Good day, ladies and gentlemen and welcome to the Nordson Corporation Webcast for Second Quarter Fiscal Year 2016 Conference Call. [Operator Instructions] As a reminder, this conference call is being recorded. I would now like to turn the conference over to Jim Jaye, Director of Investor Relations. You may begin.

Thank you, Nicole and good morning. I am here with Mike Hilton, our President and CEO and Greg Thaxton, our Senior Vice President and CFO. We welcome you to our conference call today, Tuesday, May 24, 2016 to report on Nordson’s FY ‘16 second quarter results and our third quarter outlook. Our conference call is being broadcast live on our webpage at nordson.com/investors and will be available there for 14 days. There will be a telephone replay of our conference call available until June 7, 2016 which can be accessed by calling 404-537-3406. You will need to reference ID number 5351714. During this conference call, forward-looking statements maybe 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. Now, I will turn the call over to Mike Hilton for an overview of our FY ‘16 second quarter results and a bit about our third quarter outlook. Mike, please go ahead.

Thank you, Jim and good morning everyone. Thank you for joining Nordson’s second quarter conference call. I am very pleased to report that the global Nordson team delivered record second quarter performance, with revenue, operating profit and diluted earnings per share significantly higher than the levels we generated a year ago. This performance came against continued backdrop of modest microeconomic growth. Total company organic sales growth in the quarter was more than 8% compared to the prior year and follows the momentum in order rates and project activity we reported last quarter. This performance exceeded the top end of our guidance by 300 basis points. To be clear, we did have some order activity pull into the second quarter from the third quarter. Growth was especially robust in the Advanced Technology segment as demand in electronics end markets combined with continued strong growth in medical and industrial end markets grow strong double-digit improvement from the prior year. The Adhesive Dispensing segment delivered excellent performance as well with broad-based growth across the portfolio driven largely by consumer nondurable end markets. We did see some softness in the Industrial Coating segment during the quarter against a very challenging prior year comparison, where sales volume was up 23% at this time a year ago. Revenue did increase sequentially from the first quarter of this year at a more typical pace compared to the accelerated rate of a year ago. We leveraged the strong top line growth and our continuous improvement efforts to drive significant improvement in total company operating profit and operating margin compared to prior year second quarter. And this performance generated earnings per share growth of 54% compared to the prior year second quarter with incremental margin of 69% in the quarter. Looking ahead to our third quarter, we are forecasting modest organic growth at the midpoint of our guidance. This guidance is in comparison to a robust period of growth a year ago and in a macroeconomic environment that remains fairly weak. This guidance also reflects timing, where as I noted previously, some orders were pulled into second quarter. Overall, recent customer project activity has remained steady. As the rest of the year plays out, we also stay focused on our initiatives we have previously discussed that will improve normalized operating margin over the prior year. I will speak more about our outlook and current business trends in a few moments, but first, I will turn the call over to Greg Thaxton, our Chief Financial Officer to provide more detailed commentary on the current results and our third quarter guidance. Greg?

Thank you and good morning to everyone. Second quarter sales of $438 million is an increase of more than 9% from the prior year’s second quarter. This change in sales included an 8% increase in organic volume, a 2% increase related to the first year effect of acquisitions and a 1% decrease related to the unfavorable effects of currency translation as compared to the prior year second quarter. Looking at sales performance for the quarter by segment, nearly all of the Adhesive Dispensing segment’s 9% sales volume growth was organic with the first year effect of the WAFO acquisition accounting for less than 1% of the increase. Unfavorable currency translation as compared to the prior year reduced this segment’s sales by less than 1%. This segment’s 9% organic growth is an outstanding level and was driven by strong systems demand and the underlying strength in consumer nondurable end markets. In terms of end markets, organic growth was strong in non-wovens, rigid packaging, general product assembly, injection molding and palletizing. On a geographic basis, the volume growth was led by Europe, U.S. and Japan. Sales volume in the Advanced Technology segment increased 23% over the prior year’s second quarter, inclusive of a 20% increase in organic volume and a 3% increase related to the first year effect of the Liquidyn and MatriX acquisitions. The 20% increase in organic volume follows the momentum in order rates and strong project activity we talked about during last quarter’s conference call. The increase was driven by significant growth in automated dispensing and test and inspection solutions in electronic end markets and by continued strength in fluid management components for medical and industrial end markets. Customers in Asia-Pacific, Europe and the Americas drove the growth. Sales volume in the Industrial Coating segment decreased 13% compared to the second quarter a year ago and currency reduced sales by about 1% as compared to the prior year. As Mike noted, sales in most product lines were impacted by very challenging comparisons to the prior year. Softness in the U.S. and Japan offset growth in other regions. Moving down the income statement, gross margin for the total company in the second quarter was about 57%. Operating profit in the second quarter was $102 million and operating margin was 23%, an improvement of 4 percentage points from the second quarter a year ago. This performance includes one-time charges of approximately $1.6 million for restructuring initiatives and approximately $400,000 for short-term purchase accounting charges related to the step-up in value of acquired inventory. Excluding these one-time charges, normalized operating margin for the quarter was 24% with very strong incremental margin year-over-year. Though volume leverage is helping, this margin improvement is also the result of our performance enhancement initiatives, where for example, year-over-year spending in the quarter, excluding acquisitions and one-time charges, is down 3% from the prior year. And our segmentation and sourcing efforts are benefiting gross margin. Looking at operating performance on a segment basis, reported operating margin in Adhesive Dispensing improved 3 percentage points from the prior year to 28% in the quarter or 29%, excluding approximately $1 million in charges related to continuous improvement restructuring initiatives. Within the Advanced Technology segment, reported operating margin was 24% in the second quarter, an improvement of 5 percentage points from the second quarter a year ago. Normalized operating margin in the current quarter was 25%, excluding approximately $500,000 in charges related to restructuring and short-term purchase accounting charges for acquired inventory. In the Industrial Coating segment, second quarter operating margin was 18% or 19% on a normalized basis to exclude approximately $500,000 in non-recurring charges related to restructuring activities. This is outstanding performance for this segment, especially given the lower level of volume in the current quarter as compared to the same quarter a year ago, where sales mix is benefiting gross margin in the quarter as compared to the prior year. For the total company, net income for the quarter was $71 million and GAAP diluted earnings per share were $1.23 or 54% higher than last year’s second quarter. Excluding one-time items, normalized diluted earnings per share were $1.19. We have included an earnings per share reconciliation schedule in our press release to reconcile between GAAP earnings and normalized earnings per share. Second quarter’s EBITDA was $122 million and cash flow from operations was $78 million. Free cash flow before dividends was $65 million, reflecting cash conversion of 92% of net income. We have included a table with our press release reconciling net income to free cash flow before dividends. During the quarter, we distributed approximately $14 million in dividends. From a balance sheet perspective, we remain liquid with net debt to EBITDA at 2.5x trailing 12-month EBITDA as of the end of the second quarter. I will now move on to comments regarding our outlook for the third quarter of FY ‘16. We have provided our most recent order data both on a segment and geographic basis with our press release. These orders for the latest 12 weeks as compared to the same 12 weeks of the prior year on a currency neutral basis and with acquisitions included in both years. For the 12 weeks ending May 15, 2016, order rates were up 4%. Within the Adhesive Dispensing segment, the latest 12-week orders are up 7%. Order rates were strong in most product lines, driven by the strength in consumer non-durable end markets. Geographically, orders were strong in Asia Pacific, Europe and the U.S., flat in Japan and softer in the Americas. In the Advanced Technology segment, order rates for the latest 12 weeks are up 4%. These order rates reflect strong demand for automated dispensing and test and inspection solutions for electronics end markets, partially offset by slower demand for surface treatment systems, where comparisons for this product line are very challenging. Demand for fluid management components for medical and industrial end markets was robust. Order rates are up in all regions except Japan. Within the Industrial Coating segment, the latest 12-week order rates are down 3%, again impacted by tough comps where order rates at this time last year were up 21% and prior year’s segment sales volume for the third quarter increased 23%. Growth in cold material dispensing systems, powder and liquid coating systems was offset by softness in other product lines. Order rates were positive in Japan, Europe and the U.S. Current customer project activity is steady though it’s difficult to forecast the rate at which these projects become orders. Total company backlog at April 30, 2016, was approximately $302 million, an increase of 5% compared to the prior year and inclusive of 3% organic growth and 2% growth due to acquisitions. Backlog amounts are calculated at April 30, 2016 exchange rates. Let me now turn to the outlook for the third quarter of FY ‘16. We are forecasting sales to increase in the range of 1% to 5% as compared to the third quarter a year ago. This range is inclusive of organic volume down 1% to up 3% and 3% growth from the first year effect of acquisitions. The effect of currency translation based on current exchange rates is expected to reduce sales by 1% as compared to the prior year. At the midpoint of our sales forecast, we expect third quarter gross margin to be approximately 56% and operating margin to be approximately 24%. This outlook excludes any one-time non-recurring charges associated with our margin enhancement initiatives. As we indicated last quarter, the size and timing of these non-recurring charges for the remainder of the year is difficult to estimate precisely, though we expect these charges to be well below the amount incurred in FY ‘15. We are estimating third quarter interest expense of about $6 million and effective tax rate of approximately 30%, resulting in third quarter forecasted GAAP diluted earnings per share in the range of $1.25 to $1.37. The midpoint of this guidance will generate EPS growth of 15% over the prior year third quarter. In addition to the third quarter outlook, the following updates on FY ‘16 full year may be helpful for modeling purposes. For effective tax rate, we are forecasting the full year rate to be about 30% based on current tax law and excluding discrete items. For capital spending in 2016, we are still forecasting normal maintenance capital spending to be approximately $50 million. With that, I will turn the call back to you, Mike.

Thank you, Greg. Before taking your questions, I would like to provide some additional comments on our recent performance and outlook. First and as always, a big thanks to our global team. They continued to perform at a high level and delivered record second quarter performance. The 8% organic growth on the top line was outstanding, which we leverage to drive significant improvement in operating margin and earnings per share compared to the same quarter a year ago. As we look at current backlog, recent order rates and timing of shipments, we are forecasting modest organic growth at the midpoint of our third quarter guidance. As I mentioned in my opening remarks, we are comparing to a previous [ph] strong organic growth in the third quarter last year and certainly, the current macroeconomic environment remains relatively weak. We are not prepared to offer a forecast beyond the third quarter. Current project activity remains solid in all three segments, which could provide benefit in the latter part of the year. Beyond this near-term view, we continue to execute on activities we expect will drive value for shareholders over the long-term. Specifically, we continue to focus on innovative products, tiering, new applications and emerging market penetration to drive growth. I am also pleased to report that we are making solid progress on our margin enhancement initiative using tools within the Nordson businesses system. During the quarter, we continue to execute on integration and footprint optimization activities within the Adhesive Dispensing segment, including next steps in streamlining operations of the U.S. and Europe. We also took selected actions within the Advanced Technology and Industrial Coating segments to drive greater efficiencies. In summary, we look to deliver a solid third quarter given the current global economic environment. Overall, we remain well positioned to capture growth opportunities when and where they occur and we remain focused on continuous improvement throughout the organization. We also continue to generate strong levels of cash, which provide us with the ability to fund multiple priorities. At this point, we would be happy to take your questions.

[Operator Instructions] Our first question comes from the line of Jeff Hammond of KeyBanc Capital Markets. Your line is now open.

Hey, good morning guys.

Good morning.

So the incremental margins, pretty impressive in both Adhesives and Advanced and that seems to be turning over in your guidance, is that just – is there mix in there or is that just a function of the combination of volume and some of the internal initiatives?

Well I would say there are three factors. Certainly, the volume helped and so we get significant incremental contributions from that. There are some mix benefits in parts of the segment particularly in say the Advanced Technology area, where we have a strong quarter from a dispense side in that business and medical was very solid as well. But I do see us making progress against our overall goal of improving normalized margins 200 basis points by the end of next year and we have seen significant improvement in the quarter coming from that.

Okay. And then I think you talked about 300 basis points ahead of the top end of your guidance. So can you maybe try to quantify the pull – what you saw was pull forward in that upside surprise and where else either product line or geography was surprising you versus your internal forecast?

Yes. There is probably 200 basis points that were orders we expected to come in, in the second quarter, but to be completed and go out in the third quarter. So 200 basis points of that 300 basis points that we exceeded the top end. And I would say certainly, we saw some of that come through in the advanced technology area as well as a little bit on the Adhesives side. So those are probably two areas where we saw some specific projects that we expected to get in, but we expect that the order time will be such that will be sales in the third quarter.

And then the other product lines where you were surprised to the upside?

Well, I think those are the two main segment areas and in some cases its specific project related. So, we did anticipate these orders, just we felt that they would come in perhaps later in the quarter and then therefore ship out in the third quarter.

Okay. Thanks, guys.

Okay.

Thank you. Our next question comes from the line of John Franzreb of Sidoti. Your line is now open.

Good morning, guys. Could you talk a little bit about the order trends? Are we seeing a change maybe in seasonality in demand specifically in Advanced Technology that we are seeing some pull forward in some of those orders?

I would say what we are seeing in Advanced Technology particularly for the electronics segment is a concentration within the year on orders. Our customers have helped us to reduce our lead times. And so the concentration order tends to be in the second and third quarter. I am not sure there is a typical pattern, because it really depends on what they are doing from new sort of launch perspective. I would say though that we have made some progress on new applications related to new technology we have introduced. So, as an example, we came out with new dispensing technology from our ASYMTEK business that it’s allowed us to do on way for dispensing. And so we have made some progress on the semiconductor side that we haven’t historically done. So, as customers have gone to stacking chips, there is now potentially an opportunity to do that on the wafer. So that’s been good progress. And then with that, we have also seen an uptick on the x-ray side. So, I would say the general sort of mobile-related cycle is getting more concentrated. Part of our effort is to diversify applications and we are getting some traction there in terms of different types of applications.

Okay. So, how do I reconcile maybe a more concentrated order front in AT with also record backlog? Is there also component to that that’s elongated? Can you talk about that record backlog companywide?

Well, that’s not just an AT activity, that’s across the mix of businesses. But I would say the typical, if you look at our business, the order patterns typically decelerate through the fourth quarter and through sort of January and then start to pick up and typically reach a peak at the end of third quarter or early fourth quarter. We are seeing that same type of pattern. It can vary a little bit between where the peak is in the third quarter, it could be early, it could be late. So, that’s the challenge based on timing of some of these orders. But we are following a pretty typical pattern I would say this year and we saw a nice progression in order rates throughout the quarter, stepping up the way we expect from a seasonality perspective.

Okay. And one last question regarding mix, given the improvement, I don’t recall hearing you mentioned anything about placement parts had a change in the mix profile. Was that a meaningful number or is it within norms?

I would say it’s generally within norms. I would say the mix is more within segments and across the segments. So, we had very strong performance across our adhesives business, including our sort of core adhesive packaging and non-wovens. We also in our Advanced Tech had the solid performance in our EFD business, strong performance in medical, in our dispense and the ASYMTEK business had a really strong quarter. So, it’s more of sort of a mix within the product lines and across the segments. It’s not really been much of a parts systems kind of issue in this quarter.

Okay, right. Thank your for taking my question. I will get back into queue.

Okay.

Thank you. Our next question comes from the line of Walter Liptak of Seaport Global. Your line is now open.

Hi, thanks. Good morning, everyone. Just to follow-on on the electronics business, we saw orders picking up at the end of, I guess, in February of this year and then it sounds like you are able to turn the business pretty quick when you get a block of orders that come in, in a more concentrated cycle. I wonder what you are thinking about for the back half of this year and into 2017. Is there enough new product development that’s going on with some of the mobile manufacturers in China customers to sustain a positive level of orders?

Yes, so a couple of comments. So, we did see within the quarter some nice orders from our tiered product structure that same really at the Chinese OEMs. So, we made some good progress with the material orders there. And as I mentioned also, we, in broadening applications like the semiconductor dispense application for the next-gen technology was important. And then on the x-ray side, the acquisition of MatriX has really helped us from an automated x-ray standpoint and we have had real nice penetration in Asia with that automated x-ray platform combining with our leading tube and detector technology. So, we saw nice orders there. And we started to see the typical upturn that we see in components on the mobile side, the general mobile side as well and we would expect to see that continuing through the next quarter.

Okay, great. And then your guidance you talked about gross margin sequentially down a little bit, I wonder if you could provide some more color on where you see the mix being lighter as the Advanced Tech or just conservatism on the outlook?

Yes. Well, this is Greg. That gross margin dilution in the third quarter is pretty typical with the volume growth where we have a heavier mix of systems versus parts. So, it isn’t necessarily a big shift in segment per se, but it’s more a mix of systems versus parts.

Okay, great.

Yes. We are talking about a fraction of a percent here so.

Okay. And I have asked you this in the past through the adhesives business continues to be as the core part of your business growing very nicely at that mid to high single-digit rate. I wonder if you could talk a little bit about just the programs and projects in health of new product development and one of those consumer durable customers?

Yes, so maybe just a couple of comments. Obviously, some of the end markets, some on non-durables side like food have been very pretty solid. We have seen a strong quarter in terms of the diaper side of the business. Some of this is the sort of new products our customers are coming out with, but some of this is new technology in our part giving them the opportunity to recapitalize existing infrastructure. So, we are seeing that recapitalization approach based on our new technology taking off while supporting the new sort of clothing like materials there. And then if you look at our sort of product assembly area, we are seeing some traction on the furniture market with some new applications around laminates and things like that. So, there is a couple of new applications there plus the recap that are helping to drive beyond some of the solid market performance and things like typical food and other packaging opportunities.

Okay, great. Alright, thank you.

Thank you. Our next question comes from the line of Kevin Maczka of BB&T. Your line is now open.

Thanks. Good morning.

Good morning, Kevin.

Can I just piggyback on the Advanced Tech and the 20% organic growth because that was such a strong number when we look back at the order rates in the past five quarters, which haven’t been greater than 8% in any quarter, can you just help explain that a little bit more? I understand the pull ahead, but if that’s only a couple of 100 basis points, how do we go from this anywhere from negative 16 to positive 8 order rate into a plus 20 organic this quarter when there is only a couple of 100 basis points of pull ahead?

Yes, so a couple of things. I mean, just one comment again. Our customers are compressing sort of the lead times as I talked about, so we can give some lumpiness just as a result of when they are placing their orders, because when they place, they place large quantities ahead of time. But that said, I made a couple of comments earlier where we have made progress in a couple of areas. So one, when you look at the new dispensing technology that we launched in the fall that allows us to provide many more dots at a much smaller size, it’s really enabled us to get into dispensing actually on the wafer as opposed to on the package. So as customers have gone to the three dimensional pack – three dimensional chips, they are now looking, at least the leading edge guys are looking at doing the wafer and we saw significant orders coming based on that new technology on the dispense side. It’s very sophisticated technology. With that we have also seen some pull along from an inspection standpoint on to the front end wafer side of things. And then one of the benefits of acquiring MatriX is to get a world class automation platform and what we did is combine that with our latest tube and detector technology. And we have got really good traction particularly in Asia with that combined combination of our technology and what the MatriX team brought to us and then the direct strategy we have in Asia. So I would say there is quite a bit of new product contribution coming into the business within the quarter and it’s really based on products that we launched sort of light in the fall that are getting real traction now and helping us to diversify. Then on top of that, the medical business continues to grow dramatically and again that’s also around a new product story. So those combinations I think it really helped and hit in the quarter and should continue to get traction going forward. We are not going to get out of the lumpiness though because we have to do what our customers need and it’s linked to their cycles that we have got very good at ramping up, ramping down to support that. So there is still a lumpiness related particularly to the mobile side of the electronics business.

Yes. Kevin, this is Greg. Just to add a couple of comments to that. I would say what we also did see in the quarter of above and beyond what we characterized as project activity that we anticipated to come in but shift during the third quarter. So that clearly benefited second quarter. But what we also saw during the quarter and this would affect within the Advanced Tech segment, both the electronic systems as well as fluid management product lines is a good pace of order activity that came in, in the quarter and got out during the quarter. And I think that highlights what we have seen from our customers’ behavior over the last couple of years is this demand to shorten lead times and we are really good at reacting to those kind of demands. So it was a good pace of order volume that came in during the quarter. So it wasn’t in our order rates or backlog leading into the quarter that we are able to turn around and get out during the quarter as well.

Got it, that’s all very helpful. And so then Greg, on that point, 4% order growth in Tech in the quarter, do you expect that to still hold positive and maybe there was some pull ahead there as well or is it just the compressed cycle time where you will see that every quarter now?

Well, I think to Mike’s point, we’ll see some lumpiness in those order rates. And in terms of what that demand looks like on a going forward basis, we are at that point in time, as we mentioned, where we tend to get stronger order activity in the cycle over this time period, our second, third quarter that leads to volume shipping in the third and fourth a bit stronger than the first half of the year. One other comment I would make is one – at least in our electronic systems business area, one of the things that’s moderating sort of the growth is if you recall last year, we had very significant growth in our surface treatment business related to a new application. So we are seeing some new opportunities in that business with other customers that haven’t come forward yet. So we are up against some pretty tough comps there. So the dispense piece and the test and inspection piece look very robust. The service treatment piece is a bit weaker really based on the tough comp in the prior year, but we do have good prospects to spread that technology more broadly, may hit this year or may not hit till next year.

Okay, got it. And just finally for me on margin, how much of this strong margin upside we saw this quarter would you attribute to your restructuring savings that you realized versus other continuous improvements in volume leverage and how much of the – same question on the 200 basis points couple of years, how much of that is just pure restructuring savings?

Yes. So if I look at this quarter, I would say that probably three quarters of the improvement is the function of the volume leverage in mix and probably one quarter is a function of the sort of the restructuring activity. And I would say year-to-date, we are probably half restructuring, half volume and mix in terms of the margin improvement. I think going forward, significant driver of that margin improvement is restructuring, some of which we have already completed, some of which is yet to complete. So we are – we suggest that that we will get there by the end of next year. This year is continuing to play out, but we are making good progress.

Okay, thank you.

Thank you. Our next question comes from the line of Liam Burke of Wunderlich. Your line is now open.

Thank you. Good morning Mike. Good morning Greg.

Hi.

Good morning, Liam.

Mike, in your prepared comments on the Adhesive side, you talked about a couple of polymer applications that were doing well, just overall you have got some revenue growth there, but how is your business performing?

Liam, it’s improving from where we were last year, but it’s not where we wanted to be yet. I would say the volume is certainly helping. But as you know, we have plans to transform that business. We are in the middle of that and that’s going well today. But we have some more things that we need to do that we will continue to work on in that business. But it’s encouraging to see some volume growth across the different product lines. I would say we are starting to get some indications at least on the more complex films that are sort of OEM channels are starting to see activity there. That’s probably still a ‘17 kind of activity, but we are seeing specialty applications in this quarter. We have seen some good growth across most of the product lines in this quarter, so that’s encouraging. So year-on-year, it will be nice improvement, but we still have ways to go.

And then on ATS, medical continues to be strong, are those kind of growth rates continuing to ramp for you?

Yes. We are seeing real good progress on the medical business. It’s really linked to broadening the product lines that we have, getting placed well with the new applications. We have got the capacity in place between Colorado and Mexico now to support the growth very effectively. And so we are in good position there and we continued to broaden our portfolio.

Great. Thank you, Mike.

Yes.

Thank you. Our next question comes from the line of Christopher Glynn of Oppenheimer. Your line is now open.

Thanks. Good morning.

Good morning.

Congratulations on the varied success across a number of initiatives there. In the ATS, you mentioned you are not going to get rid of the lumpiness, I am going to take that comment a bit weighted to a quarter-to-quarter dynamic, but in ATS as you build out the adjacencies in the new product platforms over the past few years in capacity, etcetera, would you anticipate a moderation of the impact of the sort of the 2-year mobile cycles that we have seen where you have had the strong kind of even number years and then sort of a pause in the odd number years?

I would say in the longer run, as things like medical, our general applications and sort of our focus to broaden the customer base, I would say yes. In the short-term, may be in the next year or 2 years, we still could see some swings there because of just the market structure of the key players out there. I like the progress we are making with the Chinese OEMs. As I have talked about in the past, there is still coming of the learning curve from an automation standpoint, but we are making – we are building some momentum there. And I like the diversification efforts that we have going on like I talked about with the new dispense technology that we just put out there and then of course medical and general applications. So over the long run, it should be less of a factor I would say in the next year or 2 years, it still could be more of a factor. And certainly within the year, we have kind – it kind of affects some quarter-to-quarter movement.

Okay. In terms of mix impacts and things, would you say the – last year to this year was maybe more than extreme end?

Yes, I would say so, because while we had a tougher year from a dispense standpoint, it was actually down say in the electronics side and we filled in with solid products, but not at the same kind of margin profile. So, that’s fairly extreme. So, I would expect as we continue to broaden the base for that to moderate a bit and that’s a key focus. I mean, obviously, when we take advantage of the growth there and the good customer relationships we have and the benefit that technology can play in delivering sort of leading edge products, so we don’t want to give up on that, but we do have a strong focus to diversify both markets, applications and customers.

Okay. And wondering if, did FX help margins at all in terms of favorable movements in production currencies?

No, Chris, this is Greg. FX would have had a slight dilutive effect on both gross margin and operating margin.

Got it. Thanks, guys.

But we are talking – we are in the 30 basis point, 30, 40 basis point kind of range.

Okay, I will mark it down as 35. Thanks.

Thank you. Our next question comes from the line of Matt McConnell of RBC Capital Markets. Your line is now open.

Thank you. Good morning and congratulations on a good quarter.

Thank you. Good morning.

Could we talk about capital allocation and what you are seeing in the M&A pipeline, what the priorities are and seller expectations? And whether there is anything that you think could be actionable in the next couple of quarters?

Yes, I would say overall, our priorities at the highest level are the same, support organic growth first, keep our dividends string going. Second, offset dilution. Third, there is relatively modest. So, then it comes down to the M&A activity that you are pointing out and then what else we might do opportunistically from the share side. And I would say couple of things. We did say we were going to take a little bit of a breather here in the first part of the year to continue to complete the latest integrations and the kind of work down our leverage a little bit and we are doing that. I would say the pipeline out there still tends to be smaller opportunities in some of our businesses with the exception of medical, where there are smaller opportunities than potentially a couple of larger ones. So, I would say that’s the area probably where there is more opportunities. Timing is always questionable. I would say pricing is still fairly robust. So, it’s still relatively a sellers market at the moment. And that varies in terms of the kind of opportunities that you are looking at, whether it’s a product tuck-in versus something more substantial. So, we see a pretty robust pipeline in general, typically smaller deals with the potential of some larger ones in the medical side. It’s hard to predict when they might come forward or come to market. Some of them – a lot of them tend to be private owners and that’s always tough to judge.

Okay, great. Thank you.

Thank you. Our next question comes from the line of Matt Summerville of Alembic Global Advisors. Your line is now open.

Hey, good morning. Just a couple of questions.

Good morning.

Most of mine have been answered. Within the Adhesive Dispensing business, I went back I mean I have to go back to 2012 kind of margins as high as it was here in Q2 at around and I think 29%. Is this sort of the signal that you can get this thing back to the 30% plus where it used to be of these flex pack businesses and I will just aggregate them into one kind of lumps and all of those businesses now systematically improve their profitability such that the magnitude of dilution has come in meaningfully?

So, I would say, directionally, you are correct, we are improving. I mean, we have taken action across the segments and in terms of some restructuring and then you are seeing some of that improvement come through. As I mentioned a little while ago, we still have some work to do in terms of realizing all of the benefits on the plastic side from improvements and some of the restructuring that we have underway. And of course, then there is volume leverage as that comes back. So as we have said, I think in the past our goal is to get that segment up to the 30% margin plus point. The specific timing is still probably a couple of years out when you think about it on an annual basis. We can have quarters, I think where we will be approaching that, but on an annual basis, it’s still probably a couple of years out when we complete all of the efforts that we have ongoing in our plastics business. But directionally, we are moving with improvements across all elements of the business.

As I think about your restructuring, you mentioned the progress we are making. Maybe can you get a little more specific in terms of what kind of magnitude of headcount reductions that have been completed, what needs to be done? If you have exited rooftops, how many and how many more are there? And then just lastly, what can make that 200 basis points, 300 or 400 as you have gotten in and rolled up the sleeves a little bit more here?

Yes. So, what – just a couple of high level comments. Overall, we talked about getting out of one facility in the Netherlands. We talked about consolidating multiple German facilities into a single facility. We are on process to do that. We have talked about other consolidation in our dies business in the U.S. We are in process to do that. We still have some additional consolidation to do as well. Some of that is dependent on expansions in other places. So in other words, there is an expansion in one site and consolidation in other. So, we have got a very thoughtful plan on how to do that. So, we have multiple phases here. I would say we are well into probably complete – almost complete in the first phase and we have some other things that we are working on. Really not going to comment anymore specifically on that until those plans are more fully fleshed out and communicated, but we are making good progress there. We have seen the benefits that we expected to see from the actions that we have taken. And we have taken actions across the business, not just in the plastics area reflecting sort of the softer environment, we are seeing from a macro standpoint and our desire to make that structural improvement in margins. So, it’s not just a plastics activity, it’s across multiple businesses. If you recall last year in our EFD business, we consolidated in Europe, exited a facility. And in the medical business, we expanded in Colorado, got out of manufacturing in Minnesota. We are expanding in Mexico to support our assembly operations. So, these are the supply chain moves we are making outside of just the plastics area.

Got it. Thanks, Mike.

Thank you. And our next question comes from the line of Charles Brady of SunTrust. Your line is now open.

Hey, thanks. Good morning, guys.

Good morning.

Good morning.

So, on the orders again, not to beat the dead horse, but I am going to anyway. So, the plus 4% in the quarter, I want to go back to your comment about some of the velocity of the incoming order and exit order rate, because if you do the math on the backlog and the sales numbers, it sounds like in the quarter itself ending April, of course, your 12 weeks on a two-week lag, but for the quarter, it sounds like you are close to 7.5% order growth in the actual quarter ending April and then for the 12-week on that two-week lag, you dropped to 4%. And I am just trying to understand, that’s a function of your velocity of the orders coming in exiting in the quarter, because you are having compressed time segments with the customers on Advanced Tech?

Yes, Charlie, this is Greg. I think you have got it to suggest that kind of during the quarter as we entered the quarter, order rates have been up 1%, coming into the second quarter. We saw good demand activity during the quarter clearly that helped drive this performance, sales performance in the second quarter and it’s a snapshot. So, you get variability from week-to-week, but as we looked at where those order rates were the latest 12 weeks, we are up 4%. So, that would suggest that we had some strong pace during the quarter that moderated a bit towards the end of the quarter.

The other thing as you look out you are comparing against a pretty strong quarter into Q3 of last year and so the comparable is maybe a little bit tougher as well.

Yes, no, fair point. I am not going to try to downplay the order growth. I guess my point is a lot of that stuff tends to be very short cycle, you may get an order tomorrow, it’s going to go out in a week, so you don’t know what’s coming in today and that 4% may actually be understating some of the underlying growth you are seeing in the businesses just from your commentary you have been making?

Yes. I mean, I think we are trying to give you the best snapshot that we have. I mean, as Greg said, if you went into last quarter, our backlog was pretty solid at 8%. The order rate was a little softer. We had some guidance that was kind of in the middle and the order rate picked up. Here we are a quarter later the backlog is a little softer. The order rate is pretty solid. We are giving you our best estimate. But as you have just said, we got a lot of business that comes in and out in a relatively short period of time in a matter of weeks. We have a good view of the project activity and the list associated with it. Our customers aren’t always as clear on their expectations, both in the placement of the order and the delivery. And so that can move around. So, we are good at dealing with that. It does make it a little more challenging to forecast.

Yes, sure. And so just switching gears on Adhesive Dispensing for a second, I thought I heard you say in your commentary that the non-wovens was one of the areas of strength in the quarter. And that tends to be your lower margin business and yet that segment had phenomenal margins. So, I am just trying can you comment of what the mix of that non-woven is and is underlying margin in that particular piece of the business gotten meaningfully better?

So, just first comment, the non-wovens business is a good business for us. So, I wouldn’t categorize it as low margin business first of all. Secondly, what I would say is there is lot of change there that’s driving kind of nice growth. So, from an overall mix standpoint, I think what we have talked about in the past, we have sort of three areas in that sort of more traditional adhesives business, the packaging piece which tends to be our highest and then the non-wovens in the product assembly and that sort of order the product assembly takes more of an integrated systems approach and so the margins tend to be a little bit lower. They are all good margins though.

Yes, no, I didn’t mean to suggest that I guess my point was historically it’s been a lumpier business and sometimes when the mix on non-wovens is higher, the overall margin is a little softer than otherwise would be if the mix has been lower. But it sounds like that’s not really having that kind of impact right now?

Because the other two components are also pretty strong.

Got it. Okay, thanks.

Thank you. And I am showing no further questions at this time.

Alright. With no further questions, I want to thank everyone for participating in the call. We appreciate your support. Thank you.

Ladies and gentlemen, thank you for participating in today’s conference. That does conclude today’s program. You may all disconnect. Have a great day everyone.