Item 8. Financial Statements and Supplementary Data

Consolidated Statements of Income

Years ended October 31, 2018, 2017 and 2016		2018				2017				2016
(In thousands except for per-share amounts)
Sales		$	2,254,668			$	2,066,982			$	1,808,994
Operating costs and expenses:
Cost of sales			1,018,703				927,981				815,495
Selling and administrative expenses			741,408				681,299				605,068
			1,760,111				1,609,280				1,420,563
Operating profit			494,557				457,702				388,431
Other income (expense):
Interest expense			(49,576	)			(36,601	)			(21,322	)
Interest and investment income			1,384				1,124				728
Other - net			2,154				(1,934	)			657
			(46,038	)			(37,411	)			(19,937	)
Income before income taxes			448,519				420,291				368,494
Income tax provision:
Current			105,093				124,961				100,248
Deferred			(33,949	)			(472	)			(3,597	)
			71,144				124,489				96,651
Net income		$	377,375			$	295,802			$	271,843
Average common shares			57,970				57,533				57,060
Incremental common shares attributable to outstanding stock options, restricted stock and deferred stock-based compensation			961				671				470
Average common shares and common share equivalents			58,931				58,204				57,530
Basic earnings per share		$	6.51			$	5.14			$	4.76
Diluted earnings per share		$	6.40			$	5.08			$	4.73
Dividends declared per common share		$	1.25			$	1.11			$	0.99

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

Nordson Corporation 33

Consolidated Statements of Comprehensive Income

Years ended October 31, 2018, 2017 and 2016		2018				2017				2016
(In thousands)
Net income		$	377,375			$	295,802			$	271,843
Components of other comprehensive income (loss), net of tax:
Foreign currency translation adjustments			(28,619	)			22,697				(8,693	)
Pension and postretirement benefit plans:
Prior service (cost) credit arising during the year			(45	)			—				1,831
Net actuarial gain (loss) arising during the year			(7,783	)			2,641				(22,482	)
Amortization of prior service (cost) credit			(322	)			(210	)			92
Amortization of actuarial loss			10,536				7,972				6,724
Settlement loss recognized			200				712				111
Curtailment (gain) loss recognized			—				—				(1,144	)
Total pension and postretirement benefit plans			2,586				11,115				(14,868	)
Total other comprehensive income (loss)			(26,033	)			33,812				(23,561	)
Reclassification due to adoption of new accounting standard (Note 2)			(18,846	)			—				—
Total comprehensive income		$	332,496			$	329,614			$	248,282

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

Nordson Corporation 34

Consolidated Balance Sheets

October 31, 2018 and 2017		2018				2017
(In thousands)
Assets
Current assets:
Cash and cash equivalents		$	95,678			$	90,383
Receivables - net			491,423				505,087
Inventories - net			264,477				264,266
Prepaid expenses			32,524				28,636
Total current assets			884,102				888,372
Property, plant and equipment - net			386,666				346,411
Goodwill			1,608,018				1,589,210
Intangible assets - net			499,741				547,180
Deferred income taxes			9,780				11,020
Other assets			32,705				32,346
		$	3,421,012			$	3,414,539
Liabilities and shareholders' equity
Current liabilities:
Accounts payable		$	83,590			$	86,016
Income taxes payable			19,319				22,310
Accrued liabilities			175,085				173,366
Customer advance payments			38,997				34,654
Current maturities of long-term debt			28,734				326,587
Current obligations under capital leases			4,555				4,813
Total current liabilities			350,280				647,746
Long-term debt			1,285,357				1,256,397
Obligations under capital leases			8,850				9,693
Pension obligations			113,222				111,666
Postretirement obligations			70,154				73,589
Deferred income taxes			100,704				134,090
Other liabilities			41,704				25,865
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, 2018 and 2017			12,253				12,253
Capital in excess of stated value			446,555				412,785
Retained earnings			2,488,375				2,164,597
Accumulated other comprehensive loss			(179,314	)			(134,435	)
Common shares in treasury, at cost			(1,317,128	)			(1,299,707	)
Total shareholders' equity			1,450,741				1,155,493
		$	3,421,012			$	3,414,539

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

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Consolidated Statements of Shareholders’ Equity

Years ended October 31, 2018, 2017 and 2016		2018				2017				2016
(In thousands)
Number of common shares in treasury
Balance at beginning of year			40,308				40,716				40,665
Shares issued under company stock and employee benefit plans			(503	)			(438	)			(421	)
Purchase of treasury shares			181				30				472
Balance at end of year			39,986				40,308				40,716
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		$	412,785			$	376,625			$	348,986
Shares issued under company stock and employee benefit plans			12,220				8,913				5,952
Tax benefit from stock option and restricted stock transactions			—				7,079				3,476
Stock-based compensation			21,550				20,168				18,211
Balance at end of year		$	446,555			$	412,785			$	376,625
Retained earnings
Balance at beginning of year		$	2,164,597			$	1,932,635			$	1,717,228
Net income			377,375				295,802				271,843
Dividends declared ($1.25 per share in 2018, $1.11 per share in 2017, and $0.99 per share in 2016)			(72,443	)			(63,840	)			(56,436	)
Reclassification due to adoption of new accounting standard (Note 2)			18,846				—				—
Balance at end of year		$	2,488,375			$	2,164,597			$	1,932,635
Accumulated other comprehensive loss
Balance at beginning of year		$	(134,435	)		$	(168,247	)		$	(144,686	)
Foreign currency translation adjustments			(28,619	)			22,697				(8,693	)
Settlement and curtailment loss (gain) recognized, net of tax of $(52) in 2018, $(299) in 2017 and $332 in 2016			200				712				(1,033	)
Defined benefit and OPEB activity - prior service cost, net of tax of $189 in 2018, $75 in 2017 and $(558) in 2016			(367	)			(210	)			1,923
Defined benefit and OPEB activity - actuarial gain (loss), net of tax of $(802) in 2018, $(4,628) in 2017 and $8,642 in 2016			2,753				10,613				(15,758	)
Reclassification due to adoption of new accounting standard (Note 2)			(18,846	)			—				—
Balance at end of year		$	(179,314	)		$	(134,435	)		$	(168,247	)
Common shares in treasury, at cost
Balance at beginning of year		$	(1,299,707	)		$	(1,301,663	)		$	(1,273,765	)
Shares issued under company stock and employee benefit plans			6,591				5,342				5,735
Purchase of treasury shares			(24,012	)			(3,386	)			(33,633	)
Balance at end of year		$	(1,317,128	)		$	(1,299,707	)		$	(1,301,663	)
Total shareholders' equity		$	1,450,741			$	1,155,493			$	851,603

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, 2018, 2017 and 2016		2018				2017				2016
(In thousands)
Cash flows from operating activities:
Net income		$	377,375			$	295,802			$	271,843
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation			52,959				45,947				41,243
Amortization			55,448				44,907				29,061
Provision for losses on receivables			1,185				4,030				1,867
Deferred income taxes			(33,949	)			(472	)			(3,597	)
Non-cash stock compensation			21,550				20,168				18,211
Loss on sale of property, plant and equipment			830				188				859
Other non-cash			1,359				2,770				2,973
Changes in operating assets and liabilities:
Receivables			10,236				(46,152	)			(41,247	)
Inventories			5,532				(19,667	)			1,784
Prepaid expenses			(4,046	)			4,737				(8,667	)
Other assets			320				(3,429	)			7,773
Accounts payable			(2,671	)			4,805				7,296
Income taxes payable			(2,718	)			7,522				(2,684	)
Accrued liabilities			2,134				(5,629	)			23,328
Customer advance payments			5,047				5,163				3,631
Other liabilities			18,402				2,266				(17,739	)
Other			(4,355	)			(6,204	)			(1,301	)
Net cash provided by operating activities			504,638				356,752				334,634
Cash flows from investing activities:
Additions to property, plant and equipment			(89,790	)			(71,558	)			(60,851	)
Proceeds from sale of property, plant and equipment			458				4,007				1,300
Acquisition of businesses, net of cash acquired			(50,586	)			(805,943	)			(42,650	)
Equity investments			—				(4,470	)			—
Net cash used in investing activities			(139,918	)			(877,964	)			(102,201	)
Cash flows from financing activities:
Proceeds from short-term borrowings			996				6,017				13,456
Repayment of short-term borrowings			(1,006	)			(8,149	)			(12,059	)
Proceeds from long-term debt			585,661				841,536				261,161
Repayment of long-term debt			(854,538	)			(237,183	)			(392,775	)
Repayment of capital lease obligations			(5,333	)			(5,287	)			(5,059	)
Payment of debt issuance costs			(1,826	)			(3,214	)			(99	)
Issuance of common shares			18,811				14,086				11,476
Purchase of treasury shares			(24,012	)			(3,216	)			(33,421	)
Dividends paid			(72,443	)			(63,840	)			(56,436	)
Net cash provided by (used in) financing activities			(353,690	)			540,750				(213,756	)
Effect of exchange rate changes on cash			(5,735	)			3,606				(1,706	)
Increase in cash and cash equivalents			5,295				23,144				16,971
Cash and cash equivalents at beginning of year			90,383				67,239				50,268
Cash and cash equivalents at end of year		$	95,678			$	90,383			$	67,239

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

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Notes to Consolidated Financial Statements

NOTE REGARDING AMOUNTS AND FISCAL YEAR REFERENCES

In this annual report, all amounts related to United States dollars and foreign currency and to the number of Nordson Corporation’s common shares, except for per share earnings and dividend amounts, are expressed in thousands. Unless the context otherwise indicates, all references to “we” or the “Company” mean Nordson Corporation.

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

Note 1 — Significant accounting policies

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

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

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

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

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 Consolidated Balance Sheet. Revenues deferred in 2018, 2017 and 2016 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 $12,451, $11,296 and $11,095 in 2018, 2017 and 2016, respectively.

Research and development — Investments in research and development are important to our long-term growth, enabling us to keep pace with changing customer and marketplace needs through the development of new products and new applications for existing products. We place strong emphasis on technology developments and improvements through internal engineering and research teams. Research and development costs are expensed as incurred and were $58,806, $52,462 and $46,247 in 2018, 2017 and 2016, respectively. As a percentage of sales, research and development expenses were 2.6, 2.5 and 2.6 percent in 2018, 2017 and 2016, 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 2018 and 2017. Options for 396 common shares were excluded from the diluted earnings per share calculation in 2016, because their effect would have been anti-dilutive. Under the Amended & Restated 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.

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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.

Inventories — Inventories are valued at net realizable value. Cost was determined using the last-in, first-out (LIFO) method for 15 percent of consolidated inventories at October 31, 2018 and 16 percent of consolidated inventories at October 31, 2017. The first-in, first-out (FIFO) method is used for all other inventories. Consolidated inventories would have been $6,545 and $6,684 higher than reported at October 31, 2018 and 2017, 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 2018, 2017 or 2016.

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, 2018, 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).

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Accumulated other comprehensive loss — Accumulated other comprehensive loss at October 31, 2018 and 2017 consisted of:

		Cumulative				Pension and				Accumulated
		translation				postretirement benefit				other comprehensive
		adjustments				plan adjustments				loss
Balance at October 31, 2017		$	(28,423	)		$	(106,012	)		$	(134,435	)
Pension and postretirement plan changes, net of tax of $(665)			—				2,586				2,586
Reclassification due to adoption of new accounting standard (Note 2)			—				(18,846	)			(18,846	)
Currency translation losses			(28,619	)			—				(28,619	)
Balance at October 31, 2018		$	(57,042	)		$	(122,272	)		$	(179,314	)

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 2018 and 2017:

		2018				2017
Balance at beginning of year		$	13,377			$	11,770
Accruals for warranties			11,937				11,394
Warranty assumed from acquisitions			—				75
Warranty payments			(12,966	)			(10,090	)
Currency adjustments			(153	)			228
Balance at end of year		$	12,195			$	13,377

Note 2 — Recently issued accounting standards

New accounting guidance adopted:

In March 2016, the Financial Accounting Standards Board (“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 statements of income rather than additional paid-in capital. Additionally, the excess tax benefits will be classified along with other income tax cash flows as an operating activity, rather than a financing activity, in the statements of cash flows. Further, the update allows an entity to make a policy election to recognize forfeitures as they occur or estimate the number of awards expected to be forfeited. We adopted this new standard during the first quarter of 2018. As a result, net excess tax benefits of $9,498 were recognized as a reduction of income tax expense during 2018. The cash flow classification requirements of this new standard were applied retrospectively. As a result, excess tax benefits of $9,498 were reported as net cash provided by operating activities in 2018 and $7,079 and $3,476 of excess tax benefits were reclassified from net cash used in financing activities to net cash provided by operating activities in 2017 and 2016, respectively. This new standard also requires that employee taxes paid when an employer withholds shares for tax-withholding purposes be reported as financing activities in the statements of cash flows on a retrospective basis. Previously, this activity was included in operating activities. The impact of this change was immaterial to the statements of cash flows. Additionally, we elected to continue to estimate forfeitures rather than account for them as they occur.

In February 2018, the FASB issued a new standard which gives entities the option to reclassify tax effects stranded in accumulated other comprehensive income as a result of the Tax Cuts and Jobs Act (“the Act”) into retained earnings. The guidance allows entities to reclassify from accumulated other comprehensive income to retained earnings stranded tax effects resulting from the Act's new federal corporate income tax rate. The guidance also allows entities to elect to reclassify other stranded tax effects that relate to the Act but do not directly relate to the change in the federal tax rate (e.g., state taxes, changing from a worldwide tax system to a territorial system). Tax effects that are stranded in accumulated other comprehensive income for other reasons (e.g., prior changes in tax law, a change in valuation allowance) may not be reclassified. This standard is effective for us beginning November 1, 2019; with early adoption permitted. We early adopted this standard in the fourth quarter of 2018. As a result, we reclassified $18,846 of stranded tax effects from accumulated other comprehensive income to retained earnings.

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In March 2018, the FASB issued amendments which incorporate various Securities and Exchange Commission (“SEC”) paragraphs pursuant to the issuance of the December 2017 SEC Staff Accounting Bulletin No. 118 (“SAB 118”), Income Tax Accounting Implications of the Tax Cuts and Jobs Act, effective immediately. The SEC issued SAB 118 to address concerns about reporting entities’ ability to timely comply with the accounting requirements to recognize all of the effects of the Act in the period of enactment. SAB 118 allows disclosure that timely determination of some or all of the income tax effects from the Act are incomplete by the due date of the financial statements and if possible to provide a reasonable estimate. We have accounted for the tax effects of the Act under the guidance of SAB 118, on a provisional basis. Our accounting for certain income tax effects is incomplete, but we have determined reasonable estimates for those effects and have recorded provisional amounts in our Consolidated Financial Statements. Refer to Note 7 for additional information.

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. The new standard is required to be applied retrospectively to each prior reporting period presented or retrospectively with the cumulative effect of initially applying it recognized at the date of initial application (modified retrospective method). We adopted the standard beginning November 1, 2018 using the modified retrospective method.

We have established our accounting policy, provided training to our reporting units and completed our evaluation of the new standard, including the impact on our business processes, systems, and controls as well as differences in the timing and/or method of revenue recognition for our contracts. We also designed and implemented specific controls over the evaluation of the impact of the new standard, including the calculation of the cumulative effect of adopting the new standard. We determined that the revenue recognition for our products and services will remain largely unchanged; and therefore, the adoption of this new standard did not have a material impact on our Consolidated Financial Statements. We will provide expanded disclosures as required under this standard in the Consolidated Financial Statements subsequent to adoption.

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 November 1, 2019. 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 November 1, 2018. The adoption of this standard is not expected to have a material impact on our Consolidated Financial Statements.

In August 2018, the FASB issued a new standard which removes, modifies, and adds certain disclosure requirements on fair value measurements. The guidance removes disclosure requirements pertaining to the amount of and reasons for transfers between Level 1 and Level 2 of the fair value hierarchy, the policy for timing of transfers between levels, and the valuation processes for Level 3 fair value measurements. For investments in certain entities that calculate net asset value, an entity is required to disclose the timing of liquidation of an investee’s assets and the date when restrictions from redemption might lapse only if the investee has communicated the timing to the entity or announced the timing publicly. In addition, the amendment clarifies that the measurement uncertainty disclosure is to communicate information about the uncertainty in measurement as of the reporting date. The guidance adds disclosure requirements for changes in unrealized gains and losses for the period included in other comprehensive income for recurring Level 3 fair value measurements held at the end of the reporting period as well as the range and weighted average of significant unobservable inputs used to develop Level 3 fair value measurements. It will be effective for us beginning November 1, 2020. Early adoption is permitted. We are currently assessing the impact this standard will have on our Consolidated Financial Statements.

Nordson Corporation 41

In August 2018, the FASB issued a new standard which addresses defined benefit plans. The amendments modify the following disclosure requirements for employers that sponsor defined benefit pension or other postretirement plans: the amounts in accumulated other comprehensive income expected to be recognized as components of net period benefit cost over the next fiscal year, amount and timing of plan assets expected to be returned to the employer, related party disclosure about the amount of future annual benefits covered by insurance and annuity contracts and significant transactions between the employer or related parties and the plan, and the effects of a one-percentage point change in assumed health care cost trend rates on the (a) aggregate of the service and interest cost components of net periodic benefit costs and (b) benefit obligation for postretirement health care benefits are removed. A disclosure requirement was added for the explanation of the reasons for significant gains and losses related to changes in the benefit obligation for the period. Additionally, the standard clarifies disclosure requirement surrounding the projected benefit obligation (PBO) and fair value of plan assets for plans with PBOs in excess of plan assets and the accumulated benefit obligation (ABO) and fair value of plan assets for plans with ABOs in excess of plan assets. It will be effective for us beginning November 1, 2020. Early adoption is permitted. We are currently assessing the impact this standard will have on our Consolidated Financial Statements.

Note 3 — Acquisitions

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

2018 acquisitions

On October 17, 2018, we purchased 100 percent of the outstanding shares of Cladach Nua Teoranta (“Clada”), a Galway, Ireland designer and developer primarily focused on medical balloons and balloon catheters. Clada’s technologies are used in key applications such as angioplasty and the treatment of vascular disease. We acquired Clada for an aggregate purchase price of $5,222, which included an earn-out liability of $1,131. Based on the fair value of the assets acquired and the liabilities assumed, goodwill of $2,905 and identifiable intangible assets of $1,218 were recorded. The identifiable intangible assets consist primarily of $812 of customer relationships (amortized over 10 years), $203 of tradenames (amortized over 15 years) and $203 of technology (amortized over 15 years). Goodwill associated with this acquisition is not tax deductible. This acquisition is being reported in our Advanced Technology Systems segment. As of October 31, 2018, the purchase price allocations remain preliminary as we complete our assessments of goodwill, intangible assets, income taxes and certain reserves.

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

Pro forma sales and results of operations for our 2018 acquisitions, had they occurred at the beginning of the applicable fiscal year ended October 31, are not material and, accordingly, are not provided.

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.

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Based on the fair value of the assets acquired and the liabilities assumed, goodwill of $434,123, of which $37,200 is tax deductible, and identifiable intangible assets of $286,000 were recorded. The identifiable intangible assets consist primarily of $240,000 of customer relationships (amortized over 14 years), $2,000 of tradenames (amortized over 6 years), and $44,000 of technology, consisting of $36,000 (amortized over 14 years) and $8,000 (amortized over 10 years). Goodwill represents the value we expect to achieve through the expansion of our existing medical platform. This acquisition is being reported in our Advanced Technology Systems segment.

The following table summarizes the purchase price allocation of the estimated 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			434,123
Intangible assets			286,000
Other assets			1,071
Total assets acquired		$	802,926
Liabilities assumed:
Current liabilities			19,130
Deferred tax liabilities			64,757
Total liabilities assumed		$	83,887
Net assets acquired		$	719,039

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.

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.

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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.

Note 4 — Details of Consolidated Balance Sheet

		2018				2017
Receivables:
Accounts		$	475,638			$	491,224
Notes			4,476				5,121
Other			20,889				18,533
			501,003				514,878
Allowance for doubtful accounts			(9,580	)			(9,791	)
		$	491,423			$	505,087
Inventories:
Raw materials and component parts		$	112,823			$	105,424
Work-in-process			47,126				45,743
Finished goods			148,618				152,923
			308,567				304,090
Obsolescence and other reserves			(37,545	)			(33,140	)
LIFO reserve			(6,545	)			(6,684	)
		$	264,477			$	264,266
Property, plant and equipment:
Land		$	10,544			$	10,598
Land improvements			4,294				4,292
Buildings			252,127				190,611
Machinery and equipment			456,307				424,006
Enterprise management system			53,234				52,936
Construction-in-progress			24,266				49,713
Leased property under capitalized leases			26,118				25,715
			826,890				757,871
Accumulated depreciation and amortization			(440,224	)			(411,460	)
		$	386,666			$	346,411
Accrued liabilities:
Salaries and other compensation		$	72,364			$	73,234
Pension and retirement			5,095				4,768
Taxes other than income taxes			8,060				7,663
Other			89,566				87,701
		$	175,085			$	173,366

Note 5 — 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.

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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. 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 in 2018, 2017, or 2016.

Changes in the carrying amount of goodwill during 2018 by operating segment:

		Adhesive Dispensing Systems				Advanced Technology Systems				Industrial Coating Systems				Total
Balance at October 31, 2017		$	392,295			$	1,172,857			$	24,058			$	1,589,210
Acquisitions			—				24,679				—				24,679
Currency effect			(3,304	)			(2,567	)			—				(5,871	)
Balance at October 31, 2018		$	388,991			$	1,194,969			$	24,058			$	1,608,018

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

Accumulated impairment losses, which were recorded in 2009, were $232,789 at October 31, 2018 and October 31, 2017. 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, 2018
		Carrying Amount				Accumulated Amortization				Net Book Value
Customer relationships		$	480,404			$	137,640			$	342,764
Patent/technology costs			153,602				59,845				93,757
Trade name			96,433				34,768				61,665
Noncompete agreements			11,469				9,919				1,550
Other			1,386				1,381				5
Total		$	743,294			$	243,553			$	499,741

		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

Amortization expense for 2018, 2017 and 2016 was $55,448, $44,907 and $29,061 respectively.

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Estimated amortization expense for each of the five succeeding years:

Year		Amounts
2019		$	48,523
2020		$	48,055
2021		$	42,703
2022		$	38,730
2023		$	37,885

Note 6 — 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 2018, 2017 and 2016 was approximately $22,634, $19,259 and $17,194, 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.

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
		2018				2017				2018				2017
Change in benefit obligation:
Benefit obligation at beginning of year		$	430,816			$	409,459			$	88,761			$	91,396
Service cost			13,543				12,456				2,069				2,378
Interest cost			14,306				12,844				1,635				1,537
Participant contributions			—				—				90				85
Plan amendments			—				—				50				—
Settlements			—				(1,548	)			(1,431	)			(1,309	)
Foreign currency exchange rate change			—				—				(2,676	)			4,896
Actuarial (gain) loss			(20,502	)			9,351				107				(7,602	)
Benefits paid			(12,558	)			(11,746	)			(1,378	)			(2,620	)
Benefit obligation at end of year		$	425,605			$	430,816			$	87,227			$	88,761
Change in plan assets:
Beginning fair value of plan assets		$	369,234			$	333,867			$	37,504			$	35,604
Actual return on plan assets			(13,890	)			29,620				2,370				612
Company contributions			18,287				19,041				3,728				3,165
Participant contributions			—				—				90				85
Settlements			—				(1,548	)			(1,431	)			(1,309	)
Foreign currency exchange rate change			—				—				(1,266	)			1,967
Benefits paid			(12,558	)			(11,746	)			(1,378	)			(2,620	)
Ending fair value of plan assets		$	361,073			$	369,234			$	39,617			$	37,504
Funded status at end of year		$	(64,532	)		$	(61,582	)		$	(47,610	)		$	(51,257	)
Amounts recognized in financial statements:
Noncurrent asset		$	1,544			$	—			$	748			$	64
Accrued benefit liability			(1,176	)			(1,201	)			(36	)			(36	)
Long-term pension and retirement obligations			(64,900	)			(60,381	)			(48,322	)			(51,285	)
Total amount recognized in financial statements		$	(64,532	)		$	(61,582	)		$	(47,610	)		$	(51,257	)

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		United States								International
		2018				2017				2018				2017
Amounts recognized in accumulated other comprehensive (gain) loss:
Net actuarial (gain) loss		$	130,788			$	124,917			$	23,304			$	27,134
Prior service credit			(161	)			(184	)			(2,844	)			(3,279	)
Accumulated other comprehensive loss		$	130,627			$	124,733			$	20,460			$	23,855
Amounts expected to be recognized during next fiscal year:
Amortization of net actuarial (gain) loss		$	6,221			$	8,672			$	1,700			$	2,074
Amortization of prior service credit			(61	)			(23	)			(302	)			(313	)
Total		$	6,160			$	8,649			$	1,398			$	1,761

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

		United States								International
		2018				2017				2018				2017
Balance at beginning of year		$	124,733			$	134,447			$	23,855			$	31,645
Net (gain) loss arising during the year			15,351				515				(752	)			(6,867	)
Prior service cost arising during the year			—				—				50				—
Net (gain) loss recognized during the year			(9,479	)			(9,537	)			(2,115	)			(2,605	)
Prior service (cost) credit recognized during the year			22				(44	)			316				302
Settlement loss			—				(648	)			(252	)			(363	)
Exchange rate effect during the year			—				—				(642	)			1,743
Balance at end of year		$	130,627			$	124,733			$	20,460			$	23,855

Information regarding the accumulated benefit obligation is as follows:

		United States								International
		2018				2017				2018				2017
For all plans:
Accumulated benefit obligation		$	403,590			$	420,035			$	74,690			$	76,032
For plans with benefit obligations in excess of plan assets:
Projected benefit obligation			373,531				430,816				46,292				83,289
Accumulated benefit obligation			351,516				420,035				42,363				70,985
Fair value of plan assets			307,455				369,234				5,355				32,325

Net pension benefit costs include the following components:

		United States												International
		2018				2017				2016				2018				2017				2016
Service cost		$	13,543			$	12,456			$	11,490			$	2,069			$	2,378			$	2,448
Interest cost			14,306				12,844				15,932				1,635				1,537				2,294
Expected return on plan assets			(21,964	)			(20,784	)			(19,666	)			(1,512	)			(1,338	)			(1,501	)
Amortization of prior service cost (credit)			(22	)			44				76				(316	)			(302	)			(203	)
Amortization of net actuarial gain (loss)			9,479				9,537				8,480				2,115				2,605				1,723
Settlement (gain) loss			—				648				—				252				363				160
Curtailment (gain) loss			—				—				—				—				—				(1,526	)
Total benefit cost		$	15,342			$	14,745			$	16,312			$	4,243			$	5,243			$	3,395

Net periodic pension cost for 2018 included a settlement loss of $252 due to lump sum retirement payments. 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.

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

		United States												International
		2018				2017				2016				2018				2017				2016
Assumptions used to determine benefit obligations at October 31:
Discount rate			4.53	%			3.80	%			3.94	%			2.14	%			2.07	%			1.86	%
Rate of compensation increase			3.90				3.61				3.61				3.12				3.13				3.12
Assumptions used to determine net benefit costs for the years ended October 31:
Discount rate - benefit obligation			3.80				3.94				4.39				2.07				1.86				2.81
Discount rate - service cost			4.01				4.31				4.39				1.76				1.55				2.81
Discount rate - interest cost			3.31				3.20				4.39				1.83				1.66				2.81
Expected return on plan assets			6.00				6.25				6.72				3.91				3.51				4.22
Rate of compensation increase			3.61				3.61				3.50				3.13				3.12				3.22

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 2018, 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, 2018 and 2017 is as follows:

		United States								International
		2018				2017				2018				2017
Asset Category
Equity securities			13	%			13	%			—	%			—	%
Debt securities			50				48				—				—
Insurance contracts			—				—				55				56
Pooled investment funds			36				39				44				42
Other			1				—				1				2
Total			100	%			100	%			100	%			100	%

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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 90 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 2018, 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 10 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.

The fair values of our pension plan assets at October 31, 2018 by asset category are in the table below:

		United States																International
		Total				Level 1				Level 2				Level 3				Total				Level 1				Level 2				Level 3
Cash		$	1,083			$	1,083			$	—			$	—			$	528			$	528			$	—			$	—
Money market funds			1,620				1,620				—				—				—				—				—				—
Equity securities:
Basic materials			2,763				2,763				—				—				—				—				—				—
Consumer goods			3,703				3,703				—				—				—				—				—				—
Financial			5,306				5,306				—				—				—				—				—				—
Healthcare			4,179				4,179				—				—				—				—				—				—
Industrial goods			2,516				2,516				—				—				—				—				—				—
Technology			4,690				4,690				—				—				—				—				—				—
Utilities			732				732				—				—				—				—				—				—
Mutual funds			21,987				21,987				—				—				—				—				—				—
Fixed income securities:
U.S. Government			50,602				10,224				40,378				—				—				—				—				—
Corporate			123,159				—				123,159				—				—				—				—				—
Other			5,589				—				5,589				—				—				—				—				—
Other types of investments:
Insurance contracts			—				—				—				—				21,645				—				—				21,645
Other			1,967				1,967				—				—				—				—				—				—
Total investments in the fair value hierarchy		$	229,896			$	60,770			$	169,126			$	—			$	22,173			$	528			$	—			$	21,645
Investments measured at Net Asset Value:
Real estate collective funds			23,109																—
Pooled investment funds			108,068																17,444
Total Investments at Fair Value		$	361,073															$	39,617

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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
Other			1,013				1,013				—				—				—				—				—				—
Total investments in the fair value hierarchy		$	225,811			$	58,716			$	167,095			$	—			$	21,603			$	566			$	—			$	21,037
Investments measured at Net Asset Value:
Real estate collective funds			21,699																—
Pooled investment funds			121,724																15,901
Total Investments at Fair Value		$	369,234															$	37,504

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 11. 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.

Nordson Corporation 50

The following tables present an analysis of changes during the years ended October 31, 2018 and 2017 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, 2017		$	21,037			$	21,037
Actual return on plan assets:
Assets held, end of year			862				862
Assets sold during the period			—				—
Purchases			2,760				2,760
Sales			(2,501	)			(2,501	)
Foreign currency translation			(513	)			(513	)
Ending balance at October 31, 2018		$	21,645			$	21,645

		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

Contributions to pension plans in 2019 are estimated to be approximately $22,000.

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

Year		United States				International
2019		$	15,639			$	2,202
2020			17,076				2,728
2021			18,525				3,144
2022			19,894				2,636
2023			22,048				2,736
2024-2028			129,157				17,052

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.

Nordson Corporation 51

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
			2018				2017				2018				2017
Change in benefit obligation:
Benefit obligation at beginning of year		$	75,146			$	71,904			$	599			$	623
Service cost			737				752				20				20
Interest cost			2,529				2,307				20				20
Participant contributions			663				503				—				—
Foreign currency exchange rate change			—				—				(11	)			24
Actuarial (gain) loss			(4,519	)			2,212				(110	)			(81	)
Benefits paid			(2,546	)			(2,532	)			(6	)			(7	)
Benefit obligation at end of year		$	72,010			$	75,146			$	512			$	599
Change in plan assets:
Beginning fair value of plan assets		$	—			$	—			$	—			$	—
Company contributions			1,883				2,029				6				7
Participant contributions			663				503				—				—
Benefits paid			(2,546	)			(2,532	)			(6	)			(7	)
Ending fair value of plan assets		$	—			$	—			$	—			$	—
Funded status at end of year		$	(72,010	)		$	(75,146	)		$	(512	)		$	(599	)
Amounts recognized in financial statements:
Accrued benefit liability		$	(2,360	)		$	(2,148	)		$	(8	)		$	(8	)
Long-term postretirement obligations			(69,650	)			(72,998	)			(504	)			(591	)
Total amount recognized in financial statements		$	(72,010	)		$	(75,146	)		$	(512	)		$	(599	)

		United States								International
			2018				2017				2018				2017
Amounts recognized in accumulated other comprehensive (gain) loss:
Net actuarial (gain) loss		$	14,526			$	20,124			$	(423	)		$	(342	)
Prior service credit			(43	)			(142	)			—				—
Accumulated other comprehensive (gain) loss		$	14,483			$	19,982			$	(423	)		$	(342	)
Amounts expected to be recognized during next fiscal year:
Amortization of net actuarial (gain) loss		$	609			$	995			$	(28	)		$	(20	)
Amortization of prior service cost (credit)			(27	)			(99	)			—				—
Total		$	582			$	896			$	(28	)		$	(20	)

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

		United States								International
			2018				2017				2018				2017
Balance at beginning of year		$	19,982			$	18,480			$	(342	)		$	(265	)
Net (gain) loss arising during the year			(4,519	)			2,212				(110	)			(82	)
Net gain (loss) recognized during the year			(1,079	)			(874	)			20				17
Prior service (cost) credit recognized during the year			99				164				—				—
Exchange rate effect during the year			—				—				9				(12	)
Balance at end of year		$	14,483			$	19,982			$	(423	)		$	(342	)

Nordson Corporation 52

Net postretirement benefit costs include the following components:

		United States												International
			2018				2017				2016				2018				2017				2016
Service cost		$	737			$	752			$	849			$	20			$	20			$	16
Interest cost			2,529				2,307				2,923				20				20				23
Amortization of prior service cost (credit)			(99	)			(164	)			(267	)			—				—				—
Amortization of net actuarial (gain) loss			1,079				874				684				(20	)			(17	)			(24	)
Total benefit cost		$	4,246			$	3,769			$	4,189			$	20			$	23			$	15

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

		United States												International
		2018				2017				2016				2018				2017				2016
Assumptions used to determine benefit obligations at October 31:
Discount rate			4.56	%			3.86	%			4.05	%			3.88	%			3.52	%			3.40	%
Health care cost trend rate			3.75				3.70				3.63				6.35				6.50				6.13
Rate to which health care cost trend rate is assumed to decline (ultimate trend rate)			3.27				3.23				3.24				3.50				3.50				3.50
Year the rate reaches the ultimate trend rate			2026				2026				2026				2037				2037				2031
Assumption used to determine net benefit costs for the years ended October 31:
Discount rate - benefit obligation			3.84	%			4.03	%			4.50	%			3.52	%			3.40	%			4.35	%
Discount rate - service cost		4.11				4.48					4.50			3.54				3.56				4.35
Discount rate - interest cost		3.39				3.27					4.50				3.40				3.20			4.35

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.

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 2018		$	516			$	(411	)		$	11			$	(8	)
Effect on postretirement obligation as of October 31, 2018		$	9,316			$	(7,659	)		$	120			$	(93	)

Contributions to postretirement plans in 2019 are estimated to be approximately $2,400.

Nordson Corporation 53

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

Year		United States				International
2019		$	2,360			$	8
2020			2,725				8
2021			2,993				8
2022			3,239				8
2023			3,528				8
2024-2028			20,613				59

Note 7 — Income taxes

Income tax expense includes the following:

		2018				2017				2016
Current:
U.S. federal		$	39,837			$	54,878			$	44,156
State and local			1,734				3,731				2,256
Foreign			63,522				66,352				53,836
Total current			105,093				124,961				100,248
Deferred:
U.S. federal			(32,829	)			3,596				(2,334	)
State and local			891				1,164				563
Foreign			(2,011	)			(5,232	)			(1,826	)
Total deferred			(33,949	)			(472	)			(3,597	)
		$	71,144			$	124,489			$	96,651

Earnings before income taxes of domestic operations, which are calculated after intercompany profit eliminations, were $192,643, $181,840 and $156,723 in 2018, 2017 and 2016, respectively.

On December 22, 2017 the Act was enacted. It reduces the U.S. federal corporate income tax rate from 35 percent to 21 percent. We have an October 31 fiscal year end, therefore the lower corporate income tax rate will be phased in, resulting in a U.S. statutory federal rate of 23.34 percent for our fiscal year ending October 31, 2018, and 21 percent for subsequent fiscal years. The statutory tax rate of 23.34 percent was applied to earnings in the current year.

The Act requires us to revalue our existing U.S. deferred tax balance to reflect the lower statutory tax rate and pay a one-time transition tax on earnings of certain foreign subsidiaries that were previously deferred from U.S. taxes. As a result, during 2018, we recorded a provisional tax benefit of $49,082 to reflect the revaluation of our tax assets and liabilities at the reduced corporate tax rate. We also recorded a provisional tax expense of $27,618 to reflect the transition tax on previously deferred foreign earnings. The net tax effect of these discrete items resulted in a decrease of $21,464 in income tax expense for 2018. We intend to pay the transition tax in installments over the eight-year period allowable under the Act. The transition tax is primarily included in other long-term liabilities in the Consolidated Balance Sheet at October 31, 2018. The amounts recorded are considered a provisional estimate under the U.S. Securities and Exchange Commission Staff Accounting Bulletin No. 118. The provisional calculations may change after various components of the computation are finalized. Furthermore, we are still analyzing certain aspects of the Act and related interpretive guidance and refining our calculations which could potentially affect the measurement of these balances or potentially give rise to new or additional deferred tax amounts. Certain provisions of the Act will impact the Company starting in 2019. These provisions include, but are not limited to, the creation of the base erosion anti-abuse tax, a general limitation of U.S. federal income taxes on dividends from foreign subsidiaries, a new provision designed to tax global intangible low-taxed income and the repeal of the domestic production activities deduction. We continue to evaluate the future impacts of these provisions and, as of October 31, 2018, have not recorded any impact of any of these future provisions.

As discussed in Note 2, in the first quarter of 2018 we adopted a new standard which simplifies the accounting for share-based payment transactions of which excess tax benefits of $9,498 were reported as net cash provided by operating activities in 2018 and $7,079 and $3,476 of excess tax benefits were reclassified from net cash used in financing activities to net cash provided by operating activities in 2017 and 2016, respectively. This guidance requires that excess tax benefits and tax deficiencies be recognized as income tax expense or benefit in the Consolidated Statements of Income rather than as additional paid-in capital. Our income tax provision for 2018 includes a favorable adjustment to unrecognized tax benefits of $1,120 related to the lapse of statute of limitations.

Nordson Corporation 54

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

Our income tax provision for 2016 also includes discrete tax benefits. 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.

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

		2018				2017				2016
Statutory federal income tax rate			23.34	%			35.00	%			35.00	%
Transition Tax			6.16				—				—
Tax Rate Change Deferred Tax Remeasurement			(10.94	)			—				—
Share-Based and Other Compensation			(1.45	)			—				—
Domestic Production Deduction			(0.82	)			(1.48	)			(1.43	)
Foreign tax rate variances, net of foreign tax credits			(0.46	)			(4.69	)			(4.59	)
State and local taxes, net of federal income tax benefit			0.45				0.76				0.50
Amounts related to prior years			(0.21	)			0.03				(1.20	)
Tax benefit from previously taxed dividends paid			—				—				(1.67	)
Other – net			(0.21	)			—				(0.38	)
Effective tax rate			15.86	%			29.62	%			26.23	%

Earnings before income taxes of international operations, which are calculated before intercompany profit elimination entries, were $255,877, $238,451 and $211,771 in 2018, 2017 and 2016, 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 $1,088,183 and $1,026,793 at October 31, 2018 and 2017, 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 these basis differences because of the multiple methods by which these differences could reverse and the impact of withholding, US state and local taxes and currency translation considerations.

At October 31, 2018 and 2017, total unrecognized tax benefits were $2,891 and $3,781, respectively. The amounts that, if recognized, would impact the effective tax rate were $2,411 and $3,273 at October 31, 2018 and 2017, 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 2018, 2017 and 2016 is as follows:

		2018				2017				2016
Balance at beginning of year		$	3,781			$	3,336			$	6,258
Additions based on tax positions related to the current year			310				529				522
Additions for tax positions of prior years			40				621				310
Reductions for tax positions of prior years			(120	)			(150	)			(140	)
Settlements			—				—				(3,091	)
Lapse of statute of limitations			(1,120	)			(555	)			(523	)
Balance at end of year		$	2,891			$	3,781			$	3,336

At October 31, 2018 and 2017, we had accrued interest and penalty expense related to unrecognized tax benefits of $538 and $623, 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 2015 through 2018 tax years; tax years prior to the 2015 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 2012. 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 55

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

		2018				2017
Deferred tax assets:
Employee benefits		$	56,622			$	84,109
Other accruals not currently deductible for taxes			18,186				28,579
Tax credit and loss carryforwards			16,652				23,976
Inventory adjustments			4,451				8,778
Total deferred tax assets			95,911				145,442
Valuation allowance			(14,862	)			(14,891	)
Total deferred tax assets			81,049				130,551
Deferred tax liabilities:
Depreciation and amortization			171,304				252,489
Other - net			669				1,132
Total deferred tax liabilities			171,973				253,621
Net deferred tax liabilities		$	(90,924	)		$	(123,070	)

At October 31, 2018, we had $6,804 of tax credit carryforwards of which have an indefinite carryforward period. We also had $2,751 Federal, $64,899 state and $15,678 foreign operating loss carryforwards, and $20,149 capital loss carryforward, of which $89,635 will expire in 2019 through 2038, and $13,842 of which has an indefinite carryforward period. The net change in the valuation allowance was a decrease of $29 in 2018 and an increase of $6,587 in 2017. The valuation allowance of $14,862 at October 31, 2018, 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 8 — Notes payable

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

		2018				2017
Maximum borrowings available under bank lines of credit (all foreign banks)		$	76,151			$	75,041
Outstanding borrowings / notes payable (all foreign bank debt)			—				—
Weighted-average interest rate on notes payable			—				—
Unused bank lines of credit		$	76,151			$	75,041

Note 9 — Long-term debt

A summary of long-term debt is as follows:

		2018				2017
Revolving credit agreement, due 2020		$	52,200			$	249,138
Senior notes, due 2018-2025			156,700				172,600
Senior notes, due 2019-2027			100,000				100,000
Senior notes, due 2023-2030			350,000				—
Term loan, due 2018-2020			—				200,000
Term loan, due 2018-2022			605,000				705,000
Euro loan, due 2019			—				12,191
Euro loan, due 2021			16,967				—
Private shelf facility, due 2018-2026			36,111				146,666
Development loans, due 2018-2026			1,086				1,218
			1,318,064				1,586,813
Less current maturities			28,734				326,587
Less unamortized debt issuance costs			3,973				3,829
Long-term maturities		$	1,285,357			$	1,256,397

Nordson Corporation 56

Revolving credit agreement — This $850,000 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 3.10 percent at October 31, 2018.

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 3.45 years. The weighted-average interest rate at October 31, 2018 was 3.03 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 5.24 years. The weighted-average interest rate at October 31, 2018 was 3.04 percent.

Senior notes, due 2023-2030 – These fixed-rate notes entered in 2018 with a group of insurance companies had a remaining weighted-average life of 7.05 years. The weighted-average interest rate at October 31, 2018 was 3.90 percent.

Term loan, due 2018-2020 — In 2015, we entered into a $200,000 term loan facility with a group of banks. This loan was paid off in 2018.

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. The agreement provides for term loans due in three tranches. $100,000 is due in March 2020 with a weighted-average interest rate of 3.24 percent, $200,000 is due in October 2021 with a weighted-average interest rate of 3.19 percent and $305,000 is due in March 2022 with a weighted-average interest rate of 3.26 percent. For the portion that is due in March 2020, $100,000 of this term loan facility was paid down in 2018.

Euro loan, due 2019 — This Euro denominated loan was entered into in 2015 with Bank of America Merrill Lynch International Limited. This loan was paid off in 2018.

Euro loan, due 2021 — This Euro denominated loan was entered into in 2018 with Bank of America Merrill Lynch International Limited. The interest rate is variable based upon the EUR LIBOR rate. The weighted average interest rate at October 31, 2018 was 0.88 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. We paid down $100,000 during 2018. At October 31, 2018, the amount outstanding under this facility was at fixed rates of 2.21 percent and 2.56 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, 2018, are as follows: $28,734 in 2019; $220,938 in 2020; $255,153 in 2021; $335,791 in 2022 and $130,796 in 2023.

Note 10 — 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 $19,131, $17,938 and $18,047 in 2018, 2017 and 2016, respectively.

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

Nordson Corporation 57

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

		2018				2017
Transportation equipment		$	18,226			$	17,594
Other			7,892				8,121
Total capitalized leases			26,118				25,715
Accumulated amortization			(12,956	)			(11,408	)
Net capitalized leases		$	13,162			$	14,307

At October 31, 2018, future minimum lease payments under non-cancelable capitalized and operating leases are as follows:

		Capitalized Leases				Operating Leases
Year:
2019		$	6,161			$	16,603
2020			4,241				11,520
2021			2,152				9,394
2022			909				8,050
2023			665				5,299
Later years			4,070				15,232
Total minimum lease payments			18,198			$	66,098
Less amount representing executory costs			1,926
Net minimum lease payments			16,272
Less amount representing interest			2,867
Present value of net minimum lease payments			13,405
Less current portion			4,555
Long-term obligations at October 31, 2018		$	8,850

Note 11 — Fair value measurements

The inputs to the valuation techniques used to measure fair value are classified into the following categories:

Level 1: Quoted market prices in active markets for identical assets or liabilities.

Level 2: Observable market based inputs or unobservable inputs that are corroborated by market data.

Level 3: Unobservable inputs that are not corroborated by market data.

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

October 31, 2018		Total				Level 1				Level 2				Level 3
Assets:
Foreign currency forward contracts (a)		$	6,428			$	—			$	6,428			$	—
Total assets at fair value		$	6,428			$	—			$	6,428			$	—
Liabilities:
Deferred compensation plans (b)		$	11,018			$	—			$	11,018			$	—
Foreign currency forward contracts (a)			9,289				—				9,289				—
Total liabilities at fair value		$	20,307			$	—			$	20,307			$	—

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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 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 5.

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

		2018								2017
		Carrying Amount				Fair Value				Carrying Amount				Fair Value
Long-term debt (including current portion)			1,314,091				1,293,899				1,582,984				1,587,920

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

•	Long-term debt is valued by discounting future cash flows at currently available rates for borrowing arrangements with similar terms and conditions, which are considered to be Level 2 inputs under the fair value hierarchy. The carrying amount of long-term debt is shown net of unamortized debt issuance costs as described in Note 9.

Note 12 — Derivative financial instruments

We operate internationally and enter into intercompany transactions denominated in foreign currencies. Consequently, we are subject to market risk arising from exchange rate movements between the dates foreign currency transactions occur and the dates they are settled. We regularly use foreign currency forward contracts to reduce our risks related to most of these transactions. These contracts usually have maturities of 90 days or less and generally require us to exchange foreign currencies for U.S. dollars at maturity, at rates stated in the contracts. These contracts are not designated as hedging instruments under U.S. GAAP. Accordingly, the changes in the fair value of the foreign currency forward contracts are recognized in each accounting period in “Other – net” on the Consolidated Statement of Income together with the transaction gain or loss from the related balance sheet position. In 2018, we recognized net losses of $3,151 on foreign currency forward contracts and net gains of $4,284 from the change in fair value of balance sheet positions. 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.

Nordson Corporation 59

The following table summarizes, by currency, the contracts outstanding at October 31, 2018 and 2017:

		Notional Amounts
		Sell					Buy
October 31, 2018 contract amounts:
Euro		$	323,571				$	184,170
Pound sterling			23,879					60,007
Japanese yen			25,408					46,671
Australian dollar			178					7,912
Hong Kong dollar			—					112,414
Singapore dollar			604					14,092
Others			4,730					57,546
Total		$	378,370				$	482,812
October 31, 2017 contract amounts:
Euro		$	144,611				$	78,253
Pound sterling			45,252					54,204
Japanese yen			24,904					28,358
Australian dollar			193					8,185
Hong Kong dollar			—					100,131
Singapore dollar			794					12,681
Others			5,413					51,930
Total		$	221,167				$	333,742

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 2018 and 2017, net gains of $828 and net losses of $760, 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.

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, 2018 and 2017, there were no significant concentrations of credit risk.

Note 13 — Capital shares

Preferred — We have authorized 10,000 Series A convertible preferred shares without par value. No preferred shares were outstanding in 2018, 2017 or 2016.

Common — We have 160,000 authorized common shares without par value. At October 31, 2018 and 2017, there were 98,023 common shares issued. At October 31, 2018 and 2017, the number of outstanding common shares, net of treasury shares, was 58,037 and 57,715, respectively.

Common shares repurchased as part of publicly announced programs during 2018, 2017 and 2016 were as follows:

		Number				Total				Average
Year		of Shares				Amount				per Share
2018			145			$	18,939			$	130.21
2017			—			$	—			$	—
2016			447			$	31,877			$	71.37

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Note 14 — Stock-based compensation

During the 2018 Annual Meeting of Shareholders, our shareholders approved the Amended and Restated 2012 Stock Incentive and Award Plan (the “2012 Plan”). The 2012 Plan provides for the granting of stock options, stock appreciation rights, restricted shares, restricted share units, performance shares, cash awards and other stock or performance-based incentives. A maximum of 4,525 common shares is available for grant under the 2012 Plan.

Stock options — Nonqualified or incentive stock options may be granted to our employees and directors. Generally, options granted to employees may be exercised beginning one year from the date of grant at a rate not exceeding 25 percent per year and expire 10 years from the date of grant. Vesting accelerates upon a qualified termination in connection with a change in control. In the event of termination of employment due to early retirement or normal retirement at age 65, options granted within 12 months prior to termination are forfeited, and vesting continues post retirement for all other unvested options granted. In the event of disability or death, all unvested stock options granted within 12 months prior to termination (or at any time prior to December 28, 2017) fully vest. Termination for any other reason results in forfeiture of unvested options and vested options in certain circumstances. The amortized cost of options is accelerated if the retirement eligibility date occurs before the normal vesting date. Option exercises are satisfied through the issuance of treasury shares on a first-in, first-out basis. We recognized compensation expense related to stock options of $9,964, $9,326 and $7,874 for 2018, 2017 and 2016, respectively.

The following table summarizes activity related to stock options during 2018:

		Number of Options				Weighted˗Average Exercise Price Per Share				Aggregate Intrinsic Value				Weighted˗Average Remaining Term
Outstanding at October 31, 2017			1,922			$	70.08
Granted			368			$	127.67
Exercised			(387	)		$	48.68
Forfeited or expired			(18	)		$	108.33
Outstanding at October 31, 2018			1,885			$	85.33			$	72,193			6.5 years
Vested at October 31, 2018 or expected to vest			1,870			$	85.05			$	72,091			6.5 years
Exercisable at October 31, 2018			956			$	66.82			$	53,374			5.0 years

Summarized information on currently outstanding options follows:

		Range of Exercise Price
		$27 - $44				$45 - $73				$74 - $129
Number outstanding			230				716				939
Weighted-average remaining contractual life, in years			2.4				6.0				8.0
Weighted-average exercise price		$	40.85			$	69.19			$	108.53
Number exercisable			230				491				235
Weighted-average exercise price		$	40.85			$	68.40			$	88.92

As of October 31, 2018, there was $7,740 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 used to estimate the fair value of traded options that have no vesting restrictions and are fully transferable. Option valuation models require the input of 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:

			2018				2017				2016
Expected volatility		24.0%-26.7%				26.0%-29.2%				29.1%-30.4%
Expected dividend yield		0.97%				0.91%-1.17%				1.54%
Risk-free interest rate		2.09%-2.20%				1.89%-2.06%				1.78%-1.90%
Expected life of the option (in years)		5.4-6.2				5.4-6.2				5.4-6.2

The weighted-average expected volatility used to value options granted in 2018, 2017 and 2016 was 25.0 percent, 29.1 percent and 29.6 percent, respectively.

Nordson Corporation 61

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 2018, 2017 and 2016 was $31.42, $28.86 and $18.23, respectively.

The total intrinsic value of options exercised during 2018, 2017 and 2016 was $35,696, $22,317 and $17,271, respectively.

Cash received from the exercise of stock options for 2018, 2017 and 2016 was $18,811, $14,086 and $11,476, respectively.

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

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

For non-employee directors, all restrictions lapse in the event of disability or death. 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 2018:

		Number of Shares				Weighted˗Average Grant Date Fair Value Per Share
Restricted at October 31, 2017			58			$	90.38
Granted			22			$	127.89
Forfeited			(1	)		$	95.20
Vested			(26	)		$	83.95
Restricted at October 31, 2018			53			$	108.82

As of October 31, 2018, there was $2,981 of unrecognized compensation cost related to restricted shares. The cost is expected to be amortized over a weighted average period of 1.7 years. The amount charged to expense related to restricted shares was $2,610, $2,127 and $1,963 in 2018, 2017 and 2016, respectively. These amounts included common share dividends of $70, $64, and $60 in 2018, 2017 and 2016, respectively.

The following table summarizes activity related to restricted share units in 2018:

		Number of Units				Weighted˗Average Grant Date Fair Value
Restricted share units at October 31, 2017			0			$	—
Granted			8			$	126.38
Vested			(8	)		$	126.38
Restricted share units at October 31, 2018			0			$	—

As of October 31, 2018, 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 2018 and 2017 was $1,011 in both years, and was $974 for 2016.

Nordson Corporation 62

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

The following table summarizes activity related to director deferred compensation share equivalent units during 2018:

		Number of Shares				Weighted˗Average Grant Date Fair Value Per Share
Outstanding at October 31, 2017			101			$	46.74
Restricted stock units vested			5			$	126.49
Dividend equivalents			1			$	138.50
Outstanding at October 31, 2018			107			$	51.24

The amount charged to expense related to director deferred compensation was $127, $106 and $158 in 2018, 2017 and 2016, 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 $123.45 for 2018, $103.75 and $104.49 for 2017 and $67.69 per share for 2016. The amounts charged to expense for executive officers and selected other key employees in 2018, 2017 and 2016 were $7,635, $7,398 and $7,083, respectively. The cumulative amount recorded in shareholders’ equity at October 31, 2018, and 2017 was $14,757 and $12,820, 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 $273, $264 and $219 for 2018, 2017 and 2016, respectively.

Shares reserved for future issuance — At October 31, 2018, there were 2,459 of common shares reserved for future issuance through the exercise of outstanding options or rights.

Note 15 — 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 2018, 2017 or 2016.

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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, 2018
Net external sales		$	955,192			$	1,039,366			$	260,110			$	—			$	2,254,668
Depreciation and amortization			31,597				62,594				6,166				8,050				108,407
Operating profit (loss)			259,493				243,523				50,638				(59,097	)			494,557
Identifiable assets (b)			829,696				1,713,404				122,088				763,734		(a)		3,428,922
Expenditures for long-lived assets			46,911				16,205				8,546				18,128				89,790
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				228,062				43,991				(67,931	)			457,702
Identifiable assets (b)			794,699				1,718,844				120,458				790,940		(a)		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				159,531				43,511				(43,754	)			388,431
Identifiable assets (b)			751,153				1,080,711				140,169				463,642		(a)		2,435,675
Expenditures for long-lived assets			17,407				18,967				17,357				7,120				60,851

(a)	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.

(b)	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:

		2018				2017				2016
Net external sales
United States		$	720,832			$	647,657			$	531,117
Americas			158,837				147,026				124,657
Europe			622,108				530,812				503,869
Japan			161,771				147,189				122,054
Asia Pacific			591,120				594,298				527,297
Total net external sales		$	2,254,668			$	2,066,982			$	1,808,994
Long-lived assets
United States		$	279,437			$	266,921			$	209,959
Americas			2,158				2,322				1,730
Europe			41,663				39,102				23,943
Japan			5,492				5,594				6,408
Asia Pacific			57,916				32,472				31,089
Total long-lived assets		$	386,666			$	346,411			$	273,129

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

		2018				2017				2016
Total profit for reportable segments		$	494,557			$	457,702			$	388,431
Interest expense			(49,576	)			(36,601	)			(21,322	)
Interest and investment income			1,384				1,124				728
Other-net			2,154				(1,934	)			657
Income before income taxes		$	448,519			$	420,291			$	368,494

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

		2018				2017				2016
Total assets for reportable segments		$	3,428,922			$	3,424,941			$	2,435,675
Customer advance payments			38,997				34,654				26,175
Eliminations			(46,907	)			(45,056	)			(41,267	)
Total consolidated assets		$	3,421,012			$	3,414,539			$	2,420,583

Note 16 — Supplemental information for the statement of cash flows

		2018				2017				2016
Cash operating activities:
Interest paid		$	42,305			$	36,450			$	23,423
Income taxes paid			87,879				118,096				102,592
Non-cash investing and financing activities:
Capitalized lease obligations incurred		$	5,330			$	6,509			$	5,639
Capitalized lease obligations terminated			415				670				1,033
Shares acquired and issued through exercise of stock options			—				170				212

Note 17 — Quarterly financial data (unaudited)

		First				Second				Third				Fourth
2018:
Sales		$	550,424			$	553,706			$	581,243			$	569,295
Gross margin			301,003				306,828				320,396				307,738
Net income			104,555				91,235				94,884				86,702
Earnings per share:
Basic			1.81				1.57				1.63				1.49
Diluted			1.78				1.55				1.61				1.47
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

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 third quarter of 2018, we recorded a favorable adjustment of unrecognized tax benefits of $1,041 related to the lapse of statute of limitations.

During the first quarter of 2018, we recorded discrete items to income tax expense as a result of the Act. See Note 7 for additional information.

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

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

During the second quarter of 2017, we recorded pre-tax acquisition costs of $13,415 related to 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.

Nordson Corporation 65

Note 18 — 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. 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.

Nordson Corporation 66

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, 2018.

We completed the acquisitions of Sonoscan, Inc. (“Sonoscan”) and Cladach Nua Teoranta (“Clada”) on January 2, 2018, and October 17, 2018, respectively. As permitted by SEC guidance, the scope of our evaluation of internal control over financial reporting as of October 31, 2018 did not include the internal control over financial reporting of Sonoscan and Clada. The results of Sonoscan and Clada are included in our consolidated financial statements from the date each business was acquired. The combined total assets of Sonoscan and Clada represented one percent of our total assets at October 31, 2018. The combined net sales and net income of Sonoscan and Clada represented one percent of our consolidated net sales and less than one percent of our net income for 2018.

Based on our assessment, management concluded that our internal control over financial reporting was effective as of October 31, 2018.

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, 2018. Their report is included herein.

/s/ Michael F. Hilton		/s/ Gregory A. Thaxton
President and		Executive Vice President, Chief Financial Officer
Chief Executive Officer		December 14, 2018
December 14, 2018

Nordson Corporation 67

Report of Independent Registered Public Accounting Firm

To the Shareholders and the Board of Directors of Nordson Corporation

Opinion on Internal Control over Financial Reporting

We have audited Nordson Corporation’s internal control over financial reporting as of October 31, 2018, 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). In our opinion, Nordson Corporation (the Company) maintained, in all material respects, effective internal control over financial reporting as of October 31, 2018, based on the COSO criteria.

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 Sonoscan, Inc. (Sonoscan) and Cladach Nua Teoranta (Clada), which are included in the 2018 consolidated financial statements of the Company and on a combined basis constituted one percent of total assets as of October 31, 2018 and one percent of consolidated net sales and less than one percent of consolidated net income for the year then ended. Our audit of internal control over financial reporting of the Company also did not include an evaluation of the internal control over financial reporting of Sonoscan and Clada.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated balance sheets of the Company as of October 31, 2018 and 2017, the related consolidated statements of income, shareholders’ equity and cash flows, for each of the three years in the period ended October 31, 2018, and the related notes and financial statement schedule listed in the Index at Item 15(a) and our report dated December 14, 2018 expressed an unqualified opinion thereon.

Basis for Opinion

The Company’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 are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audit in accordance with the standards of the PCAOB. 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.

Definition and Limitations of Internal Control Over Financial Reporting

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.

/s/ Ernst & Young LLP

Cleveland, Ohio

December 14, 2018

Nordson Corporation 68

Report of Independent Registered Public Accounting Firm

To the Shareholders and the Board of Directors of Nordson Corporation

Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheets of Nordson Corporation (the Company) as of October 31, 2018 and 2017, 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, 2018, and the related notes and financial statement schedule listed in the Index at Item 15(a) (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at October 31, 2018 and 2017, and the results of its operations and its cash flows for each of the three years in the period ended October 31, 2018, in conformity with U.S. generally accepted accounting principles.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company’s internal control over financial reporting as of October 31, 2018, 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 14, 2018 expressed an unqualified opinion thereon.

Basis for Opinion

These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the of the financial statements. We believe that our audits provide a reasonable basis for our opinion.

/s/ Ernst & Young LLP

We have served as the Company’s auditor since 1956.

Cleveland, Ohio

December 14, 2018

Nordson Corporation 69