NORDSON CORP 10-Q

ITEM 1. FINANCIAL STATEMENTS (UNAUDITED) Condensed Consolidated Statements of Income Three Months Ended (In thousands, except for per share data) January 31, 2024 January 31, 2023 Sales $ 633,193 $ 610,477 Operating costs and expenses: Cost of sales 284,766 281,610 Selling and administrative expenses 188,992 184,648 473,758 466,258 Operating profit 159,435 144,219 Other income (expense): Interest expense ( 21,442 ) ( 10,530 ) Interest and investment income 1,044 587 Other income (expense)- net ( 338 ) ( 3,196 ) ( 20,736 ) ( 13,139 ) Income before income taxes 138,699 131,080 Income taxes 29,127 26,819 Net income $ 109,572 $ 104,261 Average common shares 57,064 57,170 Incremental common shares attributable to equity compensation 491 592 Average common shares and common share equivalents 57,555 57,762 Basic earnings per share $ 1.92 $ 1.82 Diluted earnings per share $ 1.90 $ 1.81 See accompanying notes. Page 3 Table of Contents Nordson Corporation Consolidated Statements of Comprehensive Income Three Months Ended (In thousands) January 31, 2024 January 31, 2023 Net income $ 109,572 $ 104,261 Components of other comprehensive income (loss): Foreign currency translation adjustments 43,943 76,821 Pension and other postretirement plan adjustments, net of tax ( 459 ) ( 576 ) Total other comprehensive income 43,484 76,245 Total comprehensive income $ 153,056 $ 180,506 See accompanying notes. Page 4 Table of Contents Nordson Corporation Consolidated Balance Sheets (In thousands) Assets Current assets: January 31, 2024 October 31, 2023 Cash and cash equivalents $ 136,201 $ 115,679 Receivables - net 537,702 590,886 Inventories - net 451,217 454,775 Prepaid expenses and other current assets 82,992 67,970 Total current assets 1,208,112 1,229,310 Goodwill 2,805,086 2,784,201 Intangible assets - net 666,487 672,744 Property, plant and equipment - net 394,467 392,846 Operating right of use lease assets 105,348 106,176 Deferred income taxes 19,167 16,022 Other assets 48,410 50,471 Total assets $ 5,247,077 $ 5,251,770 Liabilities and shareholders' equity Current liabilities: Current maturities of long-term debt and notes payable $ 116,585 $ 115,662 Accrued liabilities 182,854 199,588 Accounts payable 103,153 106,320 Customer advanced payments 76,131 93,389 Income taxes payable 51,018 45,359 Operating lease liability - current 16,913 16,853 Finance lease liability - current 5,026 4,918 Total current liabilities 551,680 582,089 Long-term debt 1,513,871 1,621,394 Operating lease liability - noncurrent 91,725 92,412 Deferred income taxes 206,833 210,637 Postretirement obligations 51,069 50,862 Pension obligations 41,315 40,425 Finance lease liability - noncurrent 11,820 11,670 Other long-term liabilities 54,797 44,221 Shareholders' equity: Common shares 12,253 12,253 Capital in excess of stated value 685,275 668,097 Retained earnings 4,060,070 3,989,353 Accumulated other comprehensive loss ( 152,957 ) ( 196,441 ) Common shares in treasury, at cost ( 1,880,674 ) ( 1,875,202 ) Total shareholders' equity 2,723,967 2,598,060 Total liabilities and shareholders' equity $ 5,247,077 $ 5,251,770 See accompanying notes. Page 5 Table of Contents Nordson Corporation Consolidated Statements of Shareholders’ Equity Three Months Ended January 31, 2024 (In thousands, except for share and per share data) Common Shares Additional Paid-in Capital Retained Earnings Accumulated Other Comprehensive Income (Loss) Common Shares in Treasury, at cost TOTAL November 1, 2023 $ 12,253 $ 668,097 $ 3,989,353 $ ( 196,441 ) $ ( 1,875,202 ) $ 2,598,060 Shares issued under company stock and employee benefit plans — 12,519 — — 1,899 14,418 Stock-based compensation — 4,659 — — — 4,659 Purchase of treasury shares — — — — ( 7,371 ) ( 7,371 ) Dividends declared ($ 0.68 per share) — — ( 38,855 ) — — ( 38,855 ) Net income — — 109,572 — — 109,572 Other Comprehensive Income (Loss): Foreign currency translation adjustments — — — 43,943 — 43,943 Defined benefit pension and post-retirement plan adjustments — — — ( 459 ) — ( 459 ) January 31, 2024 $ 12,253 $ 685,275 $ 4,060,070 $ ( 152,957 ) $ ( 1,880,674 ) $ 2,723,967 Three Months Ended January 31, 2023 (In thousands, except for share and per share data) Common Shares Additional Paid-in Capital Retained Earnings Accumulated Other Comprehensive Income (Loss) Common Shares in Treasury, at cost TOTAL November 1, 2022 $ 12,253 $ 626,697 $ 3,652,216 $ ( 207,782 ) $ ( 1,789,009 ) $ 2,294,375 Shares issued under company stock and employee benefit plans — 7,032 — — 1,775 8,807 Stock-based compensation — 7,071 — — — 7,071 Purchase of treasury shares — — — — ( 6,875 ) ( 6,875 ) Dividends declared ($ 0.65 per share) — — ( 37,199 ) — — ( 37,199 ) Net income — — 104,261 — — 104,261 Other Comprehensive Income (Loss): Foreign currency translation adjustments — — — 76,821 — 76,821 Defined benefit pension and post-retirement plan adjustments — — — ( 576 ) — ( 576 ) January 31, 2023 $ 12,253 $ 640,800 $ 3,719,278 $ ( 131,537 ) $ ( 1,794,109 ) $ 2,446,685 See accompanying notes. Page 6 Table of Contents Nordson Corporation Condensed Consolidated Statements of Cash Flows (In thousands) Three Months Ended Cash flows from operating activities: January 31, 2024 January 31, 2023 Net income $ 109,572 $ 104,261 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 33,544 26,434 Non-cash stock compensation 4,659 6,239 Deferred income taxes 1,642 ( 278 ) Other non-cash expense 243 253 Loss on sale of property, plant and equipment 8 10 Changes in operating assets and liabilities 14,614 ( 58,371 ) Other 8,074 44,789 Net cash provided by operating activities 172,356 123,337 Cash flows from investing activities: Additions to property, plant and equipment ( 7,530 ) ( 9,302 ) Proceeds from sale of property, plant and equipment 22 9 Other 1,783 — Acquisition of business, net of cash acquired — ( 377,843 ) Net cash used in investing activities ( 5,725 ) ( 387,136 ) Cash flows from financing activities: Proceeds from issuance of debt 805 566,978 Repayment of debt ( 108,000 ) ( 314,700 ) Repayment of finance lease obligations ( 1,488 ) ( 1,318 ) Issuance of common shares 14,418 8,807 Purchase of treasury shares ( 7,371 ) ( 6,875 ) Dividends paid ( 38,855 ) ( 37,199 ) Net cash provided (used) in financing activities ( 140,491 ) 215,693 Effect of exchange rate changes on cash ( 5,618 ) 6,643 Decrease in cash and cash equivalents 20,522 ( 41,463 ) Cash and cash equivalents at beginning of period 115,679 163,457 Cash and cash equivalents at end of period $ 136,201 $ 121,994 See accompanying notes. Page 7 Table of Contents Nordson Corporation Notes to Condensed Consolidated Financial Statements January 31, 2024 NOTE REGARDING AMOUNTS AND FISCAL YEAR REFERENCES In this Quarterly Report on Form 10-Q, 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 ending October 31. Significant accounting policies Basis of presentation . The accompanying unaudited Condensed Consolidated Financial Statements have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and notes required by generally accepted accounting principles in the United States ("U.S. GAAP") for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the three months ended January 31, 2024 are not necessarily indicative of the results that may be expected for the full year. For further information, refer to the Consolidated Financial Statements and notes included in our Annual Report on Form 10-K for the year ended October 31, 2023. Consolidation . The Condensed Consolidated Financial Statements include the accounts of Nordson Corporation and its 100%-owned and controlled subsidiaries. Investments in affiliates and joint ventures in which our ownership is 50 % 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 Condensed Consolidated Financial Statements. Actual amounts could differ from these estimates. 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 January 31, 2024 and 2023 were not material. However, for certain contracts related to the sale of customer-specific products within our Medical and Fluid Solutions segment, revenue is recognized 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 on January 31, 2024 and October 31, 2023. Revenue recognized over time represented approximately less than ten percent of our overall consolidated revenues at January 31, 2024 and October 31, 2023. Revenue is measured as the amount of consideration we expect to receive in exchange for transferring products or services. Taxes, including sales and value add, that 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 Page 8 Table of Contents Nordson Corporation costs is one year or less. These costs are recorded within Selling and administrative expenses in our Condensed 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 and are not material. 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, and, therefore, these items are typically regarded as inconsequential or not material. 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 our Operating segments Note for details. 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 shares 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 excluded from the calculation of diluted earnings per share for the three months ended January 31, 2024 and 2023 were 74 and 144 , respectively. Recently issued accounting standards In November 2023, the FASB issued ASU 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures . ASU 2023-07 requires enhanced disclosures about significant segment expenses and enhanced disclosures in interim periods. The guidance in ASU 2023-07 will be applied retrospectively and is effective for annual reporting periods in fiscal years beginning after December 15, 2023 and interim reporting periods in fiscal years beginning after December 31, 2024, with early adoption permitted. The Company is currently evaluating the impact that the adoption of ASU 2023-07 will have on its consolidated financial statements and disclosures and anticipates adoption in 2025. In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures . ASU 2023-09 is intended to improve income tax disclosure requirements by requiring specific disclosure in the rate reconciliation and additional information for reconciling items that meet a quantitative threshold. The guidance in ASU 2023-09 will be effective for annual reporting periods in fiscal years beginning after December 15, 2024. The Company is currently evaluating the impact that the adoption of ASU 2023-09 will have on its consolidated financial statements and disclosures and anticipates adoption in fiscal 2026. 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 Condensed Consolidated Statements of Income. 2023 Acquisitions On August 24, 2023, the Company completed the acquisition of the ARAG Group and its subsidiaries ("ARAG Group" or "ARAG") pursuant to the terms of the Sale and Purchase Agreement, dated as of June 25, 2023, by and among the Company, its Italian subsidiary, Capvis Equity V LP, DRIP Co-Investment, and certain individuals. ARAG is a global market and innovation leader in the development, production and supply of precision control systems and smart fluid components for agricultural spraying. ARAG operates as a division of our Industrial Precision Solutions segment. In anticipation of the acquisition, the Company entered into a € 760,000 senior unsecured term loan facility with a group of banks in August 2023 (the "364-Day Term Loan F acility" ). The all-cash ARAG acquisition of approximately € 957,000 , net of the repayment of approximately € 30,300 of debt of the acquired companies, was funded using borrowings under the 364-Day Term Loan Facility and the Company's revolving credit facility. The 364-Day Term Loan Facility was subsequently paid off in September 2023 with the net proceeds of a senior notes offering. Based on the fair value of the assets acquired and the liabilities assumed, goodwill of $ 687,200 and identifiable intangible assets of $ 353,500 were recorded. The identifiable intangible assets consist primarily of $ 27,500 of tradenames (amortized over nine years ), $ 31,000 of technology (amortized over five years ), and $ 295,000 of customer relationships (amortized over twenty-two years ). Goodwill associated with the acquisition was not tax deductible. As of January 31, 2024, the purchase price allocation remains preliminary as we complete our assessment principally of income taxes. The financial results of the ARAG Group acquisition are not expected to have a material impact on our Consolidated Financial Statements. Page 9 Table of Contents Nordson Corporation The assets and liabilities acquired were as follows: August 24, 2023 Cash $ 32,966 Receivables - net 29,765 Inventories - net 52,130 Goodwill 687,200 Intangibles 353,500 Other assets 57,238 Total Assets $ 1,212,799 Accounts payable $ 18,915 Deferred income taxes 100,057 Other liabilities 15,924 Total Liabilities $ 134,896 On November 3, 2022, we acquired 100 % of CyberOptics Corporation ("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 is reported in our Advanced Technology Solutions segment. We acquired CyberOptics for an aggregate purchase price of $ 377,843 , net of cash of approximately $ 40,890 , funded using borrowings under our revolving credit facility and cash on hand. Based on the fair value of the assets acquired and the liabilities assumed, goodwill of $ 285,330 and identifiable intangible assets of $ 58,600 were recorded. The identifiable intangible assets consist primarily of $ 15,200 of tradenames (amortized over fifteen years ), $ 14,600 of technology (amortized over seven years ), and $ 28,800 of customer contracts (amortized over twelve years ). Goodwill associated with the acquisition was not tax deductible . As of January 31, 2024, the purchase price allocation is final. The results of CyberOptics are not material to our Consolidated Financial Statements. The assets and liabilities acquired were as follows: November 3, 2022 Cash $ 40,890 Receivables - net 21,364 Inventories - net 33,639 Goodwill 285,330 Intangibles 58,600 Other assets 13,768 Total Assets $ 453,591 Accounts payable $ 8,109 Deferred income taxes 14,826 Other liabilities 11,923 Total Liabilities $ 34,858 Receivables Our allowance for credit losses is principally determined based on aging of receivables. Receivables are exposed to credit risk based on the customers' ability to pay which is influenced by, among other factors, their financial liquidity. We perform ongoing customer credit evaluation to maintain sufficient allowances for potential credit losses. Our segments perform credit evaluation and monitoring to estimate and manage credit risk through the review of customer information, credit ratings, approval and monitoring of customer credit limits, and assessment of market conditions. We may also require prepayments or bank guarantees from customers to mitigate credit risk. Our receivables are generally short-term in nature with a majority of receivables outstanding less than 90 days. Accounts receivable balances are written-off against the allowance if deemed uncollectible. Accounts receivable are net of an allowance for credit losses of $ 10,460 and $ 10,015 on January 31, 2024 and October 31, 2023, respectively. The p rovision for losses on receivables was $ 80 and $ 348 for the three months ended January 31, 2024 and 2023, Page 10 Table of Contents Nordson Corporation respectively. The remaining change in the allowance for credit losses is principally related to net write-off/recoveries of uncollectible accounts as well as currency translation. Inventories Components of inventories were as follows: January 31, 2024 October 31, 2023 Finished goods $ 253,283 $ 233,552 Raw materials and component parts 206,590 211,874 Work-in-process 72,645 86,474 532,518 531,900 Obsolescence and other reserves ( 81,301 ) ( 77,125 ) $ 451,217 $ 454,775 Property, Plant and Equipment Components of property, plant and equipment were as follows: January 31, 2024 October 31, 2023 Land $ 16,049 $ 15,792 Land improvements 5,027 5,019 Buildings 296,676 294,267 Machinery and equipment 566,476 549,291 Enterprise management system 52,959 52,939 Construction-in-progress 22,701 24,916 Leased property under finance leases 28,843 28,406 988,731 970,630 Accumulated depreciation and amortization ( 594,264 ) ( 577,784 ) $ 394,467 $ 392,846 Depreciation expense was $ 14,157 and $ 12,562 for the three months ended January 31, 2024 and 2023, respectively. Goodwill and other intangible assets Changes in the carrying amount of goodwill for th e three months ended January 31, 2024 by operating segment were as follows: Industrial Precision Solutions Medical Fluid Systems Advanced Technology Solutions Total Balance at October 31, 2023 $ 1,208,996 $ 1,173,858 $ 401,347 $ 2,784,201 Acquisitions ( 7,700 ) — — ( 7,700 ) Currency effect 25,705 1,304 1,576 28,585 Balance at January 31, 2024 $ 1,227,001 $ 1,175,162 $ 402,923 $ 2,805,086 See Acquisitions Note for additional details. Page 11 Table of Contents Nordson Corporation Information regarding our intangible assets subject to amortization was as follows: January 31, 2024 Carrying Amount Accumulated Amortization Net Book Value Customer relationships $ 811,031 $ 304,531 $ 506,500 Patent/technology costs 206,855 118,913 87,942 Trade name 126,724 55,085 71,639 Non-compete agreements 10,102 9,696 406 Other 301 301 — Total $ 1,155,013 $ 488,526 $ 666,487 October 31, 2023 Carrying Amount Accumulated Amortization Net Book Value Customer relationships $ 794,706 $ 287,585 $ 507,121 Patent/technology costs 204,905 112,994 91,911 Trade name 125,692 52,488 73,204 Non-compete agreements 10,028 9,521 507 Other 182 181 1 Total $ 1,135,513 $ 462,769 $ 672,744 Amortization expense for the three months ended January 31, 2024 and 2023 was $ 19,387 and $ 13,872 , respectively. See Acquisitions Note for details regarding intangibles recorded due to the acquisition of ARAG and CyberOptics. Pension and other postretirement plans The components of net periodic pension and other postretirement cost for the three months ended January 31, 2024 and 2023 were: U.S. International Three Months Ended 2024 2023 2024 2023 Service cost $ 2,507 $ 2,744 $ 237 $ 275 Interest cost 4,752 4,175 689 603 Expected return on plan assets ( 6,652 ) ( 6,529 ) ( 417 ) ( 377 ) Amortization of prior service credit — — ( 2 ) ( 13 ) Amortization of net actuarial loss — — 9 20 Total benefit cost $ 607 $ 390 $ 516 $ 508 The components of other postretirement benefit costs for the three months ended January 31, 2024 and 2023 were: U.S. International Three Months Ended 2024 2023 2024 2023 Service cost $ 70 $ 100 $ 1 $ 1 Interest cost 754 765 3 3 Amortization of net actuarial gain ( 147 ) — ( 14 ) ( 16 ) Total benefit cost (income) $ 677 $ 865 $ ( 10 ) $ ( 12 ) The components of net periodic pension and other postretirement cost other than service cost are included in Other – net in our Condensed Consolidated Statements of Income. Page 12 Table of Contents Nordson Corporation Income taxes We record our interim provision for income taxes based on our estimated annual effective tax rate, as well as certain items discrete to the current period. The effective tax rate for the three months ended January 31, 2024 and 2023 was 21.0 % and 20.5 %, respectively. Due to our share-based payment transactions, our income tax provision included a discrete tax benefit of $ 369 and $ 1,166 for the three months ended January 31, 2024 and 2023, respectively . Accumulated other comprehensive income (loss) The components of accumulated other comprehensive income (loss), including adjustments for items that are reclassified from accumulated other comprehensive loss to net income, are shown below. Cumulative translation adjustments Pension and postretirement benefit plan adjustments Accumulated other comprehensive income (loss) Balance at October 31, 2023 $ ( 133,280 ) $ ( 63,161 ) $ ( 196,441 ) Pension and other postretirement plan adjustments, net of tax of $ 149 — ( 459 ) ( 459 ) Foreign currency translation adjustments (a) 43,943 — 43,943 Balance at January 31, 2024 $ ( 89,337 ) $ ( 63,620 ) $ ( 152,957 ) (a) Includes a net loss of $ 11,855 , net of tax of $ 3,541 , on net investment hedges. Stock-based compensation During the 2021 Annual Meeting of Shareholders, our shareholders approved the Nordson Corporation 2021 Stock Incentive and Award Plan (the "2021 Plan") as the successor to the Amended and Restated 2012 Stock Incentive and Award Plan (the "2012 Plan"). The 2021 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 900 common shares were authorized for grant under the 2021 Plan plus the number of shares that remained available to be granted under the 2012 Plan, as well as issuable under the CyberOptics equity plan. As of January 31, 2024, a total of 1,885 common shares were available to be granted under the 2021 Plan. Stock Options Nonqualified or incentive stock options may be granted to our employees and directors. Generally, options granted to employees may be exercised beginning one year from the date of grant at a rate not exceeding 25 percent per year and expire 10 years from the date of grant. Vesting accelerates upon a qualified termination in connection with a change in control. In the event of termination of employment due to early retirement or normal retirement at age 65 , options granted within 12 months prior to termination are forfeited, and vesting continues post retirement for all other unvested options granted. In the event of disability or death, all unvested stock options granted within 12 months prior to termination 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 $ 1,088 and $ 1,663 for the three months ended January 31, 2024 and 2023, respectively. The following table summarizes activity related to stock options for the three months ended January 31, 2024: Number of Options Weighted- Average Exercise Price Per Share Aggregate Intrinsic Value Weighted Average Remaining Term Outstanding at October 31, 2023 1,062 $ 152.41 Granted 55 238.80 Exercised ( 116 ) 128.09 Forfeited or expired ( 6 ) 228.20 Outstanding at January 31, 2024 995 $ 159.51 $ 92,894 5.1 years Expected to vest 164 $ 237.41 $ 2,927 8.4 years Exercisable at January 31, 2024 828 $ 143.80 $ 89,927 4.4 years Page 13 Table of Contents Nordson Corporation As of January 31, 2024, there was $ 8,042 of total unrecognized compensation cost related to unvested stock options. That cost is expected to be amortized over a weighted average period of approximately 2.7 years. 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: Three Months Ended January 31, 2024 January 31, 2023 Expected volatility 30.5 % - 31.7 % 30.4 % - 31.8 % Expected dividend yield 1.15 % - 1.15 % 1.12 % - 1.12 % Risk-free interest rate 4.22 % - 4.26 % 3.79 % - 3.82 % Expected life of the option (in years) 5.0 - 6.2 5.0 - 6.1 The weighted-average expected volatility used to value the 2024 and 2023 options was 30.7 % and 30.6 %, 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 U.S. Treasury issues with a term equal to the expected life of the option being valued. The weighted average grant date fair value of stock options granted during the three months ended January 31, 2024 and 2023 was $ 79.81 and $ 78.12 , respectively. The total intrinsic value of options exercised during the three months ended January 31, 2024 and 2023 was $ 14,127 and $ 8,350 , respectively. Cash received from the exercise of stock options for the three months ended January 31, 2024 and 2023 was $ 14,418 and $ 8,807 , respectively. Restricted Shares and Restricted Share Units We may grant restricted shares and/or restricted share units to our employees and directors. These shares or units may not be transferred for a designated period of time (generally one to three years ) defined at the date of grant. We may also grant continuation awards in the form of restricted share units with cliff vesting and a performance measure that must be achieved for the restricted share units to vest. For employee recipients, in the event of termination of employment due to early retirement, with the consent of the Company, restricted shares and units granted within 12 months prior to termination are forfeited, and other restricted shares and units vest on a pro-rata basis, subject to the consent of the Compensation Committee. In the event of termination of employment due to normal retirement at age 65 , restricted shares and units granted within 12 months prior to termination are forfeited, and, for other restricted shares and units, the restriction period applicable to restricted shares will lapse and the shares will vest and be transferable and all unvested units will become vested in full, subject to the consent of the Compensation Committee. In the event of a recipient's disability or death, all restricted shares and units granted within 12 months prior to termination fully vest. Termination for any other reason prior to the lapse of any restrictions or vesting of units results in forfeiture of the shares or units. For non-employee directors, all restrictions lapse in the event of disability or death of the non-employee director. 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, stock-based compensation equivalent to the fair value on the date of grant is expensed over the vesting period. As of January 31, 2024, there were no unrecognized compensation cost related to restricted shares. The amount charged to expense related to restricted shares during the three months ended January 31, 2024 and 2023 was $ 0 and $ 160 , respectively, which included common share dividends of $ 0 and $ 2 , respectively. Page 14 Table of Contents Nordson Corporation The following table summarizes activity related to restricted share units during the three months ended January 31, 2024: Number of Units Weighted-Average Grant Date Fair Value Restricted share units at October 31, 2023 69 $ 236.28 Granted 36 233.74 Forfeited ( 2 ) 240.72 Vested ( 28 ) 233.59 Restricted share units at January 31, 2024 75 $ 235.89 As of January 31, 2024, there was $ 15,288 of remaining expense to be recognized related to outstanding restricted share units, which is expected to be recognized over a weighted average period of 2.2 years. The amount charged to expense related to restricted share units during each of the three months ended January 31, 2024 and 2023 was $ 2,226 and $ 2,258 , 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 and the percentage of the requisite service that has been rendered. The calculations are based upon the grant date fair value, which is principally driven by the stock price on the date of grant. The per share values were $ 229.58 in 2024, and $ 231.34 , $ 211.25 and $ 214.51 for 2023. The amount charged to expense related to performance awards for the three months ended January 31, 2024 and 2023 was $ 1,268 and $ 2,062 , respectively. As of January 31, 2024, there was $ 11,531 of unrecognized compensation cost related to performance share incentive awards. 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 payout each year. Additional share units are credited for quarterly dividends paid on our common shares. Expense related to dividends paid under this plan for the three months ended January 31, 2024 and 2023 was $ 21 and $ 18 , 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 the three months ended January 31, 2024: Number of Shares Weighted-Average Grant Date Fair Value Outstanding at October 31, 2023 78 $ 93.11 Distributions ( 5 ) 53.35 Outstanding at January 31, 2024 73 $ 96.11 The amount charged to expense related to director deferred compensation for the three months ended January 31, 2024 and 2023 was $ 56 and $ 80 , respectively . 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 Sheets. Page 15 Table of Contents Nordson Corporation Following is a reconciliation of the product warranty liability for the three months ended January 31, 2024 and 2023: January 31, 2024 January 31, 2023 Beginning balance at October 31 $ 14,401 $ 11,723 Accruals for warranties 3,089 4,809 Warranty payments ( 2,663 ) ( 3,186 ) Currency effect 192 215 Ending balance $ 15,019 $ 13,561 Operating segments We conduct business in three p rimary operating segments: Industrial Precision Solutions, Medical and Fluid 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 us ed 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 Condensed Consolidated Statements 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 the same as those described in the Significant accounting policies Note. Industrial Precision Solutions: This segment focuses on delivering proprietary dispensing and processing technology, both standard and highly customized equipment, to diverse end markets. Product lines commonly reduce material consumption, increase line efficiency through precision dispense and measurement and control, 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, agricultural, consumer durables and non-durables markets. Medical and Fluid Solutions: This segment includes the Company’s fluid management solutions for medical, high-tech industrial and other diverse end markets. Related plastic tubing, balloons, catheters, syringes, cartridges, tips and fluid connection components are used to dispense or control fluids within customers’ medical devices or products, as well as production processes. Advanced Technology Solutions: This segment focuses on products serving electronics end markets. Advanced Technology Solutions products integrate our proprietary product technologies found in progressive stages of an electronics customer’s production processes, such as surface treatment, precisely controlled dispensing of material and test and inspection to ensure quality and reliability. Applications include, but are not limited to, semiconductors, printed circuit boards, electronic components and automotive electronics. The following table presents information about our segments: Three Months Ended Industrial Precision Solutions Medical and Fluid Solutions Advanced Technology Solutions Corporate Total January 31, 2024 Net external sales $ 354,547 $ 159,526 $ 119,120 $ — $ 633,193 Operating profit (loss) 108,364 46,100 19,038 ( 14,067 ) 159,435 January 31, 2023 Net external sales $ 311,546 $ 154,287 $ 144,644 $ — $ 610,477 Operating profit (loss) 102,319 39,384 16,963 ( 14,447 ) 144,219 We had significant sales in the following geographic regions: Three Months Ended January 31, 2024 January 31, 2023 Americas $ 274,012 $ 264,878 Europe 179,310 162,939 Asia Pacific 179,871 182,660 Total net external sales $ 633,193 $ 610,477 Page 16 Table of Contents Nordson Corporation 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: January 31, 2024 Total Level 1 Level 2 Level 3 Assets: Foreign currency forward contracts (a) $ 3,934 $ — $ 3,934 $ — Net investment contracts (b) 8,449 — 8,449 — Total assets at fair value $ 12,383 $ — $ 12,383 $ — Liabilities: Deferred compensation plans (c) $ 10,812 $ — $ 10,812 $ — Foreign currency forward contracts (a) 1,537 — 1,537 — Net investment contracts (b) 20,087 — 20,087 — Total liabilities at fair value $ 32,436 $ — $ 32,436 $ — October 31, 2023 Total Level 1 Level 2 Level 3 Assets: Foreign currency forward contracts (a) $ 696 $ — $ 696 $ — Net investment contracts (b) 13,713 — 13,713 Total assets at fair value $ 14,409 $ — $ 14,409 $ — Liabilities: Deferred compensation plans (c) $ 9,637 $ — $ 9,637 $ — Net investment contracts (b) 9,985 — 9,985 — Foreign currency forward contracts (a) 10,425 — 10,425 — Total liabilities at fair value $ 30,047 $ — $ 30,047 $ — (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) Net assets of our foreign subsidiaries are exposed to volatility in foreign currency exchange rates. We utilize net investment hedges to offset the translation adjustment arising from re-measuring our investment in foreign subsidiaries. The notional amount of our net investment hedge contracts as of January 31, 2024 was $ 815,256 . (c) Executive officers and other highly compensated employees may defer up to 100 % of their salary and annual cash incentive compensation and for executive officers, up to 90 % 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. The carrying amounts and fair values of financial instruments, other than cash and cash equivalents, receivables, accounts payable and notes payable, are shown in the table below. The carrying values of cash and cash equivalents, receivables, accounts payable and notes payable approximate fair value due to the short-term nature of these instruments. January 31, 2024 Carrying Amount Fair Value Long-term debt (including current portion) $ 1,624,514 $ 1,676,192 Page 17 Table of Contents Nordson Corporation 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 disclosed in the Long-term debt Note. Derivative financial instruments Foreign Currency Forward Contracts 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 Condensed Consolidated Statements of Income together with the transaction gain or loss from the related balance sheet position. The settlement of these contracts is recorded in operating activities on the Consolidated Statement of Cash Flows. For the three months ended January 31, 2024, we recognized a net gain of $ 12,094 on foreign currency forward contracts and a net loss of $ 12,916 from the change in fair value of balance sheet positions. For the three months ended January 31, 2023, we recognized a net gain of $ 16,139 on foreign currency forward contracts and a net loss of $ 20,710 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 Receivable-net and Accrued liabilities, respectively, in our Consolidated Balance Sheets. The following table summarizes, by currency, the foreign currency forward contracts outstanding at January 31, 2024 and 2023: January 31, 2024 contract amounts: Notional Sell Amounts Notional Buy Amounts Euro $ 111,826 $ 96,737 British pound 19,136 180,224 Japanese yen 12,024 23,985 Mexican Peso 925 33,885 Hong Kong dollar — 7,453 Singapore dollar 72 20,062 Australian dollar — 9,334 Taiwan Dollar — 8,000 Others 5,329 85,206 Total $ 149,312 $ 464,886 January 31, 2023 contract amounts: Notional Sell Amounts Notional Buy Amounts Euro $ 93,142 $ 398,560 British pound 27,965 112,945 Mexican Peso 11,658 31,315 Japanese yen 11,644 35,772 Hong Kong dollar 4,180 148,653 Singapore dollar 245 18,862 Australian dollar 375 8,821 Taiwan Dollar — 35,047 Others 3,395 65,175 Total $ 152,604 $ 855,150 Page 18 Table of Contents Nordson Corporation 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. For the three months ended January 31, 2024 and 2023, there were no significant concentrations of credit risk. Net Investment Hedges Net assets of our foreign subsidiaries are exposed to volatility in foreign currency exchange rates. We may utilize net investment hedges to offset the translation adjustment arising from re-measuring our investment in foreign subsidiaries. As of January 31, 2024, the Company was party to various cross currency swaps between the U.S. Dollar and Euro, Japanese Yen, Taiwan Dollar and Chinese Yuan, which were designated as hedges of our net investments in certain foreign subsidiaries to mitigate the foreign exchange risk associated with certain investments in these subsidiaries. Any increases or decreases related to the remeasurement of the hedges are recorded in the currency translation component of Accumulated other comprehensive income (loss) within Shareholders' Equity in the Consolidated Balance Sheet until the sale or substantial liquidation of the underlying investments. A loss of $ 11,855 , net of tax, was recorded for the three months ended January 31, 2024. The following table summarizes the fair values of our net investment contracts designated as net investment hedges in the Company's Consolidated Balance Sheets as of January 31, 2024: Prepaid expenses and other current assets Other assets Accrued liabilities Other long-term liabilities Net investment contracts $ 8,365 $ 84 $ 1,121 $ 18,966 There were no net investment hedges as of January 31, 2023. Long-term debt A summary of long-term debt is as follows: January 31, 2024 October 31, 2023 Notes Payable $ 5,942 $ 5,019 Revolving credit agreement, due 2028 160,000 248,000 Term loan due 2026 280,000 300,000 Senior notes, due 2024-2025 32,000 32,000 Senior notes, due 2024-2027 54,286 54,286 Senior notes, due 2024-2030 260,000 260,000 5.600% Notes due 2028 350,000 350,000 5.800% Notes due 2033 500,000 500,000 1,642,228 1,749,305 Less current maturities 116,585 115,662 Less unamortized debt issuance costs 10,335 10,773 Less bond discounts 1,437 1,476 Long-term maturities $ 1,513,871 $ 1,621,394 Revolving credit agreement — In June 2023, we entered into a $ 1,150,000 unsecured multi-currency credit facility with a group of banks, which provides for a term loan facility in the aggregate principal amount of $ 300,000 (the "Term Loan Facility"), maturing in June 2026, and a multicurrency revolving credit facility in the aggregate principal amount of $ 850,000 (the "Revolving Facility"), maturing in June 2028 (the "New Credit Agreement"). The Company borrowed and has outstanding $ 280,000 on the Term Loan Facility and $ 160,000 on the Revolving Facility as of January 31, 2024. The Revolving Facility permits borrowing in U.S. Dollars, Euros, Sterling, Swiss Francs, Singapore Dollars, Yen, and each other currency approved by a Revolving Facility lender. The New Credit Agreement provides that the applicable margin for (i) RFR, as defined in the New Credit Agreement, and Eurodollar Loans will range from 0.85 % to 1.20 % and (ii) Base Rate Loans will range from 0.00 % to 0.20 %, in each case, based on the Company’s Leverage Ratio (as defined in the Credit Agreement and calculated on a consolidated net debt basis). Borrowings under the New Credit Agreement bear interest at (i) either a base rate or a SOFR rate, with respect to borrowings in U.S. dollars, (ii) a eurocurrency rate, with respect to borrowings in Euros and Yen, or (iii) Daily Simple RFR, with respect to borrowings in Sterling, Swiss Francs or Singapore Dollars, plus, in each case, an applicable margin (and, solely in the case of Singapore Dollars, a spread adjustment). The applicable margin is based on the Company’s Leverage Ratio. The weighted-average interest rate at January 31, 2024 was 6.38 %. Page 19 Table of Contents Nordson Corporation Senior notes, due 2024-2025 — These unsecured fixed-rate notes entered into in 2012 with a group of insurance companies have a remaining weighted-average life of 0.75 years. The weighted-average interest rate at January 31, 2024 was 3.10 %. Senior notes, due 2024-2027 — These unsecured fixed-rate notes entered into in 2015 with a group of insurance companies have a remaining weighted-average life of 1.73 years. The weighted-average interest rate at January 31, 2024 was 3.11 %. Senior notes, due 2024-2030 — These unsecured fixed-rate notes entered into in 2018 with a group of insurance companies have a remaining weighted-average life of 2.62 years. The weighted-average interest rate at January 31, 2024 was 3.97 %. 5.600% Notes due 2028 and 5.800% Notes due 2033 — In September 2023, we completed an underwritten public offering (the "Offering") of $ 350,000 aggregate principal amount of 5.600 % Notes due 2028 and $ 500,000 aggregate principal amount of 5.800 % Notes due 2033. We were in compliance with all covenants at January 31, 2024, and the amount we could borrow would not have been limited by any debt covenants. Contingencies We are involved in pending or potential litigation regarding environmental, product liability, patent, contract, employee and other matters arising from the normal course of business. Including the environmental 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. 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. As of January 31, 2024 and October 31, 2023, our accrual for the ongoing operation, maintenance and monitoring obligation at th e Site was $ 231 . 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. Page 20 Table of Contents Nordson Corporation