expecting sequential sales growth of about 7%, which we should leverage to delivering operating margin approximately 3 percentage points higher than the first quarter, and earnings per share that are 23% higher than the first quarter. As Greg mentioned, on a year-over-year basis, we do expect currency translation to remain a significant headwind to revenue and earnings growth in the second quarter and full-year, given current exchange rates. Excluding this currency translation effect, our underlying business remains sound. Our backlog is solid and 12-week order rates are up a strong 14% compared to the same period a year ago. This growth in organic orders are impressive, given the challenging macroeconomic environment. Given the strength, you might expect our organic growth in the second quarter to exceed the 1% level we are forecasting at the midpoint of our guidance, as we typically have a strong correlation between order growth rates and the outlook for the next quarter. To help reconcile this, let me provide some additional color. First, timing does play a role here as the current backlog does include some longer lead time items that are expected to benefit the third quarter. This is particularly true within Advanced Technology and Industrial Coatings segments. In addition, we're optimistic as to our likely success on various projects that are not yet in our backlog, that should generate revenue beyond the second quarter. Our participation in these large dollar projects reflects the consultative…

Thank you. And the first question is from Joe Radigan of KeyBanc. Your line is now open.

Good morning, guys.

Good morning, Joe.

Mike, maybe we can start with your comments around the timing in the second quarter. Can you provide any more granularity in terms of growth by segment? I mean, obviously you've got some longer lead time stuffs in ICS, but orders are fairly good in Adhesives and that tends to be to be relatively short cycle, it sounds like there's some longer lead time stuff in Advanced Tech, but there's a – you have a relatively easy comp on a year-over-year basis, and orders were up almost 20% there, and that business has been growing at a double-digit clip here for, I think three consecutive quarters. So can you maybe reconcile the growth by what you're expecting by segment?

Yeah. Joe, you did hit the – sort of the key areas that tend to have bigger projects, and bigger projects tend to be a little bit longer lead item. We also have projects in here where our customers have asked for sort of phased deliveries, so that's also a part of what we're seeing, and that falls into the two areas, in particular that you mentioned the Industrial Coatings and the Advanced Technology area. There are elements of our plastics business that have some longer lead time orders like our pelletizing business that also impact that. So from our perspective, what we've seen is more of systems orders, which is encouraging, and some of those are phased from a delivery standpoint, and that's really the main fact – chalk it up essentially timing.

Okay. And then, in terms of the cadence of orders that you saw through the 12-week period, first quarter is typically a soft spot in the customer capital cycle, did you see orders – order rate strengthen in recent weeks, can you kind of talk about how that develop?

Yeah. Yeah, Joe, as you know it's soft because of the holiday period, and it tends to – as we talked about in the past, orders tend to get to a low-point, sort of over the holidays, right after the New Year, and then start to pickup, and we absolutely did see that trend where each of the last few weeks has gotten stronger, generally across most businesses.

Okay. And then, maybe lastly, in terms of the operating margin, at the midpoint of your guidance, I think you said, that's expected to be about 20%, that's almost a 250 basis point or about a 250 basis point decline year-over-year, some of that, probably 100 basis points of that I think is the FX, but is there a mix factor as well in the second quarter, in terms of the timing of engineered versus standard stuff?

Yeah. So you've – currently have the currency is a significant impact. And then when you look at things, volume is relatively soft and actually down a little bit, so we get a little bit of a negative leverage there, relative to our spend base. So it's not anything that we're alarmed about, again, I think it's largely the timing issue on the organic piece, and we're really pretty encouraged by the prospects that we see in addition to orders already in hand. The currency piece, as Greg said, we're going to deal with over the next couple of quarters, and it is a strong headwind and it does impact margin to the tune of about 100 basis points, maybe a little more in the second quarter, and a little less as we go throughout the year.

Okay. Thanks, Mike.

Thank you. The next question is from Charlie Brady of BMO Capital Markets. Your line is open.

Hi. Thanks. Good morning, guys.

Hey, Charlie.

Hi, Charlie.

Hey, could you give us a sense of what the parts business look like in the quarter, was there any – I guess, I'm trying to parse out if that had any meaningful impact on the margins, particularly at Adhesive Dispensing?

Year-over-year, it was pretty much the same as last year, around I think, 43% or 44%, Charlie, so no significant impact. Adhesives is one of the areas where we feel the biggest impact from a currency perspective.

Right, Right. I just want to go back to Jeff's question on the segment organic growth, particularly on Adhesive Dispensing, because if I'm hearing you correctly, that one – and I guess, some in the plastics, but the majority of this long lead time or phase-in of orders is happening in ICS and Advanced Tech not so much in Adhesive Dispensing. So can you give us a sense of what you're looking for kind of on organic growth, just on the Adhesive Dispensing in Q2?

Well, I think overall for the year we're thinking – the things will be consistent with our long-term kind of growth rates. I think in the second quarter, we're looking for things to be a little bit less, and then – and pick up based on some of the orders, trends coming in. So not too atypical when you look at sort of the more traditional Adhesives. The one area that is strong right now, but can be lumpy is the product assembly piece, because those tend to be bigger systems orders as well. But nothing atypical that we see here in terms of progress on that part of the business. We're engaged by what we see across most of the product lines.

And Charlie, it's Greg. I'd just add, quarter-to-quarter we might see some trends – softening trend in one quarter versus the next. But as Mike mentioned, if we look at that business on a longer-term basis, kind of across the year, we'd expect to see kind of that – that typical mid single-digit kind of growth rate in Adhesives.

Yeah. I guess, I'm just trying to square it up, because you had 6% order growth in the quarter, which was – that's a good solid order number for Adhesives. And I'm not hearing that you have a lot of longer lead time phase-in on the Adhesive side. So I'm – unless I'm hearing it incorrectly, so I guess, I'm just trying to square up 6% really good order growth, but maybe not translating into the same kind of growth organically in Q2, am I correct, or I mean, is there stuff that is being phased in like the other two segments, or am I missing a piece here?

It's mainly on the plastic side, that the – particularly the pelletizer business, that tends to be a little bit longer lead times. So you're seeing that sort of impacted in the near-term. There is nothing unusual in the Adhesive side. As Greg said, you can have some one quarter and other movement based on some orders, and typically those orders will be in the product assembly area that's been pretty strong for us here of late. So nothing unusual there, but we do have our orders in the plastic side, that are little bit longer lead time and that's pulling that number down in the short-term.

Okay. Thanks.

Thank you. And the next question is from Allison Poliniak of Wells Fargo. Your line is open.

Hi, guys. Good morning.

Hey, good morning.

Hi, Allison.

Just want to go back to operating margins, particularly as we look to the back half, you talked about currency headwinds, and it sounds like there's some system headwind there. I'm just trying to marry that with the expected volume improvement. I mean, is it going to be, I mean, should we sort of expect that acceleration on the EBIT side as well?

Yeah. Absolutely. I mean, I think you know that we've got tremendous incremental margin leverage on volume. So in a typical year, we'll see margin improve from the first quarter throughout the year as volumes improve just on a seasonal basis, and this year based on some of these orders stretching into the third quarter, and what we see from a project list and some new technology introductions, we expect to see that volume lift later in the year, and with that you'll see the margin lift that we typically see across the quarters with volume.

Okay. And then just, even on the second half, you noted some confidence in the second half acceleration in top line growth, is there any segment or end market specifically that you're probably a little bit more concerned about as we look to the back half of the year?

I'd say the growth across most of our segments looks solid. There could be certain end markets that are a little soft here, but we're making them up in others. I'd say, more concern would be around geography, and just because some of the geographies are struggling from a economic perspective. So when you think about the Americas, particularly Latin America, Europe is not as robust and Japan is more of a mixed bag. That said, some of the other geographies have been considerably stronger. So I'd say, it's more of a mixed bag on geography than end market applications. There are obviously some that are pretty strong, and things like auto, medical, electronics, applications including wireless, those kind of things are generally pretty strong. We've got new areas where we're interested in, that are picking up, but for us also, we're introducing a lot of new products this year, I would categorize in the singles category, a nice new incremental growth opportunities or recapitalization opportunities, that I think will also help in our – getting some traction.

Great. Thank you so much.

Thank you. And the next question is from the Christopher Glynn of Oppenheimer. Your line is open.

Thanks. Good morning.

Good morning.

Good morning, Chris.

I was – wanted to go into the second half margin outlook a little bit more, I think in the past, maybe you've offered directional guidance on quantifying a range or expectation for sequential incremental margins. So given the volume outlook, it's a little different modeling this year, given the FX dynamics. So wondering if you could kind of offer some kind of vague or specific rule of thumb?

Yeah. I mean the incremental margins are significant as the volume grows throughout the year. It does depend a little bit on mix. So for example, the Industrial Coatings, given the nature of scope what we provide there, while they have very good incremental margins that are probably in the 30% kind of range, are different than what we might see in technology, which would be higher and traditional adhesives would be higher yet. So it does depend a little bit on the mix. But we would expect to see strong incremental margins across each of the businesses as it grows throughout the year. You can see from the order rates that we're providing, Industrial Coatings is stepping up nicely and the Advanced Technology is stepping up nicely, so those mix effects will be a little bit lower than, say if all the Adhesives business was stepping up. But we would expect a pretty typical pattern as the volume grows up – grows for the rest of the year, only to be moderated a little bit by mix.

Thanks, that's helpful. And then at ADS, just wondering how you'd score the investments in the plastics processing at this point, I think EDI and Xaloy are coming up under – on about three years with Nordson. And just wondering, if there is any change to your view of the long-term returns and update on how you get there, the integrations et cetera?

Yeah. Maybe I'll just start with a comment on the – for the two major end markets that support all that business. As Greg mentioned in his comments, the plastic injection part of the end markets are doing well, and when you think about the products that are being made there, it goes into auto, it goes into electronics, it goes into medical, those areas are all doing pretty well. When you look at the film side of the business, the film side of the business, particularly the high-end film side of the business is really struggling, while there's some increase in demand. Europe slowing, China slowing, Latin America slowing really hurt the sort of supply/demand situation on the film business. So I'd say, we're still struggling pretty significantly on the film business that affects the dyes business the most. A different application like fluid coatings in the dyes business is doing really well, but the bigger application is struggling. So we're obviously – we're behind where we had hoped to be. And the supply/demand imbalance has not resolved itself yet. And we could be looking at another year or two before that's completely resolved, and that's a function really of the soft growth primarily outside the U.S. on the demand side at this point. Now, as far as integration goes, we made, I think great progress on the integration of those businesses. We're focused on new products in sort of other markets that we haven't played in as much, particularly on the film side, and we're getting some traction there, and we've built up our international capability, it's allowing us to do well, particularly in Asia. So we're encouraged by that. But in the short-term, we're obviously behind where we thought we would be.

Okay, thank you.

Thank you. And the next question is from Jason Ursaner of CJS Securities. Your line is open.

Good morning.

Hey Jason.

Good morning.

I had a little trouble connecting and missed some of the notes around each segment. Organic growth and the order rates, obviously extremely strong, just wondering maybe if you could walk through which divisions in the Tech segment were driving that in the 12-week orders?

Yeah. It's pretty much across the – across the board. So if you look at – and the electronics part of the business is doing well in wireless, but also in more traditional advanced packaging applications have started to pick up. And if you look at some of the Gartner data, it's encouraging in that area. But also auto electronics has been strong. And then, outside of the electronics space, a lot of general industry applications that would affect our EFD business are strong. We have a bunch of new products coming into play across our EFD business as well as our systems business. And then the medical businesses aren't really well – really driven by the broadening of our product line, and some international growth now as well. So really across the board, that looks very encouraging at the moment.

Okay. And the traditional PC market, I know that, yeah, it's been a struggle, but came back to growth – at least in global numbers, and especially in the domestic market. Have you seen any of that translate in some of the more, I guess legacy applications in PC and server?

Yes. We are seeing that, my comment on advanced packaging is directly related to PC, desktop, server kind of applications, both with end users and then sort of the outsourced manufacturers, we saw some encouraging orders coming through. So we're certainly starting to see that.

Okay. And the investments you've been making in Tech, just any update on kind of where those stand, and any success on the curing side issue (35:15)?

Yeah. So we have, on the wafer project we launched, we picked up our second big order in that business, and we have probably more than 10 significant prospects that we expect to see signed this year. So we're getting good – I think good traction on that. We're also taking advantage of expanding our local China manufacturing applications, and we have a number of new products across the – that particular systems base that we're introducing this year that we are seeing some good traction, and so it's encouraging at this point.

Okay, I appreciate the commentary, thanks.

Thank you. And the next question is from Jason Rodgers of Great Lakes Review. Your line is open.

Yes, I was wondering if you can give an update on the Freedom and Liberty systems and how that – how they play into your forecast for strong second half of the year?

Yeah, we've had an uptick on both of those products in the last couple of quarters. I think what we used to characterize last year is probably revenue exceeded expectations, volume didn't quite exceed expectations. I think that is continuing, but we have seen an uptick. The one we issue we mentioned was the availability of new adhesives that would further enhance the benefit of those particular new products has really not come to market yet. And some of the things going on in the oil industry right now, and the supply chain probably delayed that a little bit further, but they're clearly, Freedom is top of the line, Liberty is sort of our next tiered position and we have a number of other tiered positions. So we feel pretty good about what we have to offer broadly, and then we've only recently started to offer those products in Asia. So I'd say, we're at expectations on those products, not accelerating the way we might have hoped, based on the availability of the adhesives.

And Greg, the pension settlement expense that you have in your press release, is that included in the selling and admin line of the income statement?

Yeah, that is – in the segment detail, that's in corporate spending.

Thank you.

Thank you. The next question is from Walter Liptak of Global Hunter. Your line is open.

Hi, thanks. Good morning.

Good morning, Walt.

Good morning.

I wanted to ask about the coatings business, very strong orders there and this is the third quarter that we've seen of the strong order trend, and as I think back, through the past we've seen periods like this before, where you kind of take on a couple of quarters of increasing orders, and then my recollection is that, then it starts to slow down again. So I guess, I'd like to get some color on what's driving it, what the visibility looks like as we go further into 2015?

Yeah, so of course, Walt. Yeah. So I would say, obviously the business itself is linked to the business cycle, and that's, I think, what you're referring to in your comments. That said, there are a number of markets that have been strong, so auto for example is one that's been strong for us. With some of our, cold materials acquisition in the Sealant Equipment business, we've been able to take that – now starting to take that internationally, we're seeing some uptick there. And we've talked about in the past – oil and gas exploration, and what that's doing from pipe coating application, pipe coating. So I would say solid, but even in businesses that are more traditional like our container business, we're seeing good order growth, some of that is upgrades and recapitalization, which new technology helps. So I'd say, generally it's fairly broad-based, I'd say the areas that are still a little bit – a little bit slow would be the things like coatings for recreational products, for some office furniture, things like appliances kind of go up and down a little bit, but they're generally solid. So, I'd say the key drivers are the ones, that I've talked about here, and we've got as you look at the orders, some pretty good visibility, and – at least in the near-term. And when we look at our projects list, really across the globe, we see some pretty good activity.

Okay, great. It sounds good. And then just a general one on currency. Is there any fundamental impact on currency like, are you any less competitive in any markets because of the stronger dollar?

No. If you look at – we're pretty well distributed from a supply chain standpoint, so it's really the translation impacts that you're looking at there. So no, we're not seeing any significant competitive threats there. But the degree of change particularly in Europe in the end, and to a lesser extent, the pound has impacted the translation effect, but we're not seeing a competitive dynamic given the balance in our supply chain.

Okay, got it. Thank you.

Thank you. And I'm not showing any further questions in queue at this time. Would you like to close with any closing remarks?

Yes. This is Jim again. Thank you, everybody for joining the call. I do have some calls scheduled with some of you later today, I'm around, and I'll be around tomorrow as well to take your call. So again, thank you. And I appreciate your ongoing interest in Nordson. Have a good day.

Thank you.

Thank you. Ladies and gentlemen, this concludes today's conference. You may now disconnect. Good day.