NORDSON CORP 10-K

Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations 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,” “us,” “our,” or the “Company” mean Nordson Corporation. Unless otherwise noted, all references to years relate to our fiscal year ending October 31. Critical Accounting Policies and Estimates Our Consolidated Financial Statements and accompanying notes have been prepared in accordance with accounting principles generally accepted in the United States. The preparation of these financial statements requires management to make estimates, judgments and assumptions that affect reported amounts of assets, liabilities, revenues and expenses. On an ongoing basis, we evaluate the accounting policies and estimates that are used to prepare financial statements. We base our estimates on historical experience and assumptions believed to be reasonable under current facts and circumstances. Actual amounts and results could differ from these estimates used by management. Certain accounting policies that require significant management estimates and are deemed critical to our results of operations or financial position are discussed below. On a regular basis, critical accounting policies are reviewed with the Audit Committee of the board of directors. 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 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. Refer to Note 1 to the Consolidated Financial Statements for further discussion regarding the Company's revenue recognition policy. Business combinations - The acquisitions of our businesses are accounted for under the acquisition method of accounting. The amounts assigned to the identifiable assets acquired and liabilities assumed in connection with acquisitions are based on estimated fair values as of the date of the acquisition, with the remainder, if any, recorded as goodwill. The fair values are determined by management, taking into consideration information supplied by the management of the acquired entities, and other relevant information. Such information typically includes valuations obtained from independent appraisal experts, which management reviews and considers in its estimates of fair values. The valuations are generally based upon future cash flow projections for the acquired assets, discounted to present value. The determination of fair values requires significant judgment by management, particularly with respect to the value of identifiable intangible assets. This judgment could result in either a higher or lower value assigned to amortizable or depreciable assets. The impact could result in either higher or lower amortization and/or depreciation expense. Goodwill - Goodwill is the excess of purchase price over the fair value of tangible and identifiable intangible net assets acquired in various business combinations. Goodwill is not amortized but is tested for impairment annually at the reporting unit level, or more often if indications of impairment exist. We test goodwill in accordance with Accounting Standards Codification ("ASC") 350. We did not record any goodwill impairment charges in 2022. We use an independent valuation specialist to assist with refining our assumptions and methods used to determine fair values. To test for goodwill impairment, we estimate the fair value of each of our reporting units using a combination of the Income Approach and the Market Approach. Effective in the fourth quarter of 2022, we realigned our former two operating segments into three: Industrial Precision Solutions, Medical and Fluid Solutions, and Advanced Technology Solutions. Previously, Advanced Technology Solutions was comprised of Medical and Fluid Solutions and the former Advanced Technology Solutions. Our segment change did not have any impact on our reporting units. 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 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. Nordson Corporation 23 Table of Contents 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. For 2022, the WACC rates used ranged from 8.3 percent to 11.0 percent depending upon the reporting unit's size, end market volatility and projection risk. See Note 6 - Goodwill and intangible assets for further details regarding the valuation methodologies used. In 2022, 2021 and 2020, the results of our annual impairment tests indicated no impairment. The fair value ("FV") was compared to the carrying value ("CV") for each reporting unit. Based on the results shown in the table below and based on our measurement date of August 1, 2022, our conclusion is that no goodwill was impaired in 2022. Potential events or circumstances, such as a sustained downturn in global economies, could have a negative effect on estimated fair values. WACC Excess of FV over CV Goodwill Industrial Precision Solutions Segment - Adhesives 8.3% 619% $ 501,082 Industrial Precision Solutions Segment - Industrial Coating Systems 11.0% 745% $ 24,083 Advanced Technology Solutions Segment - Electronics Systems 9.5% 497% $ 27,110 Advanced Technology Solutions Segment - Test & Inspection 11.0% 354% $ 87,248 Medical and Fluid Solutions Segment - Fluid Management 9.5% 237% $ 1,713,531 Pension plan in the United States - The measurement of the liabilities related to our domestic pension plan is based on management’s assumptions related to future factors, including interest rates, return on pension plan assets, compensation increases, mortality and turnover assumptions, and health care cost trend rates. The liabilities associated with the Company's international pension plans and OPEB are not as materially sensitive to changes in assumptions as the pension plan in the United States. The weighted-average discount rate used to determine the present value of our domestic pension plan obligations was 5.70 percent at October 31, 2022 and 3.02 percent at October 31, 2021. The discount rate used was determined by using quality fixed income investments with a duration period approximately equal to the period over which pension obligations are expected to be settled. In determining the expected return on plan assets, we consider both historical performance and an estimate of future long-term rates of return on assets similar to those in our plans. We consult with and consider the opinions of financial and actuarial experts in developing appropriate return assumptions. The expected rate of return (long-term investment rate) on domestic pension assets used to determine net benefit costs was 5.75 percent in both 2022 and 2021. The assumed rate of compensation increases used to determine the present value of our domestic pension plan obligations was 4.30 percent and 4.00 percent at October 31, 2022 and October 31, 2021, respectively. Annual expense amounts are determined based on the discount rate used at the end of the prior year. Differences between actual and assumed investment returns on pension plan assets result in actuarial gains or losses that are amortized into expense over a period of years. Economic assumptions have a significant effect on the amounts reported. The effect of a one percent change in the discount rate, expected return on assets and compensation increase is shown in the table below. Bracketed numbers represent decreases in expense and obligation amounts. United States 1% Point Increase 1% Point Decrease Discount rate: Effect on total net periodic pension cost in 2022 $ (6,706) $ 8,128 Effect on pension obligation as of October 31, 2022 $ (39,523) $ 48,781 Expected return on assets: Effect on total net periodic pension cost in 2022 $ (5,094) $ 4,994 Compensation increase: Effect on total net periodic pension cost in 2022 $ 5,654 $ (4,965) Effect on pension obligation as of October 31, 2022 $ 16,488 $ (14,861) Nordson Corporation 24 Table of Contents Income taxes – Income taxes are estimated based on income for financial reporting purposes. Deferred income taxes reflect the net tax effect of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes and certain changes in valuation allowances. We provide valuation allowances against deferred tax assets if, based on available evidence, it is more likely than not that some portion or all of the deferred tax assets will not be realized. Management believes the valuation allowances are adequate after considering future taxable income, allowable carryforward periods and ongoing prudent and feasible tax planning strategies. In the event we were to determine that we would be able to realize the deferred tax assets in the future in excess of the net recorded amount (including the valuation allowance), an adjustment to the valuation allowance would increase income in the period such determination was made. Conversely, should we determine that we would not be able to realize all or part of the net deferred tax asset in the future, an adjustment to the valuation allowance would be expensed in the period such determination was made. Further, at each interim reporting period, we estimate an effective income tax rate that is expected to be applicable for the full year. Significant judgment is involved regarding the application of global income tax laws and regulations and when projecting the jurisdictional mix of income. Additionally, interpretation of tax laws, court decisions or other guidance provided by taxing authorities influences our estimate of the effective income tax rates. As a result, our actual effective income tax rates and related income tax liabilities may differ materially from our estimated effective tax rates and related income tax liabilities. Any resulting differences are recorded in the period they become known. CyberOptics Acquisition On November 3, 2022, the Company completed the acquisition of CyberOptics Corporation (“CyberOptics”) pursuant to the terms of the Agreement and Plan of Merger, dated as of August 7, 2022, by and among the Company, Meta Merger Company and CyberOptics. CyberOptics is a leading global developer and manufacturer of high-precision 3D optical sensing technology solutions. The CyberOptics acquisition expanded our test and inspection platform, providing differentiated technology that expands our product offering in the semiconductor and electronics industries and will be reported in our Advanced Technology Solutions segment. The all-cash transaction of approximately $380,000, net of cash acquired, was funded using our revolving credit facility and is not expected to have a material impact on our Consolidated Financial Statements Results of Operations Effective in the fourth quarter of 2022, we realigned and separated our two former operating segments into the following three operating segments: Industrial Precision Solutions, Medical and Fluid Solutions, and Advanced Technology Solutions. Previously, Advanced Technology Solutions was comprised of Medical and Fluid Solutions and the former Advanced Technology Solutions. Existing product lines were unchanged as part of this new structure. We made these changes to realign our management team and our operating segments. We believe this realignment gives us better visibility into our medical and electronics platforms, which have grown significantly through both organic and acquisitive opportunities, including through the recent acquisition of CyberOptics. We also believe that the three revised operating segments better reflect how we now manage the Company, allocate resources and assess performance of the businesses. We also revised our geographic regions, such that the United States and Japan are now included in the Americas and Asia Pacific regions, respectively. As such, our geographical regions as used throughout this annual report include the Americas (United States, Canada, Mexico and Central and South America), Asia Pacific (including Japan) and Europe. Below is a detailed discussion comparison of our results of operations for the fiscal years ended October 31, 2022 and October 31, 2021 as well as a comparison of sales and segment results for fiscal years October 31, 2021 and October 31, 2020 due to our change in operating segments and geographic regions. For a discussion of other changes from the fiscal year ended October 31, 2021 to the fiscal year ended October 31, 2020, refer to Part II, Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations, of our Annual Report on Form 10-K for the fiscal year ended October 31, 2021. 2022 compared to 2021 Worldwide sales for 2022 were $2,590,278, an increase of 9.7 percent from 2021 sales of $2,362,209. The increase consisted of a 10.8 percent improvement in organic sales, inclusive of pricing to offset inflation, and a net 3.3 percent increase from acquisitions and divestitures, partially offset by unfavorable currency translation effects that decreased sales by 4.4 percent. Sales outside the United States accounted for 66.8 percent of total sales in 2022, as compared to 66.6 percent in 2021. On a geographic basis, sales in the Americas region were $1,096,596, an increase of 13.2 percent from 2021, with sales volume increasing 10.9 percent and a net 2.8 percent increase from acquisitions and divestitures, partially offset by unfavorable currency effect of 0.5 percent. Sales in the Asia Pacific region were $848,079, an increase of 9.3 percent from 2021, with sales volume increasing 11.0 percent and a net 3.2 percent increase from acquisitions and divestitures, partially offset by unfavorable currency effects of 4.9 percent. Sales in Europe were $645,603, an increase of 4.6 percent from 2021. The increase in sales Nordson Corporation 25 Table of Contents consisted of a 10.7 percent organic sales volume increase and a net 3.9 percent increase from acquisitions and divestitures, partially offset by unfavorable currency effects of 10.0 percent. Cost of sales were $1,163,742 in 2022, up 12.1 percent from $1,038,129 in 2021. Gross profit, expressed as a percentage of sales, decreased to 55.1 percent in 2022 from 56.1 percent in 2021. The 1.0 percentage point decrease in gross margin was driven by the impact of passing through inflationary cost increases, partially offset by a favorable divestiture impact. Selling and administrative expenses were $724,176 in 2022, up from $708,953 in 2021. The 2.1 percent increase was driven by a 5.3 percent first-year effect of an acquisition impact and base business growth of 0.3 percentage points, partially offset by favorable currency translation effects which decreased costs 3.5 percentage points. Selling and administrative expenses as a percentage of sales decreased to 28.0 percent in 2022 from 30.0 percent in 2021. The 2.0 percentage point decrease was due primarily to sales growth leverage. Operating profit as a percentage of sales increased to 27.1 percent in 2022 compared to 26.0 percent in 2021. The 1.1 percent increase in operating margin was primarily driven by selling and administrative expense leverage due to the 10.8 percent increase in organic sales, partially offset by the impact of passing through inflationary cost increases. Operating capacity for each of our segments can support fluctuations in order activity without significant changes in operating costs. Operating margins for each segment were unfavorably impacted by a stronger dollar primarily against all major currencies during 2022 as compared to 2021. Interest expense in 2022 was $22,413, a decrease of $3,078, or 12.1 percent, from 2021 . The decrease was due to lower average debt levels compared to the prior year. During 2022, the Company recognized non-cash pension settlement charges of $41,221 related to the purchase of an annuity contract to relieve the Company of certain U.S. pension benefit obligations. Other income in 2022 was $8,527 compared to other expense of $17,610 in 2021 . Included in other income in 2022 w ere $6,270 in net foreign currency gains. Included in the prior year’s other expense were pension costs of 9,484 and $5,926 in foreign currency losses. The decrease in pension cost was principally attributable to decreased amortization of net actuarial losses. Income tax expense in 2022 was $136,176, or 21.0 percent of pre-tax income, as compared to $119,808, or 20.9 percent of pre-tax income in 2021 . The income tax provision for 2022 included a tax benefit of $3,273 due to our share-based payment transactions. Our income tax provision for 2021 included a tax benefit of $5,982 due to our share-based payment transactions. Net income was $513,103, or $8.81 per diluted share, in 2022, compared to net income of $454,368, or $7.74 per diluted share, in 2021. This represented a 12.9 percent increase in net income and a 13.8 percent increase in diluted earnings per share. The increase of $1.07 per diluted share was primarily driven by sales growth, strong gross margins and selling and administrative expense leverage. Industrial Precision Solutions Sales of the Industrial Precision Solutions segment were $1,337,242 in 2022, an increase of 7.2 percent, from 2021 sales of $1,246,947. The increase was the result of an organic sales increase of 7.0 percent and a net acquisition / divestiture impact of 6.1 percent, partially offset by unfavorable currency effects of 5.9 percent. Organic sales growth occurred in all product lines, except nonwovens. Sales growth was generally strong across all product lines and in all regions, except for nonwovens which had sales declines in all regions. Operating profit as a percentage of sales decreased to 32.5 percent in 2022 compared to 33.2 percent in 2021. The 0.7 percentage point decline in operating margin was the result of the impact of passing through inflationary cost increases , partially offset by selling and administrative expense leverage due to the increase in sales . Medical and Fluid Solutions Sales of the Medical and Fluid Solutions segment were $690,177 in 2022, an increase of 7.6 percent from 2021 sales of $641,654. The increase was the result of an organic sales increase of 9.7 percent partially offset by unfavorable currency effects that decreased sales by 2.1 percent. Sales growth was generally strong across all product lines and in all regions. Operating profit as a percentage of sales increased to 31.5 percent in 2022 compared to 30.9 percent in 2021. The 0.6 percent percentage point improvement in operating margin was principally driven by greater selling and administrative expense leverage which contributed 1.6 percentage points, principally associated with the sales volume growth, partially offset by the impact of passing through inflationary cost increases . Advanced Technology Solutions Sales of the Advanced Technology Solutions segment were $562,859 in 2022, an increase of 18.8 percent from 2021 sales of $473,608. The increase was the result of an organic sales increase of 22.4 percent partially offset by unfavorable currency effects that decreased sales by 3.6 percent. Sales growth was strong across all product lines and in all regions. Nordson Corporation 26 Table of Contents Operating profit as a percentage of sales increased to 23.7 percent in 2022 compared to 15.5 percent in 2021. The 8.2 percentage point improvement in operating margin was driven by greater selling and administrative expense leverage associated with the sales volume growth. 2021 compared to 2020 Due to the change in our operating segments and geographical regions, the following comparison of our sales and segment results are being provided. Worldwide sales for 2021 were $2,362,209, an increase of 11.4 percent from 2020 sales of $2,121,100. The increase consisted of a 11.3 percent improvement in organic sales volume and favorable currency translation effects, which increased sales by 2.7 percent, partially offset by a net 2.6 percent decrease from acquisitions and divestitures. On a geographic basis, sales in the Americas region were $969,110, an increase of 8.0 percent from 2020, with organic sales volume increasing 10.7 percent and a favorable currency effect of 0.4 percent, partially offset by a net 3.0 percent decrease from acquisitions and divestitures. Sales in the Asia Pacific region were $775,607, an increase of 12.8 percent from 2020, with organic sales volume increasing 11.8 percent and favorable currency effects of 3.3 percent, partially offset by a net 2.3 percent decrease from acquisitions and divestitures. Sales in Europe were $617,492, an increase of 15.1 percent from 2020. The increase in sales consisted of a 11.4 percent organic sales volume increase and favorable currency effects of 5.7 percent, partially offset by a 2.0 percent decrease from acquisitions and divestitures. Industrial Precision Solutions Sales of the Industrial Precision Solutions segment were $ 1,246,947 in 2021, an increase of 9.1 percent, from 2020 sales of $ 1,143,423 . The increase was the result of an organic sales volume increase of 11.7 percent and favorable currency effects that increased sales by 3.4 percent, partially offset by a divestiture impact of 6.0 percent. Growth occurred in all product lines, except nonwovens, and in all regions except for Japan. Operating profit as a percentage of sales increased to 33.2 percent in 2021 compared to 18.2 percent in 2020 . The 15.0 percentage point improvement in operating margin was the result of improved operating results, specifically favorable absorption from higher sales volume and favorable product mix driven by a divestiture, and 2020 operating profit negatively impacted by an assets held for sale impairment charge related to a divestiture. Medical and Fluid Solutions Sales of the Medical and Fluid Solutions segment were $ 641,654 in 2021, an increase of 13.6 percent from 2020 sales of $ 564,899 . The increase was the result of an organic sales volume increase of 9.8 percent, a positive acquisition impact of 2.3 percent and favorable currency effects that increased sales by 1.5 percent. Sales growth was generally strong across all product lines and in all regions. Operating profit as a percentage of sales increased to 30.9 percent in 2021 compared to 26.6 percent in 2020 . The 4.3 percentage point improvement in operating margin was principally driven by greater selling and administrative expense leverage associated with the sales volume growth. Advanced Technology Solutions Sales of the Advanced Technology Solutions segment were $473,608 in 2021, an increase of 14.7 percent from 2020 sales of $ 412,778 . The increase was the result of an organic sales volume increase of 12.4 percent and favorable currency effects that increased sales by 2.3 percent. Sales growth was generally strong across all product lines and in all regions. Operating profit as a percentage of sales increased to 15.5 percent in 2021 compared to 10.0 percent in 2020 . The 5.5 percentage point improvement in operating margin was principally driven by greater selling and administrative expense leverage associated with the sales volume growth and cost simplification actions taken in 2020. Liquidity and Capital Resources Cash and cash equivalents decreased $136,515 in 2022 to $163,457 as of October 31, 2022 compared to $299,972 as of October 31, 2021. Approximately 53 percent of our consolidated cash and cash equivalents were held at various foreign subsidiaries as of October 31, 2022. On November 3, 2022, net cash of $380,000 was used to fund the acquisition of CyberOptics as disclosed in Note 19 to these Consolidated Financial Statements. Cash provided by operating activities was $513,131 in 2022, compared to $545,927 in 2021. The primary sources were net income adjusted for non-cash income and expenses (consisting of depreciation and amortization, non-cash stock compensation, provision for losses on receivables, deferred income taxes, other non-cash expense, gain/loss on sale of property, plant and equipment, and non-cash pension settlement charges), which were $676,200 in 2022, compared to $590,607 in 2021. Changes in working capital items used cash of $107,314 compared to $29,011 provided in 2021 as increases in receivables and inventory Nordson Corporation 27 Table of Contents based on sales growth were partially offset by increases in other liabilities. In addition, cash used for other operating items decreased by $17,936 in 2022 compared to 2021. Cash used in investing activities was $222,761 in 2022, compared to $33,169 in 2021. In 2022, $171,613 in cash was used, utilizing cash from operations, for acquisitions compared to $0 used in 2021. Capital expenditures were $51,428 in 2022 compared to $38,303 in 2021. Cash used in financing activities was $416,006 in 2022, compared to $422,913 cash used in 2021. Net repayment of long-term debt and long-term borrowings used $33,908 of cash in 2022, compared to $289,416 used in 2021. In 2022, cash of $262,869 was used for the purchase of treasury shares, up from $60,970 used in 2021. Dividend payments were $125,914 in 2022, up from $97,683 in 2021 due to an increase in dividend on our common shares, on an annual basis, to $2.18 per share from $1.69 per share. Issuance of common shares related to employee benefit plans generated $12,124 of cash in 2022, down from $31,780 in 2021. The following is a summary of significant changes by balance sheet caption from October 31, 2021 to October 31, 2022. Receivables-net and inventories-net combined increased $104,127 due to increased business activity during the year. Goodwill increased $131,129 due to the acquisition of NDC Technologies. Intangible assets-net decreased $27,965 primarily due to amortization expense. Pension obligations decreased $40,033 primarily due to a decrease in discount rates. We have a $850,000 unsecured multi-currency revolving credit facility with a group of banks that expires in April 2024. At October 31, 2022 and October 31, 2021, we had no balances outstanding under the revolving credit facility. In connection with the CyberOptics acquisition, we borrowed under the revolving credit facility. Our operating performance, balance sheet position and financial ratios for 2022 remained strong. Total debt decreased $78,040 during 2022. The Company is well-positioned to manage liquidity needs that arise from working capital requirements, capital expenditures, and contributions related to pension and postretirement obligations as well as principal and interest payments on our outstanding debt. Primary sources of capital to meet these needs, as well as other opportunistic investments, are a combination of cash provided by operations and borrowings under our loan agreements. Cash from operations, which when combined with our available borrowing capacity and ready access to capital markets, is expected to be more than adequate to fund our liquidity needs over the twelve months and the foreseeable future thereafter. The company believes it has the ability to generate and obtain adequate amounts of cash to meet its long-term needs for cash. Contractual and Other Material Cash Obligations The following table summarizes contractual and other material cash obligations as of October 31, 2022: Payments Due by Period Total Less than 1 Year 1-3 Years 4-5 Years After 5 Years Debt (1) $ 738,822 $ 392,537 $ 196,285 $ 60,000 $ 90,000 Interest payments on long-term debt (1) 50,846 16,222 19,720 9,214 5,690 Finance lease obligations (2) 17,826 4,907 5,439 1,367 6,113 Operating leases (2) 117,411 15,738 26,470 21,327 53,876 Contributions related to pension and postretirement benefits (3) 6,335 6,335 — — — Purchase obligations (4) 238,530 232,675 5,855 — — Total obligations $ 1,169,770 $ 668,414 $ 253,769 $ 91,908 $ 155,679 (1) Refer to Note 10 to the Consolidated Financial Statements for further discussion. (2) Refer to Note 11 to the Consolidated Financial Statements for further discussion. (3) Pension and postretirement plan funding amounts will be determined based on the future funded status of the plans and therefore cannot be estimated at this time. Refer to Note 7 to the Consolidated Financial Statements for further discussion. (4) Purchase obligations primarily represent commitments for materials used in our manufacturing processes that are not recorded in our Consolidated Balance Sheet. We believe that the combination of present capital resources, cash from operations and unused financing sources such as our credit facilities, including our revolving credit facility, are more than adequate to meet cash requirements for the twelve months and the foreseeable future thereafter. There are no significant restrictions limiting the transfer of funds from international subsidiaries to the parent company. Nordson Corporation 28 Table of Contents New Accounting Standards There have been no new accounting standards issued which would require either disclosure or adoption during the current period by the Company. Effects of Foreign Currency The impact of changes in foreign currency exchange rates on sales and operating results cannot be precisely measured due to fluctuating selling prices, sales volume, product mix and cost structures in each country where we operate. As a general rule, a weakening of the United States dollar relative to foreign currencies has a favorable effect on sales and net income, while a strengthening of the dollar has a detrimental effect. In 2022, as compared with 2021, the United States dollar was generally stronger against foreign currencies. If 2021 exchange rates had been in effect during 2022, sales would have been approximately $103,829 higher and third-party costs would have been approximately $68,788 higher. In 2021, as compared with 2020, the United States dollar was generally weaker against foreign currencies. If 2020 exchange rates had been in effect during 2021, sales would have been approximately $55,200 lower and third-party costs would have been approximately $24,600 lower. These effects on reported sales do not include the impact of local price adjustments made in response to changes in currency exchange rates. Trends Our solid historical performance is attributed to our diverse geographic and end market participation and our long-term commitment to develop and provide quality products and worldwide service to meet our customers’ changing needs. Safe Harbor Statements Under the Private Securities Litigation Reform Act of 1995 This annual report, particularly “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” contains forward-looking statements within the meaning of the Securities Act of 1933, as amended, the Securities Exchange Act of 1934, as amended, and the Private Securities Litigation Reform Act of 1995. Such statements relate to, among other things, income, earnings, cash flows, changes in operations, operating improvements, businesses in which we operate and the United States and global economies. Statements in this annual report that are not historical are hereby identified as “forward-looking statements” and may be indicated by words or phrases such as “anticipates,” “supports,” “plans,” “projects,” “expects,” “believes,” “should,” “would,” “could,” “hope,” “forecast,” “management is of the opinion,” use of the future tense and similar words or phrases. These statements reflect management’s current expectations and involve a number of risks and uncertainties. These risks and uncertainties include, but are not limited to, U.S. and international economic conditions; financial and market conditions; currency exchange rates and devaluations; possible acquisitions including the Company’s ability to complete and successfully integrate acquisitions, including the integration of CyberOptics; the Company’s ability to successfully divest or dispose of businesses that are deemed not to fit with its strategic plan; the effects of changes in U.S. trade policy and trade agreements; the effects of changes in tax law; and the possible effects of events beyond our control, such as political unrest, including the conflict between Russia and Ukraine, acts of terror, natural disasters and pandemics, including the COVID-19 pandemic. In light of these risks and uncertainties, actual events and results may vary significantly from those included in or contemplated or implied by such statements. Readers are cautioned not to place undue reliance on such forward-looking statements. These forward-looking statements speak only as of the date made. We undertake no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law. Factors that could cause our actual results to differ materially from the expected results are discussed in Part 1, Item 1A, Risk Factors of this annual report. Nordson Corporation 29 Table of Contents