N
otes to Condensed Consolidated Financial Statements
April 30, 2017
NOTE REGARDING AMOUNTS AND FISCAL YEAR REFERENCES
In this quarterly 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 otherwise noted, all references to years relate to our fiscal year ending October 31.
1.
|
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 footnotes required by generally accepted accounting principles 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 and six months ended April 30, 2017 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 footnotes included in our Annual Report on Form 10-K for the year ended October 31, 2016.
Basis of 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% 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 accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the amounts reported in the consolidated financial statements. Actual amounts could differ from these estimates.
Revenue recognition
. Most of our revenues are recognized upon shipment, provided that persuasive evidence of an arrangement exists, the sales price is fixed or determinable, collectibility is reasonably assured, and title and risk of loss have passed to the customer.
Certain arrangements may include installation, installation supervision, training, and spare parts, which tend to be completed in a short period of time, at an insignificant cost, and utilizing skills not unique to us, therefore, are typically regarded as inconsequential or perfunctory. Revenue for undelivered items is deferred and included within accrued liabilities in the accompanying balance sheet. Revenues deferred in 2017 and 2016 were not material.
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. No options were excluded from the calculation of diluted earnings per share for the three and six months ended April 30, 2017.
Options excluded from the calculation of diluted earnings per share for the three and six months ended April 30, 2016 were 542 and 791, respectively.
Page 7
Nordson Corporation
2.
|
Recently issued accounting standards
|
In May 2014, the Financial Accounting Standards Board (FASB) issued a new standard regarding revenue recognition. Under this standard, a company recognizes revenue when it transfers promised goods or services to customers in an amount that reflects the consideration to which the company expects to be entitled in exchange for those goods or services. The standard implements a five-step process for customer contract revenue recognition that focuses on transfer of control. In August 2015, the FASB issued a standard to delay the effective date by one year. In accordance with this delay, the new standard is effective for us beginning in the first quarter of 2019. Early adoption is permitted. The new standard is required to be applied retrospectively to each prior reporting period presented or retrospectively with the cumulative effect of initially applying it recognized at the date of initial application. We are currently reviewing the guidance as compared to our current accounting policies and assessing the impact this standard, along with the subsequent updates and clarifications, will have on our consolidated financial statements and disclosures. During 2017, we plan to assess the impact the new standard may have on our customer contracts and consider our method of adoption.
In February 2016, the FASB issued a new standard which requires a lessee to recognize on the balance sheet the assets and liabilities for the rights and obligations created by those leases with a lease term of more than twelve months. Leases will continue to be classified as either financing or operating, with classification affecting the recognition, measurement and presentation of expenses and cash flows arising from a lease. It will be effective for us beginning in 2020. We are currently assessing the impact this standard will have on our consolidated financial statements.
In March 2016, the FASB issued a new standard which simplifies the accounting for share-based payment transactions. This guidance requires that excess tax benefits and tax deficiencies be recognized as income tax expense or benefit in the Consolidated Statements of Income rather than additional paid-in capital. Additionally, the excess tax benefits will be classified along with other income tax cash flows as an operating activity, rather than a financing activity, on the Statement of Cash Flows. Further, the update allows an entity to make a policy election to recognize forfeitures as they occur or estimate the number of awards expected to be forfeited. It will be effective for us beginning in 2018 and should be applied prospectively, with certain cumulative effect adjustments. Early adoption is permitted. We are currently assessing the impact this standard will have on our consolidated financial statements.
In January 2017, the FASB issued a new standard which eliminates Step 2 from the goodwill impairment test in order to simplify the subsequent measurement of goodwill. It will be effective for us beginning in 2021. Early adoption is permitted for interim or annual goodwill impairment tests performed on testing dates after January 1, 2017. We are currently assessing the impact this standard will have on our consolidated financial statements.
In March 2017, the FASB issued a new standard which requires the presentation of the service cost component of the net periodic benefit cost in the same income statement line item as other employee compensation costs arising from services rendered during the period. All other components of net periodic benefit cost will be presented below operating income. Additionally, only the service cost component will be eligible for capitalization in assets. It will be effective for us beginning in 2019. Early adoption is permitted. We are currently assessing the impact this standard will have on our consolidated financial statements.
3.
|
Severance and restructuring costs
|
During the fourth quarter of 2016, we implemented an initiative within our Adhesive Dispensing Systems segment to consolidate certain polymer processing product line facilities in the U.S. This initiative is designed to improve customer experience, accelerate growth, optimize performance and realize synergies for sustained long term success. During the three and six months ended April 30, 2017, costs of $491 and $718 were recognized relating to this initiative, respectively. Payments of $260 and $374 related to these actions were paid during the three and six months ended April 30, 2017, respectively. Total costs for this action to-date have been $6,283, which consisted primarily of severance costs. Additional costs related to this initiative are not expected to be material in future periods. Cash payments related to this initiative are expected to be paid during 2017 and 2018.
Page 8
Nordson Corporation
T
he following table summarizes severance and restructuring activity during
the six
months ended
April 30
,
2
017 related
to
this action:
|
|
Employee
|
|
|
Other
|
|
|
|
|
|
|
|
severance
|
|
|
one-time
|
|
|
|
|
|
|
|
charges
|
|
|
costs
|
|
|
Total
|
|
Accrual Balance at October 31, 2016
|
|
$
|
4,576
|
|
|
$
|
104
|
|
|
$
|
4,680
|
|
Charged to expense
|
|
|
(248
|
)
|
|
|
966
|
|
|
|
718
|
|
Cash payments
|
|
|
(29
|
)
|
|
|
(345
|
)
|
|
|
(374
|
)
|
Non cash utilization
|
|
|
—
|
|
|
|
(362
|
)
|
|
|
(362
|
)
|
Accrual Balance at April 30, 2017
|
|
$
|
4,299
|
|
|
$
|
363
|
|
|
$
|
4,662
|
|
During the second half of 2015, we implemented initiatives across each of our segments to optimize operations and to enhance operational efficiency and customer service. No costs were recognized during the three and six months ended April 30, 2017 related to these initiatives. Costs of $1,633 and $2,650 were recognized during the three and six months ended April 30, 2016 related to these initiatives, respectively, which consisted primarily of severance costs.
Within the Adhesives Dispensing Systems segment, restructuring initiatives to optimize operations in the U.S. and Belgium resulted in costs of $991 and $1,471 during the three and six months ended April 30, 2016, respectively. Payments of $85 related to these actions were paid during the six months ended April 30, 2017.
Within the Advanced Technology Systems segment, a restructuring initiative to enhance operational efficiency and customer service resulted in costs of $170 and $680 during the three and six months ended April 30, 2016, respectively. Payments of $503 related to these actions were paid during the six months ended April 30, 2017.
Within the Industrial Coating Systems segment, a restructuring program to enhance operational efficiency and customer service resulted in severance costs of $472 and $499 during the three and six months ended April 30, 2016, respectively. Payments of $345 related to these actions were paid during the six months ended April 30, 2017.
Total costs for these actions to-date have been $16,621, which include $12,592 of severance costs, $759 of fixed asset impairment charges, $1,383 of lease termination costs and $1,887 of other one-time restructuring costs.
The following table summarizes severance and restructuring activity during the six months ended April 30, 2017 related to actions initiated in 2015:
|
|
Employee
|
|
|
Lease
|
|
|
Other
|
|
|
|
|
|
|
|
severance
|
|
|
termination
|
|
|
one-time
|
|
|
|
|
|
|
|
charges
|
|
|
charges
|
|
|
costs
|
|
|
Total
|
|
Accrual Balance at October 31, 2016
|
|
$
|
1,136
|
|
|
$
|
143
|
|
|
$
|
497
|
|
|
$
|
1,776
|
|
Cash payments
|
|
|
(450
|
)
|
|
|
(143
|
)
|
|
|
(340
|
)
|
|
|
(933
|
)
|
Accrual Balance at April 30, 2017
|
|
$
|
686
|
|
|
$
|
-
|
|
|
$
|
157
|
|
|
$
|
843
|
|
Additional costs related to these initiatives are not expected to be material in future periods. The remainder of the cash payments related to these initiatives are expected to be paid during 2017. Other severance and restructuring costs unrelated to these initiatives are not considered material. All severance and restructuring costs are included in selling and administrative expenses in the Consolidated Statements of Income.
On March 31, 2017, we completed the acquisition
of Vention Medical’s Advanced Technologies business (“Vention”), a Salem, New Hampshire leading
designer, developer and manufacturer of minimally invasive interventional delivery devices, catheters and advanced components for the global medical technology market. This is a highly complementary business that adds significant scale and enhances strategic capabilities of our existing medical platform. We acquired Vention for an aggregate purchase price of $705,000, net of $3,313 of cash and other closing adjustments of $10,141. The acquisition was funded primarily through a new term loan facility, as well as through cash and borrowings on our credit facility.
Based on the fair value of the assets acquired and the liabilities assumed, goodwill of $465,544 and identifiable intangible assets of $285,000 were recorded. The identifiable intangible assets consist primarily of $250,000 of customer relationships (amortized over 14 years), $2,000 of tradenames (amortized over 6 years), and $33,000 of technology, consisting of $25,000 (amortized over 14 years) and $8,000 (amortized over 10 years).
Goodwill associated with this acquisition is not tax deductible. Goodwill represents the value we expect to achieve through the expansion of our existing medical platform. This acquisition is being reported in our Advanced
Page 9
Nordson Corporation
Technology Systems segment. As of April 30, 2017, the purchase price allocations are considered preliminary as we have not yet finalized the estimated values of goodwill, intangible assets, income taxes and certain reserves. The following
table summarizes the preliminary fair values of the assets acquired and liabilities assumed at the acquisition date:
Assets acquired:
|
|
|
|
|
Cash
|
|
$
|
3,313
|
|
Receivables
|
|
|
25,191
|
|
Inventories
|
|
|
15,150
|
|
Prepaid expenses
|
|
|
3,079
|
|
Property, plant and equipment
|
|
|
34,032
|
|
Goodwill
|
|
|
465,544
|
|
Intangible assets
|
|
|
285,000
|
|
Other noncurrent assets
|
|
|
16,849
|
|
Total assets acquired
|
|
$
|
848,158
|
|
Liabilities assumed:
|
|
|
|
|
Current liabilities
|
|
|
38,025
|
|
Deferred tax liabilities
|
|
|
91,679
|
|
Total liabilities assumed
|
|
$
|
129,704
|
|
Net assets acquired
|
|
$
|
718,454
|
|
The transaction was accounted for under the acquisition method of accounting and, accordingly, the results of Vention’s operations, including $12,904 in sales and net income of $440, are included in our Condensed Consolidated Statements of Income from the date of acquisition.
During the second quarter of 2017, we incurred $13,415 of corporate charges related to Vention acquisition transaction costs which have been included within selling and administrative expenses in our Condensed Consolidated Statements of Income.
The following unaudited pro forma financial information for 2017 and 2016 assumes the Vention acquisition occurred as of the beginning of 2016 and are based on our historical financial statements and those of Vention. The pro forma results have been prepared for comparative purposes only and are not necessarily indicative of the results of operations which may occur in the future or that would have occurred had the acquisition of Vention been affected on the date indicated, nor are they necessarily indicative of our future results of operations.
|
|
Six Months Ended
|
|
|
|
April 30, 2017
|
|
|
April 30, 2016
|
|
Sales
|
|
$
|
969,042
|
|
|
$
|
870,397
|
|
Net income
|
|
|
113,529
|
|
|
|
106,219
|
|
Diluted earnings per share
|
|
|
1.95
|
|
|
|
1.85
|
|
The most significant pro forma adjustments included within the unaudited pro forma financial information presented in the table above relate to acquisition transaction costs, amortization of intangible assets, depreciation of property, plant and equipment, charges related to the fair value adjustment of acquisition-date inventory and interest expense associated with the new term loan facility.
Also on March 31, 2017, we entered into a $705,000 term loan facility with a group of banks. The Term Loan Agreement provides for the following term loans in three tranches: $200,000 due in October 2018, $200,000 due in March 2020, and $305,000 due in March 2022. The weighted average interest rate for borrowings under this agreement was 2.25% at April 30, 2017. Borrowings under this agreement were used for the single purpose of acquiring Vention. We were in compliance with all covenants at April 30, 2017.
On February 16, 2017, we purchased 100 percent of the outstanding shares of InterSelect GmbH (“InterSelect”), a German designer and manufacturer of selective soldering systems used in a variety of automotive, aerospace and industrial electronics assembly applications.
We acquired InterSelect for an aggregate purchase price of $5,518, net of cash acquired of $492. Based on the fair value of the assets acquired and the liabilities assumed, goodwill of $2,943 and identifiable intangible assets of $1,879 were recorded. The identifiable intangible assets consist primarily of $1,109 of customer relationships (amortized over 9 years), $348 of tradenames (amortized over 12 years), and $422 of technology (amortized over 9 years).Goodwill associated with this acquisition is not tax deductible. This acquisition is being reported in our Advanced Technology Systems segment. As of April 30, 2017, the purchase price allocations are considered preliminary as we complete our assessments of deferred taxes and certain reserves.
Page 10
Nordson Corporation
On February 1, 2017, we purchased 100
percent of the outstanding shares of Plas-Pak Industries, Inc. (“Plas-Pak”), a Norwich, Connecticut designer and manufacturer of injection molded, single-use plastic dispensing products. Plas-Pak’s broad product offering includes two-component (2K) cartri
dges for industrial and commercial do-it-yourself adhesives, dial-a-dose calibrated syringes for veterinary and animal health applications, and specialty syringes for pesticide, dental and other markets. We acquired Plas-Pak for an aggregate purchase price
of $70,798, net of cash acquired of $543. Based on the fair value of the assets acquired and the liabilities assumed,
goodwill of $24,952 and identifiable intangible assets of $33,800 were recorded. The identifiable intangible assets consist primarily of
$23,700 of customer relationships (amortized over 17 years), $4,100 of tradenames (amortized over 12 years), $5,000 of technology (amortized over 9 years) and $1,000 of non-compete agreements (amortized over 5 years). Goodwill associated with this acquisit
ion is tax deductible. This acquisition is being reported in our Advanced Technology Systems segment. As of April 30, 2017, the purchase price allocations remain preliminary as we complete our assessments of deferred taxes and certain reserves
On January 3, 2017, we purchased certain assets of ACE Production Technologies, Inc. (“ACE”), a Spokane, Washington based designer and manufacturer of selective soldering systems used in a variety of automotive and industrial electronics assembly applications. We acquired the assets for an aggregate purchase price of $13,761. Based on the fair value of the assets acquired and the liabilities assumed, goodwill of $6,383 and identifiable intangible assets of $5,010 were recorded. The identifiable intangible assets consist primarily of $2,800 of customer relationships (amortized over 7 years), $1,000 of tradenames (amortized over 11 years), $1,100 of technology (amortized over 7 years) and $110 of non-compete agreements (amortized over 3 years). Goodwill associated with this acquisition is tax deductible. This acquisition is being reported in our Advanced Technology Systems segment. As of April 30, 2017, the purchase price allocations are considered preliminary as we complete our assessments of deferred taxes.
On September 1, 2016, we purchased 100 percent of the outstanding shares of LinkTech Quick Couplings, Inc. (“LinkTech”), a Ventura, California designer, manufacturer and distributor of highly engineered precision couplings and fittings. This acquisition is being reported in our Advanced Technology Systems segment. As of April 30, 2017, no material measurement period adjustments were recorded, and the purchase price allocations are considered preliminary as we complete our assessments of income taxes.
At April 30, 2017 and October 31, 2016, inventories consisted of the following:
|
|
April 30, 2017
|
|
|
October 31, 2016
|
|
Raw materials and component parts
|
|
$
|
113,851
|
|
|
$
|
85,802
|
|
Work-in-process
|
|
|
49,889
|
|
|
|
36,681
|
|
Finished goods
|
|
|
152,025
|
|
|
|
134,602
|
|
|
|
|
315,765
|
|
|
|
257,085
|
|
Obsolescence and other reserves
|
|
|
(33,959
|
)
|
|
|
(29,324
|
)
|
LIFO reserve
|
|
|
(6,000
|
)
|
|
|
(7,400
|
)
|
|
|
$
|
275,806
|
|
|
$
|
220,361
|
|
6.
|
Goodwill and other intangible assets
|
Changes in the carrying amount of goodwill for the six months ended April 30, 2017 by operating segment are as follows:
|
|
Adhesive Dispensing
Systems
|
|
|
Advanced Technology
Systems
|
|
|
Industrial Coating
Systems
|
|
|
Total
|
|
Balance at October 31, 2016
|
|
$
|
385,733
|
|
|
$
|
697,346
|
|
|
$
|
24,058
|
|
|
$
|
1,107,137
|
|
Acquisitions
|
|
|
—
|
|
|
|
499,822
|
|
|
|
—
|
|
|
|
499,822
|
|
Currency effect
|
|
|
(823
|
)
|
|
|
209
|
|
|
|
—
|
|
|
|
(614
|
)
|
Balance at April 30, 2017
|
|
$
|
384,910
|
|
|
$
|
1,197,377
|
|
|
$
|
24,058
|
|
|
$
|
1,606,345
|
|
Accumulated impairment losses, which were recorded in 2009, were $232,789 at April 30, 2017 and October 31, 2016. Of these losses, $229,173 related to the Advanced Technology Systems segment, and $3,616 related to the Industrial Coating Systems segment.
Page 11
Nordson Corporation
Information regarding our intangible assets subject to amortization is as follows:
|
|
April 30, 2017
|
|
|
|
Carrying Amount
|
|
|
Accumulated
Amortization
|
|
|
Net Book Value
|
|
Customer relationships
|
|
$
|
485,216
|
|
|
$
|
82,444
|
|
|
$
|
402,772
|
|
Patent/technology costs
|
|
|
137,648
|
|
|
|
42,248
|
|
|
|
95,400
|
|
Trade name
|
|
|
92,783
|
|
|
|
25,041
|
|
|
|
67,742
|
|
Non-compete agreements
|
|
|
10,942
|
|
|
|
8,721
|
|
|
|
2,221
|
|
Other
|
|
|
1,387
|
|
|
|
1,383
|
|
|
|
4
|
|
Total
|
|
$
|
727,976
|
|
|
$
|
159,837
|
|
|
$
|
568,139
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
October 31, 2016
|
|
|
|
Carrying Amount
|
|
|
Accumulated
Amortization
|
|
|
Net Book Value
|
|
Customer relationships
|
|
$
|
207,493
|
|
|
$
|
71,608
|
|
|
$
|
135,885
|
|
Patent/technology costs
|
|
|
97,640
|
|
|
|
37,873
|
|
|
|
59,767
|
|
Trade name
|
|
|
85,271
|
|
|
|
22,140
|
|
|
|
63,131
|
|
Non-compete agreements
|
|
|
9,855
|
|
|
|
8,347
|
|
|
|
1,508
|
|
Other
|
|
|
1,400
|
|
|
|
1,389
|
|
|
|
11
|
|
Total
|
|
$
|
401,659
|
|
|
$
|
141,357
|
|
|
$
|
260,302
|
|
Amortization expense for the three months ended April 30, 2017 and 2016 was $10,159 and $7,271, respectively. Amortization expense for the six months ended April 30, 2017 and 2016 was $17,789 and $14,605, respectively.
7.
|
Pension and other postretirement plans
|
The components of net periodic pension cost for the three and six months ended April 30, 2017 and April 30, 2016 were:
|
|
U.S.
|
|
|
International
|
|
Three Months Ended
|
|
2017
|
|
|
2016
|
|
|
2017
|
|
|
2016
|
|
Service cost
|
|
$
|
3,184
|
|
|
$
|
2,984
|
|
|
$
|
625
|
|
|
$
|
719
|
|
Interest cost
|
|
|
3,243
|
|
|
|
4,032
|
|
|
|
419
|
|
|
|
609
|
|
Expected return on plan assets
|
|
|
(5,265
|
)
|
|
|
(4,914
|
)
|
|
|
(358
|
)
|
|
|
(377
|
)
|
Amortization of prior service cost (credit)
|
|
|
11
|
|
|
|
19
|
|
|
|
(76
|
)
|
|
|
(24
|
)
|
Amortization of net actuarial loss
|
|
|
2,457
|
|
|
|
2,314
|
|
|
|
662
|
|
|
|
471
|
|
Total benefit cost
|
|
$
|
3,630
|
|
|
$
|
4,435
|
|
|
$
|
1,272
|
|
|
$
|
1,398
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S.
|
|
|
International
|
|
Six Months Ended
|
|
2017
|
|
|
2016
|
|
|
2017
|
|
|
2016
|
|
Service cost
|
|
$
|
6,243
|
|
|
$
|
5,745
|
|
|
$
|
1,159
|
|
|
$
|
1,420
|
|
Interest cost
|
|
|
6,454
|
|
|
|
7,966
|
|
|
|
768
|
|
|
|
1,222
|
|
Expected return on plan assets
|
|
|
(10,443
|
)
|
|
|
(9,833
|
)
|
|
|
(643
|
)
|
|
|
(765
|
)
|
Amortization of prior service cost (credit)
|
|
|
23
|
|
|
|
38
|
|
|
|
(147
|
)
|
|
|
(45
|
)
|
Amortization of net actuarial loss
|
|
|
4,785
|
|
|
|
4,240
|
|
|
|
1,261
|
|
|
|
936
|
|
Total benefit cost
|
|
$
|
7,062
|
|
|
$
|
8,156
|
|
|
$
|
2,398
|
|
|
$
|
2,768
|
|
Page 12
Nordson Corporation
The components of other
postretirement benefit cost for the three
and six
months ended
April 30
, 2017 and
April 30
, 2016 were:
|
|
U.S.
|
|
|
International
|
|
Three Months Ended
|
|
2017
|
|
|
2016
|
|
|
2017
|
|
|
2016
|
|
Service cost
|
|
$
|
154
|
|
|
$
|
176
|
|
|
$
|
5
|
|
|
$
|
5
|
|
Interest cost
|
|
|
565
|
|
|
|
696
|
|
|
|
5
|
|
|
|
6
|
|
Amortization of prior service credit
|
|
|
(41
|
)
|
|
|
(66
|
)
|
|
|
—
|
|
|
|
—
|
|
Amortization of net actuarial (gain) loss
|
|
|
205
|
|
|
|
130
|
|
|
|
(4
|
)
|
|
|
(7
|
)
|
Total benefit cost
|
|
$
|
883
|
|
|
$
|
936
|
|
|
$
|
6
|
|
|
$
|
4
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S.
|
|
|
International
|
|
Six Months Ended
|
|
2017
|
|
|
2016
|
|
|
2017
|
|
|
2016
|
|
Service cost
|
|
$
|
376
|
|
|
$
|
425
|
|
|
$
|
9
|
|
|
$
|
8
|
|
Interest cost
|
|
|
1,152
|
|
|
|
1,461
|
|
|
|
10
|
|
|
|
12
|
|
Amortization of prior service credit
|
|
|
(82
|
)
|
|
|
(133
|
)
|
|
|
—
|
|
|
|
—
|
|
Amortization of net actuarial (gain) loss
|
|
|
434
|
|
|
|
342
|
|
|
|
(8
|
)
|
|
|
(12
|
)
|
Total benefit cost
|
|
$
|
1,880
|
|
|
$
|
2,095
|
|
|
$
|
11
|
|
|
$
|
8
|
|
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 rates for the three and six months ended April 30, 2017 were 31.8% and 30.6%, respectively. The effective tax rate for the three and six months ended April 30, 2016 were 28.6% and 23.4%, respectively.
During the three months ended April 30, 2017, we recorded a discrete tax expense of $2,600 related to nondeductible acquisition costs.
During the three months ended April 30, 2016, we recorded a favorable adjustment to unrecognized tax benefits of $1,136 related to the effective settlement of a tax exam.
On December 18, 2015, the Protecting Americans from Tax Hikes Act of 2015 was enacted which retroactively reinstated the Federal Research and Development Tax Credit (Federal R&D Tax Credit) as of January 1, 2015, and made it permanent. As a result, our income tax provision for the six months ended April 30, 2016 includes a discrete tax benefit of $2,025 primarily related to 2015. The tax rate for the six months ended April 30, 2016 also includes a discrete tax benefit of $6,184 related to dividends paid from previously taxed foreign earnings generated prior to 2015.
9.
|
Accumulated other comprehensive loss
|
The components of accumulated other comprehensive loss, including adjustments for items that are reclassified from accumulated other comprehensive loss to net income, are shown below.
|
|
Cumulative
|
|
|
Pension and
|
|
|
Accumulated
|
|
|
|
translation
|
|
|
postretirement benefit
|
|
|
other comprehensive
|
|
|
|
adjustments
|
|
|
plan adjustments
|
|
|
loss
|
|
Balance at October 31, 2016
|
|
$
|
(51,120
|
)
|
|
$
|
(117,127
|
)
|
|
$
|
(168,247
|
)
|
Pension and postretirement plan changes, net of
tax of $(2,000)
|
|
|
—
|
|
|
|
3,398
|
|
|
|
3,398
|
|
Currency translation losses
|
|
|
99
|
|
|
|
—
|
|
|
|
99
|
|
Balance at April 30, 2017
|
|
$
|
(51,021
|
)
|
|
$
|
(113,729
|
)
|
|
$
|
(164,750
|
)
|
10
.
|
Stock-based compensation
|
During the 2013 Annual Meeting of Shareholders, our shareholders approved the 2012 Stock Incentive and Award Plan (the “2012 Plan”). The 2012 Plan provides for the granting of stock options, stock appreciation rights, restricted shares, performance shares, stock purchase rights, stock equivalent units, cash awards and other stock or performance-based incentives. A maximum of 2,900 common shares is available for grant under the Plan.
Page 13
Nordson Corporation
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 the occurrence of events that involve or may result in a change of control. For grants made prior to November 2012, vesting ceases upon retirement, death and disability, and unvested shares are forfeited. For grants made during and after November 2012, in the event of termination of employment due to early retirement or normal retirement at age 65, options granted within 12 months prior to termination are forfeited, and vesting continues post retirement for all other unvested options granted. In the event of disability or death, all unvested stock options fully vest. Termination for any other reason results in forfeiture of unvested options and vested options in certain circumstances. The amortized cost of options is accelerated if the retirement eligibility date occurs before the normal vesting date. Option exercises are satisfied through the issuance of treasury shares on a first-in, first-out basis. We recognized compensation expense related to stock options of $2,312 and $1,857 in the three months ended April 30, 2017 and 2016, respectively. Corresponding amounts for the six months ended April 30, 2017 and 2016 were $4,634 and $4,013, respectively.
The following table summarizes activity related to stock options for the six months ended April 30, 2017:
|
|
Number of
Options
|
|
|
Weighted-Average
Exercise
Price Per
Share
|
|
|
Aggregate
Intrinsic Value
|
|
|
Weighted
Average
Remaining
Term
|
Outstanding at October 31, 2016
|
|
|
1,881
|
|
|
$
|
58.41
|
|
|
|
|
|
|
|
Granted
|
|
|
381
|
|
|
$
|
107.68
|
|
|
|
|
|
|
|
Exercised
|
|
|
(274
|
)
|
|
$
|
44.50
|
|
|
|
|
|
|
|
Forfeited or expired
|
|
|
(13
|
)
|
|
$
|
79.30
|
|
|
|
|
|
|
|
Outstanding at April 30, 2017
|
|
|
1,975
|
|
|
$
|
69.72
|
|
|
$
|
109,561
|
|
|
6.9 years
|
Vested or expected to vest at April 30, 2017
|
|
|
1,948
|
|
|
$
|
69.37
|
|
|
$
|
108,740
|
|
|
6.8 years
|
Exercisable at April 30, 2017
|
|
|
1,040
|
|
|
$
|
54.03
|
|
|
$
|
74,014
|
|
|
5.2 years
|
As of April 30, 2017, there was $11,421 of total unrecognized compensation cost related to unvested stock options. That cost is expected to be amortized over a weighted average period of approximately 1.5 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:
Six months ended
|
|
April 30, 2017
|
|
April 30, 2016
|
|
Expected volatility
|
|
26.0%-29.2%
|
|
29.1%-30.4%
|
|
Expected dividend yield
|
|
0.91%-1.17%
|
|
|
1.54%
|
|
Risk-free interest rate
|
|
1.89%-2.06%
|
|
1.78%-1.90%
|
|
Expected life of the option (in years)
|
|
5.4-6.2
|
|
5.4-6.2
|
|
The weighted-average expected volatility used to value the 2017 and 2016 options was 29.1%, and 29.6%, 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 six months ended April 30, 2017 and 2016 was $28.86 and $18.23, respectively.
The total intrinsic value of options exercised during the three months ended April 30, 2017 and 2016 was $6,806 and $2,351, respectively. The total intrinsic value of options exercised during the six months ended April 30, 2017 and 2016 was $19,256 and $3,319, respectively.
Cash received from the exercise of stock options for the six months ended April 30, 2017 and 2016 was $12,040 and $2,906, respectively. The tax benefit realized from tax deductions from exercises for the six months ended April 30, 2017 and 2016 was $4,908 and $959, respectively.
Page 14
Nordson Corporation
Restricted Shares and Restricted Share Units
We may grant restricted shares and/or restricted share units to our employees and directors. These shares or units may not be transferred for a designated period of time (generally one to three years) defined at the date of grant.
For employee recipients, in the event of termination of employment due to early retirement, restricted shares granted within 12 months prior to termination are forfeited, and other restricted shares vest on a pro-rata basis. In the event of termination of employment due to normal retirement at age 65, restricted shares granted within 12 months prior to termination are forfeited, and, for other restricted shares, the restriction period will lapse and the shares will vest and be transferable. Restrictions lapse in the event of a recipient’s disability or death. Termination for any other reason prior to the lapse of any restrictions results in forfeiture of the shares.
For non-employee directors, all restrictions lapse in the event of disability or death 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, deferred stock-based compensation equivalent to the fair value on the date of grant is expensed over the vesting period. Tax benefits arising from the lapse of restrictions are recognized when realized and credited to capital in excess of stated value.
The following table summarizes activity related to restricted shares during the six months ended April 30, 2017:
|
|
Number of Shares
|
|
|
Weighted-Average
Grant Date Fair
Value
|
|
Restricted shares at October 31, 2016
|
|
|
60
|
|
|
$
|
73.56
|
|
Granted
|
|
|
22
|
|
|
$
|
107.76
|
|
Forfeited
|
|
|
(2
|
)
|
|
$
|
71.42
|
|
Vested
|
|
|
(24
|
)
|
|
$
|
73.41
|
|
Restricted shares at April 30, 2017
|
|
|
56
|
|
|
$
|
87.36
|
|
As of April 30, 2017, there was $3,330 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 during the three months ended April 30, 2017 and 2016 was $510 and $487, respectively. These amounts included common share dividends for the three months ended April 30, 2017 and 2016 of $15, respectively. For the six months ended April 30, 2017 and 2016, the amounts charged to expense related to restricted shares were $1,088 and $993, respectively. These amounts included common share dividends for the six months ended April 30, 2017 and 2016 of $31 and $30, respectively.
The following table summarizes activity related to restricted share units during the six months ended April 30, 2017:
|
|
Number of Units
|
|
|
Weighted-Average
Grant Date Fair
Value
|
|
Restricted share units at October 31, 2016
|
|
|
0
|
|
|
$
|
—
|
|
Granted
|
|
|
10
|
|
|
$
|
97.43
|
|
Restricted share units at April 30, 2017
|
|
|
10
|
|
|
$
|
97.43
|
|
As of April 30, 2017, there was $500 of remaining expense to be recognized related to outstanding restricted share units, which is expected to be recognized over a weighted average period of 0.5 years. The amount charged to expense related to restricted share units during the three months ended April 30, 2017 and 2016 was $253 and $244, respectively. For the six months ended April 30, 2017 and 2016, the corresponding amounts were $506 and $487, 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.
Page 15
Nordson Corporation
The following table summarizes activity related to director deferred compensation share equivalent units during the
six
months ended
April 30
, 2017:
|
|
Number of Shares
|
|
|
Weighted-Average
Grant Date Fair
Value
|
|
Outstanding at October 31, 2016
|
|
|
99
|
|
|
$
|
41.72
|
|
Dividend equivalents
|
|
|
1
|
|
|
$
|
118.57
|
|
Distributions
|
|
|
(5
|
)
|
|
$
|
26.89
|
|
Outstanding at April 30, 2017
|
|
|
95
|
|
|
$
|
42.92
|
|
The amount charged to expense related to director deferred compensation for the three months ended April 30, 2017 and 2016 was $26 and $40, respectively. For the six months ended April 30, 2017 and 2016, the corresponding amounts were $52 and $79, respectively.
Performance Share Incentive Awards
Executive officers and selected other key employees are eligible to receive common share-based incentive awards. Payouts, in the form of unrestricted common shares, vary based on the degree to which corporate financial performance exceeds predetermined threshold, target and maximum performance goals over three-year performance periods. No payout will occur unless threshold performance is achieved.
The amount of compensation expense is based upon current performance projections for each three-year period and the percentage of the requisite service that has been rendered. The calculations are also based upon the grant date fair value determined using the closing market price of our common shares at the grant date, reduced by the implied value of dividends not to be paid. The per share values were $103.75 and $104.49 for 2017, $67.69 per share for 2016 and $76.48 per share for 2015. During the three months ended April 30, 2017 and 2016, $3,178 and $2,056 was charged to expense, respectively. For the six months ended April 30, 2017 and 2016, the corresponding amounts were $3,430 and $3,925, respectively. The cumulative amount recorded in shareholders’ equity at April 30, 2017 was $8,851.
Deferred Compensation
Our executive officers and other highly compensated employees may elect to defer up to 100% of their base pay and cash incentive compensation and, for executive officers, up to 90% 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 April 30, 2017 and 2016 was $68 and $55, respectively. For the six months ended April 30, 2017 and 2016, the corresponding amounts were $129 and $104, respectively.
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) from the date of delivery or first use. We record an estimate for future warranty-related costs based on actual historical return rates. Based on analysis of return rates and other factors, the adequacy of our warranty provisions are adjusted as necessary. The liability for warranty costs is included in accrued liabilities in the Consolidated Balance Sheet.
Following is a reconciliation of the product warranty liability for the six months ended April 30, 2017 and 2016:
|
|
April 30, 2017
|
|
|
April 30, 2016
|
|
Beginning balance at October 31
|
|
$
|
11,770
|
|
|
$
|
10,537
|
|
Accruals for warranties
|
|
|
5,148
|
|
|
|
4,987
|
|
Warranty assumed from acquisitions
|
|
|
61
|
|
|
|
-
|
|
Warranty payments
|
|
|
(4,821
|
)
|
|
|
(4,955
|
)
|
Currency effect
|
|
|
2
|
|
|
|
217
|
|
Ending balance
|
|
$
|
12,160
|
|
|
$
|
10,786
|
|
Page 16
Nordson Corporation
We conduct business across three primary business segments: Adhesive Dispensing Systems, Advanced Technology Systems, and Industrial Coating Systems. The composition of segments and measure of segment profitability is consistent with that used by our chief operating decision maker. The primary measure used by the chief operating decision maker for purposes of making decisions about allocating resources to the segments and assessing performance is operating profit, which equals sales less cost of sales and certain operating expenses. Items below the operating profit line of the Consolidated Statement of Income (interest and investment income, interest expense and other income/expense) are excluded from the measure of segment profitability reviewed by our chief operating decision maker and are not presented by operating segment. The accounting policies of the segments are the same as those described in Note 1, Significant Accounting Policies, of our annual report on Form 10-K for the year ended October 31, 2016.
The following table presents information about our segments:
|
|
Adhesive Dispensing Systems
|
|
|
Advanced Technology Systems
|
|
|
Industrial Coating Systems
|
|
|
Corporate
|
|
|
Total
|
|
Three months ended
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
April 30, 2017
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net external sales
|
|
$
|
226,943
|
|
|
$
|
210,142
|
|
|
$
|
59,052
|
|
|
$
|
—
|
|
|
$
|
496,137
|
|
Operating profit (loss)
|
|
|
65,719
|
|
(a)
|
|
54,306
|
|
|
|
10,252
|
|
(d)
|
|
(26,746
|
)
|
|
|
103,531
|
|
Three months ended
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
April 30, 2016
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net external sales
|
|
$
|
221,030
|
|
|
$
|
158,555
|
|
|
$
|
58,007
|
|
|
$
|
—
|
|
|
$
|
437,592
|
|
Operating profit (loss)
|
|
|
62,977
|
|
(b)
|
|
38,731
|
|
(c)
|
|
10,292
|
|
|
|
(10,096
|
)
|
|
|
101,904
|
|
Six months ended
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
April 30, 2017
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net external sales
|
|
$
|
434,780
|
|
|
$
|
355,502
|
|
|
$
|
113,325
|
|
|
$
|
—
|
|
|
$
|
903,607
|
|
Operating profit (loss)
|
|
|
118,775
|
|
(a)
|
|
80,669
|
|
|
|
17,337
|
|
|
|
(37,332
|
)
|
|
|
179,449
|
|
Six months ended
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
April 30, 2016
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net external sales
|
|
$
|
424,469
|
|
|
$
|
276,415
|
|
|
$
|
108,928
|
|
|
$
|
—
|
|
|
$
|
809,812
|
|
Operating profit (loss)
|
|
|
113,337
|
|
(b)
|
|
46,704
|
|
(c)
|
|
14,470
|
|
(d)
|
|
(20,629
|
)
|
|
|
153,882
|
|
|
(a)
|
Includes $491 and $718 of severance and restructuring costs in the three and six months ended April 30, 2017, respectively.
|
|
(b)
|
Includes $991 and $1,471 of severance and restructuring costs in the three and six months ended April 30, 2016, respectively.
|
|
(c)
|
Includes $170 and $680 of severance and restructuring costs in the three and six months ended April 30, 2016, respectively.
|
|
(d)
|
Includes $472 and $499 of severance and restructuring costs in the three and six months ended April 30, 2016, respectively.
|
A reconciliation of total segment operating income to total consolidated income before income taxes is as follows:
|
|
Three Months Ended
|
|
|
Six Months Ended
|
|
|
|
April 30, 2017
|
|
|
April 30, 2016
|
|
|
April 30, 2017
|
|
|
April 30, 2016
|
|
Total profit for reportable segments
|
|
$
|
103,531
|
|
|
$
|
101,904
|
|
|
$
|
179,449
|
|
|
$
|
153,882
|
|
Interest expense
|
|
|
(7,907
|
)
|
|
|
(5,000
|
)
|
|
|
(13,548
|
)
|
|
|
(10,844
|
)
|
Interest and investment income
|
|
|
272
|
|
|
|
188
|
|
|
|
545
|
|
|
|
326
|
|
Other-net
|
|
|
(1,323
|
)
|
|
|
1,727
|
|
|
|
(1,480
|
)
|
|
|
2,529
|
|
Income before income taxes
|
|
$
|
94,573
|
|
|
$
|
98,819
|
|
|
$
|
164,966
|
|
|
$
|
145,893
|
|
Page 17
Nordson Corporation
We have significant sales in the following geographic regions:
|
|
Three Months Ended
|
|
|
Six Months Ended
|
|
|
|
April 30, 2017
|
|
|
April 30, 2016
|
|
|
April 30, 2017
|
|
|
April 30, 2016
|
|
United States
|
|
$
|
156,095
|
|
|
$
|
131,262
|
|
|
$
|
281,616
|
|
|
$
|
248,653
|
|
Americas
|
|
|
36,326
|
|
|
|
33,582
|
|
|
|
66,368
|
|
|
|
60,289
|
|
Europe
|
|
|
128,468
|
|
|
|
125,933
|
|
|
|
247,627
|
|
|
|
245,651
|
|
Japan
|
|
|
30,855
|
|
|
|
29,366
|
|
|
|
55,032
|
|
|
|
48,869
|
|
Asia Pacific
|
|
|
144,393
|
|
|
|
117,449
|
|
|
|
252,964
|
|
|
|
206,350
|
|
Total net external sales
|
|
$
|
496,137
|
|
|
$
|
437,592
|
|
|
$
|
903,607
|
|
|
$
|
809,812
|
|
Total assets for our Advanced Technology Systems reportable segment increased to $1,682,181 at April 30, 2017 as compared to $1,080,711 at October 31, 2016 primarily as a result of our acquisition of businesses in 2017 as described in Note 4,
Acquisitions
. There have been no material changes in total assets of our other reportable segments from October 31, 2016.
13.
|
Fair value measurements
|
The inputs to the valuation techniques used to measure fair value are classified into the following categories:
Level 1: Quoted market prices in active markets for identical assets or liabilities.
Level 2: Observable market based inputs or unobservable inputs that are corroborated by market data.
Level 3: Unobservable inputs that are not corroborated by market data.
The following table presents the classification of our assets and liabilities measured at fair value on a recurring basis at April 30, 2017:
|
|
Total
|
|
|
Level 1
|
|
|
Level 2
|
|
|
Level 3
|
|
Assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign currency forward contracts (a)
|
|
|
1,469
|
|
|
|
—
|
|
|
|
1,469
|
|
|
|
—
|
|
Total assets at fair value
|
|
$
|
1,469
|
|
|
$
|
—
|
|
|
$
|
1,469
|
|
|
$
|
—
|
|
Liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deferred compensation plans (b)
|
|
$
|
11,467
|
|
|
$
|
—
|
|
|
$
|
11,467
|
|
|
$
|
—
|
|
Foreign currency forward contracts (a)
|
|
|
3,409
|
|
|
|
—
|
|
|
|
3,409
|
|
|
|
—
|
|
Total liabilities at fair value
|
|
$
|
14,876
|
|
|
$
|
—
|
|
|
$
|
14,876
|
|
|
$
|
—
|
|
|
(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 currency forward contracts are valued using market exchange rates. Foreign currency forward contracts are not designated as hedges. Gains on foreign currency forward contracts are classified in Receivables-net and losses on foreign currency forward contracts are classified in Accrued liabilities on the Consolidated Balance Sheets.
|
|
(b)
|
Executive officers and other highly compensated employees may defer up to 100% of their salary and annual cash incentive award and for executive officers, up to 90% of their long-term performance share incentive award,
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.
|
14.
|
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 currencies are recorded 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. We do not use financial instruments for trading or speculative purposes.
Page 18
Nordson Corporation
Gains
and losses on foreign currency forward contracts are recorded in “Othe
r – net” on the Consolidated Statement of Income together with the transaction gain or loss from the hedged balance sheet position. For the three months ended
April 30
, 2017, we recognized losses of $
1,687
on foreign currency forward contracts and gains o
f $
702
from the change in fair value of balance sheet positions. For the three months
ended
April 30
, 2016,
we recognized
losse
s of $
56
4 on foreign
currency forward contracts and gain
s of $
53
from the change in fair value of balance sheet positions
.
For
the six months ended April 30, 2017, we recognized losses of $
1,9
00 on foreign currency forward contracts and gains of $
906
from the change in fair value of balance sheet positions. For the six months ended April 30, 2016, we recognized gains of $863 on fo
reign currency forward contracts and losses of $336 from the change in fair value of balance sheet positions.
The following table summarizes, by currency, the foreign currency forward contracts outstanding at April 30, 2017
:
|
|
Sell
|
|
|
Buy
|
|
|
|
Notional Amounts
|
|
|
Fair Market Value
|
|
|
Notional Amounts
|
|
|
Fair Market Value
|
|
Euro
|
|
$
|
275,187
|
|
|
$
|
280,481
|
|
|
$
|
187,639
|
|
|
$
|
190,989
|
|
British pound
|
|
|
78,912
|
|
|
|
80,911
|
|
|
|
86,330
|
|
|
|
88,540
|
|
Japanese yen
|
|
|
30,912
|
|
|
|
30,611
|
|
|
|
21,082
|
|
|
|
21,023
|
|
Australian dollar
|
|
|
420
|
|
|
|
412
|
|
|
|
7,742
|
|
|
|
7,589
|
|
Hong Kong dollar
|
|
|
70,321
|
|
|
|
70,105
|
|
|
|
156,706
|
|
|
|
156,231
|
|
Singapore dollar
|
|
|
1,154
|
|
|
|
1,170
|
|
|
|
11,821
|
|
|
|
11,969
|
|
Others
|
|
|
2,035
|
|
|
|
2,049
|
|
|
|
39,825
|
|
|
|
39,697
|
|
Total
|
|
$
|
458,941
|
|
|
$
|
465,739
|
|
|
$
|
511,145
|
|
|
$
|
516,038
|
|
The carrying amounts and fair values of financial instruments at April 30, 2017, other than receivables and accounts payable, are shown in the table below. The carrying values of receivables and accounts payable approximate fair value due to the short-term nature of these instruments.
|
|
Carrying
Amount
|
|
|
Fair
Value
|
|
Cash and cash equivalents
|
|
$
|
88,406
|
|
|
$
|
88,406
|
|
Notes payable
|
|
|
2,943
|
|
|
|
2,943
|
|
Long-term debt, including current maturities
|
|
|
1,712,274
|
|
|
|
1,716,140
|
|
Foreign currency forward contracts (net)
|
|
|
(1,940
|
)
|
|
|
(1,940
|
)
|
We used the following methods and assumptions in estimating the fair value of financial instruments:
|
•
|
Cash, cash equivalents and notes payable are valued at their carrying amounts due to the relatively short period to maturity of the instruments.
|
|
•
|
Long-term debt is valued by discounting future cash flows at currently available rates for borrowing arrangements with similar terms and conditions, which are considered to be Level 2 inputs under the fair value hierarchy.
|
|
•
|
Foreign currency forward contracts are valued using observable market based inputs, which are considered to be Level 2 inputs under the fair value hierarchy.
|
We are involved in pending or potential litigation regarding environmental, product liability, patent, contract, employee and other matters arising from the normal course of business. Including the environmental matter discussed below, it is our opinion, after consultation with legal counsel, that resolutions of these matters are not expected to result in a material effect on our financial condition, quarterly or annual operating results or cash flows.
Page 19
Nordson Corporation
We have voluntari
ly 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
April 30
, 2017 and October 31, 2016, our accrual for the ongoing operation, maintenance and monitoring obligation at the Site was $516
.
The liability for environmental remediation represents managem
ent’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 e
stimate. 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
Nordson Corporation