Nordson Corporation (NDSN) Q4 2018 Earnings Conference Call Transcript

Nordson Corporation (NASDAQ: NDSN)Q4 2018 Earnings Conference CallDec. 13, 2018, 8:30 p.m. ET

Prepared Remarks:

Operator

Good day ladies and gentlemen, and welcome to the Nordson Corporation Webcast for the Fourth Quarter and Fiscal Year 2018. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session, and instructions will follow at that time. If anyone should require operator assistance, please press the * and the 0 key on your touchtone telephone. As a reminder, this call will be recorded.

I would now like to introduce your host for today's conference, Ms. Lara Mahoney. You may begin.

Lara Mahoney -- Vice President of Corporate Communications and Investor Relations

Thank you, Katherine. Good morning. This is Lara Mahoney, Vice President of Corporate Communications and Investor Relations. I'm here with Mike Hilton, our President and CEO; and Greg Thaxton, Executive Vice President and CFO. We welcome you to our conference call today, Thursday, December 13, 2018, to report Nordson's fiscal year 2018 fourth quarter and full year results and our fiscal year 2019 outlook.

Our conference call is being broadcast live on our webpage at nordson.com/investors and will be available there for 14 days. There also will be a telephone replay of our conference call available until Thursday, December 20, 2018, which can be accessed by dialing 404-537-3406. You will need to reference ID number 6659799.

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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 on the quarter, we will be happy to take your questions.

With that, I'll turn the call over to Mike.

Mike Hilton -- President and Chief Executive Officer

Thank you, Lara, and good morning, everyone. Thank you for joining Nordson's fiscal 2018 fourth quarter and full year conference call. I'd like to begin by recognizing our global team, who have delivered another record year of sales, operating profit, GAAP diluted earnings per share, and EBITDA. Our performance highlights our continued commitment to delivering the best technology solutions to our customers and to generate growth through innovation and superior customer service.

For the full fiscal year of 2018, sales were $2.3 billion, an increase of 9% compared to the same period a year ago. This included organic sales growth of nearly 2.5% in the current year against two challenging prior fiscal year comparisons where we generated robust organic sales of 8% and 7% in 2017 and '16, respectively.

Specific to the fourth quarter, and in line with our prior guidance, sales were $569 million, a 1% decrease compared to the prior year's fourth quarter. Operating profit in the quarter was $115 million, or 20% of sales. Excluding restructuring charges in the quarter, operating margin was 21%.

The fourth quarter's performance included several long-term investments that will ultimately yield benefits to our customers and shareholders. These investments included the previously announced facility consolidation efforts in the adhesive segment, where we're consolidating facilities in both the United States and Germany. Other notable investments during the quarter included the continued build-out of our centralized shared service center in the United States and an ERP conversion that brings several of our Advanced Technology systems' product lines onto our common operating platforms to support that centralized shared service.

EBITDA for the fourth quarter was $143 million, or 25% of sales, or 26% excluding restructuring charges of $3 million. Free cash flow before dividends increased 5% over the prior year to $118 million, which reflects strong cash conversion of 136% of net income.

I'll speak more about our fiscal 2019 annual guidance in a few moments, but I'll first turn the call over to Greg to provide more detailed perspective on the fourth quarter and full year of 2018.

Greg Thaxton -- Executive Vice President and Chief Financial Officer

Thank you, Mike, and good morning to everyone. Fourth quarter sales decreased 1% compared to the prior year's fourth quarter. This change in sales included a decrease of 1% in organic volume, growth related to the first year effect of acquisitions of approximately 1%, and a decrease related to the unfavorable effects of currency translation as compared to the prior year's fourth quarter of 1%.

Within the Adhesive Dispensing segment, organic volume increased 3% over last year's fourth quarter. We are pleased with the pace of our end markets, as well as growth in new applications and within our tiering strategy.

Within the Advanced Technology Systems segment, organic volume decreased 2% against challenging organic volume growth comparisons of 4% and 30% in the fourth quarters of 2017 and 2016, respectively. With the exception of those product lines facing the most challenging comparisons to the prior year, namely dispense and surface treatment product lines serving electronics end markets, demand was robust during the quarter for test and inspection and fluid management product lines, notably medical components.

Within the Industrial Coating segment, organic volume declined 7%, mostly related to automotive platform sales that did not repeat from the prior year.

Moving down the income statement, gross margin for the total company was 54% in the quarter. Operating profit was $115 million, with reported operating margin of 20% in the current quarter. As Mike noted, adjusted total company operating margin, to exclude restructuring charges, was 21%. Mike also talked about other entity level initiatives that impacted spending in the quarter that will provide future performance benefits.

Specific to the adhesive facility consolidation imitative, we incurred approximately $1 million of duplicate costs during the quarter and approximately $8 million for the full fiscal year. We expect to be mostly complete with this project by the end of the calendar year, with minimal duplicate costs of about $1 million during the first quarter of fiscal 2019 for both the U.S. and Germany consolidation efforts.

On a segment basis, Adhesive Dispensing delivered strong operating margin of 27% in the quarter, or 28% when excluding restructuring charges of $2 million related to this facility consolidation. This adjusted fourth quarter margin performance was equal to the prior year's first quarter.

Within the Advanced Technology Systems segment, operating margin was 20% in the fourth quarter, as compared to prior years' fourth quarter margin, lower sales volume, acquisition dilution, product mix, and higher spending contributed to the margin decline. Industrial Coating segment operating margin was 26%, an improvement of 200 basis points despite a decline in sales volume. This is as a result of product mix and the segment's continuous improvement initiatives.

On a total company basis, net income for the quarter was $87 million, and GAAP diluted earnings were $1.47 per share. The current quarter included restructuring charges of $0.04 per share and discreet tax benefits of $0.07 per share. Adjusted EPS to exclude these one-time items was $1.44.

A reconciliation of GAAP earnings per share to non-GAAP adjusted earnings per share is included in the financial exhibits of our press release. We delivered fourth quarter EBITDA of $143 million, or 25% of sales, inclusive of $3 million of restructuring charges. As Mike noted previously, free cash flow before dividends during the quarter was $118 million, or 136% of net income. Our press release includes financial exhibits reconciling net income to free cash flow before dividends and adjusted free cash flow before dividends, as well as EBITDA and adjusted EBITDA.

I'll now share a few comments on our full year results. Sales for the fiscal year were $2.3 billion, an increase of 9% compared to the same period a year ago. This change in sales included organic volume growth of nearly 2.5%, a 5% increase related to the first-year effect of acquisitions and a 2% increase due to the favorable effects of currency translation as compared to the prior year.

Full year operating profit was $495 million, which is an increase of 8% compared to the prior year. Reported operating margin was 22%, or 23 on an adjusted basis, to add back $10 million of incremental and tangible asset amortization expense related to our fiscal 2018 and '17 acquisitions, and adding back $10 million of one-time charges for restructuring and a step up in value of acquired inventory. This performance is equal to the prior year's adjusted operating margin to add back charges of $20 million associated with the Vention transaction cost, the step up in value of acquired inventory, and restructuring charges.

Net income for the full year was $377 million, and GAAP diluted earnings per share were $6.40. Adjusted diluted earnings per share increased 11% compared to the prior year to $5.94. A reconciliation between GAAP earnings and adjusted earnings per share is included with the financial exhibits to our press release.

EBITDA for the full year increased 11% to $605 million, and adjusted EBITDA increased 8% to $690 million, both compared to the prior year. EBITDA margin and adjusted EBITDA margin were both 27% of sales. From a balance sheet perspective, net debt to EBITDA was two times trailing 12 months' EBITDA at the end of the fiscal year. In addition to funding organic and acquisitive growth initiatives with our strong free cash flow, Nordson returned value to its shareholders by distributing $72 million in dividends in fiscal year 2018 and investing $19 million for the repurchase of shares during the fourth quarter.

I'll now turn the call over to Mike for a few closing comments and our fiscal 2019 annual guidance.

Mike Hilton -- President and Chief Executive Officer

Thank you, Greg. Once again, I want to thank our team for delivering solid full year results. In very challenging prior year sales growth comparisons, we were able to hold operating margins steady after you adjust for incremental and tangible amortization expense and certain one-time charges. We also grew EBITDA by 11% over fiscal 2017, inclusive of the strategic investments I spoke about earlier, which we believe will allow us to deliver improved performance going forward.

In addition to executing on our financial targets, we took another step forward in growing our medical expertise by acquiring Clada Medical Devices in October. Clada is a Galway, Ireland based design and development operation primarily focused on medical balloons and balloon catheters. Its technologies are used in key applications such as angioplasty and the treatment of vascular disease. Clada has a successful track record of innovation, quality, and customer focus, which makes it a great fit within our medical product portfolio.

We also continued our legacy of investing a portion of our success into the communities where we live and work, and we reached significant milestones in 2018. Since its inception, Nordson has given more than $100 million through a variety of charitable initiatives, and our employees have volunteered nearly 100,000 hours. That's quite an impact and something we're very proud of.

Now, I'll turn our focus to fiscal 2019. After much thought and external benchmarking, we made the decision to transition from providing quarterly guidance to annual guidance. There is certainly a growing consensus in the market about the positive effects of doing so, and we believe investors are best served by focusing on our longer term performance, where quarterly guidance can create noise that distracts from the overall strength of the business. To emphasize our long term annual growth, we have added a new exhibit to our press release that illustrates the company's consistent annual organic sales growth.

For the full fiscal year 2019, organic sales volume is expected to increase in the range of 3% to 5% compared to fiscal 2018, offset by an unfavorable currency translation effect of 2% based on the current exchange rate environment as compared to the prior year. We recognize that we'll face a challenging comparison in the first quarter; however, we are forecasting the strength and diversity of our end markets and our ability to execute on our growth initiatives will enable another year of solid organic sales growth.

With this sales growth and our focus on executing the Nordson business system, we expect to generate an increase in both operating margin and EBITDA margin between 100 and 150 basis points over fiscal 2018 performance. To be clear, this improvement will be over adjusted fiscal 2018 results to add back charges of $3 million related to short-term purchase accounting for the step up in the value of acquired inventory and approximately $7 million of restructuring charges.

For fiscal 2019, the company expects interest expense to be approximately $45 million and maintenance capital expenditures to be approximately $50 million. The company's forecasted effective tax rate is approximately 23%.

Our strategic priorities for the year remain consistent with prior years. We are focused on accelerating organic growth, diversifying our end markets through acquisition, and optimizing Nordson for the future. As always, thank you to our customers, employees, and shareholders for your continued support.

With that, we'll pause and now take your questions.

Questions and Answers:

Operator

Thank you. Ladies and gentlemen, if you have a question at this time, please press the * then the 1 key on your touchtone telephone. Again, if you would like to ask a question, press the * then the 1 key on your touchtone telephone.

And our first question comes from Allison Pontiac with Wells Fargo. Your line is open.

Allison Pontiac -- Wells Fargo -- Analyst

Hi, good morning.

Mike Hilton -- President and Chief Executive Officer

Good morning, Allison.

Allison Pontiac -- Wells Fargo -- Analyst

Greg, you had called out a number of headwinds to margin on ATS. Could you maybe help us understand or bucket, or if you can quantify, what was the biggest impact there?

Mike Hilton -- President and Chief Executive Officer

Yeah, Allison, I'd say the bigger impact, if you take a point out related to the dilution from our acquisitions, the larger impact would have been the margin mix, where what was down in sales in this quarter versus a robust prior year for our dispensing product lines that tend to carry higher gross margin than some of the other product lines do. So, that was a big impact in the quarter.

Greg Thaxton -- Executive Vice President and Chief Financial Officer

And to be clear, the other product lines were up.

Mike Hilton -- President and Chief Executive Officer

Right. There was also some spending that was up over the prior year, some of the initiatives that we called out like the conversion onto one of our common platforms were product lines within that segment. So, during the quarter, we had some readiness for that conversion, which took place at the beginning of this fiscal year. So, there was some spend -- incremental spend that also impacted it, but I'd say the larger items were those first two.

Allison Pontiac -- Wells Fargo -- Analyst

Great. And then, within the context of your full year organic guide, just given the comparisons in the first half, should we assume this is a much more second-half weighted growth story for Nordson?

Mike Hilton -- President and Chief Executive Officer

Yeah, Allison. If you look at it, we expect this year to be more of the typical seasonal year we'd see with the softer first quarter, picking up in the second, and a stronger second half. The momentum in the business is encouraging, but I'd say that's the typical seasonal pattern that we would expect.

Allison Pontiac -- Wells Fargo -- Analyst

Perfect. Thank you.

Operator

Thank you. Our next question comes from Christopher Glynn with Oppenheimer. Your line is open.

Christopher Glynn -- Oppenheimer -- Analyst

Hey, thanks. Good morning.

Mike Hilton -- President and Chief Executive Officer

Morning, Chris.

Christopher Glynn -- Oppenheimer -- Analyst

You talked about normal seasonality next year. Picking up on the seasonal trend, the ATS revenue was pretty moderate within the variable range of seasonality into fourth quarter. Just wondering if the electronics was more resilient than you expected in the quarter?

Mike Hilton -- President and Chief Executive Officer

In the fourth quarter?

Christopher Glynn -- Oppenheimer -- Analyst

Yeah, for ATS.

Mike Hilton -- President and Chief Executive Officer

I would say electronics came in about as we expected. As Greg mentioned earlier, we still had some tough comparisons on the dispense side. The test inspection did well. But our diversification efforts outside of electronics really played out in that segment with both our EFD product lines and especially our medical product lines being particularly strong in the quarter to offset some of that impact. So, I'd say it's been more -- it was more around the other parts of the segment than the electronics piece.

Christopher Glynn -- Oppenheimer -- Analyst

Okay. And then, I know it's always a tough one to call, but curious of your latest thoughts on kind of the latency period, if that's the right description, into drivers of future changes in your field work across the mobile vertical for kind of the next wave.

Mike Hilton -- President and Chief Executive Officer

Yeah, I'd say it's still a little early. I think as we've talked about in the past, it's usually kind of from November through probably February, even early March where we do all these development programs and then get a sense of what the change is. As we've talked before, we think the next bigger change is going to come with 5G. What isn't clear is whether that's a '19 or '20 phenomenon at this point.

But what I would say is -- I mentioned it just a second ago, is we feel good about the things that we're doing in diversifying the electronics, the growth in auto, the test inspection business, but particularly in the general industries areas, the EFD product line support, as well as medical which is strong. And then outside of that, our typical focus on innovation in both adhesives and the coatings business to get into new markets and applications. We're using tiering effectively, as well, to expand our geographic reach in things like building our business in India and in Vietnam and Thailand and entering Africa. So, we feel, I'd say, good about all the other things, as well, particularly our diversification efforts.

Christopher Glynn -- Oppenheimer -- Analyst

Sounds good. Thanks for that.

Operator

Thank you. Our next question comes from Mike Halloran with Baird. Your line is open.

Mike Halloran -- Baird & Co. -- Analyst

Hey, good morning everyone.

Mike Hilton -- President and Chief Executive Officer

Good morning, Mike.

Mike Halloran -- Baird & Co. -- Analyst

So, let's start on the margin expansion year over year. Could you just help provide some buckets on how you're going to get to the 100, 150? How much of it is stranded costs and things you incurred in 2018 that don't repeat in fiscal '19? How much of it is benefits from things that you implemented in fiscal '18 that you should see savings or improvement from? And then, how much is volume or any other buckets you think I might be missing?

Greg Thaxton -- Executive Vice President and Chief Financial Officer

Okay, Mike. This is Greg. I'll take a stab at that, and Mike can then add comments. Certainly, a portion of that improvement is going to come from some of the duplicate costs that we've called out associated with the adhesive facility consolidation. So, maybe that's 40 basis points, maybe slightly less. We'll have a little bit of some costs here in the first quarter, but call it 40 basis points there.

But beyond that then, we do expect to get benefit out of this transition to our shared service center here in the United States, where we've got a bit of some cost overlap as we've stood up this facility, and we expect to get some of the benefits out of that in 2018 and beyond as we continue to grow and are better able then to leverage these back office costs. So, that's going to be part of it, as well.

Certainly, as you called out, we'll get a bit of volume leverage if we hit these kind of growth targets we're talking about. And then it's a lot of blocking and tackling that we do in all of the segments utilizing the Nordson business system, whether that's continued focus on low-cost country sourcing, pricing initiatives, the various tools that we leverage. None of those may be doubles, triples home runs -- a lot of singles, but it's the kind of thing that we continue to focus on to help drive margin. So, I kind of called out the couple of larger buckets, but it's going to be a lot of this continued focus on continuous improvement that's going to help leverage that.

Mike Halloran -- Baird & Co. -- Analyst

Makes sense. And just to be clear on the cadence of revenue for next year, it sounds like you're just basically assuming pretty normal sequentials as you work through the year, no sharp bounce back in that. When you look at the segments themselves, pretty stable demand levels from here? Is that the thought process?

Mike Hilton -- President and Chief Executive Officer

Yeah, we're expecting all of our businesses to grow next year, and I'd say in typical fashion with our longer term views of each of those opportunities. I think, at a high level, we're focused on the economies growing at maybe a little less than they've grown this year, but we expect, as we typically do, to outgrow the markets with all of our focus around innovation and driving new products and applications. So, we feel pretty good about each of the businesses and where we are in delivering as a result of how we focus on creating our own demand. Plus, we won't have the same headwinds that we had this year, particularly in the mobile dispensing segment.

Mike Halloran -- Baird & Co. -- Analyst

Makes sense. And then, just on the industrial coating side, you called out the auto side as the headwind in the quarter here. Is that the right base to work off as we think forward, or is there some capture coming up with project timing or anything like that?

Mike Hilton -- President and Chief Executive Officer

So, I would say that's probably the right base to work on. From our perspective, the auto platform business has been down the last couple of years. We expect it to be kind of more stable at this point. But growth in that business is really going to come from newer applications. So, things like battery work for electric vehicles and some work we're doing in aerospace and some additional work we're doing on coatings for food processing, and then continued strength in our powder-related businesses. So, we're not expecting any significant growth on the auto platform side of the business.

If you look around the world, particularly in the U.S., the car production has been flat for the last three years. China is flat to maybe slightly down. So, we're not necessarily counting on that.

Mike Halloran -- Baird & Co. -- Analyst

Great. Appreciate the time, as always. Thank you.

Operator

Thank you. Our next question comes from Matt Summerville with D.A. Davidson. Your line is open.

Matt Summerville -- D.A. Davidson -- Analyst

Thanks. Couple of questions. First, can you provide an update as to how U.S.-China trade relations are impacting your business, both from a cost standpoint, as well as end demand? And I guess, have you seen any customer behavior change over the last month or two, and is this a consideration that you factored into your fiscal '19 organic outlook?

Mike Hilton -- President and Chief Executive Officer

Okay. So, there are a lot of questions there, Matt, but I'll try and address those. On the first part, sort of the impact to date has been pretty modest, not without a lot of effort on our part to make it pretty modest. So, given the work we have in our procurement area to mitigate the sort of cost push, and certainly there are vendors trying to push cost in steel and aluminum, for example. We've been able to mitigate that pretty well. Some of the other tariffs that were put in place had some modest effect, but we've been working the things that you would expect, looking at different sourcing options, moving our supply chain around a bit driving pricing.

So, I'd say to date, it's been relatively modest. We have included some impact, more on the cost side than I would say on the revenue side in 2019 to account for the continuation of what we're seeing today, and we're doing some things to mitigate the potential step up that could occur if we don't get through an agreement in March with China. That said, that's a pretty big unknown in terms of where that's going, so we're running through our own sort of scenarios.

I'd say to date on the demand side, we haven't seen any significant change. I would say, both in the U.S. and in China there are some concerns being expressed about whether this is going to be resolved. It hasn't translated into an impact to any extent on demand to date, but should things get worse it could potentially could. So, we're trying to work through all the potential scenarios to make sure we're positioned as well as possible to mitigate any impact.

Greg Thaxton -- Executive Vice President and Chief Financial Officer

Another comment I'd layer in there, Matt -- in some of our businesses, if you recall, we locally manufacture for that market. So, I think that will help us avoid some of this impact.

Matt Summerville -- D.A. Davidson -- Analyst

Got it. And then just as a followup. If you look at -- can you give us a sense outside of the mobile electronic space what the pacing has been over the last three-month period or so? I know you don't exactly give order rates, but a couple of quarters you would say orders are relatively flat, maybe up slightly, down slightly. Can you just give us a sense of how incoming order rates have looked as of late across the business? It is maybe a high level?

Mike Hilton -- President and Chief Executive Officer

I'd say overall for the company, the business is up relative to last year a few percentage points. I'd say we've seen particular strength in a number of our adhesives businesses in a variety of areas. We've seen really strong in our fluid management businesses, both our EFD product lines and our medical business in particular. I'd say most product lines, we're seeing momentum that's positive going into the year.

Greg Thaxton -- Executive Vice President and Chief Financial Officer

And just to define, Matt, that's as we look at orders over the last 12 weeks and compare them to the same period of the prior year.

Matt Summerville -- D.A. Davidson -- Analyst

Very good. Thank you.

Operator

Thank you. Our next question comes from Jeff Hammond with KeyBanc Capital Markets. Your line is open.

Brad (Last Name Not Given) -- KeyBanc Capital Markets -- Analyst

Hey. Good morning, guys.

Mike Hilton -- President and Chief Executive Officer

Good morning, Jeff.

Brad (Last Name Not Given) -- KeyBanc Capital Markets -- Analyst

This is Brad on for Jeff. Sorry about that. Just on the backlog, it looked like the first total decline in quite some time. Just talk about maybe some of the moving pieces there and what that might mean for the degree of weakness in the first quarter of next year or any kind of higher level thoughts about the magnitude there. Thanks.

Mike Hilton -- President and Chief Executive Officer

So, just to be clear, are you talking about Q3 to Q4 or Q4 versus Q4?

Brad (Last Name Not Given) -- KeyBanc Capital Markets -- Analyst

Q4 to Q4.

Mike Hilton -- President and Chief Executive Officer

Okay. Yeah, the sole driver of that is really large orders we received last year in the electronics area. So, if you look past that, things would be up.

Greg Thaxton -- Executive Vice President and Chief Financial Officer

So, just to expand on that a little bit. You might not have followed this, but during our prior year fourth quarter in our diversification efforts to expand where we deploy our technology, we had a nice win with an application in that electronic space that both generated upside that we had in our fourth quarter, as well as was a big driver for the volume gain we had in the first quarter of fiscal 2018 in that electronics portion of Advanced Technology. So, a large portion of that order was fill-in backlog at the end of the fiscal year last year.

Mike Hilton -- President and Chief Executive Officer

So, that said, we talked earlier about how we see the seasonality of the business progress. We still feel we're going to outgrow the economies that we operate this year, and we feel pretty comfortable about that sort of 3% to 5% target we put out there.

Brad (Last Name Not Given) -- KeyBanc Capital Markets -- Analyst

Okay, great. That's helpful. Then, just on the capital allocation front, it's kind of level sitting actually in the fiscal year here. How far would you say we are along with the underlying diversification strategy, specifically building out the medical piece? It looks like this year was a lot of fewer, smaller deals. Is that what we should expect moving forward, or is there maybe appetite or opportunity for some more sizable deals?

Mike Hilton -- President and Chief Executive Officer

I think as we've mentioned in the past, the medical area still is fairly fragmented, and they're small and potentially a few larger opportunities out there. Our capital priorities haven't changed as it relates to acquisitions. The timing is hard to predict, but we do see both smaller and a few larger opportunities out there. Should they come to market, we'd hope we'd have an opportunity to be successful there.

Brad (Last Name Not Given) -- KeyBanc Capital Markets -- Analyst

Okay, great. Thanks for the time.

Mike Hilton -- President and Chief Executive Officer

Thank you.

Operator

Thank you. Ladies and gentlemen, if you have a question at this time, please press the * then the 1 key on your touchtone telephone. And our next question comes from Chris Dankert with Longbow Research. Your line is open.

Chris Dankert -- Longbow Research -- Analyst

Morning, guys. Thanks for taking my call.

Mike Hilton -- President and Chief Executive Officer

Good morning.

Chris Dankert -- Longbow Research -- Analyst

I guess, and forgive me if I missed it, but can you guys give any update or split as far as how polymer versus non-polymer has performed within Advanced Dispensing?

Mike Hilton -- President and Chief Executive Officer

For this past year?

Chris Dankert -- Longbow Research -- Analyst

Yes, and fourth quarter in particular.

Mike Hilton -- President and Chief Executive Officer

I'd say they're probably pretty similar in the fourth quarter, and no great difference there.

Chris Dankert -- Longbow Research -- Analyst

Gotcha. And then, as far as some of the domestic Chinese handset manufacturers, I guess what are you guys seeing there? Has been there a change in tenor given some of the trade and that type of thing? Just any developments on the front outside of the big two handset manufacturers.

Mike Hilton -- President and Chief Executive Officer

No, I wouldn't say any change from what we've seen throughout this year. I think, again, everybody seems to be working on the sort of 5G approach. It was pretty quiet for all the handset manufacturers in terms of level of innovation in 2018, and everybody seems to be focused on 5G as the big deal. As I mentioned earlier, what isn't clear to us is is that going to translate into handsets in '19, or is that going to be more of a '20 impact, and quite frankly, I don't think we'll have a clear view on that until probably that February/March timeframe.

That said, we're focused on the other things that I mentioned: Continuing to diversify electronics, outside electronics, growing all of our businesses through innovation, new products, new applications, and we feel pretty good about where that pipeline is.

Chris Dankert -- Longbow Research -- Analyst

Got it. And just one last one if I could. You mentioned medical was a strong grower in the quarter, I guess. Is that still kind of holding in the high-single-digit, low-double-digit organic rate here?

Mike Hilton -- President and Chief Executive Officer

Yes. Yes, it's very robust.

Chris Dankert -- Longbow Research -- Analyst

Got it. Thanks so much, guys.

Operator

Thank you. Our next question comes from Matthew Trusz with G. Research. Your line is open.

Matthew Trusz -- G. Research -- Analyst

Good morning. Thank you for taking my questions.

Mike Hilton -- President and Chief Executive Officer

Good morning.

Matthew Trusz -- G. Research -- Analyst

So, if we think about, at a high level, what you're seeing in global macro and how it's affecting your business, could you sort of walk through how growth trends contrast between your key end markets, like North America and China and the rest of Asia? And are there any particular dynamics you're focused on, or are you seeing a China slowdown, Europe slowdown? Any color there would be great. Thanks.

Mike Hilton -- President and Chief Executive Officer

So, let me just talk about this year, and then talk we'll a little bit about next year. So, this year, the U.S. generally from an economic standpoint was better than the prior year. While Europe and Japan still grew, they were less than the prior year. And China was about where it has typically been around that 6.5%. So, for us going into '18, that played out the way we thought -- sort of high 2% global GDP in the areas we operate. So, think about that as maybe 2.8%.

We're expecting next year to be a little lower than that, overall maybe 2.5%, and we expect that we'll be able to grow at a multiple of that through all the levers that we can pull, whether that's new products or new applications, things we've started to talk about like athletic wear, replacing taping and stitching with gluing. We've seen some nice winds there. We've talked about batteries for electric vehicles. We've talked a little bit at the time of aerospace. Auto electronics continues to be a strong driver for us. And then, the tiering strategy has helped us grow in India. It's giving us opportunities to grow in places like Vietnam, Thailand, and through OEMs outside of China, going to Africa.

So, we focus on those growth initiatives that allow us to drive growth over and above the GDP. As I mentioned, we had these tough headwinds in '18 that shouldn't repeat at the same kind of level going forward.

Greg Thaxton -- Executive Vice President and Chief Financial Officer

Matt, I'd just make a couple comments that kind of cut the other way. If you think about some of the end markets that we sell into, like consumer nondurables, like medical, those tend to be more recession-resistant end markets. So, not to say that we're immune to the impacts, but we get some strength because of the underlying drivers of some of these end markets that we sell into.

Matthew Trusz -- G. Research -- Analyst

Great. Thank you.

Operator

Thank you. And our next question comes from Charlie Brady with SunTrust. Your line is open.

Charlie Brady -- SunTrust -- Analyst

Hey, thanks. Good morning.

Mike Hilton -- President and Chief Executive Officer

Hi, Charlie.

Charlie Brady -- SunTrust -- Analyst

I missed part of the call, so if you've covered this let me know and I'll just circle back with you. I'm just wondering on the guidance, the move to annual guidance from rig quarterly guidance -- typically you guys have said your visibility just doesn't go out maybe beyond four months with any significant certainty, and I'm just wondering how that dovetails in with providing annual guidance right now as far as the confidence levels doing that. I understand the reasons behind it, but I'm trying to understand really the confidence level of looking out 12 months as opposed to just next quarter or so?

Mike Hilton -- President and Chief Executive Officer

Thanks, Charlie. Obviously, given our customer-intimate model, we're pretty close to customers and the end markets, many of which are stable particularly on an annual basis and longer. There's some instability in the shorter term, and that's really led to some of the noise that we've talked about. But when you look at things like core adhesives, or even our polymer business where we tend to have longer lead times, we can look at backlog and get some confidence there. And you look at our EFD product lines and our medical product lines, which are more run-rate kinds of businesses, as our mixes changed over time, we're feeling a little bit more confident in that sort of annual guidance there.

And I'd say we also feel a little bit more comfortable because we don't have some of these headwinds that we had last year. And as we look back historically, one of the reasons we provided some of the additional historical data here is even in a really tough environment like last year, we'll still be able to grow organically because of all the levers we're pulling innovation. And that's really given us some more confidence there.

And in the short term, we can have a lot of stuff moving back and forth, but over a year and longer, we tend to be pretty consistent given some of the stability in the market and our closeness with our customers.

Charlie Brady -- SunTrust -- Analyst

That's helpful. Thanks. And I'm just wondering -- I know you're not giving quarterly guidance, but Advanced Tech obviously with a 50% comp in Q1, can you just address maybe the magnitude of what that business might look like in Q1?

Mike Hilton -- President and Chief Executive Officer

Yeah, Charlie, I'm probably not going to do that. Obviously, we've got a tough comparison in Q1. As we said earlier, we're going to have a more seasonal year. So, we're going to be down in Q1, but for the year, we feel pretty confident we're going to be able to deliver what we just talked about in that 3% to 5% top line organically.

Charlie Brady -- SunTrust -- Analyst

Are you expecting Advanced Tech to be up for the year, despite the tough comp in Q1?

Mike Hilton -- President and Chief Executive Officer

Yes. As I said, we...This is where I come back to it's maybe hard to see underneath all this, but our diversification efforts are really working within that segment and outside. But in particular, we had a really strong year within electronics in our test and inspection, but you can't see that given the dispense headwinds, but our EFD product lines and medical. So, things outside the electronics did extremely well, and we expect them to continue to grow, and they'll grow at disproportionate rates relative to other parts of our business. So, we feel pretty comfortable in how we've been able to diversify within and outside electronics. So, yeah, we expect all businesses to be up for the year.

Charlie Brady -- SunTrust -- Analyst

Great. And then, one more for me. Just on the commentary on the M&A back to one of the earlier questions on the focus on medical, just in terms of multiples, any change in any of those multiples on medical? And I'm just wondering, given the fragmentation of that market and a lot of those deals are smaller, more nicheier, that maybe the multiples in that space are a bit less stretched and giving you an opportunity to execute deals rather than other areas you might be looking into.

Mike Hilton -- President and Chief Executive Officer

So, I would say the multiples kind of vary a little bit within the medical space depending on the degree of differentiation and the growth prospects around the individual businesses. But it's a space that has good growth prospects and high margins, and so it's still rich. At the end of the day, it's still rich.

We've been benefiting from that the last couple of years with what we've been able to do, and we feel like it absolutely fits well with our business model, our focus around customers, the drive for innovation. We feel pretty well positioned, but there are areas where we'd like to build out our capability, and there are businesses out there that could help us do that. We don't expect them to be discounted in any big way. You might have some differences between small and large, but the market is robust in the areas where you have true differentiation, and that's what we're focused on.

Charlie Brady -- SunTrust -- Analyst

Thanks.

Operator

Thank you. And our next question comes from Matt Summerville with D.A. Davidson. Your line is open.

Matt Summerville -- D.A. Davidson -- Analyst

Thanks. Just a couple followups. Are you willing to quantify the long-term savings potential you anticipate to see in ADS as a result of -- I'm just going to call it kind of the manufacturing repositioning, as well as the uplift you would anticipate from the shared services implementation here in the U.S. and the ERP consolidation?

Mike Hilton -- President and Chief Executive Officer

I'd say not at this point, Matt. I'd say what we view '19 on the sort of adhesives piece is we got past all the running multiple facilities. We're back into right kind of operating frame. I'd say beyond '19, we should see both efficiencies, but also capacity with better incremental margins. And I think on our shared services piece, that's also where we see the benefit is growing at lower costs. We'll see some efficiency benefits, but the bigger driver is going to be able to scale with much lower costs. So, I'd say not ready to quantify that yet or benefits in -- some in '19, but more beyond '19.

Matt Summerville -- D.A. Davidson -- Analyst

And then just to follow up on 5G. To your comment, Mike, is it a '19 or '20 sort of thing? And in that context, I guess, what are you anticipating? What underpins your ATS? What's embedded in ATS within your guide in that regard? And then, I guess the question is do you think this 5G equipment cycle as it pertains to Nordson could be bigger than the last couple of cycles you've seen in your mobile-facing business? Can you frame that up a little bit? Thanks.

Mike Hilton -- President and Chief Executive Officer

So, in the last part of the question, it's hard to tell at this point. We know that the approach will drive additional antennas and other types of things of things that will require a fundamental change in the phones. We don't have a feel yet for what that's going to translate into in terms of new equipment. It's early yet on that.

Matt Summerville -- D.A. Davidson -- Analyst

Thank you.

Operator

Thank you. And I'm showing no further questions at this time. I'd like to turn the call back to Mr. Mike Hilton for any further remarks.

Mike Hilton -- President and Chief Executive Officer

Thank you. I just thank all of you for participating in today's call. Once again, a thank you to the Nordson organization who've delivered another very solid year for us. I appreciate everything. Take care, and have a good holiday, everyone.

Operator

Ladies and gentlemen, thank you for participating in today's conference. This concludes today's program. You may all disconnect, everyone. Have a great day.

Duration: 47 minutes

Call participants:

Lara Mahoney -- Vice President of Corporate Communications and Investor Relations

Mike Hilton -- President and Chief Executive Officer

Greg Thaxton -- Executive Vice President and Chief Financial Officer

Allison Pontiac -- Wells Fargo -- Analyst

Christopher Glynn -- Oppenheimer -- Analyst

Mike Halloran -- Baird & Co. -- Analyst

Matt Summerville -- D.A. Davidson -- Analyst

Brad (Last Name Not Given) -- KeyBanc Capital Markets -- Analyst

Chris Dankert -- Longbow Research -- Analyst

Matthew Trusz -- G. Research -- Analyst

Charlie Brady -- SunTrust -- Analyst

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