As a reminder, today's conference is being recorded. I would like to introduce to this conference call Mr. James Jaye, Director of Investor Relations. You may begin, sir.
Thank you and good morning, Kevin. This is James Jaye, Nordson's Director of Investor Relations. I'm here with Michael Hilton, our President and CEO, and Gregory Thaxton, our Senior Vice President and Chief Financial Officer. We'd like to welcome you to our conference call today, Friday, August 21st, 2015, on Nordson's FY 2015 third quarter results and fourth 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 August 28th, 2015, which can be accessed by calling 404-537-3406. You will need to reference ID number 98-58-11-61. 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 will now turn the call over to Michael Hilton for an overview of our FY 2015 third quarter results and a bit about our fourth quarter outlook. Mike, go ahead.
Thank you, Jim, and good morning, everyone. Thank you for attending Nordson's third quarter conference call. Nordson delivered organic growth of 6% during the quarter, a strong number in what continues to be a challenging macroeconomic environment. Unfavorable currency translation continued to be a significant headwind on results compared to the same period a year ago as the strong dollar continued to strengthen during the quarter, resulting in a 7% negative impact on sales.
Sales and earnings per share were negatively impacted by $33 million and $0.16 per share, respectively, compared to the third quarter of last year. From an operating perspective, we've leveraged sequential revenue growth to generate operating margin of 22% in the third quarter, an increase of three percentage points compared to the second quarter.
We maintained our disciplined and balanced approach to capital deployment during the quarter, distributing $13 million in dividends and investing $49 million in share repurchases. We also acquired Liquidyn, a German manufacturer of micro-dispensing valve that will broaden our fluid management product offering and is a nice complement to our EFD product portfolio. We continued our ongoing focus on optimizing the business, taking restructuring actions within certain Advanced Technology segment product lines to enhance operational efficiency and provide customer service in a more cost-effective manner.
This is among several actions we are taking now and over the coming year to protect and enhance our margins in 2016, where we expect the macroeconomic environment will continue to be soft. In terms of our fourth quarter outlook, the current macroeconomic environment and comparisons to the prior year are challenging, resulting in modest organic growth at the midpoint of our forecast.
This outlook would result in full year organic growth of approximately 4%, a solid level given the state of the global economy, which we've seen soften as the year has progressed. I'll speak more about our outlook and current business trends in a few moments, but first, I'll turn the call over to Gregory Thaxton, our Chief Financial Officer, who will provide more detailed commentary on our current results and our fourth quarter guidance. Greg?
Thank you, and good morning to everyone. Sales in the quarter were $463 million, an increase of 1% from the prior year third quarter. This change in sales included a 6% increase in organic volume, a 2% increase related to the first year effect of acquisitions, and a 7% decrease related to the unfavorable effects of currency translation. As Mike noted, the U.S. dollar further strengthened during the quarter, generating a stronger headwind to sales than we guided to back in May.
Looking at sales performance for the quarter by segment, Adhesive Dispensing Systems segment organic sales volume increased 4% as compared to the prior year third quarter. Organic growth was solid in product lines serving disposable hygiene, general product assembly, rigid packaging, and plastic extrusion end markets. We generated organic volume growth in all regions except the U.S.
Sales volume in the Advanced Technology segment increased 8% from the prior year third quarter, where organic volume increased 2% and the first year effect of acquisitions added 6%. I'll remind you that the Advanced Technology segment had a very strong quarter last year, where third quarter sales grew 15% over fiscal 2013 third quarter.
Our comps are very challenging. In electronic systems end markets, organic growth was strong in surface treatment and Test & Inspection product lines, partially related to the penetration of new applications and customer adoption of new products. Demand for automated dispensing systems was lower in comparison to the very strong period a year ago. Within fluid management product lines, medical end market demand continued to drive strong growth in single-use components.
Geographically, total segment organic volume was strong in the U.S., Americas, and Europe. Organic sales volume in the Industrial Coding segment increased 23% compared to the third quarter a year ago. This marks the fourth consecutive quarter of strong growth within this segment as our team captures the global opportunities presented within the end market served.
Organic growth increased by double digits in all product lines and was driven by projects in consumer durable, automotive, industrial, container, and electronics end markets. Growth was positive in all regions. Gross margin for the total company in the third quarter was 54%. As compared to the prior year, currency negatively impacted gross margin by 110 basis points, and Advanced Technology product mix also reduced gross margin.
Operating profit in the quarter was $103 million, and operating margin was 22% or 24% excluding the effects of currency as compared to the prior year. Looking at operating performance on a segment basis, adhesive dispensing delivered operating margin of 26% in the third quarter, or 28% excluding the effects of currency as compared to the prior year. Within the advanced technology segment, operating margin was 24% in the third quarter, or 25% excluding one-time items. The effects of currency as compared to the prior year were negligible as a high percentage of sales are U.S. dollar denominated.
As noted previously, the prior year's third quarter was an exceptional quarter for this segment, both in terms of sales volume growth and the customer and product mix of volume sold, where we delivered margin of 32% in the quarter, a high watermark over the last couple of years for this segment. Comparing to a more normalized operating margin for this segment in the third and fourth quarter of high 20%, operating margin in the quarter was negatively impacted by product line and customer mix, with a higher mix of non-automated dispense sales. The industrial coding segment delivered operating margin of 19% in the third quarter, or 21% excluding the effects of currency as compared to the prior year.
This outstanding performance is an increase of 6 percentage points over the prior year and reflective of the strong operating leverage generated by this business on higher volume and our ongoing efforts to drive profitability. Continuing down the income statement, our effective tax rate for the quarter was 29.5%, or 30.1%, excluding a discrete return to provision adjustment. Net income for the quarter was $69 million, and GAAP diluted earnings per share were $1.14, or $1.16, excluding the $0.01 per share benefit related to the discrete tax item and a $0.03 per share charge related to restructuring and efficiency initiatives mentioned previously.
As in previous quarters, we've included an earnings per share reconciliation schedule in our press release to reconcile between GAAP earnings and normalized earnings per share to exclude certain one-time items. The current quarter's EBITDA was $120 million. Cash flow from operations in the third quarter was $50 million, and Free Cash Flow before dividends was $37 million.
Free Cash Flow in the quarter was impacted by an increase in working capital, mostly related to the timing of receivable collection and some inventory build. We expect Free Cash Flow in the fourth quarter to benefit from a reduction in working capital as we trend back to our typical DSI and DSO metrics. We have included a table with our press release reconciling net income to Free Cash Flow before dividends.
We continued our balanced approach to capital deployment during the quarter, distributing approximately $13 million in dividends, investing $49 million for the repurchase of shares, and continuing to execute on our acquisition strategy. As of the end of our third quarter, we have approximately $147 million available against the $300 million share repurchase authorization.
From a balance sheet perspective, we remain very liquid, with net debt to EBITDA at 2.1x trailing 12-month EBITDA as of the end of the third quarter. In terms of additional color on acquisition activity, we've recently completed two small acquisition that add to our capabilities. On June 15, we completed the acquisition of Liquidyn, a German manufacturer of micro-dispensing systems, including micro-dispensing pneumatic valves, controllers, and process equipment.
Highly complementary to our existing portfolio, Liquidyn's products expand our jetting capabilities and are used to dispense adhesive, greases, silicones, oil, flux, lacquers, solder paste, and other chemicals in the electronics, automobile, medical, packaging, furniture, and aerospace industries. The company has 13 full-time employees and will be integrated into the Nordson EFD product line within the Advanced Technology Systems segment.
While the transaction is not material and we are not disclosing specific financial information, the purchase price was approximately $15 million. After the close of the third quarter, we completed the acquisition of WAFO Produktions GmbH, a German manufacturer of screws and barrels for plastic injection molding and extrusion applications. This purchase is in line with our global strategy and establishes a local European screw and barrel source to enable and support growth in that region.
WAFO serves a diverse customer base, adds field engineering resources, and deepens and accelerates market penetration. The company has approximately 65 employees and will be integrated into the polymer product line within the Adhesive Dispensing Systems segment. Again, this transaction is not material, and we are not disclosing specific financial information. The purchase price for WAFO was approximately $8 million.
We're excited about the opportunities these two organizations bring to Nordson, and we welcome these new employees to the Nordson family. I'll now move on to comments regarding our outlook for the fourth quarter of fiscal 2015. As we typically do, we provided our most recent order data, both on a segment and geographic basis, with our press release.
These orders are for the latest 12 weeks as compared to the same 12 weeks of the prior year on a currency-neutral basis and with the Liquidyn acquisition included in both years. For the 12 weeks ending August 16, 2015, order rates are up 5% as compared to the same 12 weeks in the prior year. Within the Adhesive Dispensing Systems segment, the latest 12-week orders were up 12% as compared to the same period in the prior year, where we generated order growth in all product lines and all geographies except Japan.
In the Advanced Technology Systems segment, order rates for the latest 12 weeks are up 1% against the prior year. Strength in automated dispensing systems for electronics markets and fluid management components for medical end markets was offset by other product lines. Strength in Asia Pacific, Europe, and the Americas was offset by other regions.
Within the Industrial Coating segment, the latest 12-week order rates are down 9%. We are facing challenging comparisons within this segment, where order rates were up 18% at this time last year. Growth in automotive and liquid painting product lines was offset by other product lines. Strength in Europe and the Americas was offset by other regions.
Backlog at July 31, 2015 was approximately $270 million, an increase of 10% compared to July 31, 2014, inclusive of 6% organic growth and 4% growth due to acquisitions. Current backlog decreased 5% compared to the end of the second quarter of fiscal 2015. These backlog amounts are calculated at July 31, 2015 exchange rates.
Let me now turn to the outlook for the fourth quarter of fiscal 2015. We're forecasting sales to be in the range of down 3% to down 7% as compared to the fourth quarter a year ago. This range is inclusive of organic volume growth of down 1% to up 3%, 1% growth from the first year effect of acquisitions, and a negative 7% impact related to the unfavorable effects of currency translation based on current exchange rates. At the midpoint of our sales forecast, we expect fourth quarter gross margin to be 55%, and operating margin is estimated to be approximately 22%, with both negatively impacted by 1 percentage point due to unfavorable currency rates as compared to the prior year.
We're estimating fourth quarter interest expense of about $4.4 million and an effective tax rate of approximately 30%, resulting in fourth quarter forecasted GAAP diluted earnings per share in the range of $1-$1.12 per share, inclusive of a $0.01 per share charge associated with purchase accounting for acquired inventory.
We do expect strong cash conversion during the fourth quarter, given the expected return to more typical working capital metrics previously noted, such that on a full-year cash conversion ratio, we expect to be close to 100%. In summary, we delivered strong organic growth in the third quarter against a challenging macroeconomic backdrop while also continuing our balanced approach to capital deployment. Our fourth quarter outlook reflects continued softness in the macroeconomic environment and challenging comparisons to the prior year. With that, I'll turn the call back over to you, Mike.
Thank you, Greg. Before taking your questions, I'd like to provide some additional comments on our recent performance and outlook. First, I want to thank our global team for their hard work. Our employees have delivered solid performance over the first nine months of the year in a challenging environment. They are the secret of our success.
In terms of our fourth quarter guidance, organic growth is positive at the midpoint of our forecast, even in a soft macroeconomic environment and challenging comparisons, as Greg noted. At this midpoint, Nordson would deliver full-year organic growth of approximately 4%, a solid number, and well above global GDP. Looking further ahead, many economists at this time are not forecasting significant macroeconomic improvement heading into the coming year, and our own visibility over the longer term is limited.
Given this uncertain outlook, we are taking actions in areas we can control to improve normalized operating margin in 2016 and beyond, independent of sales volume leverage. The actions taken in the third quarter to optimize the performance of our Advanced Technology segment are among the first of these steps. These actions were taken in conjunction with the opening of our new facility in Colorado and the acquisition of Liquidyn, which provided us with opportunities to further optimize customer service and operational footprint across selected fluid management product lines.
Using tools within the Nordson business system, we are implementing a more concentrated effort around multiple continuous improvement initiatives, accelerating footprint consolidation activities, challenging the productivity of our organization, while limiting additions to headcount and reducing other spending categories. We'll have more detail around these activities in the coming quarters as they occur.
Overall, our target is an improvement of at least 200 basis points to the normalized operating margin by 2017, with some of this coming in 2016, again, independent of sales volume leverage. While we do expect to grow the top line of the business beyond GDP levels, which does then generate solid volume leverage, our focus will be on improving operating performance levels of each of the segments against the assumption of a low growth environment.
Overall, our global team is committed to providing a best-in-class experience to our customers and delivering solid long-term returns to our shareholders. We remain confident in our business model and our ability to capitalize on many of the opportunities available to us in the diverse end markets we serve. At this time, let me turn it over to your questions.
Ladies and gentlemen, if you have a question or a comment at this time, please press the star, then the one key on your touchtone telephone. If your question has been answered or you wish to move yourself from the queue, please press the pound key. One moment for our first question. Our first question comes from Kevin Maczka with BB&T.
Thanks. Good morning.
Morning, Kevin.
Morning.
First question, I guess kind of big picture demand. I know visibility is always limited here, but as we're approaching fiscal 2016, I guess my interpretation here is that we're gonna do about 4% organic growth this year, but it sounds like maybe you're bracing for a bigger slowdown, given your comments about visibility and uncertainty and soft macro and taking new cost actions. Is that the right way to be thinking about 2016?
No, Kevin, I wouldn't. Here's how I would characterize it. If you think about where we were at the beginning of our year, looking at the global macro economy, most economists were forecasting well above 3+% GDP growth. Quite frankly, based on where we sit today, the only geographic region that has hit that is Europe. U.S. is below where things were expected. Japan, China, most of Asia and emerging markets are below. We see this year's GDP coming in in that 2%-2.5%, likely, you know, middle, you know, 2.2%-2.3%. Our view is next year, that's probably gonna be the same. There are some economists now that show 3% for next year.
We don't see a catalyst at the moment that's gonna drive more, you know, global GDP growth well above 3%. We're looking at it more like this year. If you think about, you know, rough rule of thumb of kind of 2x the GDP that we see, that's kind of our expectation. That's not the most robust growth environment, and we think it's only prudent to go into the end of the year, you know, being watchful of our expense line, driving our productivity initiatives, and maybe accelerating some of the programs we had in the plan already.
Kevin, this is Greg. What I'd add to those comments is we certainly have other initiatives, including new product development initiatives, new market opportunity initiatives that help us have aspirations of driving above that two times GDP. Historically, we've been able to capture some of that. It's the sense that the operating environment next year may not be much better than what we're operating in this year.
Yeah, I'd say, just to add to that, from an initiative standpoint, we're doing pretty well this year. We're just floating on a little bit weaker economy than we expected.
Yeah, I think 6% in the quarter and 4% for the year is certainly better than most industrials this year. That looks good on a relative basis and in a soft GDP world. I'm just, I guess where I'm going is, I'm just wondering, where do you see the opportunity for things to accelerate if we do have a similar GDP environment?
Who knows? Maybe it's worse, maybe it's better. If it's similar, like you're forecasting, you know, what would make us do better than 4%? Is it new product development and some of the new initiatives you have, Greg? Or is there something specific to your segments or your geographies that gives you some comfort that things can be better?
Yeah, Kevin, I would say a lot of it is linked to the new products, the development side. We have a lot of new products that we've introduced this year, and I'd say generally getting traction. Some of them are taking a little bit longer than we might have expected, but getting good feedback on those. I think that is a sort of key opportunity. In some cases, we've got new applications that in effect are creating demand, and so we're seeing some of that this year, and we expect to see some of that next year.
If you look at it, in each business, we have, you know, initiatives that we think we can control, including in some cases we've talked about in the past, where we're making progress now in tiered products, you know, for example, in the advanced tech space that we hadn't had before. We see some of those kinds of things driving the sort of premium growth even when you know, the economy is a little bit softer than maybe folks had expected. We're not discouraged. I think we're encouraged by what we're seeing in our initiatives. What is most unclear is what are we floating on top of, and I'd say that's particularly unclear when you think about Asia, Japan and China in particular.
Okay, got it. I'll get back in queue. Thank you.
Our next question come from Joe Radigan with KeyBanc.
Hey, good morning, guys.
Hey, Joe.
First, on the fourth quarter guidance, can you give some directional color by segment in context of the organic growth guidance you provided? You know, adhesive dispensing has been trending kind of below where the order growth has been, you know, would seem to indicate, advanced tech and industrial coatings are both facing pretty tough double-digit organic growth comps. Is it reasonable to expect adhesives to come in, you know, at or above the high end of that range, and then the other segments kind of below or near the bottom of that range? Or how are you thinking about it in terms of, you know, relative to the, to the total company?
Yeah, one of the things that's a little bit different on the adhesives side here is with the polymer product lines in there, some of those are a little bit longer delivery. Some of the orders that we're seeing now probably don't get shipped in the fourth quarter, would carry over into the first quarter. I think generally speaking, if you look at it until we kind of lap all of that and get a sort of a more normalized set of history with that business in, we're gonna see some disconnection between orders and what you see in revenue. Some of that that's certainly gone on a little bit in the adhesives side of things.
If you look at the rest of the business, we're entering the period of time where you typically would expect orders to follow a more typical pattern, which would be to drop off from their peaks going forward, and that's what we anticipate to see is typical traditional background going forward there. That's kind of factored in against, as you said, the tough comps, and particularly in the coatings business and also in parts of the advanced technology business.
Yeah, Joe, this is Greg. And I think just to add to what Mike said, it's you hit a lot of it in the prelude to your question. If you look at prior year revenue in each of the segments and kinda correlate that with current period growth rates, you know, it helps give you a view of given the current pace of orders and the comps that were up again, you can kinda correlate where you might expect to see that growth rate coming in the fourth quarter.
Okay, great. In advanced tech, I mean, do you expect the operating margin to moderate sequentially, kinda on lower volume in the fourth quarter, in line with what you typically see seasonally? I know you're gonna have FX headwind again in the fourth quarter, which will impact that margin. Does some of the restructuring benefits that you're gonna get from the actions you've taken kinda offset that?
Yeah, I'd say the restructuring benefits are mainly gonna be things that we see next year. We're really not gonna see much, I don't think, in the fourth quarter. You know, with regard to the operating margin on the Advanced Technology segment, I think Greg tried to point out that we had a really unusual third quarter last year, and that kinda distorted things.
If you recall, last year in that segment, the first two quarters were pretty soft. We had a big concentration of orders in the third quarter, such that the, you know, the volumes were really strong, and that had an impact in terms of the volume leverage in that quarter. Then it moved back to a more traditional approach. I think what we see this year is the same kind of improvement in the third quarter, but not to the same level or the same peak.
Okay, great. Thanks, Mike. Thanks, Greg.
Our next question comes from Christopher Glynn with Oppenheimer.
Thanks. Good morning.
Morning.
At ADS, the orders number is really truly striking in this global economic environment. The adjusted-for-FX operating margin looks like it's, you know, hearkening back to some of the pre-plastics days as well. Are you finally seeing the pivot in that extrusion end market?
I would say the orders in general in the plastics product lines are up nicely. I would say what we're seeing right now is more capability build in that extrusion segment, so sort of newer technology for capability, not for capacity. I would say not yet in terms of that turn on the capacity side. We are seeing upgrades. We're seeing rebuilds. We're seeing capability enhancements on the extrusion side. We're seeing, you know, continued solid business in the injection side. No, in particular, we haven't seen the high-end Biax turn yet.
Okay. I know it's been covered, but on the ATS margin pressure year-over-year, despite a little bit of organic growth, just the magnitude's a little tough to comprehend. I know you've addressed it qualitatively, but if we could just kinda revisit that topic.
Sure.
I think it would help.
Yeah, let me take a stab at that, and then Greg can comment if he wants to add additional color. We would expect in a normal quarter, third quarter and typically fourth quarter as well, but third quarter in particular, to see kind of a high 20s margin in that segment. 32 last year was probably 3 or 4 points above what was typical, and it's really a function of the concentration of when the volume came in last year. If you then look at the sort of 24% this year, you've got one percentage point that's the restructuring impact. Then there are three percentage points or so, three to four, that are linked to mix.
When we say mix, basically our surface treating products and our Test & Inspection products were up, a lot of that based on some new applications and new products, but our dispense volume was down significantly. If you look at just the margins by the nature of the scope of what we supply and the markets those products are going into, you've got that sort of margin swing there that's having an impact. We're not seeing any pricing pressure. We're not losing share, you know, none of that. It's just a, you know, pretty significant swing in the mix that's had an impact there.
What's the foreground for orders and projects on the automated side, you know, even from a touchy-feely perspective of answering?
Yeah, I would say we're seeing improvement in the dispense side of things relative to where we were last year. If year-over-year, it's likely not to be as strong as last year. If I look at where we were, say, a quarter ago, you know, we expected and there were some signals that were showing more traditional applications picking up, and that didn't play out throughout the rest of the quarter. I'd say from a mobile perspective, we've seen a couple things. We've seen mix change in our customers.
Growth in the sort of Chinese-based customers who to date are buying some equipment, but not to the same extent that others would, as a sort of a key impact there as well. Those are a couple of things that kind of impacted the dispense business. This is a year where we've seen more modest change in the sort of features and functions of phones in general. Typically, when there's a more dramatic change, we'll see more of an uptick. We are seeing in the most recent orders a nice positive impact on the dispense side of things. In general for the year, it's probably not gonna be where we would've hoped coming into the year.
Thanks. It's very interesting.
Our next question comes from John Franzreb with Sidoti & Company.
Yeah, I'd just like to maybe stick a little bit.
Morning.
Good morning. Just stick a little bit on maybe the consumer nondurable side of the business. Can you talk a little bit about, you know, regional differences you may be seeing in order patterns that maybe we should be cognizant of?
A lot of the consumer nondurables fit within, you know, our adhesives business. If you look at sort of the adhesives business in general, you know, the nonwovens part of the business has been pretty strong. The product assembly part of the business has been pretty strong. I'd say packaging has been solid with the exception of parts of Asia, and particularly China has been relatively soft year-over-year in the packaging area.
That's, I think, really a function of what you're seeing in the Chinese economy growth, but not robust growth. Everywhere else, it's been pretty solid. You can have some variations quarter to quarter based on large projects, but it's been a strong nonwovens year. It's been a strong product assembly year and a solid packaging year with the exception of what we're seeing in Asia, you know, Japan softening and China being softer. We're starting to see a pickup now in the plastic side of the business.
Mike, now that Asia/China demand has that weakened in recent months, or has it been weak through the balance of the year?
I would say, China in particular, you know, started off weak, picked up and then kind of flattened out. I would say we're seeing a flattening in China, where we probably had expectations that China was gonna pick up a little bit more. If you look at things like, beer and beverage consumption and some other consumer products, they've been pretty weak in China, if you just look at sort of some of the other, headlines. Part of that's linked to struggles with the transition to the consumption-based, economy that they're having, which is really contributing to, challenges meeting their GDP target. That's one area where we see it playing out.
Okay. Greg, could you just elaborate a little bit more on the inventory build you referenced earlier and the receivable collections?
I think it's-- You know, we had this kind of phenomenon at the end of our second quarter, which, you know, generally our revenues are pretty consistent throughout the quarter. At the end of the second quarter, we just had a lot of volume that went out late in the quarter that impacted our DSO metrics, and we had a very strong in the third quarter. I'm sorry, I'm a quarter off here. We had a very strong collection in the following quarter.
I expect the same trends to continue, where during the third quarter, we saw a heavy mix of revenue shipping later in the quarter. I think we've got a bit of the same on the inventory. Our DSI went up a couple days, but we're not pre-building a lot of inventory for volumes that, you know, are extending beyond next quarter shipments. I expect to see the same trends will moderate back to typical DSI, DSO, and our cash conversion will be strong in the fourth quarter.
Okay. Thank you very much, guys.
Our next question comes from Allison Poliniak with Wells Fargo.
Hi, guys. Good morning.
Good morning, Allison.
Just touching on, I know there's, you know, China sounds like it's certainly not, you know, met expectations from your perspective, but any concerns about, you know, with this, you know, the headlines we're seeing on a daily basis, customers pushing out some of these projects that you're talking about working on and so forth at this point?
I'd say, as a general statement, we're not seeing significant delays or pushouts, but I would say in a couple areas where there are bigger ticket investments, so in, say, for example, in parts of our Industrial Coding area as an example, we are seeing some stretch in time between sort of bidding and decisions.
I'd say in general, no, but in areas where it might be higher capital decisions for customers, we're hearing a little bit about pushouts, longer lead times, things like that. You know, not so much in some of the shorter term decisions that would fall into other parts of the business. I'd also say that this probably has an impact in some of the more traditional electronics applications, as well, just as a consumer of those products that's not as robust as maybe we would've expected earlier in the year.
Sure. Just, you know, it sounds like, you know, as we head into 2016, there's really no sort of catalyst for change in the environment. Any changes or thoughts of changes to the capital deployment plan that you have in place today?
Just to comment on the first part, I'd say we're being prudent. We'd like to be surprised at the upside if things improve, but we're not seeing anything from an underlying macro standpoint that would dramatically change sort of the global economic environment there. I'd say on the initiatives, we feel pretty good about our initiatives.
From a capital deployment standpoint, I think our priorities would remain the same. You know, we would look to increase our dividend. You noticed this year we moderated in terms of the amount we increased it, in part because we're now into the range that we'd like to be in the sort of low twenties. You know, we would offset any kind of compensation related to share creep. We would look for acquisitions. You know, we talked about too as really product line tuck-ins. We're seeing more of that kind of thing right now as kind of either tuck-ins or smaller acquisitions than we might have seen in the past.
Then we do have an open share repurchase authorization, and we utilize that in a staged fashion. We've always liked to keep that available. That's sort of our priority. No real change in that. As we said in the beginning of the year, we thought this year would be a modest year from an acquisition standpoint. We have a nice pipeline. They tend to be, in the short term, likely to be smaller kinds of opportunities than some of the things we've looked at in the past.
Great. Thanks so much.
One moment for our next question. Our next question comes from Liam Burke with Wunderlich.
Thank you. Good morning, Mike. Good morning, Greg.
Morning, Liam.
Mike, you talked about the tiering strategy in ATS going pretty well. With the emerging markets development sort of being choppy here, how has the tiering strategy been progressing on the adhesive side?
That's, you know, the most advanced of our businesses from a tiering approach, and it's going very well. If you look at across the major parts of our business, particularly the nonwovens and the packaging, we've got, you know, multiple tiers, you know, anywhere from three to six sort of product offerings at various stages. That's gone very well. This year has been a solid year for the high end, but it's also been a good year for the mid-tier.
We've spent, you know, some money this year building out our engineering support capability further in China to advance the mid-tier products, and that's meeting with good success there. Some of those products will support tiering outside of the Asia market, as well. I'd say that's progressing well. You know, we've made our first set of offerings now with the DIMA acquisition and moving that to Suzhou and the electronics side. We also have you know, some tiered offerings in our coatings business as well. I think we're making good progress there, but we're most advanced in the adhesives side.
Great. You mentioned the transition to the new plant for ATS in Colorado. Is that complete, and how has that gone?
It's gone well. I think we still have a few pieces of equipment to move in, but the transition has gone very well. The facility is complete. We've got capacity there that not only supports the medical business, but supports some of our other EFD business. At the same time, we've also expanded the capability that came with Avalon in Mexico to support growth of that business and some of the things that we do from an assembly standpoint in other parts of the medical business. That's all going as planned very well.
Liam, just to add to that's where we comment on improving our productivity or efficiency. It's these facilities that allow us to improve our overall operating performance.
Great. Thanks, Mike. Thanks, Greg.
Again, ladies and gentlemen, if you have a question or a comment at this time, please press star then the one key on your touchtone telephone. Our next question comes from Walter Liptak with Global Hunter Securities.
Hi. Thanks. Good morning, everyone.
Hey, Walter.
Wanted to ask kind of a follow-on to the last one. You know, the charge you took this quarter looks like about $1.8 million. Is that the sort of, you know, restructuring size as you do these actions that we should be expecting? Kind of along those lines, you know, which segments, which businesses, you know, do you see these productivity opportunities?
I'd say, in general, we see productivity opportunities across all of our businesses. I think we've talked in the past that there are a number of different things that we could do. One element of that is optimizing our supply and demand, and that may impact you know, some of the facilities, and that's what you've seen here in this quarter. We would expect that there may be some more of that going forward. The exact timing and the impact will be a little bit clearer as we go forward.
There's also a lot of work that we're doing around segmentation of our business and streamlining in various other areas that you know, will be helpful as well as we look at improving both effectiveness and efficiency. There's opportunities across all the businesses. Certain ones have more opportunity than others. You know, I think, as you have noticed, as we've made some acquisitions, I know there's been some opportunity there to integrate those more fully, and you'll see some of that coming going forward.
Okay. You know, with the relocation to Colorado benefits, you mentioned that you didn't think you would see a benefit in the fourth quarter. In 2016, you know, what do you think the positive benefits are to margins?
I'm not sure I wanna comment specifically on that one, but we would expect, as we said, our overall goal is by 2017 to improve 200 basis points, and some of that'll come in 2016 with that action and probably some others. Don't necessarily wanna say specifically on that one, but it's an important improvement for those set of product lines.
Okay. Okay, sounds good. Thank you.
I'm not showing any further questions at this time. I'd like to turn the call back over to our host.
Okay. Jim, I just wanna make one sort of final comment. As we look at sort of the performance so far this year, we do think it is very solid given the sort of weaker environment. As we look at the activity and opportunity going forward, that still looks solid. Not as robust as we would've hoped coming into the year, but still looks solid, and our team is doing a good job of execution, and we expect that we'll continue to execute and execute on these improvement opportunities going through the fourth quarter and into 2016. We appreciate all of your support and your attention here. Thank you.
Thank you, Mike and Greg. This is Jim. I'll be around today. Happy to take your calls. Have a good weekend. Thanks again for attending the call.
Ladies and gentlemen, this concludes today's presentation. You may now disconnect.