Item 8. Financial Statements and Supplementary Data

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Item 8. Financial Statements and Supplementary Data

Consolidated Statements of Income


Years ended October 31, 2020, 2019 and 2018
(In thousands except for per-share amounts)	2020		2019		2018
Sales	$	2,121,100	$	2,194,226	$	2,254,668
Operating costs and expenses:
Cost of sales	990,632		1,002,123		1,018,340
Selling and administrative expenses	693,552		708,990		733,749
Assets held for sale impairment charge	87,371		—		—
	1,771,555		1,711,113		1,752,089
Operating profit	349,545		483,113		502,579
Other income (expense):
Interest expense	(32,160)		(47,145)		(49,576)
Interest and investment income	1,681		1,844		1,384
Other - net	(17,577)		(6,708)		(5,868)
	(48,056)		(52,009)		(54,060)
Income before income taxes	301,489		431,104		448,519
Income tax provision:
Current	65,906		95,031		105,093
Deferred	(13,956)		(1,018)		(33,949)
	51,950		94,013		71,144
Net income	$	249,539	$	337,091	$	377,375
Average common shares	57,757		57,462		57,970
Incremental common shares attributable to outstanding stock options, restricted stock and deferred stock-based compensation	716		740		961
Average common shares and common share equivalents	58,473		58,202		58,931
Basic earnings per share	$	4.32	$	5.87	$	6.51
Diluted earnings per share	$	4.27	$	5.79	$	6.40
Dividends declared per common share	$	1.53	$	1.43	$	1.25

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

Nordson Corporation 36

Table of Co ntents

Consolidated Statements of Comprehensive Income


Years ended October 31, 2020, 2019 and 2018
(In thousands)	2020		2019		2018
Net income	$	249,539	$	337,091	$	377,375
Components of other comprehensive income (loss), net of tax:
Foreign currency translation adjustments	12,910		3,710		(28,619)
Pension and postretirement benefit plans:
Prior service (cost) credit arising during the year	(6)		(148)		(45)
Net actuarial loss arising during the year	(21,607)		(63,138)		(7,783)
Amortization of prior service cost	(232)		(322)		(322)
Amortization of actuarial loss	12,767		6,946		10,536
Settlement loss recognized	1,931		385		200
Total pension and postretirement benefit plans	(7,147)		(56,277)		2,586
Total other comprehensive income (loss)	5,763		(52,567)		(26,033)
Reclassification due to adoption of ASU 2018-02	—		—		(18,846)
Total comprehensive income	$	255,302	$	284,524	$	332,496

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

Nordson Corporation 37

Table of Co ntents

Consolidated Balance Sheets


October 31, 2020 and 2019
(In thousands)
Assets
Current assets:	2020		2019
Cash and cash equivalents	$	208,293	$	151,164
Receivables - net	471,873		530,765
Inventories - net	277,033		283,399
Prepaid expenses and other current assets	43,798		45,867
Assets held for sale	19,615		—
Total current assets	1,020,612		1,011,195
Property, plant and equipment - net	358,618		398,895
Operating right of use lease assets	122,125		—
Goodwill	1,713,354		1,614,739
Intangible assets - net	407,586		445,575
Deferred income taxes	9,831		11,261
Other assets	42,530		34,782
	$	3,674,656	$	3,516,447
Liabilities and shareholders' equity
Current liabilities:
Accounts payable	$	70,949	$	85,139
Income taxes payable	7,841		15,601
Accrued liabilities	167,883		161,655
Customer advance payments	42,323		41,131
Current maturities of long - term debt	38,043		168,738
Operating lease liability - current	16,918		—
Finance lease liability	5,984		5,362
Liabilities held for sale	13,148		—
Total current liabilities	363,089		477,626
Long-term debt	1,067,952		1,075,404
Operating lease liability - noncurrent	109,317		—
Finance lease liability - noncurrent	10,470		9,513
Pension obligations	165,529		158,506
Postretirement obligations	85,249		86,368
Deferred income taxes	66,995		83,564
Other long-term liabilities	47,064		44,421
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, 2020 and 2019	12,253		12,253
Capital in excess of stated value	534,684		483,116
Retained earnings	2,908,738		2,747,650
Accumulated other comprehensive loss	(226,118)		(231,881)
Common shares in treasury, at cost	(1,470,566)		(1,430,093)
Total shareholders' equity	1,758,991		1,581,045
	$	3,674,656	$	3,516,447

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

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Table of Co ntents

Consolidated Statements of Shareholders’ Equity


Years ended October 31, 2020, 2019 and 2018
(In thousands, except for per share data)	Common Shares		Additional Paid-in- Capital		Retained Earnings		Accumulated Other Comprehensive Income (Loss)		Common Shares in Treasury, at cost		TOTAL
October 31, 2017	$	12,253	$	412,785	$	2,164,597	$	(134,435)	$	(1,299,707)	$	1,155,493
Shares issued under company stock and employee benefit plans	—		12,220		—		—		6,591		18,811
Stock-based compensation	—		21,550		—		—		—		21,550
Purchase of treasury shares (180,735 shares)	—		—		—		—		(24,012)		(24,012)
Dividends declared ($1.25 per share)	—		—		(72,443)		—		—		(72,443)
Net income	—		—		377,375		—		—		377,375
Reclassification due to adoption of ASU 2018-02	—		—		18,846		(18,846)		—		—
Other comprehensive income (loss):
Foreign currency translation adjustments	—		—		—		(28,619)		—		(28,619)
Defined benefit pension and post-retirement plans adjustment	—		—		—		2,586		—		2,586
October 31, 2018	$	12,253	$	446,555	$	2,488,375	$	(179,314)	$	(1,317,128)	$	1,450,741
Shares issued under company stock and employee benefit plans	—		18,475		—		—		7,545		26,020
Stock-based compensation	—		18,086		—		—		—		18,086
Purchase of treasury shares (998,004 shares)	—		—		—		—		(120,510)		(120,510)
Dividends declared ($1.43 per share)	—		—		(82,145)		—		—		(82,145)
Net income	—		—		337,091		—		—		337,091
Impact of adoption of ASU 2014-09	—		—		4,329		—		—		4,329

Other comprehensive income (loss):
Foreign currency translation adjustments	—		—		—		3,710		—		3,710
Defined benefit pension and post-retirement plans adjustment	—		—		—		(56,277)		—		(56,277)
October 31, 2019	$	12,253	$	483,116	$	2,747,650	$	(231,881)	$	(1,430,093)	$	1,581,045
Shares issued under company stock and employee benefit plans	—		38,712		—		—		12,141		50,853
Stock-based compensation	—		12,856		—		—		—		12,856
Purchase of treasury shares (384,498 shares)	—		—		—		—		(52,614)		(52,614)
Dividends declared ($1.53 per share)	—		—		(88,347)		—		—		(88,347)
Net income	—		—		249,539		—		—		249,539
Impact of adoption of ASU 2016-02	—		—		(104)		—		—		(104)
Other comprehensive income (loss):
Foreign currency translation adjustments	—		—		—		12,910		—		12,910
Defined benefit pension and post-retirement plans adjustment	—		—		—		(7,147)		—		(7,147)
October 31, 2020	$	12,253	$	534,684	$	2,908,738	$	(226,118)	$	(1,470,566)	$	1,758,991

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

Nordson Corporation 39

Table of Co ntents

Consolidated Statements of Cash Flows


Years ended October 31, 2020, 2019 and 2018
(In thousands)
Cash flows from operating activities:	2020		2019		2018
Net income	$	249,539	$	337,091	$	377,375
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation	56,323		55,454		52,959
Amortization	56,979		54,790		55,448
Provision for losses on receivables	2,165		2,254		1,185
Deferred income taxes	(13,956)		(1,018)		(33,949)
Non-cash stock compensation	12,856		18,086		21,550
Loss on sale of property, plant and equipment	484		953		830
Impairment loss on assets held for sale	87,371		—		—
Other non-cash	3,729		(669)		1,359
Changes in operating assets and liabilities:
Receivables	50,098		(39,992)		10,236
Inventories	5,785		(23,117)		5,532
Prepaid expenses	1,978		(2,024)		(4,046)


Accounts payable	(10,673)		654		(2,671)
Income taxes payable	(7,816)		(3,832)		(2,718)
Accrued liabilities	6,360		(14,027)		2,134
Customer advance payments	(619)		2,193		5,047
Other net	1,818		(3,903)		14,367
Net cash provided by operating activities	502,421		382,893		504,638
Cash flows from investing activities:
Additions to property, plant and equipment	(50,535)		(64,244)		(89,790)
Proceeds from sale of property, plant and equipment	840		1,285		458
Acquisition of businesses, net of cash acquired	(142,414)		(12,486)		(50,586)
Other	(2,000)		(844)		—
Net cash used in investing activities	(194,109)		(76,289)		(139,918)
Cash flows from financing activities:
Proceeds from short-term borrowings	—		—		996
Repayment of short-term borrowings	—		—		(1,006)
Proceeds from long-term debt	165,734		186,635		585,661
Repayment of long-term debt	(319,550)		(254,473)		(854,538)
Repayment of capital lease obligations	(7,605)		(4,859)		(5,333)
Payment of debt issuance costs	—		(1,742)		(1,826)
Issuance of common shares	50,853		26,020		18,811
Purchase of treasury shares	(52,614)		(120,510)		(24,012)
Dividends paid	(88,347)		(82,145)		(72,443)
Net cash used in financing activities	(251,529)		(251,074)		(353,690)
Effect of exchange rate changes on cash	346		(44)		(5,735)
Increase in cash and cash equivalents	57,129		55,486		5,295
Cash and cash equivalents at beginning of year	151,164		95,678		90,383
Cash and cash equivalents at end of year	$	208,293	$	151,164	$	95,678

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 — A contract exists when it has approval and commitment from both parties, the rights of the parties are identified, payment terms are identified, the contract has commercial substance and collectability of the consideration is probable. Revenue is recognized when performance obligations under the terms of the contract with a customer are satisfied. Generally, our revenue results from short-term, fixed-price contracts and primarily is recognized as of a point in time when the product is shipped or at a later point when the control of the product transfers to the customer. Revenue for undelivered items is deferred and included within Accrued liabilities in our Consolidated Balance Sheets. Revenues deferred as of October 31, 2020 and 2019 were not material.

However, for certain contracts related to the sale of customer-specific products within our Advanced Technology Solutions segment, there was a change in revenue recognition upon adoption of the new revenue standard. Previously, these contracts were recognized at the point in time when the shipping terms were satisfied. Under the new revenue standard, we now recognize revenue for these contracts over time as we satisfy performance obligations because of the continuous transfer of control to the customer. The continuous transfer of control to the customer occurs as we enhance assets that are customer controlled and we are contractually entitled to payment for work performed to date plus a reasonable margin.

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

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

We offer assurance type warranties on our products as well as separately sold warranty contracts. Revenue related to warranty contracts that are sold separately is recognized over the life of the warranty term. Certain arrangements may include installation, installation supervision, training, and spare parts, which tend to be completed in a short period of time, at an insignificant cost, and utilizing skills not unique to us, therefore, are typically regarded as inconsequential or not material.

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Notes to Consolidated Financial Statements — (Continued)

We disclose disaggregated revenues by operating segment and geography in accordance with the revenue standard and on the same basis used internally by the chief operating decision maker for evaluating performance of operating segments and for allocating resources. Refer to Note 16 for details on our operating segments.

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 $7,174, $10,479 and $12,451 in 2020, 2019 and 2018, 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 $63,591, $60,018 and $58,806 in 2020, 2019 and 2018, respectively. As a percentage of sales, research and development expenses were 3.0, 2.7 and 2.6 percent in 2020, 2019 and 2018, respectively.

Earnings per share — Basic earnings per share are computed based on the weighted-average number of common shares outstanding during each year, while diluted earnings per share are based on the weighted-average number of common shares and common share equivalents outstanding. Common share equivalents consist of shares issuable upon exercise of stock options computed using the treasury stock method, as well as restricted stock and deferred stock-based compensation. Options whose exercise price is higher than the average market price are excluded from the calculation of diluted earnings per share because the effect would be anti-dilutive. Options for 95 common shares were excluded from the diluted earnings per share calculation in 2020 and 176 options were excluded from the calculation of diluted earnings per share in 2019 because their effect would have been anti-dilutive. No options were excluded from the calculation of diluted earnings per share in 2018. Under the Amended and 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.

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 the lower of cost or net realizable value. Cost was determined using the last-in, first-out (LIFO) method for 19 percent of consolidated inventories at October 31, 2020 and 19 percent of consolidated inventories at October 31, 2019. The first-in, first-out (FIFO) method is used for all other inventories. Consolidated inventories would have been $4,545 and $6,145 higher than reported at October 31, 2020 and 2019, 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 finance 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 2020, 2019 or 2018.

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Notes to Consolidated Financial Statements — (Continued)

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, 2020, the weighted-average useful lives for each major category of amortizable intangible assets were:


Patent/technology costs			12 years
Customer relationships			14 years
Noncompete agreements			4 years
Trade names			15 years

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

Accumulated other comprehensive loss — Accumulated other comprehensive loss at October 31, 2020 and 2019 consisted of:


	Cumulative translation adjustments		Pension and postretirement benefit plan adjustments		Accumulated other comprehensive loss
Balance at October 31, 2019	$	(53,332)	$	(178,549)	$	(231,881)
Pension and postretirement plan changes, net of tax of $(2,404)	—		(7,147)		(7,147)
Currency translation losses	12,910		—		12,910
Balance at October 31, 2020	$	(40,422)	$	(185,696)	$	(226,118)

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 is 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 2020 and 2019:


	2020		2019
Balance at beginning of year	$	11,006	$	12,195
Accruals for warranties	11,662		9,670
Warranty payments	(12,330)		(10,881)
Currency adjustments	212		22
Balance at end of year	$	10,550	$	11,006

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Notes to Consolidated Financial Statements — (Continued)

Note 2 — Recently issued accounting standards

New accounting guidance adopted:

On November 1, 2019, we adopted Accounting Standards Update (ASU) 2016-02, Accounting Standards Codification (ASC) 842, “Leases.” This standard 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 12 months. We elected to use the transition option, which allows entities to initially apply the new standard at the adoption date and recognize a cumulative effect adjustment to the opening balance of retained earnings in the period of adoption without restating prior periods. We elected the practical expedient package related to the identification of leases in contracts, lease classification, and accounting for initial direct costs whereby prior conclusions do not have to be reassessed for leases that commenced before the effective date. As we have not reassessed such conclusions, we did not adopt the practical expedient to use hindsight to determine the likelihood of whether a lease will be extended or terminated, to separate non-lease components within our lease portfolios, or whether a purchase option will be exercised. There was not a material cumulative-effect adjustment to our beginning retained earnings for the adoption of this standard. Upon adoption, we recognized operating right-of-use assets and lease liabilities in our Consolidated Balance Sheet of $130,538 and $134,853 as of November 1, 2019, respectively, and operating right-of-use assets and lease liabilities were $122,125 and $126,235 as of October 31, 2020, respectively. Adoption of the new standard did not have a material impact on our Consolidated Statements of Income and Cash Flows. Refer to Note 11 for further discussion of leases.

In June 2016, the Financial Accounting Standards Board (FASB) issued ASU 2016-13, “Financial Instruments – Credit Losses (Topic 326),” which changes the impairment model for most financial instruments. Prior guidance required the recognition of credit losses based on an incurred loss impairment methodology that reflects losses once the losses are probable. The new standard requires the use of a current expected credit loss model to immediately recognize an estimate of credit losses that are expected to occur over the life of the financial instruments that are in the scope of this update, including trade receivables. The standard does not prescribe a specific method to make an estimate, so the application requires judgment and should consider historical information, current information, and reasonable and supportable forecasts, and includes estimates of prepayment. We adopted the new standard on November 1, 2020 with no material impact to the Consolidated Financial Statements.

In August 2018, the FASB issued ASU 2018-15, “Intangibles – Goodwill and Other Internal-Use Software (Subtopic 350-40),” a new standard which makes a number of changes meant to help entities evaluate the accounting for fees paid by a customer in a cloud computing arrangement (hosting arrangement), by providing guidance in determining when the arrangement includes a software license. We adopted the new standard on November 1, 2020 with no material impact to the 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. We adopted the new standard on November 1, 2020 with no material impact to the Consolidated Financial Statements.

New accounting guidance issued and not yet adopted:

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 1.00 percent point change in assumed health care cost trend rates on the (a) aggregate of the service and interest cost components of net periodic benefit costs and (b) benefit obligations for postretirement health care benefits 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 requirements 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. The standard will be effective for us beginning November 1, 2021. Early adoption is permitted. We are currently assessing the impact this standard will have on our Consolidated Financial Statements.

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Notes to Consolidated Financial Statements — (Continued)

In December 2019, the FASB issued ASU 2019-12, “Income Taxes (ASC 740) – Simplifying the Accounting for Income Taxes,” which simplifies the accounting for income taxes by removing certain exceptions to the general principles in ASC 740. The amendments also improve consistent application of and simplify U.S. GAAP for other areas of ASC 740 by clarifying and amending existing guidance. The standard will be effective for us beginning November 1, 2021. Early adoption is permitted, including adoption in any interim period for which financial statements have not yet been issued. Depending on the amendment, adoption may be applied on the retrospective, modified retrospective or prospective basis. We are currently assessing the impact of this standard on our Consolidated Financial Statements.

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.

2020 acquisitions

On September 1, 2020, we acquired 100 percent of the outstanding shares of vivaMOS Ltd. ("vivaMOS"), a developer and fabricator of high-end large-area complementary metal–oxide–semiconductor (CMOS) image sensors for a wide range of X-ray applications. We acquired vivaMOS for an aggregate purchase price of $17,154 net of cash and other closing adjustments of approximately $158, utilizing cash on hand. Based on the fair value of the assets acquired and the liabilities assumed, goodwill of $14,394 and identifiable intangible assets of $4,040 were recorded. The identifiable intangible assets consist primarily of $3,900 of technology (amortized over 10 years) and $140 of non-compete agreements (amortized over 3 years). Goodwill associated with this acquisition is not tax deductible. This acquisition is being reported in our Advanced Technology Solutions segment and the results of vivaMOS are not material to our Consolidated Financial Statements. As of October 31, 2020, the purchase price allocation remains preliminary as we complete our assessments of intangible assets and income taxes.

On June 1, 2020, we acquired 100 percent of the outstanding shares of Fluortek, Inc. ("Fluortek"), a precision plastic extrusion manufacturer that provides custom dimensioned tubing to the medical device industry. We acquired Fluortek for an aggregate purchase price of $125,260, net of cash and other closing adjustments of approximately $515, utilizing cash on hand. Based on the fair value of the assets acquired and the liabilities assumed, property, plant and equipment and working capital – net of $19,843, goodwill of $76,047 and identifiable intangible assets of $29,370 were recorded. The identifiable intangible assets consist primarily of $19,700 of customer relationships (amortized over 12 years), $7,400 of technology (amortized over 10 years), $1,500 of tradenames (amortized over 10 years), and $770 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 Solutions segment and the results for Fluortek are not material to the our Consolidated Financial Statements. As of October 31, 2020, the purchase price allocation remains preliminary as we complete our assessment of income taxes.

2019 acquisition

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

2018 acquisitions

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

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. Goodwill associated with this acquisition is tax deductible. This acquisition is being reported in our Advanced Technology Solutions segment.

Nordson Corporation 45

Notes to Consolidated Financial Statements — (Continued)

Note 4 — Assets Held for Sale

In the fourth quarter of 2020, we committed to a plan to sell our screws and barrels product line within the Adhesives reporting unit under our Industrial Precision Solutions operating segment and determined that it met the criteria to be classified as held for sale. Therefore, these assets and liabilities have been presented as held for sale in the Consolidated Balance Sheet as of October 31, 2020. Assets and liabilities classified as held for sale are measured at the lower of carrying value or fair value less costs to sell. We entered into a letter of intent to sell the screws and barrels product line in October 2020. In December 2020, we entered into a definitive agreement with the buyer.

Before measuring the fair value less costs to sell of the disposal group as a whole, we first reviewed individual assets and liabilities to determine if any fair value adjustments were required and concluded no individual asset impairments were required. Then, based on the definitive agreement entered into by us and the buyer, we determined the fair value of the disposal group to be equal to the selling price, less costs to sell. Based on this review, we recorded a non-cash, assets held for sale impairment charge of $87,371.

The assets and liabilities of the screws and barrels product line classified as held for sale at October 31, 2020 were as follows:


	2020
Receivables - net	$	14,327
Inventories - net	9,854
Prepaid expenses and other current assets	696
Property, plant and equipment - net	58,950
Other assets	23,159
Impairment on carrying value	(87,371)
Assets held for sale	$	19,615

Accounts payable	$	4,625
Accrued liabilities	3,352
Other liabilities	5,171
Liabilities held for sale	$	13,148

The pending transaction is subject to customary closing conditions and is expected to close no later than the third quarter of 2021.

Excluding the non-cash, assets held for sale impairment charge of $87,371 recorded in the fourth quarter of 2020, the operating results of the screws and barrels product line were not material to our Consolidated Financial Statements for any period presented.

Nordson Corporation 46

Notes to Consolidated Financial Statements — (Continued)


Note 5 — Details of Consolidated Balance Sheet	2020		2019
Receivables:
Accounts	$	445,360	$	506,318
Notes	4,592		3,980
Other	30,966		30,268
	480,918		540,566
Allowance for doubtful accounts	(9,045)		(9,801)
	$	471,873	$	530,765
Inventories:
Raw materials and component parts	$	94,630	$	102,044
Work-in-process	44,403		42,904
Finished goods	183,860		183,973
	322,893		328,921
Obsolescence and other reserves	(41,315)		(39,377)
LIFO reserve	(4,545)		(6,145)
	$	277,033	$	283,399
Property, plant and equipment:
Land	$	8,816	$	10,468
Land improvements	4,611		4,390
Buildings	253,621		256,195
Machinery and equipment	464,171		489,864
Enterprise management system	56,103		53,020
Construction-in-progress	29,897		34,944
Leased property under capitalized leases	32,590		29,528
	849,809		878,409
Accumulated depreciation and amortization	(491,191)		(479,514)
	$	358,618	$	398,895
Accrued liabilities:
Salaries and other compensation	$	52,260	$	57,773
Pension and retirement	10,282		9,993
Taxes other than income taxes	13,346		8,606
Customer commissions	9,158		9,030
Other	82,837		76,253
	$	167,883	$	161,655

Note 6 — Goodwill and intangible assets

We account for goodwill and other intangible assets in accordance with the provisions of ASC 350 and account for business combinations using the acquisition method of accounting and accordingly, the assets and liabilities of the entities acquired are recorded at their estimated fair values at the acquisition date. Goodwill is the excess of purchase price over the fair value of tangible and identifiable intangible net assets acquired in various business combinations. Goodwill is not amortized but is 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. We assess the fair value of reporting units on a non-recurring basis using a quantitative analysis that uses 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. The implied fair value of our reporting units is determined based on significant unobservable inputs, as discussed below; accordingly, these inputs fall within Level 3 of the fair value hierarchy. The discounted cash flow method (Income Approach) uses assumptions for revenue growth, operating margin, and working capital turnover that are based on management’s strategic plans tempered

Nordson Corporation 47

Notes to Consolidated Financial Statements — (Continued)

by performance trends and reasonable expectations about those trends. Terminal value calculations employ a published formula known as the Gordon Growth Model Method that essentially captures the present value of perpetual cash flows beyond the last projected period assuming a constant Weighted Average Cost of Capital (WACC) methodology and growth rate. For each reporting unit, a sensitivity analysis is performed to vary the discount and terminal growth rates in order to provide a range of reasonableness for detecting impairment. Discount rates are developed using a WACC methodology. The WACC represents the blended average required rate of return for equity and debt capital based on observed market return data and company specific risk factors.

In the application of the guideline public company method (Market Approach), fair value is determined using transactional evidence for similar publicly traded equity. The comparable company guideline group is determined based on relative similarities to each reporting unit since exact correlations are not available. An indication of fair value for each reporting unit is based on the placement of each reporting unit within a range of multiples determined for its comparable guideline company group. Valuation multiples are derived by dividing latest twelve-month performance for revenues and Earnings Before Interest, Taxes, Depreciation and Amortization (EBITDA) into total invested capital, which is the sum of traded equity plus interest bearing debt less cash. These multiples are applied against the revenue and EBITDA of each reporting unit. While the implied indications of fair value using the guideline public company method yield meaningful results, the discounted cash flow method of the income approach includes management’s thoughtful projections and insights as to what the reporting units will accomplish in the near future. Accordingly, the reasonable, implied fair value of each reporting unit is a blend based on the consideration of both the Income and Market approaches.

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. Based on our annual impairment tests in 2020, 2019 and 2018, the fair value of each reporting unit exceeded its carrying value, and accordingly we did not record any goodwill impairment charges in 2020, 2019 or 2018.

Our reporting units include components of the Industrial Precision Solutions and the Advanced Technology Solutions segments.

Changes in the carrying amount of goodwill during 2020 by operating segment:


	Industrial Precision Solutions		Advanced Technology Solutions		Total
Balance at October 31, 2019	$	411,461	$	1,203,278	$	1,614,739
Acquisitions	—		90,441		90,441
Other	(453)				(453)
Currency effect	4,854		3,773		8,627
Balance at October 31, 2020	$	415,862	$	1,297,492	$	1,713,354

The Other activity above reflects an allocation of goodwill to the disposal group classified as held for sale. See Note 4, Assets Held for Sale.

Changes in the carrying amount of goodwill during 2019 by operating segment:


	Industrial Precision Solutions		Advanced Technology Solutions		Total
Balance at October 31, 2018	$	413,049	$	1,194,969	$	1,608,018
Acquisition	—		9,225		9,225
Currency effect	(1,588)		(916)		(2,504)
Balance at October 31, 2019	$	411,461	$	1,203,278	$	1,614,739

Accumulated impairment losses, which were recorded in 2009, were $232,789 at October 31, 2020 and October 31, 2019. Of these losses, $229,173 related to the Advanced Technology Solutions segment and $3,616 related to the Industrial Precision Solutions segment.

Nordson Corporation 48

Notes to Consolidated Financial Statements — (Continued)

Information regarding intangible assets subject to amortization:


	October 31, 2020
	Carrying Amount		Accumulated Amortization		Net Book Value
Customer relationships	$	483,568	$	193,617	$	289,951
Patent/technology costs	153,555		76,934		76,621
Trade name	74,240		34,693		39,547
Noncompete agreements	9,908		8,444		1,464
Other	1,403		1,400		3
Total	$	722,674	$	315,088	$	407,586


	October 31, 2019
	Carrying Amount		Accumulated Amortization		Net Book Value
Customer relationships	$	480,007	$	173,996	$	306,011
Patent/technology costs	154,735		71,663		83,072
Trade name	96,655		41,303		55,352
Noncompete agreements	11,540		10,406		1,134
Other	1,400		1,394		6
Total	$	744,337	$	298,762	$	445,575

Amortization expense for 2020, 2019 and 2018 was $56,979, $54,790 and $55,448 respectively.

Estimated amortization expense for each of the five succeeding years:


Year	Amounts
2021	$	50,576
2022	$	46,685
2023	$	45,697
2024	$	40,815
2025	$	39,115

Note 7 — Retirement, pension and other postretirement plans

Retirement plans — We have funded contributory retirement plans covering certain employees. Our contributions are primarily determined by the terms of the plans, subject to the limitation that they shall not exceed the amounts deductible for income tax purposes. We also sponsor unfunded contributory supplemental retirement plans for certain employees. Generally, benefits under these plans vest gradually over a period of approximately three years from date of employment, and are based on the employee’s contribution. The expense applicable to retirement plans for 2020, 2019 and 2018 was approximately $20,265, $22,573 and $22,634, 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.

Nordson Corporation 49

Notes to Consolidated Financial Statements — (Continued)

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
	2020		2019		2020		2019
Change in benefit obligation:
Benefit obligation at beginning of year	$	551,997	$	425,605	$	97,990	$	87,227
Service cost	20,635		14,587		2,099		1,933
Interest cost	15,824		18,304		1,025		1,670
Participant contributions	—		—		83		83
Plan amendments	—		—		—		186
Settlements	(4,992)		—		—		(3,018)
Foreign currency exchange rate change	—		—		2,814		106
Actuarial loss	47,788		107,662		2,729		11,852
Benefits paid	(15,484)		(14,161)		(1,891)		(2,049)
Benefit obligation at end of year	$	615,768	$	551,997	$	104,849	$	97,990

Change in plan assets:
Beginning fair value of plan assets	$	448,931	$	361,073	$	39,640	$	39,617
Actual return on plan assets	41,712		76,700		3,697		707
Company contributions	40,083		25,319		3,365		3,696
Participant contributions	—		—		83		83
Settlements	(4,992)		—		—		(3,018)
Foreign currency exchange rate change	—		—		582		604
Benefits paid	(15,484)		(14,161)		(1,891)		(2,049)
Ending fair value of plan assets	$	510,250	$	448,931	$	45,476	$	39,640

Funded status at end of year	$	(105,518)	$	(103,066)	$	(59,373)	$	(58,350)

Amounts recognized in financial statements:
Noncurrent asset	$	3,162	$	2,171	$	3,321	$	1,375
Accrued benefit liability	(5,211)		(6,435)		(634)		(21)
Long-term pension obligations	(103,469)		(98,802)		(62,060)		(59,704)
Total amount recognized in financial statements	$	(105,518)	$	(103,066)	$	(59,373)	$	(58,350)


	United States				International
	2020		2019		2020		2019
Amounts recognized in accumulated other comprehensive (gain) loss:
Net actuarial loss	$	192,593	$	178,390	$	32,097	$	33,826
Prior service credit	(16)		(100)		(2,137)		(2,342)
Accumulated other comprehensive loss	$	192,577	$	178,290	$	29,960	$	31,484

Amounts expected to be recognized during next fiscal year:
Amortization of net actuarial loss	$	14,297	$	13,591	$	3,049	$	2,945
Amortization of prior service credit	(81)		(84)		(299)		(288)
Total	$	14,216	$	13,507	$	2,750	$	2,657

Nordson Corporation 50

Notes to Consolidated Financial Statements — (Continued)

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


	United States				International
	2020		2019		2020		2019
Balance at beginning of year	$	178,290	$	130,627	$	31,484	$	20,460
Net loss arising during the year	30,743		54,304		305		12,737
Prior service cost arising during the year	—		—		—		186
Net gain recognized during the year	(14,032)		(6,702)		(2,972)		(1,696)
Prior service credit recognized during the year	84		61		290		303
Settlement loss	(2,508)		—		—		(470)
Exchange rate effect during the year	—		—		853		(36)
Balance at end of year	$	192,577	$	178,290	$	29,960	$	31,484

Information regarding the accumulated benefit obligation is as follows:


	United States				International
	2020		2019		2020		2019
For all plans:
Accumulated benefit obligation	$	571,036	$	513,861	$	96,252	$	83,439

For plans with benefit obligations in excess of plan assets:
Projected benefit obligation	553,403		491,816		92,775		86,534
Accumulated benefit obligation	508,671		453,681		85,189		73,293
Fair value of plan assets	444,723		386,580		30,797		27,769

Net periodic pension costs include the following components:


	United States						International
	2020		2019		2018		2020		2019		2018
Service cost	$	20,635	$	14,587	$	13,052	$	2,099	$	1,933	$	2,048
Interest cost	15,824		18,304		14,797		1,025		1,670		1,656
Expected return on plan assets	(24,667)		(23,341)		(21,964)		(1,273)		(1,592)		(1,512)
Amortization of prior service cost (credit)	(84)		(61)		(22)		(290)		(303)		(316)
Amortization of net actuarial loss	14,032		6,702		9,479		2,972		1,696		2,115
Settlement loss	2,508		—		—		—		470		252
Total benefit cost	$	28,248	$	16,191	$	15,342	$	4,533	$	3,874	$	4,243

Net periodic pension cost for 2020, 2019 and 2018 included a settlement loss of $2,508, $470 and $252, respectively, due to lump sum retirement payments.

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

Nordson Corporation 51

Notes to Consolidated Financial Statements — (Continued)

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


	United States						International
	2020		2019		2018		2020		2019		2018
Assumptions used to determine benefit obligations at October 31:
Discount rate	2.85	%	3.25	%	4.53	%	1.01	%	1.26	%	2.14	%
Rate of compensation increase	4.00		4.00		3.90		2.69		3.12		3.12
Assumptions used to determine net benefit costs for the years ended October 31:
Discount rate - benefit obligation	3.25		4.53		3.80		1.26		2.14		2.07
Discount rate - service cost	3.56		4.70		4.01		1.12		1.82		1.76
Discount rate - interest cost	2.78		4.15		3.31		1.05		1.90		1.83
Expected return on plan assets	5.75		6.00		6.00		3.22		3.96		3.91
Rate of compensation increase	4.00		3.90		3.61		3.12		3.12		3.13

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

The discount rate reflects the current rate at which pension liabilities could be effectively settled at the end of the year. The discount rate used considers a yield derived from matching projected pension payments with maturities of a portfolio of available bonds that receive the highest rating given from a recognized investments ratings agency. The changes in the discount rates in 2020, 2019, and 2018 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 management’s 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 percent 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.

The allocation of pension plan assets as of October 31, 2020 and 2019 is as follows:


	United States				International
	2020		2019		2020		2019
Asset Category
Equity securities	11	%	11	%	—	%	—	%
Debt securities	49		53		—		—
Insurance contracts	—		—		54		54
Pooled investment funds	39		35		44		45
Other	1		1		2		1
Total	100	%	100	%	100	%	100	%

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

Our United States plans comprise 92 percent of the Company's 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 2020, the target in “return-seeking assets” is 30 percent and 70 percent in fixed income assets. 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.

Nordson Corporation 52

Notes to Consolidated Financial Statements — (Continued)

Our international plans comprise 8 percent of the Company's 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, 2020 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	$	1,331	$	1,331	$	—	$	—	$	759	$	759	$	—	$	—
Money market funds	5,059		5,059		—		—		—		—		—		—
Equity securities:
Basic materials	1,750		1,750		—		—		—		—		—		—
Consumer goods	5,024		5,024		—		—		—		—		—		—
Financial	4,745		4,745		—		—		—		—		—		—
Healthcare	4,518		4,518		—		—		—		—		—		—
Industrial goods	3,588		3,588		—		—		—		—		—		—
Technology	5,706		5,706		—		—		—		—		—		—
Utilities	685		685		—		—		—		—		—		—
Mutual funds	24,266		24,266		—		—		—		—		—		—
Fixed income securities:
U.S. Government	71,855		8,267		63,588		—		—		—		—		—
Corporate	173,046		—		173,046		—		—		—		—		—
Other	6,673		—		6,673		—		—		—		—		—
Other types of investments:
Insurance contracts	—		—		—		—		24,496		—		—		24,496
Other	845		845		—		—		—		—		—		—
Total investments in the fair value hierarchy	$	309,091	$	65,784	$	243,307	$	—	$	25,255	$	759	$	—	$	24,496

Investments measured at Net Asset Value:
Real estate collective funds	38,996								—
Pooled investment funds	162,163								20,221
Total Investments at Fair Value	$	510,250							$	45,476

Nordson Corporation 53

Notes to Consolidated Financial Statements — (Continued)

The fair values of our pension plan assets at October 31, 2019 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	$	1,208	$	1,208	$	—	$	—	$	441	$	441	$	—	$	—
Money market funds	5,566		5,566		—		—		—		—		—		—
Equity securities:
Basic materials	2,318		2,318		—		—		—		—		—		—
Consumer goods	4,412		4,412		—		—		—		—		—		—
Financial	6,120		6,120		—		—		—		—		—		—
Healthcare	4,460		4,460		—		—		—		—		—		—
Industrial goods	3,152		3,152		—		—		—		—		—		—
Technology	5,064		5,064		—		—		—		—		—		—
Utilities	937		937		—		—		—		—		—		—
Mutual funds	19,674		19,674		—		—		—		—		—		—
Fixed income securities:
U.S. Government	83,025		13,094		69,931		—		—		—		—		—
Corporate	151,607		—		151,607		—		—		—		—		—
Other	5,051		—		5,051		—		—		—		—		—
Other types of investments:
Insurance contracts	—		—		—		—		21,245		—		—		21,245
Other	1,101		1,101		—		—		—		—		—		—
Total investments in the fair value hierarchy	$	293,695	$	67,106	$	226,589	$	—	$	21,686	$	441	$	—	$	21,245

Investments measured at Net Asset Value:
Real estate collective funds	33,917								—
Pooled investment funds	121,319								17,954
Total Investments at Fair Value	$	448,931							$	39,640

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

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

Money market funds** - Money market funds are public investment vehicles that are valued with a net asset value of one dollar. This is a quoted price in an active market and is classified as Level 1.
Equity securities** - Common stocks and mutual funds are valued at the closing price reported on the active market on which the individual securities are traded and are classified as Level 1.
Fixed income securities** - U.S. Treasury bills reflect the closing price on the active market in which the securities are traded and are classified as Level 1. Securities of U.S. agencies are valued using bid evaluations and are classified as Level 2. Corporate fixed income securities are valued using evaluated prices, such as dealer quotes, bids and offers and are therefore classified as Level 2.
Insurance contracts** - Insurance contracts are investments with various insurance companies. The contract value represents the best estimate of fair value. These contracts do not hold any specific assets. These investments are classified as Level 3.
Real estate collective funds** – These funds are valued using the net asset value of the underlying properties. Net asset value is calculated using a combination of key inputs, such as revenue and expense growth rates, terminal capitalization rates and discount rates.
Pooled investment funds** - These are public investment vehicles valued using the net asset value. The net asset value is based on the value of the assets owned by the plan, less liabilities. These investments are not quoted on an active exchange.

Nordson Corporation 54

Notes to Consolidated Financial Statements — (Continued)

The following tables present an analysis of changes during the years ended October 31, 2020 and 2019 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, 2019	$	21,245	$	21,245
Actual return on plan assets:
Assets held, end of year	1,739		1,739
Assets sold during the period	—		—
Purchases	2,462		2,462
Sales	(1,495)		(1,495)
Foreign currency translation	545		545
Ending balance at October 31, 2020	$	24,496	$	24,496


	Fair Value Measurements Using Significant Unobservable Inputs (Level 3)
	Insurance contracts		Total
Beginning balance at October 31, 2018	$	21,645	$	21,645
Actual return on plan assets:
Assets held, end of year	913		913
Assets sold during the period	—		—
Purchases	2,431		2,431
Sales	(4,102)		(4,102)
Foreign currency translation	358		358
Ending balance at October 31, 2019	$	21,245	$	21,245

Contributions to pension plans in 2021 are estimated to be approximately $43,721.

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


Year	United States		International
2021	$	23,045	$	3,488
2022	20,262		3,042
2023	21,686		3,069
2024	23,213		3,527
2025	25,209		3,721
2026-2030	150,280		19,949

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 55

Notes to Consolidated Financial Statements — (Continued)

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
	2020		2019		2020		2019
Change in benefit obligation:
Benefit obligation at beginning of year	$	88,660	$	72,010	$	454	$	512
Service cost	666		545		15		16
Interest cost	2,345		2,984		13		19
Participant contributions	611		684		—		—
Foreign currency exchange rate change	—		—		(5)		(1)
Actuarial (gain) loss	(2,024)		15,101		(26)		(86)
Benefits paid	(2,613)		(2,664)		(6)		(6)
Benefit obligation at end of year	$	87,645	$	88,660	$	445	$	454

Change in plan assets:
Beginning fair value of plan assets	$	—	$	—	$	—	$	—
Company contributions	2,002		1,980		6		6
Participant contributions	611		684		—		—
Benefits paid	(2,613)		(2,664)		(6)		(6)
Ending fair value of plan assets	$	—	$	—	$	—	$	—

Funded status at end of year	$	(87,645)	$	(88,660)	$	(445)	$	(454)

Amounts recognized in financial statements:
Accrued benefit liability	$	(2,835)	$	(2,740)	$	(6)	$	(6)
Long-term postretirement obligations	(84,810)		(85,920)		(439)		(448)
Total amount recognized in financial statements	$	(87,645)	$	(88,660)	$	(445)	$	(454)


	United States				International
	2020		2019		2020		2019
Amounts recognized in accumulated other comprehensive (gain) loss:
Net actuarial (gain) loss	$	25,614	$	28,992	$	(466)	$	(482)
Prior service credit	—		(16)		—		—
Accumulated other comprehensive (gain) loss	$	25,614	$	28,976	$	(466)	$	(482)
Amounts expected to be recognized during next fiscal year:
Amortization of net actuarial (gain) loss	$	1,388	$	1,674	$	(39)	$	(37)
Amortization of prior service credit	—		(16)		—		—
Total	$	1,388	$	1,658	$	(39)	$	(37)

Nordson Corporation 56

Notes to Consolidated Financial Statements — (Continued)

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


	United States				International
	2020		2019		2020		2019
Balance at beginning of year	$	28,976	$	14,483	$	(482)	$	(423)
Net (gain) loss arising during the year	(2,024)		15,101		(26)		(86)
Net gain (loss) recognized during the year	(1,355)		(634)		36		28
Prior service credit recognized during the year	17		26		—		—
Exchange rate effect during the year	—		—		6		(1)
Balance at end of year	$	25,614	$	28,976	$	(466)	$	(482)

Net postretirement benefit costs include the following components:


	United States						International
	2020		2019		2018		2020		2019		2018
Service cost	$	666	$	545	$	709	$	15	$	16	$	20
Interest cost	2,345		2,984		2,557		13		19		20
Amortization of prior service credit	(17)		(26)		(99)		—		—		—
Amortization of net actuarial (gain) loss	1,355		634		1,079		(36)		(28)		(20)
Total benefit cost (credit)	$	4,349	$	4,137	$	4,246	$	(8)	$	7	$	20

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


	United States						International
	2020		2019		2018		2020		2019		2018
Assumptions used to determine benefit obligations at October 31:
Discount rate	2.84	%	3.27	%	4.56	%	2.94	%	3.03	%	3.88	%
Health care cost trend rate	3.40		3.62		3.75		4.22		4.00		6.35
Rate to which health care cost trend rate is assumed to incline/decline (ultimate trend rate)	3.17		3.24		3.27		4.05		4.05		3.50
Year the rate reaches the ultimate trend rate	2026		2026		2026		2040		2040		2037
Assumption used to determine net benefit costs for the years ended October 31:
Discount rate benefit obligation	3.27	%	4.56	%	3.86	%	3.03	%	3.88	%	3.52	%
Discount rate service cost	3.61		4.77		4.11		3.05		3.90		3.54
Discount rate interest cost	2.79		4.18		3.39		2.88		3.80		3.40

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

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 net postretirement benefit cost components in 2020	$	431	$	(345)	$	7	$	(5)
Effect on postretirement obligation as of October 31, 2020	$	11,019	$	(9,100)	$	103	$	(80)

Contributions to postretirement plans in 2021 are estimated to be approximately $2,800.

Nordson Corporation 57

Notes to Consolidated Financial Statements — (Continued)

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


Year	United States		International
2021	$	2,835	$	6
2022	3,047		6
2023	3,238		6
2024	3,444		6
2025	3,623		6
2026-2030	20,133		46

Note 8 — Income taxes

Income tax expense includes the following:


	2020		2019		2018
Current:
U.S. federal	$	19,265	$	40,012	$	39,837
State and local	984		3,429		1,734
Foreign	45,657		51,590		63,522
Total current	65,906		95,031		105,093
Deferred:
U.S. federal	(10,143)		1,470		(32,829)
State and local	(1,023)		633		891
Foreign	(2,790)		(3,121)		(2,011)
Total deferred	(13,956)		(1,018)		(33,949)
	$	51,950	$	94,013	$	71,144

Earnings before income taxes of domestic operations, which are calculated after intercompany profit eliminations, were $120,054, $222,435 and $192,643 in 2020, 2019 and 2018, respectively.

Our income tax provision for 2020 included a tax benefit of $15,661 due to our share-based payment transactions. Income before taxes in 2020 included a non-cash, assets held for sale impairment charge of $87,371 related to our commitment to sell our screws and barrels product line within the Adhesives reporting unit under our Industrial Precision Solutions segment and the tax benefit of the impairment was $15,254. A portion of the impairment charge did not have related tax benefits.

Our income tax provision for 2019 included a provisional tax benefit of $4,866 to reflect the adjustment to the provisional amounts recognized in 2018 due to changes in interpretations and assumptions and the finalization of estimates related to the U.S. Tax Cuts and Jobs Act ("the Act"). We are paying the transition tax in installments over the eight-year period allowable under the Act. The remaining transition tax is included in other long-term liabilities in the Consolidated Balance Sheet at October 31, 2020.

Other provisions of the Act became effective for us in 2019. The Foreign-Derived Intangible Income provision generates a deduction against our U.S. taxable income for U.S. earnings derived offshore that utilize intangibles held in the U.S. Conversely, the Global Intangible Low-Taxed Income (“GILTI”) provision requires us to subject to U.S. taxation a portion of our foreign subsidiary earnings that exceed an allowable return. We elected to treat any GILTI inclusion as a period expense in the year incurred.

Nordson Corporation 58

Notes to Consolidated Financial Statements — (Continued)

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


	2020		2019		2018
Statutory federal income tax rate	21.00	%	21.00	%	23.34	%
Transition tax	—		1.46		6.16
Tax rate change deferred tax remeasurement	—		—		(10.94)
Share-based and other compensation	(4.15)		(0.55)		(1.45)
Domestic production deduction	—		—		(0.82)
Foreign tax rate variances, net of foreign tax credits	1.51		1.16		(0.46)
State and local taxes, net of federal income tax benefit	(0.01)		0.74		0.45
Amounts related to prior years	(0.04)		(0.55)		(0.21)
Foreign-Derived Intangible Income Deduction	(0.95)		(1.51)		—
Global Intangible Low-Taxed Income net of foreign tax credits	0.97		0.85		—
Other – net	(1.10)		(0.79)		(0.21)
Effective tax rate	17.23	%	21.81	%	15.86	%

Earnings before income taxes of international operations, which are calculated before intercompany profit elimination entries, were $181,435, $208,669 and $255,877 in 2020, 2019 and 2018, 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 $1,045,389 and $1,101,736 at October 31, 2020 and 2019, 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, U.S. state and local taxes and currency translation considerations.

At October 31, 2020 and 2019, total unrecognized tax benefits were $6,717 and $2,909, respectively. The amounts that, if recognized, would impact the effective tax rate were $5,998 and $2,429 at October 31, 2020 and 2019, respectively. During 2020, unrecognized tax benefits related primarily to domestic 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 2020, 2019 and 2018 is as follows:


	2020		2019		2018
Balance at beginning of year	$	2,909	$	2,891	$	3,781
Additions based on tax positions related to the current year	370		370		310
Additions for tax positions of prior years	4,068		547		40
Reductions for tax positions of prior years	—		—		(120)
Settlements	(137)		—		—
Lapse of statute of limitations	(493)		(899)		(1,120)
Balance at end of year	$	6,717	$	2,909	$	2,891

At October 31, 2020 and 2019, we had accrued interest and penalty expense related to unrecognized tax benefits of $2,179 and $593, 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 2017 through 2020 tax years; tax years prior to the 2017 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 2014. 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 59

Notes to Consolidated Financial Statements — (Continued)

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


	2020		2019
Deferred tax assets:
Employee benefits	$	70,838	$	73,025
Other accruals not currently deductible for taxes	16,207		16,294
Tax credit and loss carryforwards	20,268		18,074
Inventory adjustments	8,757		5,269
Total deferred tax assets	116,070		112,662
Valuation allowance	(22,233)		(15,301)
Total deferred tax assets	93,837		97,361
Deferred tax liabilities:
Depreciation and amortization	150,591		169,009
Other - net	410		655
Total deferred tax liabilities	151,001		169,664
Net deferred tax liabilities	$	(57,164)	$	(72,303)

At October 31, 2020, we had $8,565 of tax credit carryforwards, $921 of which expires in 2028 and $7,644 of which has an indefinite carryforward period. We also had $58,559 state, $24,394 foreign operating loss carryforwards, and a $24,227 capital loss carryforward, of which $88,613 will expire in 2021 through 2040, and $18,567 of which has an indefinite carryforward period. The net change in the valuation allowance was an increase of $6,932 in 2020 and of $439 in 2019. The valuation allowance of $22,233 at October 31, 2020, related primarily to tax credits and loss carryforwards that may expire before being realized. We continue to assess the need for valuation allowances against deferred tax assets based on determinations of whether it is more likely than not that deferred tax benefits will be realized.

Note 9 — Bank lines of credit

Bank lines of credit are summarized as follows:


	2020		2019
Maximum borrowings available under bank lines of credit (all foreign banks)	$	74,766	$	79,930


Unused bank lines of credit	$	74,766	$	79,930

Note 10 — Long-term debt

A summary of long-term debt is as follows:


	2020		2019

Senior notes, due 2021-2025	$	109,900	$	140,800
Senior notes, due 2021-2027	85,714		92,857
Senior notes, due 2023-2030	350,000		350,000
Term loan, due 2022-2024	255,000		505,000
Euro loan, due 2023	308,642		128,219
Private shelf facility	—		30,556
Development loans	—		951
	1,109,256		1,248,383
Less current maturities	38,043		168,738
Less unamortized debt issuance costs	3,261		4,241
Long-term maturities	$	1,067,952	$	1,075,404

Nordson Corporation 60

Notes to Consolidated Financial Statements — (Continued)

Revolving credit agreement — In April 2019, we entered into a $850,000 unsecured multi-currency credit facility with a group of banks, which amended, restated and extended our existing syndicated revolving credit agreement that was scheduled to expire in February 2020. This facility has a five-year term and includes a $75,000 subfacility for swing-line loans. It expires in April 2024. At October 31, 2020 and October 31, 2019, we had no balances outstanding under this facility. We were in compliance with all covenants at October 31, 2020, and the amount we could borrow under the facility would not have been limited by any debt covenants.

Senior notes, due 2021-2025 — These unsecured fixed-rate notes entered into in 2012 with a group of insurance companies had a remaining weighted-average life of 2.33 years. The weighted-average interest rate at October 31, 2020 was 3.07 percent.

Senior notes, due 2021-2027 — These unsecured fixed-rate notes entered into in 2015 with a group of insurance companies had a remaining weighted-average life of 3.91 years. The weighted-average interest rate at October 31, 2020 was 3.06 percent.

Senior notes, due 2023-2030 — These unsecured fixed-rate notes entered in 2019 with a group of insurance companies had a remaining weighted-average life of 5.04 years. The weighted-average interest rate at October 31, 2020 was 3.90 percent.

Term loan, due 2022-2024 — In April 2019, we amended, restated and extended the term of our existing $605,000 term loan facility with a group of banks. The interest rate is variable based upon the LIBOR rate. At October 31, 2020, $255,000 was outstanding under this facility. The Term Loan Agreement provides for the following term loans due in two tranches: $50,000 is due in September 2022, and $205,000 is due in March 2024. The weighted average interest rate for borrowings under this agreement was 0.83 percent at October 31, 2020. We were in compliance with all covenants at October 31, 2020

Euro loan, due 2023 — In March 2020 we amended, restated and extended the term of our existing term loan facility with Bank of America Merrill Lynch International Limited. The interest rate is variable based on the EURIBOR rate. The Term Loan Agreement provides for the following term loans due in two tranches: €115,000 is due in March 2023 and an additional €150,000 that was drawn down in March 2020 is due in March 2023. The weighted average interest rate at October 31, 2020 was 0.71 percent. We were in compliance with all covenants at October 31, 2020.

Private shelf facility — In October 2020, we amended, restated and extended the term of the unsecured $200,000 private shelf facility agreement with New York Life Investment Management LLC. The facility has a three-year term and expires in October 2023. The interest rate on each borrowing is fixed based upon the market rate at the borrowing date or is variable based upon the LIBOR rate. At October 31, 2020, there was no outstanding balance under this facility.

Annual maturities — The annual maturities of long-term debt for the five years subsequent to October 31, 2020, are as follows: $38,043 in 2021; $80,642 in 2022; $439,285 in 2023; $315,643 in 2024 and $85,643 in 2025.

Note 11 — Leases

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

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

Nordson Corporation 61

Notes to Consolidated Financial Statements — (Continued)

Additional lease information is summarized below for the twelve months ended October 31, 2020:


	October 31, 2020
	Finance Leases		Operating Leases
Amortization of right of use assets	$	7,087	$	—
Interest	350		—
Lease cost(1)	7,437		21,489
Short-term and variable lease cost(1)	1,478		3,011
Total lease cost	$	8,915	$	24,500

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

Supplemental cash flow information is summarized below for the twelve months ended October 31, 2020:


Cash outflows for leases	$	7,605	$	20,918
Weighted average remaining lease term (years)	4.65		10.47
Weighted average discount rate	2.39%		1.70%

The following table reconciles the undiscounted cash flows for five years and thereafter to the operating and finance lease liabilities recognized on the Consolidated Balance Sheet as of October 31, 2020. The reconciliation excludes short-term leases that are not recognized on the Consolidated Balance Sheet.


Year:	Finance Leases		Operating Leases
2021	$	6,226	$	18,821
2022	4,332		17,367
2023	2,655		14,805
2024	999		13,163
2025	652		11,265
Later years	2,956		63,986
Total minimum lease payments	17,820		139,407
Amounts representing interest	1,366		13,172
Present value of minimum lease payments	$	16,454	$	126,235

Rental expense for operating leases during the fiscal years ended October 31, 2019 and October 31, 2018 was $22,061 and $19,131, respectively.

Assets held under capitalized finance leases and included in property, plant and equipment during the fiscal years ended October 31, 2020 and October 31, 2019 was $15,659 and $14,588, respectively.

Note 12 — Fair value measurements

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

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

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

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

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

Nordson Corporation 62

Notes to Consolidated Financial Statements — (Continued)


October 31, 2020	Total		Level 1		Level 2		Level 3
Assets:
Foreign currency forward contracts (a)	$	2,700	$	—	$	2,700	$	—
Total assets at fair value	$	2,700	$	—	$	2,700	$	—
Liabilities:
Deferred compensation plans (b)	$	12,304	$	—	$	12,304	$	—
Foreign currency forward contracts (a)	5,937		—		5,937		—
Total liabilities at fair value	$	18,241	$	—	$	18,241	$	—


October 31, 2019	Total		Level 1		Level 2		Level 3
Assets:
Foreign currency forward contracts (a)	$	5,042	$	—	$	5,042	$	—
Total assets at fair value	$	5,042	$	—	$	5,042	$	—
Liabilities:
Deferred compensation plans (b)	$	11,850	$	—	$	11,850	$	—
Foreign currency forward contracts (a)	2,381		—		2,381		—
Total liabilities at fair value	$	14,231	$	—	$	14,231	$	—

(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 6.

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


	2020				2019
	Carrying Amount		Fair Value		Carrying Amount		Fair Value
Long-term debt (including current portion)	$	1,105,995	$	1,170,073	$	1,244,142	$	1,278,142

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 10.

Note 13 — Derivative financial instruments

We operate internationally and enter into intercompany transactions denominated in foreign currencies. Consequently, we are subject to market risk arising from exchange rate movements between the dates foreign 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 2020, we recognized net losses of $5,899 on foreign currency forward contracts and net gains of $4,367 from the change in fair value of balance sheet positions. In 2019, we recognized net gains of $2,373 on foreign currency forward contracts and net losses of $2,231 from the change in fair value of balance sheet positions. In 2018, we

Nordson Corporation 63

Notes to Consolidated Financial Statements — (Continued)

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. The fair values of our foreign currency forward contract assets and liabilities are included in Prepaid expenses and other current assets and Accrued liabilities, respectively in the Consolidated Balance Sheets.

The following table summarizes, by currency, the contracts outstanding at October 31, 2020 and 2019:


	Notional Amounts
	Sell		Buy
October 31, 2020 contract amounts:
Euro	$	127,849	$	259,510
Pound sterling	36,943		71,380
Japanese yen	23,262		41,133
Australian dollar	179		9,084
Hong Kong dollar	59,459		81,199
Singapore dollar	1,102		17,350
Others	6,985		73,310
Total	$	255,779	$	552,966
October 31, 2019 contract amounts:
Euro	$	264,661	$	107,598
Pound sterling	32,600		48,867
Japanese yen	29,397		51,217
Australian dollar	168		7,767
Hong Kong dollar	189		135,862
Singapore dollar	1,108		15,684
Others	4,485		66,349
Total	$	332,608	$	433,344

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, 2020 and 2019, there were no significant concentrations of credit risk.

Note 14 — Capital shares

Preferred — We have authorized 10,000 Series A convertible preferred shares without par value. No preferred shares were outstanding in 2020, 2019 or 2018.

Common — We have 160,000 authorized common shares without par value. At October 31, 2020 and 2019, there were 98,023 common shares issued. At October 31, 2020 and 2019, the number of outstanding common shares, net of treasury shares, was 58,081 and 57,600, respectively.

Common shares repurchased as part of publicly announced programs during 2020, 2019 and 2018 were as follows:


Year	Number of Shares	Total Amount	Average per Share
2020	303	38,138	$	125.70
2019	949	114,790	$	121.01
2018	145	18,939	$	130.21

Note 15 — 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 are 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

Nordson Corporation 64

Notes to Consolidated Financial Statements — (Continued)

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 $10,087, $10,067 and $9,964 for 2020, 2019 and 2018, respectively.

The following table summarizes activity related to stock options during 2020:


	Number of Options	Weighted˗Average Exercise Price Per Share		Aggregate Intrinsic Value		Weighted˗Average Remaining Term
Outstanding at October 31, 2019	1,787	$	97.74
Granted	391	$	166.38
Exercised	(644)	$	78.91
Forfeited or expired	(47)	$	145.52
Outstanding at October 31, 2020	1,487	$	122.45	$	105,536	7.0 years
Expected to vest	845	$	141.28	$	44,065	8.1 years
Exercisable at October 31, 2020	632	$	96.79	$	61,104	5.5 years

Summarized information on currently outstanding options follows:


	Range of Exercise Price
	$43 - $90		$91 - $140		$141 - $190
Number outstanding	279		844		364
Weighted-average remaining contractual life, in years	4.0		7.1		9.1
Weighted-average exercise price	$	70.40	$	120.56	$	166.66
Number exercisable	279		352		1
Weighted-average exercise price	$	70.40	$	117.43	$	165.21

As of October 31, 2020, there was $11,294 of total unrecognized compensation cost related to nonvested stock options. That cost is expected to be amortized over a weighted average period of approximately 1.7 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:


	2020	2019	2018
Expected volatility	24.5%-30.5%	24.1%-24.5%	24.0%-26.7%
Expected dividend yield	0.87%-1.16%	1.04%	0.97%
Risk-free interest rate	0.44%-1.69%	2.84%-2.95%	2.09%-2.20%
Expected life of the option (in years)	5.3-6.3	5.3-6.2	5.4-6.2

The weighted-average expected volatility used to value options granted in 2020, 2019 and 2018 was 25.4 percent, 24.3 percent and 25.0 percent, respectively.

Historical information was the primary basis for the selection of the expected volatility, expected dividend yield and the expected lives of the options. The risk-free interest rate was selected based upon yields of United States Treasury issues with terms equal to the expected life of the option being valued.

The weighted average grant date fair value of stock options granted during 2020, 2019 and 2018 was $38.57, $31.74 and $31.42, respectively.

The total intrinsic value of options exercised during 2020, 2019 and 2018 was $65,783, $31,881 and $35,696, respectively.

Cash received from the exercise of stock options for 2020, 2019 and 2018 was $50,853, $26,020 and $18,811, respectively.

Nordson Corporation 65

Notes to Consolidated Financial Statements — (Continued)

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.

The following table summarizes activity related to restricted shares during 2020:


	Number of Shares	Weighted˗Average Grant Date Fair Value Per Share
Restricted at October 31, 2019	66	$	126.83
Granted	27	$	170.94
Forfeited	(7)	$	135.43
Vested	(28)	$	121.01
Restricted at October 31, 2020	58	$	148.75

As of October 31, 2020, there was $4,292 of unrecognized compensation cost related to restricted shares. The cost is expected to be amortized over a weighted average period of 2.0 years. The amount charged to expense related to restricted shares was $3,956, $3,608 and $2,610 in 2020, 2019 and 2018, respectively. These amounts included common share dividends of $87, $84, and $70 in 2020, 2019 and 2018, respectively.

The following table summarizes activity related to restricted share units in 2020:


	Number of Units	Weighted˗Average Grant Date Fair Value
Restricted share units at October 31, 2019	—	$	—
Granted	7	$	160.68
Vested	(7)	$	160.68
Restricted share units at October 31, 2020	—	$	—

As of October 31, 2020, there was no remaining expense to be recognized related to outstanding restricted share units. The amounts charged to expense related to restricted share units in 2020, 2019 and 2018 were $1,181, $1,052 and $1,011, 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 $160.02, $133.01, and $184.04 for 2020; $120.12 and $138.53 for 2019; and $123.45 and $138.53 for 2018. The amount credited to expense for executive officers and selected other key employees in 2020 was $2,732, and the amounts charged to expense in 2019 and 2018 were $2,989 and $7,635, respectively. The cumulative amount recorded in shareholders’ equity at October 31, 2020, and 2019 was $1,557 and $10,459, respectively.

Nordson Corporation 66

Notes to Consolidated Financial Statements — (Continued)

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 $276, $300 and $273 for 2020, 2019 and 2018, respectively**.**

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

The following table summarizes activity related to director deferred compensation share equivalent units during 2020:


	Number of Shares	Weighted˗Average Grant Date Fair Value Per Share
Outstanding at October 31, 2019	114	$	55.52
Restricted stock units vested	5	$	161.09
Dividend equivalents	1	$	169.43
Outstanding at October 31, 2020	120	$	60.81

The amount charged to expense related to director deferred compensation was $175, $154 and $127 in 2020, 2019 and 2018, respectively.

Shares reserved for future issuance — At October 31, 2020, there were 2,032 of common shares reserved for future issuance through the exercise of outstanding options or rights**.**

Note 16 — Operating segments and geographic area data

We conduct business in two primary operating segments: Industrial Precision Solutions and Advanced Technology Solutions. The composition of segments and measure of segment profitability is consistent with that used by our chief operating decision maker. The primary measure used by the chief operating decision maker for purposes of making decisions about allocating resources to the segments and assessing performance is operating profit, which equals sales less cost of sales and certain operating expenses. Items below the operating profit line of the 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.

Effective in the second quarter of 2020, we made changes to realign our management team and our operating segments. This realignment will enable us to better serve global customers and markets, to more efficiently leverage technology synergies, to operate divisions of significant size in a consistent and focused way and to position ourselves for our next chapter of profitable growth. The revised operating segments better reflect how we manage the Company, allocate resources, and assess performance of the businesses.

We realigned our former three operating segments into two: Industrial Precision Solutions and Advanced Technology Solutions. Existing product lines were unchanged as part of this new structure.

Industrial Precision Solutions: This segment combines our former Adhesive Dispensing Systems (ADS) and Industrial Coating Systems (ICS) businesses. IPS enhances the technology synergies between ADS and ICS to deliver proprietary dispensing and processing technology to diverse end markets. Product lines reduce material consumption, increase line efficiency and enhance product brand and appearance. Components are used for dispensing adhesives, coatings, paint, finishes, sealants and other materials. This segment primarily serves the industrial, consumer durables and non-durables markets.

Advanced Technology Solutions: This segment integrates our proprietary product technologies found in progressive stages of a customer’s production processes, such as surface treatment, precisely controlled dispensing of material and post-dispense test and inspection to ensure quality. Related single-use plastic molded syringes, cartridges, tips, fluid connection components, tubing, balloons and catheters are used to dispense or control fluids in production processes or within customers’ end products. This segment predominantly serves customers in the electronics, medical and related high-tech industrial markets.

The financial information presented herein reflects the impact of the preceding changes and prior periods have been revised to reflect these changes.

No single customer accounted for 10 percent or more of sales in 2020, 2019 or 2018.

Nordson Corporation 67

Notes to Consolidated Financial Statements — (Continued)

The following table presents information about our reportable segments:


	Industrial Precision Solutions		Advanced Technology Solutions		Corporate			Total
Year ended October 31, 2020
Net external sales	$	1,143,423	$	977,677	$	—		$	2,121,100
Depreciation and amortization	38,939		64,543		9,820			113,302
Operating profit (loss)	208,028		191,602		(50,085)			349,545
Identifiable assets (b)	882,946		1,849,391		948,048		(a)	3,680,385
Property, plant and equipment expenditures	18,798		31,737		—			50,535
Year ended October 31, 2019
Net external sales	$	1,208,376	$	985,850	$	—		$	2,194,226
Depreciation and amortization	38,333		62,836		9,075			110,244
Operating profit (loss)	329,054		205,609		(51,550)			483,113
Identifiable assets (b)	997,460		1,740,259		782,188		(a)	3,519,907
Property, plant and equipment expenditures	30,400		26,010		7,834			64,244
Year ended October 31, 2018
Net external sales	$	1,215,302	$	1,039,366	$	—		$	2,254,668
Depreciation and amortization	37,763		62,594		8,050			108,407
Operating profit (loss)	315,048		244,880		(57,349)			502,579
Identifiable assets (b)	951,784		1,713,404		763,734		(a)	3,428,922
Property, plant and equipment expenditures	55,457		16,205		18,128			89,790

(a)Corporate assets are principally cash and cash equivalents, deferred income taxes, leases, headquarter facilities, the major portion of our enterprise management system, and intangible assets. Includes assets held for sale, see Note 4.

(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:


	2020		2019		2018
Net external sales
United States	$	755,642	$	758,383	$	720,832
Americas	141,473		167,661		158,837
Europe	536,636		571,596		622,108
Japan	126,601		126,756		161,771
Asia Pacific	560,748		569,830		591,120
Total net external sales	$	2,121,100	$	2,194,226	$	2,254,668
Long-lived assets
United States	$	329,390	$	286,894	$	279,437
Americas	2,307		1,948		2,158
Europe	69,854		44,041		41,663
Japan	22,733		6,169		5,492
Asia Pacific	56,459		59,843		57,916
Total long-lived assets	$	480,743	$	398,895	$	386,666

Long-lived assets includes property, plant and equipment - net and operating right of use lease assets, which were recorded as a result of the new lease standard as codified in ASC 842 and excludes amounts held for sale, see Note 4. The increase in 2020 was driven primarily by the recording of the operating right of use lease assets.

Nordson Corporation 68

Notes to Consolidated Financial Statements — (Continued)

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


	2020		2019		2018
Total profit for reportable segments	$	349,545	$	483,113	$	502,579
Interest expense	(32,160)		(47,145)		(49,576)
Interest and investment income	1,681		1,844		1,384
Other-net	(17,577)		(6,708)		(5,868)
Income before income taxes	$	301,489	$	431,104	$	448,519

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


	2020		2019		2018
Total assets for reportable segments	$	3,680,385	$	3,519,907	$	3,428,922
Customer advance payments	42,323		41,131		38,997
Eliminations	(48,052)		(44,591)		(46,907)
Total consolidated assets	$	3,674,656	$	3,516,447	$	3,421,012

Note 17 — Supplemental information for the statement of cash flows


	2020		2019		2018
Cash operating activities:
Interest paid	$	31,095	$	50,578	$	42,305
Income taxes paid	80,849		104,326		87,879

Note 18 — Quarterly financial data (unaudited)


	First		Second		Third		Fourth
2020:
Sales	$	494,916	$	529,478	$	538,181	$	558,525
Gross margin	263,194		289,598		280,808		296,868
Net income	52,004		92,079		86,981		18,475
Earnings per share:
Basic	0.90		1.60		1.51		0.32
Diluted	0.89		1.58		1.49		0.31
2019:
Sales	$	497,910	$	551,119	$	559,746	$	585,451
Gross margin	268,976		301,529		302,623		318,975
Net income	48,567		91,923		93,928		102,673
Earnings per share:
Basic	0.84		1.60		1.64		1.79
Diluted	0.83		1.58		1.62		1.76

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

During the fourth quarter of 2020, we recorded a non-cash, assets held for sale impairment charge of $87,371 related to the disposal of our screws and barrels product line. Refer to Note 4 for additional information.

During the first quarter of 2019, we recorded a discrete tax expense of $4,866 related to the Act. Refer to Note 8 for additional information.

Nordson Corporation 69

Notes to Consolidated Financial Statements — (Continued)

Note 19 — Contingencies

We are involved in pending or potential litigation regarding environmental, product liability, patent, contract, employee and other matters arising from the normal course of business. Including the litigation and environmental matters discussed below, after consultation with legal counsel, we do not believe that losses in excess of the amounts we have accrued would have a material adverse effect on our financial condition, quarterly or annual operating results or cash flows.

Class Action Litigation

On February 22, 2019, a former employee, Mr. Ortiz, filed a purported class action lawsuit in the San Diego County Superior Court, California, against Nordson Asymtek, Inc. and Nordson Corporation, alleging various violations of the California Labor Code. Plaintiff seeks, among other things, an unspecified amount for unpaid wages, actual, consequential and incidental losses, penalties, and attorneys’ fees and costs. Following mediation in June 2020, the parties agreed to settle the lawsuit, subject to the execution of a written settlement agreement and court approval. If the court approves of the settlement on the agreed upon terms, the class action lawsuit will be resolved. Management believes, based on currently available information, that the ultimate outcome of the proceeding described above will not have a material adverse effect on the Company’s financial condition or results of operations.

Environmental

We have voluntarily agreed with the City of New Richmond, Wisconsin and other Potentially Responsible Parties to share costs associated with the remediation of the City of New Richmond municipal landfill (the “Site”) and the construction of a potable water delivery system serving the impacted area down gradient of the Site. At October 31, 2020 and October 31, 2019, our accrual for the ongoing operation, maintenance and monitoring obligation at the Site was $360 and $401, respectively. The liability for environmental remediation represents management’s best estimate of the probable and reasonably estimable undiscounted costs related to known remediation obligations. The accuracy of our estimate of environmental liability is affected by several uncertainties such as additional requirements that may be identified in connection with remedial activities, the complexity and evolution of environmental laws and regulations, and the identification of presently unknown remediation requirements. Consequently, our liability could be greater than our current estimate. However, we do not expect that the costs associated with remediation will have a material adverse effect on our financial condition or results of operations.

Nordson Corporation 70

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, 2020.

We completed the acquisitions of Fluortek, Inc. (“Fluortek”) and vivaMOS Ltd. (“vivaMOS”) on June 1, 2020, and September 1, 2020, respectively. As permitted by SEC guidance, the scope of our evaluation of internal control over financial reporting as of October 31, 2020 did not include the internal control over financial reporting of Fluortek and vivaMOS. The results of Fluortek and vivaMOS are included in our consolidated financial statements from the date each business was acquired. The combined total assets of Fluortek and vivaMOS represented four percent of our total assets at October 31, 2020. The combined sales and net income of Fluortek and vivaMOS represented less than one percent of our consolidated sales and less than one percent of our net income for 2020.

Based on our assessment, management concluded that our internal control over financial reporting was effective as of October 31, 2020.

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, 2020. Their report is included herein.


/s/ Sundaram Nagarajan						/s/ Joseph P. Kelley
President and Chief Executive Officer						Executive Vice President, Chief Financial Officer

December 18, 2020						December 18, 2020

Nordson Corporation 71

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, 2020, 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, 2020, 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 Fluortek Inc. and vivaMOS Ltd., which are included in the 2020 consolidated financial statements of the Company and constituted a combined four percent of total assets as of October 31, 2020 and less than one percent of consolidated sales and 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 Fluortek Inc. and vivaMOS Ltd.

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, 2020 and 2019, 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, 2020, and the related notes and financial statement schedule listed in the Index at Item 15(a) and our report dated December 18, 2020 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 18, 2020

Nordson Corporation 72

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, 2020 and 2019, 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, 2020, 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, 2020 and 2019, and the results of its operations and its cash flows for each of the three years in the period ended October 31, 2020, 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, 2020, 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 18, 2020 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 financial statements. We believe that our audits provide a reasonable basis for our opinion.

Critical Audit Matter

The critical audit matter communicated below is a matter arising from the current period audit of the financial statements that was communicated or required to be communicated to the audit committee and that: (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective or complex judgments. The communication of the critical audit matter does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the account or disclosure to which it relates.

Nordson Corporation 73


						Valuation of Goodwill
Description of the Matter						At October 31, 2020, the Company had $1,713,354 thousand of goodwill. As discussed in Note 6 to the consolidated financial statements, the Company evaluates the carrying amount of goodwill for impairment annually as of August 1, and between annual evaluations 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. The Company performed a quantitative impairment test for all reporting units in fiscal 2020. As part of the quantitative impairment test, the Company estimated the fair value of each reporting unit using a combination of valuation techniques including the discounted cash flow method, a form of the income approach, and the guideline public company method, a form of the market approach. Auditing management’s annual goodwill impairment assessment relating to goodwill was complex due to the use of valuation methodologies in the determination of the estimated fair values of the reporting units. These fair value estimates are impacted by assumptions such as the selection of comparable guideline companies and the related valuation multiples, as well as discount rates, revenue growth rates, and operating margins which are affected by expectations about future market or economic conditions.

How We Addressed the Matter in Our Audit						We obtained an understanding, evaluated the design and tested the operating effectiveness of controls over the Company’s goodwill impairment process whereby the Company develops assumptions that are used as inputs to the annual goodwill impairment test. This included controls over management's review of the valuation models and the assumptions, described above. To test the implied fair value of the Company’s reporting units, we performed audit procedures that included, among others, assessing the valuation methodologies, testing the assumptions, and testing the completeness and accuracy of the underlying data. We involved our internal valuation specialists in assessing the fair value methodologies applied and evaluating the reasonableness of certain assumptions selected by management. We assessed the historical accuracy of management’s estimates and performed sensitivity analyses of assumptions to evaluate the changes in the fair value of the reporting units that would result from changes in the assumptions. We tested management’s reconciliation of the fair value of the reporting units to the market capitalization of the Company. We also assessed the appropriateness of the disclosures in the consolidated financial statements.

/s/ Ernst & Young LLP

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

Cleveland, Ohio

December 18, 2020

Nordson Corporation 74

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