Nordson (NDSN) 10-Q 2023 Q1 Quarterly report

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C.  20549

FORM 10-Q

(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, 2023

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

(State or other jurisdiction of incorporation or organization)

28601 Clemens Road

Westlake, Ohio

(Address of principal executive offices)

34-0590250

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

44145

(Zip Code)

(440) 892-1580

(Registrant's Telephone Number, Including Area Code)

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

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 (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  x    No  o

Indicate by check mark whether the Registrant has submitted electronically every Interactive Data File required to be submitted 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 such files).    Yes  x    No  o

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.

Large accelerated filer	☒	Accelerated filer	☐
Non-accelerated filer	☐	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.  o

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

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 February 21, 2023:  57,260,973

Table of Contents

PART I – FINANCIAL INFORMATION	3
ITEM 1.  FINANCIAL STATEMENTS (UNAUDITED)	3
Condensed Consolidated Statements of Income	3
Consolidated Statements of Comprehensive Income	4
Consolidated Balance Sheets	5
Consolidated Statements of Shareholders' Equity	6
Condensed 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	20
Overview	20
Critical Accounting Policies and Estimates	20
Results of Operations	21
Financial Condition	22
ITEM 3.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK	23
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	24
ITEM 6.  EXHIBITS	25
SIGNATURE	26

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Nordson Corporation

Part I – FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS (UNAUDITED)

Condensed Consolidated Statements of Income

	Three Months Ended
(In thousands, except for per share data)	January 31, 2023		January 31, 2022
Sales	$	610,477	$	609,166
Operating costs and expenses:
Cost of sales	281,610		269,032
Selling and administrative expenses	184,648		184,274
	466,258		453,306
Operating profit	144,219		155,860
Other income (expense):
Interest expense	(10,530)		(5,650)
Interest and investment income	587		465
Other - net	(3,196)		1,292
	(13,139)		(3,893)
Income before income taxes	131,080		151,967
Income taxes	26,819		31,558
Net income	$	104,261	$	120,409
Average common shares	57,170		58,152
Incremental common shares attributable to equity compensation	592		667
Average common shares and common share equivalents	57,762		58,819
Basic earnings per share	$	1.82	$	2.07
Diluted earnings per share	$	1.81	$	2.05

See accompanying notes.

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Consolidated Statements of Comprehensive Income

	Three Months Ended
(In thousands)	January 31, 2023		January 31, 2022
Net income	$	104,261	$	120,409
Components of other comprehensive income (loss):
Foreign currency translation adjustments	76,821		(13,358)
Pension and other postretirement plan adjustments, net of tax	(576)		3,060
Total other comprehensive income (loss)	76,245		(10,298)
Total comprehensive income	$	180,506	$	110,111

See accompanying notes.

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Consolidated Balance Sheets

(In thousands)
Assets
Current assets:	January 31, 2023		October 31, 2022
Cash and cash equivalents	$	121,994	$	163,457
Receivables - net	546,649		537,313
Inventories - net	447,727		383,398
Prepaid expenses and other current assets	62,046		48,803
Total current assets	1,178,416		1,132,971
Goodwill	2,107,113		1,804,693
Intangible assets - net	377,835		329,402
Property, plant and equipment - net	361,447		353,442
Operating right of use lease assets	111,375		102,279
Deferred income taxes	11,994		10,447
Other assets	89,243		87,141
Total assets	$	4,237,423	$	3,820,375
Liabilities and shareholders' equity
Current liabilities:
Current maturities of long-term debt and notes payable	$	420,947	$	392,537
Accrued liabilities	156,864		206,828
Accounts payable	90,602		99,276
Customer advanced payments	97,683		92,584
Income taxes payable	37,161		22,333
Operating lease liability - current	17,319		15,738
Finance lease liability - current	4,885		4,907
Total current liabilities	825,461		834,203
Long-term debt	595,166		345,320
Operating lease liability - noncurrent	97,179		90,768
Deferred income taxes	121,152		110,781
Postretirement obligations	56,953		56,804
Pension obligations	45,114		40,551
Finance lease liability - noncurrent	11,070		11,184
Other long-term liabilities	38,643		36,389
Shareholders' equity:
Common shares	12,253		12,253
Capital in excess of stated value	640,800		626,697
Retained earnings	3,719,278		3,652,216
Accumulated other comprehensive loss	(131,537)		(207,782)
Common shares in treasury, at cost	(1,794,109)		(1,789,009)
Total shareholders' equity	2,446,685		2,294,375
Total liabilities and shareholders' equity	$	4,237,423	$	3,820,375

See accompanying notes.

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Consolidated Statements of Shareholders’ Equity

	Three Months Ended January 31, 2023
(In thousands, except for share and 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, 2022	$	12,253	$	626,697	$	3,652,216	$	(207,782)	$	(1,789,009)	$	2,294,375
Shares issued under company stock and employee benefit plans	—		7,032		—		—		1,775		8,807
Stock-based compensation	—		7,071		—		—		—		7,071
Purchase of treasury shares	—		—		—		—		(6,875)		(6,875)
Dividends declared ($0.65 per share)	—		—		(37,199)		—		—		(37,199)
Net income	—		—		104,261		—		—		104,261
Other Comprehensive Income (Loss):
Foreign currency translation adjustments	—		—		—		76,821		—		76,821
Defined benefit pension and post-retirement plan adjustments	—		—		—		(576)		—		(576)
January 31, 2023	$	12,253	$	640,800	$	3,719,278	$	(131,537)	$	(1,794,109)	$	2,446,685

	Three Months Ended January 31, 2022
(In thousands, except for share and 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, 2021	$	12,253	$	585,334	$	3,265,027	$	(175,835)	$	(1,527,649)	$	2,159,130
Shares issued under company stock and employee benefit plans	—		5,046		—		—		675		5,721
Stock-based compensation	—		8,392		—		—		—		8,392
Purchase of treasury shares	—		—		—		—		(35,002)		(35,002)
Dividends declared ($0.51 per share)	—		—		(29,724)		—		—		(29,724)
Net income	—		—		120,409		—		—		120,409
Other Comprehensive Income (Loss):
Foreign currency translation adjustments	—		—		—		(13,358)		—		(13,358)
Defined benefit pension and post-retirement plan adjustments	—		—		—		3,060		—		3,060
January 31, 2022	$	12,253	$	598,772	$	3,355,712	$	(186,133)	$	(1,561,976)	$	2,218,628

See accompanying notes.

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Condensed Consolidated Statements of Cash Flows

(In thousands)	Three Months Ended
Cash flows from operating activities:	January 31, 2023		January 31, 2022
Net income	$	104,261	$	120,409
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	26,434		25,390
Non-cash stock compensation	6,239		8,392
Deferred income taxes	(278)		1,785
Other non-cash expense	253		653
Loss on sale of property, plant and equipment	10		193
Changes in operating assets and liabilities	(58,371)		(29,217)
Other	44,789		(9,518)
Net cash provided by operating activities	123,337		118,087
Cash flows from investing activities:
Additions to property, plant and equipment	(9,302)		(12,491)
Proceeds from sale of property, plant and equipment	9		7
Acquisition of business, net of cash acquired	(377,843)		(171,613)
Net cash used in investing activities	(387,136)		(184,097)
Cash flows from financing activities:
Proceeds from long-term debt	566,978		361
Repayment of long-term debt	(314,700)		(1,618)
Repayment of finance lease obligations	(1,318)		(1,640)
Issuance of common shares	8,807		5,721
Purchase of treasury shares	(6,875)		(35,002)
Dividends paid	(37,199)		(29,724)
Net cash provided by (used in) financing activities	215,693		(61,902)
Effect of exchange rate changes on cash	6,643		(1,521)
Decrease in cash and cash equivalents	(41,463)		(129,433)
Cash and cash equivalents at beginning of period	163,457		299,972
Cash and cash equivalents at end of period	$	121,994	$	170,539

See accompanying notes.

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Notes to Condensed Consolidated Financial Statements

January 31, 2023

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 the context otherwise indicates, all references to “we” or the “Company” mean Nordson Corporation.

Unless otherwise noted, all references to years relate to our fiscal year ending October 31.

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 notes required by generally accepted accounting principles in the United States (U.S. GAAP) 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, 2023 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 notes included in our Annual Report on Form 10-K for the year ended October 31, 2022.

Consolidation.  The Condensed Consolidated Financial Statements include the accounts of Nordson Corporation and its 100%-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 generally accepted accounting principles in the United States requires management to make estimates and assumptions that affect the amounts reported in the Condensed Consolidated Financial Statements.  Actual amounts could differ from these estimates.

Revenue recognition. 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 revenue results from short-term, fixed-price contracts and primarily is recognized as of a point in time when the product is shipped or at a later point when the control of the 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, 2023 and 2022 were not material.

However, for certain contracts related to the sale of customer-specific products within our Medical and Fluid Solutions segment, revenue 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, 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 on January 31, 2023 and October 31, 2022. Revenue recognized over time represented approximately less than ten percent of our overall consolidated revenues at January 31, 2023 and October 31, 2022.

Revenue is measured as the amount of consideration we expect to receive in exchange for transferring products or services.  Taxes, including sales and value add, that 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

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Nordson Corporation

costs is one year or less. These costs are recorded within Selling and administrative expenses in our Condensed Consolidated Statements of Income.

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 and are not material. 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, these items are typically regarded as inconsequential or not 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 evaluating performance of operating segments and for allocating resources. Refer to our Operating segments Note for details.

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 whose exercise price is higher than the average market price are excluded from the calculation of diluted earnings per share because the effect would be anti-dilutive. Options excluded from the calculation of diluted earnings per share for the three months ended January 31, 2023 and 2022 were 144 and 83, respectively.

Recently issued accounting standards

There have been no new accounting standards issued which would require either disclosure or adoption during the current period.

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 Condensed Consolidated Statements of Income.

2023 Acquisition

On November 3, 2022 we acquired 100% of CyberOptics Corporation (CyberOptics). CyberOptics is a leading global developer and manufacturer of high-precision 3D optical sensing technology solutions. The CyberOptics acquisition expanded our test and inspection platform, providing differentiated technology that expands our product offering in the semiconductor and electronics industries and is reported in our Advanced Technology Solutions segment. We acquired CyberOptics for an aggregate purchase price of $377,843, net of cash of approximately $40,890, funded using borrowing under our revolving credit facility and cash on hand. Based on the fair value of the assets acquired and the liabilities assumed, goodwill of $279,630 and identifiable intangible assets of $58,600 were recorded. The identifiable intangible assets consist primarily of $15,200 of tradenames (amortized over fifteen years), $14,600 of technology (amortized over seven years), and $28,800 of customer contracts (amortized over twelve years). The results of CyberOptics are not material to our Consolidated Financial Statements. As of January 31, 2023, the purchase price allocation remains preliminary as we complete our assessment of intangibles and income taxes. The assets and liabilities acquired were as follows:

	November 3, 2022
Cash	$	40,890
Receivables - net	21,364
Inventories - net	35,300
Goodwill	279,630
Intangibles	58,600
Other assets	14,046
Total Assets	$	449,830
Accounts payable	$	8,109
Deferred income taxes	14,294
Other liabilities	8,694
Total Liabilities	$	31,097

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2022 Acquisition

On November 1, 2021, we acquired 100% of NDC Technologies (NDC), a leading global provider of precision measurement solutions for in-line manufacturing process control. NDC's technology portfolio includes in-line measurement sensors, gauges and analyzers using near-infrared, laser, X-ray, optical and nucleonic technologies, as well as proprietary algorithms and software. We acquired NDC for an aggregate purchase price of $171,613, net of cash of approximately $7,533 and other working capital adjustments of $2,763, utilizing cash on hand. Based on the fair value of the assets acquired and the liabilities assumed, goodwill of $131,129 and identifiable intangible assets of $31,130 were recorded. The identifiable intangible assets consist primarily of $10,800 of tradenames (amortized over thirteen years), $10,000 of technology (amortized over seven years), $9,500 of customer relationships (amortized over four years) and $830 of non-compete agreements (amortized over three years). Goodwill associated with this acquisition of $72,018 is tax deductible. This acquisition is being reported in our Industrial Precision Solutions segment and the results of NDC are not material to our Consolidated Financial Statements.

Receivables

Our allowance for credit losses is principally determined based on aging of receivables. Receivables are exposed to credit risk based on the customers' ability to pay which is influenced by, among other factors, their financial liquidity. We perform ongoing customer credit evaluation to maintain sufficient allowances for potential credit losses. Our segments perform credit evaluation and monitoring to estimate and manage credit risk through the review of customer information, credit ratings, approval and monitoring of customer credit limits, and assessment of market conditions. We may also require prepayments or bank guarantees from customers to mitigate credit risk. Our receivables are generally short-term in nature with a majority of receivables outstanding less than 90 days. Accounts receivable balances are written-off against the allowance if deemed uncollectible.

Accounts receivable are net of an allowance for credit losses of $9,148 and $8,218 on January 31, 2023 and October 31, 2022, respectively. The provision for losses on receivables was $348 and $471 for the three months ended January 31, 2023 and 2022, respectively. The remaining change in the allowance for credit losses is principally related to net write-off/recoveries of uncollectible accounts as well as currency translation.

Inventories

Components of inventories were as follows:

	January 31, 2023		October 31, 2022
Finished goods	$	256,243	$	218,491
Raw materials and component parts	191,185		157,447
Work-in-process	57,917		53,195
	505,345		429,133
Obsolescence and other reserves	(57,618)		(45,735)
	$	447,727	$	383,398

See Acquisitions Note for inventory increase attributable to acquisition of CyberOptics.

Property, Plant and Equipment

Components of property, plant and equipment were as follows:

	January 31, 2023		October 31, 2022
Land	$	9,780	$	9,278
Land improvements	5,029		4,979
Buildings	284,065		271,450
Machinery and equipment	522,574		505,343
Enterprise management system	52,564		52,513
Construction-in-progress	28,774		31,466
Leased property under finance leases	28,221		27,512
	931,007		902,541
Accumulated depreciation and amortization	(569,560)		(549,099)
	$	361,447	$	353,442

Depreciation expense was $12,562 and $12,305 for the three months ended January 31, 2023 and 2022, respectively.

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Goodwill and other intangible assets  

Changes in the carrying amount of goodwill for the three months ended January 31, 2023 by operating segment were as follows:

	Industrial Precision Solutions		Medical Fluid Systems		Advanced Technology Solutions		Total
Balance at October 31, 2022	$	520,236	$	1,172,069	$	112,388	$	1,804,693
Acquisitions	—		—		279,630		279,630
Currency effect	15,734		3,751		3,305		22,790
Balance at January 31, 2023	$	535,970	$	1,175,820	$	395,323	$	2,107,113

The increase in goodwill for the three months ended January 31, 2023 was due to the acquisition of CyberOptics. See Acquisitions Note for additional details.

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

	January 31, 2023
	Carrying  Amount		Accumulated Amortization		Net Book  Value
Customer relationships	$	516,035	$	264,296	$	251,739
Patent/technology costs	175,436		102,181		73,255
Trade name	99,141		47,151		51,990
Non-compete agreements	10,516		9,665		851
Other	157		157		—
Total	$	801,285	$	423,450	$	377,835
	October 31, 2022
	Carrying  Amount		Accumulated Amortization		Net Book  Value
Customer relationships	$	480,058	$	250,798	$	229,260
Patent/technology costs	157,549		96,426		61,123
Trade name	82,759		44,707		38,052
Non-compete agreements	10,253		9,290		963
Other	446		442		4
Total	$	731,065	$	401,663	$	329,402

Amortization expense for the three months ended January 31, 2023 and 2022 was $13,872 and $13,085, respectively. See Acquisitions Note for details regarding intangibles recorded due to the acquisition of CyberOptics.

Pension and other postretirement plans

The components of net periodic pension and other postretirement cost for the three months ended January 31, 2023 and 2022 were:

	U.S.				International
Three Months Ended	2023		2022		2023		2022
Service cost	$	2,744	$	5,187	$	275	$	489
Interest cost	4,175		3,583		603		298
Expected return on plan assets	(6,529)		(7,878)		(377)		(393)
Amortization of prior service cost (credit)	—		12		(13)		(18)
Amortization of net actuarial loss	—		2,766		20		607
Total benefit cost	$	390	$	3,670	$	508	$	983

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The components of other postretirement benefit costs for the three months ended January 31, 2023 and 2022 were:

	U.S.				International
Three Months Ended	2023		2022		2023		2022
Service cost	$	100	$	195	$	1	$	3
Interest cost	765		488		3		3
Amortization of net actuarial (gain) loss	—		263		(16)		(12)
Total benefit cost (income)	$	865	$	946	$	(12)	$	(6)

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

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 rate for the three months ended January 31, 2023 and 2022 was 20.5% and 20.8%, respectively.

Due to our share-based payment transactions, our income tax provision included a discrete tax benefit of $1,166 and $1,115, for the three months ended January 31, 2023 and 2022, respectively.

Accumulated other comprehensive loss

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

	Cumulative translation adjustments		Pension and postretirement  benefit plan adjustments		Accumulated other  comprehensive income (loss)
Balance at October 31, 2022	$	(160,046)	$	(47,736)	$	(207,782)
Pension and other postretirement plan adjustments, net of tax of ($195)	—		(576)		(576)
Foreign currency translation adjustments	76,821		—		76,821
Balance at January 31, 2023	$	(83,225)	$	(48,312)	$	(131,537)

Stock-based compensation

During the 2021 Annual Meeting of Shareholders, our shareholders approved the Nordson Corporation 2021 Stock Incentive and Award Plan (the "2021 Plan") as the successor to the Amended and Restated 2012 Stock Incentive and Award Plan (the "2012 Plan"). The 2021 Plan provides for the granting of stock options, stock appreciation rights, restricted shares, restricted share units, performance shares, cash awards and other stock or performance-based incentives. A maximum of 900 common shares were authorized for grant under the 2021 Plan plus the number of shares that remained available to be granted under the 2012 Plan and additional shares registered related to the acquisition of CyberOptics. As of January 31, 2023, a total of 2,005 common shares were available to be granted under the 2021 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% per year and expire 10 years from the date of grant. Vesting accelerates upon a qualified termination in connection with a change in control. In 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 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 $1,663 and $1,772 for the three months ended January 31, 2023 and 2022, respectively.

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The following table summarizes activity related to stock options for the three months ended January 31, 2023:

	Number of Options	Weighted- Average Exercise Price  Per Share		Aggregate Intrinsic Value		Weighted Average Remaining Term
Outstanding at October 31, 2022	1,187	$	141.82
Granted	78	240.01
Exercised	(73)	122.96
Forfeited or expired	(2)	132.92
Outstanding at January 31, 2023	1,190	$	148.33	$	114,851	5.4 years
Expected to vest	257	$	213.45	$	9,021	7.9 years
Exercisable at January 31, 2023	930	$	130.05	$	105,762	4.7 years

As of January 31, 2023, there was $10,669 of total unrecognized compensation cost related to unvested stock options. That cost is expected to be amortized over a weighted average period of approximately 1.9 years.

The fair value of each option grant was estimated at the date of grant using the Black-Scholes option-pricing model with the following assumptions:

Three Months Ended	January 31, 2023			January 31, 2022
Expected volatility	30.4%	-	31.8%	30.6%	-	30.8%
Expected dividend yield	1.12%	-	1.12%	0.76%	-	0.76%
Risk-free interest rate	3.79%	-	3.82%	1.36%	-	1.47%
Expected life of the option (in years)	5.0	-	6.1	5.3	-	6.2

The weighted-average expected volatility used to value the 2023 and 2022 options was 30.6% and 30.6%, 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, 2023 and 2022 was $78.12 and $79.03, respectively.

The total intrinsic value of options exercised during the three months ended January 31, 2023 and 2022 was $8,350 and $6,961, respectively.

Cash received from the exercise of stock options for the three months ended January 31, 2023 and 2022 was $8,807 and $5,721, 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. We may also grant continuation awards in the form of restricted share units with cliff vesting and a performance measure that must be achieved for the restricted share units to vest.

For employee recipients, in the event of termination of employment due to early retirement, with the consent of the Company, restricted shares and units granted within 12 months prior to termination are forfeited, and other restricted shares and units vest on a pro-rata basis, subject to the consent of the Compensation Committee. In the event of termination of employment due to normal retirement at age 65, restricted shares and units granted within 12 months prior to termination are forfeited, and, for other restricted shares and units, the restriction period applicable to restricted shares will lapse and the shares will vest and be transferable and all unvested units will become vested in full, subject to the consent of the Compensation Committee. In the event of a recipient's disability or death, all restricted shares and units granted within 12 months prior to termination fully vest. Termination for any other reason prior to the lapse of any restrictions or vesting of units results in forfeiture of the shares or units.

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.  

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The following table summarizes activity related to restricted shares during the three months ended January 31, 2023:

	Number of Shares	Weighted-Average Grant Date Fair Value
Restricted shares at October 31, 2022	6	$	167.99
Vested	(3)	165.21
Restricted shares at January 31, 2023	3	$	170.56

As of January 31, 2023, there was $173 of unrecognized compensation cost related to restricted shares. The cost is expected to be amortized over a weighted average period of 0.5 years. The amount charged to expense related to restricted shares during the three months ended January 31, 2023 and 2022 was $160 and $314, respectively, which included common share dividends of $2 and $5, respectively.

The following table summarizes activity related to restricted share units during the three months ended January 31, 2023:

	Number of Units	Weighted-Average Grant Date Fair Value
Restricted share units at October 31, 2022	81	$	223.77
Granted	36	237.68
Forfeited	(2)	242.02
Vested	(42)	218.85
Restricted share units at January 31, 2023	73	$	233.00

As of January 31, 2023, there was $14,661 of remaining expense to be recognized related to outstanding restricted share units, which is expected to be recognized over a weighted average period of 2.1 years. The amount charged to expense related to restricted share units during each of the three months ended January 31, 2023 and 2022 was $2,258 and $2,273.

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.

The amount of compensation expense is based upon current performance projections and the percentage of the requisite service that has been rendered. The calculations are based upon the grant date fair value, which is principally driven by the stock price on the date of grant or a Monte Carlo valuation for awards with market conditions. The per share values were $231.34 in 2023, and $260.60, $273.50, and $221.94 for 2022. The amount charged to expense related to performance awards for the three months ended January 31, 2023 and 2022 was $2,062 and $3,944, respectively. The cumulative amount recorded in shareholders' equity at January 31, 2023 and 2022 was $10,603 and $10,959, respectively. As of January 31, 2023, there was $12,980 of unrecognized compensation cost related to performance share incentive awards.

Deferred Compensation

Our executive officers and other highly compensated employees may elect to defer up to 100% of their base pay and cash incentive compensation, 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, 2023 and 2022 was $18 and $18, 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.

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The following table summarizes activity related to director deferred compensation share equivalent units during the three months ended January 31, 2023:

	Number of Shares	Weighted-Average Grant Date Fair Value
Outstanding at October 31, 2022	90	$	77.70
Distributions	(4)	50.88
Outstanding at January 31, 2023	86	$	79.73

The amount charged to expense related to director deferred compensation for the three months ended January 31, 2023 and 2022 was $80 and $76, respectively.

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 Accrued liabilities in the Consolidated Balance Sheets.  

Following is a reconciliation of the product warranty liability for the three months ended January 31, 2023 and 2022:

	January 31, 2023		January 31, 2022
Beginning balance at October 31	$	11,723	$	11,113
Accruals for warranties	4,809		3,865
Warranty payments	(3,186)		(3,051)
Currency effect	215		(10)
Ending balance	$	13,561	$	11,917

Operating segments

We conduct business in three primary operating segments: Industrial Precision Solutions, Medical and Fluid Solutions, and Advanced Technology Solutions. 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 Condensed Consolidated Statements 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 the Significant accounting policies Note.

Industrial Precision Solutions: This segment focuses on delivering proprietary dispensing and processing technology, both standard and highly customized equipment, to diverse end markets. Product lines commonly reduce material consumption, increase line efficiency through precision dispense and measurement and control, and enhance product brand and appearance. Components are used for dispensing adhesives, coatings, paint, finishes, sealants and other materials. This segment primarily serves the industrial, consumer durables and non-durables markets.

Medical and Fluid Solutions: This segment includes the Company’s fluid management solutions for medical, high-tech industrial and other diverse end markets. Related plastic tubing, balloons, catheters, syringes, cartridges, tips and fluid connection components are used to dispense or control fluids within customers’ medical devices or products, as well as production processes.

Advanced Technology Solutions: This segment focuses on products serving electronics end markets. Advanced Technology Solutions products integrate our proprietary product technologies found in progressive stages of an electronics customer’s production processes, such as surface treatment, precisely controlled dispensing of material and test and inspection to ensure quality and reliability. Applications include, but are not limited to, semiconductors, printed circuit boards, electronic components and automotive electronics.

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The following table presents information about our segments:

Three Months Ended	Industrial Precision Solutions		Medical and Fluid Solutions		Advanced Technology Solutions		Corporate		Total
January 31, 2023
Net external sales	$	311,546	$	154,287	$	144,644	$	—	$	610,477
Operating profit (loss)	102,319		39,384		16,963		(14,447)		144,219
January 31, 2022
Net external sales	$	323,933	$	158,784	$	126,449	$	—	$	609,166
Operating profit (loss)	102,187		49,093		27,234		(22,654)		155,860

We had significant sales in the following geographic regions:

	Three Months Ended
	January 31, 2023		January 31, 2022
Americas	$	264,878	$	239,901
Europe	162,939		155,985
Asia Pacific	182,660		213,280
Total net external sales	$	610,477	$	609,166

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 tables present the classification of our assets and liabilities measured at fair value on a recurring basis:

January 31, 2023	Total		Level 1		Level 2		Level 3
Assets:
Foreign currency forward contracts (a)	$	12,851	$	—	$	12,851	$	—
Total assets at fair value	$	12,851	$	—	$	12,851	$	—
Liabilities:
Deferred compensation plans (b)	$	11,118	$	—	$	11,118	$	—
Foreign currency forward contracts (a)	3,401		—		3,401		—
Total liabilities at fair value	$	14,519	$	—	$	14,519	$	—

October 31, 2022	Total		Level 1		Level 2		Level 3
Assets:
Foreign currency forward contracts (a)	$	5,035	$	—	$	5,035	$	—
Total assets at fair value	$	5,035	$	—	$	5,035	$	—
Liabilities:
Deferred compensation plans (b)	$	9,076	$	—	$	9,076	$	—
Foreign currency forward contracts (a)	11,724		—		11,724		—
Total liabilities at fair value	$	20,800	$	—	$	20,800	$	—

(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 exchange contracts are valued using market exchange rates. These foreign exchange contracts are not designated as hedges.

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(b)Executive officers and other highly compensated employees may defer up to 100% of their salary and annual cash incentive compensation and for executive officers, up to 90% of their long-term incentive compensation, into various non-qualified deferred compensation plans. Deferrals can be allocated to various market performance measurement funds. Changes in the value of compensation deferred under these plans are recognized each period based on the fair value of the underlying measurement funds.

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.

	January 31, 2023
	Carrying Amount		Fair Value
Long-term debt (including current portion)	$	1,016,113	$	1,003,337

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. The carrying amount of long-term debt is shown net of unamortized debt issuance costs as disclosed in the Long-term Debt Note.

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 currency 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 under U.S. GAAP. Accordingly, the changes in the fair value of the foreign currency forward contracts are recognized in each accounting period in “Other – net” on the Condensed Consolidated Statements of Income together with the transaction gain or loss from the related balance sheet position.

For the three months ended January 31, 2023, we recognized a net gain of $16,139 on foreign currency forward contracts and a net loss of $20,710 from the change in fair value of balance sheet positions. For the three months ended January 31, 2022, we recognized a net loss of $3,598 on foreign currency forward contracts and a net gain of $3,962 from the change in fair value of balance sheet positions. The fair values of our foreign currency forward contract assets and liabilities are included in Receivable-net and Accrued liabilities, respectively, in our Consolidated Balance Sheets. The following table summarizes, by currency, the foreign currency forward contracts outstanding at January 31, 2023 and 2022:

January 31, 2023 contract amounts:	Notional Sell Amounts		Notional Buy Amounts
Euro	$	93,142	$	398,560
British pound	27,965		112,945
Mexican Peso	11,658		31,315
Japanese yen	11,644		35,772
Hong Kong dollar	4,180		148,653
Australian dollar	375		8,821
Singapore dollar	245		18,862
Taiwan Dollar	—		35,047
Others	3,395		65,175
Total	$	152,604	$	855,150
January 31, 2022 contract amounts:	Notional Sell Amounts		Notional Buy Amounts
Euro	$	102,132	$	338,128
British pound	34,657		70,869
Japanese yen	12,315		40,384
Singapore dollar	1,079		18,214
Australian dollar	325		10,026
Hong Kong dollar	—		49,595
Others	15,792		87,704
Total	$	166,300	$	614,920

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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, 2023 and 2022, there were no significant concentrations of credit risk.

Long-term debt

A summary of long-term debt is as follows:

	January 31, 2023		October 31, 2022
Revolving credit agreement, due 2024	$	250,000	$	—
Senior notes, due 2023-2025	55,500		55,500
Senior notes, due 2023-2027	71,429		71,429
Senior notes, due 2023-2030	350,000		350,000
Euro loan, due 2023	287,851		261,893
Notes payable and other	2,453		—
	1,017,233		738,822
Less current maturities and notes payable	420,947		392,537
Less unamortized debt issuance costs	1,120		965
Long-term maturities	$	595,166	$	345,320

Revolving credit agreement, due 2024 — In April 2019, we entered into a $850,000 unsecured multi-currency credit facility with a group of banks, which amended, restated and extended our then existing syndicated revolving credit agreement. This facility has a five-year term and includes a $75,000 subfacility for swing-line loans. It expires in April 2024. The weighted-average interest rate at January 31, 2023 was 5.07%.

Senior notes, due 2023-2025 — These unsecured fixed-rate notes entered into in 2012 with a group of insurance companies had a remaining weighted-average life of 1.21 years. The weighted-average interest rate at January 31, 2023 was 3.10%.

Senior notes, due 2023-2027 — These unsecured fixed-rate notes entered into in 2015 with a group of insurance companies had a remaining weighted-average life of 2.19 years. The weighted-average interest rate at January 31, 2023 was 3.10%.

Senior notes, due 2023-2030 — These unsecured fixed-rate notes entered into in 2018 with a group of insurance companies had a remaining weighted-average life of 2.79 years. The weighted-average interest rate at January 31, 2023 was 3.90%.  

Euro loan, due 2023 — In March 2020, we amended, restated and extended the term of our existing euro term loan facility with Bank of America Merrill Lynch International Limited. The interest rate is variable based on the EURIBOR rate. The term loan agreement provides for the following term loans due in two tranches: €115,000 is due in March 2023 and an additional €150,000 that was drawn down in March 2020 is due in March 2023. The weighted average interest rate at January 31, 2023 was 2.12%.

Term loan, due 2024 — In January 2023, we entered into a $200,000 unsecured term loan facility. This facility has a 1.25 year term and expires in April 2024. At January 31, 2023, we had no balance outstanding under this facility.

We were in compliance with all covenants at January 31, 2023 and the amount we could borrow would not have been limited by any debt covenants.

Contingencies

We are involved in pending or potential litigation regarding environmental, product liability, patent, contract, employee and other matters arising from the normal course of business.  Including the environmental 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.

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. As of January 31, 2023 and October 31, 2022, our accrual for the ongoing operation, maintenance and monitoring obligation at the Site was $266 and $266, respectively. The liability for environmental remediation represents management’s best estimate of the probable and reasonably estimable undiscounted costs related to known remediation obligations. The accuracy of our estimate of environmental liability is affected by several uncertainties such as additional requirements that may be identified in connection with remedial activities, the

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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.

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

The following is management's discussion and analysis of certain significant factors affecting our financial condition and results of operations for the periods included in the accompanying condensed consolidated financial statements.

Overview

Nordson Corporation is an innovative precision technology company that leverages a scalable growth framework to deliver top tier growth with leading margins and returns. The Company’s direct sales model and applications expertise serves global customers through a wide variety of critical applications. Its diverse end market exposure includes consumer non-durable, medical, electronics and industrial end markets. Founded in 1954 and headquartered in Westlake, Ohio, the Company has approximately 7,200 employees with operations and support offices in over 35 countries.

COVID-19 Update

In December 2019, a novel strain of coronavirus (COVID-19) emerged and has since spread to other countries, including the United States. In March 2020, the World Health Organization declared COVID-19 as a pandemic (the COVID-19 pandemic). The COVID-19 pandemic, including multiple variants, has resulted in governments around the world implementing stringent measures to help control the spread of the virus, including quarantines, “shelter in place” and “stay at home” orders, travel restrictions, business interruptions and other measures.

Throughout the COVID-19 pandemic, we have supported, and continue to support, multiple “critical infrastructure” sectors by manufacturing materials and products needed for medical supply chains, packaging, transportation, energy, communications, and other critical infrastructure industries. We have benefited from our geographical and product diversification as the end markets we serve have remained resilient in response to the COVID-19 pandemic, and we continue to invest in the businesses, people, and strategies necessary to achieve our long-term priorities as we focus on driving profitable growth. We have continued to operate during the COVID-19 pandemic in all our production facilities, having taken the recommended public health measures to ensure worker and workplace safety. As a result, there have been unfavorable impacts on our manufacturing efficiencies. Additionally, we are taking steps to offset cost increases from COVID-19 pandemic-related supply chain disruptions.

We continue to actively monitor the rapidly evolving circumstances and impact of the COVID-19 pandemic, which has negatively disrupted, and may continue to negatively disrupt, our business and results of operations in the future. For example, in the first quarter of 2023, our revenue growth in Asia-Pacific was negatively impacted by labor shortages and business disruption from the spread of COVID-19. The full extent of the COVID-19 pandemic on our operations and the markets we serve remains highly uncertain and will depend largely on future developments related to the COVID-19 pandemic, including infection rates increasing or returning in various geographic areas, variations of COVID-19, the ultimate duration of the COVID-19 pandemic, actions by government authorities to contain the outbreak or treat its impact, such as reimposing previously lifted measures or putting in place additional restrictions, and the widespread distribution and acceptance of an effective vaccine, among other things. These developments are constantly evolving and cannot be accurately predicted.

CyberOptics Acquisition

On November 3, 2022, the Company completed the acquisition of CyberOptics Corporation (“CyberOptics”) pursuant to the terms of the Agreement and Plan of Merger, dated as of August 7, 2022, by and among the Company, Meta Merger Company and CyberOptics. CyberOptics is a leading global developer and manufacturer of high-precision 3D optical sensing technology solutions. The CyberOptics acquisition expanded our test and inspection platform, providing differentiated technology that expands our product offering in the semiconductor and electronics industries and will be reported in our Advanced Technology Solutions segment. The all-cash transaction of approximately $378,000, net of cash acquired, was funded using borrowings under our revolving credit facility and cash on hand and is not expected to have a material impact on our Consolidated Financial Statements.

Critical Accounting Policies and Estimates

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, 2022 (the 2022 Form 10-K). There have been no significant changes in critical accounting policies, management estimates or accounting policies followed since the year ended October 31, 2022.

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Results of Operations

Three months ended January 31, 2023

Worldwide sales for the three months ended January 31, 2023 were $610,477, an increase of 0.2% from sales of $609,166 for the comparable period of 2022. The increase consisted of a 1.4% increase in organic sales and a favorable 2.8% increase due to an acquisition, which was partially offset by an unfavorable effect from currency translation of 4.0%. The organic sales increase was driven by strong demand in Europe and the Americas region, partially offset by weakness in the Asia Pacific region, predominantly in China.

In the Americas region, sales were $264,878 for the three months ended January 31, 2023, an increase of 10.4% from 2022, consisting of an organic sales increase of 8.6% and an increase due to an acquisition of 2.1%, partially offset by unfavorable currency effects of 0.3%. In the Asia Pacific region, sales were $182,660, a decrease of 14.4% from 2022, consisting of an organic sales decrease of 13.3% and a 5.8% decrease due to unfavorable currency effects, partially offset by a 4.7% increase due to an acquisition. In Europe, sales were $162,939, an increase of 4.5% from 2022, consisting of an organic sales increase of 10.7% and a 1.3% increase due to an acquisition, partially offset by unfavorable currency effects of 7.5%.

Cost of sales for the three months ended January 31, 2023 were $281,610, up from $269,032 in the comparable period of 2022. Gross profit, expressed as a percentage of sales, decreased to 53.9% from 55.8% in the comparable period of 2022. The 1.9 percentage point decrease in gross margin was primarily driven by the impact of passing through inflationary cost increases and incremental inventory step-up amortization of $2,743.

Selling and administrative expenses for the three months ended January 31, 2023 were $184,648, up from $184,274 in the comparable period of 2022. The 0.2% increase was primarily driven by the first-year effect of an acquisition, partially offset by favorable currency translation effects and a reduction in variable expenses.

Operating profit decreased to $144,219 for the three months ended January 31, 2023, compared to $155,860 in the comparable period of 2022. Operating profit as a percentage of sales decreased to 23.6% for the three months ended January 31, 2023 compared to 25.6% in the comparable period of 2022. The 2.0 percentage point decline in operating margin was primarily driven by fees, severance and non-cash inventory charges associated with the CyberOptics acquisition, as well as unfavorable currency translation effects.

Interest expense for the three months ended January 31, 2023 was $10,530, compared to $5,650 in the comparable period of 2022. The increase was primarily due to higher average debt levels compared to the prior year period, as well as increases in interest rates. Other expense was $3,196 compared to other income of $1,292 in the comparable period of 2022. Included in 2023 other expense were pension and postretirement income of $1,369 and $4,571 of foreign currency losses. Included in 2022 other income were pension and postretirement income of $281 and $364 of foreign currency gains.

Net income for the three months ended January 31, 2023 was $104,261, or $1.81 per diluted share, compared to $120,409, or $2.05 per diluted share, in the same period of 2022. This represents a 13.4% decrease in net income, and a 11.7% decrease in diluted earnings per share. The decrease was driven by a combination of fees, severance, and non-cash inventory charges associated with the CyberOptics acquisition, increased interest expense, and foreign currency losses.

Industrial Precision Solutions

Sales of the Industrial Precision Solutions segment were $311,546 in the three months ended January 31, 2023, a decrease of 3.8% from sales in the comparable period of 2022 of $323,933. The decrease consisted of an organic sales increase of 1.2%, which was offset by unfavorable currency effects that decreased sales by 5.0%. The organic sales increase was driven primarily by steady demand across most product lines and regions, offset by softness in the Asia Pacific region due to labor shortages and business disruption from the spread of COVID-19, as well as the timing of the Chinese New Year.

Operating profit as a percentage of sales increased to 32.8% for the three months ended January 31, 2023 compared to 31.5% in the comparable period of 2022. The 1.3 percentage point improvement in operating margin was primarily due to favorable product mix.

Medical and Fluid Solutions

Sales of the Medical and Fluid Solutions segment were $154,287 in the three months ended January 31, 2023, a decrease of 2.8% from sales in the comparable period of 2022 of $158,784. The decrease consisted of an organic sales decrease of 0.8% and unfavorable currency effects that decreased sales by 2.0%. The organic sales decrease was driven by lower demand for the medical fluid components product lines and fluid solutions product lines in China, offset by strong demand for medical interventional solutions product lines.

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Operating profit as a percentage of sales decreased to 25.5% for the three months ended January 31, 2023 compared to 30.9% in the comparable period of 2022. The 5.4 percentage point decline in operating margin was primarily due to meaningful sales mix changes within medical product lines and related factory inefficiencies due to reduced volumes.

Advanced Technology Solutions

Sales of the Advanced Technology Solutions segment were $144,644 in the three months ended January 31, 2023, an increase of 14.4% from sales in the comparable period of 2022 of $126,449. The increase was the result of organic sales increase of 4.6% and a 13.5% increase due to an acquisition, partially offset by an unfavorable currency effect of 3.7%. The organic sales increase was driven by test and inspection product lines.

Operating profit as a percentage of sales decreased to 11.7% for the three months ended January 31, 2023 compared to 21.5% in the comparable period of 2022. The 9.8 percentage point decline in operating margin was primarily due to fees, severance and non-cash inventory charges of $10,295 associated with the CyberOptics acquisition and unfavorable sales mix.

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 judgment 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, 2023 was 20.5%, compared to 20.8% for the three months ended January 31, 2022.

Foreign Currency Effects

In the aggregate, average exchange rates for 2023 used to translate international sales and operating results into U.S. dollars were generally unfavorable compared with average exchange rates existing during 2022. 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 31, 2023 were translated at exchange rates in effect during the same period of 2022, we estimated that sales would have been approximately $24,800 higher while costs of sales and selling and administrative expenses would have been approximately $16,600 higher.

Financial Condition

Liquidity and Capital Resources

During the three months ended January 31, 2023, cash and cash equivalents decreased $41,463 as cash was used to fund the CyberOptics acquisition, partially offset by incremental borrowings and cash generated from operations in the period. Cash provided by operations during this period was $123,337 compared to $118,087 for the three months ended January 31, 2022. Changes in operating assets and liabilities decreased cash by $58,371 in the three months ended January 31, 2023, primarily driven by a decrease in accounts payable and accrued liabilities, compared to decreasing cash by $29,217 in the comparable period of 2022. Other improved year over year due primarily to cash inflows related to settlement of foreign exchange contracts.

Cash used in investing activities was $387,136 for the three months ended January 31, 2023, compared to $184,097 used in the comparable period of 2022. During the three months ended January 31, 2023, cash of $377,843 was used for the CyberOptics acquisition and cash of $9,302 was used for capital expenditures. During the three months ended January 31, 2022, cash of $171,613 was used for the NDC acquisition and $12,491 was used for capital expenditures. The decrease in capital expenditures related primarily to 2022 expenditures being higher as a result of capacity expansion in our medical fluid dispensing and components product lines.

Cash provided by financing activities was $215,693 for the three months ended January 31, 2023, compared to $61,902 cash used in the comparable period of 2022. In the three months ended January 31, 2023, cash of $37,199 was used for dividend payments and cash of $6,875 was used for the purchase of treasury shares, compared to $29,724 and $35,002, respectively, in the comparable period of 2022. The three months ended January 31, 2023 included net borrowings of long-term debt of $252,278, used primarily to fund the acquisition of CyberOptics, compared to net repayments of $1,257 during the three months ended January 31, 2022.

The following is a summary of significant changes in balance sheet captions from October 31, 2022 to January 31, 2023. Inventories-net increased by $64,329, primarily as a result of the CyberOptics acquisition. Goodwill and intangibles increased by $279,630 and $58,600, respectively, due to the CyberOptics acquisition. Accrued liabilities decreased by $49,964 due primarily to incentive compensation payments made in the three months ended January 31, 2023, and long-term debt increased principally as result of borrowing $250,000 under the revolving credit facility for the CyberOptics acquisition.

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We believe the combination of present capital resources, cash from operations and unused financing sources, such as our credit facilities, which includes our revolving credit facility and new term loan entered in January 2023, are more than adequate to meet cash requirements for the next twelve months and for the foreseeable future thereafter. There are no significant restrictions limiting the transfer of funds from international subsidiaries to the parent Company. We were in compliance with all debt covenants as of January 31, 2023. Refer to our Long-term debt Note in the notes to our condensed consolidated financial statements for additional details regarding our debt outstanding.

Safe Harbor Statements Under the Private Securities Litigation Reform Act of 1995

This Form 10-Q, particularly “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” 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 United States and global economies. Statements in this quarterly report that are not historical are hereby identified as “forward-looking statements” and may be indicated by words or phrases such as “anticipates,” “supports,” “plans,” “projects,” “expects,” “believes,” “should,” “would,” “could,” “hope,” “forecast,” “management is of the opinion,” use of the future tense and similar words or phrases. These statements reflect management’s current expectations and involve a number of risks and uncertainties. These risks and uncertainties include, but are not limited to, U.S. and international economic conditions; financial and market conditions; currency exchange rates and devaluations; possible acquisitions including the Company’s ability to complete and successfully integrate acquisitions, including the integration of CyberOptics; the Company’s ability to successfully divest or dispose of businesses that are deemed not to fit with its strategic plan; the effects of changes in U.S. trade policy and trade agreements; the effects of changes in tax law; and the possible effects of events beyond our control, such as political unrest, including the conflict between Russia and Ukraine and tensions between the United States and China, acts of terror, natural disasters and pandemics, including the COVID-19 pandemic.

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 2022 Form 10-K.

ITEM 3.    QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Information regarding our financial instruments that are sensitive to changes in interest rates and foreign currency exchange rates was disclosed under Part II, Item 7A, “Quantitative and Qualitative Disclosures About Market Risk” in our 2022 Form 10-K. The information disclosed has not changed materially in the interim period since then.

ITEM 4. CONTROLS AND PROCEDURES

Our management with the participation of the principal executive officer (President and Chief Executive Officer) and principal financial officer (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, 2023. 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, 2023 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 Securities and Exchange Commission'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 control over financial reporting that occurred during the three months ended January 31, 2023 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

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Part II – OTHER INFORMATION

ITEM 1.    LEGAL PROCEEDINGS

See our Contingencies Note to the condensed consolidated financial statements for a discussion of our contingencies and legal matters.

ITEM 1A.    RISK FACTORS

In addition to the other information set forth in this report, you should carefully consider the risk factors disclosed in “Item 1A. Risk Factors” of our 2022 Form 10-K. Many of the risks identified in the 2022 Form 10-K have been, and may be further, exacerbated by the impact of the COVID-19 pandemic and the actions taken by governmental entities, businesses, individuals and others in response to the pandemic.

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

The following table summarizes common shares repurchased by the Company during the three months ended January 31, 2023:

(In whole shares)	Total Number of Shares Purchased (1)	Average Price Paid per Share		Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs (2)	Maximum Value of Shares that May Yet Be Purchased Under the Plans or Programs (2)
November 1, 2022 to November 30, 2022	14,351	$	234.07	—	$	631,782
December 1, 2022 to December 31, 2022	1,180	$	236.43	—	$	631,782
January 1, 2023 to January 31, 2023	331	$	237.94	—	$	631,782
Total	15,862			—

(1) Includes shares tendered for taxes related to stock option exercises and 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. In August 2018, the board of directors authorized the repurchase of an additional $500,000 of the Company’s common shares. In September 2022, the board of directors authorized the repurchase of up to an additional $500,000 of the Company's common shares. Approximately $631,782 of the total $1,500,000 authorized remained available for share repurchases at January 31, 2023. Uses for repurchased shares include the funding of benefit programs including stock options and restricted stock. Shares purchased are treated as treasury shares until used for such purposes. The repurchase program will be funded using cash from operations and proceeds from borrowings under our credit facilities. The repurchase program does not have an expiration date.

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ITEM 6. EXHIBITS

4.1	Term Loan Agreement, dated as of January 18, 2023, by and among Nordson Corporation and Nordson Engineering GmbH, as Borrowers, and the Lenders party thereto and PNC Bank, as Administrative Agent, and PNC Capital Markets LLC, as Sole Lead Arranger and Sole Bookrunner (incorporated herein by reference to Exhibit 4.1 to Registrant’s Form 8-K dated January 23, 2023)
10.1	Nordson Corporation 2021 Stock Incentive and Award Plan, Form of Notice of Stock Options Award
10.2	Nordson Corporation 2021 Stock Incentive and Award Plan, Form of Notice of Restricted Share Units Award
10.3	Nordson Corporation 2021 Stock Incentive and Award Plan, Form of Notice of Performance Share Units Award
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 (furnished herewith).
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 (furnished herewith).
101	The following financial information from Nordson Corporation’s Quarterly Report on Form 10-Q for the three months ended January 31, 2023 formatted in inline Extensible Business Reporting Language (iXBRL): (i) the Condensed Consolidated Statements of Income for the three months ended January 31, 2023 and 2022, (ii) the Consolidated Statements of Comprehensive Income for the three months ended January 31, 2023 and 2022, (iii) the Consolidated Balance Sheets at January 31, 2023 and October 31, 2022, (iv) the Consolidated Statements of Shareholders’ Equity for the three months ended January 31, 2023 and 2022, (v) the Condensed Consolidated Statements of Cash Flows for the three months ended January 31, 2023 and 2022, and (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, 2023, formatted in inline Extensible Business Reporting Language (iXBRL) (included in Exhibit 101).

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SIGNATURE

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:  February 23, 2023	Nordson Corporation
	By: /s/ Joseph P. Kelley
	Joseph P. Kelley
	Executive Vice President, Chief Financial Officer
	(Principal Financial Officer)

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