Nordson Corp (NDSN) 2004 Q4 法說會逐字稿

At this time I would like to welcome everyone to the Nordson fourth-quarter and fiscal 2004 results conference call. (OPERATOR INSTRUCTIONS). Thank you. I would now like to turn the conference over to Barbara Price, Manager of Shareholder Relations.

Thank you. Good morning everyone. With me this morning are Peter Hellman, Chief Financial and Administrative Officer, and Nick Pellecchia, Vice President and Controller. We would like to welcome you to our conference call today, December 9, 2004, on Nordson's fourth-quarter and fiscal 2004 results.

Our conference call is being broadcast live on our webpage at www.nordson.com and will be available for 14 days. There will be a telephone for replay of our conference call available until midnight Thursday, December 16 by calling 1-800-642-1687, and you will need to reference ID number 2377261.

Our attorneys have requested we open this call with a cautionary statement under the Safe Harbor provisions of the Private Security 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 now like to turn the call over to Peter for an overview of our fourth-quarter and fiscal 2004 results and Nordson's future outlook. Peter?

Thank you, Barb, and thank you all for attending Nordson's conference call discussing our fourth-quarter 2004 results.

In the fourth quarter we saw, as we did throughout the year, improvement in volume. Our performance was further benefited by a weakening dollar, continued cost controls and lower interest expense. Somewhat offsetting these factors was a loss incurred upon the sale of a minority equity investment. The net effect was a quarter that exceeded our guidance range in the consensus forecast by 5 or 6 cents when the investment loss is factored in. In addition, the positive trend that we have seen in order rates has continued, and while moderating to a slower growth rate, gives us comfort about the year ahead.

Sales for the quarter were a record $228 million, up 21 percent from the prior year, the fifth quarter in a row of increased sales. The quarter reflected a very significant volume increase of 16.5 percent. In addition, the weaker dollar added 4.3 percent to sales. Volume has been up in each of the past five quarters and was up for the full year 13.3 percent. The currency effect for the year added another 5.6 percent to sales.

Our volume in the fourth quarter reflects the continuing economic improvement in every geographic region. Volume was up in North America 14.3 percent, in the Americas 16.3 percent, in Europe up 9.3 percent, in Japan 29.6 percent, and in Asia 35.7 percent. Volume increased as well in each of our business segments. Adhesives reported a fourth-quarter volume increase of 14.3 percent, advanced technology an increase of 13 percent, and finishing had a quarter of strong volume, up 30 percent. For the year, volume increased in adhesives 10 percent, advanced technology was up 26 percent, and finishing had a volume increase of 11 percent.

While the economic recovery is reflected in moderating growth in the advanced technology segment, the finishing volume increase more than made this up. As we had anticipated, finishing had a strong quarter, converting its backlog of powder orders to shipments, resulting in a positive operating income for the year and an increase of over 60 percent year-to-year. Contributing to the volume increase in adhesives was strong shipments in fibers, nonwovens and automotive, while advanced technology was helped by Asymtek, March Plasma and UV.

Recent order activity reflects continued improvement, but with more difficult comparisons on a year-to-year basis now a factor, the recovery has moved from the rebound phase to that of slower growth. All comments about orders are in constant currency, orders that reflect greater improvement stated in nominal currency given the weakness of the dollar currently.

Over the past 12 weeks, order rates are running at 104 percent of last year's demand. On a sequential basis, that's the last 12 weeks versus the 12 weeks before that, we are down 1 percent. We have seen the greatest improvement in finishing which has -- was slow to fully participate in the recovery. By segment, the past 12-week order rates versus a year ago are 107 percent in finishing, 102 percent in adhesives and 104 percent in advanced technology.

On a geographic basis, orders over the past 12 weeks in the United States are at 107 percent of the prior year's level, the Americas 120 percent, Europe is at 101 percent, Japan has seen an order decline of 9 percent, and Asia is at 105 percent of the prior year's level. As we have in the past, this order and fourth-quarter financial information can be found at the Nordson.com Website in the investor relations section.

As is typical of our seasonality, backlog was drawn upon during the quarter. That having been said, we ended the year with $78 million in backlog, up from the beginning of the year by 11 million, or 16 percent. This should also help get the year off to a good start. In summary, from an order standpoint we continue to see growth even as the recovery moves to a slower phase.

Turning to the income statement, gross margins in the quarter decreased slightly from 53.3 percent -- I'm sorry -- in the quarter decreased slightly to 53.3 percent from 53.9 percent last year. The benefit of a weaker dollar improved gross margin by 0.9 percentage points with the effect of effect of (indiscernible) and absorption offsetting this gain.

In spending, we see the effects of continuing cost controls as spending, as a percentage of sales dropped from 41.1 percent in last year's fourth quarter to 37.8 percent this year. We continue to see productivity gains from our lean initiatives, as can be seen from the year-to-year employment levels, which, adjusted for an acquisition that occurred during the year, increased less than 1 percent while volume increased more than 23 percent.

Our interest expense continued to be reduced but at a moderated pace, as further debt increases, other than scheduled maturities, are not economic at this time. In fact, the strong cash flow throughout the year resulted in a cash and marketable security balance of $61 million at year-end. In the quarter, we also experienced a lower effective tax rate due to a tax refund relating to prior years.

Nordson's net income for the quarter was 19.7 million versus 13.3 million last year. Fourth-quarter diluted earnings per share was 53 cents versus 39 cents last year. Hence, earnings per share earnings increased 36 percent, or 14 cents on a year-to-year basis, with 6 cents of the improvement from foreign exchange offset by the loss on the sale of a minority equity investment of 6 cents and 5 cents of share dilution effects. The consensus estimate for the fourth quarter was 53 cents per share but excluded the 6 cents per share investment loss.

Our operating cash flow for the quarter continued to be strong. Specific cash flow items in addition to net income are noncash charges that generated cash flow of 13 million, working capital generated 9 million, capital expenditures were about 4 million, while dividends were almost $6 million. We also experienced some option exercises generating approximately 4 million in cash. Net cash flow was there for cash generation of $35 million in the quarter.

For the full year, we generated $125 million of cash flow, which included $55 million of option exercises. Cash was used to reduce debt where economic and increase marketable securities. Our balance sheet is strong as measured by debt leverage, which, as we measure it, debt to total capital was 30 percent at year end and 20 percent when measured as debt net of cash and marketable securities.

I should add that the adoption of lean operating approaches continues to yield results in the balance sheet as well. Inventory management continues to improve, with inventory turnover of 108 days versus 143 days a year ago when measured across the entire year. Inventory turnover in the fourth quarter improved from 115 days a year ago to 95 days this year. Cash-related measures reflected relatively good performance in this environment. The quarter's EBITDA was $39 million, or $1.05 per share, compared to $32 million, or 93 cents a share last year.

In summary, the quarter reflected a very strong volume increase, aided further by a weaker dollar. It was a quarter and a year where we were hitting on all cylinders and every business segment and geographic region reflected strength.

Let me turn to some brief comments about our outlook for the first quarter of 2005. As we said in our earlier discussion of orders, we are seeing continued improvement in each business segment and most regions. This, coupled with the level of our year-end backlog, allows us to have an outlook of an increase in volume of 5 to 7 percent in the first quarter.

In addition, should foreign exchange rates hold at today's level there would be an additional 4 percent benefit, resulting in an increase of sales of 9 to 11 percent. In the first quarter, we should see some year-to-year improvement in gross margin while spending should follow its seasonal pattern. This outlook results in earnings per share for the quarter in the 36 to 41 cents per share range, with the current consensus estimates at the low end of our guidance range.

In summary, the fourth quarter and full year were very strong financially. During the downturn, we managed aggressively our cost structure. Now with the rebound in volume, we are seeing the benefits of the significant profit leverage we have to an improved economy. The continued weakness in the dollar only adds to this benefit.

And with those opening comments, let us now turn to your questions.

(OPERATOR INSTRUCTIONS). Walt Liptak, KeyBanc Capital Markets.

Let me ask you a question, first on your efficiency. You are becoming a much more efficient company, and it showed up in the leverage and the lower S&A expense, which looks like it dropped about 300 basis points or so. How much more do you have to go? What kind of things are you working on? And I guess specifically about that employment data point that you gave us, the 23 percent volume increase, employment up only 1 percent -- can you comment? Do you have to take employment levels up next year?

As I said the 23 I realized I misstated. Actually volume was up 13 percent. So I'm glad you raised it; it got me a chance to -- that was the one mistake I think I made. But still, the point is there. We had a less than 1 percent increase in employment, while volume was up 13 percent. We are becoming more efficient. I think that there's still a lot more we can do. While we are pleased with the SG&A in terms of a percentage of sales improvement, for a full-year basis we're still higher than we would like. Our goal on that number is 40 percent or less. And for the full year I think it was 41 percent.

As we continue to see volume, we will be increasing employment at lower than those volume levels. I don't know whether we can have, if you will, a 13-to-1 ratio, but clearly, perhaps a 2-to-1 ratio is a clearly achievable outcome. As we look at spending, we want to spend at half the rate of our sales growth, and that's why I come to that 2-for-1. We've been doing lean for three years. I think we're now getting better at, and clearly have tripped over the fruit on the ground, picked some low-hanging fruit. But there's still a lot more productivity we can accomplish.

Great. I will ask you kind of an open-ended question that may not be appropriate for a conference call, but maybe if you can efficiently answer this question. What are you seeing from your customers in the traditional industrial capital goods, I guess anecdotally, as well as in the tech area? You know, I guess -- what is the view for the full year?

We are constructive on the full year, and I know that there's a lot of talk about our order rate pattern and the industrial order rate patterns. And let me just remind people kind of what's happened over the last year-and-a-half. We saw the first rebound in demand in the advanced technology segment. It was quite impressive, and we posted some really pretty high numbers of volume increase in first orders and then shipments. Then that moved into the advanced -- into the adhesives segment, and lastly, into the finishing business which sells into more mature industries, metal bending and painting industries.

That pattern kind of followed -- as then advanced technology started hitting more difficult comps early, the growth rates slowed, principally at a higher level of course, but principally because the comps started, the year-over-year comps. While they're now down to growth rates that are single-digit, they're still growth rates. And given some of the segments of the industries they sell in, indeed that is better than our peers. So it does not reflect any loss of share; in fact, quite the opposite.

The adhesives business didn't recess very much, and therefore, its rebound has been more modest. But we're quite constructive on the growth there, particularly in the product assembly area where we're expanding the footprint and going into woodworking markets, including furniture and window fabrication.

And then, speaking of our finishing business, there we have seen a pronounced improvement in orders, and in the last quarter, shipments, as capacity is being put in place in new markets such as China. And wherever new painting capacity goes in it tends to be disproportionately powder, which plays to our strength. In Japan we have seen a good amount of demand tied to environmental constraints on emissions and a conversion of at least a portion of that industry from liquid painting to powder painting. And in the Western markets, we are seeing good demand, proportionate to a mature industry. So I think finishing will have -- continue to have a good year, and it won't be just a blip on the screen.

So to sum up advanced technology, growth in the single digits would be forecast for the quarter and beyond, adhesives upper single-digit commensurate to their organic growth rates, and we'll still be seeing some recovery faster than organic growth rates in finishing.

Charlie Brady, Hibernia Southcoast.

Could you just on the divestiture of your minority interest, can you just give a little color about exactly what that was?

Yes, I can. About six years ago we entered into an investment in a venture capitalized company that had excellent and promising technology in microwave curing of circuit boards that was adjacent to some of the processes which we were involved in. We entered into that venture with a board seat and a cash investment, and also obtained as part of that investment some distribution rights. The technology continues to be, to us, intriguing and promising. But it has failed over the six-year term or run to be commercialized. There were events during the fourth quarter which caused us to believe that its achievement of commercialization would be still distant. And by selling our investment at this time we were able to also to utilize a capital gain which would have been lost, the carryover period was maturing. So it seemed like the right time to sell our investment. The follow-up question might be are there other investments in your portfolio like this, and the answer to it was and is no, this was unique. It was one of those investments we made with a very focused purpose that didn't achieve its objective.

Thanks. That was a good thorough answer. Can you talk about on the operating margins sustainability, particularly at the adhesive dispensing side and the powder coating business? The adhesive dispensing, we haven't seen margin levels like that since 2000, and a similar kind of timeframe on powder. Going into '05 is there sustainability at this level or are we sort of really at the top here and we should moderate a bit?

Let me do adhesives first. I think we saw improvement in adhesives, and that in part was mixed but it was also improvement in the margins of our fiber business that we have been working hard to do. So I think that that is sustainable going forward, depending on mix, because that business does have some mix issues with fiber being a systems integration business that carries even in the best of times lower gross margins. But I think those margins are sustainable.

In finishing, it depends exactly what period you're talking about. If you're talking about just the fourth quarter, that would be sustainable in a fourth quarter, because that's a very seasonal business. I think that over the full year, the margins actually should improve. If you look at the full-year margins to this year to full-year margins next year, I think you'll see improvement, because they have now volume that's taken them out of the trench.

Okay. Last question. Can you just talk about on your corporate expense side, how much of that was tied into anything related to Sarbanes Oxley, or sort of other unusually onerous items?

I'll let -- I might whine too much if I talk about Sarbanes Oxley. It wasn't the material of Sarbanes Oxley, but it is an ongoing cost and it's something that Nick can talk about.

There's nothing -- the Sarbanes Oxley cost, clearly, when you look at historical trends there is some increase in our corporate cost structure because of that, and the big picture -- again, not significant -- I mean, we are seeing incremental costs year-on-year. If you go back over a five-year picture, probably 6, $700,000 type of range, more in that range. It's not 5 million, it's more -- it's below $1 million on a go-forward basis. Some of it is timing as we do the work through the year. So on a quarter-to-quarter basis a little bit of it may fluctuate. But over the course of time, I'd say the built-in structural cost is probably more like 700,000 than over 1 million.

For us 404 comes into play as an October year-end, if you will, during '05. And in the initial phases which we have been going through, most of our work has been internal. We have used some external and very little of our independent accounting firm. In '05, we will probably peak those expenses because we're going through them for the first time, and therefore we may be over a million. But our estimate going forward on a steady-state basis, kind of beyond the transition year, would be that it would be an expense of less than a million. Other than -- you asked about that question -- there is nothing in the corporate expenses that are unusual. Compensation is good this year. It's good because, I think, we had a good year. And some of the compensation is tied to stock price, and the stock price has been up as well.

Bob Schenosky, Jeffries & Co.

Just a couple of easy ones first off. CapEx, Nick or Peter -- what's the outlook for '05?

It's similar to '04. I think we budgeted $12 million. In addition we are looking at buying a building that we're currently leasing. It's a favorable transaction, and that would add another 2.5 million.

14.5 million would be -- with that included would be the outlook.

But our operating CapEx, if you will, would be 12.

Because it's a switch from lease cost to capitalized and depreciated in the building we're in.

Secondly, you've got a nice cash horde compared to last year. Anything that you're starting to see in terms of small acquisitions or any immediate plans to do anything relative to shareholders with that 60 million?

Well, our first preference is acquisitions, and for the last year to year-and-a-half we have been filling that pipeline. As you know, our acquisition methodology is to engage in conversations, dialogues with people who own privately-owned companies. It takes awhile for those to mature. It's kind of the Groucho Marx; I think I would run if anybody on our first call said that they wanted to sell their company. And I think that during the year we will enter into some acquisitions. I avoid referencing your immediate question. I think that the acquisition program will roll out, and should use some of the cash and cash flow. Should the acquisition arena not cause us to use our balance sheet, then we would consider increasing the amount of share buyback. Clearly, our dividend, which has now been increased for 41 years, is another form that we return value to shareholders.

But we shouldn't be surprised to see maybe one or two small acquisitions during the year?

Yes. I think we'll go back into our pattern of smaller acquisitions, non-EFD type, and you'll see a series of those over the next year to 18 months.

If I could, just one more on the back of Walt's question earlier. In the -- specific to adhesives and the finishing business, can you delineate at all, Peter, in terms of what your sense is with your order patterns continuing to move up? Is that more pent up replacement product or are you starting to see CapEx budgets open up for new product?

In which segment?

Specifically in adhesives, but secondarily as well in the finishing business.

Yes, I think that industrial confidence is higher. I think people are fulfilling some pent up programs, and I think that is where we saw the early demand in each of our segments. We went through a period of, well, starting with 9/11, where industrial confidence was nonexistent. And I think a lot of projects just got in queue, and we have seen the release of those. I think in '05 we are going to see more of a normal pattern, and I think we have worked -- other than in finishing, which I think still has some recovery, I think we have worked through the pent up demand phase and now we are into normal industrial capital spending.

Robert McCarthy, Robert W. Baird.

Following up on the questions about CapEx. Peter, I assume you would figure depreciation and amortization would be roughly flat in 2005. And could you comment on what your expectations are for what you might be able to do with working capital?

I think that it's flat to down a million, as I recall.

Over the course of the year it will probably be down about $1 million, Rob.

I think we can continue to do better in inventory but at a slower pace. We have cut our inventory, or in terms of turnover we doubled the turnover. When we began lean we were operating at about 180 days, and we ended the year close to the interim goal of 90. And now it gets harder. But I think there is still more work we can do, and clearly -- but basically on the inventory side. I think from a terms and conditions, our receivables have always been pretty good from an age standpoint. And as you know, as we sell into some markets that have by their local nature extended terms, then that can move around. So it's about inventory, and we would expect some improvement but not at the rate that we have seen over the last two or three years.

So net net, maybe working capital generates a little bit of cash for the year?

Yes. Because I think we should generate cash even though we are expecting to see volume increases.

And I want to make sure I understood you. The tax rate for the fourth quarter at about 31.5 percent, the 1.5 GAAP to the 33 you've been running represents the size of the tax refund?

Correct. That's it.

And our policy is when we get it we book it.

Of course. And then that's independent of the capital gain that you're able to use as an offset on the --

That's right. Robert, the capital gain (multiple speakers) the same tax rate as ordinary income. The issue, though, is capital gains and losses. When you incur a capital loss, although the tax rate is the same as ordinary income, you could only offset losses against gains. So as Peter said, we had a gain in our carryback period that was expiring, and we were able to disposition with the investment, offset the loss incurred on the investment with gains we had prior, and took the benefit at the same statutory rate as ordinary income. So it did not have an effect on effective rate. There was no effective rate change due to that.

Thanks. Peter, a little -- I recognize that you're not making a formal forecast for the year, but in your comments about growth expectations for the three individual segments -- I mean, your message on adhesives and advance tech, I think, was pretty clear. But it wasn't quite clear to me what you intended to convey about coating and finishing. You expect the strongest organic growth out of the three segments?

No. Organic growth in the finishing business, I think we're clear on, is our slowest growth business. It's GDP plus or minus. But in '05 we're not there yet, because they still have recovery. And so their growth will exceed their organic growth rate, where in the other business their growth rates will be approaching their organic growth rates.

Okay. You all -- I mean, a lot of it just has to do with the business you're in. You have been able to -- well, to simply not face the same degree of material cost issues in terms of its aggregate impact on your numbers that most other capital goods companies have. But has it -- is it starting to be a measurable drag that we might want to be aware of? Because then it could be something that could go away. Or is it really still a de minimus issue?

It had an effect. We planned for cost decreases from our supply base. We essentially ended the year around breakeven. And our normal ability to engineer costs out was able to offset commodity price increases so that we did breakeven, and that's the environment that we find ourselves. And our goal for the year is, again, to get some costs out of our cost to goods sold, products purchased. But it hasn't been a material impact.

Would it be fair to say that the pricing environment has improved a little bit?

Yes. I think that to the extent that our competitors are, and we are looking at commodity price increases, we are able to pass those along.

Lastly, can you help me understand what is going on in the margin that you generated in the advanced technology segment? You know, roughly even sales with third-quarter levels, but a fairly significant decline in operating income.

It was basically caused by mix, but I'll let Nick --

It's mix issues. At an operating segment level, Rob, we do have two larger units, Asymtek and EFD, and they have a different structure in terms of cost structure and operating profit environment. And we have two smaller businesses, this plasma treatment business we have and our UV curing business. And those two businesses account for probably 20 percent of the segment in total. And the growth in the fourth quarter -- all units grew in the fourth quarter and showed good growth. But the growth rate in the smaller business, the plasma for example, was significant. The dollars of growth in our plasma was about equal to the dollars of growth in EFD. So it was mix. Those businesses do not generate the same profit -- gross margins as EFD and Asymtek, so it was a mix issue.

EFD profitability remains at similar levels to where it has been all year long?

The profitability remains at similar levels for that business unit, but when look in the quarter and you add them up and you consolidate all your business units, if you do have a business with a lower gross margin that grew just as fast but not the same profitability, you average it down. (multiple speakers) look at your incremental revenue, a good -- as I said, all businesses contributed, and the average mix had a lower gross margin content to it than other quarters during the year. It was unique to the quarter more so than anything else.

Then can I infer from that that we -- all else equal, we expect to see or -- look -- would we expect to see the improvement in margin rates in '05 (multiple speakers)

If you look at '04 as a whole, because these quarterly cuts of it -- when you get mix impacts to that business unit, and you look at the year of advanced tech, you had gross margin -- you had operating profit margins of about 18 percent. And that is reflecting current cost structures and operating environments. So I would say the 14 percent was an outlier because of mix.

Alan Margolis (ph), Horseman Leaf (ph).

Just a follow-up on that question. Can you give a little more detail on exactly the gross in operating margins on those different businesses in advanced tech?

No. For competitive reasons we (multiple speakers) do that.

And then another question -- in terms of the growth of each business, can you just sort of dimensionalize where -- in which geographies each business grew the most or where it was the weakest?

And by business you mean business segment?

Business segment, right. I think before you mentioned, just as an example -- before you mentioned, I think, finishing just had a lot of -- there's a lot of growth happening in China.

Within the business segment, clearly in the finishing business, primarily powder coating drove the growth in that segment. And the growth geographically across that segment did reflect good growth in Asia, but it also did have recovery in North America and Europe. I don't have specific percentages broken down to powder in Asia, but clearly when you look at our overall geographic growth mix in Asia, we were selling powder systems. And overall, geographically we were up in Asia for the quarter 36 percent in volume terms, and powder would have been up, in my mind, proportionately to that if not a bit more.

And Japan is being driven by powder as well, Europe is very broad-based, Americas which was up pretty good in percentages and that big deal in dollars, and the United States was broad-based.

Across all the segments?

Across all the segments.

John Franzreb, Sidoti & Co.

Just a little bit about the acquisition strategy. Could you comment on if life sciences is still a priority, and what other (indiscernible) end-market (indiscernible) you'd be looking at?

Life sciences is a priority, as is advanced technology and some smaller under-served markets in adhesives. We had good growth in our organic growth rate in life sciences. We exceeded our goal of $10 million in life sciences this year, and we are now on our way to our next goal of 25 million in two years. But as we've said all along, we would like to augment that organic beachhead with some acquisitions. And we are progressing in understanding the dynamics of that industry and the players, and initiating those conversations. In advanced technologies there's still process steps that are close to what we do in dispensing or curing, and those are attractive to us. And in adhesives likewise, adjacent process steps or market segments that we under-serve that we would like to do more with, and those conversations are continuing as well.

And the relative size of these acquisitions -- could you give a sense of what kind of revenues you're looking at? And as far as adding on you said the niche size; how small are we talking?

If you look at the historic pattern of Nordson's acquisitions, we made a series -- a dozen or so in the couple million to $40 million size. And then we did a very large acquisition with EFD. And I alluded to the former type of acquisition, but with some inflation in the growth of our company and their company, maybe the 40 goes upward to a number higher than that. But clearly, smaller size acquisitions.

Robert McCarthy, Robert W. Baird.

It occurred to me that you shared with us your outlook, at least on a relative basis, for the product-based segments. Could you talk a little bit about how you are thinking about geographic outlook for the coming year?

Yes. For the quarter, probably a little slower in Asia. But I will remind you that in the fourth quarter Asia was 36 percent volume. There was a move in China in particular for tighter money, and that slowed some projects down. Our understanding is maybe they're easing again, but we are just not going to be at the same growth rate. Japan -- probably less than the 30 percent they posted in the quarter. That's going to be a good year but it may be a little bit choppy. Europe, they had 9 percent. That is slow in terms of what we did in the quarter. They'll probably be slow in terms of what we do in the first quarter. Americas, probably around where they were, which is in the mid-teens. And the United States at 14 percent -- probably a little slower in the first quarter.

It didn't occur to me. I guess historically you all have shared a segment-based volume outlook for the quarter. Can you do that in support of the 5 to 7 aggregate number?

I don't think we have that.

(multiple speakers) No. I mean we'd be (indiscernible) on a segment level. But going forward on an outlook basis, we don't break the segments down by geographic.

Sorry about. Lots of numbers. Fiber systems contributed to fourth-quarter adhesive segment results, I gather. Yes?

Yes.

Yes.

Do you have some more of those big projects in backlog?

Yes. They have got a good backlog, but to have a full-year they're going to have to get some new orders.

But you've got something available to be shippable in the first half, for example?

Yes.

Yes.

Walt Liptak, KeyBanc Capital Markets.

I would like to go back to the acquisition discussion that we were having. And I wondered if you wouldn't mind talking about the different multiples for those three product groups that you talked about, especially the life sciences, just so we won't be shocked if and when you do a good-size acquisition in that sector.

The discussions we are having -- while life sciences may be a little richer, if you will, from an EBITDA multiple, we're still in the 7, 8 time multiple. And for the type of company we are looking for, for what they do -- remember that these are dispensing businesses. These are tier 2, if you will, in medical products. So they don't have some of the liabilities, and therefore, don't have some of the margins that you see if you are in a tier 1 environment. So yes, they are higher than some of the other businesses, but they're not materially higher. And I don't think the premium paid will shock you. But having said that, a lot of the discussion is what year are you buying? We are claiming we're buying '03, they're claiming we're buying '05. So just how you look at it that way can change the multiple a bit.

I hate to put an expectation on this, but it's a reasonable expectation that you wouldn't pay more than, say, eight times?

I don't want to (indiscernible) it. But in most of the dialogues we are having, we are okay with the margins that we would have to pay.

At this time there are no further questions. Are there any closing remarks?

Just to thank you all for attending and to encourage you to continue to give us your feedback on how we can make our investor relations program more effective. We did receive some comments, and that's why we went to this format, which is to release in the afternoon, followed by the morning teleconference next day. So if there are other things that we can do to make the program more effective to you, both the analyst and the investor, contact either me or Nick or Barb. The only other closing comment is to wish you all the happiest of holidays and thank you for attending our conference.

Thank you for participating in today's Nordson fourth-quarter and fiscal 2004 results conference call. You may now disconnect.