Item 8. Financial Statements and Supplementary Data

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Item 8. Financial Statements and Supplementary Data

Consolidated Statements of Income

Years ended October 31, 2015, 2014 and 2013	2015			2014			2013
(In thousands except for per-share amounts)
Sales	$	1,688,666		$	1,704,021		$	1,542,921

Operating costs and expenses:
Cost of sales		774,702			758,923			676,777
Selling and administrative expenses		584,823			575,442			541,169
Severance and restructuring costs		11,411			2,551			1,126
		1,370,936			1,336,916			1,219,072
Operating profit		317,730			367,105			323,849

Other income (expense):
Interest expense		(18,104	)		(15,035	)		(14,841	)
Interest and investment income		558			581			421
Other - net		678			(138	)		1,694
		(16,868	)		(14,592	)		(12,726	)
Income before income taxes		300,862			352,513			311,123

Income tax provision:
Current		87,651			102,251			84,184
Deferred		2,100			3,489			5,122
		89,751			105,740			89,306
Net income	$	211,111		$	246,773		$	221,817

Average common shares		60,652			63,656			64,214
Incremental common shares attributable to outstanding stock options, restricted stock and deferred stock-based compensation		499			625			694
Average common shares and common share equivalents		61,151			64,281			64,908

Basic earnings per share	$	3.48		$	3.88		$	3.45
Diluted earnings per share	$	3.45		$	3.84		$	3.42

Dividends declared per common share	$	0.90		$	0.76		$	0.63

The accompanying notes are an integral part of the consolidated financial statements.

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Consolidated Statements of Comprehensive Income

Years ended October 31, 2015, 2014 and 2013	2015			2014			2013
(In thousands)
Net income	$	211,111		$	246,773		$	221,817
Components of other comprehensive income (loss), net of tax:
Translation adjustments		(45,154	)		(23,972	)		465
Pension and postretirement benefit plans:
Prior service (cost) credit arising during the year		—			175			(1,050	)
Net actuarial gain (loss) arising during the year		(7,588	)		(29,158	)		38,149
Amortization of prior service cost		(303	)		(251	)		(375	)
Amortization of actuarial loss		10,146			6,989			9,657
Settlement loss recognized		1,369			398			—
Curtailment loss recognized		43			—			—
Total pension and postretirement benefit plans		3,667			(21,847	)		46,381
Total other comprehensive income (loss)		(41,487	)		(45,819	)		46,846
Total comprehensive income	$	169,624		$	200,954		$	268,663

The accompanying notes are an integral part of the consolidated financial statements.

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Consolidated Balance Sheets

October 31, 2015 and 2014	2015			2014
(In thousands)
Assets
Current assets:
Cash and cash equivalents	$	50,268		$	42,314
Receivables - net		389,550			365,844
Inventories - net		225,672			210,871
Deferred income taxes		24,865			29,926
Prepaid expenses		21,236			23,728
Total current assets		711,591			672,683
Property, plant and equipment - net		249,940			224,439
Goodwill		1,082,375			1,052,537
Intangible assets - net		277,426			291,310
Deferred income taxes		5,705			6,559
Other assets		33,407			32,602
	$	2,360,444		$	2,280,130
Liabilities and shareholders' equity
Current liabilities:
Notes payable	$	1,108		$	106,181
Accounts payable		68,229			68,500
Income taxes payable		28,642			16,586
Accrued liabilities		140,931			137,001
Customer advance payments		22,884			25,578
Current maturities of long-term debt		22,842			10,751
Deferred income taxes		1,256			1,163
Current obligations under capital leases		4,884			5,108
Total current liabilities		290,776			370,868
Long-term debt		1,092,643			682,868
Obligations under capital leases		9,698			11,018
Pension obligations		118,071			124,082
Postretirement obligations		66,690			68,300
Deferred income taxes		89,770			87,092
Other liabilities		32,780			31,105
Shareholders' equity:
Preferred shares, no par value; 10,000 shares authorized;
none issued		—			—
Common shares, no par value; 160,000 shares authorized;
98,023 shares issued at October 31, 2015 and 2014		12,253			12,253
Capital in excess of stated value		348,986			328,605
Retained earnings		1,717,228			1,560,966
Accumulated other comprehensive loss		(144,686	)		(103,199	)
Common shares in treasury, at cost		(1,273,765	)		(893,828	)
Total shareholders' equity		660,016			904,797
	$	2,360,444		$	2,280,130

The accompanying notes are an integral part of the consolidated financial statements.

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Consolidated Statements of Shareholders’ Equity

Years ended October 31, 2015, 2014 and 2013	2015			2014			2013
(In thousands)
Number of common shares in treasury
Balance at beginning of year		35,588			33,805			33,766
Shares issued under company stock and employee benefit plans		(318	)		(480	)		(468	)
Purchase of treasury shares		5,395			2,263			507
Balance at end of year		40,665			35,588			33,805
Common shares
Balance at beginning and ending of year	$	12,253		$	12,253		$	12,253
Capital in excess of stated value
Balance at beginning of year	$	328,605		$	304,549		$	287,581
Shares issued under company stock and employee benefit plans		1,458			264			(325	)
Tax benefit from stock option and restricted stock transactions		3,661			6,385			5,531
Stock-based compensation		15,262			17,407			11,762
Balance at end of year	$	348,986		$	328,605		$	304,549
Retained earnings
Balance at beginning of year	$	1,560,966		$	1,362,584		$	1,181,245
Net income		211,111			246,773			221,817
Dividends paid ($.90 per share in 2015, $.76 per share in 2014, and $.63 per share in 2013)		(54,849	)		(48,391	)		(40,478	)
Balance at end of year	$	1,717,228		$	1,560,966		$	1,362,584
Accumulated other comprehensive income (loss)
Balance at beginning of year	$	(103,199	)	$	(57,380	)	$	(104,226	)
Translation adjustments		(45,154	)		(23,972	)		465
Settlement and curtailment loss (gain) recognized, net of tax of $491 in 2015 and $(234) in 2014		1,412			398			—
Defined benefit and OPEB activity - prior service cost, net of tax of $191 in 2015, $125 in 2014 and $840 in 2013		(303	)		(76	)		(1,425	)
Defined benefit and OPEB activity - actuarial gain (loss), net of tax of $(1,242) in 2015, $11,457 in 2014 and $(28,644) in 2013		2,558			(22,169	)		47,806
Balance at end of year	$	(144,686	)	$	(103,199	)	$	(57,380	)
Common shares in treasury, at cost
Balance at beginning of year	$	(893,828	)	$	(734,143	)	$	(707,083	)
Shares issued under company stock and employee benefit plans		4,359			6,749			6,490
Purchase of treasury shares		(384,296	)		(166,434	)		(33,550	)
Balance at end of year	$	(1,273,765	)	$	(893,828	)	$	(734,143	)
Total shareholders' equity	$	660,016		$	904,797		$	887,863

The accompanying notes are an integral part of the consolidated financial statements.

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Consolidated Statements of Cash Flows

Years ended October 31, 2015, 2014 and 2013	2015			2014			2013
(In thousands)
Cash flows from operating activities:
Net income	$	211,111		$	246,773		$	221,817
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation		37,707			34,446			31,766
Amortization		27,487			25,308			22,672
Provision for losses on receivables		1,014			867			889
Deferred income taxes		2,100			3,489			5,122
Tax benefit from the exercise of stock options		(3,661	)		(6,385	)		(5,531	)
Non-cash stock compensation		15,262			17,407			11,762
(Gain)/loss on sale of property, plant and equipment		376			218			(1,879	)
Other non-cash		56			406			760
Changes in operating assets and liabilities:
Receivables		(37,179	)		(65,692	)		19,971
Inventories		(14,208	)		(8,699	)		(10,741	)
Prepaid expenses		1,799			(1,852	)		(75	)
Other noncurrent assets		1,733			(232	)		(5,898	)
Accounts payable		(1,261	)		6,906			(2,549	)
Income taxes payable		15,616			9,524			(8,552	)
Accrued liabilities		5,817			27,932			(19,130	)
Customer advance payments		(1,062	)		(2,103	)		(839	)
Other noncurrent liabilities		2,830			59			7,195
Other		(3,586	)		(217	)		1,616
Net cash provided by operating activities		261,951			288,155			268,376
Cash flows from investing activities:
Additions to property, plant and equipment		(62,087	)		(43,574	)		(47,219	)
Proceeds from sale of property, plant and equipment		597			323			3,847
Acquisition of businesses, net of cash acquired		(75,565	)		(186,420	)		(176,333	)
Equity investments		(1,480	)		(854	)		(1,116	)
Proceeds from sale of marketable securities		—			—			276
Net cash used in investing activities		(138,535	)		(230,525	)		(220,545	)
Cash flows from financing activities:
Proceeds from short-term borrowings		59,870			108,679			5,036
Repayment of short-term borrowings		(164,716	)		(6,093	)		(51,505	)
Proceeds from long-term debt		719,534			158,828			270,283
Repayment of long-term debt		(289,202	)		(107,591	)		(208,067	)
Repayment of capital lease obligations		(5,240	)		(5,854	)		(5,842	)
Payment of debt issuance costs		(1,557	)		-			-
Issuance of common shares		5,372			7,013			6,018
Purchase of treasury shares		(383,851	)		(166,434	)		(33,402	)
Tax benefit from the exercise of stock options		3,661			6,385			5,531
Dividends paid		(54,849	)		(48,391	)		(40,478	)
Net cash used in financing activities		(110,978	)		(53,458	)		(52,426	)
Effect of exchange rate changes on cash		(4,484	)		(4,233	)		5,731
Increase (decrease) in cash and cash equivalents		7,954			(61	)		1,136
Cash and cash equivalents at beginning of year		42,314			42,375			41,239
Cash and cash equivalents at end of year	$	50,268		$	42,314		$	42,375

The accompanying notes are an integral part of the consolidated financial statements.

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Notes to Consolidated Financial Statements

NOTE REGARDING AMOUNTS AND FISCAL YEAR REFERENCES

In this annual 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.

Note 1 — Significant accounting policies

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 percent 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 consolidated financial statements and notes. Actual amounts could differ from these estimates.

Fiscal year — Our fiscal year is November 1 through October 31.

Revenue recognition — Most of our revenues are recognized upon shipment, provided that persuasive evidence of an arrangement exists, the sales price is fixed or determinable, collectibility is reasonably assured, and title and risk of loss have passed to the customer.

A relative selling price hierarchy exists for determining the selling price of deliverables in multiple deliverable arrangements. Vendor specific objective evidence (VSOE) is used, if available. Third-party evidence (TPE) is used if VSOE is not available, and best estimated selling price (BESP) is used if neither VSOE nor TPE is available. Our multiple deliverable arrangements include installation, installation supervision, training, and spare parts, which tend to be completed in a short period of time, at an insignificant cost, and utilizing skills not unique to us, therefore, are typically regarded as inconsequential or perfunctory. Revenue for undelivered items is deferred and included within accrued liabilities in the accompanying balance sheet. Revenues deferred in 2015, 2014 and 2013 were not material.

Shipping and handling costs — Amounts billed to customers for shipping and handling are recorded as revenue. Shipping and handling expenses are included in cost of sales.

Advertising costs — Advertising costs are expensed as incurred and were $11,943, $10,823 and $12,480 in 2015, 2014 and 2013, respectively.

Research and development — Research and development costs are expensed as incurred and were $46,689, $47,536 and $47,973 in 2015, 2014 and 2013, respectively.

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 stock and deferred stock-based compensation. Options whose exercise price is higher than the average market price are excluded from the calculation of diluted earnings per share because the effect would be anti-dilutive. Options for 373 common shares were excluded from the diluted earnings per share calculation in 2015 because their effect would have been anti-dilutive. Options for 69 common shares were excluded from the diluted earnings per share calculation in 2014. No options for common shares were excluded from the 2013 diluted earnings per share calculation. Under the 2012 Stock Incentive and Award Plan, executive officers and selected other key employees receive common share awards based on corporate performance measures over three-year performance periods. Awards for which performance measures have not been met were excluded from the calculation of diluted earnings per share.

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Cash and cash equivalents — Highly liquid instruments with maturities of 90 days or less at date of purchase are considered to be cash equivalents. Cash and cash equivalents are carried at cost, which approximates fair value.

Allowance for doubtful accounts — An allowance for doubtful accounts is maintained for estimated losses resulting from the inability of customers to make required payments. The amount of the allowance is determined principally on the basis of past collection experience and known factors regarding specific customers. Accounts are written off against the allowance when it becomes evident that collection will not occur.

Inventories — Inventories are valued at the lower of cost or market. Cost was determined using the last-in, first-out (LIFO) method for 20 percent of consolidated inventories at October 31, 2015, and October 31, 2014. The first-in, first-out (FIFO) method is used for all other inventories. Consolidated inventories would have been $7,638 and $7,496 higher than reported at October 31, 2015 and October 31, 2014, respectively, had the FIFO method, which approximates current cost, been used for valuation of all inventories.

Property, plant and equipment and depreciation — Property, plant and equipment are carried at cost. Additions and improvements that extend the lives of assets are capitalized, while expenditures for repairs and maintenance are expensed as incurred. Plant and equipment are depreciated for financial reporting purposes using the straight-line method over the estimated useful lives of the assets or, in the case of property under capital leases, over the terms of the leases. Leasehold improvements are depreciated over the shorter of the lease term or their useful lives. Useful lives are as follows:

Land improvements	15-25 years
Buildings	20-40 years
Machinery and equipment	3-18 years
Enterprise management systems	5-13 years

Depreciation expense is included in cost of sales and selling and administrative expenses.

Internal use software costs are expensed or capitalized depending on whether they are incurred in the preliminary project stage, application development stage or the post-implementation stage. Amounts capitalized are amortized over the estimated useful lives of the software beginning with the project’s completion. All re-engineering costs are expensed as incurred. Interest costs on significant capital projects are capitalized. No interest was capitalized in 2015, 2014 or 2013.

Goodwill and intangible assets — Goodwill is the excess of cost of an acquired entity over the amounts assigned to assets acquired and liabilities assumed in a business combination. Goodwill relates to and is assigned directly to specific reporting units. Goodwill is not amortized but is subject to annual impairment testing. Our annual impairment testing is performed as of August 1. Testing is done more frequently if an event occurs or circumstances change that would indicate the fair value of a reporting unit is less than the carrying amount of those assets.

Other amortizable intangible assets, which consist primarily of patent/technology costs, customer relationships, noncompete agreements, and trade names, are amortized over their useful lives on a straight-line basis. At October 31, 2015, the weighted-average useful lives for each major category of amortizable intangible assets were:

Patent/technology costs	13 years
Customer relationships	14 years
Noncompete agreements	3 years
Trade names	16 years

Foreign currency translation — The financial statements of subsidiaries outside the United States are generally measured using the local currency as the functional currency. Assets and liabilities of these subsidiaries are translated at the rates of exchange at the balance sheet dates. Income and expense items are translated at average monthly rates of exchange. The resulting translation adjustments are included in accumulated other comprehensive income (loss), a separate component of shareholders’ equity. Generally, gains and losses from foreign currency transactions, including forward contracts, of these subsidiaries and the United States parent are included in net income. Gains and losses from intercompany foreign currency transactions of a long-term investment nature are included in accumulated other comprehensive income (loss).

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Accumulated other comprehensive loss — Accumulated other comprehensive loss at October 31, 2015 and 2014 consisted of:

	Cumulative			Pension and			Accumulated
	translation			postretirement benefit			other comprehensive
	adjustments			plan adjustments			loss
Balance at October 31, 2014	$	2,727		$	(105,926	)	$	(103,199	)
Pension and postretirement plan changes, net of tax of $(1,541)		—			3,667			3,667
Currency translation losses		(45,154	)		—			(45,154	)
Balance at October 31, 2015	$	(42,427	)	$	(102,259	)	$	(144,686	)

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) measured from the date of delivery or first use. We record an estimate for future warranty-related costs based on actual historical return rates. Based on analysis of return rates and other factors, the adequacy of our warranty provisions are adjusted as necessary. The liability for warranty costs is included in accrued liabilities in the Consolidated Balance Sheet.

Following is a reconciliation of the product warranty liability for 2015 and 2014:

	2015			2014
Balance at beginning of year	$	9,918		$	9,409
Accruals for warranties		12,531			10,813
Warranty assumed from acquisitions		11			—
Warranty payments		(11,487	)		(10,012	)
Currency adjustments		(436	)		(292	)
Balance at end of year	$	10,537		$	9,918

Note 2 — Recently issued accounting standards

In May 2014, the Financial Accounting Standards Board (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. In accordance with this delay, the new standard is effective for us beginning in the first quarter of 2019. Early adoption is permitted, but not before the original effective date of the standard. 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. We are currently assessing the impact this standard will have on our consolidated financial statements as well as the method by which we will adopt the new standard.

In April 2015, the FASB issued a new standard regarding the presentation of debt issuance costs. Under this standard, a company is required to present unamortized debt issuance costs related to a recognized debt liability in the balance sheet as a direct deduction from the carrying amount of that debt liability, rather than as a separate asset. The recognition and measurement guidance for debt issuance costs are not affected by this new standard. In August 2015, the FASB issued an amendment to this standard to address line-of-credit arrangements, which would allow an entity to present debt issuance costs as an asset and subsequently amortize the debt issuance costs ratably over the term of the line-of-credit arrangement. It will be effective for us beginning in 2017. We do not expect this standard to have a material impact on our consolidated financial statements as it will only impact presentation.

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In July 2015, the FASB issued a new standard regarding the measurement of inventory. Under this standard, inventory that is measured using the first-in, first-out (“FIFO”) or average cost methods is required to be measured at the lower of cost or net realizable value. Net realizable value is the estimated selling price in the ordinary course of business, less reasonably predictable costs of completion, disposal and transportation. This standard does not impact inventory measured on a last-in, last-out (“LIFO”) method. It will be effective for us beginning in 2017. We are currently assessing the impact this standard will have on our consolidated financial statements.

In September 2015, the FASB issued a new standard intended to simplify the accounting for measurement period adjustments in a business combination. Measurement period adjustments are changes to provisional amounts recorded when the accounting for a business combination is incomplete as of the end of a reporting period. The measurement period can extend for up to a year following the transaction date. During the measurement period, companies may make adjustments to provisional amounts when information necessary to complete the measurement is received. The new guidance requires companies to recognize these adjustments, including any related impacts to net income, in the reporting period in which the adjustments are determined. Companies are no longer required to retroactively apply measurement period adjustments to all periods presented. It will be effective for us beginning in 2017. The new guidance will be applied prospectively and the impact of adoption will be dependent on the nature of measurement period adjustments that may be necessary.

Note 3 – Severance and restructuring costs

Severance and restructuring costs of $11,411 were recognized in 2015. Within the Adhesives Dispensing Systems segment, restructuring initiatives to optimize operations in the U.S. and Belgium resulted in severance costs of $7,064, fixed asset impairment charges of $554 relating to one facility and other one-time restructuring costs of $354. $938 of severance payments related to these actions was paid during 2015.

Within the Advanced Technology Systems segment, certain restructuring programs to enhance operational efficiency and customer service in the U.S. and Germany resulted in severance costs of $1,586, one-time lease termination costs of $1,322 and other one-time restructuring costs of $152. Payments of $135 related to these actions were paid during 2015.

Within the Industrial Coatings Systems segment, a restructuring program to enhance operational efficiency and customer service resulted in severance costs of $379. $111 of severance payments related to these actions were paid during 2015.

Severance and restructuring costs of $2,551 were recorded during 2014. Within the Adhesives Dispensing Systems segment, certain restructuring programs within our U.S. and European operations resulted in costs of $1,731. Within the Advanced Technology Systems segment, restructuring initiatives in the U.S. resulted in severance costs of $579. Within the Industrial Coatings Systems segment, restructuring activities in China resulted in severance costs of $241.

Severance and restructuring costs of $1,126 were recorded during 2013. Within the Adhesives Dispensing Systems segment, a restructuring program to optimize certain European operations resulted in costs of $315. Within the Advanced Technology Systems segment, restructuring initiatives that involved plant and facility consolidations and other programs resulted in severance costs of $811.

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Note 4 — 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 Statement of Income. Pro-forma results of operations would not have been materially different from reported results and, therefore, are not presented.

2015 acquisitions

On June 15, 2015, we purchased 100 percent of the outstanding shares of Liquidyn , a German based manufacturer of micro dispensing systems, including micro dispensing pneumatic valves, controllers, and process equipment used in the electronics, automobile, medical, packaging, furniture and aerospace markets. We acquired Liquidyn for an aggregate purchase price of $14,565, net of cash acquired of $657. Based on the fair value of the assets acquired and the liabilities assumed, goodwill of $10,487 and identifiable intangible assets of $3,991 were recorded. The identifiable intangible assets consist primarily of $1,285 of customer relationships (amortized over 6 years), $1,049 of tradenames (amortized over 11 years), $1,421 of technology (amortized over 5 years) and $236 of non-compete agreements (amortized over 2 years). Goodwill associated with this acquisition is not tax deductible. This acquisition is being reported in our Advanced Technology Systems segment. As of October 31, 2015, the purchase price allocations remain preliminary as we complete our assessments of deferred taxes and certain reserves.

On August 3, 2015, we purchased 100 percent of the outstanding shares of WAFO , a German based manufacturer and refurbisher of screws and barrels for the synthetic material and rubber industries. We acquired WAFO for an aggregate purchase price of $7,429, net of cash acquired of $236. Based on the fair value of the assets acquired and the liabilities assumed, goodwill of $3,463 and identifiable intangible assets of $1,708 were recorded. The identifiable intangible assets consist of $635 of customer relationships (amortized over 5 years), $679 of tradenames (amortized over 10 years), $142 of technology (amortized over 3 years) and $252 of non-compete agreements (amortized over 3 years). Goodwill associated with this acquisition is not tax deductible. This acquisition is being reported in our Adhesive Dispensing Systems segment. As of October 31, 2015, the purchase price allocations remain preliminary as we complete our assessments of deferred taxes and certain reserves.

On September 1, 2015, we purchased 100 percent of the outstanding shares of MatriX , a German based developer of automated in-line and off-line x-ray tools and solutions used for inspection applications. We acquired MatriX for an aggregate purchase price of $53,759, net of cash acquired of $966 and debt assumed of $481. Based on the fair value of the assets acquired and the liabilities assumed, goodwill of $32,439 and identifiable intangible assets of $16,382 were recorded. The identifiable intangible assets consist of $6,485 of customer relationships (amortized over 8 years), $4,046 of tradenames (amortized over 11 years), $5,328 of technology (amortized over 6 years) and $523 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. As of October 31, 2015, the purchase price allocations remain preliminary as we complete our assessments of deferred taxes and certain reserves.

2014 acquisitions

On August 8, 2014, we purchased 100 percent of the outstanding shares of Avalon Laboratories Holding Corp. (Avalon). Avalon, a leading designer and manufacturer of highly specialized catheters and medical tubing products for cardiology, pulmonology and related applications, complements our existing lines of highly engineered, single-use plastic components for fluid management in medical applications. We acquired Avalon for an aggregate purchase price of $179,966, net of cash acquired of $1,324. Based on the fair value of the assets acquired and the liabilities assumed, goodwill of $122,011 and identifiable intangible assets of $52,000 were recorded. The identifiable intangible assets consist of $32,200 of customer relationships (amortized over 10 years), $9,800 of technology (amortized over 10 years) and $10,000 of tradenames (amortized over 15 years). Goodwill associated with this acquisition is not tax deductible; however there is $15,800 from a previous acquisition that is tax deductible.

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On August 29, 2014, we purchased 100 percent of the outstanding shares of Dima Group B.V. (Dima), a Netherlands based manufacturer of conformal coating, dispensing and surface mount technology equipment for the global electronics assembly market. We acquired Dima for an aggregate purchase price of $6,454, net of cash acquired of $149. Based on the fair value of the assets acquired and the liabilities assumed, goodwill of $2,380 and identifiable intangible assets of $1,281 were recorded. The identifiable intangible assets consist of $1,017 of customer relationships (amortized over 7 years), and $264 of tradenames (amortized over 15 years). Goodwill associated with this acquisition is not tax deductible.

Both of these acquisitions are being reported in our Advanced Technology Systems segment.

2013 acquisitions

On November 8, 2012, we purchased certain assets of Kodama Chemical Industry Co., Ltd., a Japanese licensed distributor of EDI Holdings, Inc, (EDI), that we had previously acquired in 2012. This operation provides die sales to extrusion processors, web converters, and OEMs in Japan and Taiwan and carries out final manufacturing steps on new equipment to enhance die performance and accommodate local requirements. The acquisition date fair value was $1,335, which consisted of cash transferred of $1,231 and a holdback liability of $104. Based on the fair value of the assets acquired and the liabilities assumed, identifiable intangible assets of $912 were recorded. The identifiable intangible assets consist of $847 of customer relationships that are being amortized over nine years and $65 of technology being amortized over nine years. This operation is being reported in our Adhesive Dispensing Systems segment.

On August 30, 2013, we purchased 100 percent of the outstanding shares of Münster, Germany based Kreyenborg Group’s Kreyenborg GmbH and BKG Bruckmann & Kreyenborg Granuliertechnik GmbH (the Kreyenborg Group). The Kreyenborg Group broadens our existing offering of screen changers, pumps and valves, critical components in the polymer processing melt stream for extrusion processes, and expands the product portfolio to include pelletizers, the key component in polymer compounding, recycling and related processes. The acquired companies have additional operations in Shanghai, China, Kuala Lumpur and Malaysia, and are reported in our Adhesive Dispensing Systems segment. We acquired the Kreyenborg Group for an aggregate purchase price of $169,994, net of cash acquired of $22,913 and debt assumed of $391. Based on the fair value of the assets acquired and the liabilities assumed, goodwill of $115,103 and identifiable intangible assets of $60,021 were recorded. The identifiable intangible assets consist primarily of $42,306 of customer relationships (amortized over 15 years), $15,336 of technology (amortized over 15 years) and $1,851 of tradenames related to BKG (amortized over 10 years). Goodwill associated with this acquisition is not tax deductible.

On September 27, 2013 we purchased certain assets of Nellcor Puritan Bennett Mexico, S.A. de C.V., a subsidiary of Covidien LP (Nellcor) to be used by our Value Plastics operation. The fair value on the date of acquisition was $5,500, consisting solely of cash. Based on the fair value of the assets acquired and the liabilities assumed, goodwill of $2,301, property, plant and equipment of $1,149, technology of $740 (amortized over 10 years) and customer relationships of $1,310 (amortized over 25 years) were recorded. Goodwill associated with this acquisition is not tax deductible. Value Plastics is reported in our Advanced Technology Systems segment.

Nordson Corporation 47

Note 5 — Details of balance sheet

	2015			2014
Receivables:
Accounts	$	372,705		$	347,259
Notes		7,303			6,339
Other		14,044			16,733
		394,052			370,331
Allowance for doubtful accounts		(4,502	)		(4,487	)
	$	389,550		$	365,844

Inventories:
Raw materials and component parts	$	97,215		$	86,573
Work-in-process		35,509			27,994
Finished goods		128,816			130,544
		261,540			245,111
Obsolescence and other reserves		(28,230	)		(26,744	)
LIFO reserve		(7,638	)		(7,496	)
	$	225,672		$	210,871

Property, plant and equipment:
Land	$	9,947		$	10,216
Land improvements		3,926			3,827
Buildings		161,924			141,880
Machinery and equipment		355,066			319,110
Enterprise management system		46,382			44,682
Construction-in-progress		17,326			27,419
Leased property under capitalized leases		25,684			27,715
		620,255			574,849
Accumulated depreciation and amortization		(370,315	)		(350,410	)
	$	249,940		$	224,439

Accrued liabilities:
Salaries and other compensation	$	54,801		$	57,722
Pension and retirement		1,973			1,738
Taxes other than income taxes		6,178			6,367
Other		77,979			71,174
	$	140,931		$	137,001

Nordson Corporation 48

Note 6 — Goodwill and intangible assets

We account for goodwill and other intangible assets in accordance with the provisions of ASC 350 and account for business combinations using the acquisition method of accounting and accordingly, the assets and liabilities of the entities acquired are recorded at their estimated fair values at the acquisition date. Goodwill is the excess of purchase price over the fair value of tangible and identifiable intangible net assets acquired in various business combinations. Goodwill is not amortized but is tested for impairment annually at the reporting unit level, or more often if indications of impairment exist. We assess the fair value of reporting units on a non-recurring basis using a combination of two valuation methods, a market approach and an income approach, to estimate the fair value of our reporting units. The implied fair value of our reporting units is determined based on significant unobservable inputs; accordingly, these inputs fall within Level 3 of the fair value hierarchy.

Our reporting units are the Adhesive Dispensing Systems segment, the Industrial Coating Systems segment and one level below the Advanced Technology Systems segment.

The goodwill impairment test is a two-step process. In the first step, performed in the fourth quarter of each year, we estimate a reporting unit’s fair value using a combination of the discounted cash flow method of the Income Approach and the guideline public company method of the Market Approach and compare the result against the reporting unit’s carrying value of net assets. If the carrying value of a reporting unit exceeds its fair value, then a second step is performed to determine if goodwill is impaired. In the second step, a hypothetical purchase price allocation of the reporting unit’s assets and liabilities is performed using the fair value calculated in step one. The difference between the fair value of the reporting unit and the hypothetical fair value of assets and liabilities is the implied goodwill amount. Impairment is recorded if the carrying value of the reporting unit’s goodwill is higher than its implied goodwill. Based upon results of step one in 2015, 2014 and 2013, the second step of the goodwill impairment test was not necessary.

We acquired WAFO on August 3, 2015 and Matrix on September 1, 2015. Determination of the preliminary goodwill associated with these acquisitions was completed with the assistance of an independent valuation specialist in the fourth quarter of 2015. Since the dates of the valuations, no events or changes in circumstances have occurred that would more likely than not reduce the fair value of these acquisitions below their carrying values.

Changes in the carrying amount of goodwill during 2015 by operating segment follow:

	Adhesive Dispensing Systems			Advanced Technology Systems			Industrial Coating Systems		Total
Balance at October 31, 2014	$	397,046		$	631,433		$	24,058	$	1,052,537
Acquisitions		3,463			42,926			—		46,389
Currency effect		(14,534	)		(2,017	)		—		(16,551	)
Balance at October 31, 2015	$	385,975		$	672,342		$	24,058	$	1,082,375

Accumulated impairment losses, which were recorded in 2009, were $232,789 at October 31, 2015 and October 31, 2014. Of these losses, $229,173 related to the Advanced Technology Systems segment and $3,616 related to the Industrial Coating Systems segment.

Nordson Corporation 49

Information regarding intangible assets subject to amortization follows:

	October 31, 2015
	Carrying Amount		Accumulated Amortization		Net Book Value
Customer relationships	$	201,282	$	56,315	$	144,967
Patent/technology costs		98,063		32,764		65,299
Trade name		83,022		17,003		66,019
Noncompete agreements		8,952		7,819		1,133
Other		1,365		1,357		8
Total	$	392,684	$	115,258	$	277,426

	October 31, 2014
	Carrying Amount		Accumulated Amortization		Net Book Value
Customer relationships	$	200,028	$	41,910	$	158,118
Patent/technology costs		93,799		27,030		66,769
Trade name		77,846		12,173		65,673
Noncompete agreements		8,220		7,600		620
Other		1,369		1,239		130
Total	$	381,262	$	89,952	$	291,310

Amortization expense for 2015, 2014 and 2013 was $27,487, $25,308 and $22,672 respectively.

Estimated amortization expense for each of the five succeeding years follows:

Year	Amounts
2016	$	29,574
2017	$	29,148
2018	$	28,752
2019	$	28,504
2020	$	27,980

Note 7 — Retirement, pension and other postretirement plans

Retirement plans — We have funded contributory retirement plans covering certain employees. Our contributions are primarily determined by the terms of the plans, subject to the limitation that they shall not exceed the amounts deductible for income tax purposes. We also sponsor unfunded contributory supplemental retirement plans for certain employees. Generally, benefits under these plans vest gradually over a period of approximately three years from date of employment, and are based on the employee’s contribution. The expense applicable to retirement plans for 2015, 2014 and 2013 was approximately $15,747, $14,423 and $12,955, respectively.

Pension plans — We have various pension plans covering a portion of our United States and international employees. Pension plan benefits are generally based on years of employment and, for salaried employees, the level of compensation. Actuarially determined amounts are contributed to United States plans to provide sufficient assets to meet future benefit payment requirements. We also sponsor an unfunded supplemental pension plan for certain employees. International subsidiaries fund their pension plans according to local requirements.

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A reconciliation of the benefit obligations, plan assets, accrued benefit cost and the amount recognized in financial statements for pension plans is as follows:

	United States						International
	2015			2014			2015			2014
Change in benefit obligation:
Benefit obligation at beginning of year	$	345,479		$	299,716		$	96,831		$	85,543
Service cost		10,851			8,071			2,816			2,597
Interest cost		15,037			13,921			2,561			3,185
Participant contributions		—			—			127			137
Plan amendments		—			186			—			(419	)
Settlements		—			—			(3,260	)		—
Other		—			—			475			—
Foreign currency exchange rate change		—			—			(7,906	)		(5,343	)
Actuarial (gain) loss		1,371			34,610			2,751			13,293
Benefits paid		(11,699	)		(11,025	)		(3,780	)		(2,162	)
Benefit obligation at end of year	$	361,039		$	345,479		$	90,615		$	96,831
Change in plan assets:
Beginning fair value of plan assets	$	277,912		$	243,506		$	39,618		$	37,078
Actual return on plan assets		5,868			25,535			1,960			1,627
Company contributions		23,239			19,896			4,888			4,009
Participant contributions		—			—			127			137
Settlements		—			—			(3,277	)		—
Foreign currency exchange rate change		—			—			(2,063	)		(1,071	)
Benefits paid		(11,699	)		(11,025	)		(3,780	)		(2,162	)
Ending fair value of plan assets	$	295,320		$	277,912		$	37,473		$	39,618
Funded status at end of year	$	(65,719	)	$	(67,567	)	$	(53,142	)	$	(57,213	)
Amounts recognized in financial statements:
Noncurrent asset	$	—		$	—		$	—		$	17
Accrued benefit liability		(784	)		(709	)		(7	)		(6	)
Long-term pension and retirement obligations		(64,935	)		(66,858	)		(53,135	)		(57,224	)
Total amount recognized in financial statements	$	(65,719	)	$	(67,567	)	$	(53,142	)	$	(57,213	)

Nordson Corporation 51

	United States						International
	2015			2014			2015			2014
Amounts recognized in accumulated other comprehensive (gain) loss:
Net actuarial loss	$	114,898		$	111,337		$	30,544		$	34,683
Prior service cost (credit)		(235	)		(47	)		(818	)		(995	)
Accumulated other comprehensive loss	$	114,663		$	111,290		$	29,726		$	33,688
Amounts expected to be recognized during next fiscal year:
Amortization of net actuarial loss	$	7,691		$	8,694		$	1,902		$	2,459
Amortization of prior service cost (credit)		77			121			(89	)		(97	)
Total	$	7,768		$	8,815		$	1,813		$	2,362

The following table summarizes the changes in accumulated other comprehensive (gain) loss:

	United States						International
	2015			2014			2015			2014
Balance at beginning of year	$	111,290		$	93,541		$	33,688		$	23,594
Net (gain) loss arising during the year		13,820			26,372			2,380			13,438
Prior service cost (credit) arising during the year		—			186			—			(419	)
Net gain (loss) recognized during the year		(9,742	)		(7,940	)		(2,268	)		(1,233	)
Prior service (cost) credit recognized during the year		(121	)		(237	)		90			101
Settlement loss		(516	)		(632	)		(1,319	)		—
Curtailment loss		(68	)		—			—			—
Exchange rate effect during the year		—			—			(2,845	)		(1,793	)
Balance at end of year	$	114,663		$	111,290		$	29,726		$	33,688

Information regarding the accumulated benefit obligation is as follows:

	United States				International
	2015		2014		2015		2014
For all plans:
Accumulated benefit obligation	$	354,567	$	336,464	$	69,489	$	75,305
For plans with benefit obligations in excess of plan assets:
Projected benefit obligation		361,040		345,479		82,521		87,128
Accumulated benefit obligation		354,567		336,464		69,444		73,135
Fair value of plan assets		295,320		277,912		37,424		37,415

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Net pension benefit costs include the following components:

	United States									International
	2015			2014			2013			2015			2014			2013
Service cost	$	10,851		$	8,071		$	8,896		$	2,816		$	2,597		$	2,098
Interest cost		15,037			13,921			12,314			2,561			3,185			2,872
Expected return on plan assets		(18,316	)		(17,297	)		(15,241	)		(1,589	)		(1,772	)		(1,512	)
Amortization of prior service cost (credit)		121			237			157			(90	)		(101	)		(81	)
Amortization of net actuarial (gain) loss		9,742			7,940			13,995			2,285			1,233			1,406
Settlement loss		516			632			—			1,319			—			—
Curtailment loss		68			—			—
Total benefit cost	$	18,019		$	13,504		$	20,121		$	7,302		$	5,142		$	4,783

Net periodic pension cost for 2015 included a settlement loss of $593 due to lump sum retirement payments and $1,242 due to a plan termination. Net periodic pension cost for 2014 included a settlement loss of $632, due to a lump sum retirement payment.

The weighted average assumptions used in the valuation of pension benefits were as follows:

	United States									International
	2015			2014			2013			2015			2014			2013
Assumptions used to determine benefit obligations at October 31:
Discount rate		4.39	%		4.29	%		4.75	%		2.81	%		2.94	%		3.72	%
Rate of compensation increase		3.50			3.49			3.30			3.22			3.19			3.18
Assumptions used to determine net benefit costs for the years ended October 31:
Discount rate		4.29			4.75			3.85			2.94			3.72			3.52
Expected return on plan assets		6.76			7.24			7.24			4.39			4.60			4.43
Rate of compensation increase		3.49			3.30			3.30			3.19			3.18			3.13

The amortization of prior service cost is determined using a straight-line amortization of the cost over the average remaining service period of employees expected to receive benefits under the plans.

The discount rate reflects the current rate at which pension liabilities could be effectively settled at the end of the year. The discount rate used considers a yield derived from matching projected pension payments with maturities of a portfolio of available bonds that receive the highest rating given from a recognized investments ratings agency. The increase in the discount rate in 2015 and decrease in 2014 are due to changes in yields for these types of investments as a result of the economic environment.

In determining the expected return on plan assets, we consider both historical performance and an estimate of future long-term rates of return on assets similar to those in our plans. We consult with and consider the opinions of financial and other professionals in developing appropriate return assumptions. The rate of compensation increase is based on managements’ estimates using historical experience and expected increases in rates.

Nordson Corporation 53

Economic assumptions have a significant effect on the amounts reported. The effect of a one percent change in the discount rate, expected return on assets and compensation increase is shown in the table below. Bracketed numbers represent decreases in expense and obligation amounts.

	United States						International
	1% Point Increase			1% Point Decrease			1% Point Increase			1% Point Decrease
Discount rate:
Effect on total service and interest cost components in 2015	$	(5,156	)	$	6,335		$	(1,605	)	$	2,206
Effect on pension obligation as of October 31, 2015	$	(45,247	)	$	56,766		$	(15,901	)	$	19,273
Expected return on assets:
Effect on total service and interest cost components in 2015	$	(2,582	)	$	2,582		$	(362	)	$	362
Compensation increase:
Effect on total service and interest cost components in 2015	$	3,891		$	(2,228	)	$	1,274		$	(1,041	)
Effect on pension obligation as of October 31, 2015	$	19,507		$	(11,101	)	$	7,652		$	(6,922	)

The allocation of pension plan assets as of October 31, 2015 and 2014 is as follows:

	United States						International
	2015			2014			2015			2014
Asset Category
Equity securities		19	%		23	%		—	%		—	%
Debt securities		29			29			—			—
Insurance contracts		—			—			54			58
Pooled investment funds		51			47			46			42
Other		1			1			—			—
Total		100	%		100	%		100	%		100	%

Our investment objective for defined benefit plan assets is to meet the plans’ benefit obligations, while minimizing the potential for future required plan contributions.

Our United States plans comprise 89 percent of the worldwide pension assets. In general, the investment strategies focus on asset class diversification, liquidity to meet benefit payments and an appropriate balance of long-term investment return and risk. Target ranges for asset allocations are determined by dynamically matching the actuarial projections of the plans’ future liabilities and benefit payments with expected long-term rates of return on the assets, taking into account investment return volatility and correlations across asset classes. For 2015, the target in “return-seeking assets” is 45 percent and 55 percent in fixed income. Plan assets are diversified across several investment managers and are invested in liquid funds that are selected to track broad market indices. Investment risk is carefully controlled with plan assets rebalanced to target allocations on a periodic basis and continual monitoring of investment managers’ performance relative to the investment guidelines established with each investment manager.

Our international plans comprise 11 percent of the worldwide pension assets. Asset allocations are developed on a country-specific basis. Our investment strategy is to cover pension obligations with insurance contracts or to employ independent managers to invest the assets.

Nordson Corporation 54

The fair values of our pension plan assets at October 31, 2015 by asset category are in the table below:

	United States								International
	Total		Level 1		Level 2		Level 3		Total		Level 1		Level 2		Level 3
Cash	$	1,781	$	1,781	$	—	$	—	$	8	$	8	$	—	$	—
Money market funds		4,286		4,286		—		—		—		—		—		—
Equity securities:										—
Basic materials		2,705		2,705		—		—		—		—		—		—
Consumer goods		4,173		4,173		—		—		—		—		—		—
Financial		6,989		6,989		—		—		—		—		—		—
Healthcare		3,436		3,436		—		—		—		—		—		—
Industrial goods		3,105		3,105		—		—		—		—		—		—
Technology		4,080		4,080		—		—		—		—		—		—
Utilities		822		822		—		—		—		—		—		—
Mutual funds		28,112		28,112		—		—		—		—		—		—
Fixed income securities:
U.S. Government		29,219		7,276		21,943		—		—		—		—		—
Corporate		54,224		—		54,224		—		—		—		—		—
Other		1,546		—		1,546		—		—		—		—		—
Other types of investments:										—
Insurance contracts		—		—		—		—		20,432		—		—		20,432
Real estate collective funds		18,827		—		—		18,827		—		—		—		—
Pooled investment funds		131,347		—		131,347		—		17,033		—		17,033		—
Other		668		668		—		—		—		—		—		—
	$	295,320	$	67,433	$	209,060	$	18,827	$	37,473	$	8	$	17,033	$	20,432

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The fair values of our pension plan assets at October 31, 2014 by asset category are in the table below:

	United States								International
	Total		Level 1		Level 2		Level 3		Total		Level 1		Level 2		Level 3
Cash	$	1,617	$	1,617	$	—	$	—	$	8	$	8	$	—	$	—
Money market funds		2,820		2,820		—		—		—		—		—		—
Equity securities:
Basic materials		3,224		3,224		—		—		—		—		—		—
Consumer goods		5,114		5,114		—		—		—		—		—		—
Financial		8,036		8,036		—		—		—		—		—		—
Healthcare		4,372		4,372		—		—		—		—		—		—
Industrial goods		3,527		3,527		—		—		—		—		—		—
Technology		4,226		4,226		—		—		—		—		—		—
Utilities		1,084		1,084		—		—		—		—		—		—
Mutual funds		31,255		31,255		—		—		—		—		—		—
Fixed income securities:
U.S. Government		26,447		7,877		18,570		—		—		—		—		—
Corporate		50,720		—		50,720		—		—		—		—		—
Other		2,486		—		2,486		—		—		—		—		—
Other types of investments:
Insurance contracts		—		—		—		—		23,174		—		—		23,174
Real estate collective funds		16,495		—		—		16,495		—		—		—		—
Pooled investment funds		115,877		—		115,877		—		16,436		—		16,436		—
Other		612		612		—		—		—		—		—		—
	$	277,912	$	73,764	$	187,653	$	16,495	$	39,618	$	8	$	16,436	$	23,174

These investment funds did not own a significant number of shares of Nordson Corporation common stock for any year presented.

The inputs and methodology used to measure fair value of plan assets are consistent with those described in Note 12. Following are the valuation methodologies used to measure these assets:

	·	Money market funds - Money market funds are public investment vehicles that are valued with a net asset value of one dollar. This is a quoted price in an active market and is classified as Level 1.

	·	Equity securities - Common stocks are valued at the closing price reported on the active market on which the individual securities are traded and are classified as Level 1. Mutual funds are valued at the net asset values of the shares at year-end, as determined by the closing price reported on the active market on which the individual securities are traded and are classified as Level 1.

	·	Fixed income securities - U.S. Treasury bills reflect the closing price on the active market in which the securities are traded and are classified as Level 1. Securities of U.S. agencies are valued using bid evaluations and a classified as Level 2. Corporate fixed income securities are valued using evaluated prices, such as dealer quotes, bids and offers and are therefore classified as Level 2.

	·	Insurance contracts - Insurance contracts are investments with various insurance companies. The contract value represents the best estimate of fair value. These contracts do not hold any specific assets. These investments are classified as Level 3.

Nordson Corporation 56

	·	Real estate collective funds – These funds are valued at the estimated fair value of the underlying properties. Estimated fair value is calculated using a combination of key inputs, such as revenue and expense growth rates, terminal capitalization rates and discount rates. These investments are classified as Level 3.

	·	Pooled investment funds - These are public investment vehicles valued using the net asset value. The net asset value is based on the value of the assets owned by the plan, less liabilities. These investments are not quoted on an active exchange and are classified as Level 2.

The following tables present an analysis of changes during the years ended October 31, 2015 and 2014 in Level 3 plan assets, by plan asset class, for U.S. and International pension plans using significant unobservable inputs to measure fair value:

	Fair Value Measurements Using Significant Unobservable Inputs
	(Level 3)
	Real estate collective funds			Insurance contracts			Total
Beginning balance at October 31, 2014	$	16,495		$	23,174		$	39,669
Actual return on plan assets:
Assets held, end of year		2,469			724			3,193
Assets sold during the period		36			7			43
Purchases		—			3,769			3,769
Sales		(173	)		(5,763	)		(5,936	)
Foreign currency translation		—			(1,479	)		(1,479	)
Ending balance at October 31, 2015	$	18,827		$	20,432		$	39,259

	Fair Value Measurements Using Significant Unobservable Inputs
	(Level 3)
	Real estate collective funds			Insurance contracts			Total
Beginning balance at October 31, 2013	$	14,958		$	22,093		$	37,051
Actual return on plan assets:
Assets held, end of year		1,667			771			2,438
Assets sold during the period		25			—			25
Purchases		—			2,816			2,816
Sales		(155	)		(1,529	)		(1,684	)
Foreign currency translation		—			(977	)		(977	)
Ending balance at October 31, 2014	$	16,495		$	23,174		$	39,669

Contributions to pension plans in 2016 are estimated to be approximately $25,400.

Retiree pension benefit payments, which reflect expected future service, are anticipated to be paid as follows:

Year	United States		International
2016	$	11,741	$	3,010
2017		12,862		2,689
2018		13,878		3,383
2019		15,095		5,140
2020		16,389		3,723
2021-2025		101,531		19,573

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Other postretirement plans - We have an unfunded postretirement benefit plan covering certain of our United States employees. Employees hired after January 1, 2002, are not eligible to participate in this plan. The plan provides medical and life insurance benefits. The plan is contributory, with retiree contributions in the form of premiums that are adjusted annually, and contains other cost-sharing features, such as deductibles and coinsurance. We also sponsor an unfunded, non-contributory postretirement benefit plan that provides medical and life insurance benefits for certain international employees.

A reconciliation of the benefit obligations, accrued benefit cost and the amount recognized in financial statements for other postretirement plans is as follows:

	United States						International
		2015			2014			2015			2014
Change in benefit obligation:
Benefit obligation at beginning of year	$	69,479		$	61,004		$	897		$	768
Service cost		979			1,037			29			28
Interest cost		2,946			3,062			35			38
Participant contributions		412			431			—			—
Foreign currency exchange rate change		—			—			(111	)		(63	)
Actuarial (gain) loss		(3,677	)		6,015			(321	)		130
Benefits paid		(1,824	)		(2,070	)		(5	)		(4	)
Benefit obligation at end of year	$	68,315		$	69,479		$	524		$	897
Change in plan assets:
Beginning fair value of plan assets	$	—		$	—		$	—		$	—
Company contributions		1,412			1,639			5			4
Participant contributions		412			431			—			—
Benefits paid		(1,824	)		(2,070	)		(5	)		(4	)
Ending fair value of plan assets	$	—		$	—		$	—		$	—
Funded status at end of year	$	(68,315	)	$	(69,479	)	$	(524	)	$	(897	)
Amounts recognized in financial statements:
Accrued benefit liability	$	(2,142	)	$	(2,069	)	$	(7	)	$	(7	)
Long-term postretirement obligations		(66,173	)		(67,410	)		(517	)		(890	)
Total amount recognized in financial statements	$	(68,315	)	$	(69,479	)	$	(524	)	$	(897	)

	United States						International
		2015			2014			2015			2014
Amounts recognized in accumulated other
comprehensive (gain) loss:
Net actuarial (gain) loss	$	17,652		$	22,434		$	(379	)	$	(86	)
Prior service credit		(573	)		(1,012	)		—			—
Accumulated other comprehensive (gain) loss	$	17,079		$	21,422		$	(379	)	$	(86	)
Amounts expected to be recognized
during next fiscal year:
Amortization of net actuarial (gain) loss	$	847		$	1,187		$	(25	)	$	—
Amortization of prior service cost (credit)		(267	)		(438	)		—			—
Total	$	580		$	749		$	(25	)	$	—

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The following table summarizes the changes in accumulated other comprehensive (gain) loss:

	United States						International
		2015			2014			2015			2014
Balance at beginning of year	$	21,422		$	16,393		$	(86	)	$	(243	)
Net (gain) loss arising during the year		(3,677	)		6,015			(321	)		130
Net gain (loss) recognized during the year		(1,104	)		(1,435	)		—			13
Prior service credit recognized during the year		438			449			—			—
Exchange rate effect during the year		—			—			28			14
Balance at end of year	$	17,079		$	21,422		$	(379	)	$	(86	)

Net postretirement benefit costs include the following components:

	United States									International
		2015			2014			2013			2015		2014			2013
Service cost	$	979		$	1,037		$	1,145		$	29	$	28		$	35
Interest cost		2,946			3,062			2,598			35		38			38
Amortization of prior service credit		(438	)		(449	)		(473	)		—		—			—
Amortization of net actuarial (gain) loss		1,104			1,435			2,112			—		(13	)		(4	)
Total benefit cost	$	4,591		$	5,085		$	5,382		$	64	$	53		$	69

The weighted average assumptions used in the valuation of postretirement benefits were as follows:

	United States									International
	2015			2014			2013			2015			2014			2013
Assumptions used to determine benefit obligations at October 31:
Discount rate		4.50	%		4.40	%		4.80	%		4.35	%		4.25	%		4.95	%
Health care cost trend rate		3.72			3.93			4.12			6.31			6.48			6.65
Rate to which health care cost trend rate is assumed to decline (ultimate trend rate)		3.27			3.41			3.47			3.50			3.50			3.50
Year the rate reaches the ultimate trend rate		2025			2024			2021			2031			2031			2031
Assumption used to determine net benefit costs for the years ended October 31:
Discount rate		4.40	%		4.80	%		3.85	%		4.25	%		4.95	%		4.40	%

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The discount rate and the health care cost trend rate assumptions have a significant effect on the amounts reported. For example, a one-percentage point change in the discount rate and the assumed health care cost trend rate would have the following effects. Bracketed numbers represent decreases in expense and obligation amounts.

	United States						International
	1% Point Increase			1% Point Decrease			1% Point Increase			1% Point Decrease
Discount rate:
Effect on total service and interest cost components in 2015	$	(777	)	$	946		$	(6	)	$	7
Effect on postretirement obligation as of October 31, 2015	$	(9,474	)	$	12,040		$	(96	)	$	126
Health care trend rate:
Effect on total service and interest cost components in 2015	$	663		$	(524	)	$	17		$	(13	)
Effect on postretirement obligation as of October 31, 2015	$	10,492		$	(8,419	)	$	120		$	(93	)

Contributions to postretirement plans in 2016 are estimated to be approximately $2,100.

Retiree postretirement benefit payments are anticipated to be paid as follows:

Year	United States		International
2016	$	2,142	$	7
2017		2,304		8
2018		2,466		11
2019		2,583		12
2020		2,773		12
2021-2025		17,097		78

Note 8 — Income taxes

Income tax expense includes the following:

	2015			2014			2013
Current:
U.S. federal	$	36,875		$	52,985		$	45,004
State and local		1,623			1,900			2,351
Foreign		49,153			47,366			36,829
Total current		87,651			102,251			84,184
Deferred:
U.S. federal		4,950			8,695			8,361
State and local		1,031			(1,635	)		(991	)
Foreign		(3,881	)		(3,571	)		(2,248	)
Total deferred		2,100			3,489			5,122
	$	89,751		$	105,740		$	89,306

Earnings before income taxes of domestic operations, which are calculated after intercompany profit eliminations, were $140,044, $184,894 and $164,702 in 2015, 2014 and 2013, respectively.

On December 19, 2014, the Tax Increase Prevention Act of 2014 was enacted which retroactively reinstated the Federal Research and Development Tax Credit (Federal R&D Tax Credit) from January 1, 2014 to December 31, 2014 and extended certain other tax provisions. As a result, our income tax provision for 2015 included discrete tax benefits of $2,486 primarily related to 2014.

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Income tax expense in 2013 included a benefit of $900 for the reduction of unrecognized tax benefits primarily related to expiration of certain foreign statutes of limitations.

On January 2, 2013, the American Taxpayer Relief Act of 2012 was enacted which retroactively reinstated and extended the Federal Research and Development Tax Credit (Federal R&D Tax Credit) from January 1, 2012 to December 31, 2013 and extended certain other tax provisions. As a result, our income tax provision for 2013 included a discrete tax benefit of $1,700 related to 2012.

A reconciliation of the U.S. statutory federal rate to the worldwide consolidated effective tax rate follows:


Statutory federal income tax rate	35.00		%	35.00		%	35.00		%
Domestic Production Deduction	(1.47	)		(1.74	)		(1.71	)
Foreign tax rate variances, net of foreign tax credits	(3.25	)		(3.42	)		(3.39	)
State and local taxes, net of federal income tax benefit	0.43			0.05			0.28
Amounts related to prior years	(1.04	)		(0.24	)		(1.00	)
Other – net	0.16			0.35			(0.48	)
Effective tax rate	29.83		%	30.00		%	28.70		%

The Domestic Production Deduction, enacted by the American Jobs Creation Act of 2004, allows a deduction with respect to income from certain United States manufacturing activities.

Earnings before income taxes of international operations, which are calculated before intercompany profit elimination entries, were $160,818, $167,619 and $146,421 in 2015, 2014 and 2013, respectively. Deferred income taxes are not provided on undistributed earnings of international subsidiaries that are intended to be permanently invested in their operations. These undistributed earnings represent the post-income tax earnings under U.S. GAAP not adjusted for previously taxed income which aggregated approximately $712,913 and $622,914 at October 31, 2015 and 2014, respectively. Should these earnings be distributed, applicable foreign tax credits, distributions of previously taxed income, and utilization of other attributes would substantially offset taxes due upon the distribution. It is not practical to estimate the amount of additional taxes that might be payable on such undistributed earnings.

At October 31, 2015 and 2014, total unrecognized tax benefits were $6,258 and $5,812, respectively. The amounts that, if recognized, would impact the effective tax rate were $5,650 and $5,175 at October 31, 2015 and 2014, respectively. The unrecognized tax benefits relate primarily to foreign positions and, if recognized, a substantial portion of the gross unrecognized tax benefits would be offset against assets currently recorded in the Consolidated Balance Sheet. A reconciliation of the beginning and ending amount of unrecognized tax benefits for 2015, 2014 and 2013 is as follows:

	2015			2014			2013
Balance at beginning of year	$	5,812		$	5,717		$	3,140
Additions based on tax positions related to the current year		288			196			703
Additions for tax positions of prior years		331			319			3,261
Reductions for tax positions of prior years		(28	)		—			(317	)
Settlements		—			(110	)		—
Lapse of statute of limitations		(145	)		(310	)		(1,070	)
Balance at end of year	$	6,258		$	5,812		$	5,717

At October 31, 2015 and 2014, we had accrued interest and penalty expense related to unrecognized tax benefits of $2,664 and $2,025, respectively. We include interest accrued related to unrecognized tax benefits in interest expense. Penalties, if incurred, would be recognized as other income (expense).

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We are subject to United States Federal income tax as well as income taxes in numerous state and foreign jurisdictions. We are subject to examination in the U.S. by the Internal Revenue Service (IRS) for the 2012 through 2015 tax years; tax years prior to the 2012 year are closed to further examination by the IRS. Generally, major state and foreign jurisdiction tax years remain open to examination for tax years after 2009. Within the next twelve months, it is reasonably possible that certain statute of limitations periods would expire, which could result in a minimal decrease in our unrecognized tax benefits.

Significant components of deferred tax assets and liabilities are as follows:

	2015			2014
Deferred tax assets:
Employee benefits	$	84,651		$	79,669
Other accruals not currently deductible for taxes		17,259			17,379
Tax credit and loss carryforwards		9,242			16,531
Inventory adjustments		6,591			5,276
Translation of foreign currency accounts		—			154
Total deferred tax assets		117,743			119,009
Valuation allowance		(6,768	)		(7,672	)
Total deferred tax assets		110,975			111,337
Deferred tax liabilities:
Depreciation and amortization		171,234			163,107
Other - net		196			-
Total deferred tax liabilities		171,430			163,107
Net deferred tax liabilities	$	(60,455	)	$	(51,770	)

At October 31, 2015, we had $2,881 of tax credit carryforwards of which $135 will expire in 2016 through 2017, and $2,746 of which has an indefinite carryforward period. We also had $3,629 Federal, $70,298 state and $14,323 foreign operating loss carryforwards, of which $73,927 will expire in 2016 through 2035, and $14,323 of which has an indefinite carryforward period. The net change in the valuation allowance was a decrease of $904 in 2015 and an increase of $2,009 in 2014. The valuation allowance of $6,768 at October 31, 2015, related primarily to tax credits and loss carryforwards that may expire before being realized. We continue to assess the need for valuation allowances against deferred tax assets based on determinations of whether it is more likely than not that deferred tax benefits will be realized.

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Note 9 — Notes payable

Bank lines of credit and notes payable are summarized as follows:

	2015			2014
Maximum borrowings under bank lines of credit:
Domestic banks	$	—		$	100,000
Foreign banks		45,102			48,619
Total	$	45,102		$	148,619

Outstanding notes payable:
Domestic bank debt	$	—		$	100,000
Foreign bank debt		1,108			6,181
Total	$	1,108		$	106,181

Weighted-average interest rate on notes payable		2.75	%		1.00	%
Unused bank lines of credit	$	43,994		$	42,438

In 2014, we entered into a 364-day unsecured credit facility with PNC Bank National Association. In August 2014, we borrowed $100,000 under this facility to partially fund the Avalon acquisition. In January 2015, we amended the agreement and borrowed an additional $50,000 to fund daily operations. In April 2015, we paid down $100,000 of the $150,000 outstanding. In May 2015, we paid down the remaining $50,000 outstanding.

Note 10 — Long-term debt

A summary of long-term debt is as follows:

	2015		2014
Revolving credit agreement, due 2020	$	457,025	$	375,242
Senior notes, due 2017-2025		200,000		200,000
Senior notes, due 2019-2027		100,000		—
Term loan, due 2018-2020		200,000		—
Euro loan, due 2018		77,042		—
Euro loan, due 2016		11,501		63,244
Private shelf facility, due 2012-2020		67,778		53,333
Development loans, due 2011-2026		1,467		1,586
Other		672		214
		1,115,485		693,619
Less current maturities		22,842		10,751
Long-term maturities	$	1,092,643	$	682,868

Revolving credit agreement — This $600,000 unsecured multi-currency revolving credit agreement is with a group of banks and expires in February 2020. Payment of quarterly fees is required. The interest rate is variable based upon the LIBOR rate. The weighted average interest rate for borrowings under this agreement was 1.20 percent at October 31, 2015.

Senior notes, due 2017-2025 — These fixed-rate notes entered into in 2012 with a group of insurance companies had a remaining weighted-average life of 8.78 years. The weighted-average interest rate at October 31, 2015 was 2.93 percent.

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Senior notes, due 2019-2027 — These fixed-rate notes entered into in 2015 with a group of insurance companies had a remaining weighted-average life of 8.5 years. The weighted-average interest rate at October 31, 2015 was 3.04 percent.

Term loan, due 2018-2020 — In 2015, we entered into a $200,000 term loan facility with a group of banks. The interest rate is variable based upon the LIBOR rate. $100,000 is due in three years with a weighted-average interest rate of 1.20 percent and $100,000 is due in five years with a weighted-average interest rate of 1.30 percent.

Euro loan, due 2018 — This Euro denominated loan was entered into in 2015 with Bank of America Merrill Lynch International Limited. It can be extended by one year at the end of the third and fourth anniversaries. The interest rate is variable based upon the EUR LIBOR rate. The weighted average interest rate at October 31, 2015 was 0.88 percent.

Euro loan, due 2016 — This Euro denominated loan was entered into in 2013 with The Bank of Tokyo-Mitsubishi UFJ, Ltd. It can be extended by one year at the end of the third and fourth anniversaries. The interest rate is variable based upon the EUR LIBOR rate. The weighted average interest rate at October 31, 2015 was 0.79 percent.

Private shelf facility — In 2011, we entered into a $150,000 three-year Private Shelf Note agreement with New York Life Investment Management LLC (NYLIM). The amount of the facility was increased to $180,000 in 2015. Borrowings under the agreement may be up to 12 years, with a remaining average life of 3.13 years, and are unsecured. The interest rate on each borrowing is fixed based upon the market rate at the borrowing date. At October 31, 2015, the amount outstanding under this facility was at fixed rates of 2.21 percent and 2.56 percent.

Development loans, due 2011-2026 — These fixed-rate loans with the State of Ohio and Cuyahoga County, Ohio were issued in 2011 in connection with the construction of our corporate headquarters building and are payable in monthly installments over 15 years beginning in 2011. The interest rate on the State of Ohio loan is 3.00 percent, and the interest rate on the Cuyahoga County loan is 3.50 percent.

Annual maturities — The annual maturities of long-term debt for the five years subsequent to October 31, 2015, are as follows: $22,842 in 2016; $495,118 in 2017; and $203,628 in 2018; $28,734 in 2019 and $168,738 in 2020.

Note 11 — Leases

We have lease commitments expiring at various dates, principally for manufacturing, warehouse and office space, automobiles and office equipment. Many leases contain renewal options and some contain purchase options and residual guarantees.

Rent expense for all operating leases was approximately $15,721, $15,135 and $14,835 in 2015, 2014 and 2013, respectively.

Amortization of assets recorded under capital leases is recorded in depreciation expense.

Assets held under capitalized leases and included in property, plant and equipment are as follows:

	2015			2014
Transportation equipment	$	15,614		$	15,524
Other		10,070			12,191
Total capitalized leases		25,684			27,715
Accumulated amortization		(10,743	)		(11,139	)
Net capitalized leases	$	14,941		$	16,576

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At October 31, 2015, future minimum lease payments under non-cancelable capitalized and operating leases are as follows:

	Capitalized Leases		Operating Leases
Year:
2016	$	6,417	$	12,611
2017		3,981		8,490
2018		2,025		6,746
2019		866		5,944
2020		609		4,143
Later years		5,746		11,886
Total minimum lease payments		19,644	$	49,820
Less amount representing executory costs		1,550
Net minimum lease payments		18,094
Less amount representing interest		3,512
Present value of net minimum lease payments		14,582
Less current portion		4,884
Long-term obligations at October 31, 2015	$	9,698

Note 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 presents the classification of our assets and liabilities measured at fair value on a recurring basis at October 31, 2015:

	Total		Level 1		Level 2		Level 3
Assets:
Foreign currency forward contracts (a)	$	2,299	$	—	$	2,299	$	—
Total assets at fair value	$	2,299	$	—	$	2,299	$	—

Liabilities:
Deferred compensation plans (b)	$	9,984	$	—	$	9,984	$	—
Foreign currency forward contracts (a)		4,655		—		4,655		—
Total liabilities at fair value	$	14,639	$	—	$	14,639	$	—

(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.

(b)

Executive officers and other highly compensated employees may defer up to 100 percent of their salary and annual cash incentive compensation and for executive officers, up to 90 percent 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.

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Fair value disclosures related to goodwill and indefinite-lived intangible assets are disclosed in Note 6.

Note 13 — 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 Consolidated Statement of Income together with the transaction gain or loss from the related balance sheet position. In 2015, we recognized net losses of $3,866 on foreign currency forward contracts and net gains of $3,862 from the change in fair value of balance sheet positions. In 2014, we recognized net losses of $826 on foreign currency forward contracts and net gains of $348 from the change in fair value of balance sheet positions. In 2013, we recognized net gains of $1,437 on foreign currency forward contracts and net losses of $3,651 from the change in fair value of balance sheet positions.

The following table summarizes, by currency, the contracts outstanding at October 31, 2015 and 2014:

	Sell				Buy
	Notional Amounts		Fair Market Value		Notional Amounts		Fair Market Value
October 31, 2015 contract amounts:
Euro	$	182,503	$	180,406	$	188,021	$	184,174
Pound sterling		55,234		55,543		37,714		37,513
Japanese yen		17,046		17,067		13,646		13,706
Australian dollar		—		—		7,120		6,981
Hong Kong dollar		—		—		59,734		59,739
Singapore dollar		858		857		11,519		11,561
Others		3,018		2,993		29,744		29,674
Total	$	258,659	$	256,866	$	347,498	$	343,348

October 31, 2014 contract amounts:
Euro	$	424,624	$	407,422	$	344,461	$	330,957
Pound sterling		86,654		85,632		141,638		140,065
Japanese yen		21,057		19,780		17,477		16,498
Australian dollar		216		220		9,012		8,618
Hong Kong dollar		52,278		52,247		117,040		116,978
Singapore dollar		—		—		10,984		10,693
Others		2,627		2,573		28,409		27,236
Total	$	587,456	$	567,874	$	669,021	$	651,045

We also use intercompany foreign currency transactions of a long-term investment nature to hedge the value of investment in wholly-owned subsidiaries. For hedges of the net investment in foreign operations, realized and unrealized gains and losses are shown in the cumulative translation adjustment account included in total comprehensive income. For 2015 and 2014, net gains of $427 and $318, respectively, were included in the cumulative translation adjustment account related to foreign denominated fixed-rate debt designated as a hedge of net investment in foreign operations.

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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. As of October 31, 2015, there were no significant concentrations of credit risk.

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

	2015						2014
	Carrying Amount			Fair Value			Carrying Amount		Fair Value
Cash and cash equivalents	$	50,268		$	50,268		$	42,314	$	42,314
Notes payable		1,108			1,108			106,181		106,181
Long-term debt (including current portion)		1,115,485			1,113,140			693,619		696,140
Foreign currency forward contracts (net)		(2,356	)		(2,356	)		1,510		1,510

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

	·	Cash, cash equivalents and notes payable are valued at their carrying amounts due to the relatively short period to maturity of the instruments.

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

	·	Foreign currency forward contracts are estimated using quoted exchange rates, which are considered to be Level 2 inputs under the fair value hierarchy.

Note 14 — Capital shares

Preferred — We have authorized 10,000 Series A convertible preferred shares without par value. No preferred shares were outstanding in 2015, 2014 or 2013.

Common — We have 160,000 authorized common shares without par value. At October 31, 2015 and 2014, there were 98,023 common shares issued. At October 31, 2015 and 2014, the number of outstanding common shares, net of treasury shares, was 57,358 and 62,435, respectively.

Common shares repurchased as part of publicly announced programs during 2015, 2014 and 2013 were as follows:

	Number		Total		Average
Year	of Shares		Amount		per Share
2015		5,360	$	381,598	$	71.19
2014		2,224	$	163,584	$	73.55
2013		459	$	30,443	$	66.29

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Note 15 — Stock-based compensation

During the 2013 Annual Meeting of Shareholders, our shareholders approved the 2012 Stock Incentive and Award Plan (the “2012 Plan”). The 2012 Plan provides for the granting of stock options, stock appreciation rights, restricted stock, performance shares, stock purchase rights, stock equivalent units, cash awards and other stock or performance-based incentives. A maximum of 2,900 common shares is available for grant under the 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. For grants made prior to November 2012, vesting ceases upon retirement, death and disability, and unvested shares are forfeited. For grants made in or after November 2012, 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 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 $8,772, $10,251 and $4,906 for 2015, 2014 and 2013, respectively. The increase in the 2014 expense was primarily related to accelerated amortization of the cost of options.

The following table summarizes activity related to stock options during 2015:

			Weighted˗Average Exercise Price Per Share		Aggregate Intrinsic Value		Weighted˗Average Remaining Term
Outstanding at October 31, 2014	1,686		$	42.77
Granted	316		$	79.66
Exercised	(211	)	$	27.60
Forfeited or expired	(32	)	$	68.38
Outstanding at October 31, 2015	1,759		$	50.74	$	38,727	6.0 years
Vested at October 31, 2015 or expected to vest	1,745		$	50.54	$	38,721	6.0 years
Exercisable at October 31, 2015	1,039		$	37.62	$	34,975	4.6 years

Summarized information on currently outstanding options follows:

	Range of Exercise Price
	$14 - $28		$29 - $44		$45 - $81
Number outstanding		442		506		811
Weighted-average remaining contractual life, in years	2.9		5.4		8.1
Weighted-average exercise price	$	22.82	$	41.78	$	71.57
Number exercisable		442		416		181
Weighted-average exercise price	$	22.82	$	41.38	$	65.14

As of October 31, 2015, there was $5,052 of total unrecognized compensation cost related to nonvested stock options. That cost is expected to be amortized over a weighted average period of approximately 1.5 years.

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The Black-Scholes option valuation model was developed for use in estimating the fair value of traded options that have no vesting restrictions and are fully transferable. Option valuation models require the input of highly subjective assumptions, including the expected stock price volatility. 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:


Expected volatility	30.3-39.5%	40.1%˗44.7%	45.3%˗46.9%
Expected dividend yield	1.06-1.10%	0.98%˗1.03%	0.97%˗1.01%
Risk-free interest rate	1.57%˗1.85%	1.51%˗1.79%	0.75%˗0.90%
Expected life of the option (in years)	5.4˗6.1	5.4˗6.1	5.4˗6.1

The weighted-average expected volatility used to value options granted in 2015, 2014 and 2013 was 34.3 percent, 44.5 percent and 46.3 percent, 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 United States Treasury issues with terms equal to the expected life of the option being valued.

The weighted average grant date fair value of stock options granted during 2015, 2014 and 2013 was $24.63, $27.92 and $24.12, respectively.

The total intrinsic value of options exercised during 2015, 2014 and 2013 was $10,406, $17,223 and $12,892, respectively.

Cash received from the exercise of stock options for 2015, 2014 and 2013 was $5,372, $7,013 and $6,018, respectively. The tax benefit realized from tax deductions from exercises for 2015, 2014 and 2013 was $3,661, $6,385 and $5,531, 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, 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 retirement at normal retirement age, restricted shares granted within 12 months prior to termination are forfeited, and, for other restricted shares, the restriction period will terminate and the shares will vest and be transferable. 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. 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 market 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.

The following table summarizes activity related to restricted shares during 2015:

			Weighted˗Average Grant Date Fair Value Per Share
Restricted at October 31, 2014	71		$	63.53
Granted	24		$	78.64
Forfeited	(5	)	$	75.30
Vested	(37	)	$	58.04
Restricted at October 31, 2015	53		$	73.23

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As of October 31, 2015, there was $1,908 of unrecognized compensation cost related to restricted shares. The cost is expected to be amortized over a weighted average period of 1.8 years. The amount charged to expense related to restricted shares was $1,840, $1,784 and $2,464 in 2015, 2014 and 2013, respectively. These amounts included common share dividends $51, $52, and $57 in 2015, 2014 and 2013, respectively.

The following table summarizes activity related to restricted share units in 2015:

			Weighted˗Average Grant Date Fair Value
Restricted share units at October 31, 2014	5		$	61.59
Granted	13		$	76.19
Vested	(18	)	$	71.83
Restricted share units at October 31, 2015	0		$	—

As of October 31, 2015, there was no remaining expense to be recognized related to outstanding restricted share units. The amount charged to expense related to restricted share units during 2015, 2014 and 2013 was $972, $890 and $598, 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 2015:

			Weighted˗Average Grant Date Fair Value Per Share
Outstanding at October 31, 2014	110		$	29.74
Restricted stock units vested	12		$	69.51
Dividend equivalents	1		$	73.46
Distributions	(23	)	$	21.97
Outstanding at October 31, 2015	100		$	36.76

The amount charged to expense related to director deferred compensation was $91, $101 and $183 in 2015, 2014 and 2013, 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 levels over three-year performance periods. No payout will occur unless certain threshold performance measures are exceeded.

The amount of compensation expense is based upon current performance projections for each three-year period and the percentage of the requisite service that has been rendered. The calculations are also based upon the grant date fair value determined using the closing market price of our common shares at the grant date, reduced by the implied value of dividends not to be paid. This value was $76.48 per share for 2015, $69.25 per share for 2014 and $59.59 per share for 2013. The amounts charged to expense for executive officers and selected other key employees in 2015, 2014 and 2013 were $3,459, $4,304 and $3,588, respectively. The cumulative amount recorded in shareholders’ equity at October 31, 2015, and 2014 was $7,561 and $7,570, respectively.

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Deferred compensation — Our executive officers and other highly compensated employees may elect to defer up to 100 percent of their base pay and cash incentive compensation and, for executive officers, up to 90 percent of their performance share-based 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 was $179, $129 and $79 for 2015, 2014 and 2013, respectively.

Shares reserved for future issuance — At October 31, 2015, there were 2,303 of common shares reserved for future issuance through the exercise of outstanding options or rights.

Note 16 — Operating segments and geographic area data

We conduct business in three primary operating 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 Statement of Income (interest and investment income, interest expense and other income/expense) are excluded from the measure of segment profitability reviewed by our chief operating decision maker and are not presented by operating segment. The accounting policies of the segments are generally the same as those described in Note 1, Significant Accounting Policies.

No single customer accounted for 10 percent or more of sales in 2015, 2014 or 2013.

The following table presents information about our reportable segments:

	Adhesive Dispensing Systems			Advanced Technology Systems			Industrial Coating Systems			Corporate				Total
Year ended October 31, 2015
Net external sales	$	836,066		$	593,858		$	258,742		$	—			$	1,688,666
Depreciation		14,804			13,015			3,194			6,694				37,707
Operating profit (loss)		195,902	(a)		120,940	(b)		41,458	(c)		(40,570	)			317,730
Identifiable assets (e)		734,145			1,021,221			130,421			486,852		(d)		2,372,639
Expenditures for long-lived assets		12,880			36,182			5,112			7,913				62,087
Year ended October 31, 2014
Net external sales	$	899,696		$	561,784		$	242,541		$	—			$	1,704,021
Depreciation		15,467			10,433			3,368			5,178				34,446
Operating profit (loss)		229,556	(a)		140,240	(b)		38,117	(c)		(40,808	)			367,105
Identifiable assets (e)		747,063			919,052			130,624			495,676		(d)		2,292,415
Expenditures for long-lived assets		15,886			15,163			4,057			8,468				43,574
Year ended October 31, 2013
Net external sales	$	793,488		$	516,266		$	233,167		$	—			$	1,542,921
Depreciation		15,326			9,180			3,084			4,176				31,766
Operating profit (loss)		203,757	(a)		123,403	(b)		33,786			(37,097	)			323,849
Identifiable assets (e)		750,616			721,524			113,835			467,809		(d)		2,053,784
Expenditures for long-lived assets		20,498			10,080			6,239			10,402				47,219

(a)	Includes $7,972, $1,731 and $315 of severance and restructuring costs in 2015, 2014 and 2013, respectively.

(b)	Includes $3,060, $579 and $811 of severance and restructuring costs 2015, 2014 and 2013, respectively.

(c)	Includes $379 and $241 of severance and restructuring costs in 2015 and 2014, respectively.

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(d)	Corporate assets are principally cash and cash equivalents, deferred income taxes, capital leases, headquarter facilities, the major portion of our enterprise management system, and intangible assets.

(e)	Operating segment identifiable assets include notes and accounts receivable net of customer advance payments and allowance for doubtful accounts, inventories net of reserves, property, plant and equipment net of accumulated depreciation and goodwill.

We have significant sales and long-lived assets in the following geographic areas:

	2015		2014		2013
Net external sales
United States	$	529,893	$	503,776	$	465,789
Americas		129,325		120,993		123,654
Europe		462,565		494,538		416,725
Japan		107,797		127,057		127,945
Asia Pacific		459,086		457,657		408,808
Total net external sales	$	1,688,666	$	1,704,021	$	1,542,921

Long-lived assets
United States	$	187,212	$	159,946	$	136,551
Americas		1,735		2,451		4,154
Europe		21,231		21,039		22,576
Japan		5,876		5,967		4,384
Asia Pacific		33,886		35,036		33,314
Total long-lived assets	$	249,940	$	224,439	$	200,979

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

	2015			2014			2013
Total profit for reportable segments	$	317,730		$	367,105		$	323,849
Interest expense		(18,104	)		(15,035	)		(14,841	)
Interest and investment income		558			581			421
Other-net		678			(138	)		1,694
Income before income taxes	$	300,862		$	352,513		$	311,123

A reconciliation of total assets for reportable segments to total consolidated assets is as follows:

	2015			2014			2013
Total assets for reportable segments	$	2,372,639		$	2,292,415		$	2,053,784
Customer advance payments		22,884			25,578			28,341
Eliminations		(35,079	)		(37,863	)		(28,946	)
Total consolidated assets	$	2,360,444		$	2,280,130		$	2,053,179

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Note 17 — Supplemental information for the statement of cash flows

	2015		2014		2013
Cash operating activities:
Interest paid	$	17,312	$	14,115	$	16,037
Income taxes paid		72,175		87,797		93,074
Non-cash investing and financing activities:
Capitalized lease obligations incurred	$	5,562	$	8,584	$	6,441
Capitalized lease obligations terminated		672		864		468
Shares acquired and issued through exercise of stock options		445		—		148

Note 18 — Quarterly financial data (unaudited)

	First		Second		Third		Fourth
2015:
Sales	$	379,008	$	400,727	$	462,731	$	446,200
Gross margin		208,721		221,890		248,492		234,861
Net income		42,885		49,214		69,388		49,624
Earnings per share:
Basic		0.69		0.81		1.15		0.84
Diluted		0.69		0.80		1.14		0.84

2014:
Sales	$	359,420	$	417,461	$	458,550	$	468,590
Gross margin		194,782		235,552		257,511		257,253
Net income		34,880		61,934		77,879		72,080
Earnings per share:
Basic		0.54		0.97		1.23		1.14
Diluted		0.54		0.96		1.21		1.13

The sum of the per-share amounts for the four quarters may not always equal the annual per-share amounts due to differences in the average number of shares outstanding during the respective periods.

During the fourth quarter of 2015, we recorded pre-tax severance and restructuring costs of $9,092. Additionally, we recorded other income of $1,608 related to a favorable litigation settlement.

During the third quarter of 2015, we recorded pre-tax severance and restructuring costs of $2,319.

During the first quarter of 2015, we recorded a pre-tax loss of $1,572 related to a pension settlement.

On December 19, 2014, the Tax Increase Prevention Act of 2014 was enacted which retroactively reinstated the Federal Research and Development Tax Credit (Federal R&D Tax Credit) from January 1, 2014 to December 31, 2014 and extended certain other tax provisions. As a result, our income tax provision for the first quarter of 2015 included a discrete tax benefit of $1,786 primarily related to 2014.

During the fourth quarter of 2014, we recorded pre-tax severance costs of $1,273. Additionally, we recorded a pre-tax gain of $1,005 related to a property insurance settlement.

During the second quarter of 2014, we recorded pre-tax severance costs of $1,278.

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Note 19 — Contingencies

We are involved in pending or potential litigation regarding environmental, product liability, patent, contract, employee and other matters arising from the normal course of business. Including the environmental matter discussed below, after consultation with legal counsel, we believe that the probability is remote 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 constructing a potable water delivery system serving the impacted area down gradient of the Site. At October 31, 2015, and 2014 our accrual for the ongoing operation, maintenance and monitoring obligation at the Site was $565 and $615, respectively. The liability for environmental remediation represents management’s best estimate of the probable and reasonably estimable undiscounted costs related to known remediation obligations. The accuracy of our estimate of environmental liability is affected by several uncertainties such as additional requirements that may be identified in connection with remedial activities, the complexity and evolution of environmental laws and regulations, and the identification of presently unknown remediation requirements. Consequently, our liability could be different 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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Management’s Report on Internal Control Over Financial Reporting

The management of Nordson Corporation is responsible for establishing and maintaining adequate internal control over financial reporting.

Using criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in Internal Control-Integrated Framework (2013 framework), Nordson’s management assessed the effectiveness of our internal control over financial reporting as of October 31, 2015.

We acquired Liquidyn GmbH (Liquidyn), WAFO Produktionsgesellschaft GmbH (WAFO) and MatriX Technologies GmbH (MatriX) on June 15, 2015, August 3, 2015 and September 1, 2015, respectively. They represented four percent of our total assets as of October 31, 2015. As the acquisitions occurred during the last 12 months, the scope of our assessment of the effectiveness of internal control over financial reporting does not include Liquidyn, WAFO and MatriX. This exclusion is in accordance with the SEC’s general guidance that assessments of recently acquired businesses may be omitted from our scope in the year of acquisition.

Based on our assessment, management concluded that our internal control over financial reporting was effective as of October 31, 2015.

The independent registered public accounting firm, Ernst & Young LLP, has also audited the effectiveness of our internal control over financial reporting as of October 31, 2015. Their report is included herein.

/s/ Michael F. Hilton		/s/ Gregory A. Thaxton
President and		Senior Vice President, Chief Financial Officer
Chief Executive Officer		December 15, 2015
December 15, 2015

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Report of Independent Registered Public Accounting Firm

The Board of Directors and Shareholders of Nordson Corporation

We have audited Nordson Corporation’s internal control over financial reporting as of October 31, 2015, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) (the COSO criteria). Nordson Corporation’s management is responsible for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting included in the accompanying “Management’s Report on Internal Control Over Financial Reporting”. Our responsibility is to express an opinion on the company’s internal control over financial reporting based on our audit.

We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

As indicated in the accompanying Management’s Report on Internal Control Over Financial Reporting, management’s assessment of and conclusion on the effectiveness of internal control over financial reporting did not include the internal controls of Liquidyn GmbH, WAFO Produktionsgesellschaft GmbH and MatriX Technologies GmbH, which are included in the 2015 consolidated financial statements of Nordson Corporation and constituted four percent of total assets as of October 31, 2015. Our audit of internal control over financial reporting of Nordson Corporation also did not include an evaluation of the internal control over financial reporting of Liquidyn GmbH, WAFO Produktionsgesellschaft GmbH and MatriX Technologies GmbH.

In our opinion, Nordson Corporation maintained, in all material respects, effective internal control over financial reporting as of October 31, 2015, based on the COSO criteria.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated balance sheets of Nordson Corporation as of October 31, 2015 and 2014, and the related consolidated statements of income, comprehensive income, shareholders’ equity, and cash flows for each of the three years in the period ended October 31, 2015 of Nordson Corporation and our report dated December 15, 2015 expressed an unqualified opinion thereon.

/s/ Ernst & Young LLP
Ernst & Young LLP

Cleveland, Ohio
December 15, 2015

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Report of Independent Registered Public Accounting Firm

The Board of Directors and Shareholders of Nordson Corporation

We have audited the accompanying consolidated balance sheets of Nordson Corporation as of October 31, 2015 and 2014 and the related consolidated statements of income, comprehensive income, shareholders’ equity, and cash flows for each of the three years in the period ended October 31, 2015. Our audits also included the financial statement schedule listed in the Index at Item 15(a). These financial statements and schedule are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements and schedule based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of Nordson Corporation at October 31, 2015 and 2014, and the consolidated results of its operations and its cash flows for each of the three years in the period ended October 31, 2015, in conformity with US generally accepted accounting principles. Also, in our opinion, the related financial statement schedule, when considered in relation to the basic financial statements taken as a whole, presents fairly in all material respects the information set forth therein.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), Nordson Corporation’s internal control over financial reporting as of October 31, 2015, based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) and our report dated December 15, 2015 expressed an unqualified opinion thereon.

/s/ Ernst & Young LLP
Ernst & Young LLP

Cleveland, Ohio
December 15, 2015

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