Item 8. Financial Statements and Supplementary Data

Consolidated Statements of Income

Years ended October 31, 2017, 2016 and 2015		2017				2016				2015
(In thousands except for per-share amounts)
Sales		$	2,066,982			$	1,808,994			$	1,688,666
Operating costs and expenses:
Cost of sales			927,981				815,495				774,702
Selling and administrative expenses			678,861				594,293				584,823
Severance and restructuring costs			2,438				10,775				11,411
			1,609,280				1,420,563				1,370,936
Operating profit			457,702				388,431				317,730
Other income (expense):
Interest expense			(36,601	)			(21,322	)			(18,104	)
Interest and investment income			1,124				728				558
Other - net			(1,934	)			657				678
			(37,411	)			(19,937	)			(16,868	)
Income before income taxes			420,291				368,494				300,862
Income tax provision:
Current			124,961				100,248				87,651
Deferred			(472	)			(3,597	)			2,100
			124,489				96,651				89,751
Net income		$	295,802			$	271,843			$	211,111
Average common shares			57,533				57,060				60,652
Incremental common shares attributable to outstanding stock options, restricted stock and deferred stock-based compensation			671				470				499
Average common shares and common share equivalents			58,204				57,530				61,151
Basic earnings per share		$	5.14			$	4.76			$	3.48
Diluted earnings per share		$	5.08			$	4.73			$	3.45
Dividends declared per common share		$	1.11			$	0.99			$	0.90

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

Nordson Corporation 35

Consolidated Statements of Comprehensive Income

Years ended October 31, 2017, 2016 and 2015		2017				2016				2015
(In thousands)
Net income		$	295,802			$	271,843			$	211,111
Components of other comprehensive income (loss), net of tax:
Foreign currency translation adjustments			22,697				(8,693	)			(45,154	)
Pension and postretirement benefit plans:
Prior service credit arising during the year			—				1,831				—
Net actuarial gain (loss) arising during the year			2,641				(22,482	)			(7,588	)
Amortization of prior service cost			(210	)			92				(303	)
Amortization of actuarial loss			7,972				6,724				10,146
Settlement loss recognized			712				111				1,369
Curtailment (gain) loss recognized			—				(1,144	)			43
Total pension and postretirement benefit plans			11,115				(14,868	)			3,667
Total other comprehensive income (loss)			33,812				(23,561	)			(41,487	)
Total comprehensive income		$	329,614			$	248,282			$	169,624

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

Nordson Corporation 36

Consolidated Balance Sheets

October 31, 2017 and 2016		2017				2016
(In thousands)
Assets
Current assets:
Cash and cash equivalents		$	90,383			$	67,239
Receivables - net			505,087				428,560
Inventories - net			264,266				220,361
Prepaid expenses			28,636				29,415
Total current assets			888,372				745,575
Property, plant and equipment - net			346,411				273,129
Goodwill			1,589,210				1,107,137
Intangible assets - net			547,180				260,302
Deferred income taxes			11,020				10,681
Other assets			32,346				23,759
		$	3,414,539			$	2,420,583
Liabilities and shareholders' equity
Current liabilities:
Notes payable		$	—			$	2,141
Accounts payable			86,016				75,130
Income taxes payable			22,310				22,762
Accrued liabilities			173,366				162,798
Customer advance payments			34,654				26,175
Current maturities of long-term debt			326,587				38,093
Current obligations under capital leases			4,813				4,444
Total current liabilities			647,746				331,543
Long-term debt			1,256,397				942,771
Obligations under capital leases			9,693				9,714
Pension obligations			111,666				130,376
Postretirement obligations			73,589				70,397
Deferred income taxes			134,090				61,836
Other liabilities			25,865				22,343
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, 2017 and 2016			12,253				12,253
Capital in excess of stated value			412,785				376,625
Retained earnings			2,164,597				1,932,635
Accumulated other comprehensive loss			(134,435	)			(168,247	)
Common shares in treasury, at cost			(1,299,707	)			(1,301,663	)
Total shareholders' equity			1,155,493				851,603
		$	3,414,539			$	2,420,583

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

Nordson Corporation 37

Consolidated Statements of Shareholders’ Equity

Years ended October 31, 2017, 2016 and 2015		2017				2016				2015
(In thousands)
Number of common shares in treasury
Balance at beginning of year			40,716				40,665				35,588
Shares issued under company stock and employee benefit plans			(438	)			(421	)			(318	)
Purchase of treasury shares			30				472				5,395
Balance at end of year			40,308				40,716				40,665
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		$	376,625			$	348,986			$	328,605
Shares issued under company stock and employee benefit plans			8,913				5,952				1,458
Tax benefit from stock option and restricted stock transactions			7,079				3,476				3,661
Stock-based compensation			20,168				18,211				15,262
Balance at end of year		$	412,785			$	376,625			$	348,986
Retained earnings
Balance at beginning of year		$	1,932,635			$	1,717,228			$	1,560,966
Net income			295,802				271,843				211,111
Dividends paid ($1.11 per share in 2017, $0.99 per share in 2016, and $0.90 per share in 2015)			(63,840	)			(56,436	)			(54,849	)
Balance at end of year		$	2,164,597			$	1,932,635			$	1,717,228
Accumulated other comprehensive income (loss)
Balance at beginning of year		$	(168,247	)		$	(144,686	)		$	(103,199	)
Foreign currency translation adjustments			22,697				(8,693	)			(45,154	)
Settlement and curtailment loss (gain) recognized, net of tax of $(299) in 2017, $332 in 2016 and $(491) in 2015			712				(1,033	)			1,412
Defined benefit and OPEB activity - prior service cost, net of tax of $75 in 2017, $(558) in 2016 and $191 in 2015			(210	)			1,923				(303	)
Defined benefit and OPEB activity - actuarial gain (loss), net of tax of $(4,628) in 2017, $8,642 in 2016 and $(1,242) in 2015			10,613				(15,758	)			2,558
Balance at end of year		$	(134,435	)		$	(168,247	)		$	(144,686	)
Common shares in treasury, at cost
Balance at beginning of year		$	(1,301,663	)		$	(1,273,765	)		$	(893,828	)
Shares issued under company stock and employee benefit plans			5,342				5,735				4,359
Purchase of treasury shares			(3,386	)			(33,633	)			(384,296	)
Balance at end of year		$	(1,299,707	)		$	(1,301,663	)		$	(1,273,765	)
Total shareholders' equity		$	1,155,493			$	851,603			$	660,016

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, 2017, 2016 and 2015		2017				2016				2015
(In thousands)
Cash flows from operating activities:
Net income		$	295,802			$	271,843			$	211,111
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation			45,947				41,243				37,707
Amortization			44,907				29,061				27,487
Provision for losses on receivables			4,030				1,867				1,014
Deferred income taxes			(472	)			(3,597	)			2,100
Tax benefit from the exercise of stock options			(7,079	)			(3,476	)			(3,661	)
Non-cash stock compensation			20,168				18,211				15,262
Loss on sale of property, plant and equipment			188				859				376
Other non-cash			2,770				2,973				56
Changes in operating assets and liabilities:
Receivables			(46,152	)			(41,247	)			(37,179	)
Inventories			(19,667	)			1,784				(14,208	)
Prepaid expenses			4,737				(8,667	)			1,799
Other assets			(3,429	)			7,773				1,733
Accounts payable			4,805				7,296				(1,261	)
Income taxes payable			7,522				(2,684	)			15,616
Accrued liabilities			(5,629	)			23,328				5,817
Customer advance payments			5,163				3,631				(1,062	)
Other liabilities			2,266				(17,739	)			2,830
Other			(6,204	)			(1,301	)			(3,586	)
Net cash provided by operating activities			349,673				331,158				261,951
Cash flows from investing activities:
Additions to property, plant and equipment			(71,558	)			(60,851	)			(62,087	)
Proceeds from sale of property, plant and equipment			4,007				1,300				597
Acquisition of businesses, net of cash acquired			(805,943	)			(42,650	)			(75,565	)
Equity investments			(4,470	)			—				(1,480	)
Net cash used in investing activities			(877,964	)			(102,201	)			(138,535	)
Cash flows from financing activities:
Proceeds from short-term borrowings			6,017				13,456				59,870
Repayment of short-term borrowings			(8,149	)			(12,059	)			(164,716	)
Proceeds from long-term debt			841,536				261,161				719,534
Repayment of long-term debt			(237,183	)			(392,775	)			(289,202	)
Repayment of capital lease obligations			(5,287	)			(5,059	)			(5,240	)
Payment of debt issuance costs			(3,214	)			(99	)			(1,557	)
Issuance of common shares			14,086				11,476				5,372
Purchase of treasury shares			(3,216	)			(33,421	)			(383,851	)
Tax benefit from the exercise of stock options			7,079				3,476				3,661
Dividends paid			(63,840	)			(56,436	)			(54,849	)
Net cash provided by (used in) financing activities			547,829				(210,280	)			(110,978	)
Effect of exchange rate changes on cash			3,606				(1,706	)			(4,484	)
Increase in cash and cash equivalents			23,144				16,971				7,954
Cash and cash equivalents at beginning of year			67,239				50,268				42,314
Cash and cash equivalents at end of year		$	90,383			$	67,239			$	50,268

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

Nordson Corporation 39

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.

Certain arrangements may include installation, installation supervision, training, and spare parts, which tend to be completed in a short period of time, at an insignificant cost, and utilizing skills not unique to us, 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 2017, 2016 and 2015 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 $11,296, $11,095 and $11,943 in 2017, 2016 and 2015, respectively.

Research and development — Research and development costs are expensed as incurred and were $52,462, $46,247 and $46,689 in 2017, 2016 and 2015, 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. No options were excluded from the calculation of diluted earnings per share in 2017. Options for 396 and 373 common shares were excluded from the diluted earnings per share calculation in 2016 and 2015, respectively, because their effect would have been anti-dilutive. 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.

Cash — Highly liquid instruments with maturities of 90 days or less at date of purchase are considered to be cash equivalents.

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. Credit is extended to customers satisfying pre-defined credit criteria. We believe we have limited concentration of credit risk due to the diversity of our customer base.

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Inventories — Inventories are valued at net realizable value. Cost was determined using the last-in, first-out (LIFO) method for 16 percent of consolidated inventories at October 31, 2017 and 20 percent of consolidated inventories at October 31, 2016. The first-in, first-out (FIFO) method is used for all other inventories. Consolidated inventories would have been $6,684 and $7,400 higher than reported at October 31, 2017 and 2016, 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 2017, 2016 or 2015.

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, 2017, 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	15 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).

Accumulated other comprehensive loss — Accumulated other comprehensive loss at October 31, 2017 and 2016 consisted of:

		Cumulative				Pension and				Accumulated
		translation				postretirement benefit				other comprehensive
		adjustments				plan adjustments				loss
Balance at October 31, 2016		$	(51,120	)		$	(117,127	)		$	(168,247	)
Pension and postretirement plan changes, net of tax of $(4,852)			—				11,115				11,115
Currency translation losses			22,697				—				22,697
Balance at October 31, 2017		$	(28,423	)		$	(106,012	)		$	(134,435	)

Nordson Corporation 41

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 2017 and 2016:

		2017				2016
Balance at beginning of year		$	11,770			$	10,537
Accruals for warranties			11,394				14,487
Warranty assumed from acquisitions			75				—
Warranty payments			(10,090	)			(12,575	)
Currency adjustments			228				(679	)
Balance at end of year		$	13,377			$	11,770

Note 2 — Recently issued accounting standards

New accounting guidance adopted:

In April 2015, the Financial Accounting Standards Board (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, which added clarification to the presentation of debt issuance costs. This amendment allows debt issuance costs related to line-of-credit arrangements to be presented as an asset and subsequently amortized ratably over the term of the line-of-credit agreement, regardless of whether there are any outstanding borrowings on the line-of-credit arrangement. We adopted this standard during the first quarter of 2017, and applied this standard retrospectively to 2016. The new guidance only impacted presentation on our consolidated balance sheet and did not affect our results of operations or other financial statement disclosures. Refer to Note 10 for the impact on our Consolidated Balance Sheet at October 31, 2016.

In May 2015, the FASB issued a new standard regarding the disclosures for investments that calculate net asset value per share (or its equivalent). Under the new guidance, investments measured at net asset value (“NAV”), as a practical expedient for fair value, are excluded from the fair value hierarchy. Removing investments measured using the practical expedient from the fair value hierarchy is intended to eliminate the diversity in practice that currently exists with respect to the categorization of these investments. We adopted this standard in 2017. The new guidance only impacted the presentation of certain pension related assets that use NAV as a practical expedient. Refer to Note 7 for additional information.

In October 2016, the FASB issued a new standard which requires companies to recognize in the income statement the income tax effects of intercompany sales or transfer of assets, other than inventory, as income tax expense (or benefit) in the period the sale or transfer occurs. It would have been effective for us beginning in 2019; however, we early adopted this guidance in the first quarter of 2017, and it did not have a material impact on our consolidated financial statements.

In January 2017, the FASB issued a new standard which eliminates Step 2 from the goodwill impairment test in order to simplify the subsequent measurement of any goodwill impairment charge. It will be effective for us beginning in 2021. Early adoption is permitted for annual or interim goodwill impairment tests performed on testing dates after January 1, 2017, and the prospective transition method should be applied. We adopted this standard, prospectively, in the fourth quarter of 2017. The adoption did not have an impact on our consolidated financial statements as we did not record any goodwill impairment charges.

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New accounting guidance issued and not yet adopted:

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

In February 2016, the FASB issued a new standard which requires a lessee to recognize on the balance sheet the assets and liabilities for the rights and obligations created by those leases with a lease term of more than twelve months. Leases will continue to be classified as either financing or operating, with classification affecting the recognition, measurement and presentation of expenses and cash flows arising from a lease. It will be effective for us beginning in 2020. We are currently assessing the impact this standard will have on our consolidated financial statements.

In March 2016, the FASB issued a new standard which simplifies the accounting for share-based payment transactions. This guidance requires that excess tax benefits and tax deficiencies be recognized as income tax expense or benefit in the income statement rather than additional paid-in capital. Additionally, the excess tax benefits will be classified along with other income tax cash flows as an operating activity, rather than a financing activity, on the statement of cash flows. Further, the update allows an entity to make a policy election to recognize forfeitures as they occur or estimate the number of awards expected to be forfeited. It will be effective for us beginning in 2018 and should be applied prospectively, with certain cumulative effect adjustments. Early adoption is permitted. We are currently assessing the impact this standard will have on our consolidated financial statements.

In March 2017, the FASB issued a new standard which requires the presentation of the service cost component of the net periodic benefit cost in the same income statement line item as other employee compensation costs arising from services rendered during the period. All other components of net periodic benefit cost will be presented below operating income. Additionally, only the service cost component will be eligible for capitalization in assets. It will be effective for us beginning in 2019. Early adoption is permitted. We are currently assessing the impact this standard will have on our consolidated financial statements.

Note 3 — Severance and restructuring costs

During the fourth quarter of 2016, we implemented an initiative within our Adhesive Dispensing Systems segment to consolidate certain polymer processing product line facilities in the U.S. This initiative is designed to improve customer experience, accelerate growth, optimize performance and realize synergies for sustained long term success. Costs of $2,399 and $5,565 were recognized relating to this initiative during 2017 and 2016, respectively. Payments of $1,775 and $624 related to these actions were paid during 2017 and 2016, respectively. Total costs for this action to-date have been $7,964, which consisted primarily of severance costs. Additional costs related to this initiative are not expected to be material in future periods. Cash payments related to this initiative are expected to be paid during 2018.

The following table summarizes severance and restructuring activity during 2017 related to this action:

		Employee				Other
		severance				one-time
		charges				costs				Total
Accrual Balance at October 31, 2016		$	4,576			$	104			$	4,680
Charged to expense			(243	)			2,642				2,399
Cash payments			(209	)			(1,566	)			(1,775	)
Non cash utilization			—				(488	)			(488	)
Accrual Balance at October 31, 2017		$	4,124			$	692			$	4,816

During the second half of 2015, we implemented initiatives across each of our segments to optimize operations and to enhance operational efficiency and customer service. Costs of $39 costs were recognized during 2017 related to these initiatives. Costs of $5,210 were recognized during 2016 related to these initiatives, which consisted primarily of severance costs.

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Within the Adhesives Dispensing Systems segment, restructuring initiatives to optimize operations in the U.S. and Belgium resulted in costs of $219 and $2,235 during 2017 and 2016, respectively. Payments of $360 and $7,586 related to these actions were paid during 2017 and 2016, respectively.

Within the Advanced Technology Systems segment, a restructuring initiative to enhance operational efficiency and customer service resulted in costs of $1,054 during 2016. Costs of $180 related to severance were reversed in 2017. Payments of $503 and $3,144 related to these actions were paid during 2017 and 2016, respectively.

Within the Industrial Coating Systems segment, a restructuring program to enhance operational efficiency and customer service resulted in severance costs of $1,921 during 2016. Payments of $345 and $1,844 related to these actions were paid during 2017 and 2016, respectively.

Total costs for these actions to-date have been $16,660, which include $12,459 of severance costs, $759 of fixed asset impairment charges, $1,383 of lease termination costs, and $2,059 of other one-time restructuring costs.

The following table summarizes severance and restructuring activity during 2017 related to actions initiated in 2015:

		Employee				Lease				Other
		severance				termination				one-time
		charges				charges				costs				Total
Accrual Balance at October 31, 2016		$	1,136			$	143			$	497			$	1,776
Charged to expense			(133	)			—				172			$	39
Cash payments			(525	)			(143	)			(540	)			(1,208	)
Accrual Balance at October 31, 2017		$	478			$	—			$	129			$	607

Additional costs related to these initiatives are not expected to be material in future periods. The remainder of the cash payments related to these initiatives are expected to be paid through 2019. Other severance and restructuring costs unrelated to these initiatives are not considered material. All severance and restructuring costs are included in selling and administrative expenses in the Consolidated Statements of Income.

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.

2017 acquisitions

On March 31, 2017, we completed the acquisition of Vention Medical’s Advanced Technologies business (“Vention”), a Salem, New Hampshire leading designer, developer and manufacturer of minimally invasive interventional delivery devices, catheters and advanced components for the global medical technology market. This is a highly complementary business that adds significant scale and enhances strategic capabilities of our existing medical platform. We acquired Vention for an aggregate purchase price of $705,000, net of $3,313 of cash and other closing adjustments of $10,726. The acquisition was funded primarily through a new term loan facility, as well as through cash and borrowings on our credit facility. The purchase price was allocated to the underlying assets acquired and liabilities assumed based upon their estimated fair values at the date of acquisition. We determined the estimated fair values based on independent appraisals, discounted cash flow analyses, quoted market prices, replacement cost analyses and estimates made by management.

Based on the fair value of the assets acquired and the liabilities assumed, we recordedidentifiable intangible assets of $286,000 consisting primarily of $240,000 of customer relationships (amortized over 14 years), $2,000 of tradenames (amortized over 6 years), and $44,000 of technology, consisting of $36,000 (amortized over 14 years) and $8,000 (amortized over 10 years). The fair value of the identifiable intangible assets were estimated by applying income and market approaches. The fair value measurement is based on significant inputs that are not observable in the market and thus represents a fair value measurement categorized within Level 3 of the fair value hierarchy with various assumptions about growth rates and margins, discount rates, and financial multiples of entities considered to be similar to Vention.

As a result of the acquisition, we recognized $434,625 of goodwill, of which $37,200 is tax deductible. Goodwill represents the value we expect to achieve through the expansion of our existing medical platform. This acquisition is being reported in our Advanced Technology Systems segment. As of October 31, 2017, the purchase price allocations are considered preliminary as we complete our

Nordson Corporation 44

assessments of income taxes. The following table summarizes the preliminary fair values of the assets acquired and liabilities assumed at the acquisition date:

Assets acquired:
Cash		$	3,313
Receivables			26,742
Inventories			14,279
Prepaid expenses			3,079
Property, plant and equipment			34,319
Goodwill			434,625
Intangible assets			286,000
Other assets			343
Total assets acquired		$	802,700
Liabilities assumed:
Current liabilities			19,130
Deferred tax liabilities			64,531
Total liabilities assumed		$	83,661
Net assets acquired		$	719,039

The transaction was accounted for under the acquisition method of accounting and, accordingly, the results of Vention’s operations, including $94,515 in sales and net income of $7,820, are included in our Consolidated Statements of Income from the date of acquisition. As of October 31, 2017, we incurred $14,671 of corporate charges related to Vention acquisition transaction costs which have been included within selling and administrative expenses in our Consolidated Statements of Income.

The following unaudited pro forma financial information for 2017 and 2016 assumes the Vention acquisition occurred as of the beginning of 2016 and is based on our historical financial statements and those of Vention. The pro forma results have been prepared for comparative purposes only and are not necessarily indicative of the results of operations which may occur in the future or that would have occurred had the acquisition of Vention been effected on the date indicated, nor are they necessarily indicative of our future results of operations.

		Twelve Months Ended
		October 31, 2017				October 31, 2016
Sales		$	2,132,417			$	1,939,525
Net income			294,891				260,991
Diluted earnings per share			5.07				4.54

The most significant pro forma adjustments included within the unaudited pro forma financial information presented in the table above relate to acquisition transaction costs, amortization of intangible assets, depreciation of property, plant and equipment, charges related to the fair value adjustment of acquisition-date inventory and interest expense associated with the new term loan facility.

Also on March 31, 2017, we entered into a $705,000 term loan facility with a group of banks. The Term Loan Agreement provides for the following term loans in three tranches: $200,000 due in October 2018, $200,000 due in March 2020, and $305,000 due in March 2022. The weighted average interest rate for borrowings under this agreement was 2.33% at October 31, 2017. Borrowings under this agreement were used for the single purpose of acquiring Vention. We were in compliance with all covenants at October 31, 2017.

Pro forma sales and results of operations for the following 2017, 2016 and 2015 acquisitions, had they occurred at the beginning of the applicable fiscal year ended October 31, are not material and, accordingly, are not provided.

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

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

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

2016 acquisition

On September 1, 2016, we purchased 100 percent of the outstanding shares of LinkTech Quick Couplings, Inc. (“LinkTech”), a Ventura, California designer, manufacturer and distributor of highly engineered precision couplings and fittings. We acquired LinkTech for an aggregate purchase price of $43,348, net of cash acquired of $36. Based on the fair value of the assets acquired and the liabilities assumed, goodwill of $25,867 and identifiable intangible assets of $14,610 were recorded. The identifiable intangible assets consist primarily of $8,600 of customer relationships (amortized over 11 years), $2,800 of tradenames (amortized over 12 years), $2,300 of technology (amortized over 8 years) and $910 of non-compete agreements (amortized over 5 years). Goodwill associated with this acquisition is tax deductible. This acquisition is being reported in our Advanced Technology Systems segment.

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.

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.

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.

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Note 5 — Details of balance sheet

		2017				2016
Receivables:
Accounts		$	491,224			$	415,311
Notes			5,121				7,971
Other			18,533				10,813
			514,878				434,095
Allowance for doubtful accounts			(9,791	)			(5,535	)
		$	505,087			$	428,560
Inventories:
Raw materials and component parts		$	105,424			$	85,802
Work-in-process			45,743				36,681
Finished goods			152,923				134,602
			304,090				257,085
Obsolescence and other reserves			(33,140	)			(29,324	)
LIFO reserve			(6,684	)			(7,400	)
		$	264,266			$	220,361
Property, plant and equipment:
Land		$	10,598			$	9,914
Land improvements			4,292				4,020
Buildings			190,611				169,995
Machinery and equipment			424,006				372,479
Enterprise management system			52,936				50,051
Construction-in-progress			49,713				25,873
Leased property under capitalized leases			25,715				24,231
			757,871				656,563
Accumulated depreciation and amortization			(411,460	)			(383,434	)
		$	346,411			$	273,129
Accrued liabilities:
Salaries and other compensation		$	73,234			$	67,257
Pension and retirement			4,768				4,046
Taxes other than income taxes			7,663				5,955
Other			87,701				85,540
		$	173,366			$	162,798

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.

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. In accordance with the new accounting standard (Refer to Note 2), which was prospectively adopted effective August 1, 2017, an impairment charge is recorded for the amount by which the carrying value of the reporting unit exceeds the fair value of the reporting unit, as calculated in the quantitative analysis described above. We did not record any goodwill impairment charges using the newly adopted accounting standard in 2017. Prior to the adoption of this new standard, the measurement

Nordson Corporation 47

of an impairment (Step 2 of the impairment test) would have been calculated by determining the implied fair value of a reporting unit’s goodwill by allocating the fair value of the reporting unit to all other assets and liabilities of that unit based on their relative fair values. The excess of the fair value of a reporting unit over the amount assigned to its other assets and liabilities would have been the implied fair value of goodwill. We did not record any goodwill impairment charges using Step 2 of the impairment test in 2016 or 2015.

Changes in the carrying amount of goodwill during 2017 by operating segment:

		Adhesive Dispensing Systems				Advanced Technology Systems				Industrial Coating Systems				Total
Balance at October 31, 2016		$	385,733			$	697,346			$	24,058			$	1,107,137
Acquisition			—				470,248				—				470,248
Currency effect			6,562				5,263				—				11,825
Balance at October 31, 2017		$	392,295			$	1,172,857			$	24,058			$	1,589,210

Changes in the carrying amount of goodwill during 2016 by operating segment:

		Adhesive Dispensing Systems				Advanced Technology Systems				Industrial Coating Systems				Total
Balance at October 31, 2015		$	385,975			$	672,342			$	24,058			$	1,082,375
Acquisition			—				25,169				—				25,169
Currency effect			(242	)			(165	)			—				(407	)
Balance at October 31, 2016		$	385,733			$	697,346			$	24,058			$	1,107,137

Accumulated impairment losses, which were recorded in 2009, were $232,789 at October 31, 2017 and October 31, 2016. Of these losses, $229,173 related to the Advanced Technology Systems segment and $3,616 related to the Industrial Coating Systems segment.

Information regarding intangible assets subject to amortization:

		October 31, 2017
		Carrying Amount				Accumulated Amortization				Net Book Value
Customer relationships		$	480,536			$	102,033			$	378,503
Patent/technology costs			150,581				48,669				101,912
Trade name			93,281				28,366				64,915
Noncompete agreements			11,142				9,298				1,844
Other			1,384				1,378				6
Total		$	736,924			$	189,744			$	547,180

		October 31, 2016
		Carrying Amount				Accumulated Amortization				Net Book Value
Customer relationships		$	207,493			$	71,608			$	135,885
Patent/technology costs			97,640				37,873				59,767
Trade name			85,271				22,140				63,131
Noncompete agreements			9,855				8,347				1,508
Other			1,400				1,389				11
Total		$	401,659			$	141,357			$	260,302

Amortization expense for 2017, 2016 and 2015 was $44,907, $29,061 and $27,487 respectively.

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Estimated amortization expense for each of the five succeeding years:

Year		Amounts
2018		$	54,806
2019		$	54,548
2020		$	53,999
2021		$	48,532
2022		$	44,484

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 2017, 2016 and 2015 was approximately $19,259, $17,194 and $15,747, 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
		2017				2016				2017				2016
Change in benefit obligation:
Benefit obligation at beginning of year		$	409,459			$	361,039			$	91,396			$	90,615
Service cost			12,456				11,490				2,378				2,448
Interest cost			12,844				15,932				1,537				2,294
Participant contributions			—				—				85				115
Plan amendments			—				173				—				(3,050	)
Settlements			(1,548	)			—				(1,309	)			—
Curtailments			—				—				—				(6,790	)
Foreign currency exchange rate change			—				—				4,896				(7,675	)
Actuarial loss			9,351				31,781				(7,602	)			15,749
Benefits paid			(11,746	)			(10,956	)			(2,620	)			(2,310	)
Benefit obligation at end of year		$	430,816			$	409,459			$	88,761			$	91,396
Change in plan assets:
Beginning fair value of plan assets		$	333,867			$	295,320			$	35,604			$	37,473
Actual return on plan assets			29,620				23,280				612				2,205
Company contributions			19,041				26,223				3,165				3,793
Participant contributions			—				—				85				115
Settlements			(1,548	)			—				(1,309	)			—
Other			—				—				—				(145	)
Foreign currency exchange rate change			—				—				1,967				(5,527	)
Benefits paid			(11,746	)			(10,956	)			(2,620	)			(2,310	)
Ending fair value of plan assets		$	369,234			$	333,867			$	37,504			$	35,604
Funded status at end of year		$	(61,582	)		$	(75,592	)		$	(51,257	)		$	(55,792	)
Amounts recognized in financial statements:
Noncurrent asset		$	—			$	—			$	64			$	—
Accrued benefit liability			(1,201	)			(1,000	)			(36	)			(8	)
Long-term pension and retirement obligations			(60,381	)			(74,592	)			(51,285	)			(55,784	)
Total amount recognized in financial statements		$	(61,582	)		$	(75,592	)		$	(51,257	)		$	(55,792	)

		United States								International
		2017				2016				2017				2016
Amounts recognized in accumulated other comprehensive (gain) loss:
Net actuarial loss		$	124,917			$	134,586			$	27,134			$	35,090
Prior service cost (credit)			(184	)			(139	)			(3,279	)			(3,445	)
Accumulated other comprehensive loss		$	124,733			$	134,447			$	23,855			$	31,645
Amounts expected to be recognized during next fiscal year:
Amortization of net actuarial loss		$	8,672			$	9,336			$	2,074			$	2,558
Amortization of prior service cost (credit)			(23	)			47				(313	)			(304	)
Total		$	8,649			$	9,383			$	1,761			$	2,254

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

		United States								International
		2017				2016				2017				2016
Balance at beginning of year		$	134,447			$	114,663			$	31,645			$	29,726
Net (gain) loss arising during the year			515				28,167				(6,867	)			8,255
Prior service cost (credit) arising during the year			—				173				—				(3,050	)
Net loss recognized during the year			(9,537	)			(8,480	)			(2,605	)			(1,723	)
Prior service (cost) credit recognized during the year			(44	)			(76	)			302				203
Settlement loss			(648	)			—				(363	)			(160	)
Curtailment gain			—				—				—				1,526
Exchange rate effect during the year			—				—				1,743				(3,132	)
Balance at end of year		$	124,733			$	134,447			$	23,855			$	31,645

Information regarding the accumulated benefit obligation is as follows:

		United States								International
		2017				2016				2017				2016
For all plans:
Accumulated benefit obligation		$	420,035			$	397,350			$	76,032			$	77,166
For plans with benefit obligations in excess of plan assets:
Projected benefit obligation			430,816				409,459				83,289				90,852
Accumulated benefit obligation			420,035				397,350				70,985				77,121
Fair value of plan assets			369,234				333,867				32,325				35,533

Net pension benefit costs include the following components:

		United States												International
		2017				2016				2015				2017				2016				2015
Service cost		$	12,456			$	11,490			$	10,851			$	2,378			$	2,448			$	2,816
Interest cost			12,844				15,932				15,037				1,537				2,294				2,561
Expected return on plan assets			(20,784	)			(19,666	)			(18,316	)			(1,338	)			(1,501	)			(1,589	)
Amortization of prior service cost (credit)			44				76				121				(302	)			(203	)			(90	)
Amortization of net actuarial loss			9,537				8,480				9,742				2,605				1,723				2,285
Settlement loss			648				—				516				363				160				1,319
Curtailment (gain) loss			—				—				68				—				(1,526	)			—
Total benefit cost		$	14,745			$	16,312			$	18,019			$	5,243			$	3,395			$	7,302

Net periodic pension cost for 2017 included a settlement loss of $1,011 due to lump sum retirement payments.Net periodic pension cost for 2016 included a settlement loss of $160 due to lump sum retirement payments and a curtailment gain of $1,526 due to a plan amendment allowing participants to elect a new defined contribution plan or a new defined benefit plan.

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

		United States												International
		2017				2016				2015				2017				2016				2015
Assumptions used to determine benefit obligations at October 31:
Discount rate			3.80	%			3.94	%			4.39	%			2.07	%			1.86	%			2.81	%
Rate of compensation increase			3.61				3.61				3.50				3.13				3.12				3.22
Assumptions used to determine net benefit costs for the years ended October 31:
Discount rate - benefit obligation			3.94				4.39				4.29				1.86				2.81				2.94
Discount rate - service cost			4.31				4.39				4.29				1.55				2.81				2.94
Discount rate - interest cost			3.20				4.39				4.29				1.66				2.81				2.94
Expected return on plan assets			6.25				6.72				6.76				3.51				4.22				4.39
Rate of compensation increase			3.61				3.50				3.49				3.12				3.22				3.19

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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 changes in the discount rates in 2017 and 2016 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 using the calculated value of 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.

Net actuarial gains or losses are amortized to expense on a plan-by-plan basis when they exceed the accounting corridor, which is set at 10% of the greater of the plan assets or benefit obligations. Gains or losses outside of the corridor are subject to amortization over an average employee future service period that differs by plan. If substantially all of the plan’s participants are no longer actively accruing benefits, the average life expectancy is used.

In the fourth quarter of 2016, we adopted a change in the method to be used to estimate the service and interest cost components of net periodic benefit cost for defined benefit pension plans. Historically, for the vast majority of our plans, the service and interest cost components were estimated using a single weighted-average discount rate derived from the yield curve used to measure the benefit obligation at the beginning of the period. Beginning in 2017, we used a spot rate approach by applying the specific spot rates along the yield curve to the relevant projected cash flows in the estimation of the service and interest components of benefit cost, resulting in a more precise measurement. This change did not affect the measurement of total benefit obligations. The change was accounted for as a change in estimate that is inseparable from a change in accounting principle and, accordingly, was accounted for prospectively starting in 2017. The reductions in service and interest costs for 2017 associated with this change in estimate were $1,200 and $3,100, respectively.

The allocation of pension plan assets as of October 31, 2017 and 2016 is as follows:

		United States								International
		2017				2016				2017				2016
Asset Category
Equity securities			13	%			15	%			—	%			—	%
Debt securities			48				31				—				—
Insurance contracts			—				—				56				59
Pooled investment funds			39				53				42				39
Other			—				1				2				2
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 91 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 2017, the target in “return-seeking assets” is 35 percent and 65 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 9 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 52

In accordance with the adoption of a new accounting standard, as described in Note 2, certain investments that were measured at NAV (or its equivalent) have not been classified in the fair value hierarchy. The fair value amounts presented in the table are intended to permit reconciliation of the fair value hierarchy to the total pension plan assets.

The fair values of our pension plan assets at October 31, 2017 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		$	959			$	959			$	—			$	—			$	566			$	566			$	—			$	—
Money market funds			3,615				3,615				—				—				—				—				—				—
Equity securities:
Basic materials			2,129				2,129				—				—				—				—				—				—
Consumer goods			3,776				3,776				—				—				—				—				—				—
Financial			6,147				6,147				—				—				—				—				—				—
Healthcare			3,940				3,940				—				—				—				—				—				—
Industrial goods			2,459				2,459				—				—				—				—				—				—
Technology			3,815				3,815				—				—				—				—				—				—
Utilities			793				793				—				—				—				—				—				—
Mutual funds			20,698				20,698				—				—				—				—				—				—
Fixed income securities:
U.S. Government			57,789				9,372				48,417				—				—				—				—				—
Corporate			112,112				—				112,112				—				—				—				—				—
Other			6,566				—				6,566				—				—				—				—				—
Other types of investments:
Insurance contracts			—				—				—				—				21,037				—				—				21,037
Real estate collective funds at NAV			21,699				—				—				—				—				—				—				—
Pooled investment funds at NAV			121,724				—				—				—				15,901				—				—				—
Other			1,013				1,013				—				—				—				—				—				—
		$	369,234			$	58,716			$	167,095			$	—			$	37,504			$	566			$	—			$	21,037

The fair values of our pension plan assets at October 31, 2016 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		$	896			$	896			$	—			$	—			$	798			$	798			$	—			$	—
Money market funds			2,471				2,471				—				—				—				—				—				—
Equity securities:
Basic materials			2,144				2,144				—				—				—				—				—				—
Consumer goods			3,457				3,457				—				—				—				—				—				—
Financial			5,930				5,930				—				—				—				—				—				—
Healthcare			3,344				3,344				—				—				—				—				—				—
Industrial goods			2,671				2,671				—				—				—				—				—				—
Technology			3,490				3,490				—				—				—				—				—				—
Utilities			857				857				—				—				—				—				—				—
Mutual funds			27,220				27,220				—				—				—				—				—				—
Fixed income securities:
U.S. Government			38,466				6,888				31,578				—				—				—				—				—
Corporate			63,077				—				63,077				—				—				—				—				—
Other			3,403				—				3,403				—				—				—				—				—
Other types of investments:
Insurance contracts			—				—				—				—				20,927				—				—				20,927
Real estate collective funds at NAV			20,402				—				—				—				—				—				—				—
Pooled investment funds at NAV			155,247				—				—				—				13,879				—				—				—
Other			792				792				—				—				—				—				—				—
		$	333,867			$	60,160			$	98,058			$	—			$	35,604			$	798			$	—			$	20,927

Nordson Corporation 53

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 and mutual funds are valued at 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 are 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.

	•	Real estate collective funds – These funds are valued using the net asset value of the underlying properties. Net asset value is calculated using a combination of key inputs, such as revenue and expense growth rates, terminal capitalization rates and discount rates.

	•	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.

The following tables present an analysis of changes during the years ended October 31, 2017 and 2016 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)
			Insurance contracts				Total
Beginning balance at October 31, 2016			$	20,927			$	20,927
Actual return on plan assets:
Assets held, end of year				(412	)			(412	)
Assets sold during the period				—				-
Purchases				2,330				2,330
Sales				(2,502	)			(2,502	)
Foreign currency translation				694				694
Ending balance at October 31, 2017			$	21,037			$	21,037

		Fair Value Measurements Using Significant Unobservable Inputs (Level 3)
			Insurance contracts				Total
Beginning balance at October 31, 2015			$	20,432			$	20,432
Actual return on plan assets:
Assets held, end of year				1,683				1,683
Assets sold during the period				—				-
Purchases				2,799				2,799
Sales				(2,140	)			(2,140	)
Foreign currency translation				(1,847	)			(1,847	)
Ending balance at October 31, 2016			$	20,927			$	20,927

Contributions to pension plans in 2018 are estimated to be approximately $22,800.

Nordson Corporation 54

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

Year		United States				International
2018		$	14,476			$	1,837
2019			15,604				2,861
2020			16,839				2,652
2021			18,061				3,035
2022			19,529				2,633
2023-2027			116,207				16,442

Other postretirement plans - We sponsor an unfunded postretirement health care benefit plan covering certain of our United States employees. Employees hired after January 1, 2002, are not eligible to participate in this plan. For eligible retirees under the age of 65 who enroll in the plan, the plan is contributory in nature, with retiree contributions in the form of premiums that are adjusted annually. For eligible retirees age 65 and older who enroll in the plan, the plan delivers a benefit in the form of a Health Reimbursement Account (HRA), which retirees use for eligible reimbursable expenses, including premiums paid for purchase of a Medicare supplement plan or other out-of-pocket medical expenses such as deductibles or co-pays.

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
			2017				2016				2017				2016
Change in benefit obligation:
Benefit obligation at beginning of year		$	71,904			$	68,315			$	623			$	524
Service cost			752				849				20				16
Interest cost			2,307				2,923				20				23
Participant contributions			503				446				—				—
Foreign currency exchange rate change			—				—				24				(14	)
Actuarial (gain) loss			2,212				1,818				(81	)			81
Benefits paid			(2,532	)			(2,447	)			(7	)			(7	)
Benefit obligation at end of year		$	75,146			$	71,904			$	599			$	623
Change in plan assets:
Beginning fair value of plan assets		$	—			$	—			$	—			$	—
Company contributions			2,029				2,001				7				7
Participant contributions			503				446				—				—
Benefits paid			(2,532	)			(2,447	)			(7	)			(7	)
Ending fair value of plan assets		$	—			$	—			$	—			$	—
Funded status at end of year		$	(75,146	)		$	(71,904	)		$	(599	)		$	(623	)
Amounts recognized in financial statements:
Accrued benefit liability		$	(2,148	)		$	(2,123	)		$	(8	)		$	(7	)
Long-term postretirement obligations			(72,998	)			(69,781	)			(591	)			(616	)
Total amount recognized in financial statements		$	(75,146	)		$	(71,904	)		$	(599	)		$	(623	)

		United States								International
			2017				2016				2017				2016
Amounts recognized in accumulated other comprehensive (gain) loss:
Net actuarial (gain) loss		$	20,124			$	18,786			$	(342	)		$	(265	)
Prior service credit			(142	)			(306	)			—				—
Accumulated other comprehensive (gain) loss		$	19,982			$	18,480			$	(342	)		$	(265	)
Amounts expected to be recognized during next fiscal year:
Amortization of net actuarial (gain) loss		$	995			$	917			$	(20	)		$	(17	)
Amortization of prior service cost (credit)			(99	)			(164	)			—				—
Total		$	896			$	753			$	(20	)		$	(17	)

Nordson Corporation 55

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

		United States								International
			2017				2016				2017				2016
Balance at beginning of year		$	18,480			$	17,079			$	(265	)		$	(379	)
Net (gain) loss arising during the year			2,212				1,818				(82	)			81
Net gain (loss) recognized during the year			(874	)			(684	)			17				25
Prior service credit recognized during the year			164				267				—				—
Exchange rate effect during the year			—				—				(12	)			8
Balance at end of year		$	19,982			$	18,480			$	(342	)		$	(265	)

Net postretirement benefit costs include the following components:

		United States												International
			2017				2016				2015				2017				2016				2015
Service cost		$	752			$	849			$	979			$	20			$	16			$	29
Interest cost			2,307				2,923				2,946				20				23				35
Amortization of prior service credit			(164	)			(267	)			(438	)			—				—				—
Amortization of net actuarial (gain) loss			874				684				1,104				(17	)			(24	)			—
Total benefit cost		$	3,769			$	4,189			$	4,591			$	23			$	15			$	64

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

		United States												International
		2017				2016				2015				2017				2016				2015
Assumptions used to determine benefit obligations at October 31:
Discount rate			3.86	%			4.05	%			4.50	%			3.52	%			3.40	%			4.35	%
Health care cost trend rate			3.70				3.63				3.72				6.50				6.13				6.31
Rate to which health care cost trend rate is assumed to decline (ultimate trend rate)			3.23				3.24				3.27				3.50				3.50				3.50
Year the rate reaches the ultimate trend rate			2026				2026				2025				2037				2031				2031
Assumption used to determine net benefit costs for the years ended October 31:
Discount rate - benefit obligation			4.03	%			4.50	%			4.40	%			3.40	%			4.35	%			4.25	%
Discount rate - service cost		4.48					4.50				4.40			3.56				4.35				4.25
Discount rate - interest cost		3.27					4.50				4.40				3.20			4.35				4.25

The weighted average health care trend rates reflect expected increases in the Company’s portion of the obligation.

Net actuarial gains or losses are amortized to expense on a plan-by-plan basis when they exceed the accounting corridor, which is set at 10% of the greater of the plan assets or benefit obligations. Gains or losses outside of the corridor are subject to amortization over an average employee future service period that differs by plan. If substantially all of the plan’s participants are no longer actively accruing benefits, the average life expectancy is used.

Similar to the changes in the discount rate approach discussed for the pension plans above, beginning in 2017 we elected to use an approach that discounts the individual expected cash flows underlying interest and service costs using the applicable spot rates derived from the yield curve used to determine the benefit obligation to the relevant projected cash flows.The Company has accounted for this change in estimate that is inseparable from a change in accounting principle on a prospective basis starting in fiscal year 2017. The reductions in service and interest costs for 2017 associated with this change in estimate were $100 and $500, respectively.

Nordson Corporation 56

A one-percentage point change in 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
Health care trend rate:
Effect on total service and interest cost components in 2017		$	562			$	(446	)		$	10			$	(8	)
Effect on postretirement obligation as of October 31, 2017		$	10,637			$	(8,650	)		$	150			$	(115	)

Contributions to postretirement plans in 2018 are estimated to be approximately $2,200.

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

Year		United States				International
2018		$	2,148			$	8
2019			2,397				8
2020			2,592				9
2021			2,827				9
2022			3,066				9
2023-2027			18,330				59

Note 8 — Income taxes

Income tax expense includes the following:

		2017				2016				2015
Current:
U.S. federal		$	54,878			$	44,156			$	36,875
State and local			3,731				2,256				1,623
Foreign			66,352				53,836				49,153
Total current			124,961				100,248				87,651
Deferred:
U.S. federal			3,596				(2,334	)			4,950
State and local			1,164				563				1,031
Foreign			(5,232	)			(1,826	)			(3,881	)
Total deferred			(472	)			(3,597	)			2,100
		$	124,489			$	96,651			$	89,751

Earnings before income taxes of domestic operations, which are calculated after intercompany profit eliminations, were $181,840, $156,723 and $140,044 in 2017, 2016 and 2015, respectively.

Our income tax provision for 2017 includes a discrete tax expense of $1,070 related to nondeductible acquisition costs.

On December 18, 2015, the Protecting Americans from Tax Hikes Act of 2015 was enacted which retroactively reinstated the Federal Research and Development Tax Credit (Federal R&D Tax Credit) as of January 1, 2015, and made it permanent. As a result, our income tax provision for 2016 includes a discrete tax benefit of $2,200 related to 2015. The tax rate for 2016 also includes a discrete tax benefit of $6,154 related to dividends paid from previously taxed foreign earnings generated prior to 2015, and a benefit of $2,682 related to the effective settlement of a tax exam.

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.

Nordson Corporation 57

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

		2017				2016				2015
Statutory federal income tax rate			35.00	%			35.00	%			35.00	%
Domestic Production Deduction			(1.48	)			(1.43	)			(1.47	)
Foreign tax rate variances, net of foreign tax credits			(4.69	)			(4.59	)			(3.25	)
State and local taxes, net of federal income tax benefit			0.76				0.50				0.43
Amounts related to prior years			0.03				(1.20	)			(1.04	)
Tax benefit from previously taxed dividends paid			—				(1.67	)			—
Other – net			—				(0.38	)			0.16
Effective tax rate			29.62	%			26.23	%			29.83	%

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 $238,451, $211,771 and $160,818 in 2017, 2016 and 2015, 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 $1,026,793 and $757,501 at October 31, 2017 and 2016, 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, 2017 and 2016, total unrecognized tax benefits were $3,781 and $3,336, respectively. The amounts that, if recognized, would impact the effective tax rate were $3,273 and $2,775 at October 31, 2017 and 2016, respectively. During 2016, unrecognized tax benefits related primarily to foreign positions and, as recognized, a substantial portion of the gross unrecognized tax benefits were offset against assets recorded in the Consolidated Balance Sheet. A reconciliation of the beginning and ending amount of unrecognized tax benefits for 2017, 2016 and 2015 is as follows:

		2017				2016				2015
Balance at beginning of year		$	3,336			$	6,258			$	5,812
Additions based on tax positions related to the current year			529				522				288
Additions for tax positions of prior years			621				310				331
Reductions for tax positions of prior years			(150	)			(140	)			(28	)
Settlements			—				(3,091	)			—
Lapse of statute of limitations			(555	)			(523	)			(145	)
Balance at end of year		$	3,781			$	3,336			$	6,258

At October 31, 2017 and 2016, we had accrued interest and penalty expense related to unrecognized tax benefits of $623 and $541, respectively. We include interest accrued related to unrecognized tax benefits in interest expense. Penalties, if incurred, would be recognized as other income (expense).

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 2014 through 2017 tax years; tax years prior to the 2014 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 2011. 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.

Nordson Corporation 58

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

		2017				2016
Deferred tax assets:
Employee benefits		$	84,109			$	93,837
Other accruals not currently deductible for taxes			28,579				16,861
Tax credit and loss carryforwards			23,976				11,111
Inventory adjustments			8,778				7,915
Total deferred tax assets			145,442				129,724
Valuation allowance			(14,891	)			(8,304	)
Total deferred tax assets			130,551				121,420
Deferred tax liabilities:
Depreciation and amortization			252,489				171,209
Other - net			1,132				1,366
Total deferred tax liabilities			253,621				172,575
Net deferred tax liabilities		$	(123,070	)		$	(51,155	)

At October 31, 2017, we had $5,493 of tax credit carryforwards of which $27 will expire in 2022, and $5,466 of which has an indefinite carryforward period. We also had $21,929 Federal, $78,320 state and $13,174 foreign operating loss carryforwards, and $20,149 capital loss carryforward, of which $120,950 will expire in 2018 through 2037, and $12,622 of which has an indefinite carryforward period. The net change in the valuation allowance was an increase of $6,587 in 2017 and a increase of $1,537 in 2016. The valuation allowance of $14,891 at October 31, 2017, 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.

Note 9 — Notes payable

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

		2017				2016
Maximum borrowings available under bank lines of credit (all foreign banks)		$	75,041			$	61,519
Outstanding borrowings / notes payable (all foreign bank debt)			—				2,141
Weighted-average interest rate on notes payable			—				4.35	%
Unused bank lines of credit		$	75,041			$	59,378

Note 10 — Long-term debt

A summary of long-term debt is as follows:

		2017				2016
Revolving credit agreement, due 2020		$	249,138			$	244,680
Senior notes, due 2018-2025			172,600				200,000
Senior notes, due 2019-2027			100,000				100,000
Term loan, due 2018-2020			200,000				200,000
Term loan, due 2018-2022			705,000				—
Euro loan, due 2019			12,191				79,389
Private shelf facility, due 2018-2026			146,666				157,222
Development loans, due 2018-2026			1,218				1,344
Other			—				11
			1,586,813				982,646
Less current maturities			326,587				38,093
Less unamortized debt issuance costs(1)			3,829				1,782
Long-term maturities		$	1,256,397			$	942,771

Nordson Corporation 59

(1)	Prior to the adoption of new accounting guidance in the first quarter of 2017 (refer to Note 2), debt issuance costs of $1,782 were reflected in the Consolidated Balance Sheets in Other assets at October 31, 2016. Such amounts were reclassified to Long-term debt for comparative purposes.

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 2.24 percent at October 31, 2017.

Senior notes, due 2018-2025 — These fixed-rate notes entered into in 2012 with a group of insurance companies had a remaining weighted-average life of 4.11 years. The weighted-average interest rate at October 31, 2017 was 3.02 percent.

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 6.24 years. The weighted-average interest rate at October 31, 2017 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 2.24 percent and $100,000 is due in five years with a weighted-average interest rate of 2.34 percent.

Term loan, due 2018-2022 — In 2017, we entered into a $705,000 term loan facility with a group of banks. The interest rate is variable based upon the LIBOR rate. $200,000 is due in 18 months with a weighted-average interest rate of 2.25 percent, $200,000 is due in three years with a weighted-average interest rate of 2.35 percent and $305,000 is due in five years with a weighted-average interest rate of 2.38 percent.

Euro loan, due 2019 — 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 loan was amended in 2016 to extend the term by one year and increase the principal amount. The interest rate is variable based upon the EUR LIBOR rate. The weighted average interest rate at October 31, 2017 was 1.00 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, and then increased to $200,000 in 2016. Borrowings under the agreement may be for up to 12 years and are unsecured. The interest rate on each borrowing is fixed based upon the market rate at the borrowing date or is variable based upon the LIBOR rate. At October 31, 2017, the amount outstanding under this facility was at fixed rates of 2.21 percent and 2.56 percent and at variable rates of 2.49 percent and 2.60 percent.

Development loans, due 2018-2026 — 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, 2017, are as follows: $326,587 in 2018; $40,924 in 2019; $617,876 in 2020; $38,187 in 2021 and $335,791 in 2022.

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 $17,938, $18,047 and $15,721 in 2017, 2016 and 2015, respectively.

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

Nordson Corporation 60

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

		2017				2016
Transportation equipment		$	17,594			$	15,991
Other			8,121				8,240
Total capitalized leases			25,715				24,231
Accumulated amortization			(11,408	)			(10,235	)
Net capitalized leases		$	14,307			$	13,996

At October 31, 2017, future minimum lease payments under non-cancelable capitalized and operating leases are as follows:

		Capitalized Leases				Operating Leases
Year:
2018		$	6,353			$	17,337
2019			4,463				13,324
2020			2,386				10,176
2021			884				8,381
2022			617				7,179
Later years			4,655				17,720
Total minimum lease payments			19,358			$	74,117
Less amount representing executory costs			1,833
Net minimum lease payments			17,525
Less amount representing interest			3,019
Present value of net minimum lease payments			14,506
Less current portion			4,813
Long-term obligations at October 31, 2017		$	9,693

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, 2017:

		Total				Level 1				Level 2				Level 3
Assets:
Foreign currency forward contracts (a)		$	3,249			$	—			$	3,249			$	—
Total assets at fair value		$	3,249			$	—			$	3,249			$	—
Liabilities:
Deferred compensation plans (b)		$	11,004			$	—			$	11,004			$	—
Foreign currency forward contracts (a)			2,959				—				2,959				—
Total liabilities at fair value		$	13,963			$	—			$	13,963			$	—

(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

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	in the value of compensation deferred under these plans are recognized each period based on the fair value of the underlying measurement funds.

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 2017, we recognized net gains of $329 on foreign currency forward contracts and net losses of $1,015 from the change in fair value of balance sheet positions. In 2016, we recognized net gains of $2,317 on foreign currency forward contracts and net losses of $312 from the change in fair value of balance sheet positions. 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.

The following table summarizes, by currency, the contracts outstanding at October 31, 2017 and 2016:

		Sell								Buy
		Notional Amounts				Fair Market Value				Notional Amounts				Fair Market Value
October 31, 2017 contract amounts:
Euro		$	144,611			$	141,720			$	78,253			$	76,892
Pound sterling			45,252				45,242				54,204				54,658
Japanese yen			24,904				24,349				28,358				27,401
Australian dollar			193				191				8,185				7,904
Hong Kong dollar			—				—				100,131				100,114
Singapore dollar			794				791				12,681				12,642
Others			5,413				5,312				51,930				50,688
Total		$	221,167			$	217,605			$	333,742			$	330,299
October 31, 2016 contract amounts:
Euro		$	107,860			$	105,635			$	51,377			$	50,495
Pound sterling			36,692				36,125				37,473				36,302
Japanese yen			31,844				31,000				23,998				23,185
Australian dollar			380				380				8,096				8,095
Hong Kong dollar			1,702				1,702				79,516				79,411
Singapore dollar			1,031				995				12,062				11,735
Others			1,863				1,832				32,511				32,066
Total		$	181,372			$	177,669			$	245,033			$	241,289

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 2017 and 2016, net losses of $760 and net gains of $2,439, 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, 2017 and 2016, 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 cash and cash equivalents, receivables and accounts payable approximate fair value due to the short-term nature of these instruments.

		2017								2016
		Carrying Amount				Fair Value				Carrying Amount				Fair Value
Notes payable			—				—				2,141				2,141
Long-term debt (including current portion)			1,582,984				1,587,920				980,864				992,060
Foreign currency forward contracts (net)			290				290				(39	)			(39	)

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

•	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. The carrying amount of long-term debt is shown net of unamortized debt issuance costs as described in Note 10.

•	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 2017, 2016 or 2015.

Common — We have 160,000 authorized common shares without par value. At October 31, 2017 and 2016, there were 98,023 common shares issued. At October 31, 2017 and 2016, the number of outstanding common shares, net of treasury shares, was 57,715 and 57,307, respectively.

Common shares repurchased as part of publicly announced programs during 2017, 2016 and 2015 were as follows:

		Number				Total				Average
Year		of Shares				Amount				per Share
2017			—			$	—			$	—
2016			447			$	31,877			$	71.37
2015			5,360			$	381,598			$	71.19

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.

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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 during 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 $9,326, $7,874 and $8,772 for 2017, 2016 and 2015, respectively.

The following table summarizes activity related to stock options during 2017:

		Number of Options				Weighted˗Average Exercise Price Per Share				Aggregate Intrinsic Value				Weighted˗Average Remaining Term
Outstanding at October 31, 2016			1,881			$	58.41
Granted			381			$	107.68
Exercised			(316	)		$	45.13
Forfeited or expired			(24	)		$	81.92
Outstanding at October 31, 2017			1,922			$	70.08			$	108,823			6.4 years
Vested at October 31, 2017 or expected to vest			1,905			$	69.84			$	108,294			6.4 years
Exercisable at October 31, 2017			999			$	54.23			$	72,357			4.7 years

Summarized information on currently outstanding options follows:

		Range of Exercise Price
		$14 - $28				$29 - $65				$66 - $125
Number outstanding			139				516				1,267
Weighted-average remaining contractual life, in years			1.6				4.1				7.9
Weighted-average exercise price		$	21.50			$	49.83			$	83.66
Number exercisable			139				516				344
Weighted-average exercise price		$	21.50			$	49.83			$	74.09

As of October 31, 2017, there was $6,638 of total unrecognized compensation cost related to nonvested stock options. That cost is expected to be amortized over a weighted average period of approximately 1.6 years.

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:

			2017				2016				2015
Expected volatility		26.0%-29.2%				29.1%-30.4%				30.3%-39.5%
Expected dividend yield		0.91%-1.17%					1.54%			1.06%-1.10%
Risk-free interest rate		1.89%-2.06%				1.78%-1.90%				1.57%˗1.85%
Expected life of the option (in years)		5.4-6.2				5.4-6.2				5.4˗6.1

The weighted-average expected volatility used to value options granted in 2017, 2016 and 2015 was 29.1 percent, 29.6 percent and 34.3 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 2017, 2016 and 2015 was $28.86, $18.23 and $24.63, respectively.

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The total intrinsic value of options exercised during 2017, 2016 and 2015 was $22,317, $17,271 and $10,406, respectively.

Cash received from the exercise of stock options for 2017, 2016 and 2015 was $14,086, $11,476 and $5,372, respectively. The tax benefit realized from tax deductions from exercises for 2017, 2016 and 2015 was $6,685, $3,476 and $3,661, 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 normal retirement at age 65, restricted shares granted within 12 months prior to termination are forfeited, and, for other restricted shares, the restriction period will lapse and the shares will vest and be transferable. 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 2017:

		Number of Shares				Weighted˗Average Grant Date Fair Value Per Share
Restricted at October 31, 2016			60			$	73.56
Granted			28			$	109.04
Forfeited			(4	)		$	72.25
Vested			(26	)		$	74.08
Restricted at October 31, 2017			58			$	90.38

As of October 31, 2017, there was $2,829 of unrecognized compensation cost related to restricted shares. The cost is expected to be amortized over a weighted average period of 1.9 years. The amount charged to expense related to restricted shares was $2,127, $1,963 and $1,840 in 2017, 2016 and 2015, respectively. These amounts included common share dividends of $64, $60, and $51 in 2017, 2016 and 2015, respectively.

The following table summarizes activity related to restricted share units in 2017:

		Number of Units				Weighted˗Average Grant Date Fair Value
Restricted share units at October 31, 2016			0			$	—
Granted			10			$	97.43
Vested			(10	)		$	97.43
Restricted share units at October 31, 2017			0			$	—

As of October 31, 2017, 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 2017, 2016 and 2015 was $1,011, $974 and $972, respectively.

Deferred directors’ compensation — Non-employee directors may defer all or part of their cash and equity-based compensation until retirement. Cash compensation may be deferred as cash or as share equivalent units. Deferred cash amounts are recorded as liabilities, and share equivalent units are recorded as equity. Additional share equivalent units are earned when common share dividends are declared.

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The following table summarizes activity related to director deferred compensation share equivalent units during 2017:

		Number of Shares				Weighted˗Average Grant Date Fair Value Per Share
Outstanding at October 31, 2016			99			$	41.72
Restricted stock units vested			6			$	97.60
Dividend equivalents			1			$	115.54
Distributions			(5	)		$	26.89
Outstanding at October 31, 2017			101			$	46.74

The amount charged to expense related to director deferred compensation was $106, $158 and $91 in 2017, 2016 and 2015, respectively.

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

The amount of compensation expense is based upon current performance projections for each three-year period and the percentage of the requisite service that has been rendered. The calculations are also based upon the grant date fair value determined using the closing market price of our common shares at the grant date, reduced by the implied value of dividends not to be paid. The per share values were $103.75 and $104.49 for 2017, $67.69 per share for 2016 and $76.48 per share for 2015. The amounts charged to expense for executive officers and selected other key employees in 2017, 2016 and 2015 were $7,398, $7,083 and $3,459, respectively. The cumulative amount recorded in shareholders’ equity at October 31, 2017, and 2016 was $12,820 and $10,951, respectively.

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 share-based performance incentive award 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 $264, $219 and $179 for 2017, 2016 and 2015, respectively.

Shares reserved for future issuance — At October 31, 2017, there were 2,781 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 2017, 2016 or 2015.

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The following table presents information about our reportable segments:

		Adhesive Dispensing Systems				Advanced Technology Systems				Industrial Coating Systems						Corporate							Total
Year ended October 31, 2017
Net external sales		$	916,019			$	897,623			$	253,340						$	—						$	2,066,982
Depreciation and amortization			29,118				49,535				5,559							6,642							90,854
Operating profit (loss)			253,580		(a)		228,062		(b)		43,991							(67,931		)					457,702
Identifiable assets (e)			794,699				1,718,844				120,458							790,940				(d)			3,424,941
Expenditures for long-lived assets			35,310				21,135				9,108							6,005							71,558
Year ended October 31, 2016
Net external sales		$	879,573			$	676,329			$	253,092						$	—						$	1,808,994
Depreciation and amortization			28,294				29,649				5,041							7,320							70,304
Operating profit (loss)			229,143		(a)		159,531		(b)		43,511				(c)			(43,754		)					388,431
Identifiable assets (e)			751,153				1,080,711				140,169							463,642				(d)			2,435,675
Expenditures for long-lived assets			17,407				18,967				17,357							7,120							60,851
Year ended October 31, 2015
Net external sales		$	836,066			$	593,858			$	258,742						$	—						$	1,688,666
Depreciation and amortization			28,097				25,430				4,973							6,694							65,194
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							484,722				(d)			2,370,509
Expenditures for long-lived assets			12,880				36,182				5,112							7,913							62,087

(a)	Includes $2,618, $7,800 and $7,972 of severance and restructuring costs in 2017, 2016 and 2015, respectively.

(b)	Includes $(180), $1,054 and $3,060 of severance and restructuring costs in 2017, 2016 and 2015, respectively.

(c)	Includes $1,921 and $379 of severance and restructuring costs in 2016 and 2015, respectively.

(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. Amounts for the years 2015 and 2016 have been adjusted to reflect the retrospective application of our reclassification of debt issuance costs upon the adoption of a new accounting standard, as described in Note 2.

(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:

		2017				2016				2015
Net external sales
United States		$	647,657			$	531,117			$	529,893
Americas			147,026				124,657				129,325
Europe			530,812				503,869				462,565
Japan			147,189				122,054				107,797
Asia Pacific			594,298				527,297				459,086
Total net external sales		$	2,066,982			$	1,808,994			$	1,688,666
Long-lived assets
United States		$	216,352			$	209,959			$	187,212
Americas			1,552				1,730				1,735
Europe			98,921				23,943				21,231
Japan			5,939				6,408				5,876
Asia Pacific			23,647				31,089				33,886
Total long-lived assets		$	346,411			$	273,129			$	249,940

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

		2017				2016				2015
Total profit for reportable segments		$	457,702			$	388,431			$	317,730
Interest expense			(36,601	)			(21,322	)			(18,104	)
Interest and investment income			1,124				728				558
Other-net			(1,934	)			657				678
Income before income taxes		$	420,291			$	368,494			$	300,862

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

		2017				2016				2015
Total assets for reportable segments		$	3,424,941			$	2,435,675			$	2,370,509
Customer advance payments			34,654				26,175				22,884
Eliminations			(45,056	)			(41,267	)			(35,079	)
Total consolidated assets		$	3,414,539			$	2,420,583			$	2,358,314

Note 17 — Supplemental information for the statement of cash flows

		2017				2016				2015
Cash operating activities:
Interest paid		$	36,450			$	23,423			$	17,312
Income taxes paid			118,096				102,592				72,175
Non-cash investing and financing activities:
Capitalized lease obligations incurred		$	6,509			$	5,639			$	5,562
Capitalized lease obligations terminated			670				1,033				672
Shares acquired and issued through exercise of stock options			170				212				445

Note 18 — Quarterly financial data (unaudited)

		First				Second				Third				Fourth
2017:
Sales		$	407,470			$	496,137			$	589,438			$	573,938
Gross margin			225,138				275,512				326,265				312,088
Net income			49,988				64,523				101,456				79,835
Earnings per share:
Basic			0.87				1.12				1.76				1.38
Diluted			0.86				1.11				1.74				1.37
2016:
Sales		$	372,220			$	437,592			$	489,899			$	509,283
Gross margin			196,907				248,405				273,220				274,967
Net income			41,161				70,601				84,214				75,867
Earnings per share:
Basic			0.72				1.24				1.48				1.33
Diluted			0.72				1.23				1.46				1.31

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. The sum of other amounts for the four quarters may not always equal the annual amounts due to rounding.

During the fourth quarter of 2017, we recorded pre-tax severance and restructuring costs of $1,017 and we recorded pre-tax acquisition costs of $391 related to the acquisition of Vention.

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During the third quarter of 2017, we recorded pre-tax severance and restructuring costs of $703 and we recorded pre-tax acquisition costs of $865 related to Vention.

During the second quarter of 2017, we recorded pre-tax severance and restructuring costs of $491 and we recorded pre-tax acquisition costs of $13,415 related Vention. As a result, our income tax provision for the second quarter included a discrete tax expense of $2,600 related to nondeductible acquisition costs.

During the first quarter of 2017, we recorded pre-tax severance and restructuring costs of $227.

During the fourth quarter of 2016, we recorded pre-tax severance and restructuring costs of $6,411.

During the third quarter of 2016, we recorded pre-tax severance and restructuring costs of $1,714 and we recorded other expense of $2,722 related to the reversal of an indemnification asset resulting from the effective settlement of a tax exam. Additionally, our income tax provision for the third quarter included a discrete tax benefit of $1,651 related to the effective settlement of a tax exam.

During the second quarter of 2016, we recorded pre-tax severance and restructuring costs of $1,633. Additionally, we recorded other income of $800 related to a favorable litigation settlement and a $1,192 favorable adjustment to unrecognized tax benefits related to the effective settlement of a tax exam. Furthermore, our income tax provision for the second quarter included a discrete tax benefit of $1,136 related to the effective settlement of a tax exam.

During the first quarter of 2016, we recorded pre-tax severance and restructuring costs of $1,017.

On December 18, 2015, the Protecting Americans from Tax Hikes Act of 2015 was enacted which retroactively reinstated the Federal Research and Development Tax Credit (Federal R&D Tax Credit) as of January 1, 2015, and made it permanent. As a result, our income tax provision for the three months ended January 31, 2016 includes a discrete tax benefit of $2,025 primarily related to 2015. Additionally, our income tax provision for the first quarter included a discrete tax benefit of $6,184 related to dividends paid from previously taxed foreign earnings.

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, it is our opinion, after consultation with legal counsel, that resolutions of these matters are not expected to result in a material effect on our financial condition, quarterly or annual operating results or cash flows.

We have voluntarily agreed with the City of New Richmond, Wisconsin and other Potentially Responsible Parties to share costs associated with the remediation of the City of New Richmond municipal landfill (the “Site”) and the construction of a potable water delivery system serving the impacted area down gradient of the Site. At October 31, 2017 and October 31, 2016, our accrual for the ongoing operation, maintenance and monitoring obligation at the Site was $472 and $516, respectively. The liability for environmental remediation represents management’s best estimate of the probable and reasonably estimable undiscounted costs related to known remediation obligations. The accuracy of our estimate of environmental liability is affected by several uncertainties such as additional requirements that may be identified in connection with remedial activities, the complexity and evolution of environmental laws and regulations, and the identification of presently unknown remediation requirements. Consequently, our liability could be greater than our current estimate. However, we do not expect that the costs associated with remediation will have a material adverse effect on our financial condition 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, 2017.

We completed the acquisitions of ACE Production Technologies, Inc. (“ACE”), Plas-Pak Industries, Inc. (“Plas-Pak”), InterSelect GmbH (“InterSelect”) and Vention Medical’s Advanced Technologies (“Vention”) on January 3, 2017, February 1, 2017, February 16, 2017 and March 31, 2017, respectively. As permitted by SEC guidance, the scope of our evaluation of internal control over financial reporting as of October 31, 2017 did not include the internal control over financial reporting of ACE, Plas-Pak, InterSelect and Vention. The results of ACE, Plas-Pak, InterSelect and Vention are included in our consolidated financial statements from the date each business was acquired. The combined total assets of ACE, Plas-Pak, InterSelect and Vention represented 26 percent of our total assets at October 31, 2017. The combined net sales and net income of ACE, Plas-Pak, InterSelect and Vention represented 6 percent of our consolidated net sales and 4 percent of our net income for 2017.

Based on our assessment, management concluded that our internal control over financial reporting was effective as of October 31, 2017.

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, 2017. 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, 2017
December 15, 2017

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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, 2017, 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 ACE Production Technologies, Inc., Plas-Pak Industries, Inc., InterSelect GmbH and Vention Medical’s Advanced Technologies, which are included in the 2017 consolidated financial statements of Nordson Corporation and on a combined basis constituted 26% of total assets as of October 31, 2017 and 6% of net sales and 4% of net income for the year then ended. 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 ACE Production Technologies, Inc., Plas-Pak Industries, Inc., InterSelect GmbH and Vention Medical’s Advanced Technologies.

In our opinion, Nordson Corporation maintained, in all material respects, effective internal control over financial reporting as of October 31, 2017 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, 2017 and 2016 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, 2017 of Nordson Corporation and our report dated December 15, 2017 expressed an unqualified opinion thereon.

/s/ Ernst & Young LLP
Ernst & Young LLP
Cleveland, Ohio
December 15, 2017

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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, 2017 and 2016, 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, 2017. 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, 2017 and 2016, and the consolidated results of its operations and its cash flows for each of the three years in the period ended October 31, 2017, in conformity with U.S. 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, 2017, 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, 2017 expressed an unqualified opinion thereon.

/s/ Ernst & Young LLP
Ernst & Young LLP
Cleveland, Ohio
December 15, 2017

Nordson Corporation 72