FORM 10-Q
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(Mark One)
   
þ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended April 30,July 31, 2011
OR
   
o TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from                    to                    
Commission file number 0-7977
NORDSON CORPORATION
(Exact name of registrant as specified in its charter)
   
Ohio
34-0590250
(State of incorporation) 34-0590250
(I.R.S. Employer Identification No.)
   
28601 Clemens Road
Westlake, Ohio
44145
(Address of principal executive offices) 44145
(Zip Code)
(440) 892-1580
(440) 892-1580
(Telephone Number)
Securities registered pursuant to Section 12(b) of the Act:
Common Shares with no par value
Securities registered pursuant to Section 12(g) of the Act:
None
Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934 during the preceding 12 months, and (2) has been subject to such filing requirements for the past 90 days. Yesþ Noo
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the Registrant was required to submit and post such files). Yesþ Noo
Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See definition of “large accelerated filer,” “large accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):
Large accelerated filerþAccelerated fileroNon-accelerated filero
Smaller reporting companyo
(Do not check if a smaller reporting company)Smaller reporting company o
Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yeso Noþ
As of April 30,July 31, 2011, there were 68,248,13967,757,123 shares of Nordson Corporation common shares outstanding.
 
 

 

 

Table of Contents
     
PART I — FINANCIAL INFORMATION
  3 
ITEM 1. FINANCIAL STATEMENTS (UNAUDITED)
  3 
Condensed Consolidated Statements of Income
  3 
Condensed Consolidated Balance Sheets
  4 
Condensed Consolidated Statements of Cash Flows
  5 
Notes to Condensed Consolidated Financial Statements
  6 
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
  21 
Results of Operations
  21 
Financial ConditionLiquidity and Capital Resources
  25 
Critical Accounting Policies
  25 
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
  26 
ITEM 4. CONTROLS AND PROCEDURES
  27
 
PART II — OTHER INFORMATION
  27 
ITEM 1. LEGAL PROCEEDINGS
  27 
ITEM 1A. RISK FACTORS
  27 
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
  28 
ITEM 6. EXHIBITS
  28 
SIGNATURES
  29 
EX-4.1
EX-10.1
EX-31.1
EX-31.2
EX-32.1
EX-32.2
EX-101 INSTANCE DOCUMENT
EX-101 SCHEMA DOCUMENT
EX-101 CALCULATION LINKBASE DOCUMENT
EX-101 LABELS LINKBASE DOCUMENT
EX-101 PRESENTATION LINKBASE DOCUMENT
EX-101 DEFINITION LINKBASE DOCUMENT

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Nordson Corporation
Part I — FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS (UNAUDITED)
Condensed Consolidated Statements of Income
                
 Three Months Ended Nine Months Ended 
                 July 31, 2011 July 31, 2010 July 31, 2011 July 31, 2010 
 Three Months Ended Six Months Ended
(In thousands, except for per share data) April 30, 2011 April 30, 2010 April 30, 2011 April 30, 2010 
Sales $318,924 $251,659 $589,886 $472,248  $312,255 $279,121 $902,141 $751,369 
Operating costs and expenses:  
Cost of sales 121,172 97,792 225,963 186,706  124,205 113,320 350,168 300,026 
Selling and administrative expenses 105,324 96,277 205,971 191,682  109,394 98,106 315,365 289,788 
 226,496 194,069 431,934 378,388  233,599 211,426 665,533 589,814 
Operating profit 92,428 57,590 157,952 93,860  78,656 67,695 236,608 161,555 
Other income (expense):  
Interest expense  (1,338)  (1,625)  (2,733)  (3,081)  (827)  (1,580)  (3,560)  (4,661)
Interest and investment income 115 204 240 479  190 170 430 649 
Other — net 1,791 204 2,727 523  169 177 2,896 700 
 568  (1,217) 234  (2,079)  (468)  (1,233)  (234)  (3,312)
Income before income taxes 92,996 56,373 158,186 91,781  78,188 66,462 236,374 158,243 
 
Income taxes 27,754 23,942 47,047 32,618  21,638 11,133 68,685 43,751 
  
Net income $65,242 $32,431 $111,139 $59,163  $56,550 $55,329 $167,689 $114,492 
  
Average common shares 68,110 67,910 68,043 67,495  67,945 68,095 67,998 67,616 
Incremental common shares attributable to outstanding stock options, nonvested stock, and deferred stock-based compensation 892 926 878 922  836 674 864 839 
 
Average common shares and common share equivalents 69,002 68,836 68,921 68,417  68,781 68,769 68,862 68,455 
 
Basic earnings per share $0.96 $0.48 $1.63 $0.88  $0.83 $0.81 $2.47 $1.69 
Diluted earnings per share $0.95 $0.47 $1.61 $0.86  $0.82 $0.80 $2.44 $1.67 
  
Dividends declared per share $0.105 $0.095 $0.21 $0.19  $0.105 $0.095 $0.315 $0.285 
Basic and diluted earnings per share, average common shares and common share equivalents, and dividends declared per share have been restated to give effect to a two-for-one stock split. See Note 1 for additional information.
See accompanying notes.

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Nordson Corporation
Condensed Consolidated Balance Sheets
        
 July 31, 2011 October 31, 2010 
        
(In thousands) April 30, 2011 October 31, 2010 
Assets  
Current assets:  
Cash and cash equivalents $66,785 $42,329  $69,057 $42,329 
Marketable securities — 7,840  — 7,840 
Receivables 253,941 243,790 
Inventories 133,539 117,721 
Receivables — net 259,847 243,790 
Inventories — net 137,792 117,721 
Deferred income taxes 34,750 33,576  35,659 33,576 
Prepaid expenses 8,364 5,775  8,809 5,775 
Total current assets 497,379 451,031  511,164 451,031 
  
Property, plant and equipment — net 121,050 116,395  124,304 116,395 
Goodwill 361,673 347,326  369,607 347,326 
Intangible assets — net 47,666 42,927  49,481 42,927 
Other assets 31,138 28,675  29,888 28,675 
 $1,058,906 $986,354  $1,084,444 $986,354 
Liabilities and shareholders’ equity  
Current liabilities:  
Notes payable $717 $2,160  $381 $2,160 
Accounts payable 42,279 40,262  42,433 40,262 
Income taxes payable 25,688 24,336  18,206 24,336 
Accrued liabilities 83,014 96,133  96,872 96,133 
Customer advanced payments 12,151 10,999  15,004 10,999 
Current maturities of long-term debt 14,377 14,260  111 14,260 
Current obligations under capital leases 4,026 3,764  4,234 3,764 
Total current liabilities 182,252 191,914  177,241 191,914 
  
Long-term debt 51,865 96,000  51,838 96,000 
Deferred income taxes 15,006 9,745  19,750 9,745 
Pension and retirement obligations 105,607 103,327  105,813 103,327 
Other liabilities 82,672 80,296  83,995 80,296 
  
Shareholders’ equity:  
Common shares 12,253 12,253  12,253 12,253 
Capital in excess of stated value 269,144 255,595  271,298 255,595 
Retained earnings 894,542 797,695  943,942 797,695 
Accumulated other comprehensive loss  (48,490)  (66,306)  (49,016)  (66,306)
Common shares in treasury, at cost  (505,945)  (494,165)  (532,670)  (494,165)
Total shareholders’ equity 621,504 505,072  645,807 505,072 
 $1,058,906 $986,354  $1,084,444 $986,354 
See accompanying notes.

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Nordson Corporation
Condensed Consolidated Statements of Cash Flows
                
Six Months Ended    
Nine Months Ended July 31, 2011 July 31, 2010 
(In thousands) April 30, 2011 April 30, 2010 
 
Cash flows from operating activities:  
Net income $111,139 $59,163  $167,689 $114,492 
Depreciation and amortization 14,246 15,097  20,805 22,345 
Non-cash stock compensation 4,701 2,694  6,770 6,644 
Deferred income (benefit)/expense  (217) 2,529 
Deferred income tax expense 1,024 19,306 
Other non-cash expense 1,435 1,132  1,763 1,157 
(Gain)/loss on sale of property, plant and equipment 83 78  227  (91)
Tax benefit from the exercise of stock options  (6,919)  (6,071)  (7,150)  (6,104)
Changes in operating assets and liabilities  (12,406)  (55,681)  (10,836)  (91,220)
Net cash provided by operating activities 112,062 18,941  180,292 66,529 
  
Cash flows from investing activities:  
Additions to property, plant and equipment  (10,714)  (4,231)  (14,306)  (7,812)
Proceeds from sale of property, plant and equipment 131 55  130 237 
Sale of product lines —  (881)
Purchase of businesses, net of cash acquired  (21,296)  (18,492)  (34,627)  (18,492)
Proceeds from sale of (purchases of) marketable securities 7,552  (672) 7,552  (937)
Net cash used in investing activities  (24,327)  (23,340)  (41,251)  (27,885)
  
Cash flows from financing activities:  
Proceeds from short-term borrowings 65 4,478  — 7,253 
Repayment of short-term borrowings  (1,544)  (2,147)  (1,827)  (6,122)
Proceeds from long-term debt 49,506 82,000  49,500 101,000 
Repayment of long-term debt  (93,524)  (62,000)  (107,810)  (91,290)
Repayment of capital lease obligations  (2,335)  (2,565)  (3,522)  (3,848)
Issuance of common shares 9,282 10,588  9,620 10,804 
Purchase of treasury shares  (19,134)  (2,775)  (46,342)  (13,611)
Tax benefit from the exercise of stock options 6,919 6,071  7,150 6,104 
Dividends paid  (14,291)  (12,837)  (21,442)  (19,315)
Net cash provided by (used in) financing activities  (65,056) 20,813 
Net cash used in financing activities  (114,673)  (9,025)
Effect of exchange rate changes on cash 1,777  (1,289) 2,360  (358)
Increase in cash and cash equivalents 24,456 15,125  26,728 29,261 
Cash and cash equivalents:  
Beginning of year 42,329 18,781  42,329 18,781 
End of quarter $66,785 $33,906  $69,057 $48,042 
See accompanying notes.

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Nordson Corporation
Notes to Condensed Consolidated Financial Statements
April 30,July 31, 2011
NOTE REGARDING AMOUNTS AND FISCAL YEAR REFERENCES
  In this quarterly report, all amounts related to United States dollars and foreign currency and to the number of Nordson Corporation’s common shares, except for per share earnings and dividend amounts, are expressed in thousands.
 
  Unless otherwise noted, all references to years relate to our fiscal year ending October 31.
1. Basis of presentation. The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the three months ended April 30,July 31, 2011 are not necessarily indicative of the results that may be expected for the full year. For further information, refer to the consolidated financial statements and footnotes included in our annual report on Form 10-K for the year ended October 31, 2010. Certain prior period amounts have been reclassified to conform to current period presentation.
 
  On March 1, 2011, the Board of Directors declared a 2-for-1 stock split on our common shares, effected in the form of a 100% stock dividend paid on April 12, 2011 to shareholders of record on March 25, 2011. Accordingly, all per-share amounts and number of common shares and common share equivalents have been adjusted retroactively to reflect the stock split.
2. Basis of consolidation. The consolidated financial statements include the accounts of Nordson Corporation and its majority-owned and controlled subsidiaries. All significant intercompany accounts and transactions have been eliminated in consolidation.
3. Revenue recognition. Most of our revenues are recognized upon shipment, provided that persuasive evidence of an arrangement exists, the sales price is fixed or determinable, collectibility is reasonably assured, and title and risk of loss have passed to the customer. Our post-shipment deliverables typically are installation, installation supervision, training and spare parts. Installation, installation supervision and training completed in a short period of time, at an insignificant cost and utilizing skills not unique to us are regarded as inconsequential, and revenue is recognized at the time product is delivered. Otherwise, revenue for undelivered items is deferred and included within accrued liabilities in the accompanying balance sheet. Revenues deferred in 2011 and 2010 were not material.
 
  In October 2009, the FASB issued an accounting standard update on multiple deliverable arrangements. This accounting standard update establishes a relative selling price hierarchy for determining the selling price of a deliverable based on vendor specific objective evidence (VSOE) if available, third-party evidence (TPE) if vendor-specific objective evidence is not available, or best estimated selling price (BESP) if neither vendor-specific objective evidence nor third-party evidence is available. Our multiple deliverable arrangements include installation, installation supervision, training, and spare parts, which tend to be completed in a short period of time, at an insignificant cost, and utilizing skills not unique to us, therefore, are typically regarded as inconsequential or perfunctory. As such,Revenue for undelivered items is deferred and included within accrued liabilities in the accompanying balance sheet. Revenues deferred in 2011 and 2010 were not material. The requirements of this standard did not significantly change our units of accounting or how we allocate arrangement consideration to various units of accounting. The adoption of this standard had no material impact on our financial position or results of operations as of April 30,July 31, 2011.

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Nordson Corporation
4. Environmental remediation costs. We accrue for losses associated with environmental remediation obligations when such losses are probable and reasonably estimable. Accruals for estimated losses from environmental remediation obligations generally are recognized no later than completion of the remedial feasibility study. Such accruals are adjusted as further information develops or circumstances change. Costs for future expenditures for environmental remediation obligations are not discounted to their present value. Recoveries of environmental remediation costs from other parties are recognized as assets when their receipt is deemed probable.
5. Use of estimates. The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the amounts reported in the consolidated financial statements. Actual amounts could differ from these estimates.
6. Earnings per share. Basic earnings per share are computed based on the weighted-average number of common shares outstanding during each year, while diluted earnings per share are based on the weighted-average number of common shares and common share equivalents outstanding. Common share equivalents consist of shares issuable upon exercise of stock options computed using the treasury stock method, as well as nonvested (restricted) stock and deferred stock-based compensation. Options whose exercise price is higher than the average market price are excluded from the calculation of diluted earnings per share because the effect would be anti-dilutive. For the three months and sixnine months ended April 30,July 31, 2011, and the three months ended April 30,July 31, 2010, no options for common shares were excluded from the calculation of diluted earnings per share. For the sixnine months ended April 30,July 31, 2010, options for 3523 common shares were excluded from the calculation.
calculation of diluted earnings per share, because their effect would have been anti-dilutive.
7.Recently issued accounting standards. In June 2011, the Financial Accounting Standards Board (“FASB”) issued an Accounting Standards Update that amends current comprehensive income guidance. This accounting update eliminates the option to present the components of other comprehensive income as part of the statement of shareholders’ equity. Instead, we must report comprehensive income in either a single continuous statement of comprehensive income which contains two sections, net income and other comprehensive income, or in two separate but consecutive statements. This guidance will be effective beginning in 2013. This guidance is not expected to impact our consolidated financial statements, as it only requires a change in the format of presentation.
8. Inventories. At April 30,July 31, 2011 and October 31, 2010, inventories consisted of the following:
        
 April 30, 2011 October 31, 2010        
 July 31, 2011 October 31, 2010 
 
Finished goods $77,850 $72,633  $94,411 $83,459 
Work-in-process 18,706 15,614  17,192 15,614 
Raw materials and finished parts 61,442 54,131  50,514 43,305 
 157,998 142,378  162,117 142,378 
Obsolescence and valuation reserves  (17,498)  (16,802)  (17,501)  (16,802)
LIFO reserve  (6,961)  (7,855)  (6,824)  (7,855)
 $133,539 $117,721  $137,792 $117,721 

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Nordson Corporation
8.9. Goodwill and intangible assets. Changes in the carrying amount of goodwill for the six months ended April 30, 2011 by operating segment are as follows. On November 1, 2010 we completed the acquisition of Micromedics, Inc. that resulted in $13,312 of goodwill. On June 30, 2011 we completed the acquisition Constructiewerkhuizen G. Verbruggen NV that resulted in $8,461 of goodwill. The amount for Verbruggen is based on a preliminary purchase price allocation and may require subsequent adjustment as more information about the fair value of assets becomes available.
                 
  Adhesive Advanced Industrial  
  Dispensing Technology Coating  
  Systems Systems Systems Total
 
                 
Balance at October 31, 2010 $33,783  $313,543  $  —  $347,326 
Acquisition  —   13,312   —   13,312 
Currency effect  430   605   —   1,035 
 
Balance at April 30, 2011 $34,213  $327,460  $—  $361,673 
 

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Nordson Corporation
  Changes in the carrying amount of goodwill for the nine months ended July 31, 2011 by operating segment are as follows.
                 
  Adhesive  Advanced  Industrial    
  Dispensing  Technology  Coating    
  Systems  Systems  Systems  Total 
 
Balance at October 31, 2010 $33,783  $313,543  $—  $347,326 
Acquisition  8,461   13,312   —   21,773 
Currency effect  183   325   —   508 
 
Balance at July 31, 2011 $42,427  $327,180  $—  $369,607 
 
Accumulated goodwill impairment losses were $232,789 at April 30,July 31, 2011 and October 31, 2010. These losses were recorded in 2009, with $229,173 related to the Advanced Technology Systems segment and $3,616 related to the Industrial Coating Systems segment.
 
  Information regarding our intangible assets subject to amortization is as follows:
                        
 April 30, 2011 July 31, 2011   
 Accumulated    
 Carrying Amount Amortization Net Book Value Accumulated   
   Carrying Amount Amortization Net Book Value 
   
Patent costs $22,071 $8,182 $13,889  $22,212 $8,609 $13,603 
Customer relationships 36,583 10,228 26,355  39,115 10,972 28,143 
Non-compete agreements 4,528 3,545 983  4,695 3,623 1,072 
Core/developed technology 2,788 2,241 547  2,788 2,299 489 
Trade name 6,462 1,281 5,181  6,850 1,345 5,505 
Other 1,431 720 711  1,444 775 669 
Total $73,863 $26,197 $47,666  $77,104 $27,623 $49,481 
                        
 October 31, 2010 October 31, 2011   
 Accumulated    
 Carrying Amount Amortization Net Book Value Accumulated   
   Carrying Amount Amortization Net Book Value 
   
Patent costs $20,641 $6,961 $13,680  $20,641 $6,961 $13,680 
Customer relationships 30,630 8,273 22,357  30,630 8,273 22,357 
Non-compete agreements 5,982 4,857 1,125  5,982 4,857 1,125 
Core/developed technology 2,788 2,123 665  2,788 2,123 665 
Trade name 1,684 479 1,205  1,684 479 1,205 
Other 1,432 636 796  1,432 636 796 
Total $63,157 $23,329 $39,828  $63,157 $23,329 $39,828 

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Nordson Corporation
  Effective November 1, 2010, the Dage trade name was converted from an indefinite-lived asset to a finite-lived asset with a remaining life of 20 years. At October 31, 2010, $3,099the value of trademark andthis trade name intangible assets was not subject to amortization.$3,099.
 
  Amortization expense for the three months ended April 30,July 31, 2011 and April 30, 2010 was $1,749$1,652 and $1,584,$1,862, respectively. Amortization expense for the sixnine months ended April 30,July 31, 2011 and April 30, 2010 was $4,047$5,699 and $3,033,$4,895, respectively.

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Nordson Corporation
9.
10. Comprehensive income. Comprehensive income for the three months ended April 30,July 31, 2011 and April 30, 2010 is as follows:
        
 Three Months Ended        
 April 30, 2011 April 30, 2010 Three Months Ended 
 July 31, 2011 July 31, 2010 
 
Net income $65,242 $32,431  $56,550 $55,329 
Foreign currency translation adjustments 21,677  (11,111)  (2,053)  (126)
Amortization of prior service cost and net actuarial losses 1,421 2,603  1,527 1,158 
Comprehensive income $88,340 $23,923  $56,024 $56,361 
  Comprehensive income for the sixnine months ended April 30,July 31, 2011 and April 30, 2010 is as follows:
        
 Six Months Ended        
 April 30, 2011 April 30, 2010 Nine Months Ended 
 July 31, 2011 July 31, 2010 
 
Net income $111,139 $59,163  $167,689 $114,492 
Foreign currency translation adjustments 14,845  (26,918) 12,792  (27,044)
Remeasurement of supplemental pension liability —  (2,746) —  (2,746)
Settlement loss — 5,014  — 5,014 
Amortization of prior service cost and net actuarial losses 2,971 3,804  4,498 4,962 
Comprehensive income $128,955 $38,317  $184,979 $94,678 
  Accumulated other comprehensive loss at April 30,July 31, 2011 consisted of pension and postretirement benefit plan adjustments of $99,813$98,286 offset by $51,323$49,270 of net foreign currency translation adjustment credits. Accumulated other comprehensive loss at April 30,July 31, 2010 consisted of pension and postretirement benefit plan adjustments of $90,237$89,079 offset by $13,921$13,795 of net foreign currency translation adjustment credits.
 
  Changes in accumulated other comprehensive income (loss) for the sixnine months ended April 30,July 31, 2011 and 2010 are as follows:
        
 April 30, 2011 April 30, 2010        
 July 31, 2011 July 31, 2010 
 
Beginning balance $(66,306) $(55,470) $(66,306) $(55,470)
Current-period change 17,816  (20,846) 17,290  (19,814)
Ending balance $(48,490) $(76,316) $(49,016) $(75,284)

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Nordson Corporation
10.11. Stock-based compensation. The amended and restated 2004 long-term performance plan, approved by our shareholders in 2008, provides for the granting of stock options, stock appreciation rights, nonvested (restricted) stock, stock purchase rights, stock equivalent units, cash awards and other stock or performance-based incentives. The number of common shares available for grant of awards is 2.5% of the number of common shares outstanding as of the first day of each fiscal year.
 
  Stock Options
 
  Nonqualified or incentive stock options may be granted to our employees and directors. Generally, options granted to employees may be exercised beginning one year from the date of grant at a rate not exceeding 25% per year for executive officers and 20% per year for other employees and expire 10 years from the date of grant. Vesting accelerates upon the occurrence of events that involve or may result in a change of control. Option exercises are satisfied through the issuance of treasury shares on a first-in first-out basis.
 
  We recognized compensation expense related to stock options of $712$733 in the three months ended April 30,July 31, 2011 and $579$562 in the three months ended April 30,July 31, 2010. Amounts for the sixnine months ended April 30,July 31, 2011 and April 30, 2010 were $1,431$2,163 and $1,114,$1,676, respectively.
 
  The following table summarizes activity related to stock options for the sixnine months ended April 30,July 31, 2011:
                                
 Weighted Weighted 
 Weighted-Average Aggregate Average Weighted-Average Average 
 Number of Exercise Price Per Intrinsic Remaining Number of Exercise Price Per Aggregate Remaining 
 Options Share Value Term Options Share Intrinsic Value Term 
Outstanding at October 31, 2010 2,362 $20.15  2,362 $20.15 
Granted 287 $43.32  287 $43.32 
Exercised  (762) $19.04   (784) $18.94 
Forfeited or expired  (3) $22.50   (9) $26.47 
   
Outstanding at April 30, 2011 1,884 $24.12 $61,889 6.6 years
Outstanding at July 31, 2011 1,856 $24.21 $49,786 6.4 years
   
  
Vested or expected to vest at April 30, 2011 1,805 $23.83 $59,809 6.5 years
Vested or expected to vest at July 31, 2011 1,778 $23.92 $48,191 6.3 years
  
Exercisable at April 30, 2011 969 $19.67 $36,139 5.0 years
Exercisable at July 31, 2011 947 $19.77 $29,616 4.8 years
  At April 30,July 31, 2011, there was $8,250$7,550 of total unrecognized compensation cost related to nonvested stock options. That cost is expected to be amortized over a weighted average period of approximately 2.22.1 years.
 
  The fair value of each option grant was estimated at the date of grant using the Black-Scholes option-pricing model with the following assumptions:
         
SixNine months ended April 30,July 31, 2011April 30, 2010
  July 31, 2010 
 
Expected volatility  .431-.451   .429-.442 
Expected dividend yield  1.28%  1.35-1.40%
Risk-free interest rate  1.89%-2.25%  2.27-3.18%
Expected life of the option (in years)  5.4-6.3   5.4-6.3 
  The weighted-average expected volatility used to value the 2011 options was .443. The weighted-average expected volatility used to value the 2010 options was .436. The weighted-average dividend yield used to value the 2010 options was 1.39%.

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  Historical information was the primary basis for the selection of the expected volatility, expected dividend yield and the expected lives of the options. The risk-free interest rate was selected based upon yields of U.S. Treasury issues with a term equal to the expected life of the option being valued.
 
  The weighted average grant date fair value of stock options granted during the sixnine months ended April 30,July 31, 2011 and 2010 was $16.80 and $11.08, respectively.
 
  The total intrinsic value of options exercised during the three months ended April 30,July 31, 2011 and April 30, 2010 was $9,107$831 and $11,901,$180, respectively. The total intrinsic value of options exercised during the sixnine months ended April 30,July 31, 2011 and April 30, 2010 was $22,157$22,988 and $18,669,$18,849, respectively.
 
  Cash received from the exercise of stock options was $9,282$9,620 for the sixnine months ended April 30,July 31, 2011 and $10,588$10,804 for the sixnine months ended April 30,July 31, 2010. The tax benefit realized from tax deductions from exercises was $6,919$7,150 for the sixnine months ended April 30,July 31, 2011 and $6,071$6,104 for the sixnine months ended April 30,July 31, 2010.
 
  Nonvested Common Shares
 
  We may grant nonvested common shares to our employees and directors. These shares may not be disposed of for a designated period of time (generally six months to five years) defined at the date of grant. For employee recipients, shares are forfeited on a pro-rata basis in the event employment is terminated as a consequence of the employee recipient’s retirement, disability or death. Termination for any other reason results in forfeiture of the shares. For non-employee directors, restrictions lapse upon the retirement, disability or death of the non-employee director. Termination of service as a director for any other reason results in a pro-rata forfeiture of shares.
 
  As shares are issued, deferred share-based compensation equivalent to the fair market value on the date of grant is charged to shareholders’ equity and subsequently amortized over the restriction period. Tax benefits arising from the lapse of restrictions on the shares are recognized when realized and credited to capital in excess of stated value.
 
  The following table summarizes activity related to nonvested shares during the sixnine months ended April 30,July 31, 2011:
                
 Weighted-Average Weighted-Average 
 Number of Grant Date Fair Number of Grant Date Fair 
 Shares Value Shares Value 
Nonvested shares at October 31, 2010 80 $24.70  80 $24.70 
Granted 37 $43.32  38 $43.41 
Vested  (21) $15.89   (32) $19.34 
Forfeited  (1) $43.32   (1) $43.32 
   
Nonvested shares at April 30, 2011 95 $33.85 
Nonvested shares at July 31, 2011 85 $34.86 
   
  As of April 30,July 31, 2011, there was $2,230$1,957 of unrecognized compensation cost related to nonvested common shares. The cost is expected to be amortized over a weighted average period of 2.11.9 years.
 
  The amount charged to expense related to nonvested stock was $336$309 in the three months ended April 30,July 31, 2011 and $158$247 in the three months ended April 30,July 31, 2010. For the sixnine months ended April 30,July 31, 2011 and April 30, 2010, the amounts were $616$924 and $337,$584, respectively.

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  Directors Deferred Compensation
 
  Non-employee directors may defer all or part of their compensation until retirement. Compensation may be deferred as cash or as share equivalent units. Deferred cash amounts are recorded as liabilities. Additional share equivalent units are earned when common share dividends are declared.
 
  The following table summarizes activity related to director deferred compensation share equivalent units during the sixnine months ended April 30,July 31, 2011:
                
 Weighted-Average Weighted-Average 
 Number of Grant Date Fair Number of Grant Date Fair 
 Shares Value Shares Value 
Outstanding at October 31, 2010 267 $16.54  267 $16.54 
Deferrals 2 $48.94  2 $49.34 
Restricted stock units vested 18 $16.55  18 $16.55 
Dividend equivalents 1 $49.93  2 $50.40 
Distributions  (20) $14.80   (32) $15.06 
   
Outstanding at April 30, 2011 268 $17.06 
Outstanding at July 31, 2011 257 $17.27 
   
  The amount charged to expense related to this plan was $59$52 for the three months ended April 30,July 31, 2011 and $71$89 for the three months ended April 30,July 31, 2010. For the sixnine months ended April 30,July 31, 2011 and April 30, 2010, the amounts were $156$209 and $171,$260, respectively.
 
  Long-Term Incentive Compensation Plan
 
  Under the long-term incentive compensation plan, executive officers and selected other key employees receive common share awards based solely on corporate performance measures over three-year performance periods. Awards vary based on the degree to which corporate performance exceeds predetermined threshold, target and maximum performance levels at the end of a performance period. No payout will occur unless certain threshold performance objectives are exceeded.
 
  The amount of compensation expense is based upon current performance projections for each three-year period and the percentage of the requisite service that has been rendered. The calculations are also based upon the grant date fair value determined using the market price of common stock at the grant date, adjusted for dividends. This 2011 per-share value was $42.02 for both the executive officers and selected other key employees. The 2010 per-share values were $26.10 and $29.52 for the executive officers and $26.10 for the selected other key employees. The 2009 per-share value was $13.23. The amount charged to expense for the three months ended April 30,July 31, 2011 and 2010 was $874$899 and $374,$2,954, respectively. For the sixnine months ended April 30,July 31, 2011 and 2010, the amounts were $2,319$3,218 and $840,$3,794, respectively. The cumulative amount recorded in shareholders’ equity at April 30,July 31, 2011 was $4,333.$5,232.

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11.12. Warranty accrual. We offer warranty to our customers depending on the specific product and terms of the customer purchase agreement. A typical warranty program requires that we repair or replace defective products within a specified time period (generally one year) from the date of delivery or first use. We record an estimate for future warranty-related costs based on actual historical return rates. Based on analysis of return rates and other factors, the adequacy of our warranty provisions are adjusted as necessary. The liability for warranty costs is included in accrued liabilities in the Consolidated Balance Sheet.
 
  Following is a reconciliation of the product warranty liability for the sixnine months ended April 30,July 31, 2011 and 2010:
        
 April 30, 2011 April 30, 2010        
 July 31, 2011 July 31, 2010 
 
Beginning balance $5,242 $4,587  $5,242 $4,587 
Warranty assumed from acquisition — 60  — 60 
Warranty of divested product lines —  (211)
Accruals for warranties 2,681 3,111  4,734 5,237 
Warranty payments  (2,648)  (2,129)  (4,121)  (3,813)
Currency effect 161  (223) 130  (225)
Ending balance $5,436 $5,406  $5,985 $5,635 
12.13. Operating segments. We conduct business across three primary business segments: Adhesive Dispensing Systems, Advanced Technology Systems, and Industrial Coating Systems. Effective November 1, 2010, the Industrial Coating Systems segment includes our industrial UV Curing product line that had previously been reported in the Advanced Technology Systems segment, where it was combined with our former UV Curing graphic arts and lamps product lines that were sold in 2010. This change more closely reflects the change in management of this product line and its related growth opportunities. Prior year results have been reclassified to reflect the segment change.
 
  The composition of segments and measure of segment profitability is consistent with that used by our chief operating decision maker. The primary measure used by the chief operating decision maker for purposes of making decisions about allocating resources to the segments and assessing performance is operating profit, which equals sales less cost of sales and certain operating expenses. Items below the operating profit line of the Consolidated Statement of Income (interest and investment income, interest expense and other income/expense) are excluded from the measure of segment profitability reviewed by our chief operating decision maker and are not presented by operating segment. In addition, the measure of segment operating profit that is reported to and reviewed by the chief operating decision maker excludes severance costs associated with the 2008-2010 cost reduction program that beganand expense related to the withdrawal from a multiemployer employee pension fund in 2008.Japan. The accounting policies of the segments are generally the same as those described in Note 1, Significant Accounting Policies, of our annual report on Form 10-K for the year ended October 31, 2010.

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  The following table presents sales and operating profits of our reportable segments:
                                        
 Adhesive Advanced Industrial      Adhesive Advanced Industrial     
 Dispensing Technology Coating      Dispensing Technology Coating     
 Systems Systems Systems Corporate Total  Systems Systems Systems Corporate Total 
 
Three months ended April 30, 2011 
Three months ended July 31, 2011 
Net external sales $159,432 $113,013 $46,479 $— $318,924  $153,071 $111,652 $47,532 $— $312,255 
Operating profit (loss) 59,649a  33,649 7,576  (8,446) 92,428  51,385 30,884 8,417 (12,030) a 78,656 
  
Three months ended April 30, 2010 
Three months ended July 31, 2010 
Net external sales $130,151 $90,068 $31,440 $— $251,659  $135,517 $102,980 $40,624 $— $279,121 
Operating profit (loss) 43,611 19,402 1,713 (7,136)b  57,590  43,763 26,572 5,004 (7,644) b 67,695 
  
Six months ended April 30, 2011 
Nine months ended July 31, 2011 
Net external sales $296,408 $209,687 $83,791 $— $589,886  $449,479 $321,339 $131,323 $— $902,141 
Operating profit (loss) 105,845a  56,842 10,708  (15,443) 157,952  157,230 c 87,726 19,125 (27,473) a 236,608 
  
Six months ended April 30, 2010 
Nine months ended July 31, 2010 
Net external sales $247,164 $164,908 $60,176 $— $472,248  $382,681 $267,888 $100,800 $— $751,369 
Operating profit (loss) 75,898 32,368 1,830 (16,236)b  93,860  119,661 58,940 6,834 (23,880) b 161,555 
a-Includes $3,136 of expense related to the withdrawal from a multiemployer employee pension fund in Japan.
 
— b-Includes $347 of severance costs in the three months ended July 31, 2010 and $1,449 in the nine months ended July 31, 2010.
c-Includes $1,322 of impairment charges related to write down of assets to fair value.
b— Includes $571 of severance costs in the three months ended April 30, 2010 and $1,102 in the six months ended April 30, 2010.

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A reconciliation of total segment operating income to total consolidated income before income taxes is as follows:
         
Three months ended July 31, 2011  July 31, 2010 
 
Total profit for reportable segments $78,656  $67,695 
Interest expense  (827)  (1,580)
Interest and investment income  190   170 
Other-net  169   177 
 
Income before income taxes $78,188  $66,462 
 
         
Nine months ended July 31, 2011  July 31, 2010 
 
Total profit for reportable segments $236,608  $161,555 
Interest expense  (3,560)  (4,661)
Interest and investment income  430   649 
Other-net  2,896   700 
 
Income before income taxes $236,374  $158,243 
 
We had significant sales in the following geographic regions:
         
Three months ended July 31, 2011  July 31, 2010 
 
United States $77,883  $71,953 
Americas  26,510   21,146 
Europe  97,620   81,925 
Japan  26,663   26,864 
Asia Pacific  83,579   77,233 
 
Total net sales $312,255  $279,121 
 
         
Nine months ended July 31, 2011  July 31, 2010 
 
United States $227,456  $197,337 
Americas  72,528   56,556 
Europe  285,927   243,374 
Japan  81,895   67,041 
Asia Pacific  234,335   187,061 
 
Total net sales $902,141  $751,369 
 
Prior year sales include reclassification adjustments primarily into Asia Pacific from the United States based on more accurate end-user destination information for products sold by our Advanced Technology Systems segment to certain global customers.

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 A reconciliation of total segment operating income to total consolidated income before income taxes is as follows:
         
Three months ended April 30, 2011 April 30, 2010
 
         
Total profit for reportable segments $92,428  $57,590 
Interest expense  (1,338)  (1,625)
Interest and investment income  115   204 
Other-net  1,791   204 
 
Income before income taxes $92,996  $56,373 
 
         
Six months ended April 30, 2011 April 30, 2010
 
         
Total profit for reportable segments $157,952  $93,860 
Interest expense  (2,733)  (3,081)
Interest and investment income  240   479 
Other-net  2,727   523 
 
Income before income taxes $158,186  $91,781 
 
We had significant sales in the following geographic regions:
         
Three months ended April 30, 2011 April 30, 2010
 
         
United States $79,300  $66,638 
Americas  26,158   18,766 
Europe  98,049   82,806 
Japan  30,159   22,585 
Asia Pacific  85,258   60,864 
 
Total net sales $318,924  $251,659 
 
         
Six months ended April 30, 2011 April 30, 2010
 
         
United States $149,573  $125,384 
Americas  46,018   35,410 
Europe  188,307   161,449 
Japan  55,232   40,177 
Asia Pacific  150,756   109,828 
 
Total net sales $589,886  $472,248 
 
Prior year sales include reclassification adjustments primarily into Asia Pacific from the United States based on more accurate end-user destination information for products sold by our Advanced Technology Systems segment to certain global customers.

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13.14. Pension and other postretirement plans. The components of net periodic pension cost for the three and six- monthnine-month periods ended April 30,July 31, 2011 and 2010 were:
                                
 U.S. International  U.S. International 
Three months ended April 30, 2011 April 30, 2010 April 30, 2011 April 30, 2010  July 31, 2011 July 31, 2010 July 31, 2011 July 31, 2010 
   
    
Service cost $1,376 $1,651 $535 $400  $1,509 $1,612 $545 $390 
Interest cost 2,924 2,851 752 680  3,017 2,860 760 662 
Expected return on plan assets  (3,855)  (2,897)  (372)  (335)  (3,882)  (2,897)  (373)  (333)
Amortization of prior service cost 165 163 1 13  171 134 2 11 
Amortization of net actuarial loss 1,868 1,494 216 92  1,915 1,479 219 90 
Total benefit cost $2,478 $3,262 $1,132 $850  $2,730 $3,188 $1,153 $820 
                                
 U.S. International  U.S. International 
Six months ended April 30, 2011 April 30, 2010 April 30, 2011 April 30, 2010 
   
Nine months ended July 31, 2011 July 31, 2010 July 31, 2011 July 31, 2010 
    
Service cost $3,044 $3,321 $1,055 $820  $4,553 $4,933 $1,600 $1,210 
Interest cost 5,932 5,880 1,477 1,409  8,949 8,740 2,237 2,071 
Expected return on plan assets  (7,713)  (5,795)  (731)  (695)  (11,595)  (8,692)  (1,104)  (1,028)
Amortization of prior service cost 329 308 2 26  500 442 4 37 
Amortization of net actuarial loss 3,669 3,039 424 190  5,584 4,518 643 280 
Settlement loss — 8,022 — —  — 8,022 — — 
Total benefit cost $5,261 $14,775 $2,227 $1,750  $7,991 $17,963 $3,380 $2,570 
During the six months ended April 30,During the nine months ended July 31, 2010, net periodic pension cost included settlement losses of $8,022 due to lump sum retirement payments.
The components of other postretirement benefit cost for the three and six-month periods ended April 30,The components of other postretirement benefit cost for the three and nine-month periods ended July 31, 2011 and 2010 were:
                                
 U.S. International  U.S. International 
Three months ended April 30, 2011 April 30, 2010 April 30, 2011 April 30, 2010  July 31, 2011 July 31, 2010 July 31, 2011 July 31, 2010 
   
    
Service cost $315 $183 $8 $8  $281 $243 $7 $7 
Interest cost 752 574 10 11  733 667 11 11 
Amortization of prior service cost  (286)  (205) — —   (287)  (429) — — 
Amortization of net actuarial loss 428 352  (2)  (2) 401 135  (2)  (1)
Total benefit cost $1,209 $904 $16 $17  $1,128 $616 $16 $17 
                                
 U.S. International  U.S. International 
Six months ended April 30, 2011 April 30, 2010 April 30, 2011 April 30, 2010 
   
Nine months ended July 31, 2011 July 31, 2010 July 31, 2011 July 31, 2010 
    
Service cost $561 $385 $16 $15  $842 $628 $23 $22 
Interest cost 1,466 1,211 20 22  2,199 1,878 31 33 
Amortization of prior service cost  (573)  (432) — —   (860)  (861) — — 
Amortization of net actuarial loss 803 743  (4)  (3) 1,204 878  (6)  (4)
Total benefit cost $2,257 $1,907 $32 $34  $3,385 $2,523 $48 $51 

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14.15.Severance and restructuring costs. In March 2011 we announced a restructuring of our Adhesive Dispensing Systems segment operations located in Georgia in order to optimize operations and better serve our customers. The restructuring involves the expansion of our facility in Duluth and a new facility in Swainsboro. The existing Swainsboro facility, as well as facilities in Norcross and Dawsonville, will be closed. Severance costs associated with this action will occur through the third quarter of 2012 and are estimated to be approximately $1,500. Payments are expected to begin in the first quarter of 2012. Of the total expense amount, $64 was recorded in selling and administrative expenses in the three months ended July 31, 2011.
As a result of this restructuring initiative, we assessed the fair value of the facilities involved and remeasured to fair value two of the facilities using third party property appraisals or market-corroborated inputs. The amount of Level 2 long-lived assets measured at fair value on a non-recurring basis was $4,150. Impairment losses of $1,322 on the two facilities were recorded in selling and administrative expense for the nine months ended July 31, 2011.
16. Fair value measurements. The inputs to the valuation techniques used to measure fair value are classified into the following categories:
 
  Level 1: Quoted market prices in active markets for identical assets or liabilities.
  Level 2: Observable market based inputs or unobservable inputs that are corroborated by market data.
  Level 3: Unobservable inputs that are not corroborated by market data.
  The following table presents the classification of our financial assets and liabilities measured at fair value on a recurring basis at April 30,July 31, 2011:
                
 Total Level 1 Level 2 Level 3                
 Total Level 1 Level 2 Level 3 
 
Assets:  
Rabbi trust (a) $14,378 $— $14,378 $ —  $13,897 $— $13,897 $— 
Forward exchange contracts (b) 7,720 — 7,720  —  3,986 — 3,986 — 
Total assets at fair value $22,098 $— $22,098 $—  $17,883 $— $17,883 $— 
 
Liabilities:  
Deferred compensation plans (c) $6,583 $6,583 $— $—  $6,240 $6,240 $— $— 
Forward exchange contracts (b) 618 — 618 —  416 — 416 — 
Total liabilities at fair value $7,201 $6,583 $618 $—  $6,656 $6,240 $416 $— 
 (a) We maintain a rabbi trust that serves as an investment to shadow our deferred compensation plan liability. The investment assets of the trust consist of life insurance policies for which we recognize income or expense based upon changes in cash surrender value.
 
 (b) We enter into foreign currency forward contracts to reduce the risk of foreign currency exposures resulting from receivables, payables, intercompany receivables, intercompany payables and loans denominated in foreign currencies. The maturities of these contracts are usually less than 90 days. Foreign exchange contracts are valued using market exchange rates.
 
 (c) Senior management and other highly compensated employees may defer up to 100% of their salary and incentive compensation into various non-qualified deferred compensation plans. Deferrals can be allocated to various market performance measurement funds. Changes in the value of compensation deferred under these plans are recognized each period based on the fair value of the underlying measurement funds.
On March 28, 2011, we announced the decision to consolidate operations and reduce the number of facilities in Georgia related to our Adhesive Dispensing Systems Segment. As a result, we assessed the fair value of the facilities involved and remeasured to fair value two of the facilities using third party property appraisals or market-corroborated inputs. The amount of Level 2 long-lived assets measured at fair value on a non-recurring basis was $4,150 for the period ended April 30, 2011. Impairment losses of $1,322 on the two facilities were recorded in selling and administrative expense for the three and six months ended April 30, 2011.

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15.17. Financial instruments. We operate internationally and enter into intercompany transactions denominated in foreign currencies. Consequently, we are subject to market risk arising from exchange rate movements between the dates foreign currencies are recorded and the dates they are settled. We regularly use foreign currency forward contracts to reduce our risks related to most of these transactions. These contracts usually have maturities of 90 days or less and generally require us to exchange foreign currencies for U.S. dollars at maturity, at rates stated in the contracts. These contracts are not designated as hedging instruments.
 
  Gains and losses on foreign exchange contracts are recorded in “Other —– net” on the Consolidated Statement of Income together with the transaction gain or loss from the hedged balance sheet position. For the three months ended April 30,July 31, 2011, we recognized gainslosses of $6,239$3,532 on foreign exchange contracts and lossesgains of $5,086$3,640 from the change in fair value of balance sheet positions. For the sixnine months ended April 30,July 31, 2011, we recognized losses of $4,551$8,083 on foreign exchange contracts and gains of $6,340$9,980 from the change in fair value of balance sheet positions. We do not use financial instruments for trading or speculative purposes.
 
  We had the following outstanding foreign currency forward contracts at April 30,July 31, 2011:
                                
 Sell Buy Sell Buy
 Notional Fair Market Notional Fair Market Notional Fair Market Notional Fair Market 
 Amounts Value Amounts Value Amounts Value Amounts Value 
Euro $8,772 $9,219 $81,838 $86,827  $14,623 $14,680 $92,340 $93,840 
British pound 1,632 1,675 28,687 29,448  1,632 1,647 38,807 39,188 
Japanese yen 5,920 5,906 16,126 16,010  10,096 10,460 11,455 11,757 
Others 5,768 6,025 30,623 32,824  5,019 5,188 31,265 33,257 
Total $22,092 $22,825 $157,274 $165,109  $31,370 $31,975 $173,867 $178,042 
  The following table shows the fair value of foreign currency forward contracts in the consolidated balance sheet at April 30,July 31, 2011.
                      
Asset DerivativesAsset Derivatives Liability DerivativesAsset Derivatives Liability Derivatives 
Balance sheet location Fair value Balance sheet location Fair value Fair value Balance sheet location Fair value
        
Receivables $7,720 Accrued liabilities $618  $3,986 Accrued liabilities $416 

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  The carrying amounts and fair values of financial instruments at April 30,July 31, 2011, other than receivables and accounts payable, are shown in the table below. The carrying values of receivables and accounts payable approximate fair value due to the short-term nature of these instruments.
        
 Carrying          
 Amount Fair Value Carrying   
 Amount Fair Value 
 
Cash and cash equivalents $66,785 $66,785  $69,057 $69,057 
Notes payable 717 717  381 381 
Long-term debt 66,242 68,686  51,949 53,280 
Foreign exchange contracts (net) 7,102 7,102  3,570 3,570 
 We used the following methods and assumptions in estimating the fair value of financial instruments:
 • Cash, cash equivalents and notes payable are valued at their carrying amounts due to the relatively short period to maturity of the instruments.
 
 • Long-term debt is valued by discounting future cash flows at currently available rates for borrowing arrangements with similar terms and conditions.
 
 • Foreign exchange contracts are estimated using quoted exchange rates.
16.18. Income taxes. We record our interim provision for income taxes based on our estimated annual effective tax rate, as well as certain items discrete to the current period. The effective tax rates for the three and six-monthnine-month periods ended April 30,July 31, 2011 were 29.8%27.7% and 29.7%29.1%, respectively.
During the three months ending July 31, 2011, we recorded a favorable adjustment to unrecognized tax benefits of $2,027, primarily related to settlements with tax authorities. Additionally, during the three months ending July 31, 2011, we recorded a tax benefit of $368 related to an adjustment of deferred taxes resulting from a tax rate reduction in the United Kingdom.
 
  In December 2010, Congress passed and the President signed the Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010, which provided retroactive reinstatement of a research credit. As a result, we recorded an additional tax benefit related to 2010 of $200$1,580 in the threenine months ended April 30, 2011, and $1,242 in the three months ended JanuaryJuly 31, 2011. Additionally, in the threenine month period ended April 30,end July 31, 2011 we recorded a $549 tax benefit related to prior years for deductions associated with ourthe Company’s Employee Stock Ownership Plan.
 
  The balance of unrecognized tax benefits at April 30,July 31, 2011 was $4,216,$2,476, compared to $4,078 at October 31, 2010. The amounts that, if recognized, would impact the effective tax rate were $4,157$2,417 and $4,019 at April 30,July 31, 2011 and October 31, 2010, respectively. At April 30,July 31, 2011 and October 31, 2010 we had accrued interest expense related to unrecognized tax benefits of $546$304 and $468, respectively. During the three months ended July 31, 2011, unrecognized tax benefits decreased by $1,740, primarily due to settlement with tax authorities.
 
We are subject to United States Federal income tax as well as taxes in numerous state and foreign jurisdictions. We are currently under audit in the U.S. by the Internal Revenue Service (IRS) for the 2008 and 2009 tax years; tax years prior to 2007 are no longer subject to IRS audit. Generally, major state jurisdiction tax years remain open to examination for tax years after 2005; major foreign jurisdiction tax years remain open to examination for tax years after 2006. Within the next 12 months, it is reasonably possible that the U.S. audit could be completed and certain Federal, state, and foreign statute of limitations periods would expire, which could result in a decrease in our unrecognized tax benefits in a range of $0 to $1,800. The portion of the possible reduction that, if recognized, would impact the effective tax rate is $0 to $1,800.

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  The effective tax rates for the three and six-monthnine-month periods ended April 30,July 31, 2010 were 42.5%16.8% and 35.5%27.6%, respectively. As a resultDuring the three months ended July 31, 2010 we sold our graphic arts and lamps product lines to Baldwin Technology Company, Inc., and we recognized $10,700 in tax benefits from the write off of our tax basis in the product lines.
The effective tax rate for the nine months ended July 31, 2010 was negatively impacted by the enactment in March 2010 of the Patient Protection and Affordable Care Act and the subsequent enactment of the Health Care and Education Reconciliation Act of 2010, we recordedresulting in an additional tax charge of $5,255 in the three months ended April 30, 2010.$5,255. The charge is due to a reduction in the value of our deferred tax asset as a result of a change to the tax treatment associated with Medicare Part D subsidies.
The effective tax rate for This was partially offset by the six months ended April 30, 2010 was positively impacted by consolidation of certain operations and legal entities, resulting in a $3,500 tax benefit. This effect was partially offset by $438 of other adjustments related to our 2009 tax provision.

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17.19. AcquisitionAcquisitions.On November 1, 2010, we acquired 100% of the outstanding shares of Micromedics, Inc., a St. Paul, Minnesota company that is a leader in applying and dispensing biomaterials for controlling bleeding, healing wounds and other related medical procedures. The acquisition date fair value of the consideration transferred, which consisted solely of cash, was $21,296. Based on the fair value of the assets acquired and the liabilities assumed, goodwill of $13,312 and identifiable intangible assets of $7,500 were recorded. The identifiable intangible assets consist primarilyrecorded, of $4,550 ofwhich customer relationships that are beingis the primary asset valued at $4,550 and amortized over 10 years. Micromedics is being reported in our Advanced Technology Systems segment.
 
On June 30, 2011, we acquired 100% of the outstanding shares of Constructiewerkhuizen G. Verbruggen NV (Verbruggen), a Belgium manufacturer of flat dies and coextrusion equipment for the multi-layer flexible packaging industry. The acquisition date fair value of the consideration transferred, which consisted solely of cash, was $13,331 and is subject to certain post-closing adjustments. Based on a preliminary estimate of the fair value of the assets acquired and the liabilities assumed, goodwill of $8,461and identifiable intangible assets of $4,017 were recorded, of which customer relationships is the primary asset valued at $2,900 and amortized over 11 years. As noted above, the allocation of the consideration transferred is preliminary and a final determination of required adjustments will be made based upon an independent appraisal of the fair value of related long-lived tangible and intangible assets and the determination of the fair value of certain other acquired assets and liabilities. Verbruggen is being reported in our Adhesive Dispensing Systems segment.
18.20. Contingencies.We are involved in pending or potential litigation regarding environmental, product liability, patent, contract, employee and other matters arising from the normal course of business, including the environmental matter discussed below. After consultation with legal counsel, we do not expect that resolutions of these matters will result in a material effect on our financial condition, quarterly or annual results of operations or cash flows.
 
  We have voluntarily agreed with the City of New Richmond, Wisconsin and other Potentially Responsible Parties to share costs associated with the remediation of the City of New Richmond municipal landfill (the “Site”) and constructing a potable water delivery system serving the impacted area down gradient of the Site. At April 30,July 31, 2011 and October 31, 2010, our accruals for the ongoing operation, maintenance and monitoring obligation at the Site were $795 and $885, respectively.
 
  The liability for environmental remediation represents management’s best estimate of the probable and reasonably estimable undiscounted costs related to known remediation obligations. The accuracy of our estimate of environmental liability is affected by several uncertainties such as additional requirements that may be identified in connection with remedial activities, the complexity and evolution of environmental laws and regulations, and the identification of presently unknown remediation requirements. Consequently, our liability could be greater than our current estimate. However, we do not expect that the costs associated with remediation will have a material adverse effect on our financial condition, quarterly or annual results of operations or cash flows.
19.21. Subsequent events. We evaluated all events or transactions that occurred after April 30,On August 26, 2011, throughwe completed the datepreviously announced acquisition of Value Plastics, Inc., a leading designer and manufacturer of precision engineered, plastic molded, single-use fluid connection components used primarily in critical flow control applications for healthcare and medical-device markets. Headquartered in Fort Collins, Colorado, Value Plastics employs approximately 75 people and had revenues of approximately $26,000 for the financial statementsyear ended December 31, 2010. The purchase price was $250,000, subject to adjustment as provided in the purchase agreement. Cash and existing lines of credit were issued, and there were no material recognizable or non-recognizable subsequent events.used for the purchase. Value Plastics will be reported in our Advanced Technology Systems segment.

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ITEM 2.MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following is Management’s discussion and analysis of certain significant factors affecting our financial condition and results of operations for the periods included in the accompanying condensed consolidated financial statements.
Results of Operations
Results of Operations
On March 11, 2011, a severe earthquake and tsunami occurred in Japan. Minor damage occurred at several of our facilities there, and we recorded an immaterial charge in the three months ended April 30, 2011. The charge was below our insurance policy deductible. Our operations in Japan represented approximately 9% of our 2010 worldwide sales. We do not expect a significant impact on our results of operations, but uncertainty still exists with respect to the availability of electrical power, the damage to nuclear power plants, impact to other infrastructure, and the resulting commercial impact.
Sales
Worldwide sales for the three months ended April 30, 2011 were $318,924, an increase of $67,265, or 26.7%, from sales of $251,659 for the comparable period of 2010. Sales volume increased 22.8%, and favorable effects of currency translations increased sales by 3.9%. Sales increased in all three business segments and all five geographic regions in which we operate.
Sales of the Adhesive Dispensing Systems segment for the three months ended April 30, 2011 were $159,432, an increase of $29,281, or 22.5% from the comparable period of 2010. Sales volume increased 17.5%, and favorable currency translation effects increased sales by 5.0%. Sales volume increased in all geographic regions and was most pronounced in the Americas, Asia Pacific and Japan regions. Sales increased in both consumer non-durable and consumer durable end markets.
Advanced Technology Systems segment sales for the three months ended April 30, 2011 were $113,013 compared to $90,068 in the comparable period of 2010, an increase of $22,945, or 25.5%. Volume increased 23.1%, and currency translation effects increased sales by 2.4%. Within the segment, volume increases occurred in all geographic regions except Europe and were most pronounced in Asia Pacific and the Americas. Consumer electronics markets, particularly mobile devices and components, drove the sales increase.
Effective November 1, 2010, the Industrial Coating Systems segment includes our industrial UV Curing product line that had previously been reported in the Advanced Technology Systems segment, where it was combined with our former UV Curing graphic arts and lamps product lines that were sold in 2010. This change more closely reflects the change in management of this product line and its related growth opportunities. Prior year results have been reclassified to reflect the segment change.
Sales of the Industrial Coating Systems segment for the three months ended April 30, 2011 were $46,479, an increase of $15,039, or 47.8%, from sales of $31,440 for the three months ended April 30, 2010. Volume increased 44.2%, and currency translation effects increased sales by 3.6%. Sales volume increased more than 25% in all geographic regions and was most pronounced in the United States. The sales increase was driven by higher system orders in consumer durable markets.
On March 11, 2011, a severe earthquake and tsunami occurred in Japan. Minor damage occurred at several of our facilities there, and we recorded an immaterial charge in the three months ended April 30, 2011. The charge was below our insurance policy deductible. Our operations in Japan represented approximately 9% of our 2010 worldwide sales. We do not expect a significant impact on our results of operations, but uncertainty continues to exist with respect to the availability of electrical power, the effects of damage to nuclear power plants, impact on other infrastructure, and the resulting commercial impact.
Sales
Worldwide sales for the three months ended July 31, 2011 were $312,255, an increase of $33,134, or 11.9%, from sales of $279,121 for the comparable period of 2010. Sales volume increased 5.2%, and favorable effects of currency translations increased sales by 6.7%. Sales increased in all three business segments and all geographic regions in which we operate, except Japan.
Sales of the Adhesive Dispensing Systems segment for the three months ended July 31, 2011 were $153,071, an increase of $17,554, or 13.0% from the comparable period of 2010. Sales volume increased 3.6%, and favorable currency translation effects increased sales by 9.4%. The increase in sales volume was driven by the Americas, Asia Pacific and Europe regions. The sales increase was driven by consumer non-durable end- markets.
Advanced Technology Systems segment sales for the three months ended July 31, 2011 were $111,652 compared to $102,980 in the comparable period of 2010, an increase of $8,672, or 8.4%. Volume increased 4.8%, and currency translation effects increased sales by 3.6%. Within the segment, the volume increase can be traced to the U.S., Americas and Europe regions. Dispensing and surface treatment product lines showed particular strength.
Effective November 1, 2010, the Industrial Coating Systems segment includes our industrial UV Curing product line that had previously been reported in the Advanced Technology Systems segment, where it was combined with our former UV Curing graphic arts and lamps product lines that were sold in 2010. This change more closely reflects the change in management of this product line and its related growth opportunities. Prior year results have been reclassified to reflect the segment change.
Sales of the Industrial Coating Systems segment for the three months ended July 31, 2011 were $47,532, an increase of $6,908, or 17.0%, from sales of $40,624 for the three months ended July 31, 2010. Volume increased 11.2%, and currency translation effects increased sales by 5.8%. Sales volume increased in all geographic regions, except Japan. Within this segment, sales increased across all product lines.

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On a geographic basis, sales in the United States increased 19.0% for the three months ended April 30, 2011 from the three months ended April 30, 2010. Sales in the Americas region were up 39.4%, with volume increasing 34.7%On a geographic basis, sales in the United States increased 8.2% for the three months ended July 31, 2011 from the three months ended July 31, 2010. Sales in the Americas region were up 25.4%, with volume increasing 18.9% and favorable currency effect adding 6.5%. The European sales increase of 19.2% consisted of 4.9% volume and 14.3% from currency effects. Sales in Japan for the three months ended July 31, 2011 decreased 0.7% from the comparable period of the prior year. A decrease of 10.8% in sales volume was partially offset by favorable currency effects of 10.1%. Asia Pacific sales increased 8.2%, with volume increasing 4.3% and favorable currency effects adding 3.9%.
Worldwide sales for the nine months ended July 31, 2011 were $902,141, an increase of $150,772, or 20.1% from sales of $751,369 for the comparable period of 2010. Of the increase, 16.6% related to volume, and favorable effects of currency translations increased sales by 3.5%. Sales increased in all three business segments and all five geographic regions in which we operate.
Sales of the Adhesive Dispensing Systems segment for the nine months ended July 31, 2011 were $449,479, an increase of $66,798, or 17.5% from the comparable period of 2010. Sales volume increased 12.9%, and favorable currency translation effects increased sales by 4.6%. Volume increased in all geographic regions and was most pronounced in the Asia Pacific and Americas regions. Sales increased in both consumer non-durable and consumer durable end markets.
Advanced Technology Systems segment sales for the nine months ended July 31, 2011 were $321,339 compared to $267,888 in the comparable period of 2010, an increase of $53,451, or 20.0%. Volume increased 18.2%, and currency translation effects increased sales by 1.8%. Within the segment, volume increases occurred in all geographic regions and were most pronounced in Asia Pacific due to higher demand in consumer electronics end-markets. Dispensing and surface treatment product lines also showed particular strength.
Sales of the Industrial Coating Systems segment for the nine months ended July 31, 2011 were $131,323, an increase of $30,523, or 30.3%, from the nine months ended July 31, 2010. Volume increased 26.8%, and currency translation effects increased sales by 3.5%. Sales volume increased in all geographic regions and was most pronounced in the United States, Americas and Asia Pacific regions. Within this segment, sales increased across all product lines.
On a geographic basis, sales in the United States increased 15.3% for the nine months ended July 31, 2011 from the nine months ended July 31, 2010. Sales in the Americas region were up 28.2%, with volume increasing 23.3% and favorable currency effect adding 4.9%. The European sales increase of 17.5% consisted of 13.3% volume and favorable currency effects of 4.2%. Sales in Japan for the nine months ended July 31, 2011 increased 22.2% from the comparable period of the prior year. The increase consisted of volume of 11.6% and favorable currency effects of 10.6%. Asia Pacific sales increased 25.3%, with volume increasing 22.2% and favorable currency effects adding 3.1%.
Operating Profit
Cost of sales for the three months ended July 31, 2011 were $124,205, up from $113,320 in 2010. Cost of sales for the nine months ended July 31, 2011 were $350,168, up from $300,026 in 2010. The gross margin percentage was 60.2% for the three months ended July 31, 2011, as compared to 59.4% for the comparable period of 2010. The gross margin percentage was 61.2% for the nine months ended July 31, 2011, as compared to 60.1% for the comparable period of 2010. The increases in gross margin percentages in 2011 were primarily due to revenue mix, low-cost sourcing, higher absorption of fixed overhead costs and favorable currency effect adding 4.7%. The European sales increase of 18.4% consisted of 13.3% volume and 5.1% from currency effects. Sales in Japan for the three months ended April 30, 2011 increased 33.5% from the comparable period of the prior year. The increase consisted of volume of 21.6% and favorable currency effects of 11.9%. Asia Pacific sales increased 40.1%, with volume increasing 36.6% and favorable currency effects adding 3.5%.
Worldwide sales for the six months ended April 30, 2011 were $589,886, an increase of $117,638, or 24.9% from sales of $472,248 for the comparable period of 2010. Of the increase, 23.4% related to volume, and favorable effects of currency translations increased sales by 1.5%. Sales increased in all three business segments and all five geographic regions in which we operate.
Sales of the Adhesive Dispensing Systems segment for the six months ended April 30, 2011 were $296,408, an increase of $49,244, or 19.9% from the comparable period of 2010. Sales volume increased 17.9%, and favorable currency translation effects increased sales by 2.0%. Volume increased in all geographic regions and was most pronounced in the Asia Pacific, Americas and Japan regions. Sales increased in both consumer non-durable and consumer durable end markets.
Advanced Technology Systems segment sales for the six months ended April 30, 2011 were $209,687 compared to $164,908 in the comparable period of 2010, an increase of $44,779, or 27.2%. Volume increased 26.4%, and currency translation effects increased sales by 0.8%. Within the segment, volume increases occurred in all geographic regions and were most pronounced in Asia Pacific due to higher demand in consumer electronics end markets.
Sales of the Industrial Coating Systems segment for the six months ended April 30, 2011 were $83,791, an increase of $23,615, or 39.2%, from the six months ended April 30, 2010. Volume increased 37.3%, and currency translation effects increased sales by 1.9%. Sales volume increased more than 25% in all geographic regions and was most pronounced in the United States. The sales increase was driven by higher system orders in consumer durable markets.
On a geographic basis, sales in the United States increased 19.3% for the six months ended April 30, 2011 from the six months ended April 30, 2010. Sales in the Americas region were up 30.0%, with volume increasing 26.1% and favorable currency effect adding 3.9%. The European sales increase of 16.6% consisted of 17.5% volume offset by 0.9% from currency effects. Sales in Japan for the six months ended April 30, 2011 increased 37.5% from the comparable period of the prior year. The increase consisted of volume of 26.5% and favorable currency effects of 11.0%. Asia Pacific sales increased 37.3%, with volume increasing 34.7% and favorable currency effects adding 2.6%.

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Operating Profit
Cost of sales for the three months ended April 30, 2011 were $121,172, up from $97,792Selling and administrative expenses for the three months ended July 31, 2011 were $109,394, compared to $98,106 for the comparable period of 2010. This represented an increase of $11,288, or 11.5%. Currency translation effects increased selling and administrative expenses by 6.0%, and the current year included $3,136 related to a fee paid to withdraw from a multiemployer employee pension fund in Japan. The remainder of the increase was largely due to higher compensation expenses resulting from a higher level of business activity in the current year. Selling and administrative expenses for the nine months ended July 31, 2011 were $315,365, compared to $289,788 for the comparable period of 2010. This represented an increase of $25,577, or 8.8%. The increase was largely due to higher compensation expenses resulting from a higher level of business activity in the current year. Currency translation effects increased selling and administrative costs by 2.8% for the nine-month period. In addition, during the three months ended April 30, 2011, we announced the decision to consolidate operations and reduce the number of our Adhesive Dispensing Systems segment facilities in Georgia. As a result, two of our facilities were written down to fair value resulting in impairment losses of $1,322 that were recorded in selling and administrative expense.
Selling and administrative expenses for the three months ended July 31, 2011 as a percent of sales was 35.0% compared to 35.1% for the comparable period of 2010. For the nine months ended July 31, 2011, these expenses as a percent of sales decreased to 35.0% from 38.6% for the comparable period of 2010. The decrease was primarily the result of higher sales in the current year.
Operating profit as a percentage of sales was 25.2% for the three months ended July 31, 2011, up from 24.3% for the comparable period of 2010. Operating profit as a percentage of sales was 26.2% for the nine months ended July 31, 2011, up from 21.5% for the comparable period of 2010. The increases were primarily due to higher sales volume supported by a more efficient cost structure.
Operating profit as a percent of sales for the Adhesive Dispensing Systems segment increased to 33.6% for the three months ended July 31, 2011 from 32.3% in 2010 and to 35.0% for the nine months ended July 31, 2011 from 31.3% for the comparable period of 2010. The increases were primarily due to higher sales volume supported by a more efficient cost structure. Operating profit for the nine months ended July 31, 2011 included impairment losses of $1,322 on two facilities that were written down to fair value.
For the Advanced Technology Systems segment, operating profit as a percent of sales for the three months ended July 31, 2011 was 27.7% compared to 25.8% for the three months ended July 31, 2010. For the nine months ended July 31, 2011 operating profit as a percent of sales was 27.3%, up from 22.0% last year. The increases were primarily due to higher sales volume supported by a more efficient cost structure.
Operating profit for the Industrial Coating Systems segment was 17.7% of sales for the three months ended July 31, 2011, compared to 12.3% for the three months ended July 31, 2010. For the nine months ended July 31, 2011, operating profit was 14.6% of sales, compared 6.8% in the same period of 2010. The increases were primarily due to higher sales volume supported by a more efficient cost structure.
Interest and Other Income (Expense)
Interest expense for the three months ended July 31, 2011 was $827, down from $1,580 for the three months ended July 31, 2010. Interest expense for the nine months ended July 31, 2011 was $3,560, down from $4,661 for the nine months ended July 31, 2010. The decreases were primarily due to lower borrowing levels and a reduction of interest expense related to unrecognized tax benefits.
Other income was $169 for the three months ended July 31, 2011, and $177 in the comparable period of the prior year. Included in those amounts were foreign exchange gains, net of $108 in 2011 and $239 in 2010. Other income for the nine months ended July 31, 2011 was $2,896, compared to $700 for the nine months ended July 31, 2010. Included in those amounts were foreign exchange gains, net of $1,897 in 2011 and foreign exchange losses, net of $38 in 2010. Cost of sales for the six months ended April 30, 2011 were $225,963, up from $186,706 in 2010. The gross margin percentage was 62.0% for the three months ended April 30, 2011, as compared to 61.1% for the comparable period of 2010. The gross margin percentage was 61.7% for the six months ended April 30, 2011, as compared to 60.5% for the comparable period of 2010. The increases in gross margin percentages in 2011 were primarily due to revenue mix, low-cost sourcing, higher absorption of fixed overhead costs and favorable currency effects.
Selling and administrative expenses for the three months ended April 30, 2011 were $105,324, compared to $96,277 for the comparable period of 2010. This represented an increase of $9,047, or 9.4%. Selling and administrative expenses for the six months ended April 30, 2011 were $205,971, compared to $191,682 for the comparable period of 2010. This represented an increase of $14,289, or 7.5%. The increases were largely due to higher compensation expenses resulting from a higher level of business activity in the current year. Currency translation effects increased selling and administrative costs by 3.0% for the three-month period and 1.1% for the six-month period. In addition, on March 28, 2011, we announced the decision to consolidate operations and reduce the number of facilities in Georgia related to our Adhesive Dispensing Systems Segment. As a result, two of our facilities were written down to fair value resulting in impairment losses of $1,322 that were recorded in selling and administrative expense for the three and six months ended April 30, 2011.
Selling and administrative expenses for the three months ended April 30, 2011 as a percent of sales decreased to 33.0% from 38.0% for the comparable period of 2010. For the six months ended April 30, 2011, these expenses as a percent of sales decreased to 34.9% from 40.4% for the comparable period of 2010. The decreases were primarily the result of higher sales in the current year.
Operating profit as a percentage of sales was 29.0% for the three months ended April 30, 2011, up from 22.9% for the comparable period of 2010. Operating profit as a percentage of sales was 26.8% for the six months ended April 30, 2011, up from 19.9% for the comparable period of 2010. The increases were primarily due to higher sales volume supported by a more efficient cost structure.
Operating profit as a percent of sales for the Adhesive Dispensing Systems segment increased to 37.4% for the three months ended April 30, 2011 from 33.5% in 2010 and to 35.7% for the six months ended April 30, 2011 from 30.7% for the comparable period of 2010. The increases were primarily due to higher sales volume supported by a more efficient cost structure. Operating profit for the three and six months ended April 30, 2011 includes impairment losses of $1,322 on two facilities that were written down to fair value.
For the Advanced Technology Systems segment, operating profit as a percent of sales for the three months ended April 30, 2011 was 29.8% compared to 21.5% for the three months ended April 30, 2010. For the six months ended April 30, 2011 operating profit as a percent of sales was 27.1%, up from 19.6% last year. The increases were primarily due to higher sales volume supported by a more efficient cost structure.
Operating profit for the Industrial Coating Systems segment 16.3% of sales for the three months ended April 30, 2011, compared to 5.4% for the three months ended April 30, 2010. For the six months ended April 30, 2011, operating profit was 12.8% of sales, compared 3.0% in the same period of 2010. The increases were primarily due to higher sales volume supported by a more efficient cost structure.

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Interest and Other Income (Expense)
Interest expense for the three months ended April 30, 2011 was $1,338, down 17.7% from $1,625 for the three months ended April 30, 2010. Interest expense for the six months ended April 30, 2011 was $2,733, down 11.3% from $3,081 for the six months ended April 30, 2010. The decreases were primarily due to lower borrowing levels.
Other income was $1,791 for the three months ended April 30, 2011, and $204 in the comparable period of the prior year. Included in those amounts were foreign exchange gains of $1,153 in 2011 and foreign exchange losses of $488 in 2010. Other income for the six months ended April 30, 2011 was $2,727, compared to $523 for the six months ended April 30, 2010. Included in those amounts were foreign exchange gains of $1,789 in 2011 and foreign exchange losses of $277 in 2010.
Income Taxes
The effective tax rates for the three and six-month periods ending April 30, 2011 were 29.8% and 29.7%, compared to 42.5% and 35.5% for the comparable periods ending April 30, 2010.
In December 2010, Congress passed and the President signed the Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010, which provided retroactive reinstatement of a research credit. As a result, we recorded an additional tax benefit related to 2010 of $200 in the three months ended April 30, 2011, and $1,242 in the three months ended January 31, 2011. Additionally, in the three month period ended April 30, 2011 we recorded a $549 tax benefit related to prior years for deductions associated with the Company’s Employee Stock Ownership Plan.
As a result of the enactment in March 2010 of the Patient Protection and Affordable Care Act and the subsequent enactment of the Health Care and Education Reconciliation Act of 2010, we recorded an additional tax charge of $5,255 in the three months ended April 30, 2010. The charge is due to a reduction in the value of our deferred tax asset as a result of a change to the tax treatment associated with Medicare Part D subsidies.
The effective tax rate for the six months ended April 30, 2010 also was positively impacted by consolidation of certain operations and legal entities, resulting in a $3,500 tax benefit. This effect was partially offset by $438 of other adjustments related to our 2009 tax provision.
Net Income
Net income for the three months ended April 30, 2011 was $65,242, or $0.95 per share on a diluted basis, compared to $32,431, or $0.47 per share on a diluted basis in the same period of 2010. This represents a 101.2% increase in net income and a 102.1% increase in earnings per share. For the six months ended April 30, 2011, net income was $111,139, or $1.61 per share on a diluted basis, compared to $59,163, or $0.86 per share for the six months ended April 30, 2010. This represents an 87.9% increase in net income and an 87.2% increase in earnings per share.
Foreign Currency Effects
In the aggregate, average exchange rates for 2011 used to translate international sales and operating results into U.S. dollars compared favorably with average exchange rates existing during 2010. It is not possible to precisely measure the impact on operating results arising from foreign currency exchange rate changes, because of changes in selling prices, sales volume, product mix and cost structure in each country in which we operate. However, if transactions for the three months ended April 30, 2011 were translated at exchange rates in effect during the same period of 2010, sales would have been approximately $9,900 lower while third-party costs and expenses would have been approximately $5,200Income Taxes
The effective tax rates for the three and nine-month periods ending July 31, 2011 were 27.7% and 29.1%, compared to 16.8% and 27.6% for the comparable periods ending July 31, 2010.
The tax rate for the three months ended July 31, 2011, was impacted by a favorable adjustment to unrecognized tax benefits primarily related to settlements with tax authorities that reduced income taxes by $2,027. Additionally, during the three months ending July 31, 2011, we recorded a tax benefit of $368 related to an adjustment of deferred taxes resulting from a tax rate reduction in the United Kingdom.
In December 2010, Congress passed and the President signed the Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010, which provided retroactive reinstatement of a research credit. As a result, we recorded an additional tax benefit related to 2010 of $1,580 in the nine months ended July 31, 2011. Additionally, in the nine month period ending July 31, 2011 we recorded a $549 tax benefit related to prior years for deductions associated with the Company’s Employee Stock Ownership Plan.
The effective tax rate for the three months ended July 31, 2010 was positively impacted by a tax benefit of $10,700 from the write-off of our tax basis in our UV graphic arts and lamps product lines.
The effective tax rate for the nine months ended July 31, 2010 was negatively impacted by the enactment in March 2010 of the Patient Protection and Affordable Care Act and the subsequent enactment of the Health Care and Education Reconciliation Act of 2010, resulting in an additional tax charge of $5,255. The charge is due to a reduction in the value of our deferred tax asset as a result of a change to the tax treatment associated with Medicare Part D subsidies. This was partially offset by the consolidation of certain operations and legal entities, resulting in a $3,500 tax benefit.
Net Income
Net income for the three months ended July 31, 2011 was $56,550, or $0.82 per share on a diluted basis, compared to $55,329, or $0.80 per share on a diluted basis in the same period of 2010. This represents a 2.2% increase in net income and a 2.5% increase in earnings per share. For the nine months ended July 31, 2011, net income was $167,689, or $2.44 per share on a diluted basis, compared to $114,492, or $1.67 per share for the nine months ended July 31, 2010. This represents a 46.5% increase in net income and a 46.1% increase in earnings per share.
Foreign Currency Effects
In the aggregate, average exchange rates for 2011 used to translate international sales and operating results into U.S. dollars compared favorably with average exchange rates existing during 2010. It is not possible to precisely measure the impact on operating results arising from foreign currency exchange rate changes, because of changes in selling prices, sales volume, product mix and cost structure in each country in which we operate. However, if transactions for the three months ended July 31, 2011 were translated at exchange rates in effect during the same period of 2010, sales would have been approximately $18,800 lower while third-party costs and expenses would have been approximately $10,900 lower. If transactions for the nine months ended July 31, 2011 were translated at exchange rates in effect during the same period of 2010, sales would have been approximately $26,000 lower and third party costs and expenses would have been approximately $13,700 lower. If transactions for the six months ended April 30, 2011 were translated at exchange rates in effect during the same period of 2010, sales would have been approximately $7,200 lower and third party costs would have been approximately $2,800 lower.

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Nordson Corporation
Financial Condition
During the six months ended April 30, 2011, cash and cash equivalents increased $24,456. Cash provided by operations during this period was $112,062, compared to $18,941 for the six months ended April 30, 2010. Cash of $131,387 was generated from net income adjusted for non-cash income and expenses as compared to $80,693 last year. The increase is primarily due to higher net income. Changes in operating assets and liabilities used $19,325 of cash in the current year, compared to $61,752 in 2010. Included in the prior year amount was $52,028 of cash contributions to U.S. pension plans.
Cash used in investing activities was $24,327 for the six months ended April 30, 2011, compared to $23,340 in the comparable period of the prior year. Current year capital expenditures were $10,714, up from $4,231 from 2010. Significant expenditures included continued rollout of our SAP enterprise management software and construction of our new corporate headquarters building that replaced the facility sold in 2009. The acquisition of Micromedics, Inc. used $21,296 of cash in 2011, and the acquisition of GLT used $18,492 of cash in 2010. Cash proceeds of $7,552 were received in 2011 from the maturity of bank certificates of deposit that had been classified as short-term marketable securities.
Cash used by financing activities was $65,056 for the six months ended April 30, 2011, compared to cash provided by financing activities of $20,813 for the six months ended April 30, 2010. In the current year, cash of $45,497 was used for repayment of net short and long-term borrowings. In addition, cash of $19,134 was used for the repurchase of common shares, and cash of $14,291 was used for dividend payments. Cash of $9,282 was provided by the issuance of common stock related to stock option exercises.
The following is a summary of significant changes in balance sheet captions from the end of 2010 to April 30, 2011. Receivables increased $10,151 due to higher sales in the second quarter of 2011 compared to the fourth quarter of 2010. Inventories increased $15,818 due to the higher level of business activity expected in the third quarter of 2011 as compared to the first quarter and inventory acquired in the Micromedics acquisition. Prepaid expenses increased $2,589 primarily due to annual insurance and pension payments made in the first half of the year. Goodwill increased $14,347 primarily as a result of the Micromedics acquisition. Other intangibles — net increased $4,739; the additional Micromedics intangible assets of $7,500 were offset by $4,047 of amortization. The $13,119 decrease in accrued liabilities is primarily due to payments of annual incentive compensation in the first quarter and a donation to the Nordson Corporation Foundation. The increase of $5,261 in long-term deferred income taxes was primarily due to amortization of goodwill for tax purposes and Micromedics purchase accounting adjustments.
Critical Accounting Policies
Our condensed consolidated financial statements and accompanying notes have been prepared in accordance with accounting principles generally accepted in the United States for interim financial information. The preparation of these financial statements requires management to make estimates, judgments and assumptions that affect reported amounts of assets, liabilities, revenues and expenses. On an ongoing basis, we evaluate the accounting policies and estimates used to prepare financial statements. Estimates are based on historical experience and assumptions believed to be reasonable under current facts and circumstances. Actual amounts and results could differ from these estimates used by management.
Certain accounting policies that require significant management estimates and are deemed critical to the results of operations or financial position were discussed in Item 7 of the 10-K for the year ended October 31, 2010. There were no material changes in these policies during the three months ended April 30, 2011.

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Nordson Corporation
Outlook
Overall orders remain at the very high level, though year-over-year growth is transitioning toward a more sustainable long-term level. We will continue to monitor macroeconomic issues and react accordingly. However, our focus continues to be on the long term, and we will continue to invest to support growth opportunities.
We will continue to look for strategic acquisition opportunities. We will also continue to develop new applications and markets for our technologies and move forward with additional lean and other operational initiatives to enhance our financial performance.
For the third quarter of 2011, sales are expected to increase 13% to 17% compared to the same period a year ago, including an estimated 7% favorable effect associated with currency translation. Diluted earnings per share are expected in the range of $0.84 to $0.91.
Safe Harbor Statements Under The Private Securities Litigation Reform Act Of 1995
This Form 10-Q, particularly “Management’s Discussion and Analysis,” contains forward-looking statements within the meaning of the Securities Act of 1933, as amended, the Securities Exchange Act of 1934, as amended, and the Private Securities Litigation Reform Act of 1995. Such statements relate to, among other things, income, earnings, cash flows, changes in operations, operating improvements, businesses in which we operate and the U.S. and global economies. Statements in this 10-Q that are not historical are hereby identified as “forward-looking statements” and may be indicated by words or phrases such as “anticipates,” “supports,” “plans,” “projects,” “expects,” “believes,” “should,” “would,” “could,” “hope,” “forecast,” “management is of the opinion,” use of the future tense and similar words or phrases.
In light of these risks and uncertainties, actual events and results may vary significantly from those included in or contemplated or implied by such statements. Readers are cautioned not to place undue reliance on such forward-looking statements. These forward-looking statements speak only as of the date made. We undertake no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law.
Factors that could cause actual results to differ materially from the expected results are discussed in Item 1A, Risk Factors in our 10-K for the year ended October 31, 2010.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Information regarding our financial instruments that are sensitive to changes in interest rates and foreign currency exchange rates was disclosed in our 10-K for the year ended October 31, 2010. The information disclosed has not changed materially in the interim period since then.

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Nordson Corporation
ITEM 4.CONTROLS AND PROCEDURES
Our management with the participation of the principal executive officer (President and Chief Executive Officer) and principal financial officer (Vice President, Chief Financial Officer) has reviewed and evaluated our disclosure controls and procedures (as defined in the Securities Exchange Act Rule 13a-15(e)) as of April 30, 2011. Based on that evaluation, our management, including the principal executive and financial officers, has concluded that our disclosure controls and procedures were effective as of April 30, 2011 in ensuring that information required to be disclosed in the reports that we file or submit under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms and is accumulated and communicated to management, including the principal executive officer and principal financial officer, as appropriate to allow timely decisions regarding required disclosure.
There were no changes in our internal controls over financial reporting that occurred during the three months ended AprilLiquidity and Capital Resources
During the nine months ended July 31, 2011, cash and cash equivalents increased $26,728. Cash provided by operations during this period was $180,292, compared to $66,529 for the nine months ended July 31, 2010. Cash of $198,278 was generated from net income adjusted for non-cash income and expenses as compared to $163,853 last year. The increase is primarily due to higher net income, partially offset by lower deferred income taxes. Changes in operating assets and liabilities used $17,986 of cash in the current year, compared to $97,324 in 2010, which included $52,028 of cash contributions to U.S. pension plans.
Cash used in investing activities was $41,251 for the nine months ended July 31, 2011, compared to $27,885 in the comparable period of the prior year. Current year capital expenditures were $14,306, up from $7,812 in 2010. Significant expenditures included continued rollout of our SAP enterprise management software and construction of our new corporate headquarters building that replaced the facility sold in 2009. The acquisition of Micromedics, Inc. and Verbruggen used $34,627 of cash in 2011, and the acquisition of GLT used $18,492 of cash in 2010. Cash proceeds of $7,552 were received in 2011 from the maturity of bank certificates of deposit that had been classified as short-term marketable securities.
Cash used by financing activities was $114,673 for the nine months ended July 31, 2011, compared to $9,025 for the nine months ended July 31, 2010. In the current year, cash of $60,137 was used for repayment of net short and long-term borrowings. In addition, cash of $46,342 was used for the repurchase of common shares, and cash of $21,442 was used for dividend payments. Cash of $9,620 was provided by the issuance of common stock related to stock option exercises.
On June 30, 2011, we entered into a $150,000 three-year Private Shelf Note agreement with an insurance company. Borrowings under the agreement may be up to 12 years, with an average life of up to 10 years and are unsecured with covenants similar to our revolving credit facility. The interest rate on each borrowing can be fixed or floating and is based upon the market rate at the borrowing date. At July 31, 2011, there were no borrowings outstanding under this agreement.
The following is a summary of significant changes in balance sheet captions from the end of 2010 to July 31, 2011. Receivables increased $16,057 due to higher sales in the third quarter of 2011 compared to the fourth quarter of 2010. Inventories increased $20,071 due to the higher level of business activity expected in the fourth quarter of 2011 as compared to the first quarter and inventory acquired in the Micromedics and Verbruggen acquisitions. Prepaid expenses increased $3,034 primarily due to insurance and pension payments made in the first three quarters of the year. Goodwill increased $22,281 primarily as a result of the Micromedics and Verbruggen acquisitions. Other intangibles — net increased $6,554. This increase related primarily to our acquisitions, which added $11,517, offset by total amortization expense of $5,699. The decrease of $6,130 in income taxes payable was primarily due to a U.S. tax payment made in the third quarter, partially offset by an increase in pretax income in 2011. The increase in customer advanced payments can be traced to a higher level of engineered system orders that require partial payment in advance. The increase of $10,005 in long-term deferred income tax liabilities was primarily due to amortization of goodwill for tax purposes and Micromedics and Verbruggen purchase accounting adjustments.
Critical Accounting Policies
Our condensed consolidated financial statements and accompanying notes have been prepared in accordance with accounting principles generally accepted in the United States for interim financial information. The preparation of these financial statements requires management to make estimates, judgments and assumptions that affect reported amounts of assets, liabilities, revenues and expenses. On an ongoing basis, we evaluate the accounting policies and estimates used to prepare financial statements. Estimates are based on historical experience and assumptions believed to be reasonable under current facts and circumstances. Actual amounts and results could differ from these estimates used by management.
Certain accounting policies that require significant management estimates and are deemed critical to the results of operations or financial position were discussed in Item 7 of the 10-K for the year ended October 31, 2010. There were no material changes in these policies during the three months ended July 31, 2011.

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Nordson Corporation
Outlook
Order rates remain positive compared to the prior year but are reflective of the current lower macroeconomic growth. We will continue to monitor macroeconomic issues and react accordingly. However, our focus continues to be on the long term, and we will continue to invest strategically to support growth opportunities.
We will continue to look for strategic acquisition opportunities. We will also continue to develop new applications and markets for our technologies and move forward with additional lean and other operational initiatives to enhance our financial performance.
For the fourth quarter of 2011, sales are expected to increase 9% to 13% compared to the same period a year ago, including an estimated 4% favorable effect associated with currency translation. Diluted earnings per share are expected in the range of $0.77 to $0.84, inclusive of a $.02 per share charge related to anticipated restructuring activities.
Safe Harbor Statements Under The Private Securities Litigation Reform Act Of 1995
This Form 10-Q, particularly “Management’s Discussion and Analysis,” contains forward-looking statements within the meaning of the Securities Act of 1933, as amended, the Securities Exchange Act of 1934, as amended, and the Private Securities Litigation Reform Act of 1995. Such statements relate to, among other things, income, earnings, cash flows, changes in operations, operating improvements, businesses in which we operate and the U.S. and global economies. Statements in this 10-Q that are not historical are hereby identified as “forward-looking statements” and may be indicated by words or phrases such as “anticipates,” “supports,” “plans,” “projects,” “expects,” “believes,” “should,” “would,” “could,” “hope,” “forecast,” “management is of the opinion,” use of the future tense and similar words or phrases.
In light of these risks and uncertainties, actual events and results may vary significantly from those included in or contemplated or implied by such statements. Readers are cautioned not to place undue reliance on such forward-looking statements. These forward-looking statements speak only as of the date made. We undertake no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law.
Factors that could cause actual results to differ materially from the expected results are discussed in Item 1A, Risk Factors in our 10-K for the year ended October 31, 2010.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Information regarding our financial instruments that are sensitive to changes in interest rates and foreign currency exchange rates was disclosed in our 10-K for the year ended October 31, 2010. The information disclosed has not changed materially in the interim period since then.

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Nordson Corporation
ITEM 4. CONTROLS AND PROCEDURES
Our management with the participation of the principal executive officer (President and Chief Executive Officer) and principal financial officer (Vice President, Chief Financial Officer) has reviewed and evaluated our disclosure controls and procedures (as defined in the Securities Exchange Act Rule 13a-15(e)) as of July 31, 2011. Based on that evaluation, our management, including the principal executive and financial officers, has concluded that our disclosure controls and procedures were effective as of July 31, 2011 in ensuring that information required to be disclosed in the reports that we file or submit under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms and is accumulated and communicated to management, including the principal executive officer and principal financial officer, as appropriate to allow timely decisions regarding required disclosure.
There were no changes in our internal controls over financial reporting that occurred during the three months ended July 31, 2011 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
Part II — Other Information
ITEM 1.LEGAL PROCEEDINGS
We are involved in pending or potential litigation regarding environmental, product liability, patent, contract, employee and other matters arising from the normal course of business, including the environmental matter discussed below. After consultation with legal counsel, we do not expect that resolutions of these matters will result in a material effect on our financial condition, quarterly or annual results of operations or cash flows.
We have voluntarily agreed with the City of New Richmond, Wisconsin and other Potentially Responsible Parties to share costs associated with the remediation of the City of New Richmond municipal landfill (the “Site”) and constructing a potable water delivery system serving the impacted area down gradient of the Site. At April 30, 2011 and October 31, 2010, our accruals for the ongoing operation, maintenance and monitoring obligation at the Site were $795 and $885, respectively.
ITEM 1. LEGAL PROCEEDINGS
We are involved in pending or potential litigation regarding environmental, product liability, patent, contract, employee and other matters arising from the normal course of business, including the environmental matter discussed below. After consultation with legal counsel, we do not expect that resolutions of these matters will result in a material effect on our financial condition, quarterly or annual results of operations or cash flows.
We have voluntarily agreed with the City of New Richmond, Wisconsin and other Potentially Responsible Parties to share costs associated with the remediation of the City of New Richmond municipal landfill (the “Site”) and constructing a potable water delivery system serving the impacted area down gradient of the Site. At July 31, 2011 and October 31, 2010, our accruals for the ongoing operation, maintenance and monitoring obligation at the Site were $795 and $885, respectively.
The liability for environmental remediation represents management’s best estimate of the probable and reasonably estimable undiscounted costs related to known remediation obligations. The accuracy of our estimate of environmental liability is affected by several uncertainties such as additional requirements that may be identified in connection with remedial activities, the complexity and evolution of environmental laws and regulations, and the identification of presently unknown remediation requirements. Consequently, our liability could be greater than our current estimate. However, we do not expect that the costs associated with remediation will have a material adverse effect on our financial condition, quarterly or annual results of operations or cash flows.
ITEM 1A.RISK FACTORS
ITEM 1A. RISK FACTORS
Information regarding our risk factors was disclosed in our 10-K for the year ended October 31, 2010. The information disclosed has not changed materially in the interim period since then.

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ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
The following table summarizes common stock repurchased by the Company during the three months ended April 30, 2011:
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
                 
          Total Number of Maximum Number
  Total     Shares Purchased of Shares that
  Number Average as Part of Publicly May Yet Be Purchased
  of Shares Price Paid Announced Plans Under the Plans
(In thousands, except for per share data) Purchased per Share or Programs (1) or Programs
 
February 1, 2011 to February 28, 2011  162  $48.11   162   406 
March 1, 2011 to March 31, 2011  —       —   406 
April 1, 2011 to April 30, 2011  —       —   406 
                 
Total  162       162     
                 
The following table summarizes common stock repurchased by the Company during the three months ended July 31, 2011:
                 
          Total Number of  Maximum Number 
          Shares Purchased  of Shares that 
  Total Number  Average  as Part of Publicly  May Yet Be Purchased 
  of Shares  Price Paid  Announced Plans  Under the Plans 
(In thousands, except for per share data) Purchased  per Share  or Programs (1)  or Programs 
 
May 1, 2011 to May 31, 2011  44  $49.84   44   1,956 
June 1, 2011 to June 30, 2011  346  $50.83   346   1,610 
July 1, 2011 to July 31, 2011  134  $55.12   132   1,478 
               
Total  524       522     
               
 
(1) In December 2008May 2011 the Board of Directors approved a stock repurchase program of up to 1,0002,000 shares. Uses for repurchased shares include the funding of benefit programs including stock options, nonvested stock and 401(k) matching. Shares purchased are treated as treasury shares until used for such purposes. The repurchase program is funded using working capital.
ITEM 6. EXHIBITS
Exhibit Number:
31.1Certification pursuant to Rule 13a-14(a)/15d-14(a) of the Securities Exchange Act of 1934 by the Chief Executive Officer, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2Certification pursuant to Rule 13a-14(a)/15d-14(a) of the Securities Exchange Act of 1934 by the Chief Financial Officer, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1Certification of CEO pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2Certification of CFO pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101The following financial information from Nordson Corporation’s Quarterly Report on Form 10-Q for the three months ended April 30, 2011, formatted in Extensible Business Reporting Language (XBRL): (i) the Condensed Consolidated Statements of Income for the three and six months ended April 30, 2011 and April 30, 2010, (ii) the Condensed Consolidated Balance Sheets at April 30, 2011 and October 31, 2010, (iii) the Condensed Consolidated Statements of Cash Flows for the six months ended April 30, 2011 and April 30, 2010, and (iv) the Notes to Condensed Consolidated Financial Statements, tagged as blocks of text.
Exhibit Number:
4.1 Note Purchase and Private Shelf Agreement for $150 million between Nordson Corporation and New York Life Investment Management LLC dated as of June 30, 2011.
10.1 Stock Purchase Agreement by and among VP Acquisition Holdings, Inc., the Stockholders of VP Acquisition Holdings, Inc., the Optionholders of VP Acquisition Holdings, Inc., American Capital, Ltd., as Securityholder Representative, and Nordson Corporation dated as of July 15, 2011.
31.1 Certification pursuant to Rule 13a-14(a)/15d-14(a) of the Securities Exchange Act of 1934 by the Chief Executive Officer, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2 Certification pursuant to Rule 13a-14(a)/15d-14(a) of the Securities Exchange Act of 1934 by the Chief Financial Officer, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1 Certification of CEO pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2 Certification of CFO pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101 The following financial information from Nordson Corporation’s Quarterly Report on Form 10-Q for the three months ended July 31, 2011, formatted in Extensible Business Reporting Language (XBRL): (i) the Condensed Consolidated Statements of Income for the three and nine months ended July 31, 2011 and July 31, 2010, (ii) the Condensed Consolidated Balance Sheets at July 31, 2011 and October 31, 2010, (iii) the Condensed Consolidated Statements of Cash Flows for the nine months ended July 31, 2011 and July 31, 2010, and (iv) the Notes to Condensed Consolidated Financial Statements.

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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
     
Date: June 3,September 9, 2011 Nordson Corporation
 		 
 By:  /s/ GREGORY A. THAXTON   
  Gregory A. Thaxton  
  Vice President, Chief Financial Officer
(Principal Financial Officer) 		 
 

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