Good day, ladies and gentlemen, and welcome to the Nordson Corporation Webcast for Second Quarter Fiscal Year 2013 Conference Call. [Operator Instructions] As a reminder, today's conference call is being recorded. I'd now like to turn the conference over to your host, Mr. Jim Jaye, Director of Investor Relations. Please go ahead.

Thank you, Allie, and good morning. This is Jim Jaye, Nordson's Director of Investor Relations. I'm here with the Mike Hilton, our President and Chief Executive Officer; and Greg Thaxton, our Senior Vice President and Chief Financial Officer. We'd like to welcome you to our conference call today, Friday, May 24, 2013, on Nordson's second quarter results. Our conference call is being broadcast live on our webpage at www.nordson.com/investors and will be available there for 14 days. There will be a telephone replay of our conference call available until May 31, 2013, by calling (855) 859-2056. You will need to reference ID number 64354851. 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'd now like to turn the call over to Mike Hilton for an overview of our 2013 second quarter results and a bit about our outlook. Please go ahead, Mike.

Thank you, Jim, and good morning, everyone, and thank you for attending Nordson's second quarter 2013 conference call. I'm pleased to report that we delivered an excellent second quarter. These results reflect the efforts of our global team, which continues to execute at a very high level. Our customers continue to respond to the value we provide, and we remain focused on meeting their needs better than our competitors. In a continuation of the trend we saw in our first quarter, our second quarter was highlighted by strong top line organic growth. And once again, this growth was broad-based in terms of product lines, applications and geographies. The 7% organic sales growth we delivered outpaced the levels recently reported by many industrial companies and is reflective of the diversity of our end markets and our value proposition. The first year effect of acquisitions add to the top line to bring total sales volume growth in the quarter to 23% compared to the same period a year ago. We also delivered on the bottom line with GAAP diluted earnings per share increasing over the prior year's second quarter to $0.84. Looking forward to our third quarter, we see a moderation in growth from some of our end markets related to the low-growth macroeconomic environment. That said, at the midpoint of our guidance, we are still expecting year-over-year organic sales growth against the prior year that, for Nordson, was very strong. And with this outlook, we should see improving operating margins as compared to the second quarter. In a few moments, I'll share additional comments about the current business trends and our outlook but I first turn the call over to Greg Thaxton, our Chief Financial Officer, who will provide more detailed commentary on our second quarter financial results, as well as some comments on our guidance for the third quarter of 2013. Greg?

Thank you, and good morning to everyone. As Mike described, we delivered very positive second quarter results, with sales in the quarter of $382 million, an increase of 21% over the prior year's second quarter. This growth included a 7% increase in organic volume, a 16% increase related to the first year effect of acquisitions and a negative 2% impact related to unfavorable effects of currency translation compared to the same period a year ago. On a sequential basis, performance in the quarter represents a 10% increase over first quarter sales. Looking at performance within the segments. Adhesive Dispensing sales volume increased 30% as compared to the prior year's second quarter. The first year effect of acquisitions drove most of this growth, where organic volume improved by 1%, driven primarily by systems serving polymer processing and nonwovens end markets, offset by some softness in our packaging product line during the quarter. Sales volume growth in the Advanced Technologies segment, which is all organic growth, was 14% over the prior year's second quarter. Organic volume expanded in every geography as demand for our precision dispensing and fluid management solutions serving mobile electronic device, medical and other niche markets remained strong. Within the Industrial Coating segment, sales volume increased 24% compared to the prior year's second quarter, inclusive of a 13% increase in organic volume and 11% growth from the first year effect of acquisitions. The organic growth included most product lines and geographies, with the exception of Europe, and this growth continued to be driven by the investments of durable goods manufacturers. Moving down the income statement. Gross margin in the quarter was 57%. This performance is equal to our first quarter performance even with a larger mix of systems revenue in our second quarter. Operating profit increased 7% compared to…

Thank you, Greg. Before taking your questions, I'd like to provide some additional comments on our year-to-date performance and third quarter outlook. With regards to the first half of our fiscal year, we delivered excellent performance in sales, operating profit, net income and diluted earnings per share. Given the difficult macroeconomic backdrop during our first fiscal half of the year, the recent performance is very good relative to many other industrial companies, and I was especially pleased with 8% organic sales growth over this period of time. As we begin our third quarter, our current order rates reflect the moderation we are seeing in some end markets, as well as more difficult comparisons against a period of very strong growth a year ago. Against this backdrop, the midpoint of our guidance represents 2% organic sales growth on a year-over-year basis and 8% sales growth on a sequential basis. These are solid levels in the current environment and reflect the value we continue to provide to our customers. And as Greg said, we would expect to leverage the sequential volume growth to generate higher operating margin in the third quarter. Let me make a few comments regarding our fiscal 2012 acquisitions. We are on track with overall integration efforts and encouraged with the synergy opportunities we have identified, allowing Nordson to bring value to these acquisitions. Regarding performance, sales and operating margin improved on a sequential basis helping Nordson drive overall second quarter operating margins over the first quarter, and we remain excited about the longer-term prospects of these properties given emerging market opportunities, our development of new applications and overall market and economic recovery. For Nordson overall, the short-cycle nature of our business limits our visibility, making it difficult to forecast beyond the third quarter. Nordson has proven its ability to perform in a variety of economic scenarios, though we're not immune from the overall macroeconomic trends. Shifting to a more long-term view, Nordson is well positioned to continue delivering strong financial results, where we are able to leverage our diverse end-market exposure and geographic positioning, our team's ability to execute and our commitment to continuous improvement. And we will continue to drive value for our customers through our applications expertise, differentiated best-in-class technology and direct sales and service and support. At this time, let's turn to your questions.

[Operator Instructions] Our first question comes from Kevin Maczka of BB&T Capital Markets.

Mike, I guess, first question -- and I appreciate the color you just gave on the 2012 acquisitions. But if you go back to the 2 big ones, EDI and Xaloy, I thought, originally, we were thinking in terms of fiscal '13 that we'd see maybe $0.25 or even $0.30 of accretion from those deals, and it looks like earnings are pretty flat as you look at the first 3 quarters of the year. So can you just comment a little bit more about, relative to your own internal expectations, how they're doing? Or is it just some softness elsewhere against very difficult comps that's in the core business that's kind of driving these flatter earnings?

Yes. I'd say, in the short term, most of what we're seeing is really some softness in the core business, combined with conscious decisions to step up spending in certain areas. So I'd say most of what you're seeing here in the short term is a little bit of softness in the core business. I'd say, as it relates to the acquisitions, we made some comments the last quarter that we were a bit behind in terms of a couple of specific end markets, and I'd say we're still a little bit behind where we'd like to be, probably a couple of quarters behind where we'd like to be, in particular, in specific end markets. We are encouraged by new applications, particularly in the dyes business that we're getting some traction on, but we're probably a couple of quarters behind. In the long run, consumption is still strong. Even in this little softer short-term environment, we're looking at 6%, 7% plastics growth. So in the long run, when supply and demand are balanced out, we feel pretty good about where those businesses are going, and we're working on new product development opportunities to continue to drive growth beyond that, so we're encouraged. I'd say in the short term though, it's more of the softer macro affecting our core business.

Okay. And then maybe one for Greg. You mentioned the strong sequential incremental margins in the quarter and again, what you're expecting next quarter. When we get out into Q4 and beyond and we've anniversaried these big deals and you've got some planned higher spending in tech, I'm just wondering if you can kind of frame what we ought to be thinking about in terms of incrementals on a year-over-year basis once things normalize here and we've anniversaried the deals.

Yes, I think to a large extent, Kevin, some of that depends on what kind of growth we expect to see in those out periods. If you exclude the acquisitions as we've shown historically, if we're driving that top line growth more at a higher rate than what you might expect the inflationary impact on your spending to be, those incremental margins are very strong. The same would be true in these acquired properties as well. As -- if we're looking at sequential revenue growth over what they're delivering, although their leverage is not as strong, they're still, on a full year basis, pretty strong performing businesses. So same concept there, if we're generating incremental revenue that's going to translate into pretty strong incremental margins. But again, some of that -- the response is a bit of it depends what, to a certain extent, what that macroeconomic view, our outlook going to be in that out quarter.

Right. And I understand that, Greg, and I know it's hard to call this because you've had some variables like mix and macro and other things that are maybe beyond your control. But again, we just saw 59%, and you're calling 56% next quarter. This is sequential, but with the current mix of business, including these lower-margin acquisitions, we ought to not be thinking about that as sustainable year-over-year basis though, right?

On a sequential basis, yes, if we're seeing this kind of -- if we're seeing growth sequentially, I think that's the kind of mix we could see. On a year-over-year…

So Kevin, the incremental growth was about 8%, and you deliver those kinds of margins. I think what Greg's trying to say, if you see something in that range, it's not unusual to expect that kind of margin. If it's more like 2%, you're not likely necessarily to see that because we have some -- in the short term, some conscious step-up in strategic spending.

Right. And again, the tech strategic spending continues throughout the back half at an incremental $2 million rate?

Yes. Just to be clear, when you say incremental, it's about $2 million per quarter.

Our next question comes from Liam Burke of Janney Capital Markets.

Mike, on the traditional electronics piece of the Advanced Technology business, you mentioned that there was some potential life in that part of the business last quarter. Has there been any follow through there? Are you seeing any additional activity?

I'd say minor additional activity there, not a step-up in recovery that the industry guys are projecting. So I'd say we've seen continued activity but not the kind of level of step-up that you would anticipate with the sort of more robust growth in the more traditional packaging and test inspection. The industry analysts are still forecasting that to start to pick up in the second half of the year and be pretty solid into next year. But I'd say, we had some orders then, we have some orders now, but not a trend that we're ready to call yet.

So I mean, even with that piece of the business sort of mulling along, the rest of the segments, mobile, the special electronics and medical are all humming along okay?

Yes, mobile's still continuing to be strong, MEMs still strong. The medical stuff is going very nicely. It's more the traditional back end kind of stuff that is really not doing much yet.

Our next question comes from Matt Summerville with KeyBanc.

Couple questions. If you look on a year-over-year basis, your revenue's up round numbers $7 million -- or $70 million. Your operating profit's up about $1.5 million. I know FX is a drag. You mentioned growth spend. Can you talk about what the other buckets are, if you will, that impacted that year-over-year leverage and how we should be thinking about that as we model the rest of the year?

Yes. So you want to go ahead, Greg.

Well, I was just going to make a comment, Matt. Some of what we're seeing second quarter versus prior year's second quarter is mix, and if you recall, prior year second quarter, particularly in adhesives, was just kind of a knockout quarter for us, a high watermark in terms of operating margin. And what we're seeing this year is not a strong performance in that portion of the business, part of it, a revenue issue; and part of it, a change in mix from what we saw last year.

Greg, is there any way you can sort of quantify or isolate what you think the mix dilution was on margins for the whole company year-over-year?

I'm going to make a high-level comment, and Greg can correct me if I'm wrong here. The acquisitions have had -- if you look at it year-over-year, margins are down about 3% or 4%. About half of that is sort of the new acquisition mix and half of that is largely in the sort of core adhesives business with some volume decline and then, mix between the sort of 3 segments we have there, if you look at sort of packaging versus, say, the nonwovens or product assembly, they have some different margins based on cost to serve kind of activities. And so it's sort of a half and half in those 2 areas, roughly speaking.

Yes. A portion of it is the dilutive effect of the acquisitions, as we talk about, the year-over-year margin trend and then the other half both within this, call it the core segment margin dilution and then the step-out in this Advanced Tech area of this $2 million.

And then, Mike, could you maybe spend a moment just talking about the linearity or lack thereof you saw in incoming order rates? Are things volatile week-to-week, month-to-month? Are you seeing any discernible change in trend?

Yes. So the answer is they can be a volatile week-to-week depending on whether big systems orders come in or not and depending on whether they're in the quarter, last year, year ago. So you're going to have some volatility there. I would say certain segments or product lines have improved in the short term, like packaging, for example, we've seen a definite uptick. And others, in the short term, have maybe gotten a little softer. Greg called out some commentary around the auto side, and that's really year-over-year comparisons of some big platform orders last year that we didn't see come in, in the same period this year. So there is some volatility there. Maybe just a comment or 2 at a high level around the macro piece might be warranted here. If we go back a quarter, we were suggesting that for the year to get a 2-plus percent sort of macro GDP growth in the year, we needed to see sort of 3-plus percent in the second half of the year. I'd say most of the economists that we follow, and particularly one, in particular, we use, IHS, still sees that happening but probably more of a slope, so more in Q4 than in Q3 and not as much delivery in Q2 as would have been expected sort of a quarter ago. So they're still optimistic about that piece of it. I would say also in many of our end markets, our customers are still, what I'd call, cautiously optimistic about systems orders coming through, talking to us about placing those orders. We haven't -- we just haven't seen those come through yet. And so we're a little cautious around that, and that's factoring into the guidance we're providing for the next quarter.

And then just maybe one more, Mike. In terms of the Advanced Tech business, I guess, what are incoming order rates and the discussions you're having with your customers telling you about their new product pipelines and their CapEx spend, particularly as we head into fiscal Q4? Just bearing in mind the comps actually even get tougher.

Yes, so I would say, in general, on the mobile side, folks are pretty optimistic. Now whether those orders get placed in Q3 or Q4 or slip to Q1, not as clear. I mean, they're indicating they're going to come in this year, but they could easily move them a few weeks or a month and they'd be in the next quarter. But I'd say they are still pretty optimistic about new products coming out, although the timing, I think, is maybe a little bit questionable at this point. So again, I'd say generally optimistic, generally suggesting they're going to come in this year, but we're probably hedging our bet a little bit there that maybe some of that slips into the early part of next year.

Our next question comes from John Franzreb of Sidoti & Company.

In the expected margin improvement from the acquired businesses, how much of that's got to be volume-driven versus how much can you do from internal cost savings?

Yes. If I look at it, John, we still have the same kind of leverage that in our -- as Greg said earlier, in our business, so we expect significant incremental margin. Then in the short term, we're seeing a little bit of the reverse side of that as the volume in certain areas is a little softer. But we do see significant synergies, and our expectations are that these businesses were sort of high-teen businesses that we ultimately could get to the mid-20s. And that sort of moved from the high-teens to the mid-20s was largely on the sort of cost-side-synergy type of improvement. There's some large improvement from things like strategic pricing and things like that, but largely on the cost side. But we do see some volume leverage potential, and right now, that's a little bit negative as opposed to positive.

Okay. And looking at the geographic mix, the orders are down 9% in Asia Pacific. Can you kind of talk a little bit about what's going on there? What's the biggest dropoff?

Yes. It really is across all of the businesses in terms of orders at this point. And I'd make the general comment that we made about sort of the business, in that customers are still, I'd say, cautiously optimistic. But we're not seeing that translate into the order flow yet, and I'd say China is a significant part of that. Part of that, in the comment to the earlier question on the back-end packaging and the technology side, the part of that affecting our other businesses. If you looked at sort of the latest macro data on China, it's a little soft. We're still pretty confident that the government is going to impact that to deliver their sort of 7.5% to 8% sort of GDP growth for the year. But right now, it's a little softer, and that's translating into people, I'd say, holding up on the order side. If you look at sort of the project activity, it's still very robust, but it's not translating into orders at this point. And I'd say that's a fairly substantial China effect there.

Okay. Industrial Coatings, if I heard correctly, the orders are down 11%, and you said the powder coating side of the business was up, but the automotive OEM side was down?

Yes.

Can you just talk a little bit about what's going on, the dynamics there?

Yes. I'd say this is largely probably a timing kind of issue. If you look at -- in our sort of 12 weeks last year versus our 12 weeks this year, we had some large platform-type orders come through last year within this quarter that really kind of distort that a bit. So our view is over the longer term, that kind of corrects itself, and in the short term, that's kind of distorting the number. So from our perspective, that's not a fundamental, "Hey, auto is falling off." It's really a timing issue.

And those can -- John, those can be large-dollar system sales, so the timing of when those hit in the quarter can really skew the numbers.

Okay. And one last question, on the share repurchase, in the last quarter, the one just completed, what was the average purchase price you were buying back at?

Hang on a second, we need to look that up. If you recall, we talked about that. We've got an authorization. We said we'd like to be optimistic -- or opportunistic. But we also have to offset dilution, which, what I think we said was sort of in the mid-$30 million range. So we're trying to do 2 things, be opportunistic and -- but mainly offset that dilution to start.

John, we bought back a little over 340,000 shares at $65.69 per share.

Our next question comes from Jason Ursaner, CJS Securities.

Just in adhesive, you mentioned strength in systems during the quarter offset weakness in packaging. But then, in the most recent orders, it was strength in packaging offsetting other lines. So was there a clear inflection point you saw during the quarter from an order perspective? And did it coincide with the launch of the joint products with Anglo [ph] at all?

So you got that correct. In the quarter, the packaging business was softer, but we're really seeing, from an order standpoint, in the last number of weeks, that pick back up, which is encouraging. I'd say the impact of the launch has not really been felt there. I mean, we have over 100 orders for new systems there, but we're just starting to deliver the first few so that's not a big impact in the quarter or a big impact in the order rates. We're very encouraged with the customer reaction to that complete new product line, and we think it's going to be very successful for us. But that's really not impacted the near term, but we are certainly encouraged to see the packaging piece come up, particularly in a backdrop where food and beverage consumption is actually pretty modest and actually was down in the quarter, overall food and beverage consumption. So to see packaging start to pick back up is very encouraging.

And Jason, I'd characterize the product lines within that segment as packaging is the largest product line in that segment, and that tends to be the steady performer. So where we say it may be down, we're generally not talking about big movements. The other product lines that are more, call it, larger-dollar systems oriented, you'll get the timing impact of when those systems may or may not hit, and so you'll see larger swings in those product lines.

Okay. And in plastics, I guess, can you give more detail on the difference in order rates between the system -- OEMs that are building new machine cycling capacity versus more replacement demand from end users add to utilization? And are you seeing growth in the latter or both down right now?

No, I would say on the end user side, we're seeing sort of the replacement business be pretty steady. I'd say on the new system side, for some of the new applications, we're starting to see that pickup in sort of the 1-film application or biaxial film application. That's the one where there's sort of a mismatch, short-term mismatch, in supply and demand, with some lower capacity that went in last year, and that's the one we're working through. And we're focused on really offsetting that with the new applications, and we're getting some traction there. But the end users are continuing to buy at a pretty steady pace, not too different than what we see in our other businesses in terms of parts revenue being up as operating rates remain solid.

Okay. And just following up on the questions on the tech orders. What was the month-to-month linearity like there during the 12-week period? I guess, I'm just trying to understand if the softness in orders for test dispense was more correlated to the overall semi-cap industry or it's actually been improving month-to-month or if it's more company-specific to the under-fill dispense market given the capacity that got put in the last year ahead of deliveries -- or it would have been towards the later part of the period.

Yes, we're taking a look at it. I mean, right now, for overall Advanced Tech, we're looking at sort of the latest orders being essentially flat, and Greg is kind of taking a quick look here to see if we can answer...

Yes. I don't think, in terms of volume -- we typically don't look into the particular 12-week period, but specific to your question, I don't think we see any discernible pattern within those 12 weeks.

Yes. And as we've talked about before and the earlier question was around sort of launch cycle on new products that we could have Q2, Q3, early part of Q4 look different year-on-year based on sort of launch timing and patterns. As you recall, we had a pretty solid Q2 last year and a step-up in Q3 and then a solid Q4, but a little softer on the tech side. So right now, we're seeing it kind of flat on an order basis. That could change depending on where these sort of new orders fall, and as I said earlier, our customers are saying they're going to fall within the year. They could move back between Q3 and Q4. We've hedged that back a little bit just based on timing. We've got a pretty good view to the new platforms. We're encouraged by that, but the timing's not as certain.

Our next question comes from Christopher Glynn of Oppenheimer.

Just wondering if you can make a comment on what Japan operating margin is historically relative to the overall and what the FX impact might be on that currently?

So the margins, in general, in Japan are good. We've got a good position and unique products that we fine-tuned for that market, so they're good. So they're good in sort of the overall business and in some areas, maybe a little bit better depending on a particular product line. On the currency side…

Yes. So Chris, clearly, the yen had the biggest impact on a regional basis with the currency impact, which, of course, we said was about $0.03 impact in the quarter and so...

That's largely translation.

It's largely the translation effect of bringing back those revenues and spending back into dollars, so a weaker yen, obviously, has hurt.

Okay. And then on ATS, wondering if -- looking at the long-term growth, you had really tough comps here, but it is pretty seasonal. I'm just wondering to what extent you think comparisons on an annualized basis have potentially reached a plateau of sorts in some areas.

So I'm not 100% sure I understand the question, but let me just comment on long-term growth and if I'm not addressing it, come back. We still view the tech segment, on a long-term basis, over the cycle, to be something that we can grow organically at sort of double digit, around 10%. And that's, in part, the mix of what we see on the medical side, and that's, in part, a function of some of these niche applications on the electronic side, as well as broadening in our sort of fluid management EFD-type businesses, broadening the general assembly applications from where we are today. So long term, we still see that as something that approaches double digit sort of top line over the cycle. In the short term, you can have sort of the timing issues associated with the systems orders and so forth, but I'm not quite sure that's answering your question.

Yes. Well, I guess, as you're framing it as through the cycle, we've had several years of very strong double digits. So I'm just wondering if that double digits through the cycle needs to be marked to market, to your view, from here over the next few years, given that you've been significantly above that for a few years.

Yes, so let me just kind of break that down a little bit. I would say on the medical piece, we're encouraged. I would say on the broadening of the EFD business to more general applications, we're encouraged. I mean, obviously, we don't operate outside the macro environment, so if we're -- when we make those kind of comments, we're thinking more of global growth in the 3.5% and not 2% range. So your guess is good as ours as what happened in the short term. What I'd say on the electronic side is 2 things. We still envision -- we have the drivers of under-fill. We have the mobile piece. We have the niche market applications. What I'd say is the wildcard is what do you think is going to happen with the traditional back-end packaging piece. So if you think smartphones aren't going to grow at 50% rates now, they're more like 20% and in the future, they're more in the teens, that's a sort of a negative impact. On the other hand, if you do think some of the more traditional obligations are going to come back from something that's been 0 to negative over the last, probably, 18 months has the potential upside in the near term. So what's the balance of those 2? It's hard to call at the moment. As I said earlier, the industry sort of analysts that follow that back-end piece expect to see some improvement this year and a pretty solid next 2 years. But we have to see that play out.

Yes. The other dynamic I'd add is – and where we may not see -- or where we may see a moderation in growth rates for devices like smartphones, the other dynamic of new features being embedded into these phones or new models or new product introductions. That, of course, is another driver of revenue for Nordson.

Our next question comes from Walt Liptak of Global Hunter Securities.

Wanted to -- I don't want to beat a dead horse on the timing of the tech orders, but could you just help me check some logic on here? My understanding was, early in the year, the electronics firms design new products, and then your equipment gets customized to what they're doing. And then the orders go out in the second quarter, then the equipment gets put in place in the summer so that they can -- new products can hit the Christmas selling season. Is that right? And if it's -- and if things push out a little bit, why did they push out?

Yes, so I -- what I would say is that's generally true for the more traditional kinds of applications. I'd say the mobile device, in particular, moves around a bit based on when particular customers decide to drive their launches, so some have come out right now with new products, some are rumored to come out in the next month or 2, some are rumored to come out in the sort of late summer, early fall. So I'd say the one thing that's a little different from that, Walt, is sort of the smartphone piece, which tends to have a different sort of launch strategy and some competitive dynamics going on there that don't fit the sort of traditional back end. So they can move around a little bit more. So that's really the commentary we're making is specific customers are talking about different timing, and it can move around several months at a time, maybe even a quarter at a time. And just -- and so that doesn't fit necessarily with this Christmas scenario, whereas, historically, most of the traditional back-end packaging pieces that were linked into the PC side in general did fit pretty well to that sort of commentary.

Okay. Okay, good. And then in your commentary, you talked a little bit about the acquisitions and in one of the questions. But I wanted to see if I can get a little bit more clarity on exploiting EDI, and just some more color around that sales trend that you're seeing. I think you said it was up sequentially, but is -- what's going on there with the different customers? And my understanding here, too, is that the tooling is based on new product development. What geographic regions for those acquisitions are positive or negative?

Yes. I'd say, just a general comment that we're trying to make is on the film side of the business, there's a little imbalance on capacity at the moment, particularly on biaxial films, so that affects the EDI business more than the Xaloy business, which goes into both film and to injection molding applications. The overall end demand for plastic, from a consumption standpoint, even now is running in that sort of 6%, 7% range. So that's a good positive trend. In the short term in that one area, we've got a bit of an imbalance. I'd say Europe, in general, for both businesses, like we see in our core businesses, is pretty soft given there's a recession going on there and even in Germany, where a lot of the sort of OEMs are concentrated for these kinds of businesses, things are soft. I'd say we're encouraged a bit more in some of -- the U.S. is okay. In the emerging markets, we're encouraged. But I'd say Europe is the one that's particularly soft there and more on the OEM side versus the end customer side.

Okay. And you mentioned a couple of times the integration efforts and that they're getting to mid-teens -- or mid-20s margins. I wonder if we can get a timing on when do you think you might get there and what the macro needs to look like? And what are some of the efforts? Are there plant consolidations going? Or is this procurement synergies? Just some detail on the kind of cost takeout that you can do.

Yes, so at a high level, we started with 1 sort of modest facility consolidation, but we do see leverage from a procurement standpoint. You have to go through the sort of the qualification process, that takes a little while, but we do see significant leverage on this for low-cost sourcing initiatives that we have underway. We do see some benefits around segmentation and some strategic pricing. But in particular, I'd say the businesses are a bit behind where we are in our Lean Six Sigma effort, and we have tons of projects that are lined up that we're executing there around the Lean Six Sigma activity. And they're going to play out over the next couple of years, so we're really encouraged by what we see there. And then the real upside, quite frankly, is going to be on the top line, and we're getting some encouragement. We've had some -- we're doing the typical sort of cross-selling activity in the short term, where you have won the customer of 1 business. But not the other, but the real leverage is coming on -- going to come around, in the long run, on the integrated sale of, say, the sort of total film applications, as an example. And we're getting some interest there at a high-level customer, and that's kind of the thing that'll probably play out, not this year but in the next couple of years. We have to do some structuring to make sure that we've got all of the sales and support people trained, cross-trained and the engineering organization supporting them, and that takes a little bit of time. But at the end of the day, there's upside on the top line as well. But we're pretty encouraged by what we see in the traditional areas I mentioned and the extensive list of project opportunities from a Lean Six Sigma standpoint.

Okay, got it. Okay, I've got a few more questions but I'll take them offline. And just kind of a last one, this -- the acquisitions that you've done in plastics, are we -- where are we at now? Are we done now? Or are there other acquisitions that you can add to this portfolio?

What I would say is one of the things that we commented on when we made these acquisitions, was we wanted to get scaled to be a leader from a technology and a market standpoint, and we've got that. But we also mentioned that these were fragmented around individual products that make up sort of the chain that mirrors what we do in our Adhesives business. And so there are still additional opportunities to upgrade and consolidate in a fairly fragmented market, so there's additional opportunities we're looking at.

Our next question comes from Charlie Brady of BMO Capital Markets.

Can you tell -- I think I missed it, the mix of parts for total company and for Adhesive Dispensing in the quarter?

Yes, Charlie, total mix was -- if we think about the legacy business, because that's a benchmark that you all are familiar with, it was about 45%, that was down about 1 percentage point from where it was last year. And in terms of segment, again, adhesive tends to run a bit higher than that total company average, but not too far away from that point.

All right. Can you give us what the cash from operations was in the quarter?

Yes. Cash from operations was about $63 million in the quarter.

Okay. And I guess I just wanted -- on the packaging -- the commentary on packaging softness, I guess, that kind of continue to be softer because it's overcapacity. Could you just expand on that a little bit? I mean, is it getting -- is it stable where it is or is it getting better or worse? And when do you…

Are you talking about on the plastics side or are you talking about on the cardboard paper-type side, Charlie?

Sorry, the plastics side.

Yes, so what I'd say is the operating rates are going up, so the sort of trigger for new investment is getting closer based on operating rates going up. So we're seeing -- we're still seeing overall demand, which then translates into operating rates, demand being up 6%, 7%. So it's really just an absorption time frame. So yes, it's improving, but there were some large orders in late '11 and '12 that created a little bit of short-term overcapacity, particularly with the softening macro environment.

Our next question comes from Greg Halter with Great Lakes Review.

I wondered if you could comment on the competitive environment in each of the 3 segments.

So just overall, we've got, generally speaking, good competitors in each of the 3 segments. We haven't really seen any significant changes that I would say, in the quarter. We continue to focus on the model, the business model that makes us successful, which is starting with technology. So we've invested in each of our areas, in new technology, like the Freedom system that's come out this past quarter in the adhesives area. But we've got similar innovations in our technology and in our coatings business. So our view here is to continue to stay ahead of the crowd by being that technology leader and then providing the best support and service. But at the end of the day, we haven't seen any significant changes within the quarter in the competitive landscape.

All right. And I just wanted to be clear on this swing in the other expense and other income, the $565 million versus $137 million, is that primarily due to the foreign currency translation?

That's correct.

[Operator Instructions] Our next question is a follow-up from Christopher Glynn of Oppenheimer.

Just wanted to get the context around some comments earlier in the year for expectation for flat full year margins, if a certain growth rate -- realize the macro has come into play, and there's some negatives relative to the full year growth rate to get to flat margins, but just wondering if, overall, we could kind of reframe that comment.

Yes. If you look at the comments we made last quarter, what we suggested is if the overall global sort of economic environment for '13 was about what it was in '12, so read that as 2.2%, 2.3% kind of the GDP and we were able to generate the same kind of revenue growth, it was sort of 7%, 8%, then we would expect that our margins would come in at that sort of I think, it was 20...

24%.

24% range. Our view is still the volume leverage is there, if we can deliver that kind of top line. Our view in the current macro scenario is most of the economists still think the second half is going to be considerably stronger so that the year comes in at that 2.2% kind of range. I'd say they've shifted it a bit more to stronger Q4 and slightly weaker Q3 calendar is what we've seen and Q2 is probably a little lighter than they would have forecast a quarter ago. So read that as more back-end loaded. So I think there is a potential impact if they're right, and who knows whether they're going to be right, that some of that slips over into the next year as it relates to our fiscal year. But we still -- if they deliver that, we think we're going to grow above that and the margins, based on our incremental performance, would be there. I'd say what we're seeing right now at a high level, they're still encouraged macro-wise. Our customers are still cautious. We've shaved back our near-term Q3 projections based on really just not seeing that translate into orders even though our customers are telling us they're going to place them.

I'm actually showing no further questions at this time.

Okay. Let me just make a couple of comments here at the end. Number one, a strong quarter and our team did a great job in a fairly soft macro environment. Number two, we're very focused on delivering value to our customers, so if there's opportunity to secure volume out there, we're going to get it. We do need a little help from the macro environment, but if that materializes, we'll be able to deliver and we'll be able to deliver the incremental margin. So it really just comes down to whether or not we see that translate in the next quarter or so, but I would say that our customers are more optimistic than pessimistic and it may be just an issue of timing. So thank you for participating in today's call and continuing to support Nordson.

And if you have any calls, this is Jim, I'll be around today, and be happy to take any follow-ups that you might have. So thanks again, everybody, and enjoy your long weekend. Bye-bye.

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