NORDSON CORP MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (kind 10-Q)

The following is management’s discussion and analysis of certain significant
factors affecting our financial condition and results of operations for the
periods included in the accompanying condensed consolidated financial
statements.

Overview

Nordson Corporation is an innovative precision technology company that leverages
a scalable growth framework to deliver top tier growth with leading margins and
returns. The Company’s direct sales model and applications expertise serves
global customers through a wide variety of critical applications. Its diverse
end market exposure includes consumer non-durable, medical, electronics and
industrial end markets. Founded in 1954 and headquartered in Westlake, Ohio, the
Company has approximately 7,200 employees with operations and support offices in
over 35 countries.

COVID-19 Update

In December 2019, a novel strain of coronavirus (COVID-19) emerged and has since
spread to other countries, including the United States. In March 2020, the World
Health Organization declared COVID-19 as a pandemic (the COVID-19 pandemic). The
COVID-19 pandemic, including multiple variants, has resulted in governments
around the world implementing stringent measures to help control the spread of
the virus, including quarantines, “shelter in place” and “stay at home” orders,
travel restrictions, business interruptions and other measures.

Throughout the COVID-19 pandemic, we have supported, and continue to support,
multiple “critical infrastructure” sectors by manufacturing materials and
products needed for medical supply chains, packaging, transportation, energy,
communications, and other critical infrastructure industries. We have benefited
from our geographical and product diversification as the end markets we serve
have remained resilient in response to the COVID-19 pandemic, and we continue to
invest in the businesses, people, and strategies necessary to achieve our
long-term priorities as we focus on driving profitable growth. We have continued
to operate during the COVID-19 pandemic in all our production facilities, having
taken the recommended public health measures to ensure worker and workplace
safety. As a result, there have been unfavorable impacts on our manufacturing
efficiencies. Additionally, we are taking steps to offset cost increases from
COVID-19 pandemic-related supply chain disruptions.

We continue to actively monitor the rapidly evolving circumstances and impact of
the COVID-19 pandemic, which has negatively disrupted, and may continue to
negatively disrupt, our business and results of operations in the future. For
example, in the second quarter of 2022, our revenue growth in Asia-Pacific was
negatively impacted by COVID-19 lockdowns in China. The full extent of the
COVID-19 pandemic on our operations and the markets we serve remains highly
uncertain and will depend largely on future developments related to the COVID-19
pandemic, including infection rates increasing or returning in various
geographic areas, variations of COVID-19, the ultimate duration of the COVID-19
pandemic, actions by government authorities to contain the outbreak or treat its
impact, such as reimposing previously lifted measures or putting in place
additional restrictions, and the widespread distribution and acceptance of an
effective vaccine, among other things. These developments are constantly
evolving and cannot be accurately predicted.

NDC Acquisition

On November 1, 2021, the Company acquired NDC, a test and inspection business,
focused on measurement and controls solutions serving consumer non-durable, film
extrusion & converting, cable & tubing and energy storage markets. Upon
integration, financial reporting for NDC was integrated into the Industrial
Precision Solutions segment to better leverage growth opportunities within
shared industrial and consumer non-durable end markets and related sales
channels.

Critical Accounting Policies and Estimates

A comprehensive discussion of the Company’s critical accounting policies and
management estimates and significant accounting policies followed in the
preparation of the financial statements is included in Item 7 of our Annual
Report on Form 10-K for the year ended October 31, 2021 (the 2021 Form 10-K).
There have been no significant changes in critical accounting policies,
management estimates or accounting policies followed since the year
ended October 31, 2021.

Results of Operations

Three months ended April 30, 2022

Worldwide sales for the three months ended April 30, 2022 were $635,403, an
increase of 7.8% from sales of $589,538 for the comparable period of 2021. The
increase consisted of a 7.0% increase in organic sales volume and a favorable
3.6% increase due to acquisitions, which was partially offset by an unfavorable
effect from currency translation of 2.8%. The organic sales increase was driven
by strong demand across most end markets, offset by unfavorable impacts from
COVID-related lockdowns in China.

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Nordson Corporation

Sales outside the United States accounted for 65.6% of our sales in the three
months ended April 30, 2022 and in the comparable period of 2021. On a
geographic basis, sales in the United States were $218,508, an increase of 7.7%
compared to 2021, consisting of a 3.9% increase in organic sales volume and a
3.8% increase from acquisitions. In the Asia Pacific region, sales were
$163,952, an increase of 4.2% from 2021, consisting of an organic sales volume
increase of 1.8% and a 3.3% increase due to acquisitions, partially offset by
unfavorable currency effects of 0.9%. In Europe, sales were $172,256, an
increase of 10.1% from 2021, consisting of an organic sales volume increase of
14.4% and a 3.7% increase due to acquisitions, offset by unfavorable currency
effects of 8.0%. In the Americas region, sales were $55,244, an increase of
23.0% from 2021, consisting of an organic sales volume increase of 20.8%, an
increase due to acquisitions of 1.9%, and favorable currency effects of 0.3%. In
Japan, sales were $25,443, a decrease of 8.7% from 2021, consisting of an
organic sales volume decrease of 5.0% and unfavorable currency effects of 10.0%,
partially offset by a 6.3% increase due to acquisitions.

Cost of sales for the three months ended April 30, 2022 were $277,768, up from
$251,839 in the comparable period of 2021. Gross profit, expressed as a
percentage of sales, decreased to 56.3% from 57.3% in the comparable period of
2021. The 1.0 percentage point decrease in gross margin was primarily driven by
unfavorable sales mix and cost inflation in material, labor and logistics.

Selling and administrative expenses for the three months ended April 30, 2022
were $173,662, up from $171,308 in the comparable period of 2021. The 1.4%
increase was primarily driven by the first year effect of acquisitions,
partially offset by favorable currency translation effects and improved cost
controls.

Operating profit increased to $183,973 for the three months ended April 30,
2022, compared to $166,391 in the comparable period of 2021. Operating profit as
a percentage of sales increased to 29.0% for the three months ended April 30,
2022 compared to 28.2% in the comparable period of 2021. The improved
profitability was primarily driven by the 7.0% increase in organic sales volume
and continued selling and administrative expense leverage, partially offset by
unfavorable currency translation effects and unfavorable sales mix.

Interest expense for the three months ended April 30, 2022 was $5,361, compared
to $7,139 in the comparable period of 2021. The decrease was primarily due to
lower average debt levels compared to the prior year period. Other expense was
$39,764 compared to other expense of $3,843 in the comparable period of 2021.
Included in 2022 other expense were non-cash pension settlement charges of
$41,221 related to the purchase of an annuity contract to relieve the Company of
certain pension benefit obligations, pension and postretirement income of $746
and $1,000 in foreign currency gains. Included in 2021 other expense were
pension and postretirement costs of $3,499 and $777 of foreign currency losses.

Net income for the three months ended April 30, 2022 was $109,634, or $1.88 per
diluted share, compared to $124,144, or $2.12 per diluted share, in the same
period of 2021. This represents a 11.7% decrease in net income, and a 11.3%
decrease in diluted earnings per share. Net income for the three months ended
April 30, 2022 includes after tax non-cash pension settlement charges of
$32,450, or $0.56 per diluted share, related to the purchase of an annuity
contract to relieve the company of certain pension benefit obligations.

Industrial Precision Solutions

Sales of the Industrial Precision Solutions segment were $316,434 in the three
months ended April 30, 2022, an increase of 5.9% from sales in the comparable
period of 2021 of $298,775. The increase was the result of an organic sales
volume increase of 2.8% and a 7.1% increase from acquisitions, partially offset
by unfavorable currency effects that decreased sales by 4.0%. The organic sales
volume increase was driven by continued demand in consumer non-durable and
industrial end markets, which was offset by weakness in Asia-Pacific related to
the COVID-19 shutdowns in China.

Operating profit as a percentage of sales decreased to 32.3% for the three
months ended April 30, 2022 compared to 34.9% in the comparable period of 2021.
The 2.6 percentage point decline in operating margin was primarily due to
favorable sales volume leverage being more than offset by unfavorable sales mix
and unfavorable currency translation effects.

Advanced Technology Solutions

Sales of the Advanced Technology Solutions segment were $318,969 in the three
months ended April 30, 2022, an increase of 9.7% from sales in the comparable
period of 2021 of $290,763. The increase was the result of organic sales volume
increase of 11.3%, partially offset by an unfavorable currency effect of 1.6%.
The organic sales growth was driven by robust demand across electronics
dispense, test and inspection, and biopharma fluid component product lines.

Operating profit as a percentage of sales increased to 30.9% for the three
months ended April 30, 2022 compared to 26.3% in the comparable period of 2021.
The 4.6 percentage point improvement in operating margin was primarily due to
the 11.3% organic sales volume increase and favorable selling and administrative
expense leverage. Favorable product sales mix, manufacturing efficiencies and
pricing helped offset cost inflation in material, labor, and logistics.

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Nordson Corporation

Six months ended April 30, 2022

Worldwide sales for the six months ended April 30, 2022 were $1,244,569, an
increase of 11.5% from sales of $1,116,104 for the comparable period of 2021.
The increase consisted of an 11.2% increase in organic sales volume and a net
2.7% increase due to acquisitions and divestitures, partially offset by an
unfavorable effect from currency translation of 2.4%. Strength in electronics
dispense, test and inspection, and industrial end markets were the primary
drivers of the growth.

Sales outside the United States accounted for 67.1% of our sales in the six
months ended April 30, 2022 compared to 65.2% in the comparable period of 2021.
On a geographic basis, sales in the United States were $409,885, an increase of
5.6% compared to 2021, consisting of a 3.3% increase in organic sales volume and
a net 2.3% increase from acquisitions and divestitures. In the Asia Pacific
region, sales were $351,673, an increase of 17.1% from 2021, consisting of an
organic sales volume increase of 14.8% and a net 2.8% increase from acquisitions
and divestitures, partially offset by unfavorable currency effects of 0.5%. In
Europe, sales were $328,241, an increase of 12.6% from the comparable period of
2021, consisting of an organic sales volume increase of 15.5% and a net 3.8%
increase from acquisitions and divestitures, partially offset by unfavorable
currency effects of 6.7%. In the Americas region, sales were $103,769, an
increase of 28.0% from 2021, consisting of an organic sales volume increase of
27.7% and a net increase of 0.7% due to acquisitions and divestitures, partially
offset by unfavorable currency effects of 0.4%. In Japan, sales were $51,001, a
decrease of 7.2% from the comparable period of 2021, consisting of an organic
sales volume decrease of 0.9% and unfavorable currency effects of 9.5%,
partially offset by a net 3.2% increase due to acquisitions and divestitures.

Cost of sales for the six months ended April 30, 2022 were $546,800, up from
$488,445 in the comparable period of 2021. Gross profit, expressed as a
percentage of sales, decreased slightly to 56.1% from 56.2% in the comparable
period of 2021. The 0.1 percentage point decrease in gross margin was primarily
driven by unfavorable mix, increased freight and other inflationary pressures,
principally offset by favorable sales volume leverage, manufacturing
efficiencies, and pricing actions.

Selling and administrative expenses for the six months ended April 30, 2022 were
$357,936, up from $352,243 in the comparable period of 2021. The 1.6% increase
was primarily driven by the first year effect of acquisitions, partially offset
by favorable currency translation effects and improved cost controls.

Operating profit increased from $275,416 in the six months ended April 30, 2021
to $339,833 in the comparable period of 2022. Operating profit as a percentage
of sales increased to 27.3% for the six months ended April 30, 2022 compared to
24.7% in the comparable period of 2021. The 2.6 percentage point increase in
operating margin was driven by the 11.2% organic sales volume increase and
continued selling and administrative expense leverage, partially offset by
unfavorable currency translation effects.

Interest expense for the six months ended April 30, 2022 was $11,011, compared
to $14,071 in the comparable period of 2021. The decrease was due primarily to
lower average debt levels. Other expense was $38,472 compared to $8,504 in the
comparable period of 2021. Included in 2022 other expense were non-cash pension
settlement charges of $41,221 related to the purchase of an annuity contract to
relieve the Company of certain pension benefit obligations, other pension and
postretirement income of $1,027 and $1,364 in foreign currency gains. Included
in 2021 were pension and postretirement costs of $4,975 and $3,537 of foreign
currency losses.

Net income for the six months ended April 30, 2022 was $230,043, or $3.93 per
diluted share, compared to $201,726, or $3.44 per diluted share, in the same
period of 2021. This represents a 14.0% increase in net income, and a 14.2%
increase in diluted earnings per share. Net income for the six months ended
April 30, 2022 includes after tax non-cash pension settlement charges with a
second quarter impact of $32,450, or $0.56 per diluted share, related to the
purchase of an annuity contract to relieve the company of certain pension
benefit obligations.

Industrial Precision Solutions

Sales of the Industrial Precision Solutions segment were $640,367 in the six
months ended April 30, 2022, an increase of 9.1% from sales in the comparable
period of 2021 of $587,191. The increase was the result of an increase of 7.3%
in organic sales volume and a net increase of 5.3% due to acquisitions and
divestitures, partially offset by unfavorable currency effects of 3.5%. Growth
occurred in all regions except for Japan.

Operating profit as a percentage of sales decreased slightly to 31.9% for the
six months ended April 30, 2022 compared to 32.0% in the comparable period of
2021. The comparable operating margin reflects the first year effect of
acquisitions and unfavorable product mix, principally offset by benefits of the
divestiture and favorable selling and administrative expense leverage.

Advanced Technology Solutions

Sales of the Advanced Technology Solutions segment were $604,202 in the six
months ended April 30, 2022, an increase of 14.2% from sales in the comparable
period of 2021 of $528,913. The increase was the result of an organic sales
volume increase of 15.4%, partially offset by unfavorable currency effects that
decreased sales by 1.2%. Sales growth occurred in all product lines, with
particular strength in electronic dispense, test and inspection, and biopharma
fluid component product lines.

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Nordson Corporation

Operating profit as a percentage of sales increased to 28.9% for the six months
ended April 30, 2022 compared to 23.4% in the comparable period of 2021. The 5.5
percentage point improvement in operating margin was principally driven by
greater selling and administrative expense leverage which contributed 4.7
percentage points and the 15.4% organic sales volume increase.

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. Significant judgment is involved regarding the application of global
income tax laws and regulations and when projecting the jurisdictional mix of
income. We have considered several factors in determining the probability of
realizing deferred income tax assets which include forecasted operating
earnings, available tax planning strategies and the time period over which the
temporary differences will reverse. We review our tax positions on a regular
basis and adjust the balances as new information becomes available. The
effective tax rate for the three and six months ended April 30, 2022 was 21.3%
and 21.0%, respectively, compared to 20.3% and 20.5%, respectively, for the
comparable periods a year ago.

Due to our share-based payment transactions, our income tax provision included a
discrete tax benefit of $309 and $1,424 for the three and six months ended April
30, 2022, respectively, compared to $1,796 and $2,595 in the comparable periods
of 2021, respectively.

Foreign Currency Effects

In the aggregate, average exchange rates for 2022 used to translate
international sales and operating results into U.S. dollars were generally
unfavorable compared with average exchange rates existing during 2021. It is not
possible to precisely measure the impact on operating results arising from
foreign currency exchange rate changes, because of changes in selling prices,
sales volume, product mix and cost structure in each country in which we
operate. However, if transactions for the three months ended April 30, 2022 were
translated at exchange rates in effect during the same period of 2021, we
estimated that sales would have been approximately $16,500 higher while costs of
sales and selling and administrative expenses would have been approximately
$8,400 higher. If transactions for the six months ended April 30, 2022 were
translated at exchange rates in effect during the same period of 2021, we
estimated that sales would have been approximately $26,300 higher while costs of
sales and selling and administrative expenses would have been approximately
$14,400 higher.

Financial Condition

Liquidity and Capital Resources

During the six months ended April 30, 2022, cash and cash equivalents decreased
$179,080 as cash was used to fund the NDC acquisition and purchase of shares for
treasury, partially offset by cash generated from operations in the period. Cash
provided by operations during this period was $214,501 compared to $247,714 for
the six months ended April 30, 2021. Changes in operating assets and liabilities
decreased cash by $85,070 in the six months ended April 30, 2022 compared to
increasing cash by $20,206 in the comparable period of 2021, primarily related
to investments in inventory and an increase in receivables. As a result of our
pension annuitization transaction, we remeasured the periodic benefit obligation
of pension plan and recorded non-cash settlement charges of $41,221 in the
second quarter of 2022.

Cash used in investing activities was $196,374 for the six months ended
April 30, 2022, compared to $13,681 used in the comparable period of 2021.
During the six months ended April 30, 2022, cash of $171,613 was used for the
NDC acquisition and cash of $24,776 was used for capital expenditures. During
the six months ended April 30, 2021, $18,743 was used for capital expenditures.
The increase in capital expenditures related primarily to capacity expansion in
our medical fluid dispensing and components product lines.

Cash used in financing activities was $192,935 for the six months ended
April 30, 2022, compared to $310,333 used in the comparable period of 2021. In
the six months ended April 30, 2022, cash of $59,301 was used for dividend
payments and cash of $140,466 was used for the purchase of treasury shares,
compared to $45,342 and $30,274, respectively, in the comparable period of 2021.
The six months ended April 30, 2021 included net repayments of long-term debt of
$250,101.

The following is a summary of significant changes in balance sheet captions from
October 31, 2021 to April 30, 2022. Inventories-net increased by $56,020 due to
our efforts to manage supply chain disruptions and to meet expected demand and
existing backlog and as a result of the NDC acquisition. Goodwill increased by
$129,856 due to the NDC acquisition in the first quarter of 2022. Accrued
liabilities decreased by $24,318 due primarily to incentive compensation
payments made in the first quarter of 2022.

We believe the combination of present capital resources, cash from operations
and unused financing sources are more than adequate to meet cash requirements
for the next twelve months and for the foreseeable future thereafter. There are
no significant restrictions limiting the transfer of funds from international
subsidiaries to the parent Company. We were in compliance with all debt
covenants at April 30, 2022. Refer to our Long-term debt footnote in the notes
to our condensed consolidated financial statements for additional details
regarding our debt outstanding.

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Nordson Corporation

Outlook

Backlog entering the second half of fiscal year 2022 exceeds $1 billion, as the
Company continues to see extended shipment request dates in conjunction with
large orders from its customers in electronics, industrial and medical end
markets. For the fiscal year 2022, the Company expects year-over-year revenue
growth of 8% to 9% and earnings per share growth compared to fiscal year 2021.

Safe Harbor Statements Under The Private Securities Litigation Reform Act of
1995

This Form 10-Q, particularly “Management’s Discussion and Analysis of Financial
Condition and Results of Operations,” contains forward-looking statements within
the meaning of the Securities Act of 1933, as amended, the Securities Exchange
Act of 1934, as amended, and the Private Securities Litigation Reform Act of
1995. Such statements relate to, among other things, income, earnings, cash
flows, changes in operations, operating improvements, businesses in which we
operate and the United States and global economies. Statements in this annual
report that are not historical are hereby identified as “forward-looking
statements” and may be indicated by words or phrases such as “anticipates,”
“supports,” “plans,” “projects,” “expects,” “believes,” “should,” “would,”
“could,” “hope,” “forecast,” “management is of the opinion,” use of the future
tense and similar words or phrases. These statements reflect management’s
current expectations and involve a number of risks and uncertainties. These
risks and uncertainties include, but are not limited to, U.S. and international
economic conditions; financial and market conditions; currency exchange rates
and devaluations; possible acquisitions including the Company’s ability to
complete and successfully integrate acquisitions, including the integration of
NDC; the Company’s ability to successfully divest or dispose of businesses that
are deemed not to fit with its strategic plan; the effects of changes in U.S.
trade policy and trade agreements; the effects of changes in tax law; and the
possible effects of events beyond our control, such as political unrest,
including the conflicts between Russia and Ukraine, acts of terror, natural
disasters and pandemics, including the current COVID-19 pandemic.

In light of these risks and uncertainties, actual events and results may vary
significantly from those included in or contemplated or implied by such
statements. Readers are cautioned not to place undue reliance on such
forward-looking statements. These forward-looking statements speak only as of
the date made. We undertake no obligation to publicly update or revise any
forward-looking statements, whether as a result of new information, future
events or otherwise, except as required by law.

Factors that could cause actual results to differ materially from the expected
results are discussed in Part I, Item 1A, Risk Factors in our 2021 Form 10-K.

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