Nordson Corp (NDSN) 2007 Q1 法說會逐字稿

Good morning. My name is [Nashanta] and I will be your conference operator today. At this time, I would like to welcome everyone to the Nordson Corporation first quarter fiscal 2007 results conference call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks there will be a question-and-answer session. (OPERATOR INSTRUCTIONS) Ms. Price, you may begin your conference.

Good morning, everyone. This is Barb Price, Manager Shareholder Relations, along with Ed Campbell, Chairman and Chief Executive Officer, Peter Hellman, President, Chief Financial Administrative Officer, and Greg Thaxton, Vice President and Controller. We would like to welcome you to our conference call today, Wednesday, February 28, 2007, on Nordson's first-quarter fiscal 2007 results. Our conference call is being broadcast live on Webpage at www.Nordson.com, and will be available for 14 days. There will be a telephone replay of our conference call available until midnight Friday, March 9 by calling 1-800-642-1687. You'll need to reference ID number 932-4246.

Our attorneys have requested we open this call with a cautionary statement under the Safe Harbor provisions of the Private Securities Litigation Reform Act of 1995. During this conference call, forward-looking statements may be made regarding our future performance based on Nordson's current expectations. These statements may involve a number of risks, uncertainties, and other factors, as discussed in the Company's filings of 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 Ed Campbell for an overview of our first-quarter fiscal 2007 results and Nordson's future outlook.

Thank you, Barb. Good morning to all of you. Thank you for attending Nordson's conference call discussing our first-quarter 2007 results. As I begin, let me remind you that during the fourth quarter of 2006 we sold the Fiber Systems business and now report this business as discontinued operations. In my comments this morning, I will be speaking to continuing operations. In addition, results for the current quarter include the previously-announced December, 14, 2006, acquisition of Dage.

Sales for the quarter were $204 million, up 3% from the prior year and a record for any first quarter. Sales in the first quarter consisted of 3% growth from the acquisition of Dage Holdings and 3% from favorable currency effects. Organic volume was down 3%.

First quarter sales volume for the Advanced Technology Systems segment grew by 14% over the prior-year period. Dage revenue was responsible for all but 1% of this increase. Volume was down 3% in the Adhesive Dispensing Systems segment and 10% in the Finishing and Coating Systems segment.

Looking at a geographic breakdown, our volume in the first quarter reflects strong business activity in Asia-Pacific, with volume up 14%. Europe had modest volume increase of 1%. The United States, the Americas, and Japan had volume declines of 3%, 6%, and 9% respectively. Sales during the quarter were affected by relatively weak order growth during the first half of the quarter. This pattern was seen across each of our three business segments and was generally not limited to any one custom or business segment. However, we did see consistent and strong demand for powder coating systems in several geographies. While powder shipments were down, we ended the quarter with very strong backlog and momentum.

Also, with regard to Advanced Technology Systems, sales comparisons to last year's very strong sales were impacted by considerable weakness in Asia with a few key customers. This weakness largely offset significant strength and other Advanced Technology businesses, particularly in UV curing and plasma systems.

Dage is off to a strong start, with orders since the completion of the purchase through February 16 up 14% from the same period last year. Particularly noteworthy has been the rebound in our order trends in recent weeks. While we began the year with a relatively slow order pace, demand as measured by orders has shown improvement in the second half of the quarter in all segments.

To demonstrate this, I will discuss both our orders over the past twelve weeks as we normally do, but also our orders over the past eight weeks. Orders for the past twelve weeks are equal to the same period last year in constant currency. On a sequential basis, that is the past twelve weeks versus the twelve weeks before that, orders are down 2%. The more recent twelve-week period, however, includes the holiday shut down, which makes the sequential comparison less meaningful. Recent orders by segment reflect that the past twelve week order rates versus a year ago are up 20% in finishing while down 2% in adhesives and down 5% in Advanced Technology.

On a geographic basis, orders over the past twelve weeks as compared to last year are up 6% in Japan, 5% in the United States, and up 3% in both Europe and the Americas. Asia-Pacific orders are down 20%, reflecting a decline in some advanced technology sectors. All of these order rates we have been discussing include Dage activity in both the current year and the prior year. If we only include Dage in the period since closing, orders for the Corporation and for Advanced Technology Systems are up 4% and 9%, respectively, over the same twelve-week period last year.

If we turn to a more recent trend in orders, by looking at our orders over the past eight weeks, we see a pronounced rebound in activity. Orders over the past eight weeks, including the impact of the Dage acquisition, are up 13% overall year-to-year with increases in all segments and most geographies. Orders are up 26% in Advanced Technology, 23% in finishing, and up 5% in adhesives.

We ended the quarter with $101 million in backlog, compared with $97 million in backlog last year at this time, using current exchange rates for both figures. Current backlog is up $32 million since the beginning of the year, reflecting seasonal trends.

Turning to the first-quarter income statement, the overall gross margin rate in the quarter is 57.7%, equal to last year's rate. The current year margin includes the impact of purchase accounting for the Dage acquisition. Spending was up 6.9%, including Dage. If we exclude Dage, spending was up 3%, with currency accounting for 2.9 percentage points of the increase. Interest expense increased over the prior year as a result of the Dage acquisition and our effective tax rate was 33.5%, equal to last year's rate. This is lower than we expect for the remainder of the year, as the first-quarter tax rate benefited from recent legislation concerning R&D credits. Going forward, we expect a tax rate of 34.7%.

Nordson's income from continuing operations for the quarter was $15.6 million versus $17.6 million last year. Fully-diluted earnings per share was $0.46 versus last year's $0.52 from continuing operations and $0.47 per share including discontinued operations.

Let me take a moment to comment on the purchase accounting for Dage that is reflected in the first-quarter results. During the quarter, we have assigned purchase values to assets acquired, notably inventory values were increased, which will impact margins until the inventory turns over, which we expect to be completed during the third quarter. In addition, certain longer-lived assets, including intangible assets, were increased in value and will be amortized or depreciated over the remaining 10 to 15 year life.

The effects of the purchase accounting adjustments were $0.03 per share of dilution for the six-week period of ownership in the first-quarter. In addition, the cost of interest was diluted an additional $0.02 per share. Dage itself contributed $0.01 per share, reflecting a period of disproportionate holidays. During the second quarter, the purchase accounting effects increased, given the full quarter of ownership, to $0.08 per share. In the third quarter, the purchase accounting effects will be $0.05 per share lower, reflecting the end of the inventory effect, and are seen to be $0.01 per share in the fourth quarter and beyond, as we only amortize intangible and certain fixed assets.

Our operating cash flow for the quarter continued to be strong. Specific cash flow items in addition to net income were non-cash charges of $8 million. Working capital used $19 million of cash, reflecting seasonal factors. Capital expenditures were $7 million, including $5 million for the purchase of a new building which will be more than offset by the sale of the buildings from which we will be moving, with that sale expected in the second or the third quarter. Dividends were $6 million. In addition, we had other inflows of $16 million.

We ended the quarter with a strong balance sheet. Our debt leverage, measured as debt to total capital, ended the quarter at 41%, including the impact of the Dage acquisition. The quarter's EBITDA was $33.3 million, or $0.98 per share, versus last year's $35.2 million, or $1.04 per share.

In summary, the quarter was a good one with record sales. While the margins were reduced by the Dage acquisition, much of this reflects purchase accounting effects that will be somewhat temporary.

Let me now turn to some brief comments about our outlook for the second quarter of 2007. Reflecting current quarter trends results in a volume forecast for the first-quarter of a range of up 5 to 9%. Given current foreign exchange rates and the weakness of the dollar, volume should get approximately a 2% additional benefit from foreign exchange if foreign exchange rates stay at current levels. In the second quarter, we should see gross margins at about 55 to 56%. This includes the impact of purchase accounting adjustments to Dage costs of sales arising from inventory.

Spending in the second quarter should grow primarily reflecting the acquisition of Dage. Absent that, currency and volume both contribute a combined 3% over the prior year. The results is spending to sales of 40.5 to 41% of sales, including Dage. We have also included in our forecast an after-tax gain on the sale of real estate of $0.06 per share in the quarter. This forecast results in earnings per share in the $0.62 to $0.73 per share range versus last year's $0.70 from continuing operations and $0.64 including discontinued operations.

In summary, the first-quarter was a relatively good one, given the modest increase in organic volume. We are encouraged that the increases in orders that we have seen of late should be reflected in the second quarter and beyond. Let us now turn to your questions.

(OPERATOR INSTRUCTIONS) Charles Brady, BMO Capital Markets.

Can you give a little more color in the Advanced Tech business about in Asia with some of your customers and that was impacting your business there? Any more color on exactly what is going on there? Is that something that has been resolved or will it continue?

Let me talk about that in some general ways and then some specific ways as well. First of all, if you look at some of the broad industry data that is coming out, you'll see groups like Gartner Group talking about packaging assembly markets globally being down during 2007 by 5 to 6%, but rebounding with strong growth of 26% in 2008. If you look at book to bill ratios, that is the relationship between orders versus shipments, that ratio beginning in July of 2006 moved to be less than one. Then in December and January it moved and increased to being greater than 1.0. The capacity utilization numbers that are being published by the industry, as well, looked -- the forecasts are that those capacities in the semiconductor equipment utilization will be bottoming in February and then beginning to turn positive.

Let me talk about what Nordson has experienced and what we see. As I mentioned in my remarks, Charlie, the weakness is centered in Asia. It is concentrated in a short list of important customers of ours. They are associated with chip packaging. And this business is one that is weak now, both in terms of the quarter and it's reflected in the order rates that we indicated that we've seen here most recently, and it does, in fact, impact our forecast in the second quarter as well.

Frankly, what we see is that the softness that we are seeing in order rates, frankly, we think points to what we would hope and expect it will have an opportunity to recapitalize at least one of these important customers beginning later this year, but we fully expect this to occur by 2008. Short of that recapitalization, there is a lower pace of investments, both reflecting industry trends and then the specific circumstances with which we deal.

Moving beyond that chip packaging segment and outside of Asia, or outside of Southeast Asia and China -- I should be more specific there -- we see very good Advanced Technology growth in Japan. The U.S. has been strong, as has Europe. Moving away from some of the semiconductor markets, our Life Science business is quite robust. Our UV curing business is very strong. As I mentioned in my remarks also, plasma is very good. So we have a very mixed bag in Advanced Tech, but semiconductor packaging is an important area with some important customers. And that is the center of the weakness.

Okay, thanks. Can you just -- the coating and finishing margins? I don't know if I missed this in your remarks or not, but, obviously, the sort of downdraft in margins there. So what was really causing that and what is the time frame to sort of rebound that business up? It kind of looked like it really coming on the mend their.

I think actually we feel good about where Coating and Finishing business is right now. Clearly, our shipment volume in the quarter was weak, down 10% from the same period last year. But as we look through that -- first of all, just looking at operating margin, even though shipments were down that 10%, operating margins in Finishing were improved by 3.5 percentage points of sales, a negative -3% last year, a 0.5% this year, even on a lower volume. That reflects the structural changes that we put in that business.

The issue that impacts the quarter is all about volume, and as I mentioned my remarks, the order rates in Finishing are up 20% for the last 12 weeks and for the last eight weeks are up 23%. This business has got very good strength in powder. We see this in all geographies. We are having very good success with some of the rapid color change powder boosts that we're doing and, frankly, the pattern of shipments versus orders just causes that peculiarity see in terms of the second quarter. I also would mentioned this is our most seasonal business and it is very common that shutdowns, in some cases, will precipitate very little activity.

One more question and I'll hop in the queue. You talked about the eight-week order rates. Did you give those by geography? If you didn't, can we have those?

I did not give them by geography. I don't have those right here at the tip of my fingers, Charlie, but my recollection is that they are good in the U.S. and Europe and in Japan, I think, perhaps down a little bit in the Americas and in Asia Pacific.

Thanks very much.

Bob Schenosky, Jefferies.

Ed, I had a couple of questions for you. The first one on clarification. The volume gain that you mentioned, is that sequential or year-over-year, the 5 to 9%?

That is year-over-year, quarter-over-quarter.

Right, and the EPS forecast that you mentioned does include the Dage costs. Does that also include the gain on sale?

It includes both of those. $0.08 on the Dage impact and 6% favorable benefit of the gain on sale of that real estate.

I got that, that's fine. You noted costs associated with Dage is at a balance for the year. What about the EPS benefit?

You know, I'm not in a position to give you a forecast right now. The Dage business was accretive before these effects by $0.01 a share during the first six weeks that we had in the first quarter. That included the Christmas shutdown, which is a very weak period for every one of our businesses. So my own expectation without -- I don't have a number in front of me, but my belief is that this accretion is going to be widening in the second quarter and the performance of this business has been good so far, 14% order growth since we have owned them.

Right, and then the charges in the quarter of $0.05, is all of that in the gross line or is any of that in the SG&A line as well?

$0.03 of that is -- first of all, the charges in the first quarter are $0.03 associated with purchase accounting. $0.02 is simply interest. So of the $0.03, the majority of that is up in gross margin. There is order magnitude $0.005 that is in SG&A. It is that $0.01 per quarter that we mentioned in quarter four of '07 that will be continuing, and there is about half of quarter and the first quarter's $0.03.

Okay, and then, finally, if you could, could you offer any color in terms of some of the weakness that you realized early in the quarter? A lot of other companies under coverage all realized some weakness in order rates in the last month or so because of extended shutdowns and inventory rationalization. Would you characterize the weakness as similar to that?

It is interesting. We obviously have looked at this thing very hard to see if we can't find a single thing that we point to. Frankly, there is not -- other than the effects that I mentioned in semiconductor packaging. In our broader industry, using adhesives as an example, we have seen some indication of lower run rates here in the U.S. that is impacting not just our sales to people in the housing-related businesses that we've talked in recent weeks about, the window business and doors and the like, but we have also seen it in lower run rates that would manifest itself in slightly lower run rates on spare parts.

In Europe, we likewise saw some softness in the Adhesives business, but that has been more related to, if you well, sales by our customers in terms of their exporting to global markets. So it has been mixed bag, but what is encouraging is that each of those trends we saw moving in a more-favorable direction in the final eight weeks.

The one additional comment I will make just surrounding this Adhesives segment is that we do have a relatively difficult series of comparisons in one of our engineered systems segments within adhesives, where we had one-time orders last year that moved across all of 2006 that we will not have an opportunity to replicate in 2007. And that will give us, associated without series of orders, about $2 million of headwind per quarter. So we had that in the first quarter comparisons and we're going to have that in the next few quarters as well.

Thanks, Ed.

Matt Summerville, KeyBanc.

Ed, the numbers that you're talking about in terms of volumes for the second quarter, up 5 to 9, does that include Dage? What would your core volume expectation be for the second quarter?

That does include Dage, Matt. Let me, I guess, put it in some perspective for you. If we lookout over the last 12 weeks, including Dage this year, but not including Dage last year, our order growth in the most recent 12 weeks is up 4%. Without Dage, we are kind of breakeven. If I move to the most recent eight weeks, our order growth, including Dage this year and not last year, as I mentioned in my remarks earlier, is up 13% over the last eight weeks. But if I look back over 12 weeks, we are only up 4.

So our forecast of being between 5% and 9% is consistent with a center point in our forecast that would say we're going to do better than we saw the last 12 weeks, but we're not projecting for the next twelve weeks, or the next quarter, rather, that we're going to continue with that same 13% pace that we saw in the most recent eight. So it is a little bit of a splitting between those two trends.

Looking at the most recent eight, the plus 13, how much of that was Dage? Do you have that, like you mentioned for the 12 weeks excluding Dage.

For the last 12 weeks?

You said 12 weeks was plus 4, flat excluding Dage. The eight weeks was plus 13. I was wondering if you have that excluding Dage, as well.

Yes, I'm sorry. It is 8. 7.5 to 8.

All right, then in terms of the ramp you have seen in order activity in the Finishing and Coating business, when does that stuff start to ship? I guess, is this year shaping up to be more back-end loaded than normal due to anything related to timing?

Yes, it does. We would see in that large order growth we have, as I mentioned earlier, very good growth in all of our geographies associated with Finishing. Some of these orders that we have -- and in several cases, we're not just talking about one or two, several of these are orders that will shipping Q3 rather than Q2, not because of our lead times, but rather because with large finishing installations, there often time is construction of a new building or an expansion, new ovens, conveyors, and so on. We have customers that have asked us to not ship until that third quarter date. So I think the short answer to your question is yes, I think we're going to have a very good second half, relative to the first half, in Finishing.

In the most recent eight week periods, as you talked about, I think Advanced Tech orders were up 26%. Excluding Dage, do you have that number?

Do we have that number? Hold on a minute, Matt. Tell you what, maybe we can, operator, go to the next question, or Matt if you have additional, and then we will come back to some feedback for you on that.

All right, that's fine. I will get back in queue. Thank you.

Robert McCarthy, Robert W. Baird.

I'm sorry. I must not be awake enough this morning and I struggled a little bit to follow your discussion of the Dage impact in the quarter. You had $0.03 of purchase accounting adjustments. You had $0.02 of associated interest from the acquisition price, and you had a $0.01 contribution from Dage. The $0.01 net of the $0.02?

No, it is $0.01, if you well, ignoring interest and purchase accounting. So the sum of those three factors is a dilution of $0.04 per share.

Right, okay.

And in my comments about moving forward with Dage to earlier question, and I said the $0.01 was for a full quarter it would be more than that plus growth. Those were before purchase accounting and before interest, to be clear.

Right, okay. The 8, 5, and 1 are the -- for the next three quarters, $0.08 impact in the second quarter, $0.05 in the -- that is for the purchase accounting impact alone, is that right?

That is correct.

I guess, maybe you said eight not nine, but when you were originally going through your breakdown, again, back on those comparisons from the latest 12 and the latest eight, you brought us down to the 0 and 13 and then thought I heard you say something about a 4% comparison and a 9. Well, now we've heard where the 4 is, I did not hear a nine anywhere.

Okay, let me just kind of walk you through each of the numbers. We probably have thrown too many data points at you and we will have to give some thought as to whether we can package this better in the future. But if I look at 12 weeks for the entire Corporation, the most recent 12 weeks ending February 15, orders this year compared the same period last year with Dage in both '06 and in '07, orders are flat. If I only include Dage during the 12-week period when we owned it this year and ignoring Dage data when we did not own it -- both the earlier part of the 12 weeks as well as ignoring it in 2006 -- we are up 4%. Now, if I move to the most recent eight weeks, and I look at Dage being in all periods, eight weeks a year ago, eight weeks this year, we are up 7.5 to 8%. If I only look at Dage in that eight-week period for when we owned it, the Corporations orders are up 13%. Now I think --

I got that. Okay, that helps. So it wasn't a 9 is the point.

Hold on one second. It is a 9. With respect to Advanced Technology Systems, we said that during the most recent 12 weeks, Advanced Technology orders were -- grabbing the right number -- down 5%. That included Dage both in last year's 12 weeks and in this year's. If we only include Dage for the period that we have owned it -- so that is a portion of this year's 12 weeks, but not all of it -- then that negative 5 becomes a positive 9 in Advanced Technology.

Okay, that's very helpful. Now I know where the nine came from. You basically answered the question about organic growth prospects in the second quarter by pointing out how your forecast for revenue or volume growth compares with what your bookings growth has been. Can I just ask the question in a more fundamental sense? Do you believe that volume growth without Dage in either period will be positive in the second quarter?

I think we're probably -- the center point of our forecast we say we're flat.

That's great. Thanks, Ed.

The question Matt had asked earlier had to do with -- make sure I get this -- it was what is the order growth? Go ahead, Peter.

I think the question was in the eight week order growth pattern that we said, if we excluded Dage from both prior year and this year, orders, if you will, core volume of orders, would be up 6.5%

In Advanced Tech?

Total.

Walt Liptak, Barrington.

I don't want to confuse the order trend number with more numbers, but maybe if you could talk qualitatively about your expectation with the order trend that you've seen picking up in the back half of the quarter is it continuing through the end of February? Are you hearing good things from your customers?

You know, obviously things like that -- we are reporting order growth through a week ago Friday. Up until the 16th of February, which is the two-week period end date when we rolled up. That momentum that we have seen is consistent with what I'm hearing from our people out there, in terms of they see increasing improvement period by period. The one exception is that in Asia that semiconductor packaging piece that I mentioned previously. Anecdotally, we hear good orders here, good orders there from various of our businesses. So I don't see any inflection point downward, but eight weeks is a relatively short period of time for us.

So you can see how the center point of our forecast relates to both the results that we've seen in eight weeks plus and 12. Then the other point that I also want to point out is that some of the large orders that we've seen in Finishing, for example, are orders that are going to ship in the third, not the second quarter.

Okay, good. I would like to see if I could get some more color on the other segments and the back-end loading of your fiscal 2007. Is Advanced Tech, are the orders that you've seen coming in recently, are those book and ship, quick turnaround, and same with Adhesive? Or are those back-half loaded to?

Our Advanced Tech segment is very mixed. We have the PFD business, which is a good chunk of the total, that ships the same day, with zero backlog. At the other extreme is our UV curing business that has relatively longer lead times. The UV curing is up sharply with very good success not only in its traditional graphic arts businesses, but we're having very nice success supporting investments by high tech customers in the 45 nanometer fabs that are getting built. And we sell components into those markets. So that business is performing both of those segments nicely and it tends to be longer. I would say March and Asymtek would probably be the other two pieces other than Dage. They tend to have sort of average lead times that might typically be in the six to eight weeks, depending upon what customers are looking for.

Okay, then what about in Adhesives, the orders that you've seen picking up?

The improvement in Adhesives has been in several segments. Some of it has been in our packaging businesses, where we have a relatively short lead times. Some of the improvement, though, is also in some of the longer lead times. So I think probably is around the corporate average if I had look at adhesives. I don't think the changes that we've seen are distinctive to particularly short or longer times.

If I can just summarize what you're saying is that perhaps a little bit of longer lead time from the UV curing in Advanced Tack, but then, otherwise, it is mostly normal, except for the Coating and Finishing, which might be a little more back-half loaded?

Yes, I might mention just for all the people listening, what our philosophy is on providing guidance. We do our best to be as accurate as we can. We do not hedge it down and have our most-likely case on be above the midpoint. If you look at the midpoint of our forecast, that is what we think is our best estimate of what we think is going to happen. But we recognize there is an awful lot of uncertainty that goes into crafting of a forecast. There is decisions that our customers have not yet made that will influence whether we hit our forecast, exceed it, or fall short.

Okay. Thanks, Ed.

John Franzreb, Sidoti & Co.

All my questions have been answered already. Thank you, anyway.

(OPERATOR INSTRUCTIONS) Matt Summerville, KeyBanc.

Within the Advanced Tech business, that figure I think, Peter, you shared eight week orders excluding Dage in both periods of 6.5%. So it is pretty clear that you appear to have turned some corner in all of your businesses at this point. And is it the non-Asymtek businesses within Advanced Tech that's driving that plus 6.5? If it is, do you have any line of site in terms of what your customers are saying when Asymtek might turn that corner, as well.

That 6.8% was the whole Corporation. You may have asked Advanced Tech, and if you did, I apologize for giving an answer to a different question.

No, I've got thought the answer Peter gave -- he basically restated my question. I thought that you gave -- what you gave earlier were Advanced Technology orders 12 weeks and what was hoping for were the eight weeks numbers excluding Dage. You had mentioned including. I think they were up like 26% or something like that.

That is not the answer we gave you, so let us calculate. That was companywide with and -- I mean, without Dage for eight weeks.

I think our -- we will try to grab a number for you, but I think that our Advanced Tech excluding Dage is down for the last eight weeks.

Okay, then any line of site on when you see Asymtek turn the corner? It sounds like the other businesses are performing pretty well, unless I'm mistaken something.

I think that's a fair interpretation, Matt. Frankly, we see a number of factors would say that from an industry point of view, we are at the bottom right about now. I think we see some -- understanding the salespeople are always optimistic, I think we hear some optimism coming out of our sales organization within that business segment. We see capacity utilization and booked to bill numbers all turning favorable moving into March. But I think that the dip that we're dealing with right now -- I don't think it is going to reverse here in the second quarter. I think it's going to be with us a little while longer.

Okay, great. Thank you.

I misspoke. We did the arithmetic and in Advanced Technology eight weeks excluding Dage is up 1% in orders.

Up 1, okay. Then I guess I'll ask one more question. As a Company, on an organic basis, your orders for eight weeks, the most recent eight weeks, which would include a good chunk of the first half of February, which is in your fiscal second quarter, up almost 7%, but you're forecasting, you're guiding for volume to be flattish. Is that -- can you just help me reconcile that a little bit?

Sure, as I mentioned, some of the strongest areas of growth are in finishing and some of our engineered systems businesses and other segments. And UV, as I mentioned, and likewise some of the engineered systems businesses within adhesives. We have some specific dates centered around those and we lay out the backlog around the dates that we think we're going to see. And the midpoint of the forecast that we see right now is that 5 to 9% range for volume.

And I think you can begin to think about what the third quarter would be. We have not done a formal third quarter forecast and I'm not going to try to imply one, but we have very good orders that are falling into the third quarter the we're taking right now.

And I'd only add that it's not unusual for us in the early part of year to have more orders than shipments. This is a back-end loaded seasonal trend that we've seen for years. I think because finishing is so strong that back-end nature is more pronounced in the current fiscal, but it follows a seasonal pattern.

Okay, great. Thanks a lot.

Robert McCarthy, Robert W. Baird.

As I hear Peter's voice it reminds me that I should be asking you about your progress towards identifying a successor.

I wondered if we would get that question.

You just did.

We just don't want Peter to go, so we're not being very helpful for him. In all seriousness, Peter is here with us. He has agreed to be here until we name the successor. We are hard at work to do that.

Do you think you are close, Ed?

I think when we have something to announce, we will announce it. I will just leave it that that.

I had a couple other follow-up questions, though. I think through all the commentary, I think I hear that the acceleration that you saw in order activity in the last eight weeks is not something that you really are comfortable trying to pin down to specific drivers, really, companywide and -- with the exception of your exposure to semiconductor space. Is that a fair summary of what your trying to communicate?

I'd almost look at it the other way. If you look at the kind of order growth we have had over the last 36 months, we have moved along at a relatively good pace, with obvious areas of strength and weakness and so on. The anomaly is less about the last eight weeks. It is more about the period in November and early December, and perhaps some weakness in the latter part of the fourth quarter of 2006. We are now moving at the rates that we more typically move.

Right, and in your discussion of Advanced Tech, you highlighted better performing businesses. We have talked about Asymtek being the business most affected by weakness. Am I hearing that you did not have any growth at EFD in the quarter?

No, you did not hear that all. They had a good quarter.

All right, the backlog number of 101, do we have a number for what Dage contributes to that?

It was, I think, at the end of the quarter between $8 million and $9 million

That would have not -- you did not include a Dage number in the $97 million from prior year, right?

That's correct.

I guess just to tie a bow on it, I think also it is fair to conclude from everything you've said even though you only forecast the coming quarter, with the organic growth close to flat in the first, centered around flat in the second, you are expecting the balance -- you are expecting better growth out of the balance of the business, in other words excluding Dage, in the second half of the year.

That is for sure my expectation. We have not done a forecast of that.

You understand, we're not putting a number to it.

Wearing my managerial hat rather than my forecasting hat, absolutely.

What does your salesman hat say?

I am not a salesman.

Thanks, guys.

(OPERATOR INSTRUCTIONS) Charles Brady, BMO Capital Markets.

Charlie?

(OPERATOR INSTRUCTIONS) at this time, we have no further questions.

Okay, let me thank everybody participating in this phone call. I think we had a very good discussion and we value your support and interest and look forward to having the opportunity to continue to report on Nordson's progress. Goodbye.

Thank you. This concludes today's Nordson Corporation first quarter fiscal 2007 results conference call. You may now disconnect.