Nordson Corp (NDSN) 2012 Q1 法說會逐字稿

Good day, ladies and gentlemen, and welcome to your Nordson Corporation webcast for the first-quarter fiscal year 2012. 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. (Operator Instructions) As a reminder, today's conference is being recorded.

I would now like to introduce your host for today's conference, Mr. Jim Jaye. You may begin, sir.

Thank you, Kevin. This is Jim Jaye, and I am here with Mike Hilton, our President and Chief Executive Officer, and Greg Thaxton, our Senior Vice President and Chief Financial Officer. We would like to welcome you to our conference call today, Friday, February 24, 2012, Nordson's first-quarter 2012 results.

Our conference call is being broadcast live on our webpage at www.Nordson.com/investors and will be available for 14 days. There will be a telephone replay of our conference call available until midnight Thursday, March 1, by calling 404-537-3406. You will need to reference ID number 50726541.

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 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 Mike for an overview of our 2012 first-quarter results and a bit about Nordson's future outlook. Please go ahead, Mike.

Thank you, Jim; and good morning, everyone, and thank you for attending Nordson's first-quarter 2012 conference call. Overall, we delivered solid performance in the quarter, performance in line with our expectations.

Our global team remains focused and continues to execute aggressively. I want to thank all of them for their ongoing efforts.

In addition to our comments on the first quarter, we will also provide some perspective relative to our outlook for the second quarter of fiscal 2012. Starting with the first quarter, as anticipated, conditions in some of our end markets and geographies were challenging during the quarter. Nordson does not appear to be an outlier in this regard, as many industrial companies have reported similar near-term challenges in recent weeks.

The good news is that Nordson still delivered solid results in the quarter, and the fundamental strengths of our business model are intact. Those strengths include innovative technology, applications expertise, a highly effective direct sales and service model, and our global capability.

Sales volume grew by 2% in the quarter over the previous year, and we delivered operating margins of 22% excluding nonrecurring items. The operating margin is well above our pre-recession level and is inclusive of continuous improvement and other strategic investments that will drive growth and performance for Nordson over the long term. As a reminder, our first quarter is typically our weakest from a sales perspective, which does impact our operating margin.

Earnings per share in the quarter excluding nonrecurring items was in line with our guidance. In terms of our outlook, order trends over the last 12 weeks are down about 3% from a very strong period of recovery in the same 12-week period a year ago.

Clearly, some end markets and geographies continue to be impacted by near-term economic uncertainty. Orders are showing resiliency on a sequential basis, which is reflected in the 16% sequential increase represented by the midpoint of our second-quarter sales guidance.

Overall, the fundamentals of our business are solid. And as we suggested in our December earnings conference call, we anticipate better year-over-year growth in the second half of our fiscal year. Most forecasters still predict GDP growth for the year, and the second half is typically a stronger capital cycle for many of our customers.

Let me turn the call over to Greg Thaxton, our Chief Financial Officer, who will provide more detailed commentary on our first-quarter financial results as well as some comments on our guidance for the second quarter of 2012. Greg?

Thank you, Mike and good morning to everyone. As Mike noted, our financial results for the first quarter were solid. Sales in the quarter increased 2% over the prior year.

This sales improvement included a 4% increase related to the first-year effect of acquisition, offset by a 2% decrease in organic volume. The effects of currency translation were neutral as compared to the prior year.

Looking at segment performance, Adhesive Dispensing delivered sales volume improvement of 2% over the prior year's first quarter. Organic volume decreased less than 1% over the prior year, as the overall improvement was driven by acquisitions.

Relatively strong growth otherwise in this segment was offset by the timing of customers' buying patterns associated with our nonwovens product line, which tends to be larger-dollar systems where the timing of a couple orders can impact quarterly growth.

Sales volume in the Advanced Technology segment was up 4% over the previous year's quarter. The first-year effect of acquisitions drove the increased volume as organic volume decreased 3%, where softness in nondispense product lines offset growth in our dispensing product lines.

Within the Industrial Coatings segment, volume decreased by 2% compared to the prior year, primarily driven by softness in European durable goods end markets. We delivered growth in most all other regions within this segment.

Moving down the income statement, gross margin in the quarter was 61.4%, in line with the prior year. From an operating perspective, we continued to perform at a solid level while also making investments in the business that will drive future growth and performance.

These investments included headcount in support of growth as well as incremental product and market development investment and investment in our continuous improvement initiatives. In addition to this spending, our first quarter is the time of year for recognizing compensation and benefit increases. And as Mike noted, our first quarter is generally the softest from a revenue perspective, so any additional volume in future quarters should provide considerable leverage on operating margin.

With that said, reported operating margin for the quarter was 20%, or 22% excluding one-time items in the quarter.

On a segment basis, Adhesive Dispensing continued to perform at a very high level and delivered operating margin of 34%, even as we continued to invest in multiple initiatives, including our nearly completed consolidation of US facilities. Excluding the one-time charge in the quarter impacting the Adhesive segment, the operating margin was 35%.

The Advanced Technology segment's operating margin in the quarter was 16%, or 19% excluding one-time charges. Industrial Coatings margin for the quarter was 3%. Operating margins in both the Advanced Technology segment and the Industrial Coatings segment were impacted by lower organic sales volume and increased strategic investment in the areas I noted previously.

Continuing down the income statement, reported net income for the quarter is $38 million or 14% of sales, and inclusive of $3.7 million pretax of one-time charges. First-quarter diluted earnings per share were $0.58 in the quarter. As in previous quarters, we have included an earnings per share reconciliation schedule in our press release to reconcile between GAAP earnings and normalized earnings per share, to exclude certain one-time items. Earnings per share excluding one-time items were $0.62 per share in the quarter.

The current quarter's EBITDA was $65 million. First-quarter free cash flow before dividends was a strong $36 million.

As an additional comment regarding cash flow in the quarter, we continue to demonstrate our ability to fund multiple strategic initiatives. We remained active in our share repurchase program as we bought $46 million of shares during the quarter at an average price of $43.52 per share. An additional $8 million was returned directly to shareholders during the quarter in the form of dividends.

Our balance sheet remains very strong, with net debt to trailing 12-month EBITDA of less than 1; and we have sufficient capacity for future strategic investments.

Before moving on to our second-quarter outlook, I will provide comments on recent order trends. As we typically do, we have provided our most recent order data both on a segment and geographic basis with our press release. These orders are for the latest 12 weeks as compared to the same 12 weeks of the prior year on a currency-neutral basis with fiscal 2011 acquisitions included in both periods.

Looking at orders for the 12 weeks ending February 19, 2012, they are down 3% compared to the same 12 weeks in the prior year. On an annualized run rate basis, current 12-week orders are $1.2 billion.

Within the Adhesive Dispensing segment, orders are down 1% to the prior year. Solid growth in our packaging product line serving nondurable end markets is being offset by softness in general product assembly systems sold into durable goods end markets.

Advanced Technology orders over the latest 12 weeks are down 3% from the prior year, where order growth in the automated and manual dispense product lines is being offset by soft demand in surface treatment and [sump] test and inspection product lines.

Within the Industrial Coatings segment, the latest 12-week orders are down 10% as compared to the prior year. On a global basis, softness in durable goods end markets served by this segment is impacting segment results.

Overall, a relatively soft macroeconomic environment coupled with a backdrop of tighter credit in certain geographies has impacted order rates in certain end markets across each of the segments, as compared to a period of recovery a year ago.

Turning now to the outlook for the current year's second quarter, we are forecasting sales to be in the range of $313 million to $326 million. This sales outlook indicates a range of down 2% to up 2% as compared to the second quarter a year ago.

This range is inclusive of organic volume of down 4% to flat; 3% growth from the first-year effect of acquisitions; and a negative 1% currency translation impact based on the current exchange rate environment. At the midpoint of this range, sequential growth is 16% over our first quarter.

We expect gross margin to be about 61.5% in the quarter and operating margin to be approximately 26% for the quarter, at the midpoint of our sales range. We are forecasting an effective tax rate for the quarter of approximately 30.5%, resulting in diluted earnings per share that are expected to be in the range of $0.83 to $0.91 per share.

In summary, our first-quarter performance was solid and played out much as we expected. Our team continued to execute worldwide, and we have continued to make strategic investments to drive ongoing growth and enhance performance.

Our current order rates reflect customer caution in some end markets and geographies. Our outlook for the second quarter is another quarter of solid performance, with strong sequential growth providing leverage that will drive operating margin to the 26% level at the midpoint of our guidance.

Thanks, Greg. Before moving on to your questions, I would like to provide some additional comments on our recent order trends and outlook. While recent orders are not as strong as we had hoped to see, there are some positive takeaways.

First, our recent order trends put us at a full-year run rate of approximately $1.2 billion. This is about the same pace we reported in our December earnings call and still a very solid level considering that it coincides with the softest part of our year. Let me remind you that the most recent 12 weeks' orders include the impact of holidays on plant operations and the end of the capital cycle for many of our customers.

Second, I'll highlight the macroeconomic conditions we are seeing are in line with the recent views expressed by many other industrial companies. In the period following Nordson's December earnings report, several companies have since reported results, and in general their results and views reflect near-term choppiness, a fairly conservative outlook for the first half of 2012, and some acceleration beginning in the second half of the year. This is consistent with the outlook that we discussed during our December earnings call and we are still seeing today.

From a sequential standpoint, as Greg said, we are gaining momentum, as we expect second-quarter sales at the midpoint of our guidance to increase by about 16% over this year's first quarter. As we have demonstrated in our recent quarters, there is considerable leverage in our income statement, where the sequential increase in sales should result in a sequential increase of nearly 40% in operating profit excluding one-time charges in both quarters.

In terms of the macroeconomic view, uncertainty persists in some geographies and end markets, resulting in order rates that are below the longer-term rates we would expect in a more robust GDP environment. The US economy has not yet returned to full strength, and clarity surrounding the European economic backdrop has yet to emerge. In developing markets, growth remains strong, though its pace has moderated.

While these factors have caused some customers to remain cautious in the near-term, the global economy is still expected to grow in 2012.

We will continue to make strategic investments in our business to propel future growth and performance, and we are well positioned to continue winning in the end markets we serve. We have significant recurring revenue derived from parts and consumables; excellent positions in consumer nondurable spaces; rapid growth opportunities associated with mobile and other electronic devices; and multiple avenues for expansion. Our future is truly bright, and we will continue to build our market-leading positions by providing our customers with the best products, support, and service available anywhere.

Above all, we have an outstanding global team, and I am confident they will continue to deliver at a very high level. At this time, we would be happy to answer your questions.

(Operator Instructions) Mark Douglass, Longbow Research.

It's Mac Muirhead; I'm on for Mark this morning. Thanks for taking my call. Let's see; just a quick question. What is the mix of parts versus equipment this quarter?

Yes, it's up a little bit from where we were a year ago. It's, I think, on a reported basis probably around 49%. If you look at excluding the recent Value Plastics acquisition with the consumables being a fundamental large part of that acquisition, it's about 48%. So it's up a bit.

It's what we typically expect in the first quarter, given that capital investment tends to slow down and systems orders tend to slow down around the holiday period.

Okay, all right, great. Now, I was wondering if you could take us through Advanced Tech a little bit, the markets, what you are seeing, the weakness. If you're seeing in the order trends a bottom in those markets, and what you are expecting for the rest of the year.

Yes, let me make a couple of comments there. It's not too different than what we said really at our last call, kind of a tale of two parts of the business.

Anything that is focused on mobile devices, smartphones, tablets still remains pretty strong. And anything that is related to more fundamental desktops, laptops, servers has been pretty soft. And that plays out across our businesses in different ways depending on the emphasis.

But at a high level, that is what we are seeing. And the softness has been mainly in that normal typical PC environment.

In our EFD area, generally strong in most parts of our business. The part that goes into fluid formulators for the construction environment has been a little bit soft. And our medical piece has been pretty strong and on track.

So it's kind of a mix across, but I'd say it's largely the traditional back-end packaging for the PC laptop/desktop market has been pretty soft.

From an industry perspective, I think most analysts expect that that's a first half of the year phenomenon, and that things start to pick up in the second half of the year. That is the industry analysts' view, and it would be consistent with what we are seeing, from an orders standpoint at least, in terms of the softness right now in that part of the business.

Okay, great. Thanks a lot. I'll jump back in the queue.

Matt Summerville, KeyBanc.

I think it was maybe in Greg's comments he mentioned that in Adhesives there was -- well, first, was it a shipment or an order that got pushed to the right? Will that then fall into your fiscal second quarter? And I guess can you give us some sort of order of magnitude, and will this influence the mix in the second quarter at all?

Yes, Matt, this is Mike. I think what Greg was trying to say is if you look at our business in Adhesives, the nonwoven piece in particular tends to be larger systems. And timing year-over-year relative to last year, we had some larger systems hit in that first quarter that we didn't see as many in this first quarter. So we would expect over time that's going to pick up.

So it wasn't one particular order that was pushed. It's just that the timing of those tend to be one larger orders and bigger systems, and they come in groups. And year-over-year we had a difference there that can have an impact on the revenue.

Okay. So it was a year-over-year difference. Is that indicative of customer demand, or more just lumpiness in timing?

It's more lumpiness in timing. Parts -- certain geographies were really strong in this quarter in that same area, and others were a little softer.

It's really just timing. It's not a fundamental concern that we have around that part of the market. This is all consumer nondurables and pretty steady.

Yes, and Matt, this is Greg. A point that is being made there is the more run rate packaging business was holding up fairly well in the quarter. It was more this larger dollar that tends to follow a line expansion or larger dollar investment that was impacting the quarter.

Mike, on the last conference call, you -- to your comment towards the end here, recent order trends maybe not as strong as you had hoped. I think you'd laid out a view that maybe things trended somewhat soft heading into Chinese New Year; you get beyond Chinese New Year and you see a nice reacceleration.

Was there any discernible change between -- if we use that as an imaginary line? Is there any discernible change leading up to that versus the incoming order rates since then?

Yes, we definitely saw customers in the couple of weeks even before Chinese New Year tell us that they were just going to hold off; and we have seen orders pick up and come back post the Chinese New Year. Now as we go into this next quarter, we had a big ramp-up from an order perspective and a revenue perspective last year, so we are up against tougher comps. But we definitely saw a Chinese New Year effect, and we started to see orders come back and certainly bid activity come back.

Does it feel like that business is back to a more normalized level, or still depressed off whatever normalized means?

Well, I think it varies across the aspects of the business. I would say, if you talk about most of our Adhesives type businesses that go to consumer nondurables, it's pretty normal. If you look at things like product assembly that tends to go into construction and durable goods, it's still not where we'd like to see it.

And the same thing for our Coatings business, where we see significant -- we saw a significant impact from the slowdown around the capital side. Now their capital cycle for the Coatings business tends to start towards the end of January and going forward, as people get their capital budgets approved; and our bid activity is solid.

Advanced Tech is a little bit different cycle in and of itself. While -- and that's from a geographic standpoint where we saw the biggest impact from an order perspective in Asia, because a lot of those traditional back-end packagers are there, and a lot of that serves the more general PC-laptop-desktop market, and that's been soft.

If you look at your order rates, you are obviously coming off some very, very tough comparisons. So those comparisons I would say begin to ease in Adhesives a bit, in Advanced Tech, not so much yet in Industrial Coating. But the comps there are starting to get easier, perhaps more normalized.

What is your level of confidence that you start to see year-over-year order growth beginning -- when we get this next data point from you?

Yes, I think if you saw last year just from a revenue standpoint, as I said, strong quarter in the second half and that was underpinned by strong orders coming into the quarter and a strong backlog. So I think we are still looking at a tough comp in this next quarter.

Our view is, assuming that the economists are right and the economy grows at a reasonable level, say 2.5% globally this year, that we should see in the back half of our year a better economic environment. I'd say compared to where we were three months ago, US probably looks a little more encouraging; Europe probably looks a little less encouraging. Overall I think most people are looking at that 2.5%, 3% rate.

So if that happens, we should see in improvement in the underlying market conditions in the back half. And if the tech forecasters from an industry perspective are right, we would also start to see some more of that basic PC buy come back in the second half as well. So I think we are optimistic.

So it sounds like, though, at least for the second quarter it's going to be tough to get positive order growth until you get in the back half. Am I understanding that message correctly?

Yes, just because I think we are up against a very, very strong comp last year. The movement from first quarter to second quarter last year was well beyond the typical movement that we normally see.

Sure. Fair enough. Thanks a lot, Mike.

Liam Burke, Janney Capital Markets.

Good morning, Greg. Greg, just quickly, your CapEx year-over-year stepped up. Is that just a seasonal timing issue? Or is there something significant in the change?

Yes, Liam, we talked about in the last quarter that we thought our CapEx on a full-year basis would be about $25 million and that we were going to have, for lack of a better word, some lumpiness with some ins and out of buildings, where we've talked about consolidating from four to two facilities in Atlanta, for example. So this quarter reflects about $4 million associated with a new building in Atlanta.

What you are going to see eventually is the sale of some existing facilities. So our building and our facility footprint rationalization will cause some of this lumpiness. But our normalized CapEx is pretty much on track with that full-year $25 million.

Okay, great. On the ATS side, you did talk about the biomedical being on track. You did talk about the puts and takes on the electronics. Could you talk a little bit about some of the pockets like flip-chip and LED, how those smaller businesses are doing?

Yes. The general technology move towards flip-chip continues to progress, and obviously that supports most of the mobile devices. So with the uptick in smartphones and tablets, that's moving ahead nicely in that part of the business. So our systems orders, for example, are solid in the ASYMTEK business as a result of that.

But as I said, it's sort of more generic; and you saw this from folks like Dell and HP. They are seeing the impact of a softer market environment and some conversion to that tablet piece. And that has fallen through into more of our test and inspection area than the systems area.

Great. Thank you.

Kevin Maczka, BB&T Capital Markets.

Hi, good morning. In Adhesives, such a strong start to the year, I know you talked about having maybe some favorable mix, but also absorbing some of this growth spending there. I guess can you just clarify? Does that growth spending trail off from here, and is there any reason to think this isn't the low-water mark for the year?

We have planned spending throughout the year. We have been cautious as we said in the last call. Most of what you are actually seeing right now is spending that was incurred in terms of resources we added in the second half of last year, with the exception of some initiatives around product development, for example.

So as the economy improves, we may do some more things, so you could see some things come in. But we are going to be cautious and err on the side of conservatism.

So what I would say is the mix is very favorable in this period of time between our various businesses within Adhesives and in terms of the parts systems mix, as you typically see in the first quarter. So that part systems piece will change over time, and we would be hopeful that we'll start to see more of the product assembly orders come back later in the year. So that will have an effect as well.

But from a spending standpoint, we do get the impact of the merit increases and some benefit cost increases in this quarter. And that is part of what you are seeing right here.

Yes, and Kevin, this is Greg. I'd just add on the spending side, absorbing the full-year effect, if you will, of the new hires last year and our typical merit increase gets us to this spending base. I think this is a pretty consistent level that you will see going forward.

Clearly if the revenue line is growing at a faster pace, you're going to see some appreciation in spend. That kind of moves with revenue. But this is a pretty good base to assume going forward.

Got it. Then can you say a little bit more, I guess on the flipside, about the Industrial Coating margin? We had similar revenue here as we did a year ago but much lower margin. I may have missed it, but was there a big mix issue here which was a negative, whereas Adhesives was a positive?

Yes, let me just comment on that, Kevin. I would say there was a modest mix issue; but more the volume being off, there is significant leverage here. So there's probably about 1 point that is associated year-over-year with just volume being lower.

Our merit increases and benefits that relate to pension and some other postretirement issues had a couple of point impact. So I guess there are 3 points there that are sort of year-over-year.

And then there is 2 percentage points that were largely again hires last year, at the second half of last year for strategic initiatives, primarily in two areas. Emerging markets, so think about that as places like China and Brazil, particularly to support our tiering strategies there; and some product development activities around new technology. So that's another couple of percent. So that explains I think the key differences there.

But volume more than mix was an impact in the first quarter, and then the other two as I described.

Got it, Mike. I know you don't guide margins explicitly, but I mean given everything you just said, should we be thinking that the full-year margin in that business can approach what you just did in 2011? Or given that we start the year 500 points in the hole is that not realistic?

It really comes down to what are we going to see from a volume perspective. As you know, we've taken a lot of cost out and we've added a little bit back here with the specific structured initiatives that we think in the long term will drive considerable growth in the business. But if we see the volume come back, we should see volume leverage translate into significant margin improvement.

Our hope is that we will start to see some of the systems orders pick up in that business as we get into the next few months and beyond. Typically, budgets get approved in January and orders start to get let beyond that. I would say the bid activity is very solid in that business, so we are hopeful that we are going to see that come back and that we will -- assuming that the global economic environment delivers 2.5% or so, we should see positive volume that will then translate into margin improvement and leverage.

So we are hopeful that we will get back to the kind of margins that were our overall goals for this business.

Okay, thank you.

Charley Brady, BMO Capital Markets.

Hey, good morning, guys. Well, with respect to Adhesive Dispensing, can we just get the mix of parts just for that segment? I know you gave it out for the Company as a whole.

It's not too different. I would say that mix effect has probably been less the part systems piece in that business and more, for example, packaging and less product assembly. I think as we have described in the past, product assembly tends to be more engineered from a systems standpoint and so there's more SG&A support to get that right.

Those are the orders that haven't come through at this point, and packaging has been pretty solid. So it has been more of a mix there. Overall, parts and systems parts slightly higher.

Yes, Charlie, consistent with what we have said in previous quarters, Adhesives tends to be slightly higher. But again the range between that segment and the others is narrow, is very narrow. So total Company was in that 49%; Adhesives was about 50%, let's say.

Okay, thanks. That's helpful. Then if we look at the orders, the 12 weeks you gave, I wonder if we could get a sense of what the order run rate looked at the end of the quarter, given that Chinese New Year came right towards the end of the quarter, and you said you've seen an acceleration. I'm just trying to I guess really gauge the velocity of acceleration coming out of Chinese New Year.

Yes, I would say while it's up, it's not a dramatic change. What I was trying to describe is you have three months there, November December, and January; and you could think about the first part of January slowing, prior to the New Year, and then coming out of that stepping up. But you're really only talking about a week coming out of the New Year.

So not a lot of data, but I would say we are encouraged by what we are seeing from bid activity and orders.

Great, thank you.

Jason Ursaner, CJS Securities.

Good morning. Greg, on the 61.5% gross margin for next quarter, what's the assumption you are building in there for mix? And traditionally, how does the second quarter compare to the back half of the year from a systems versus parts point of view?

Typically as we move through the year, you might expect to see some dilution in the gross margin as the volume that comes into the business tends to be more of a systems base than spare parts. So you tend to see some dilution as you move from first quarter in toward the back half of the year.

Of course, it's also dependent upon what the segment growth rates are and then the product line growth within the segments. So we don't have generally a wide variation as it is in our business; but you do tend to see some dilution as you move from quarter 1 through into quarter 4.

There is a slight impact in our first quarter in that we had about $2.2 million of one-time purchase accounting charges that did hit cost of goods sold. That goes away next quarter. But generally you don't have a very broad swing throughout the year. There is some dilution effect.

What we would expect is the volume leverage that is coming on as the second quarter steps up to offset that dilution and hold the number in a tight range.

Okay. Can you talk a little bit about the key currencies that impact the revenue translation?

And then from a cost perspective, how close are you to matching costs so that you don't see a leverage effect on margin?

Yes, Jason, it's Greg. The key currency is first the euro and then the yen. And from a cost perspective, we have got more balanced than we were, say, five years ago in trying to match those costs. But we do have still our primary exposure against the euro.

Okay. On the share repurchase, I know you reupped it a couple of times. What do you have left on the authorization at this point?

Yes, as of today, we have about $15 million left under our existing authorization.

Okay. Then just last question, you guys had a Board member who I guess was a member of the family who retired in February. What do you see as the Nord family involvement going forward at this point?

We have a proxy out right now where we have two proposed new Directors for the Board, neither of which is a family member. So at this point, we don't anticipate a Nord family member being on the Board in the near term going forward. Obviously, they still own across the family a significant number of shares, and we treat them like any other significant large investor in terms of what we communicate. Nothing different than we communicate publicly to others. But in terms of participation on the Board, at least for the near term there is not a family member on the Board.

Okay. Thanks a lot. Appreciate the commentary.

Walt Liptak, Barrington Research.

Hi, thanks and good morning. I wanted to ask a follow-on too about the second-order guidance. Are you expecting another charge in the second quarter?

No, Walt. We have -- it's about $300,000 of remaining charges for the Atlanta restructuring, but it's not significant.

Okay, got it. And just a follow-up on the discussion about the laptop and desktop market for the electronics segment. What percentage of sales is that? My understanding is that was fairly small, but maybe it's larger than I thought.

If you look at it, mobile in general is probably a third of the electronics part of the businesses within Advanced Technology. And the more typical laptop-desktop-server piece is also about a third. Then the last third is a combination of some of the niche markets like MEMS, LEDs, solar, and a variety of other smaller markets. So it's not insignificant, Walt.

Okay. You mentioned x-ray inspection, surface prep; those are primarily the kind of products that are used in desktop-laptop?

Yes, they play across all, including the mobile piece. But if you look at the mix of that business it might be a little bit more towards things like the treatment of PC boards and some of the bond testing and so forth that might be more typical of what you see in a desktop or a laptop.

No, I understand. So there would be some ASYMTEK that would be in there?

Yes.

That would be used for laptop-desktop, okay. Okay, and just switching gears to Value Plastics. Did you say that 4% of total Company sales was related to the acquisition? Or was it 4% of the Advanced Tech segment?

We've got two acquisitions, Walt, that are impacting as we look at the first-year effect. We've got both the Verbruggen acquisition that falls within the Adhesive segment, and then Value Plastics that falls within the Advanced Technology segment.

Okay. Can you break out the revenue between both of those?

Well, what we talked about when we acquired those businesses, that revenue in Value Plastics was $26 million, $27 million; and Verbruggen was in the $10 million range on an annual basis.

Okay. I guess my question is on Value Plastics, what kind of growth are you saying out of it? I know it's early; you haven't owned it that long. But how is it performing?

So we are on track with our plan for the year, Walt. I think the areas that are encouraging I'd say are some new products that we are introducing, so we are encouraged by that.

We have some good plans in place to expand geographically and to expand in the industrial space. It will take some time for those to play out and probably a more modest impact this year. But we are generally encouraged by what we see in that business relative to what we thought.

Okay. Then switching again just to cost out, my understanding was that outside of the plant consolidation that there was more corporate initiatives. I wonder if you can provide us with any metrics of SG&A or what those initiatives are and how those are tracking.

Yes. In the category of overall supply chain optimization, we've talked a lot about Adhesives and our Atlanta activity. But we are doing some things more modestly in Europe. We mentioned before that we were expanding in China in our tech space, and we will have some benefits that play out next year associated with better matching supply and demand. We are moving some things around that will help.

We have got initiatives around what I call pricing and margin enhancement that are based on segmentation work. Some of that is simplifying the portfolio; some of that is selectively moving prices.

We're doing some work on our new product development activity. They are geared mainly to free up more resources to do more development.

We have a look this year -- we're taking a look at our overall logistics approach and spending and what we do there. There is some structuring from an Advanced Tech standpoint in Asia that we are looking at that could have some benefit.

So our point was we have got some bigger projects that we are looking at that will play out over the next couple of years, and at the same time re-energizing our day-to-day improvement by adding tools like Sigma to our strong lean foundation. So we are getting some traction on some smaller activities there that will build over time.

We think we've got a good pipeline of larger activities that will play out over the next couple or three years. And what you are hearing from us is there is some spending on the front-end, either because there is some restructuring that we need to do or because we are getting some help in working through our approaches to manage these things. And we will see benefits coming forward.

We mentioned the Adhesive benefits should start to flow through in the second half of the year. The Technology supply chain piece is probably more of a 2013. We will see some modest benefits on pricing and margin enhancement this year and more to come in the out-years; and some of those other initiatives will layer in beyond that. So we feel pretty good about having a robust portfolio of options here.

Okay. Okay; and I can follow up with you on that one. But can you give us an idea of corporate expense for the rest of the year?

Yes. Walt, I think corporate expense in the quarter was about $8 million. That's probably a good number to assume going forward. Of course, depending upon how robustly the top-line grows, you will see some associated increase in that. But as a base number, that's a good number to go with.

Okay. Okay; and if you don't mind, just one last one. Someone mentioned LED and I wonder if you can just give us an update on where are we with mass commercialization? Is the revenue growing? What kind of revenue are you generating at this point?

Yes, I would say that's still pretty modest. We are still in the sample equipment out there, supporting the technology development. 2012 looked like more continued on that path, and we'd look to see a ramp start in 2013. That is the high-level industry projections, and that's what we are seeing at the moment.

We are seeing nice activity we talked about last time in the MEMS niche market, everything from industrial to medical, automation to the auto industry, starting to improve and increase its use of those items. As well as obviously the smartphones, tablets, etc. helping drive that. Solar right now is pretty flat.

Okay, great. Thanks.

Matt Summerville, KeyBanc.

Just a quick follow-up on share repo. Greg, you mentioned you had $15 million left as of today. So could you also give us your share count as of today?

And will you guys seek to go back to the Board and reload that in a similar fashion to what you did actually not too long ago?

Yes, Matt, I don't have the share count number as of today. We can get back to you on that.

But in terms of going back to the Board, I think just fundamentally it's good to have an authorization in place on an ongoing basis. We want to continue to offset the dilution effect of benefits and have the opportunity to be opportunistic when the time may present itself.

So I think it's just good practice to have an authorization in place. So should we consume the capacity of this particular authorization, I would expect that we would be approaching the Board for another authorization.

If you look at our priorities and use of cash, we clearly want to support our economic growth and some of the improvement initiatives that we have under way. We obviously will want to continue to support our dividend approach and our strategy of increasing that over time.

And we'd like to add acquisitions that make sense to the portfolio. We have said in the past that we'd also balance the timing and the opportunities there with perhaps some more opportunistic, as Greg said, and aggressive approach to share repurchase. So I think that's something we always, as Greg said, want to have in terms of options available.

Matt, just to comment on the outstanding shares. At the end of the quarter, what I can say is we had 65,065,000 outstanding; and then common share and common share equivalents was 65,627,000.

Right. Then, Mike, maybe since you brought up the topic of M&A, where are you with M&A going forward? What does your pipeline look like? Are you looking at deals similar to Value Plastics? Are you looking for deals --?

I guess when I say that, I will say more generally in the medical, life sciences, biomaterial type area; and if transactions in your pipeline are similar in size, similar in multiple; can you just update us on that?

Yes. What I would say is there's as we said before four areas that we are interested in. We certainly have mentioned doing more in the flexible packaging space is something that we are interested in, and Verbruggen was a first step there, to get our feet wet. We are looking at other opportunities in that space, and they are more typical industrial multiples.

We have also said that between Adhesives and Coatings there's an area we call cold materials; but it's more viscous fluid deposition that might be more product line additions to things we already do today. Again, more of an industrial play that we are interested in.

We've mentioned more in the test and inspection space; the electronics and closely adjacent. That probably is more of an electronics or technology multiple space.

On the medical side, we are looking at dispense. So more like MICROMEDICS. And we are looking at components like Value Plastics. And to a lesser extent I would say high-value contract manufacturing, but I think in the near term we are probably looking at more things that would be complementary and roll-up in a fragmented area there. And those tend to be higher multiple in the medical space.

So we are looking across that portfolio. I'd say we have a pretty robust portfolio, but you can't count on the timing when anything is necessarily going to come through. So that's I think where a share repurchase comes in as a nice balance.

Great.

I'd just add to that comment from an organic growth opportunity, one area of focus across the segments is the opportunity to have a larger play in what we would call the mid-tier spaces of our end markets. So where you generalized, we are very good and have a very strong presence in what you'd call the top tier of the products, particularly in emerging markets. We think there is a growth opportunity in a tier just below that, that might require new product development efforts and some investment on our part; but we think there is good growth opportunity in those spaces.

And that could be some technology that gets acquired there or some capability that is acquired there that complements organic development.

Thanks, Mike. Thanks, Greg.

Operator, we probably have time for about one more question maybe.

Charley Brady, BMO Capital Markets.

Just sneak in a follow-up here under the wire. Just can you remind us on the Advanced Tech side of the business, you guys aren't heavily weighted towards one major manufacturer, like an Apple or Samsung or Nokia, than any others; is that correct?

There is nobody that has more than sort of 5% of our business. But there are certain customers that we feel pretty good about being part of their supply chain and they're sizable customers. But nobody's more than sort of 5% from a revenue standpoint of the business.

Got you. Then just on the supply chain in general, are you seeing any raw material shortages or bottlenecks in the supply chain right now?

As it relates to our equipment, no. I think you have heard from some of the PC manufacturers that they have had some hard drive issues related to the Thailand floods that have affected them. I think Intel called that out; I think HP called that out; I think Dell called that out.

So there's probably some impact on the ultimate demand there. We are not seeing anything as it relates to the materials that would support our equipment.

Thank you.

I would now like to turn the call back over to Jim Jaye for closing comments.

Thank you, Kevin. And thank you all for attending our call today. I will be available throughout the day if you want to send an e-mail or call me with any other questions. And as always, we appreciate your interest in Nordson. Thanks for attending.

Thank you.

Ladies and gentlemen, this does conclude today's presentation. You may now disconnect and have a wonderful day.