What changed in this filing

/stocks — the workspaceLOADING

Item 8. Financial Statements and Supplementary Data

2022-02-22 compared with 2021-02-16 · 80 added, 89 removed, 880 unchanged (16% of the section changed)

7 unchanged sentences

The Company’s independent auditors have issued an attestation report on the Company’s internal control over financial reporting.

That report appears in this Form 10-K.

That report appears in this Annual Report on Form 10-K.

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

122 unchanged sentences

Notes payable to banks $ 43,489 $ 22,183

Current portion of long term debt 75,000 —

Trade accounts payable 78,432 58,305

47 unchanged sentences

Cash Flows From Financing Activities

Borrowings (payments) on short-term lines of credit, net ( 1,986 ) ( 3,341 ) 4,931

Borrowings on short-term lines of credit, net 20,497 ( 1,986 ) ( 3,341 )

Borrowings on long-term lines of credit — 250,000 105,423

Payments on long-term debt and lines of credit ( 70 ) ( 250,000 ) ( 207,191 )

Payments of debt issuance costs ( 1,422 ) — —

Common stock issued 50,963 83,438 48,250

21 unchanged sentences

Stock compensation cost — 23,398 — — 23,398

Restricted stock canceled (issued) — ( 772 ) — — ( 772 )

Net earnings — — 343,853 — 343,853

1 unchanged sentence

— — ( 109,199 ) — ( 109,199 )

Reclassified to retained earnings from AOCI — — 15,453 ( 15,453 ) —

Other comprehensive income (loss) — — — ( 24,930 ) ( 24,930 )

9 unchanged sentences

Shares issued 1,740 51,560 — — 53,300

Shares repurchased ( 2,327 ) ( 8,047 ) ( 91,768 ) — ( 102,142 )

Stock compensation cost — 21,859 — — 21,859

Restricted stock canceled (issued) — ( 2,337 ) — — ( 2,337 )

Net earnings — — 439,866 — 439,866

11 unchanged sentences

and Subsidiaries (the “Company”) is 52 or 53 weeks, ending on the last Friday in December.

The years ended December 25, 2020 , December 27, 2019 and December 28, 2018 were 52-week years.

The year ended December 31, 2021 was a 53-week year whereas the years ended December 25, 2020 and December 27, 2019 were 52-week years.

Basis of Statement Presentation .

1 unchanged sentence

As of December 31, 2021 , all subsidiaries are 100 percent controlled by the Company.

Certain prior year disclosures have been revised to conform with current year reporting.

Foreign Currency Translation .

5 unchanged sentences

Accounting Estimates .

The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements.

The preparation of financial statements in conformity with U.S.

GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements.

Such estimates and assumptions also affect the reported amounts of revenues and expenses during the reporting period.

19 unchanged sentences

Contingent consideration liability represents the estimated value (using a probability-weighted expected return approach) of future payments to be made to previous owners of certain acquired businesses based on future revenues.

Disclosures related to other fair value measurements are included below in Impairment of Long-Lived Assets, in Note F (Debt) and in Note J (Retirement Benefits).

Disclosures related to other fair value measurements are included below in Impairment of Long-Lived Assets, in Note F

(Debt) and in Note J (Retirement Benefits).

Cash Equivalents .

4 unchanged sentences

Allowance for Credit Losses.

Adoption of New Accounting Standard

In June 2016, the Financial Accounting Standards Board (FASB) issued a final standard on accounting for credit losses.

The new standard is effective for the Company in fiscal 2020 and requires a change in credit loss calculations using the expected loss method.

There was no significant impact on earnings or financial condition from the adoption of the new standard.

Accounting Policy

Receivables reflected in the financial statements represent the net amount expected to be collected.

22 unchanged sentences

The Company evaluates long-lived assets (including property and equipment, goodwill and other intangible assets) for impairment annually in the fourth quarter, or whenever events or changes in circumstances indicate that the carrying amount may not be recoverable.

In connection with negotiations to sell the Company's U.K.-based valve business in 2020, impairment charges of $35 million were recorded.

We completed our annual impairment review of all long-lived assets in the fourth quarter of 2021.

No further impairment charges were recorded as a result of that review.

There were no impairment charges in 2019 or 2018.

No impairment charges were recorded as a result of that review.

In connection with the Company's sale of its U.K.-based valve business in 2020, impairment charges of $ 35 million were recorded.

There were no additional impairment charges in 2020 or 2019.

Property, Plant and Equipment .

51 unchanged sentences

Changes in cash surrender value are recorded in other expense, net.

The cash surrender value increased $ 2.2 million in 2020, $ 3.4 million in 2019 and decreased $ 1.8 million in 2018.

The cash surrender value increased $ 3.3 million in 2021, $ 2.2 million in 2020 and $ 3.4 million in 2019.

Capitalized software is amortized over its estimated useful life (generally 2 to 5 years) beginning at date of implementation.

27 unchanged sentences

Revenue Recognition .

Accounting Policy

Revenue is recognized at a single point in time upon the satisfaction of performance obligations, which occurs when control of the good or service transfers to the customer.

23 unchanged sentences

Amounts billed to customers for shipping and handling are included in net sales.

Deferred Revenues

Revenue is deferred when cash payments are received or due in advance of performance, including amounts which are refundable.

2 unchanged sentences

Net sales for the year included $ 40.9 million that was in deferred revenue and customer advances as of December 25, 2020.

Practical Expedients and Exemptions

Shipping and handling activities that occur after control of the related good transfers are accounted for as fulfillment activities instead of assessing such activities as performance obligations.

5 unchanged sentences

Such costs primarily relate to sales commissions and are recorded in selling, marketing and distribution expense.

Disaggregated revenues by reporting segment and geography are disclosed in accordance with the revenue standard.

See Note B , Segment Information.

Earnings Per Common Share .

31 unchanged sentences

The Process segment markets pumps, valves, meters and accessories to move and dispense chemicals, oil and natural gas, water, wastewater, petroleum, food, lubricants and other fluids.

Markets served include food and beverage, dairy, oil and natural gas,

pharmaceutical, cosmetics, electronics, semiconductor fabrication, wastewater, mining, fast oil change facilities, service garages, fleet service centers, automobile dealerships and industrial lubrication applications.

Markets served include food and beverage, dairy, oil and natural gas, pharmaceutical, cosmetics, electronics, semiconductor fabrication, wastewater, mining, fast oil change facilities, service garages, fleet service centers, automobile dealerships and industrial lubrication applications.

The Contractor segment markets sprayers for architectural coatings for painting, corrosion control, texture and line striping.

6 unchanged sentences

The segments share common purchasing, certain manufacturing, distribution and administration functions.

Segments information follows (in thousands):

Subsequent Event.

Effective January 1, 2022, our high performance coatings and foam product offerings within the Applied Fluid Technologies division of the Industrial segment were realigned and are now managed under the Contractor segment.

This change aligns the types of products offered and markets served within the segments.

Segment operating results will be reported under the new organizational structure in the first quarter of 2022, in connection with the effective date of the realignment.

Historic segment information restated to conform to the new organizational structure.

Segment information follows (in thousands):

2021 2020 2019

39 unchanged sentences

All other inventory was valued on the FIFO method.

In 2020, decreases in material costs, including tariffs, offset the impact of increases in certain inventory quantities and drove the LIFO reserve requirement lower.

The effect of the LIFO reserve change on net earnings was not significant.

Property, Plant and Equipment

36 unchanged sentences

Foreign Derived Intangible Income (FDII) ( 5 ) ( 3 ) ( 3 )

Pension contribution — — ( 1 )

Effective tax rate 13 % 12 % 15 %

14 unchanged sentences

Deferred revenue 2,427 1,792

Prepayments from foreign subsidiaries 32,969 —

Other 2,138 2,041

1 unchanged sentence

Total deferred tax assets were $ 55.8 million and $ 67.0 million, and total deferred tax liabilities were $ 10.7 million and $ 51.4 million on December 31, 2021 and December 25, 2020, respectively.

The difference between the deferred income tax provision and the change in net deferred income taxes is due to the change in other comprehensive income (loss) items, acquisition purchase accounting and the sale of the Company's U.K.-based valve business.

The difference between the deferred income tax provision and the change in net deferred income taxes is due to the changes in other comprehensive income (loss) items and acquisition purchase accounting.

The Company files income tax returns in the U.S.

15 unchanged sentences

Series D 5.35 % July 2026 75,000 75,000

Unsecured revolving credit facility N/A December 2021 — —

Unsecured revolving credit facility N/A March 2026 — —

Unsecured revolving credit facility - CNH 3.52 % N/A 39,222 7,668

4 unchanged sentences

The Company uses significant other observable inputs to estimate fair value (level 2 of the fair value hierarchy) based on the present value of future cash flows and rates that would be available for issuance of debt with similar terms and remaining maturities.

On December 15, 2016, the Company executed an amendment to its revolving credit agreement, extending the expiration date to December 15, 2021 and decreasing certain interest rates and fees.

The amended agreement with a syndicate of lenders provides up to $ 500 million of committed credit, available for general corporate purposes, working capital needs, share repurchases and acquisitions.

The Company may borrow up to $ 50 million under the swingline portion of the facility for daily working capital needs.

Under terms of the amended revolving credit agreement, borrowings may be denominated in U.S.

On March 25, 2021, the Company entered into an amended and restated credit agreement that amends, supersedes and restates in its entirety the Company's prior credit agreement with U.S.

Bank National Association, as administrative agent (the “Agent”) and a lender, and the other lenders that are parties thereto.

The amended and restated credit agreement extends the maturity of the Company’s $ 500 million unsecured revolving credit facility from December 15, 2021 to March 25, 2026;

includes a $ 250 million accordion feature;

and provides mechanisms for two further one-year extensions of the maturity, subject to the consent of the extending banks.

Borrowings under the amended and restated credit agreement may be denominated in U.S.

dollars or certain other currencies.

Outstanding loans in currencies other than U.S.

dollars cannot exceed $ 200 million in the aggregate.

Loans denominated in U.S.

dollars bear interest, at the Company’s option, at either a base rate or a LIBOR-based rate.

dollars may bear interest, at the Company’s option, at either a base rate or a LIBOR-based rate.

Loans denominated in currencies other than U.S.

dollars bear interest at a LIBOR-based rate.

The base rate is an annual rate equal to a margin ranging from zero percent to 0.75 percent, depending on the Company’s cash flow leverage ratio (debt to earnings before interest, taxes, depreciation, amortization and extraordinary non-operating or non-cash charges and expenses) plus the highest of (i) the bank’s prime rate, (ii) the federal funds rate plus 0.5 percent, or (iii) one-month LIBOR plus 1.5 percent.

In general, LIBOR-based loans bear interest at LIBOR plus 1 percent to 1.75 percent, depending on the Company’s cash flow leverage ratio.

In addition to paying interest on the outstanding loans, the Company is required to pay a fee on the unused amount of the loan commitments at an annual rate ranging from 0.125 to 0.25 , depending on the Company’s cash flow leverage ratio.

On September 24, 2018, the Company entered into a revolving credit agreement with a sole lender that was scheduled to expire in September 2020.

This revolver was amended effective January 29, 2020 to remove the expiration date, eliminate commitment fees, reduce interest rate margins and delete negative covenants regarding cash flow leverage and interest coverage ratios.

The credit agreement provides up to $ 50 million of committed credit, available for general corporate purposes, working capital needs, share repurchases and acquisitions.

dollars will bear interest at a LIBOR-based rate.

The base rate is an annual rate equal to a margin ranging from 0.00 % to 0.75 %, depending on the Company’s cash flow leverage ratio, plus the highest of (i) the rate of interest from time to time announced by the Agent as its prime rate, (ii) the federal funds effective rate plus 0.50 %, or (iii) one-month LIBOR plus 1.50 %.

In general, LIBOR-based loans bear interest at a rate per annum equal to LIBOR, plus a margin ranging from 1.00 % to 1.75 %, depending on the Company’s cash flow leverage ratio.

In addition to paying interest on the outstanding loans, the Company is required to pay a facility fee on the unused amount of the loan commitments at a rate per annum ranging from 0.125 % to 0.25 %, depending on the Company’s cash flow leverage ratio.

The amended and restated credit agreement contains customary provisions for the replacement of the LIBOR-based rate as that rate is phased out in the lending market.

The amended and restated credit agreement contains customary representations, warranties, covenants and events of default, including but not limited to covenants restricting the Company’s and its subsidiaries’ ability to (i) merge or consolidate with another entity, (ii) sell, transfer, lease or convey their assets, (iii) make any material change in the nature of the core business of the Company, (iv) make certain investments, or (v) incur secured indebtedness.

The amended and restated credit agreement also requires the Company to maintain a cash flow leverage ratio of not more than 3.50 to 1.00 (unless a significant acquisition has been consummated, in which case, not more than 4.00 to 1.00 during the four fiscal quarter period beginning with the quarter in which such acquisition occurs) and an interest coverage ratio of not less than 3.00 to 1.00 (unless a significant acquisition has been consummated, in which case, not less than 2.50 to 1.00 during the four fiscal quarter period beginning with the quarter in which such acquisition occurs).

A change in control of the Company will constitute an event of default under the amended and restated credit agreement.

The Company maintains a revolving credit agreement with a sole lender that provides up to $ 50 million of committed credit, available for general corporate purposes, working capital needs, share repurchases and acquisitions.

Under the terms of the agreement, loans may be denominated in U.S.

2 unchanged sentences

dollars bear interest, at the Company’s option, at either a base rate or a LIBOR-based rate.

Loans denominated in Chinese renminbi (offshore) bear interest at a LIBOR-based rate based on the Chinese offshore rate.

Other terms of this revolving credit agreement are substantially similar to those of the Company’s revolving credit agreement that expires in December 2021.

Loans denominated in

Chinese renminbi (offshore) bear interest at a LIBOR-based rate based on the Chinese offshore rate.

Other terms of this revolving credit agreement are substantially similar to those of the Company’s amended and restated credit agreement that expires in March 2026.

On January 29, 2020, the Company entered into a master note agreement with a sole lender that expires on January 29, 2023 .

15 unchanged sentences

Interest paid on debt was $ 9.8 million in 2021, $ 11.3 million in 2020 and $ 13.5 million in 2019.

Subsequent Event.

In January 2022, we repaid $ 75 million of our Series B private placement note in addition to a $ 3.5 million prepayment fee, which will be recognized as interest expense in the first quarter of 2022.

Shareholders’ Equity

8 unchanged sentences

Amounts reclassified from accumulated other comprehensive income 7,106 — 7,106

Reclassified to retained earnings ( 15,453 ) — ( 15,453 )

Balance, December 27, 2019 ( 113,721 ) ( 56,066 ) ( 169,787 )

7 unchanged sentences

Amounts related to pension and postretirement medical adjustments are reclassified to non-service components of pension cost that are included within other non-operating expenses.

In February 2018, FASB issued a new standard related to reclassification of certain tax effects from accumulated other comprehensive income (AOCI).

The Company adopted the new standard in the first quarter of 2018.

We elected to reclassify $ 15.5 million from accumulated other comprehensive income to retained earnings, representing the amount of “ stranded ” tax effects resulting from the change in the U.S.

federal tax rate and the consequent revaluation of deferred tax assets related to pension and postretirement medical expense.

Included in the 2021 reclassification is $ 12 million related to a pension settlement loss.

See Note J for additional details regarding pension and postretirement medical plans.

Share-Based Awards, Purchase Plans and Compensation Cost

100 unchanged sentences

Diluted earnings per share $ 2.52 $ 1.92 $ 2.00

Anti-dilutive stock options excluded from computations of diluted earnings per share totaled 0.3 million shares in 2020 and 1.1 million shares in 2019 and 2018.

Anti-dilutive stock options excluded from computations of diluted earnings per share totaled 0.4 million shares in 2021 and 0.3 million shares in both 2020 and 2019.

Retirement Benefits

10 unchanged sentences

The Company funds annually in amounts consistent with minimum funding levels and maximum tax deduction limits.

In October of 2021, the Company entered into an agreement under which approximately $ 63 million of pension obligations of its two U.S.

funded defined benefit pension plans were transferred to an insurance company.

Under the agreement, the Company purchased a group annuity contract for approximately 417 plan participants that provides for an irrevocable commitment to make annuity payments to the affected participants.

The payment obligation and administration thereof for the affected participants was transferred from the pension plans to the insurance company.

The transfer did not change the amount of the monthly pension benefits received by the affected participants.

Subsequent to the transfer of pension obligations, the smaller of the two pension plans was merged into the larger plan in December of 2021, with the larger plan being the surviving funded pension plan.

This arrangement is part of the Company’s effort to reduce the overall size and volatility of its pension plan obligations.

The purchase of the group annuity contract was funded through existing plan assets.

The Company recognized a non-cash pension settlement loss of approximately $ 12 million as a result of the transaction.

This charge represents the acceleration of deferred charges currently accrued in accumulated other comprehensive income.

Investment policies and strategies of the U.S.

funded pension plans are based on participant demographics of each plan.

For the larger of the two plans (the “Blue plan”) covering active participants and retirees with higher benefit amounts, investments are based on a long-term view of economic growth and weighted toward equity securities.

funded pension plan are based on participant demographics.

As the plan covers active participants and retirees with higher benefit amounts, investments are based on a long-term view of economic growth and weighted toward equity securities.

The primary goal of the plan’s investments is to ensure that the plan’s liabilities are met over time.

1 unchanged sentence

The plan invests primarily in domestic and international equities, fixed income securities, which include treasuries, highly-rated corporate bonds and high-yield bonds and real estate.

Strategic target allocations for Blue plan assets are 50 percent equity securities, 37 percent fixed income securities and 13 percent real estate and alternative investments.

For the smaller of the two plans (the “Gray plan”) covering retirees with lower benefit amounts, investments are based on a shorter-term, more conservative outlook.

The midpoints of the ranges of strategic target allocations for the Gray plan assets are 28 percent equity securities, 60 percent fixed income securities and 12 percent real estate and alternative investments.

Plan assets are held in trusts for the benefit of plan participants and are invested in various commingled funds, most of which are sponsored by the trustee.

Strategic target allocations for plan assets are 53 percent equity securities, 42 percent fixed income securities and 5 percent real estate and alternative investments.

Plan assets are held in a trust for the benefit of plan participants and are invested in various commingled funds, most of which are sponsored by the trustee.

The fair values for commingled equity, fixed-income and real estate investments are measured using net asset values, which take into consideration the value of underlying fund investments, as well as the other accrued assets and liabilities of a fund, in order to determine a per share market value.

Certain trustee-sponsored funds allow redemptions monthly or quarterly, with 10 or 60 days advance notice, while most of the funds allow redemptions daily.

The plans had unfunded commitments to make additional investments in certain funds totaling $ 2.4 million as of December 25, 2020 and $ 2.5 million as of December 27, 2019.

Certain trustee-sponsored funds allow redemptions monthly or quarterly, with 10 days or 60 days advance notice, while most of the funds allow redemptions daily .

The plan had unfunded commitments to make additional investments in certain funds totaling $ 2.4 million as of December 31, 2021 and December 25, 2020.

The Company maintains a defined contribution plan covering employees of a Swiss subsidiary, funded by Company and employee contributions.

7 unchanged sentences

Cash and cash equivalents 1 $ 303 $ 1,234

1 $ 1,234 $ ( 156 )

Insurance contract 3 30,926 31,877

8 unchanged sentences

Total $ 347,900 $ 373,565

(1) Negative cash for 2019 represents unsettled pending trades within an investment that are classified in cash and cash equivalents until settled.

The following table is a reconciliation of pension assets measured at fair value using level 3 inputs (in thousands):

11 unchanged sentences

Interest cost 11,409 13,313 832 1,016

Actuarial loss 46,545 67,756 3,572 2,532

Actuarial (gain) loss ( 31,093 ) 46,545 ( 2,391 ) 3,572

Benefit payments ( 13,360 ) ( 13,602 ) ( 1,447 ) ( 1,385 )

Plan changes ( 529 ) — — —

Plan amendments ( 1,458 ) ( 529 ) — —

Settlements ( 64,886 ) — — —

Exchange rate changes ( 2,568 ) 6,145 — —

5 unchanged sentences

Benefit payments ( 13,360 ) ( 13,602 ) ( 1,447 ) ( 1,385 )

Settlements ( 64,886 ) — — —

Exchange rate changes ( 896 ) 2,918 — —

6 unchanged sentences

Net $ 70,151 $ 137,087 $ 32,122 $ 34,458

Changes in discount rates used to value pension obligations were the main drivers of large actuarial losses in 2020 and 2019.

In the fourth quarter of 2020, the Company made a $ 20 million voluntary contribution to one of its U.S.

Changes in discount rates used to value pension obligations were the main drivers of actuarial gains in 2021 and actuarial losses in 2020.

In 2021 and 2020, the Company made a $ 20 million voluntary contribution each year to one of its U.S.

qualified defined benefit plans.

10 unchanged sentences

Expected return on assets ( 20,767 ) ( 18,814 ) ( 17,152 ) — — —

Amortization of prior service cost (credit) 294 279 279 — — —

Amortization of net loss (gain) 10,243 8,392 7,931 733 273 646

Settlement loss (gain) — — 184 — — —

Amortization of prior service cost 246 294 279 — — —

Amortization of net loss 9,248 10,243 8,392 1,002 733 273

Settlement loss 12,285 — — — — —

Cost of pension plans which are not significant and have not adopted ASC 715 368 168 110 N/A N/A N/A

5 unchanged sentences

2021 2020 2021 2020

Net loss (gain) arising during the period $ 8,872 $ 40,184 $ 3,572 $ 2,532

Net gain (loss) arising during the period $ 42,039 $ ( 8,872 ) $ 2,391 $ ( 3,572 )

Amortization of net (gain) loss 9,248 10,243 1,002 733

Prior service cost (credit) arising during the period ( 529 ) — — —

Prior service credit (cost) arising during the period 1,458 529 — —

Settlement (gain) loss 12,285 — — —

Amortization of prior service (credit) cost 246 294 — —

30 unchanged sentences

The Company expects to contribute $ 1.8 million to its unfunded pension plans and $ 1.8 million to the postretirement medical plan in 2022.

The Company expects to utilize available credits to satisfy any required contributions to the funded pension plans under minimum funding requirements for 2021.

The Company will not be required to make contributions to the funded pension plan under minimum funding requirements for 2022.

Estimated future benefit payments are as follows (in thousands):

32 unchanged sentences

The Company enters into contracts with vendors to receive services.

Commitments under these service contracts with noncancelable terms of more than one year totaled $ 7 million in 2021, $ 6 million in 2022, $ 3 million in 2023 and $ 4 million thereafter.

Commitments under these service contracts with non-cancelable terms of more than one year totaled $ 8 million in 2022, $ 5 million in 2023, $ 4 million in 2024 and $ 5 million thereafter.

In addition, the Company could be obligated to perform under standby letters of credit totaling $ 3 million at December 31, 2021 .

5 unchanged sentences

Management does not expect that resolution of these matters will have a material adverse effect on the Company, although the ultimate outcome cannot be determined based on available information.

Quarterly Financial Information (Unaudited)

Unaudited quarterly financial data is summarized below (in thousands, except per share amounts):

Quarter Second

Quarter Third

Quarter Fourth

Net Sales $ 373,567 $ 366,892 $ 439,316 $ 470,340

Gross Profit 198,631 182,529 228,953 244,824

Net Earnings 72,818 28,832 114,115 114,691

Basic Net Earnings per Common Share $ 0.43 $ 0.17 $ 0.68 $ 0.68

Diluted Net Earnings per Common Share 0.42 0.17 0.66 0.66

Cash Dividends Declared per Common Share 0.18 0.18 0.18 0.19

Net Sales $ 404,870 $ 428,328 $ 400,555 $ 412,292

Gross Profit 216,042 226,954 207,379 209,381

Net Earnings 86,749 88,137 84,132 84,835

Basic Net Earnings per Common Share $ 0.52 $ 0.53 $ 0.50 $ 0.51

Diluted Net Earnings per Common Share 0.51 0.51 0.49 0.49

Cash Dividends Declared per Common Share 0.16 0.16 0.16 0.18

Changes in and Disagreements With Accountants on Accounting and Financial Disclosure

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 8. Financial Statements and Supplementary Data