FORM 10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C.  20549

(Mark One)

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended January 31, 20182020

OR

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)

 

(I.R.S. Employer Identification No.)

 

 

 

28601 Clemens Road

Westlake, Ohio

 

44145

(Address of principal executive offices)

 

(Zip Code)

(440) 892-1580

(Telephone Number)

Securities registered pursuant to Section 12(b) of the Act:

Common Shares without par value

Securities registered pursuant to Section 12(g) of the Act:

None

Title of Each Class

Trading Symbol(s)

Name of Each Exchange
On Which Registered

Common Shares, without par value

NDSN

Nasdaq Stock Market LLC

 

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.    Yes      No  

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).    Yes      No  

Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company.  See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act. (Check one):

 

Large accelerated filer

 

Accelerated filer

 

 

 

 

 

Non-accelerated filer

(Do not check if smaller reporting company)

Smaller reporting company

 

 

 

 

 

Emerging growth company

 

 

 

If an emerging growth company, indicate by check mark if the Registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act  Act.  

Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes      No  

Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date:  Common Shares, without par value as of January 31, 2018:  57,972,664

February 29, 2020:  57,858,486

 

 

 

 

 


Nordson Corporation

 

Table of Contents

 

PartPART I – FINANCIAL INFORMATION

3

 

 

ITEM 1.  FINANCIAL STATEMENTS (UNAUDITED)

3

Condensed Consolidated Statementsof IncomeCONDENSED CONSOLIDATED STATEMENTS OF INCOME

3

Condensed Consolidated Statementsof Comprehensive IncomeCONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

4

Condensed Consolidated Balance SheetsCONDENSED CONSOLIDATED BALANCE SHEETS

5

Condensed Consolidated Statements of Cash FlowsCONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY

6

Notes to Condensed Consolidated Financial StatementsCONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

7

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

8

ITEM 2.  MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

1822

Critical Accounting Policies and Estimates

1822

Results of Operations

1822

Financial Condition

2124

ITEM 3.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

2326

ITEM 4.  CONTROLS AND PROCEDURES

23

Part II – OTHER INFORMATION

24

ITEM 1.  LEGAL PROCEEDINGS

24

ITEM 1A.  RISK FACTORS

24

ITEM 2.  UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

25

ITEM 6.  EXHIBITS

26

 

 

SIGNATUREPART 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

27

ITEM 6.  EXHIBITS

28

SIGNATURE

29

 

 

 

Page 2


Nordson Corporation

 

PartPart I – FINANCIAL INFORMATION

ITEMITEM 1.

FINANCIAL STATEMENTS (UNAUDITED)

Condensed Consolidated Statements of Income

 

Three Months Ended

 

 

Three Months Ended

 

January 31, 2018

 

 

January 31, 2017

 

 

January 31, 2020

 

 

January 31, 2019

 

(In thousands, except for per share data)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Sales

$

550,424

 

 

$

407,470

 

 

$

494,916

 

 

$

497,910

 

Operating costs and expenses:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cost of sales

 

249,421

 

 

 

182,332

 

 

 

231,722

 

 

 

228,934

 

Selling and administrative expenses

 

183,280

 

 

 

149,220

 

 

 

188,101

 

 

 

184,695

 

 

432,701

 

 

 

331,552

 

 

 

419,823

 

 

 

413,629

 

Operating profit

 

117,723

 

 

 

75,918

 

 

 

75,093

 

 

 

84,281

 

Other income (expense):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest expense

 

(11,317

)

 

 

(5,641

)

 

 

(9,740

)

 

 

(12,365

)

Interest and investment income

 

289

 

 

 

273

 

 

 

588

 

 

 

316

 

Other - net

 

(3,177

)

 

 

(157

)

 

 

(2,846

)

 

 

(4,189

)

 

(14,205

)

 

 

(5,525

)

 

 

(11,998

)

 

 

(16,238

)

Income before income taxes

 

103,518

 

 

 

70,393

 

 

 

63,095

 

 

 

68,043

 

Income taxes

 

(1,037

)

 

 

20,405

 

 

 

11,091

 

 

 

19,476

 

Net income

$

104,555

 

 

$

49,988

 

 

$

52,004

 

 

$

48,567

 

Average common shares

 

57,755

 

 

 

57,349

 

 

 

57,668

 

 

 

57,702

 

Incremental common shares attributable to outstanding

stock options, restricted stock, and deferred stock-based

compensation

 

1,119

 

 

 

674

 

 

 

856

 

 

 

670

 

Average common shares and common share equivalents

 

58,874

 

 

 

58,023

 

 

 

58,524

 

 

 

58,372

 

Basic earnings per share

$

1.81

 

 

$

0.87

 

 

$

0.90

 

 

$

0.84

 

Diluted earnings per share

$

1.78

 

 

$

0.86

 

 

$

0.89

 

 

$

0.83

 

Dividends declared per share

$

0.30

 

 

$

0.27

 

 

See accompanying notes.

 

 

Page 3


Nordson Corporation

 

CondensedCondensed Consolidated Statements of Comprehensive Income

 

 

Three Months Ended

 

 

Three Months Ended

 

 

January 31, 2018

 

 

January 31, 2017

 

 

January 31, 2020

 

 

January 31, 2019

 

(In thousands)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income

 

$

104,555

 

 

$

49,988

 

 

$

52,004

 

 

$

48,567

 

Components of other comprehensive income (loss):

 

 

 

 

 

 

 

 

Translation adjustments

 

 

38,582

 

 

 

(5,751

)

Components of other comprehensive income:

 

 

 

 

 

 

 

 

Foreign currency translation adjustments

 

 

2,793

 

 

 

16,463

 

Amortization of prior service cost and net actuarial

losses, net of tax

 

 

1,509

 

 

 

1,691

 

 

 

3,229

 

 

 

1,352

 

Total other comprehensive income (loss)

 

 

40,091

 

 

 

(4,060

)

Total other comprehensive income

 

 

6,022

 

 

 

17,815

 

Total comprehensive income

 

$

144,646

 

 

$

45,928

 

 

$

58,026

 

 

$

66,382

 

 

See accompanying notes.

 

 

Page 4


Nordson Corporation

 

CondensedCondensed Consolidated Balance Sheets

 

 

January 31, 2018

 

 

October 31, 2017

 

 

January 31, 2020

 

 

October 31, 2019

 

(In thousands)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Assets

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

132,842

 

 

$

90,383

 

 

$

115,097

 

 

$

151,164

 

Receivables - net

 

 

488,282

 

 

 

505,087

 

 

 

471,626

 

 

 

530,765

 

Inventories - net

 

 

275,690

 

 

 

264,266

 

 

 

294,768

 

 

 

283,399

 

Prepaid expenses

 

 

31,221

 

 

 

28,636

 

Prepaid expenses and other current assets

 

 

48,833

 

 

 

45,867

 

Total current assets

 

 

928,035

 

 

 

888,372

 

 

 

930,324

 

 

 

1,011,195

 

Property, plant and equipment - net

 

 

356,774

 

 

 

346,411

 

 

 

400,636

 

 

 

398,895

 

Operating right of use lease assets

 

 

130,060

 

 

 

 

Goodwill

 

 

1,622,125

 

 

 

1,589,210

 

 

 

1,613,866

 

 

 

1,614,739

 

Intangible assets - net

 

 

547,987

 

 

 

547,180

 

 

 

431,531

 

 

 

445,575

 

Deferred income taxes

 

 

12,273

 

 

 

11,020

 

 

 

11,153

 

 

 

11,261

 

Other assets

 

 

33,442

 

 

 

32,346

 

 

 

33,297

 

 

 

34,782

 

Total assets

 

$

3,500,636

 

 

$

3,414,539

 

 

$

3,550,867

 

 

$

3,516,447

 

Liabilities and shareholders' equity

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Accounts payable

 

$

82,081

 

 

$

86,016

 

 

$

78,087

 

 

$

85,139

 

Income taxes payable

 

 

19,753

 

 

 

22,310

 

 

 

14,089

 

 

 

15,601

 

Accrued liabilities

 

 

137,457

 

 

 

173,366

 

 

 

135,443

 

 

 

161,655

 

Customer advanced payments

 

 

38,787

 

 

 

34,654

 

 

 

47,849

 

 

 

41,131

 

Current maturities of long-term debt

 

 

326,587

 

 

 

326,587

 

 

 

43,598

 

 

 

168,738

 

Current obligations under capital leases

 

 

5,108

 

 

 

4,813

 

Operating lease liability - current

 

 

18,590

 

 

 

 

Finance lease liability - current

 

 

5,665

 

 

 

5,362

 

Total current liabilities

 

 

609,773

 

 

 

647,746

 

 

 

343,321

 

 

 

477,626

 

Long-term debt

 

 

1,258,843

 

 

 

1,256,397

 

 

 

1,074,314

 

 

 

1,075,404

 

Operating lease liability - noncurrent

 

 

115,682

 

 

 

 

Finance lease liability - noncurrent

 

 

10,086

 

 

 

9,513

 

Deferred income taxes

 

 

90,669

 

 

 

134,090

 

 

 

84,249

 

 

 

83,564

 

Pension obligations

 

 

111,290

 

 

 

111,666

 

 

 

161,099

 

 

 

158,506

 

Postretirement obligations

 

 

74,131

 

 

 

73,589

 

 

 

86,675

 

 

 

86,368

 

Other long-term liabilities

 

 

60,809

 

 

 

35,558

 

 

 

41,167

 

 

 

44,421

 

Shareholders' equity:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Common shares

 

 

12,253

 

 

 

12,253

 

 

 

12,253

 

 

 

12,253

 

Capital in excess of stated value

 

 

426,298

 

 

 

412,785

 

 

 

501,551

 

 

 

483,116

 

Retained earnings

 

 

2,251,831

 

 

 

2,164,597

 

 

 

2,776,684

 

 

 

2,747,650

 

Accumulated other comprehensive loss

 

 

(94,344

)

 

 

(134,435

)

 

 

(225,859

)

 

 

(231,881

)

Common shares in treasury, at cost

 

 

(1,300,917

)

 

 

(1,299,707

)

 

 

(1,430,355

)

 

 

(1,430,093

)

Total shareholders' equity

 

 

1,295,121

 

 

 

1,155,493

 

 

 

1,634,274

 

 

 

1,581,045

 

Total liabilities and shareholders' equity

 

$

3,500,636

 

 

$

3,414,539

 

 

$

3,550,867

 

 

$

3,516,447

 

 

See accompanying notes.

 

 

Page 5


Nordson Corporation

 

CondensedCondensed Consolidated Statements of Cash FlowsShareholders’ Equity

 

Three months ended

 

January 31, 2018

 

 

January 31, 2017

 

(In thousands)

 

 

 

 

 

 

 

 

Cash flows from operating activities:

 

 

 

 

 

 

 

 

Net income

 

$

104,555

 

 

$

49,988

 

Depreciation and amortization

 

 

26,285

 

 

 

18,497

 

Non-cash stock compensation

 

 

6,987

 

 

 

3,476

 

Deferred income taxes

 

 

(45,426

)

 

 

813

 

Other non-cash expense

 

 

(202

)

 

 

1,603

 

(Gain) loss on sale of property, plant and equipment

 

 

748

 

 

 

(185

)

Changes in operating assets and liabilities

 

 

16,331

 

 

 

6,959

 

Net cash provided by operating activities

 

 

109,278

 

 

 

81,151

 

Cash flows from investing activities:

 

 

 

 

 

 

 

 

Additions to property, plant and equipment

 

 

(16,681

)

 

 

(10,079

)

Proceeds from sale of property, plant and equipment

 

 

68

 

 

 

3,500

 

Equity investments

 

 

 

 

 

(2,598

)

Acquisition of businesses, net of cash acquired

 

 

(43,284

)

 

 

(14,000

)

Net cash used in investing activities

 

 

(59,897

)

 

 

(23,177

)

Cash flows from financing activities:

 

 

 

 

 

 

 

 

Proceeds from short-term borrowings

 

 

996

 

 

 

4,463

 

Repayment of short-term borrowings

 

 

(1,006

)

 

 

(2,492

)

Proceeds from long-term debt

 

 

32,981

 

 

 

15,028

 

Repayment of long-term debt

 

 

(31,355

)

 

 

(43,642

)

Repayment of capital lease obligations

 

 

(1,415

)

 

 

(1,436

)

Issuance of common shares

 

 

10,306

 

 

 

8,246

 

Purchase of treasury shares

 

 

(4,989

)

 

 

(3,080

)

Dividends paid

 

 

(17,321

)

 

 

(15,475

)

Net cash used in financing activities

 

 

(11,803

)

 

 

(38,388

)

 

 

 

 

 

 

 

 

 

Effect of exchange rate changes on cash

 

 

4,881

 

 

 

833

 

Increase in cash and cash equivalents

 

 

42,459

 

 

 

20,419

 

Cash and cash equivalents:

 

 

 

 

 

 

 

 

Beginning of year

 

 

90,383

 

 

 

67,239

 

End of period

 

$

132,842

 

 

$

87,658

 

 

 

Three-Month Period Ended January 31, 2020

 

(In thousands, except for per share data)

 

Common

Shares

 

 

Additional

Paid-in

Capital

 

 

Retained

Earnings

 

 

Accumulated

Other

Comprehensive Income (Loss)

 

 

Common

Shares in

Treasury,

at cost

 

 

TOTAL

 

November 1, 2019

 

$

12,253

 

 

$

483,116

 

 

$

2,747,650

 

 

$

(231,881

)

 

$

(1,430,093

)

 

$

1,581,045

 

Shares issued under company stock and employee

   benefit plans

 

 

 

 

 

12,330

 

 

 

 

 

 

 

 

 

4,049

 

 

 

16,379

 

Stock-based compensation

 

 

 

 

 

6,105

 

 

 

 

 

 

 

 

 

 

 

 

6,105

 

Purchase of treasury shares (26,223 shares)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(4,311

)

 

 

(4,311

)

Dividends declared ($0.38 per share)

 

 

 

 

 

 

 

 

(21,915

)

 

 

 

 

 

 

 

 

(21,915

)

Net income

 

 

 

 

 

 

 

 

52,004

 

 

 

 

 

 

 

 

 

52,004

 

Impact of adoption of ASU 2016-02 (See Note 2)

 

 

 

 

 

 

 

 

(1,055

)

 

 

 

 

 

 

 

 

(1,055

)

Other Comprehensive Income:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Foreign currency translation adjustments

 

 

 

 

 

 

 

 

 

 

 

2,793

 

 

 

 

 

 

2,793

 

Defined benefit pension and post-retirement

   plans adjustment

 

 

 

 

 

 

 

 

 

 

 

3,229

 

 

 

 

 

 

3,229

 

January 31, 2020

 

$

12,253

 

 

$

501,551

 

 

$

2,776,684

 

 

$

(225,859

)

 

$

(1,430,355

)

 

$

1,634,274

 

 

 

Three-Month Period Ended January 31, 2019

 

(In thousands, except for per share data)

 

Common

Shares

 

 

Additional

Paid-in

Capital

 

 

Retained

Earnings

 

 

Accumulated

Other

Comprehensive Income (Loss)

 

 

Common

Shares in

Treasury,

at cost

 

 

TOTAL

 

November 1, 2018

 

$

12,253

 

 

$

446,555

 

 

$

2,488,375

 

 

$

(179,314

)

 

$

(1,317,128

)

 

$

1,450,741

 

Shares issued under company stock and employee

   benefit plans

 

 

 

 

 

1,016

 

 

 

 

 

 

 

 

 

2,591

 

 

 

3,607

 

Stock-based compensation

 

 

 

 

 

4,359

 

 

 

 

 

 

 

 

 

 

 

 

4,359

 

Purchase of treasury shares (901,545 shares)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(107,667

)

 

 

(107,667

)

Dividends declared ($0.35 per share)

 

 

 

 

 

 

 

 

(20,210

)

 

 

 

 

 

 

 

 

(20,210

)

Net income

 

 

 

 

 

 

 

 

48,567

 

 

 

 

 

 

 

 

 

48,567

 

Impact of adoption of ASU 2014-09

 

 

 

 

 

 

 

 

4,329

 

 

 

 

 

 

 

 

 

4,329

 

Other Comprehensive Income:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Foreign currency translation adjustments

 

 

 

 

 

 

 

 

 

 

 

16,463

 

 

 

 

 

 

16,463

 

Defined benefit pension and post-retirement

   plans adjustment

 

 

 

 

 

 

 

 

 

 

 

1,352

 

 

 

 

 

 

1,352

 

January 31, 2019

 

$

12,253

 

 

$

451,930

 

 

$

2,521,061

 

 

$

(161,499

)

 

$

(1,422,204

)

 

$

1,401,541

 

 

See accompanying notes.

 

Page 6


Nordson Corporation

 

NotesCondensed Consolidated Statements of Cash Flows

Three months ended

 

January 31, 2020

 

 

January 31, 2019

 

(In thousands)

 

 

 

 

 

 

 

 

Cash flows from operating activities:

 

 

 

 

 

 

 

 

Net income

 

$

52,004

 

 

$

48,567

 

Depreciation and amortization

 

 

28,618

 

 

 

27,748

 

Non-cash stock compensation

 

 

6,105

 

 

 

4,359

 

Deferred income taxes

 

 

(182

)

 

 

(483

)

Other non-cash expense

 

 

1,135

 

 

 

989

 

Loss on sale of property, plant and equipment

 

 

109

 

 

 

1,475

 

Changes in operating assets and liabilities

 

 

28,486

 

 

 

(25,808

)

Net cash provided by operating activities

 

 

116,275

 

 

 

56,847

 

Cash flows from investing activities:

 

 

 

 

 

 

 

 

Additions to property, plant and equipment

 

 

(13,881

)

 

 

(14,121

)

Proceeds from sale of property, plant and equipment

 

 

65

 

 

 

260

 

Acquisition of businesses, net of cash acquired

 

 

 

 

 

(14

)

Net cash used in investing activities

 

 

(13,816

)

 

 

(13,875

)

Cash flows from financing activities:

 

 

 

 

 

 

 

 

Proceeds from long-term debt

 

 

 

 

 

70,489

 

Repayment of long-term debt

 

 

(125,951

)

 

 

(34

)

Repayment of finance lease obligations

 

 

(2,421

)

 

 

(1,481

)

Issuance of common shares

 

 

16,379

 

 

 

3,606

 

Purchase of treasury shares

 

 

(4,311

)

 

 

(107,667

)

Dividends paid

 

 

(21,915

)

 

 

(20,210

)

Net cash used in financing activities

 

 

(138,219

)

 

 

(55,297

)

 

 

 

 

 

 

 

 

 

Effect of exchange rate changes on cash

 

 

(307

)

 

 

2,193

 

Decrease in cash and cash equivalents

 

 

(36,067

)

 

 

(10,132

)

Cash and cash equivalents:

 

 

 

 

 

 

 

 

Beginning of year

 

 

151,164

 

 

 

95,678

 

End of period

 

$

115,097

 

 

$

85,546

 

See accompanying notes.

Page 7


Nordson Corporation

Notes to Condensed Consolidated Financial Statements

January 31, 20182020

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.

Significant accounting policies

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 January 31, 20182020 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, 2017.  2019. Certain reclassifications have been made to the prior year financial statements to conform to current year classifications.

Basis of consolidation.  The consolidated financial statements include the accounts of Nordson Corporation and its majority-owned and controlled subsidiaries.  Investments in affiliates and joint ventures in which our ownership is 50% or less or in which we do not have control but have the ability to exercise significant influence, are accounted for under the equity method.  All significant intercompany accounts and transactions have been eliminated in consolidation.  

Use of estimates.  The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the amounts reported in the consolidated financial statements.  Actual amounts could differ from these estimates.

Revenue recognition.  Most — A contract exists when it has approval and commitment from both parties, the rights of the parties are identified, payment terms are identified, the contract has commercial substance and collectability of the consideration is probable.  Revenue is recognized when performance obligations under the terms of the contract with a customer are satisfied.  Generally, our revenues arerevenue results from short-term, fixed-price contracts and primarily is recognized upon shipment, provided that persuasive evidenceas of an arrangement exists,a point in time when the sales priceproduct is fixedshipped or determinable, collectibility is reasonably assured, and title and riskat a later point when the control of loss have passedthe product transfers to the customer. Revenue for undelivered items is deferred and included within Accrued liabilities in our Consolidated Balance Sheets. Revenues deferred as of January 31, 2020 and 2019 were not material.

However, for certain contracts related to the sale of customer-specific products within our Advanced Technology Systems segment, revenue for these contracts is recognized over time as we satisfy performance obligations because of the continuous transfer of control to the customer. The continuous transfer of control to the customer occurs as we enhance assets that are customer controlled and we are contractually entitled to payment for work performed to date plus a reasonable margin.  

As control transfers over time for these products or services, revenue is recognized based on progress toward completion of the performance obligations.  The selection method to measure progress towards completion requires judgment and is based on the nature of the products or services to be provided.  We have elected to use the input method – costs incurred for these contracts because it best depicts the transfer of products or services to the customer based on incurring costs on the contract.  Under this method, revenues are recorded proportionally as costs are incurred.  Contract assets recognized are recorded in Prepaid expenses and other current assets and contract liabilities are recorded in Accrued liabilities in our Consolidated Balance Sheets and were not material at January 31, 2020 and October 31, 2019.  Revenue recognized over time is not material to our overall Consolidated Financial Statements.

Revenue is measured as the amount of consideration we expect to receive in exchange for transferring products or services.  Sales, value add, and other taxes we collect concurrently with revenue-producing activities are excluded from revenue.  As a practical expedient, we may exclude the assessment of whether goods or services are performance obligations, if they are immaterial in the context of the contract, and combine these with other performance obligations.  While payment terms and conditions vary by contract type, we have determined that our contracts generally do not include a significant financing component.  We have elected to apply the practical expedient to treat all shipping and handling costs as fulfillment costs as a significant portion of these costs are incurred prior to transfer of control to the customer.  We have also elected to apply the practical expedient to expense sales commissions as they are incurred as the amortization period resulting from capitalizing the costs is one year or less. These costs are recorded within Selling, general and administrative expenses in our Consolidated Statements of Income.

Page 8


Nordson Corporation

 

We offer assurance type warranties on our products as well as separately sold warranty contracts.  Revenue related to warranty contracts that are sold separately is recognized over the life of the warranty term.

Certain arrangements may 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, and, therefore, are typically regarded as inconsequential or perfunctory. Revenuenot material.

We disclose disaggregated revenues by operating segment and geography in accordance with the revenue standard and on the same basis used internally by the chief operating decision maker for undelivered items is deferredevaluating performance of operating segments and included within accrued liabilities in the accompanying balance sheet. Revenues deferred in 2018 and 2017 were not material.for allocating resources.  Refer to Note 11 for details on our operating segments.

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 restricted shares and deferred stock-based compensation.  Options whosewith an 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. No optionsNaN options were excluded from the calculation of diluted earnings per share for each of the three months ended January 31, 2018 and2020. Options excluded from the calculation of diluted earnings per share for the three months ended January 31, 2017.  

2019 were 704. 

2.

Recently issued accounting standards

New accounting guidance adopted:

In March 2016, the FinancialOn November 1, 2019, we adopted ASU 2016-02, Accounting Standards Board (“FASB”) issued a newCodification (ASC) 842, “Leases.” This standard which simplifies the accounting for share-based payment transactions. This guidance requires that excess tax benefits and tax deficiencies be recognized as income tax expense or benefit in the statements of income rather than additional paid-in capital. Additionally, the excess tax benefits will be classified along with other income tax cash flows as an operating activity, rather than a financing activity, in the statements of cash flows. Further, the update allows an entity to make a policy election to recognize forfeitures as they occur or estimate the number of awards expected to be forfeited. We adopted this new standard during the first quarter of 2018. As a result, net excess tax benefits of $4,748 were recognized as a reduction of income tax expense during the three months ended January 31, 2018. The cash flow classification requirements of this new standard were applied retrospectively. As a result, excess tax benefits of $4,748 are reported as Net cash provided by operating activities for the three months ended January 31,

Page 7


Nordson Corporation

2018 and $3,144 of excess tax benefits were reclassified from Net cash used in financing activities to Net cash provided by operating activities for the three months ended January 31, 2017. This new standard also requires that employee taxes paid when an employer withholds shares for tax-withholding purposes be reported as financing activities in the statements of cash flows on a retrospective basis. Previously, this activity was included in operating activities. The impact of this change was immaterial to the statements of cash flows. Additionally, we elected to continue to estimate forfeitures rather than account for them as they occur.

New accounting guidance issued and not yet adopted:

In May 2014, the FASB issued a new standard regarding revenue recognition.  Under this standard, a company recognizes revenue when it transfers promised goods or services to customers in an amount that reflects the consideration to which the company expects to be entitled in exchange for those goods or services. The standard implements a five-step process for customer contract revenue recognition that focuses on transfer of control.  In August 2015, the FASB issued a standard to delay the effective date by one year. The new standard is effective for us beginning November 1, 2018. The new standard is required to be applied retrospectively to each prior reporting period presented or retrospectively with the cumulative effect of initially applying it recognized at the date of initial application (modified retrospective method). We have not yet selected a transition method; however, we are currently anticipating using the modified retrospective method, but will base the final decision on the results of our assessment once complete. Our initial analysis of identifying revenue streams and evaluating a representative sample of contracts and other agreements with our customers is complete. We are in the process of assessing the impact of the new standard, if any, on our business processes, systems and controls. We will finalize our evaluation of potential differences that may result from applying the new standard to our contracts with customers in 2018 and provide updates on our progress in future filings.

In February 2016, the FASB issued a new standard which requires a lessee to recognize on the balance sheet the assets and liabilities for the rights and obligations created by those leases with a lease term of more than twelve12 months. Leases will continueWe elected to use the transition option, which allows entities to initially apply the new standard at the adoption date and recognize a cumulative effect adjustment to the opening balance of retained earnings in the period of adoption without restating prior periods. We elected the practical expedient package related to the identification of leases in contracts, lease classification, and accounting for initial direct costs whereby prior conclusions do not have to be classifiedreassessed for leases that commenced before the effective date. As we have not reassessed such conclusions, we did not adopt the practical expedient to use hindsight to determine the likelihood of whether a lease will be extended or terminated, to separate non-lease components within our lease portfolios, or whether a purchase option will be exercised.  There was not a material cumulative-effect adjustment to our beginning retained earnings for the adoption of this standard.  We recognized operating right-of-use assets and lease liabilities in our Consolidated Balance Sheet of $130,583 and $134,853 as either financing orof November 1, 2019, respectively, and recognized operating with classification affectingright-of-use assets and lease liabilities of $130,059 and $134,271 as of January 31, 2020, respectively.  Adoption of the new standard did not have a material impact on our Consolidated Statements of Income and Cash Flows.  Refer to Note 14 for further discussion of leases.      

New accounting guidance issued and not yet adopted:

In June 2016, the Financial Accounting Standards Board (FASB) issued ASU 2016-13, “Financial Instruments – Credit Losses (Topic 326),” a new standard that changes the impairment model for most financial instruments. Current guidance requires the recognition measurementof credit losses based on an incurred loss impairment methodology that reflects losses once the losses are probable.  We will be required to use a current expected credit loss model that will immediately recognize an estimate of credit losses that are expected to occur over the life of the financial instruments that are in the scope of this update, including trade receivables.  The standard does not prescribe a specific method to make an estimate so the application will require judgment and presentationshould consider historical information, current information, and reasonable and supportable forecasts, and includes estimates of expenses and cash flows arising from a lease. Itprepayment.  This guidance will bebecome effective for us beginningon November 1, 2019.2020. We are currently assessing the impact this standard will have on our consolidated financial statements.the Consolidated Financial Statements.

In March 2017,August 2018, the FASB issued ASU 2018-13, “Fair Value Measurement (Topic 820),” a new standard which requiresremoves, modifies, and adds certain disclosure requirements on fair value measurements.  The guidance removes disclosure requirements pertaining to the presentationamount of and reasons for transfers between Level 1 and Level 2 of the service cost componentfair value hierarchy, the policy for timing of transfers between levels, and the valuation processes for Level 3 fair value measurements. For investments in certain entities that calculate net asset value, an entity is required to disclose the timing of liquidation of an investee’s assets and the date when restrictions from redemption might lapse only if the investee has communicated the timing to the entity or announced the timing publicly.  In addition, the amendment clarifies that the measurement uncertainty disclosure is to communicate information about the uncertainty in measurement as of the net periodic benefit costreporting date. The guidance adds disclosure requirements for changes in unrealized gains and losses for the sameperiod included in other comprehensive income statement line itemfor recurring Level 3 fair value

Page 9


Nordson Corporation

measurements held at the end of the reporting period as other employee compensation costs arising from services rendered duringwell as the period. All other componentsrange and weighted average of net periodic benefit cost will be presented below operating income. Additionally, only the service cost component will be eligible for capitalization in assets.significant unobservable inputs used to develop Level 3 fair value measurements.  It will be effective for us beginning November 1, 2018.2020.  Early adoption is permitted.  We are currently assessing the impact this standard will have on our consolidatedConsolidated Financial Statements.

In August 2018, the FASB issued ASU 2018-14, “Compensation – Retirement Benefits – Defined Benefit Plans – General (Subtopic 715-20),” a new standard which addresses defined benefit plans.  The amendments modify the following disclosure requirements for employers that sponsor defined benefit pension or other postretirement plans: the amounts in accumulated other comprehensive income expected to be recognized as components of net period benefit cost over the next fiscal year, amount and timing of plan assets expected to be returned to the employer, related party disclosure about the amount of future annual benefits covered by insurance and annuity contracts and significant transactions between the employer or related parties and the plan, and the effects of a 1-percentage point change in assumed health care cost trend rates on the (a) aggregate of the service and interest cost components of net periodic benefit costs and (b) benefit obligations for postretirement health care benefits.  A disclosure requirement was added for the explanation of the reasons for significant gains and losses related to changes in the benefit obligation for the period.  Additionally, the standard clarifies disclosure requirement surrounding the projected benefit obligation (PBO) and fair value of plan assets for plans with PBOs in excess of plan assets and the accumulated benefit obligation (ABO) and fair value of plan assets for plans with ABOs in excess of plan assets.  It will be effective for us beginning November 1, 2021.  Early adoption is permitted.  We are currently assessing the impact this standard will have on our Consolidated Financial Statements.

In August 2018, the FASB issued ASU 2018-15, “Intangibles – Goodwill and Other Internal-Use Software (Subtopic 350-40),” a new standard which makes a number of changes meant to help entities evaluate the accounting for fees paid by a customer in a cloud computing arrangement (hosting arrangement), by providing guidance in determining when the arrangement includes a software license. It will be effective for us beginning November 1, 2020.  Early adoption is permitted.  We are currently assessing the impact this standard will have on our Consolidated Financial Statements.

In December 2019, the FASB issued ASU 2019-12, “Income Taxes (ASC 740) – Simplifying the Accounting for Income Taxes,” which simplifies the accounting for income taxes by removing certain exceptions to the general principles in ASC 740.  The amendments also improve consistent application of and simplify U.S. GAAP for other areas of ASC 740 by clarifying and amending existing guidance.  It will be effective for us beginning November 1, 2021.  Early adoption is permitted, including adoption in any interim period for which financial statements.

statements have not yet been issued.  Depending on the amendment, adoption may be applied on the retrospective, modified retrospective or prospective basis.  We are currently assessing the impact of this standard on our Consolidated Financial Statements.

 

3.

Acquisitions

Business acquisitions have been accounted for using the acquisition method, with the acquired assets and liabilities recorded at estimated fair value on the dates of acquisition. The cost in excess of the net assets of the business acquired is included in goodwill. Operating results since the respective dates of acquisitions are included in the Consolidated Statements of Income.

2019 acquisition

On July 1, 2019, we purchased certain assets of Optical Control GmbH & Co. KG (“Optical”), a Nuremberg, Germany designer and developer of high speed, fully automatic counting systems utilizing x-ray technology. This transaction was not material to our Consolidated Financial Statements. We recorded the acquisition of Optical based on the fair value of the assets acquired and the liabilities assumed. Goodwill associated with this acquisition is tax deductible. This acquisition is being reported in our Advanced Technology Systems segment. As of January 31, 2020, the purchase price allocations remain preliminary as we complete our assessments of income taxes.

2018 acquisitions

On October 17, 2018, we purchased 100 percent of the outstanding shares of Cladach Nua Teoranta (“Clada”), a Galway, Ireland designer and developer primarily focused on medical balloons and balloon catheters. Clada’s technologies are used in key applications such as angioplasty and the treatment of vascular disease. We acquired Clada for an aggregate purchase price of $5,236, which included an earn-out liability of $1,131. Based on the fair value of the assets acquired and the liabilities assumed, goodwill of $3,776 and identifiable intangible assets of $697 were recorded. The identifiable intangible assets consist primarily of $58 of customer relationships (amortized over 6 years), $70 of tradenames (amortized over 9 years), $499 of technology (amortized over 7 years) and $70 of non-compete agreements (amortized over 3 years). Goodwill associated with this acquisition is not tax deductible. This acquisition is being reported in our Advanced Technology Systems segment.

Page 10


Nordson Corporation

On January 2, 2018, we purchased 100 percent of the outstanding shares of Sonoscan, Inc. (“Sonoscan”), an Elk Grove Village, Illinois leading designer and manufacturer of acoustic microscopes and sophisticated acoustic micro imaging systems used in a variety of microelectronic, automotive, aerospace and industrial electronic assembly applications. We acquired Sonoscan for an aggregate purchase price of $44,032,$46,018, net of $748$655 of cash. Based on the fair value of the assets acquired and the liabilities assumed, goodwill of $20,078$22,775 and identifiable intangible assets of $7,900$7,910 were recorded. The identifiable intangible assets consist primarily of $1,700 of customer relationships (amortized over 7 years), $3,300 of tradenames (amortized over 11 years), $2,500 of technology (amortized over 7 years) and $400$410 of non-compete agreements (amortized over 5 years). Goodwill associated with this acquisition is tax deductible. This acquisition is being reported in our Advanced Technology Systems segment. As of January 31, 2018, the purchase price allocations remain preliminary as we complete our assessments of income taxes, intangible assets and certain reserves.

2017 acquisitions

On March 31, 2017, we completed the acquisition of Vention Medical’s Advanced Technologies business (“Vention”), a Salem, New Hampshire leading designer, developer and manufacturer of minimally invasive interventional delivery devices, catheters and advanced components for the global medical technology market. This is a highly complementary business that adds significant scale and enhances strategic capabilities of our existing medical platform. We acquired Vention for an aggregate purchase price of $705,000, net of $3,313 of cash and other closing adjustments of $10,726. The acquisition was funded primarily through a new term loan facility, as well as through cash and borrowings on our credit facility. The purchase price was

Page 8


Nordson Corporation

allocated to the underlying assets acquired and liabilities assumed based upon their estimated fair values at the date of acquisition. We determined the estimated fair values based on independent appraisals, discounted cash flow analyses, quoted market prices, replacement cost analyses and estimates made by management.

Based on the fair value of the assets acquired and the liabilities assumed, goodwill of $434,625, of which $37,200 is tax deductible, and identifiable intangible assets of $286,000 were recorded. The identifiable intangible assets consist primarily of $240,000 of customer relationships (amortized over 14 years), $2,000 of tradenames (amortized over 6 years), and $44,000 of technology, consisting of $36,000 (amortized over 14 years) and $8,000 (amortized over 10 years). Goodwill represents the value we expect to achieve through the expansion of our existing medical platform. This acquisition is being reported in our Advanced Technology Systems segment. As of January 31, 2018, the purchase price allocations are considered preliminary as we complete our assessments of income taxes.  No purchase price allocation adjustments were made during the first quarter of 2018.

Also on March 31, 2017, we entered into a $705,000 term loan facility with a group of banks. The Term Loan Agreement provides for the following term loans in three tranches: $200,000 due in October 2018, $200,000 due in March 2020, and $305,000 due in March 2022. The weighted average interest rate for borrowings under this agreement was 2.66% at January 31, 2018. Borrowings under this agreement were used for the single purpose of acquiring Vention. We were in compliance with all covenants at January 31, 2018.

Pro forma sales and results of operations for the following 2017 acquisitions, had they occurred at the beginning of the applicable fiscal year ended October 31, are not material, and accordingly, are not provided.

On February 16, 2017, we purchased 100 percent of the outstanding shares of InterSelect GmbH (“InterSelect”), a German designer and manufacturer of selective soldering systems used in a variety of automotive, aerospace and industrial electronics assembly applications. We acquired InterSelect for an aggregate purchase price of $5,432, net of cash acquired of $492. Based on the fair value of the assets acquired and the liabilities assumed, goodwill of $3,548 and identifiable intangible assets of $1,879 were recorded. The identifiable intangible assets consist primarily of $1,109 of customer relationships (amortized over 9 years), $348 of tradenames (amortized over 12 years), and $422 of technology (amortized over 9 years). Goodwill associated with this acquisition is not tax deductible. This acquisition is being reported in our Advanced Technology Systems segment. As of January 31, 2018, the purchase price allocations are complete.

On February 1, 2017, we purchased 100 percent of the outstanding shares of Plas-Pak Industries, Inc. (“Plas-Pak”), a Norwich, Connecticut designer and manufacturer of injection molded, single-use plastic dispensing products. Plas-Pak’s broad product offering includes two-component (2K) cartridges for industrial and commercial do-it-yourself adhesives, dial-a-dose calibrated syringes for veterinary and animal health applications, and specialty syringes for pesticide, dental and other markets. We acquired Plas-Pak for an aggregate purchase price of $70,798, net of cash acquired of $543. Based on the fair value of the assets acquired and the liabilities assumed, goodwill of $24,995 and identifiable intangible assets of $33,800 were recorded. The identifiable intangible assets consist primarily of $23,700 of customer relationships (amortized over 17 years), $4,100 of tradenames (amortized over 12 years), $5,000 of technology (amortized over 9 years) and $1,000 of non-compete agreements (amortized over 5 years). Goodwill associated with this acquisition is tax deductible. This acquisition is being reported in our Advanced Technology Systems segment. As of January 31, 2018, the purchase price allocations are complete.

On January 3, 2017, we purchased certain assets of ACE Production Technologies, Inc. (“ACE”), a Spokane, Washington based designer and manufacturer of selective soldering systems used in a variety of automotive and industrial electronics assembly applications. We acquired the assets for an aggregate purchase price of $13,761.  Based on the fair value of the assets acquired and the liabilities assumed, goodwill of $6,383 and identifiable intangible assets of $5,010 were recorded. The identifiable intangible assets consist primarily of $2,800 of customer relationships (amortized over 7 years), $1,000 of tradenames (amortized over 11 years), $1,100 of technology (amortized over 7 years) and $110 of non-compete agreements (amortized over 3 years). Goodwill associated with this acquisition is tax deductible. This acquisition is being reported in our Advanced Technology Systems segment. As of January 31, 2018, the purchase price allocations are complete.

Page 9


Nordson Corporation

4.4.

Inventories

At January 31, 20182020 and October 31, 2017,2019, inventories consisted of the following:

 

 

January 31, 2018

 

 

October 31, 2017

 

 

January 31, 2020

 

 

October 31, 2019

 

Raw materials and component parts

 

$

107,752

 

 

$

105,424

 

 

$

104,466

 

 

$

102,044

 

Work-in-process

 

 

45,331

 

 

 

45,743

 

 

 

47,789

 

 

 

42,904

 

Finished goods

 

 

168,075

 

 

 

152,923

 

 

 

190,770

 

 

 

183,973

 

 

 

321,158

 

 

 

304,090

 

 

 

343,025

 

 

 

328,921

 

Obsolescence and other reserves

 

 

(38,285

)

 

 

(33,140

)

 

 

(41,729

)

 

 

(39,377

)

LIFO reserve

 

 

(7,183

)

 

 

(6,684

)

 

 

(6,528

)

 

 

(6,145

)

 

$

275,690

 

 

$

264,266

 

 

$

294,768

 

 

$

283,399

 

 

5.

Goodwill and other intangible assets  

Changes in the carrying amount of goodwill for the three months ended January 31, 20182020 by operating segment are as follows:

 

 

 

Adhesive Dispensing

Systems

 

 

Advanced Technology

Systems

 

 

Industrial Coating

Systems

 

 

Total

 

Balance at October 31, 2017

 

$

392,295

 

 

$

1,172,857

 

 

$

24,058

 

 

$

1,589,210

 

Acquisition

 

 

 

 

 

20,078

 

 

 

 

 

 

20,078

 

Currency effect

 

 

7,561

 

 

 

5,276

 

 

 

 

 

 

12,837

 

Balance at January 31, 2018

 

$

399,856

 

 

$

1,198,211

 

 

$

24,058

 

 

$

1,622,125

 

 

 

Adhesive Dispensing

Systems

 

 

Advanced Technology

Systems

 

 

Industrial Coating

Systems

 

 

Total

 

Balance at October 31, 2019

 

$

387,403

 

 

$

1,203,278

 

 

$

24,058

 

 

$

1,614,739

 

Currency effect

 

 

(558

)

 

 

(315

)

 

 

 

 

 

(873

)

Balance at January 31, 2020

 

$

386,845

 

 

$

1,202,963

 

 

$

24,058

 

 

$

1,613,866

 

 

Accumulated impairment losses, which were recorded in 2009, were $232,789 at January 31, 20182020 and October 31, 2017.2019.  Of these losses, $229,173 related to the Advanced Technology Systems segment, and $3,616 related to the Industrial Coating Systems segment.

Page 11


Nordson Corporation

Information regarding our intangible assets subject to amortization is as follows:

 

 

January 31, 2018

 

 

January 31, 2020

 

 

Carrying Amount

 

 

Accumulated

Amortization

 

 

Net Book Value

 

 

Carrying Amount

 

 

Accumulated

Amortization

 

 

Net Book Value

 

Customer relationships

 

$

487,946

 

 

$

113,320

 

 

$

374,626

 

 

$

479,942

 

 

$

183,178

 

 

$

296,764

 

Patent/technology costs

 

 

156,919

 

 

 

52,741

 

 

 

104,178

 

 

 

154,849

 

 

 

74,792

 

 

 

80,057

 

Trade name

 

 

97,322

 

 

 

30,215

 

 

 

67,107

 

 

 

96,651

 

 

 

42,950

 

 

 

53,701

 

Non-compete agreements

 

 

11,732

 

 

 

9,657

 

 

 

2,075

 

 

 

11,526

 

 

 

10,524

 

 

 

1,002

 

Other

 

 

1,393

 

 

 

1,392

 

 

 

1

 

��

 

1,397

 

 

 

1,390

 

 

 

7

 

Total

 

$

755,312

 

 

$

207,325

 

 

$

547,987

 

 

$

744,365

 

 

$

312,834

 

 

$

431,531

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

October 31, 2017

 

 

October 31, 2019

 

 

Carrying Amount

 

 

Accumulated

Amortization

 

 

Net Book Value

 

 

Carrying Amount

 

 

Accumulated

Amortization

 

 

Net Book Value

 

Customer relationships

 

$

480,536

 

 

$

102,033

 

 

$

378,503

 

 

$

480,007

 

 

$

173,996

 

 

$

306,011

 

Patent/technology costs

 

 

150,581

 

 

 

48,669

 

 

 

101,912

 

 

 

154,735

 

 

 

71,663

 

 

 

83,072

 

Trade name

 

 

93,281

 

 

 

28,366

 

 

 

64,915

 

 

 

96,655

 

 

 

41,303

 

 

 

55,352

 

Non-compete agreements

 

 

11,142

 

 

 

9,298

 

 

 

1,844

 

 

 

11,540

 

 

 

10,406

 

 

 

1,134

 

Other

 

 

1,384

 

 

 

1,378

 

 

 

6

 

 

 

1,400

 

 

 

1,394

 

 

 

6

 

Total

 

$

736,924

 

 

$

189,744

 

 

$

547,180

 

 

$

744,337

 

 

$

298,762

 

 

$

445,575

 

 

Amortization expense for the three months ended January 31, 20182020 and 20172019 was $13,889$16,173 and $7,630,$13,629, respectively.

Page 10


Nordson Corporation

   

6.

Pension and other postretirement plans  

The components of net periodic pension cost for the three months ended January 31, 20182020 and January 31, 20172019 were:

 

 

U.S.

 

 

International

 

 

U.S.

 

 

International

 

Three Months Ended

 

2018

 

 

2017

 

 

2018

 

 

2017

 

 

2020

 

 

2019

 

 

2020

 

 

2019

 

Service cost

 

$

3,821

 

 

$

3,058

 

 

$

510

 

 

$

534

 

 

$

5,057

 

 

$

3,578

 

 

$

571

 

 

$

484

 

Interest cost

 

 

3,500

 

 

 

3,211

 

 

 

410

 

 

 

348

 

 

 

3,918

 

 

 

4,498

 

 

 

262

 

 

 

421

 

Expected return on plan assets

 

 

(5,491

)

 

 

(5,177

)

 

 

(380

)

 

 

(285

)

 

 

(6,159

)

 

 

(5,804

)

 

 

(330

)

 

 

(400

)

Amortization of prior service cost (credit)

 

 

(8

)

 

 

12

 

 

 

(80

)

 

 

(70

)

Amortization of prior service credit

 

 

(21

)

 

 

(15

)

 

 

(74

)

 

 

(76

)

Amortization of net actuarial loss

 

 

2,156

 

 

 

2,327

 

 

 

529

 

 

 

599

 

 

 

3,398

 

 

 

1,544

 

 

 

734

 

 

 

428

 

Total benefit cost

 

$

3,978

 

 

$

3,431

 

 

$

989

 

 

$

1,126

 

 

$

6,193

 

 

$

3,801

 

 

$

1,163

 

 

$

857

 

 

The components of other postretirement benefit cost for the three months ended January 31, 20182020 and January 31, 20172019 were:

 

 

U.S.

 

 

International

 

 

U.S.

 

 

International

 

Three Months Ended

 

2018

 

 

2017

 

 

2018

 

 

2017

 

 

2020

 

 

2019

 

 

2020

 

 

2019

 

Service cost

 

$

221

 

 

$

221

 

 

$

5

 

 

$

5

 

 

$

190

 

 

$

165

 

 

$

4

 

 

$

4

 

Interest cost

 

 

628

 

 

 

587

 

 

 

5

 

 

 

5

 

 

 

614

 

 

 

749

 

 

 

3

 

 

 

5

 

Amortization of prior service cost (credit)

 

 

(25

)

 

 

(41

)

 

 

 

 

 

 

Amortization of prior service credit

 

 

(4

)

 

 

(6

)

 

 

 

 

 

 

Amortization of net actuarial (gain) loss

 

 

249

 

 

 

229

 

 

 

(5

)

 

 

(4

)

 

 

419

 

 

 

152

 

 

 

(9

)

 

 

(7

)

Total benefit cost

 

$

1,073

 

 

$

996

 

 

$

5

 

 

$

6

 

 

$

1,219

 

 

$

1,060

 

 

$

(2

)

 

$

2

 

 

The components of net periodic pension cost other than service cost are included in Other – net in our Consolidated Statements of Income.

Page 12


Nordson Corporation

 

7.

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 months ended January 31, 20182020 and January 31, 20172019 were -1.0%17.6% and 29.0%28.6%, respectively.   The effective tax rate for the current quarterwas lower than the comparable prior year period primarily due to recentlythe net impact of one-time adjustments that were recorded in the prior year as a result of the enacted law commonly referred to as the U.S. Tax Cuts and Jobs Act ("the Act").

TheOn December 22, 2017, the Act was enacted into law on December 22, 2017.which significantly revised U.S. tax law. It reducesreduced the U.S. federal corporate income tax rate from 35% to 21%. We have an October 31 fiscal year-end, therefore the lower corporate income tax rate will be phased in, resulting in a U.S. statutory federal rate of 23.3% for our fiscal year ending October 31, 2018, and 21% for subsequent fiscal years.  The statutory tax rate of 23.3%21% was applied to earnings in the current quarter.  

The Act requires us

During the three months ended January 31, 2019, a discrete tax expense of $4,866 was recorded to revalue our existing U.S. deferredupdate the provisional amounts recognized in 2018 due to changes in interpretations and assumptions and the finalization of estimates.

Our income tax balance to reflect the lower statutory tax rate and payprovision included a one-time transition tax on earnings of certain foreign subsidiaries that were previously deferred from U.S. tax.  As a result, we recorded a provisionaldiscrete tax benefit of $45,213$2,537 and $868 due to reflect the revaluation of our tax assets and liabilities at the reduced corporate tax rate. We also recorded a provisional tax expense of $23,124 to reflect the transition tax on previously deferred foreign earnings.  The net tax effect of these discrete items resulted in a decrease of $22,089 in income tax expenseshare-based payment transactions for the three months ended January 31, 2018.  We intend to pay the transition tax in installments over the eight year period allowable under the Act. The transition tax is included in other long-term liabilities in the Consolidated Balance Sheet at2020 and January 31, 2018.  The amounts recorded are considered a provisional estimate under the U.S. Securities and Exchange Commission Staff Accounting Bulletin No. 118. The provisional calculations may change after the underlying temporary differences and foreign earnings are finalized.  Furthermore, we are still analyzing certain aspects of the Act and related interpretive guidance and refining our calculations which could potentially affect the measurement of these balances or potentially give rise to new or additional deferred tax amounts.

In March 2016, the FASB issued a new standard which simplifies the accounting for share-based payment transactions. This guidance requires that excess tax benefits and tax deficiencies be recognized as income tax expense or benefit in the Consolidated Statements of Income rather than as additional paid-in capital. As a result, our income tax provision for the three months ended January 31, 2018 includes a discrete tax benefit of $4,748.2019, respectively.

 

Page 11


Nordson Corporation

 

8.

Accumulated other comprehensive loss

The components of accumulated other comprehensive loss, including adjustments for items that are reclassified from accumulated other comprehensive loss to net income, are shown below.

 

 

 

Cumulative

 

 

Pension and

 

 

Accumulated

 

 

 

translation

 

 

postretirement benefit

 

 

other comprehensive

 

 

 

adjustments

 

 

plan adjustments

 

 

loss

 

Balance at October 31, 2017

 

$

(28,423

)

 

$

(106,012

)

 

$

(134,435

)

Pension and postretirement plan changes, net of

   tax of $(460)

 

 

 

 

 

1,509

 

 

 

1,509

 

Currency translation losses

 

 

38,582

 

 

 

 

 

 

38,582

 

Balance at January 31, 2018

 

$

10,159

 

 

$

(104,503

)

 

$

(94,344

)

 

 

Cumulative

 

 

Pension and

 

 

Accumulated

 

 

 

translation

 

 

postretirement benefit

 

 

other comprehensive

 

 

 

adjustments

 

 

plan adjustments

 

 

loss

 

Balance at October 31, 2019

 

$

(53,332

)

 

$

(178,549

)

 

$

(231,881

)

Amortization of prior service costs and net

   actuarial losses, net of tax of $(998)

 

 

 

 

 

3,229

 

 

 

3,229

 

Foreign currency translation adjustments

 

 

2,793

 

 

 

 

 

 

2,793

 

Balance at January 31, 2020

 

$

(50,539

)

 

$

(175,320

)

 

$

(225,859

)

 

9.

Stock-based compensation

During the 20132018 Annual Meeting of Shareholders, our shareholders approved the Amended and Restated 2012 Stock Incentive and Award Plan (the “2012 Plan”). The 2012 Plan provides for the granting of stock options, stock appreciation rights, restricted shares, restricted share units, performance shares, stock purchase rights, stock equivalent units, cash awards and other stock or performance-based incentives. A maximum of 2,9004,525 common shares isare available for grant under the 2012 Plan.

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 percent per year and expire 10 years from the date of grant.  Vesting accelerates upon the occurrence of events that involve or may resulta qualified termination in connection with a change ofin control. For grants made prior to November 2012, vesting ceases upon retirement, death and disability, and unvested shares are forfeited.  For grants made during and after November 2012, inIn the event of termination of employment due to early retirement or normal retirement at age 65, options granted within 12 months prior to termination are forfeited, and vesting continues post retirement for all other unvested options granted.  In the event of disability or death, all unvested stock options granted within 12 months prior to termination (or at any time prior to December 28, 2017) fully vest.  Termination for any other reason results in forfeiture of unvested options and vested options in certain circumstances.  The amortized cost of options is accelerated if the retirement eligibility date occurs before the normal vesting date.  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 $2,617$2,725 and $2,322$2,531 in the three months ended January 31, 20182020 and 2017,2019, respectively.

Page 13


Nordson Corporation

 

The following table summarizes activity related to stock options for the three months ended January 31, 2018:2020:

 

 

 

Number of

Options

 

 

Weighted-Average

Exercise Price Per

Share

 

 

Aggregate

Intrinsic Value

 

 

Weighted

Average

Remaining

Term

Outstanding at October 31, 2017

 

 

1,922

 

 

$

70.08

 

 

 

 

 

 

 

Granted

 

 

368

 

 

$

127.67

 

 

 

 

 

 

 

Exercised

 

 

(200

)

 

$

51.42

 

 

 

 

 

 

 

Forfeited or expired

 

 

(4

)

 

$

95.87

 

 

 

 

 

 

 

Outstanding at January 31, 2018

 

 

2,086

 

 

$

81.98

 

 

$

128,781

 

 

7.0 years

Vested or expected to vest at January 31, 2018

 

 

2,056

 

 

$

81.47

 

 

$

127,958

 

 

6.9 years

Exercisable at January 31, 2018

 

 

1,142

 

 

$

63.37

 

 

$

91,738

 

 

5.4 years

 

 

Number of

Options

 

 

Weighted-

Average

Exercise Price Per

Share

 

 

Aggregate

Intrinsic Value

 

 

Weighted

Average

Remaining

Term

Outstanding at October 31, 2019

 

 

1,787

 

 

$

97.74

 

 

 

 

 

 

 

Granted

 

 

367

 

 

$

165.21

 

 

 

 

 

 

 

Exercised

 

 

(204

)

 

$

80.15

 

 

 

 

 

 

 

Forfeited or expired

 

 

(6

)

 

$

130.41

 

 

 

 

 

 

 

Outstanding at January 31, 2020

 

 

1,944

 

 

$

112.22

 

 

$

110,106

 

 

7.2 years

Expected to vest

 

 

851

 

 

$

140.19

 

 

$

24,408

 

 

8.8 years

Exercisable at January 31, 2020

 

 

1,069

 

 

$

89.04

 

 

$

85,294

 

 

5.8 years

 

As of January 31, 2018,2020, there was $15,201$18,508 of total unrecognized compensation cost related to unvested stock options.  That cost is expected to be amortized over a weighted average period of approximately 1.61.7 years.

Page 12


Nordson Corporation

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:

 

Three months ended

 

January 31, 2018

 

 

January 31, 2017

 

Expected volatility

 

24.0%-26.7%

 

 

29.0%-29.2%

 

Expected dividend yield

 

0.97%

 

 

1.17%

 

Risk-free interest rate

 

2.09%-2.20%

 

 

1.89%-2.01%

 

Expected life of the option (in years)

 

5.4-6.2

 

 

5.4-6.2

 

Three months ended

January 31, 2020

January 31, 2019

Expected volatility

24.5%-25.4%

24.1%-24.5%

Expected dividend yield

0.93%-1.16%

1.04%

Risk-free interest rate

1.64%-1.69%

2.84%-2.95%

Expected life of the option (in years)

5.3-6.2

5.3-6.2

 

The weighted-average expected volatility used to value the 20182020 and 20172019 options was 25.0%,25.1% and 29.1%24.3%, respectively.

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 three months ended January 31, 20182020 and 20172019 was $31.42$37.82 and $28.86,$31.74, respectively.

The total intrinsic value of options exercised during the three months ended January 31, 20182020 and 20172019 was $18,723$17,244 and $12,450,$4,621, respectively.   

Cash received from the exercise of stock options for the three months ended January 31, 20182020 and 20172019 was $10,306$16,379 and $8,246,$3,606, respectively.

Restricted Shares and Restricted Share Units

We may grant restricted shares and/or restricted share units to our employees and directors.  These shares or units may not be transferred for a designated period of time (generally one to three years) defined at the date of grant.  

For employee recipients, in the event of termination of employment due to early retirement with the consent of the Company, restricted shares granted within 12 months prior to termination are forfeited, and other restricted shares vest on a pro-rata basis.  In the event of termination of employment due to normal retirement at age 65, restricted shares granted within 12 months prior to termination are forfeited, and, for other restricted shares, the restriction period will lapse and the shares will vest and be transferable. RestrictionsFor restricted shares granted within 12 months prior to termination (or at any time prior to December 28, 2017), the restrictions lapse in the event of a recipient’s disability or death.  Termination for any other reason prior to the lapse of any restrictions results in forfeiture of the shares.

For non-employee directors, all restrictions lapse in the event of disability or death of the non-employee director.  Termination of service as a director for any other reason within one year of date of grant results in a pro-rata vesting of shares or units.

As shares or units are issued, deferred stock-based compensation equivalent to the fair value on the date of grant is expensed over the vesting period.  Tax benefits arising from the lapse of restrictions are recognized when realized and credited to capital in excess of stated value.

Page 14


Nordson Corporation

The following table summarizes activity related to restricted shares during the three months ended January 31, 2018:2020:

 

 

Number of Shares

 

 

Weighted-Average

Grant Date Fair

Value

 

 

Number of Shares

 

 

Weighted-Average

Grant Date Fair

Value

 

Restricted shares at October 31, 2017

 

 

58

 

 

$

90.38

 

Restricted shares at October 31, 2019

 

 

66

 

 

$

126.83

 

Granted

 

 

20

 

 

$

127.68

 

 

 

17

 

 

$

164.74

 

Vested

 

 

(22

)

 

$

85.16

 

 

 

(24

)

 

$

119.15

 

Restricted shares at January 31, 2018

 

 

56

 

 

$

105.73

 

Restricted shares at January 31, 2020

 

 

59

 

 

$

140.58

 

 

As of January 31, 2018,2020, there was $4,678$5,747 of unrecognized compensation cost related to restricted shares. The cost is expected to be amortized over a weighted average period of 2.22.0 years.  The amount charged to expense related to restricted shares during the three months ended January 31, 20182020 and 20172019 was $754$1,573 and $578,$697, respectively. These amounts included common share dividends for the three months ended January 31, 20182020 and 20172019 of $17$25 and $16,$18, respectively.

Page 13


Nordson Corporation

 

The following table summarizes activity related to restricted share units during the three months ended January 31, 2018:2020:

 

 

 

Number of Units

 

 

Weighted-Average

Grant Date Fair

Value

 

Restricted share units at October 31, 2017

 

 

0

 

 

$

 

Granted

 

 

8

 

 

$

126.38

 

Restricted share units at January 31, 2018

 

 

8

 

 

$

126.38

 

 

 

Number of Units

 

 

Weighted-Average

Grant Date Fair

Value

 

Restricted share units at October 31, 2019

 

 

 

 

$

 

Granted

 

 

7

 

 

$

160.68

 

Restricted share units at January 31, 2020

 

 

7

 

 

$

160.68

 

 

As of January 31, 2018,2020, there was $751$886 of remaining expense to be recognized related to outstanding restricted share units, which is expected to be recognized over a weighted average period of 0.8 years.  The amount charged to expense related to restricted share units during each of the three months ended January 31, 20182020 and 20172019 was $253.$286 and $263, respectively.   

Deferred Directors’ Compensation

Non-employee directors may defer all or part of their cash and equity-based compensation until retirement.  Cash compensation may be deferred as cash or as share equivalent units.  Deferred cash amounts are recorded as liabilities, and share equivalent units are recorded as equity.  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 three months ended January 31, 2018:2020:

 

 

 

Number of Shares

 

 

Weighted-Average

Grant Date Fair

Value

 

Outstanding at October 31, 2017

 

 

101

 

 

$

46.74

 

Dividend equivalents

 

 

1

 

 

$

147.42

 

Outstanding at January 31, 2018

 

 

102

 

 

$

46.95

 

 

 

Number of Shares

 

 

Weighted-Average

Grant Date Fair

Value

 

Outstanding at October 31, 2019

 

 

114

 

 

$

55.52

 

Dividend equivalents

 

 

 

 

$

 

Outstanding at January 31, 2020

 

 

114

 

 

$

55.77

 

 

The amount charged to expense related to director deferred compensation for the three months ended January 31, 20182020 and 20172019 was $31$44 and $26,$37, respectively.   

Performance Share Incentive Awards

Executive officers and selected other key employees are eligible to receive common share-based incentive awards. Payouts, in the form of unrestricted common shares, vary based on the degree to which corporate financial performance exceeds predetermined threshold, target and maximum performance goals over three-year performance periods.  No payout will occur unless threshold performance is achieved.

Page 15


Nordson Corporation

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 closing market price of our common shares at the grant date, reduced by the implied value of dividends not to be paid. The per share values were $160.02 for 2020, $120.12 and $138.53 for 2019, and $123.45 and $138.53 for 2018, $103.75 and $104.49 per share for 2017 and $67.69 per share for 2016.2018.  During the three months ended January 31, 20182020 and 2017, $3,3492019, $1,421 and $252$777 was charged to expense, respectively.  The cumulative amount recorded in shareholders’ equity at January 31, 20182020 was $10,471.$5,710.

Deferred Compensation

Our executive officers and other highly compensated employees may elect to defer up to 100% of their base pay and cash incentive and for executive officers, up to 90% of their share-based performance incentive payout each year.  Additional share units are credited for quarterly dividends paid on our common shares. Expense related to dividends paid under this plan for the three months ended January 31, 2020 and 2019 was $81 and $72, respectively.   

10.

Warranties

We offer warranties 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 accruedAccrued liabilities in the Consolidated Balance Sheet.  

Page 14


Nordson Corporation

Following is a reconciliation of the product warranty liability for the three months ended January 31, 20182020 and 2017:2019:

 

 

January 31, 2018

 

 

January 31, 2017

 

 

January 31, 2020

 

 

January 31, 2019

 

Beginning balance at October 31

 

$

13,377

 

 

$

11,770

 

 

$

11,006

 

 

$

12,195

 

Accruals for warranties

 

 

3,231

 

 

 

2,764

 

 

 

2,954

 

 

 

1,999

 

Warranty payments

 

 

(3,101

)

 

 

(2,514

)

 

 

(2,551

)

 

 

(2,499

)

Currency effect

 

 

383

 

 

 

(70

)

 

 

8

 

 

 

132

 

Ending balance

 

$

13,890

 

 

$

11,950

 

 

$

11,417

 

 

$

11,827

 

 

11.

Operating segments  

We conduct business across three3 primary business segments:  Adhesive Dispensing Systems, Advanced Technology Systems, and Industrial Coating Systems.  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 StatementStatements 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.  The accounting policies of the segments are 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, 2017.2019.

The following table presents information about our segments:

 

 

Adhesive Dispensing Systems

 

 

Advanced Technology Systems

 

 

Industrial Coating Systems

 

 

Corporate

 

 

Total

 

 

Adhesive Dispensing Systems

 

 

Advanced Technology Systems

 

 

Industrial Coating Systems

 

 

Corporate

 

 

Total

 

Three months ended

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

January 31, 2018

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

January 31, 2020

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net external sales

 

$

220,864

 

 

$

271,701

 

 

$

57,859

 

 

$

 

 

$

550,424

 

 

$

207,225

 

 

$

231,117

 

 

$

56,574

 

 

$

 

 

$

494,916

 

Operating profit (loss)

 

 

53,315

 

(a)

 

67,268

 

 

 

10,160

 

 

 

(13,020

)

 

 

117,723

 

 

 

48,618

 

 

 

32,287

 

 

 

7,786

 

 

 

(13,598

)

 

 

75,093

 

Three months ended

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

January 31, 2017

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

January 31, 2019

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net external sales

 

$

207,837

 

 

$

145,360

 

 

$

54,273

 

 

$

 

 

$

407,470

 

 

$

211,517

 

 

$

234,458

 

 

$

51,935

 

 

$

 

 

$

497,910

 

Operating profit (loss)

 

 

53,056

 

(a)

 

26,363

 

 

 

7,085

 

 

 

(10,586

)

 

 

75,918

 

 

 

47,892

 

 

 

40,785

 

 

 

7,516

 

 

 

(11,912

)

 

 

84,281

 

 

Page 16


Nordson Corporation

(a)

Includes $1,067 and $227 of severance and restructuring costs in the three months ended January 31, 2018 and 2017, respectively.

 

A reconciliation of total segment operating income to total consolidated income before income taxes is as follows:

 

 

Three Months Ended

 

 

Three Months Ended

 

 

January 31, 2018

 

 

January 31, 2017

 

 

January 31, 2020

 

 

January 31, 2019

 

Total profit for reportable segments

 

$

117,723

 

 

$

75,918

 

 

$

75,093

 

 

$

84,281

 

Interest expense

 

 

(11,317

)

 

 

(5,641

)

 

 

(9,740

)

 

 

(12,365

)

Interest and investment income

 

 

289

 

 

 

273

 

 

 

588

 

 

 

316

 

Other-net

 

 

(3,177

)

 

 

(157

)

 

 

(2,846

)

 

 

(4,189

)

Income before income taxes

 

$

103,518

 

 

$

70,393

 

 

$

63,095

 

 

$

68,043

 

 

We have significant sales in the following geographic regions:

 

 

Three Months Ended

 

 

Three Months Ended

 

 

January 31, 2018

 

 

January 31, 2017

 

 

January 31, 2020

 

 

January 31, 2019

 

United States

 

$

165,831

 

 

$

125,521

 

 

$

188,500

 

 

$

170,350

 

Americas

 

 

34,279

 

 

 

30,042

 

 

 

31,083

 

 

 

32,437

 

Europe

 

 

141,938

 

 

 

119,159

 

 

 

126,391

 

 

 

132,675

 

Japan

 

 

65,869

 

 

 

24,177

 

 

 

27,552

 

 

 

29,047

 

Asia Pacific

 

 

142,507

 

 

 

108,571

 

 

 

121,390

 

 

 

133,401

 

Total net external sales

 

$

550,424

 

 

$

407,470

 

 

$

494,916

 

 

$

497,910

 

Page 15


Nordson Corporation

 

12.

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 presentstables present the classification of our assets and liabilities measured at fair value on a recurring basis at January 31, 2018:basis:

 

 

Total

 

 

Level 1

 

 

Level 2

 

 

Level 3

 

January 31, 2020

 

Total

 

 

Level 1

 

 

Level 2

 

 

Level 3

 

Assets:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Foreign currency forward contracts (a)

 

 

4,640

 

 

 

 

 

 

4,640

 

 

 

 

 

$

3,463

 

 

$

 

 

$

3,463

 

 

$

 

Total assets at fair value

 

$

4,640

 

 

$

 

 

$

4,640

 

 

$

 

 

$

3,463

 

 

$

 

 

$

3,463

 

 

$

 

Liabilities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Deferred compensation plans (b)

 

$

12,774

 

 

$

 

 

$

12,774

 

 

$

 

 

$

12,876

 

 

$

 

 

$

12,876

 

 

$

 

Foreign currency forward contracts (a)

 

 

5,314

 

 

 

 

 

 

5,314

 

 

 

 

 

 

1,232

 

 

 

 

 

 

1,232

 

 

 

 

Total liabilities at fair value

 

$

18,088

 

 

$

 

 

$

18,088

 

 

$

 

 

$

14,108

 

 

$

 

 

$

14,108

 

 

$

 

January 31, 2019

 

Total

 

 

Level 1

 

 

Level 2

 

 

Level 3

 

Assets:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Foreign currency forward contracts (a)

 

$

3,638

 

 

$

 

 

$

3,638

 

 

$

 

Total assets at fair value

 

$

3,638

 

 

$

 

 

$

3,638

 

 

$

 

Liabilities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Deferred compensation plans (b)

 

$

12,019

 

 

$

 

 

$

12,019

 

 

$

 

Foreign currency forward contracts (a)

 

 

2,319

 

 

 

 

 

 

2,319

 

 

 

 

Total liabilities at fair value

 

$

14,338

 

 

$

 

 

$

14,338

 

 

$

 

 

 

(a)

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. Foreign currency forwardexchange contracts are valued using market exchange rates. Foreign currency forwardThese foreign exchange contracts are not designated as hedges. Unrealized gains on foreign currency forward contracts are classified in Receivables-net and losses on foreign currency forward contracts are classified in Accrued liabilities on the Consolidated Balance Sheets.

Page 17


Nordson Corporation

 

(b)

Executive officers and other highly compensated employees may defer up to 100%100 percent of their salary and annual cash incentive awardcompensation and for executive officers, up to 90%90 percent of their long-term performance share incentive award,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.

The carrying amounts and fair values of financial instruments, other than cash and cash equivalents, receivables, and accounts payable, are shown in the table below. The carrying values of cash and cash equivalents, receivables and accounts payable approximate fair value due to the short-term nature of these instruments.

 

 

 

2020

 

 

 

Carrying

Amount

 

 

Fair Value

 

Long-term debt (including current portion)

 

 

1,117,913

 

 

 

1,161,124

 

We used the following methods and assumptions in estimating the fair value of financial instruments:

13.

Financial

Long-term debt is valued by discounting future cash flows at currently available rates for borrowing arrangements with similar terms and conditions, which are considered to be Level 2 inputs under the fair value hierarchy.

13.

Derivative 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 recordedcurrency transactions occur 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. We do not use financial instruments for trading or speculative purposes.

Gains and losses onunder U.S. GAAP. Accordingly, the changes in the fair value of the foreign currency forward contracts are recordedrecognized in each accounting period in “Other – net” on the Consolidated StatementStatements of Income together with the transaction gain or loss from the hedgedrelated balance sheet position. For the three months ended January 31, 2018,2020, we recognized net losses of $964$431 on foreign currency forward contracts and lossesnet gains of $982$431 from the change in fair value of balance sheet positions. For the three months ended January 31, 2017,2019, we recognized lossesnet gains of $213$1,030 on foreign currency forward contracts and gainsnet losses of $203$2,003 from the change in fair value of balance sheet positions.     

Page 16


Nordson Corporation

The following table summarizes, by currency, the foreign currency forward contracts outstanding at January 31, 2018:2020 and 2019:

 

 

Sell

 

 

Buy

 

 

Notional Amounts

 

 

Notional Amounts

 

 

Fair Market Value

 

 

Notional Amounts

 

 

Fair Market Value

 

January 31, 2020 contract amounts:

 

Sell

 

 

Buy

 

Euro

 

$

151,860

 

 

$

156,357

 

 

$

82,214

 

 

$

83,310

 

 

$

227,292

 

 

$

118,275

 

British pound

 

 

42,565

 

 

 

43,469

 

 

 

54,821

 

 

 

57,017

 

 

 

18,934

 

 

 

54,818

 

Japanese yen

 

 

55,161

 

 

 

56,229

 

 

 

25,348

 

 

 

25,996

 

 

 

37,429

 

 

 

58,672

 

Australian dollar

 

 

559

 

 

 

564

 

 

 

7,874

 

 

 

8,317

 

 

 

345

 

 

 

7,817

 

Hong Kong dollar

 

 

 

 

 

 

 

 

107,854

 

 

 

107,503

 

 

 

643

 

 

 

152,452

 

Singapore dollar

 

 

975

 

 

 

996

 

 

 

12,738

 

 

 

13,116

 

 

 

1,109

 

 

 

15,987

 

Others

 

 

6,626

 

 

 

6,741

 

 

 

52,464

 

 

 

53,970

 

 

 

6,505

 

 

 

68,395

 

Total

 

$

257,746

 

 

$

264,356

 

 

$

343,313

 

 

$

349,229

 

 

$

292,257

 

 

$

476,416

 

 

 

 

 

 

 

 

 

 

Notional Amounts

 

January 31, 2019 contract amounts:

 

Sell

 

 

Buy

 

Euro

 

$

335,775

 

 

$

204,537

 

British pound

 

 

24,348

 

 

 

66,809

 

Japanese yen

 

 

28,009

 

 

 

47,997

 

Australian dollar

 

 

786

 

 

 

8,012

 

Hong Kong dollar

 

 

 

 

 

121,578

 

Singapore dollar

 

 

858

 

 

 

15,115

 

Others

 

 

5,619

 

 

 

61,312

 

Total

 

$

395,395

 

 

$

525,360

 

Page 18


Nordson Corporation

We are exposed to credit-related losses in the event of nonperformance by counterparties to financial instruments. These financial instruments include cash deposits and foreign currency forward contracts. We periodically monitor the credit ratings of these counterparties in order to minimize our exposure. Our customers represent a wide variety of industries and geographic regions. For the three months ended January 31, 2020 and 2019, there were no significant concentrations of credit risk.

14.

Leases

We review new contracts to determine if the contracts include a lease. To the extent a lease agreement includes an extension option that is reasonably certain to be exercised, we have recognized those amounts as part of the right-of-use assets and lease liabilities. We combine lease and non-lease components, such as common area maintenance, in the calculation of the lease assets and related liabilities. As most lease agreements do not provide an implicit rate, we use an incremental borrowing rate (IBR) based on information available at the lease commencement date in determining the present value of lease payments and to help classify the lease as operating or financing. We calculate its IBR based on a bond yield curve which considers secured borrowing rates based on our credit rating and current economic environment, as well as other publicly available data.

We lease certain manufacturing facilities, warehouse space, machinery and equipment, and vehicles.  We often have options to renew lease terms for buildings and other assets.  We evaluate renewal and termination options at the lease commencement date to determine if we are reasonably certain to exercise the option on the basis of economic factors.  Leases with an initial term of 12 months or less (short-term leases) are not recorded on the Consolidated Balance Sheet.  Lease expense for operating leases is recognized on a straight-line basis over the lease term, with variable lease payments recognized in the period those payments occur.  Variable payments for leases primarily relate to future rates or amounts, miles, or other quantifiable usage factors which are not determinable at the time the lease agreement commences.  Finance lease assets are recorded in Property, plant, and equipment – net on the Consolidated Balance Sheet. As of January 31, 2020, we have no material leases that have yet to commence.

Additional lease information is summarized below for the three months ended January 31, 2020:

 

 

Finance Leases

 

 

Operating Leases

 

Amortization of right of use assets

 

$

1,714

 

 

$

 

Interest

 

 

83

 

 

 

 

Lease cost(1)

 

$

1,797

 

 

$

5,227

 

Short-term and variable lease cost(1)

 

 

289

 

 

 

865

 

Total lease cost

 

 

2,086

 

 

 

6,092

 

 

 

 

 

 

 

 

 

 

Cash outflows from leases

 

$

2,421

 

 

$

5,292

 

Weighted average remaining lease term (years)

 

5.10 years

 

 

10.75 years

 

Weighted average discount rate

 

 

2.92

%

 

 

1.70

%

(1)

Lease costs are recorded in both Cost of sales and Selling and administrative expenses on the Consolidated Statements of Income.

 

The carrying amountsfollowing table reconciles the undiscounted cash flows for five years and fair valuesthereafter to the operating and finance lease liabilities recognized on the statement of financial instruments atposition as of January 31, 2018, other than cash and cash equivalents, receivables and accounts payable,2020.  The reconciliation excludes short-term leases that are shown innot recognized on the table below.  The carrying values of cash and cash equivalents, receivables and accounts payable approximate fair value due to the short-term nature of these instruments.  Consolidated Balance Sheet.

 

 

 

Carrying

Amount

 

 

Fair

Value

 

Long-term debt, including current maturities

 

 

1,585,430

 

 

 

1,582,964

 

Foreign currency forward contracts (net)

 

 

(674

)

 

 

(674

)

Year:

 

Finance Leases

 

 

Operating Leases

 

2020

 

$

5,923

 

 

$

19,986

 

2021

 

 

3,959

 

 

 

17,820

 

2022

 

 

2,175

 

 

 

16,007

 

2023

 

 

1,049

 

 

 

13,377

 

2024

 

 

645

 

 

 

11,773

 

Later years

 

 

3,601

 

 

 

66,349

 

Total minimum lease payments

 

$

17,352

 

 

$

145,312

 

Amounts representing interest

 

 

1,601

 

 

 

11,040

 

Present value of minimum lease payments

 

$

15,751

 

 

$

134,272

 

We used the following methods and assumptions in estimating the fair value of financial instruments:

Long-term debt is valued by discounting future cash flows at currently available rates for borrowing arrangements with similar terms and conditions, which are considered to be Level 2 inputs under the fair value hierarchy.

Foreign currency forward contracts are valued using observable market based inputs, which are considered to be Level 2 inputs under the fair value hierarchy.

 

Page 1719


Nordson Corporation

 

15.

Long-term debt

A summary of long-term debt is as follows:

 

 

January 31, 2020

 

 

October 31, 2019

 

Revolving credit agreement, due 2024

 

$

 

 

$

 

Senior notes, due 2020-2025

 

 

140,800

 

 

 

140,800

 

Senior notes, due 2020-2027

 

 

92,857

 

 

 

92,857

 

Senior notes, due 2023-2030

 

 

350,000

 

 

 

350,000

 

Term loan, due 2022-2024

 

 

405,000

 

 

 

505,000

 

Euro loan, due 2021

 

 

127,565

 

 

 

128,219

 

Private shelf facility, due 2020

 

 

5,556

 

 

 

30,556

 

Development loans, due 2020-2026

 

 

 

 

 

951

 

 

 

 

1,121,778

 

 

 

1,248,383

 

Less current maturities

 

 

43,598

 

 

 

168,738

 

Less unamortized debt issuance costs

 

 

3,866

 

 

 

4,241

 

Long-term maturities

 

$

1,074,314

 

 

$

1,075,404

 

In April 2019, we amended, restated and extended the term of our existing $605,000 term loan facility with a group of banks. The interest rate is variable based upon the LIBOR rate. The Term Loan Agreement provides for the following term loans in three tranches: $100,000 due in March 2020, $200,000 due in September 2022, and $205,000 due in March 2024.   The weighted average interest rate for borrowings under this agreement was 2.30% at January 31, 2020. For the portion that is due in March 2020, $100,000 of this term loan facility was paid down in January 2020. We were in compliance with all covenants at January 31, 2020.

In April 2019, we entered into a $850,000 unsecured, multicurrency credit facility with a group of banks, which amended, restated and extended our existing syndicated revolving credit agreement that was scheduled to expire in February 2020. This facility has a five-year term and includes a $75,000 subfacility for swing-line loans.  It expires in April 2024. We had 0 balances outstanding under this facility at January 31, 2020 and October 31, 2019. We were in compliance with all covenants at January 31, 2020, and the amount we could borrow under the facility would not have been limited by any debt covenants.

In October 2018, we entered into a €150,000 agreement with Bank of America Merrill Lynch International Limited.  The interest rate is variable based on the EUR LIBOR rate and it expires in October 2021.  The weighted average interest rate at January 31, 2020 was 0.875%.  At January 31, 2020, the balance outstanding was €115,000 ($127,565).  We were in compliance with all covenants at January 31, 2020.

In June 2018, we entered into a Note Purchase Agreement with a group of insurance companies under which we sold $350,000 of Senior Notes to the insurance companies and their affiliates. The notes start to mature between June 2023 and June 2030 and bear interest at fixed rates between 3.71% and 4.17%.  We were in compliance with all covenants at January 31, 2020.

We entered into a $150,000 three-year Note Purchase and Private Shelf agreement with New York Life Investment Management LLC in 2011.  In 2015, the amount of the facility was increased to $180,000, and in 2016 it was increased to $200,000.   At January 31, 2020 and October 31, 2019, $5,556 and $30,556, respectively, was outstanding under this facility. Existing notes mature in September 2020 and bear interest at a fixed rate of 2.21%.  We were in compliance with all covenants at January 31, 2020. 

In 2012, we entered into a Note Purchase Agreement with a group of insurance companies under which we sold $200,000 of unsecured Senior Notes.  At January 31, 2020 and October 31, 2019, there was $140,800 outstanding under this agreement. Existing notes mature between July 2020 and July 2025 and bear interest at fixed rates between 2.62% and 3.13%.  We were in compliance with all covenants at January 31, 2020.

In July 2015, we entered into a Note Purchase Agreement with a group of insurance companies under which we sold $100,000 of unsecured Senior Notes. At January 31, 2020 and October 31, 2019, there was $92,857  outstanding under this agreement. Existing notes mature between July 2020 and July 2027 and bear interest at fixed rates of 2.89% and 3.19%.  We were in compliance with all covenants at January 31, 2020.  

Page 20


Nordson Corporation

16.

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 litigation and environmental matters discussed below, after consultation with legal counsel, we do not believe that losses in excess of the amounts we have accrued would have a material adverse effect on our financial condition, quarterly or annual operating results or cash flows.

Class Action Litigation

On February 22, 2019, a former employee, Mr. Ortiz, filed a purported class action lawsuit in the San Diego County Superior Court, California, against Nordson Asymtek, Inc. and Nordson Corporation, alleging various violations of the California Labor Code.  Plaintiff seeks, among other things, an unspecified amount for unpaid wages, actual, consequential and incidental losses, penalties, and attorneys’ fees and costs.  Management believes, based on currently available information, that the ultimate outcome of the proceeding described above will not have a material adverse effect on the Company’s financial condition or results of operations.

Environmental

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 the construction of a potable water delivery system serving the impacted area down gradient of the Site.  At January 31, 2020 and October 31, 2019, our accrual for the ongoing operation, maintenance and monitoring obligation at the Site was $401. 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 or results of operations.

Page 21


Nordson Corporation

ITEMITEM 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.

Overview

Founded in 1954, Nordson Corporation delivers precision technology solutions to help customers succeed worldwide.  We engineer, manufacture and market differentiated products and systems used to dispense, applyfor precision dispensing, applying and controlcontrolling of adhesives, coatings, sealants, biomaterials, polymers, plastics and other materials, andmaterials; fluid management; to test and inspect for quality;inspection; and to treatUV curing and cure surfaces.plasma surface treatment.  These products are supported with extensive application expertise and direct global sales and service.  We serve a wide variety of consumer non-durable, consumer durable and technology end-markets including packaging, nonwovens, electronics, medical, appliances, energy, transportation, building and construction, and general product assembly and finishing. We have approximately 7,5007,600 employees and direct operations in more than 35 countries.

Critical Accounting Policies and Estimates

The preparation and fair presentation of the consolidated unaudited interim financial statements and accompanying notes included in this report are the responsibility of management. The financial statements and footnotes have been prepared in accordance with U.S. generally accepted accounting principles for interim financial statements and contain certain amounts that were based upon management’s best estimates, judgments and assumptions that were believed to be reasonable under the circumstances. On an ongoing basis, we evaluate the accounting policies and estimates used to prepare our financial statements.  Estimates are based on historical experience, judgments and assumptions believed to be reasonable under current facts and circumstances.  Actual amounts and results could differ from these estimates used by management.

A comprehensive discussion of the Company’s critical accounting policies and management estimates and significant accounting policies followed in the preparation of the financial statements is included in Item 7 of our Annual Report on Form 10-K for the year ended October 31, 2017. There2019. Other than the adoption of the new lease standard as described in Note 2, there have been no significant changes in critical accounting policies, management estimates or accounting policies followed since the year ended October 31, 2017.2019.

Results of Operations

Sales

Sales – Worldwide sales for the three months ended January 31, 20182020 were $550,424, an increase$494,916, a decrease of 35.1%0.6% from sales of $407,470$497,910 for the comparable period of 2017. Sales volume increased 30.4%, consisting of 18.6% organic growth and 11.8% from the first year effect of the ACE, InterSelect, Plas-Pak, Vention, and Sonoscan acquisitions. Favorable2019. Unfavorable currency translation effects increaseddecreased sales by 4.7%0.6%.

Sales of the Adhesive Dispensing Systems segment for the three months ended January 31, 20182020 were $220,864$207,225 compared to $207,837$211,517 in the comparable period of 2017, an increase2019, a decrease of $13,027,$4,292, or 6.3%2.0%. The increasedecrease was due to favorablean organic sales volume decrease of 1.1%, and unfavorable currency effects that increaseddecreased sales 5.7%, and a sales volume increase of 0.6%by 0.9%.  Within this segment, sales volume increaseddecreased in theEurope, Japan and Asia Pacific regions, offsetting growth in the United States and Americas regions.  Growth in generalour product assembly, rigid packaging, andline serving nonwovens product linesend markets was offset by polymer processingsoftness in other product lines.

Sales of the Advanced Technology Systems segment for the three months ended January 31, 20182020 were $271,701$231,117 compared to $145,360$234,458 in the comparable period of 2017, an increase2019, a decrease of $126,341,$3,341, or 86.9%1.4%. The increasedecrease was due to a sales volume increasedecrease of 83.3%, as well as favorable1.1% and unfavorable currency effects that increaseddecreased sales by 3.6%0.3%.  The sales volume increasedecrease consisted primarily of 50.1%2.1% from organic volume, and 33.2%offset by a 1.0% increase from the first yearfirst-year effect of acquisitions.the Optical acquisition. Within this segment, sales volume inclusive of acquisitions, increased in all geographic regions, and was most pronounced in the United States and Japan. was offset by softness in all other regions.  Growth was driven by increased demand for test and inspection and automated dispensing solutions serving electronics end markets, as well as continued strength in fluid management product lines serving medical and industrialend markets was offset by softness in our product lines serving electronics end markets.

Sales of the Industrial Coating Systems segment for the three months ended January 31, 20182020, were $57,859$56,574 compared to $54,273$51,935 in the comparable period of 2017,2019, an increase of $3,586,$4,639, or 6.6%8.9%. The increase was due to favorable currency effects that increased sales by 3.4% and aan organic sales volume increase of 3.2%9.2%, offset by unfavorable currency effects that decreased sales by 0.3%. Within this segment, sales volume increased in the United States and Americas regions and was offset by weakness in all geographic regions, except for the Americas. Growth in powder, container, and liquid finishingother regions. Sales growth was driven by most all product lines serving industrial end markets waswithin this segment, offset by softness in cold materialsour liquid product lines serving automotive end markets.lines.

Page 1822


Nordson Corporation

 

Sales outside the United States accounted for 69.9%61.9% of our sales in the three months ended January 31, 20182020 compared to 69.2% for65.8% in the comparable period of 2017.2019. On a geographic basis, sales in the United States were $165,831,$188,500, an increase of 32.1%10.7% from 2017.the comparable period of 2019. The 10.7% increase in sales volume consisted primarily of 5.1% from organic volume and 27.0% from acquisitions.volume. In the Americas region, sales were $34,279, an increase$31,083, a decrease of 14.1%4.2% from 2017,the comparable period of 2019, with volume increasing 11.3%,decreasing 3.9% and favorableunfavorable currency effects of 2.8%0.3%.  The increasedecrease in sales volume consisted of 16.4% from acquisitions,lower organic volume of 4.3%, offset by a 5.1% decrease in organic volume.0.4% increase from acquisitions. Sales in Europe were $141,938, an increase$126,391, a decrease of 19.1%4.7% from 2017,the comparable period of 2019, with favorablevolume decreasing 2.8% and unfavorable currency effects of 11.2% and volume increasing 7.9%1.9%. The increasedecrease in sales volume consisted of 5.3%lower organic volume of 3.6%, offset by a 0.8% increase from acquisitions, and 2.6% from organic volume.acquisitions. Sales in Japan were $65,869, an increase$27,552, a decrease of 172.4%5.1% from 2017,the comparable period of 2019, with volume increasing 171.2% anddecreasing 6.5%, offset by favorable currency effects of 1.2%1.4%.  The increasedecrease in sales volume consisted of 168.4% fromlower organic volume and 2.8%of 7.0%, offset by a 0.5% increase from acquisitions. Sales in the Asia Pacific region were $142,507, an increase$121,390, a decrease of 31.3%9.0% from 2017,the comparable period of 2019, with volume increasing 27.2%decreasing 8.5% and favorableunfavorable currency effects of 4.1%0.5%. The increasedecrease in sales volume consisted of 25.0% fromlower organic volume and 2.2%of 8.8%, offset by a 0.3% increase from acquisitions.

Operating profit – Cost of sales for the three months ended January 31, 20182020 were $249,421, up from $182,332$231,722, compared to $228,934 in the comparable period of 2017.2019. Gross profit, expressed as a percentage of sales, decreased to 54.7%53.2% for this same period from 55.3%54.0% in 2017.2019. Of the 0.60.8 percentage point decline in gross margin, unfavorable absorption due to lower sales volume and unfavorable product mix contributed 1.00.7 percentage point,points and short-term purchase price accounting charges for acquired inventoryunfavorable currency effects contributed 0.20.1 percentage points. The 0.6 percentage point offset was due to favorable currency translation effects.points

Selling and administrative expenses for the three months ended January 31, 20182020 were $183,280,$188,101, compared to $149,220$184,695 in the comparable period of 2017.2019. The 22.8%1.8% increase includes 9.5% primarily in support of higher sales growth, 9.3%1.3% due to the first year effect of acquisitions, 3.4%higher salaries and employee related costs to support our base business and 1.0% due to currency translation effects and 0.6% due tohigher severance and restructuring costs, in the current period.  offset by unfavorable currency translation effects of 0.5%.

Selling and administrative expenses as a percentage of sales decreasedincreased to 33.3%38.0% for the three months ended January 31, 20182020 compared to 36.6%37.1% in the comparable period of 2017.2019. Of the 3.30.9 percentage point improvement,  5.8increase, higher salaries and employee related costs to support our base business contributed 0.5 percentage points, isand 0.4 percentage points were due to leveraging higher severance and restructuring costs during the three months ended January 31, 2020.  

Operating profit as a percentage of sales growthdecreased to 15.2% for the three months ended January 31, 2020 compared to 16.9% in 2019. Of the 1.7 percentage point decrease, unfavorable leverage of our Adhesive Dispensing Systemsselling and Advanced Technology Systems segments,administrative expenses contributed 0.9 percentage points, 0.7 percentage points were due to unfavorable absorption due to lower sales volume and unfavorable product mix, 0.4 percentage points were due to higher severance and restructuring costs, and 0.1 percentage points iswere due to favorableunfavorable currency translation cost.effects.  This improvementdecrease was partially offset by 2.50.4 percentage points due to the first year effect of acquisitions, and 0.1 percentage points is primarily due to higher severance and restructuring expenses in the current period.

During the three months ended January 31, 2018, we recognized severance and restructuring costs of $1,067.  These costs were all recognized within our Adhesives Dispensing Systems segment, and are associated with a restructuring initiative to consolidate certain facilities in the U.S. Additional costs related to this initiative are not expected to be material in future periods. All severance and restructuring costs are included in selling and administrative expenses in the Condensed Consolidated Statements of Income.

Operating capacity for each of our segments can support fluctuations in order activity without significant changes in operating costs. Also, currency translation affects reported operating margins. Operating margins for each segment were favorably impacted by a weaker dollar primarily against the Euro and British Pound during 2018 as compared to 2017.

Operating profit as a percentage of sales increased to 21.4% for the three months ended January 31, 2018 compared to 18.6% in the comparable period of 2017. Of the 2.8 percentage point improvement in operating margin, favorable leverage of our selling and administrative expenses contributed 5.8 percentage points and favorable currency translation effects contributed 0.9 percentage points.  This improvement was offset by 2.6 percentage points due to the first year effect of acquisitions, 1.0 percentage points due to dilution in gross margin related to the consolidation of certain facilities in the U.S., 0.2 percentage points due to short term purchase price accounting charges for acquired inventory and 0.1 percentage points due to higher severance and restructuring expenses.acquisitions.

For the Adhesive Dispensing Systems segment, operating profit as a percentage of sales decreasedincreased to 24.1%23.5% for the three months ended January 31, 20182020 compared to 25.5%22.6% in the comparable period of 2017.2019. Of the 1.40.9 percentage point declineimprovement in operating margin, dilution in gross margin contributed 1.3 percentage points were due to favorable product mix and 0.5 percentage points were due to lower severance and restructuring costs. These improvements were offset by 0.9 percentage points due to the consolidation of certain facilities in the U.S., unfavorable leverage of selling and administrative expenses contributed 1.0 percentage point, and higher severance and restructuring expenses contributed 0.4 percentage points.  These decreases were offset by a 1.3 percentage point increase due to favorable currency translation effects.

For the Advanced Technology Systems segment, operating profit as a percentage of sales increaseddecreased to 24.8%14.0% for the three months ended January 31, 20182020 compared to 18.1%17.4% in the comparable period of 2017.2019. Of the 6.73.4 percentage point increasedecline in operating margin, favorable leverage of our sellingunfavorable absorption due to lower sales volume and administrative expensesunfavorable product mix contributed 13.21.9 percentage points, higher severance and restructuring costs contributed 1.3 percentage points and favorableunfavorable currency translation effects added 0.4contributed 0.2 percentage points.  These increases were offset by 4.9 percentage points due to the first year effect of acquisitions, 1.7 percentage points due to unfavorable product mix, and 0.3 percentage points due to short term purchase price accounting charges for acquired inventory.  

Page 19


Nordson Corporation

For the Industrial Coating Systems segment, operating profit as a percentage of sales increaseddecreased to 17.6%13.8% for the three months ended January 31, 20182020 compared to 13.1%14.5% in the comparable period of 2017.2019. Of the 4.50.7 percentage point increasedecline in operating margin, favorableunfavorable product mix contributed 2.7 percentage points, favorable currency translation effects contributed 1.03.3 percentage points and favorable leverage of our selling and administrative expenses added 0.8was offset by 2.6 percentage points.  points due to higher sales volume.

Interest and other income (expense) - Interest expense for the three months ended January 31, 20182020 was $11,317, up$9,740, down from $5,641$12,365 for the comparable period of 2017. The increase2019.  This decrease was primarily due to higherlower average borrowingdebt levels between periods.Otherthan in the prior year.

Other expense was $3,177$2,846 for the three months ended January 31, 2018,2020, compared to other expense of $157$4,189 for the comparable period of 2017.2019. Included in the current quarter’s other expense were pension costs of $2,772 due to an accounting standard adopted in the prior year.  Included in the prior year’s other expense is $1,945were pension costs of $1,966 (due to the accounting standard noted earlier) and foreign currency losses and $748 primarily related to the write off of building improvements.$973.

Page 23


Nordson Corporation

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.  Significant judgmentJudgment is involved regarding the application of global income tax laws and regulations and when projecting the jurisdictional mix of income. We have considered several factors in determining the probability of realizing deferred income tax assets which include forecasted operating earnings, available tax planning strategies and the time period over which the temporary differences will reverse. We review our tax positions on a regular basis and adjust the balances as new information becomes available. The effective tax rate for the three months ended January 31, 2018 is -1.0%2020 was 17.6% compared to 29.0%28.6% for the three months ended January 31, 2017.2019.  The effective tax rate for the current quarter was lower than the comparable prior year period primarily due to recentlythe net impact of one-time adjustments that were recorded in the prior year as a result of the enacted law commonly referred to as the U.S. Tax Cuts and Jobs Act ("the Act").

TheOn December 22, 2017, the Act was enacted into law on December 22, 2017.which significantly revised U.S. tax law. It reducesreduced the U.S. federal corporate income tax rate from 35% to 21%.  We have an October 31 fiscal year-end, therefore the lower corporate income tax rate will be phased in, resulting in a U.S. statutory federal rate of 23.3% for our fiscal year ending October 31, 2018, and 21% for subsequent fiscal years.  The statutory tax rate of 23.3%21% was applied to earnings in the current quarter.  

TheSubsequent to the enactment of the Act, requires usthe SEC staff issued SAB 118, which provides a measurement period of up to revalue our existing U.S. deferredone year after the enactment date for companies to finalize the recognition of the income tax balanceeffects of the Act. During the three months ended January 31, 2019, and within the one year measurement period provided by SAB 118, a discrete tax expense of $4,866 was recorded to reflect the lower statutoryprovisional amounts recognized in 2018 due to changes in interpretations and assumptions and the finalization of estimates.

Our income tax rate and payprovision included a one-time transition tax on earnings of certain foreign subsidiaries that were previously deferred from U.S. tax.  As a result, we recorded a provisionaldiscrete tax benefit of $45,213$2,537 and $868 due to reflect the revaluation of our tax assets and liabilities at the reduced corporate tax rate. We also recorded a provisional tax expense of $23,124 to reflect the transition tax on previously deferred foreign earnings.  The net tax effect of these discrete items resulted in a decrease of $22,089 in income tax expenseshare-based payment transactions for the three months ended January 31, 2018.  We intend to pay the transition tax in installments over the eight year period allowable under the Act. The transition tax is included in other long-term liabilities in the Consolidated Balance Sheet at2020 and January 31, 2018.  The amounts recorded are considered a provisional estimate under the U.S. Securities and Exchange Commission Staff Accounting Bulletin No. 118. The provisional calculations may change after the underlying temporary differences and foreign earnings are finalized.  Furthermore, we are still analyzing certain aspects of the Act and related interpretive guidance and refining our calculations which could potentially affect the measurement of these balances or potentially give rise to new or additional deferred tax amounts.

The Act also establishes new tax laws that will affect future tax years, including, but not limited to, the creation of the base erosion anti-abuse tax, impact of foreign derived intangible income, and a new provision designed to tax global intangible low-taxed income. These provisions are not effective until our fiscal year ending October 31, 2019, and, as such, have not been incorporated into the current period tax provision.  We continue to evaluate the future impacts of these provisions and there can be no assurance of what impact these provisions or the Act in its totality will have on our business, financial condition and results of operations. In addition, in the absence of guidance on various uncertainties and ambiguities in the application of certain provisions of the Act, we will use what we believe are reasonable interpretations and assumptions in applying the Act, but it is possible that the Internal Revenue Service could issue subsequent guidance or take positions on audit that differ from our prior interpretations and assumptions, which could materially adversely impact our cash, tax liabilities, financial condition and results of operations.

In March 2016, the FASB issued a new standard which simplifies the accounting for share-based payment transactions. This guidance requires that excess tax benefits and tax deficiencies be recognized as income tax expense or benefit in the Consolidated Statements of Income rather than as additional paid-in capital. As a result our income tax provision for the three months ended January 31, 2018 includes a discrete tax benefit of $4,748.respectively.

Net income – Net income for the three months ended January 31, 20182020, was $104,555,$52,004, or $1.78$0.89 per diluted share, compared to $49,988,$48,567, or $0.86$0.83 per diluted share, in the same period of 2017.2019. This represents a 109.2%7.1% increase in net income and a 107.0%7.2% increase in diluted earnings per share. The impact on netThese increases are due primarily to lower income tax and diluted earnings per share due to U.S. Tax Reform forinterest expenses in the three months ended January 31, 2018 was a benefit of $22,089 and $0.37, respectively.current year.

Page 20


Nordson Corporation

Foreign Currency Effects

In the aggregate, average exchange rates for 20182020 used to translate international sales and operating results into U.S. dollars were favorablegenerally unfavorable comparedwith average exchange rates existing during 2017.2019.  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 January 201831, 2020 were translated at exchange rates in effect during the same period of 2017,2019, sales would have been approximately $18,964 lower$2,864 higher while third-party costs and expenses would have been approximately $10,439 lower.  $1,439 higher.

Financial Condition

Liquidity and Capital Resources

During the three months ended January 31, 2018,2020, cash and cash equivalents increased $42,459.decreased $36,067.  Cash provided by operations during this period was $109,278,$116,275, compared to $81,151$56,847 for the three months ended January 31, 2017.2019.  Cash of $92,947$87,789 was generated from net income adjusted for non-cash income and expenses (consisting of depreciation and amortization, non-cash stock compensation, deferred income taxes, other non-cash expense and loss on sale of property, plant and equipment), compared to $74,192$82,655 for the comparable period of 2017.2019.  Changes in operating assets and liabilities provided $16,331 ofincreased cash by $28,486 in the three months ended January 31, 2018,2020, compared to $6,959decreasing cash by $25,808 in the comparable period of 2017.2019. The primary reason for this increase was due to higher collections of receivables in the current period.

Cash used in investing activities was $59,897$13,816 for the three months ended January 31, 2018,2020, compared to $23,177$13,875 in the comparable period of the prior year.  In the current year, net cash of $43,284 was used for the Sonoscan acquisition.2019. Capital expenditures in the three months ended January 31, 20182020 were $16,681,$13,881, compared to $10,079$14,121 in the comparable period of 2017, due primarily to U.S. facility consolidation efforts.2019.

Cash used in financing activities was $11,803$138,219 for the three months ended January 31, 2018,2020, compared to $38,388$55,297 used in the comparable period of 2017.  Net repayments2019.  Repayments of long-term debt and short-term borrowings provided $1,616,were $125,951 during the three months ended January 31, 2020, compared to $26,643 usednet proceeds of long-term debt of $70,455 in the comparable period of the prior year.year period. Cash of $4,989$4,311 was used for the purchase of treasury shares tendered for taxes related to vesting of restricted stockassociated with employee benefit plans and cash of $17,321$21,915 was used for dividend payments.payments in the current year period, compared to $107,667 and $20,210, respectively, in the comparable period of 2019. Issuance of common shares related to employee benefit plans generated $10,306$16,379 during the three months ended January 31, 2020 compared to $8,246$3,606 in 2017.the comparable period of 2019.

Page 24


Nordson Corporation

The following is a summary of significant changes in balance sheet captions from October 31, 20172019 to January 31, 2018.2020. Receivables decreased $16,805$59,139 due to higher collections. Inventories increased $11,424 due to the Sonoscan acquisition and expected order activity in the second quarter. Net property, plant and equipment increased $10,363 due to capital expenditures of $16,681, offset by depreciation expense. Goodwill increased $32,915 due primarily to the Sonoscan acquisition and the effects of foreign currency translation. The decrease of $35,909$26,212 in accrued liabilities was primarily due to compensation adjustments and bonuses paid out in the first quarter. The decreasequarter of 2020. Current maturities of long-term debt decreased $125,140 due to a payment of $100,000 on our Term Loan Agreement and a $25,000 payment on our notes issued under our agreement with New York Life. Right-of-use lease assets and lease liabilities were also recorded in deferred income taxes liability of $43,421 was primarilythe current quarter due to the impactadoption of U.S. Tax reform. The increasea new lease accounting standard as discussed in other long-term liabilities of $25,251 was primarily due to accruing for the payment of the one-time transition tax associated with the U.S. Tax reform.Note 2.

In December 2014, the board of directors authorized a $300,000 common share repurchase program. This program replaced the $200,000 program approved by the board in August 2013. In August 2015, the board of directors authorized the repurchase of up to an additional $200,000 of the Company’s common shares. This new authorization added capacity toIn August 2018, the board’s December 2014 authorization toboard of directors authorized the repurchase $300,000 of an additional $500,000 of the Company’s common shares. Approximately $118,971$485,242 of the total $1,000,000 authorized remained available for share repurchases at January 31, 2018.2020. Uses for repurchased shares include the funding of benefit programs including stock options and restricted stock and 401(k) matching.stock. Shares purchased are treated as treasury shares until used for such purposes. The repurchase program is being funded using cash from operations and proceeds from borrowings under our credit facilities.

Contractual Obligations

In March 2017,April 2019, we entered into a $705,000amended, restated and extended the term of our existing $605,000 term loan facility with a group of banks. The interest rate is variable based upon the LIBOR rate. The Term Loan Agreement provides for the following term loans in three tranches: $200,000 due in October 2018, $200,000$100,000 due in March 2020, $200,000 due in September 2022, and $305,000$205,000 due in March 2022.2024.   The weighted average interest rate for borrowings under this agreement was 2.66%2.30% at January 31, 2018. Borrowings under2020. For the portion that is due in March 2020, $100,000 of this agreement were used for the single purpose of acquiring Vention during the second quarter of 2017.term loan facility was paid down in January 2020. We were in compliance with all covenants at January 31, 2018.2020.

In February 2015,April 2019, we increased,entered into a $850,000 unsecured, multicurrency credit facility with a group of banks, which amended, restated and extended our existing syndicated revolving credit agreement that was scheduled to expire in December 2016. We entered into a $600,000 unsecured, multicurrency credit facility with a group of banks.February 2020. This facility has a five-year term and includes a $50,000$75,000 subfacility for swing-line loans and may be increased from $600,000 to $850,000 under

Page 21


Nordson Corporation

certain conditions.loans.  It expires in February 2020. Balances outstanding under the prior facility were transferred to the new facility. At January 31, 2018, $263,388 wasApril 2024. We had no balances outstanding under this facility compared to $249,138 outstanding at October 31, 2017. The weighted average interest rate for borrowings under this agreement was 2.56% at January 31, 2018.2020 and October 31, 2019. We were in compliance with all covenants at January 31, 2018,2020, and the amount we could borrow under the facility would not have been limited by any debt covenants.

In October 2018, we entered into a €150,000 agreement with Bank of America Merrill Lynch International Limited.  The interest rate is variable based on the EUR LIBOR rate and it expires in October 2021.  The weighted average interest rate at January 31, 2020 was 0.875%.  At January 31, 2020, the balance outstanding was €115,000 ($127,565).  We were in compliance with all covenants at January 31, 2020.

In June 2018, we entered into a Note Purchase Agreement with a group of insurance companies under which we sold $350,000 of Senior Notes to the insurance companies and their affiliates. The notes start to mature between June 2023 and June 2030 and bear interest at fixed rates between 3.71% and 4.17%. We were in compliance with all covenants at January 31, 2020.

We entered into a $150,000 three-year Note Purchase and Private Shelf agreement with New York Life Investment Management LLC in 2011.  In 2015, the amount of the facility was increased to $180,000, and in 2016 it was increased to $200,000. Notes issued under the agreement may have a maturity of up to 12 years, with an average life of up to 10 years, and are unsecured.  The interest rate on each note can be fixed or floating and is based upon the market rate at the borrowing date.  At January 31, 20182020 and October 31, 2017 $146,6662019, $5,556 and $30,556, respectively, was outstanding under this facility. Existing notes mature betweenin September 2018 and September 20262020 and bear interest at a fixed and floating rates betweenrate of 2.21% and 2.56% per annum.  This agreement contains customary events of default and covenants related to limitations on indebtedness and the maintenance of certain financial ratios.. We were in compliance with all covenants at January 31, 2018, and the amount we could borrow would not have been limited by any debt covenants.2020. 

In 2012, we entered into a Note Purchase Agreement with a group of insurance companies under which we sold $200,000 of unsecured Senior Notes.  At January 31, 20182020 and October 31, 2017 $172,6002019, there was $140,800 outstanding under this agreement. Existing notes mature between July 20182020 and July 2025 and bear interest at fixed rates between 2.62% and 3.13%.  We were in compliance with all covenants at January 31, 2018.

In April 2015, we entered into a $200,000 term loan facility with a group of banks.  $100,000 is due in April 2018 and has a weighted average interest rate of 2.56% and $100,000 is due in April 2020 and has a weighted average interest rate of 2.66%. This loan was used to pay down $100,000 of our previous 364-day unsecured credit facility and $100,000 of our revolving credit facility. We were in compliance with all covenants at January 31, 2018.2020.

In July 2015, we entered into a Note Purchase Agreement under which $100,000 of Senior Unsecured Notes were purchased primarily bywith a group of insurance companies.  Thecompanies under which we sold $100,000 of unsecured Senior Notes.  At January 31, 2020 and October 31, 2019, there was $92,857 outstanding under this agreement. Existing notes mature inbetween July 20192020 and July 2027 and bear interest at fixed rates of 2.89% and 3.19%.  We were in compliance with all covenants at January 31, 2018.2020.  

In October 2015, we entered into a €70,000 agreement with Bank of America Merrill Lynch International Limited. The term

Recent Developments

We are closely monitoring the recent outbreak of the agreement is three yearscoronavirus that was first detected in Wuhan City, Hubei Province, China and can be extended by one year on two annual occasions if notice is given between 180 dayscontinues to expand. The virus has impacted a host of end markets we serve within China and 30 days beforeother regions. We continue to evaluate the maturity date. The interest rate is variable based onimpact of the EUR LIBOR rate plus applicable margin basedcoronavirus on our leverage ratio.  In September 2016 this Agreement was increased to €110,000,supply chain, our customers’ operations and amended and extended to September 2019. At October 31, 2017,any freight interruptions. We are currently reviewing our business continuity plans. Although our overall business could be negatively impacted by the balance outstanding was €10,467 ($12,191). At January 31, 2018, there was no outstanding balance.  coronavirus, we do not expect a material impact on our full year 2020 results.

Page 25


Nordson Corporation

Outlook

We were in compliance with all covenants at January 31, 2018.

Outlook

For the balance of the year, we expect to generate sales volume growth, including the first year effect of acquisitions, and we remainare optimistic about longer termour longer-term growth opportunities in the diverse consumer durable, non-durable, industrial, medical, electronics, consumer durable and industrialautomotive end markets we serve. We also support our customers with parts and consumables, so a significant percentage of our revenue is recurring. For 2020, organic sales are expected to increase 1% to 3% compared to the prior year, offset by an unfavorable currency effect of less than 1%, based on the current exchange rate environment as compared to the prior year. Based on this 2020 sales outlook, we are forecasting earnings per share growth of 2% to 6% compared to the prior year.

We move forward with caution given the potential for a lower-growth macroeconomic environment, continued trade negotiations and the marketplace effects of political instability in certain areas of the world.  We are also monitoring the recent outbreak of the coronavirus in China and other regions. Although our overall business could be negatively impacted by the coronavirus, we do not expect a material impact from the coronavirus on our full year 2020 results. Though the pacestatus of improvement in the global economy remains unclear, our growth potential has been demonstrated over time fromthrough our capacityability to build and enhance our core businesses by entering emerging markets, and pursuing market adjacencies.adjacencies and driving growth initiatives.  We drive value for our customers through our application expertise, differentiated technology, and direct sales and service support. Our priorities also are focused on operational efficiencies by employing continuous improvement methodologies in our business processes.  We expect our efforts will continue to provide more than sufficient cash from operations for meetingto meet our liquidity needs, and payingpay dividends to common shareholders as well as enablingand enable us to invest in the development of new applications and markets for our technologies.  We believe our cash provided from operations, our available borrowing capacity, and ready access to capital markets is more than adequate to fund our liquidity needs within the next year and to make other opportunistic investments.    

For the second quarter of 2018, sales are expected to increase 9% to 13% as compared to the second quarter a year ago.  This outlook includes a range for organic volume to be down 3% to up 1%, 7% growth from the first year effect of acquisitions, and 5% favorable currency translation effects based on the current exchange rate environment.  Diluted earnings per share are expected to be in the range of $1.33 to $1.47.  

Safe Harbor Statements Under The Private Securities Litigation Reform Act Of 1995

This Form 10-Q, particularly the “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 Form 10-Q that are not

Page 22


Nordson Corporation

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 Part I, Item 1A, Risk Factors in our Form 10-K for the year ended October 31, 2017.2019.

ITEMITEM 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 under Part II, Item 7A, “Quantitative and Qualitative Disclosures About Market Risk” in our Form 10-K for the year ended October 31, 2017.2019.  The information disclosed has not changed materially in the interim period since then.

ITEMITEM 4.

CONTROLS AND PROCEDURES

Our management with the participation of the principal executive officer (President and Chief Executive Officer) and principal financial officer (Senior(Executive 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 January 31, 2018.2020.  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 January 31, 20182020 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 controlscontrol over financial reporting that occurred during the three months ended January 31, 20182020 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Page 2326


Nordson Corporation

 

PartPart II – OTHER INFORMATION

ITEMITEM 1.

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 litigation and environmental mattermatters discussed below, it is our opinion, after consultation with legal counsel, we do not believe that resolutionslosses in excess of these matters are not expected to result inthe amounts we have accrued would have a material adverse effect on our financial condition, quarterly or annual operating results or cash flows.

Class Action Litigation

On February 22, 2019, a former employee, Mr. Ortiz, filed a purported class action lawsuit in the San Diego County Superior Court, California, against Nordson Asymtek, Inc. and Nordson Corporation, alleging various violations of the California Labor Code.  Plaintiff seeks, among other things, an unspecified amount for unpaid wages, actual, consequential and incidental losses, penalties, and attorneys’ fees and costs.  Management believes, based on currently available information, that the ultimate outcome of the proceeding described above will not have a material adverse effect on the Company’s financial condition or results of operations.

Environmental

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 the construction of a potable water delivery system serving the impacted area down gradient of the Site.  At January 31, 20182020 and October 31, 2017,2019, our accrual for the ongoing operation, maintenance and monitoring obligation at the Site was $472.$401. 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 or results of operations.

ITEMITEM 1A.

RISK FACTORS

Information regarding our risk factors was disclosed in our Form 10-K filed for the year ended October 31, 2017.2019.  The information disclosed has not changed materially in 2018.

Page 24


Nordson Corporation

2020.

ITEMITEM 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 January 31, 2018:2020:

 

 

 

 

 

 

 

 

 

 

 

Total Number of

 

 

Maximum Value

 

 

 

 

 

 

 

 

 

 

 

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

 

 

 

Purchased (1)

 

 

per Share

 

 

or Programs(2)

 

 

or Programs(2)

 

November 1, 2017 to November 30, 2017

 

 

8

 

 

 

127.66

 

 

 

 

 

$

118,971

 

December 1, 2017 to December 31, 2017

 

 

1

 

 

 

146.63

 

 

 

 

 

$

118,971

 

January 1, 2018 to January 31, 2018

 

 

 

 

 

 

 

 

 

 

$

118,971

 

Total

 

 

9

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total Number of

 

 

Approximate Dollar Value

 

 

 

 

 

 

 

 

 

 

 

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

 

 

 

Purchased(1)

 

 

per Share

 

 

or Programs(2)

 

 

or Programs(2)

 

November 1, 2019 to November 30, 2019

 

 

 

 

 

 

 

 

 

 

$

485,242

 

December 1, 2019 to December 31, 2019

 

 

6

 

 

 

165.83

 

 

 

 

 

$

485,242

 

January 1, 2020 to January 31, 2020

 

 

2

 

 

 

162.92

 

 

 

 

 

$

485,242

 

Total

 

 

8

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(1)

Includes shares tendered for taxes related to vesting of restricted stock.

 

(2)

In December 2014, the board of directors authorized a $300,000 common share repurchase program. In August 2015, the board of directors authorized the repurchase of up to an additional $200,000 of the Company’s common shares.  This new authorization added capacity to In August 2018, the board’s December 2014 authorization toboard of directors authorized the repurchase $300,000 of an additional $500,000 of the Company’s common shares. Approximately $118,971$485,242 of the total $1,000,000 authorized remained available for share repurchases at January 31, 2018.2020. Uses for repurchased shares include the funding of benefit programs including stock options and restricted stock and 401(k) matching.stock. Shares purchased are treated as treasury shares until used for such purposes. The repurchase program is being funded using cash from operations and proceeds from borrowings under our credit facilities.

Page 2527


Nordson Corporation

 

ITEMITEM 6.

EXHIBITS

 

  10.1

Amended and Restated Nordson Corporation Directors’ Deferred Compensation Sub-Plan (incorporated herein by reference to Exhibit 10-g-7 to Registrant’s Annual Report on Form 10-K for the year ended October 31, 2017).**

 

 

 

   10.2

Amended and Restated Nordson Corporation 2012 Stock Incentive and Award Plan (incorporated by reference to Exhibit 10.1 to Registrant’s Current Report on Form 8-K filed on March 2, 2018).**

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 Chief Executive Officer 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 Chief Financial Officer 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 January 31, 2018,2020, formatted in inline Extensible Business Reporting Language (XBRL)(iXBRL): (i) the Condensed Consolidated Statements of Income for the three months ended January 31, 20182020 and 2017,2019, (ii) the Condensed Consolidated Statements of Comprehensive Income for the three months ended January 31, 20182020 and 2017,2019, (iii) the Condensed Consolidated Balance Sheets at January 31, 20182020 and October 31, 2017,2019, (iv) the Condensed Consolidated Statements of Changes in Shareholders’ Equity for the three months ended January 31, 2020 and 2019, (v) the Condensed Consolidated Statements of Cash Flows for the three months ended January 31, 20182020 and 2017,2019, and (v)(vi) the Notes to Condensed Consolidated Financial Statements.

104

The cover page from Nordson Corporation’s Quarterly Report on Form 10-Q for the quarter ended January 31, 2020, formatted in inline Extensible Business Reporting Language (iXBRL) (included in Exhibit 101).

 

*

Furnished herewith.

**

Indicates management contract or compensatory plan, contract or arrangement in which one or more directors and/or executive officers of Nordson Corporation may be participants.

Page 2628


Nordson Corporation

 

SIGNATURESIGNATURE

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:  March 5, 20182020

 

Nordson Corporation

 

 

 

 

 

By: /s/ GREGORYGregory A. THAXTONThaxton

 

 

Gregory A. Thaxton

 

 

SeniorExecutive Vice President, Chief Financial Officer

 

 

(Principal Financial Officer)

 

Page 2729