Good morning. My name is Rebecca and I will be your conference operator today. At this time, I would like to welcome everyone to the Nordson Corporation first quarter fiscal year 2009 results conference call. (Operator instructions). Thank you, Mr. Jaye. You may begin your conference.

Thank you. Good morning. This is Jim Jaye, Director of Communications and Investor Relations, with Ed Campbell, Chairman, President, and Chief Executive Officer, and Greg Thaxton, Vice President and Chief Financial Officer. We would like to welcome you to our conference call today, Friday, February 20, 2009 on Nordson's first quarter fiscal 2009 results. Our conference call is being broadcast live on our web page 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, February 27th by calling 1-800-642-1687. You will need to reference ID number 84392409. 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 brief question and answer session. With that, I would now like to turn the call over to Edward Campbell for an overview of our first quarter fiscal 2009 results and Nordson's future outlook. Ed?

Thank you, Jim and good morning to all of you on the call. Thank you for attending Nordson's conference call discussing our 2009 first quarter results. My comments this morning will provide highlights of the performance in the first quarter as well as provide some perspective relevant to our outlook for the second quarter. Regarding first quarter results, sales were $187 million, down 24% from the prior year. Sales volume was down 19% and unfavorable currency effects reduced sales by 5%. The quarter's revenue performance was obviously impacted by the global economic slowdown and perhaps more importantly, the near collapse of the financial sector, which occurred shortly before the start of our first quarter still exists today in the form of very tight and expensive credit. The resulting absence of liquidity on a global basis has caused companies to abruptly stop spending. I would also make the point that the time period covered by our first quarter overlap several holidays during which many, many companies reacted to this economic environment by extending holiday shut downs beyond the normal week shut downs we've seen other years. This would include CHaimese New Year, which was the last week in January and impacts much of Asia. With regard to segment revenue performance in the quarter, adhesive dispensing volume was down 11% compared to the prior year first quarter. And advance technology and industrial coating in automotive volume were both down 27%, again as compared to the first quarter of 2008. As a general comment, the portions of our business that are associated with consumer nondurable and after market demand performed comparatively better during the quarter. Also two of our product lines within adhesives associated with longer lead time system orders experienced strong performance in the quarter relative to the prior year. Where we…

(Operator instructions). Your first question comes from the line of Kevin Macaka, you have the floor, sir.

Good morning everyone.

Good morning.

Good morning.

Ed, I guess my first question is on margins. I thought it was a remarkable performance that you could increase gross margins year-over-year in this macroenvironment when your revenues are down 24%. And it sounds like you're looking for them more like 55 in the second quarter. But yet you just talked about all the headcount reductions and other cost savings that did hit until late in Q1 or even into Q2. So I guess maybe just give a little more color on how you achieved that margin and why it may not hold up as well going forward?

Well, first of all in terms of how we achieved the margin its two issues. Its mix and its cost reductions in both the manufacturing segment, as well as, on the operating margin level of the SG&A. Mix obviously is a very strong determinant. We've not had the decline in parts and some of the consumables that we have had in systems. And, in fact, we have positive comparisons year-over-year in terms of some of the parts and consumables, not all areas but some. And the good margins we've received there in quarter one reflect that relationship. With regard to quarter two I point out that currency has moved quite a bit. I know a couple analysts that follow Nordson have commented this morning that the results for the second quarter feel a little weaker than might have been expected given the Dow Jones interview that we participated in last week. And that was actually published this week but the interview occurred last week. And I might point out that two things have occurred there. First, the early part of last week which was when we were compiling the forecast that we shared in that interview the Euro, for example, was at over $1.30 per one Euro and in the last several days it has gone from over $1.30 to below $1.26. And it the guidance that we have published with our press release yesterday and discussed this morning we moved the center point of the forecast to be based on $1.26 per Euro and the same conditions are true with regard to the yen. It's moved in the last week or so from 90 yen to the dollar to now it's in the 93 plus and our forecast was based – is now based on 93 versus the previous…

Okay so you're deliberately getting more conservative just in the way you handle guidance in general?

I would say that my own view of observing things that are developing in world markets in recent days you know so much of this is tied to confidence and as we've seen a word of great concerns about what's happening in Eastern Europe. I think some concerns that are being manifested in financial markets of late about the continued weakness in the financial markets as well as some concerns about the effectiveness and timeliness of stimulus plans in various places that tells me that perhaps we haven't yet seen the bottom. But the broader point I'd make it is very difficult to forecast. Who knows what this global economy is going to look like in April.

Okay thanks for that Ed, and then your commentary around customer shut downs and the holiday periods, things like that, I guess can you just talk about how your order is down 31% in the last 12 weeks, how that progressed through the quarter and are you trying to imply that now that we're beyond holidays and shut downs and things like that, that you know that maybe those order trends get better even in the macro kind of stays unchanged?

Sure. Kevin, it's interesting as we look – when we report these various order trends we're comparing to another period rather than reporting in the absolute. And it's interesting that in the 12 weeks in the prior year, in fact, it was the oldest, if I could say it that way, of those 12 weeks. The oldest four weeks so it's the last week in November and the first three weeks of December of the last fiscal year so that's 2007 calendar basis but fiscal 2008 were the strongest four weeks in the entire fiscal year. And so we have a real spike in orders a year ago that's comparing and if we just look at sequential orders they have been relatively flat here across the entirety of this 12-week period. And we're not seeing any kind of a trend downward if we just look at the individual data points or perhaps very slight. Clearly during the two weeks around Christmas there is a real dearth of orders in all Western economies and correspondently in the last week February or January rather there is a weakness of orders in places like China. But I'm not necessarily saying that we have seen the bottom in Nordson's order patterns but we've been bouncing along a fairly level point. And in fact while we've reported 31% down across the last 12 weeks our most recent data point, for example, was down 24. So that and one week believe me does not make a trend but I'm just I guess trying to say that we don’t see continuing deterioration. Perhaps it's due to the fact that we're coming out of this holiday period and so we're intercepting a different trend line as plants are back up to a more stable level of running. It's not clear. Let me make one other point and it's analogous to some of the work that we're doing, as well, here at Nordson. We continue to see in many industries plants working less than full 40-hour types of production weeks. And you will see plants that are working three days out of the five. You will see plants that are working with fewer numbers of people or fewer lines proceeding. And, in fact, we've done some of that ourselves as we have tried to balance the resources in our factories to the quantity of orders and production that we need to ship. And it's a continuing method that many manufacturers are using to keep things in balance.

Okay, thanks for all that, Ed, and just one clarification if I could. You said spending you expect down 23% year-over-year in Q2 was that your SG&A line item?

Yes, it is.

Okay, thank you.

Your next question comes from the line Charlie Brady with BMO Capital Markets. You have the floor, sir.

Thanks, good morning. Hey, Ed, can you just talk with respect to an adhesive and the spare parts business you mentioned that, that beared better than some of larger dollar types of products. But I guess I'm just wondering was that in fact sparse up year-on-year? And then can you speak just kind of the visibility you have on those type of products and similarly I guess with advanced tech on the consumables business. A similar type question in terms of you know was it actually up year-on-year relative to a year ago? Or was you know and what's your visibility on the consumable side in advanced tech?

Sure, let me start with adhesives. The spare parts and other very standard systems that are part of the adhesive systems segment were not up year-on-year in all geographies. But they were up that way in a number. And in other areas they were down a little bit as they are apt to do in this kind of a period. But they tend to be very stable. And the reason that they're stable is the underlying production of packaged foods and consumable hygiene products like disposable baby diapers and so on. You know people don't do a wait and see on buying food. In fact, there are some arguments that would say that people are dining out less and eating in more that actually is helpful for some of these different types of products. But within that segment we also have some durable goods related markets. Albeit a minority of the total sales in the segment but as we sell systems to manufacturers of windows and doors and furniture and appliances those are the kind of projects that – in plants that would be less apt to be expanding production. And so as a result you might not see the big systems when they want to add an increment of new capacity or new capability. You know those are generalities I'm making and so the parts versus the systems have that kind of bias. Standard packaging parts, for example, and standard packaging systems would tend to be more normal and more robust and less so in the durable goods. As to visibility because we tend to ship these parts to our customers the same day they give us the order and we have proven to them that we have that kind of availability they tend to not tell us ahead…

That's great color, Ed, thanks very much. I'll get back in the queue.

Okay, Charlie.

Your next question comes from the line of John Franzreb of Sidoti and Company. You have the floor, sir.

Good morning, Ed.

Hi, John.

I guess my first question is in your closing comments you said you thought things would worsen before they improved. But then if I heard you correctly you said that the order rates are sequentially generally flat and that you're forecasting volume to be up 3%, I think it was or 2 or 3% in the next quarter, could you just talk – what are you talking about when you saying things are going to get worse before they improve? Are you talking about the macros, talking about the business, can you just clarify that a little bit?

Absolutely, yes when I talked about I think things are going to get worse before they get better I am talking about the global economy. And I'm you know as a student of these types of things I guess I watch all these indicators very carefully and I don’t think we've seen the bottom yet. I think there is a lot of reason to believe that the impact of decreasing demand on employment and a variety of other conditions themselves have secondary effects that have some lag before we really see the consequences of reduced, you know, further reductions in consumer spending and all that does to everything from retailers to real estate property owners and on it sadly spirals. And I think the stimulative effects of government programs may be having effects with regard to bank liquidity but I think there is quite a delayed effect that we're going to see in consumer spending levels and consumer confidence and so you know if I had to bet up versus down from this point today I'd say we've got another round of things that we're going to hear and in public news announcements on a macroeconomic level. We may not see from here, in my personal opinion, the same pace of declines but I think the absolute direction is further weakness. Now if I shift back to Nordson you know we have both the real data we have from customers and the real trends that our sales organizations are seeing both with regard to existing customers but also some very good work they're doing in building the business. And I'm going to come back to that in a minute because I think it's an important point. And that generates for us a bottoms up forecast but then we apply our…

I guess in a related question, you know, based on (inaudible) the historical trends are based on maybe the pent up demand that you are hearing from the sales force. Which segments would you expect to see orders to turn first, based on the current outlook?

I first of all would say, that the technology markets, semiconductor and electronics, are going to, to a certain extent, be geared to new consumer electronics that, you know, the IPOD phenomenon, for example, using that as one that we all understand and capacity in some of these fixed capacity type economic business relationships. As compared to a more confidence driven set of equations that would hit some of the markets like industrial coating and automotive, as well as some of the small durable goods segments within adhesives. Clearly, adhesives is down less and I think it tends to be more meted in the impacts, and so when we see plant shut downs for holidays, it happens quickly, because so many of the products are bought as they’re needed and manufactured by us as the customers want to put them into place, as compared to the longer lead time stuff they might get elsewhere. So, I probably see adhesives returning back to positive comparisons as a segment as probably the first thing that we would see and then I think the other two segments are going to lag a bit from there.

Great. Thanks a lot Ed.

You’re welcome, John.

Your next question comes from the line of Matt Summerville with Key Banc. You have the floor sir.

Morning. A couple of questions, and I apologize if you already said this, but what is your head count reduction target? And I guess if I look in the press release, as of the end of fiscal Q1, you’re down about 132 heads sequentially from the end of the year. I guess, have there been a lot of head count reductions since then? And really what I’m trying to kind of back into is where we’re at with the cost take out in Advance Tech.

Yes, I’m glad you asked that question because frankly, I’m not real happy with the data that we have around head count on some of our publications, because we have, overtime, discovered that historically there have been inconsistencies in using temporaries versus full time employees. In certain countries of the world the definition of what a full time is is a function of local laws that are different than what you might expect in a western country and – for example, if you look at the year end 2008 headcount, you’ll see a different number in the annual report from the press release. So, let’s cut through all that and let me talk about where we are. Where we have moved so far, is a reduction of over 400 employees, and that is largely done from where we were back in, call it September of 2008. So, 10% is the head count reduction and I believe with my understanding where we are, that is largely complete. There may be some people that might be considered temporary, but that has to do with the staffing strategies where in certain factories we have a permanent layer of temporary workers for protection against volatility of demand and we flex up and flex down. But, many of those are with us for extended periods of time. It may not be the same individuals, but it would the same type of head count. So, 10% is the number.

And then, when we look at Advance Tech margins, I think in the quarter there were about 2 to 2.5%, you mentioned that that segment really didn’t see, at least on a comparable basis to the other two segments, as much benefit from cost takeout, so in the context of let’s assume Advance Tech revenue is down a bit sequentially, how should we think about the operating margin performance of that specific segment in light of what you’re doing on the cost side?

Yes, I’m going to ask Greg to chime in after I share something. The head count across the whole company, I told you was 10. In Advance Technology, the head count reduction is about 15%. Obviously, their business is down more than the corporation’s business as a whole, and we responded correspondingly. And the majority of that reduction occurred at the beginning of the second quarter. And the benefit of those actions is not included in first quarter results, but is embedded in our forecast for quarter two. As to operating margin, I – Greg I don’t know if you can –

You know, we really don’t take the forecast down to that level, Matt in sharing the outlook by segment, but I think clearly the comments I’ve made with regards to spending will have a positive impact in that particular segment. That segment, as well, is generally less impacted by currency trends as other segments may be. So, we tend to—we generally don’t get specific into guidance with regard to our segment outlook because there’s—you know—at some point we don’t go to that level of specificity, but we will get some benefit out of spending.

With respect to the mix of business, you spent a lot of time talking about that, is there anyway you can quantify or give us a sense maybe, volume on a year-over-year basis? The change in volume, I should say, between Engineered Systems standard products, as well as spare parts?

The mix of those?

Yes, either the mix in the quarter or just the year-over-year change in volume across those three categories, again, trying to get a better feel for the overall mix. Obviously, spare parts are clearly helping based on the gross margin performance.

Yes, they sure have. I’m not sure that I can give you specific numbers right here in this call, but I can tell you one of the measures is the fact that we’ve shifted a lot more towards these standard products and replacement parts and spare parts, and the like, is the size of the backlog has shrunk considerably from where it was a year ago. I’ll call that more normal times than where it is today, and that reflects, not necessarily a shrinkage. I mean, if you compare the size of the backlog to the sales forecast, for example, and back into the number of days, you see it’s much shorter net because all those standard parts and systems are shipped very quickly, depending upon the business unit. And Greg, what are the days?

Yes, you know, if you look back not too – you know, if you didn’t—not too far in the past, backlog might have been mid-40 to high-40 number of days. And that number is now closer to 37, high 30s, so I think it is reflective of the fact that 1- it’s the weakness in orders of the larger dollar systems, and primarily comprised of the shorter lead time items.

Okay, there’s a question on the balance sheet. It looks like you have roughly $210 million of debt coming due this year, can you talk about, I guess, at what rate that is financed at the present time? And when the timing is of when you have to refinance it? What the overall plan is there? And will that financing rate move higher in a meaningful fashion?

Matt, that 200 million is where we choose to show the outstanding balance of our – what was it, five year committed revolving credit facility.

Okay

That facility is – I would say it’s a five year facility that takes us through July of 2012.

Oh, okay.

And the rate is?

And the pricing on that is based upon a spread over LIBOR that most recently was 28 basis points over LIBOR, over one month LIBOR.

Perfect. And then last question. I’ll hop out. As far as your operating cash flow expectation for the year, Greg, can you talk a little bit about that?

Well, what we – you know, as Ed shared in his comments, we tend to look at different scenarios that we think are reasonable, if you will, for the balance of the year, and in each of those cases, we expect to be cash flow positive for the year.

Is that again on a operating cash flow basis or free cash flow basis, Greg?

Free cash flow basis.

Great. Thanks a lot guys.

Our next question comes from the line of Barry Haimes with Sage Asset. You have the floor, sir.

Good morning. I have one just following up on an earlier question, in terms of some of the partial service and short cycle versus some of the more expensive bigger ticket items that may be more capacity related. Whenever the upturn might come, what in your experience has been the normal lag between when your partial service and shorter cycles start to turn up, along with say, industrial production? And then, how long does it take before you tend to see the bigger ticket, more in capital items orders start to pick up? Thanks.

First of all, I’d say that of these big systems, capacity is probably one of the last reasons that people by systems from Nordson, more typically, they tend to buy them for capability reasons. For example, I’ll start with technology, but I can move to the industrial coating segment as well. They tend to be bought because there is something about their product, whether it is a new cell phone or it is a new pacemaker, or it is a new powder painting booth, there is a capability that they don’t have, and in order to have features, or in order to be able to make it smaller or faster, or there’s an economic payback, that is far and away the largest reason to people make the investments they buy these systems. And so, we have for example today, large powder painting systems that we’re continuing to sell. Some of these – I’ll give you a couple of examples, that are other than capacity. One has to do with a customer who is interested in reducing overall production cost in their relocating factories from high-cost regions of the world to a low-cost region of the world. And as a result of that, we’re replicating their entire painting capacity. In another example, there is merchandising and marketing reasons that multiple colors are necessary, as compared to a product strategy in the past. It might have a more limited color spectrum and they need the latest technology that enables them to rapidly change colors from one to another in small batches. And so again, they’re replicating or adding capability, and thus, we sell the system. And these are though, nevertheless, influenced by whether it’s pure cash conservatism on the part of customers, or, in some cases, they’ll make due because they don’t have the need. But, nevertheless, there is a component of our demand that has to do with capacity and I would say that it’s probably tied to the specific economics of the cycle where they operate. Portions of our business are consumer durable goods and if it is a capacity to use that reason that some people buy, then it would lag the recovery. In our adhesives and more standard product businesses, because the dollar cost is relatively low, it would probably be current with the cycle. And then, I’ll tell you the technology products really are in a much higher case, they are tied to the next generation product that they’re releasing. To get consumers to be interested and continue to buy cell phones, or what every other product may be, they’re embedding new features, and those new features, frankly, require them to have new capability that we can offer. And it’s not often that it’s capacity driven.

Got it. Thanks very much.

You’re welcome.

Your next question comes from the line of Walt Liptak with Barrington Research. You have the floor, sir.

Alright, thanks. Good morning everyone. Ed, when I go through and put in some of the guidance numbers, revenue down at the low end 38% and the SG&A decline of reduction down 23%, I have a little bit of trouble coming up with getting to the low end of your EPS guidance of 17. And I wondered if there’s something below the line, in maybe currency transactions, that you’re accounting for to get to the low end number?

I don’t think that you’re going to find it as currency transaction. The currency effect of this year versus last year, where the Euro, for example, was in the 153 range versus where it tends to be today, we expected negative currency to influence this by about $0.15 per share. We also have in there a restructuring charge that will be about $0.11 a share. If you strip those effects out, you come up with a – at the low end from operations, something in the range of $0.21 to $0.36 a share, low to high.

Okay. Okay, the spending level is down 23% at the low end. That gets me to sort of like the 85 million to 86 million run rate. Is that a level that we should use in the back half of year two?

I don’t know, Greg.

Yes, no, I think back second quarter, as we mentioned earlier, some of the actions that we’ve taken with regards to spending reduction have occurred during the second quarter. So, I think that, coupled with some of the comments that we made earlier on, continued focus on discretionary spending items, might suggest that our comparison as you go out, as compared to prior year volume spending could improve.

Okay. Okay. Could the tax rate for the second quarter in the full year?

For the full year, we’d be looking at in the out quarters about 35%. The second quarter will include a couple of some discreet items that are booked in the quarter that relate to adjustments to prior year returns, but, your rate going out for the provision should be 35%.

Okay. And then, you’ve done a great job with taking costs out and being early in what’s been a real brutal environment, and I guess, for uses of cash share repurchases one. Can you talk about what you did during the quarter? What you expect to do the rest of the year?

We, I think, bought back a few shares at the very beginning of the first quarter, but the remainder of the quarter we have not bought back shares. As attractive as the share price might appear, we feel like as we prioritize the actions that we take, the first and foremost of importance to us is that we make sure that we’ve got a very conservative cash flow attitude. And so, we have backed away from active share repurchases, which is not to say that we may not change that opinion at some point. But, we’ve not been in the market of late.

Okay. Right, so your expectation is in the coming quarter, coming couple of months, you’d be out of the market.

I think until we see some change in external circumstances, we’re apt to be less active.

Okay, okay. Thanks very much guys.

Your next question comes from the line of Matt Summerville with Key Banc. You have the floor, sir.

About $0.15 of FX headwind, in terms of EPS in fiscal Q2, and then also what then was the FX EPS headwind in fiscal Q1?

$0.05 in Q1. $0.15 in Q2.

And then how should we think about Q3? Q3 the FX headwind could actually be worse than in Q2. Am I right on that?

Yes. I think the just – and I don’t have precise numbers, just looking at an FX chart it looks like order magnitude – Q2 has got about $1.53 in the Euro and Q3 something in the range of $1.57. And those are not precise numbers, but –

I think those are pretty close, yes.

So, that would say, yes a little bit more headwind, and then of course, in Q4 the comparisons collapse back to ease here.

Greg, you talked about the tax credit thing in the back half of the fiscal year, but I was left unsure as to what the tax rate is that is embedded in your guidance and what you expect the magnitude of those discreet items you referenced to be in fiscal Q2?

Yes, the Q2 items would be about $0.07 per share of discreet items. That’s where in the press release and in the comments we talked about a net $0.04 charge for non-recurring items. That would be the restructuring charge in the second quarter and then the benefit, if you will, will be some tax adjustments.

So, what is – just to make sure I’m crystal clear on this, what is the anticipated per share, just the restructuring charge, in the second quarter?

$0.11.

Okay. So, you’re netting the 7 against that. Got it. Okay, thanks.

Yep

At this time, there are no further questions in queue. Please proceed with your closing remarks.

Okay, thank you. As we close, I’d like to summarize what I believe are the takeaways from today’s call. This recession is unprecedented and severe and it’s impacting every geographic market in nearly every end market to some degree. We do have our sectors of comparative strength, including spare parts, used once and disposed components, nondurable end markets like packaging and nonwovens, life science and new technologies, and cost saving systems, as well. Thirdly, our favorable mix has supported relatively good operating margins and we continue to operate with excellent cash flow and excellent liquidity. Fourth, Nordson has started early to deal with these challenges with cost reductions, which are largely implemented, of nearly $60 million in savings this year, compared to last year. And that is both the headcount reduction, as well as other savings of operating expenses, and the like. And lastly, we have the plans and are fully prepared to adjust, regardless of the direction this economy takes. So, that concludes the call and I’d like to thank all of you again for your continuing interest in Nordson. Have a great day.

This concludes today’s conference call. You may now disconnect.