3 unchanged sentences
The term "disclosure controls and procedures," as defined in Securities Exchange Act Rules 13a-15(e) and 15d-15(e), means controls and other procedures of a company that are designed to ensure that information required to be disclosed by the company in the reports that it files or submits under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in the SEC's rules and forms.
−Removed: Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is accumulated and communicated to the company's management, including its principal executive and principal financial officers, as appropriate to allow timely decisions regarding required disclosure.
+Added: Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is accumulated and communicated to the company's management, including its principal executive and principal financial
+Added: officers, as appropriate to allow timely decisions regarding required disclosure.
Management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving their objectives, and management necessarily applies its judgment in evaluating the cost-benefit relationship of possible controls and procedures.
5 unchanged sentences
Based on our assessment, management believes that at year-end 2020 our internal control over financial reporting was effective based on the criteria issued by COSO.
−Removed: On January 2, 2019, we acquired SMH.
−Removed: Our audited consolidated financial statements include the results of SMH since the acquisition date, including total assets of $196.9 million and total revenues of $83.4 million as of and for the fiscal year ended December 28, 2019 , but management's assessment does not include an assessment of the internal control over financial reporting of the SMH business.
Because of inherent limitations, internal control over financial reporting may not prevent or detect misstatements.
2 unchanged sentences
Changes in Internal Control over Financial Reporting
−Removed: There have not been any changes in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Securities Exchange Act of 1934, as amended) during the fiscal quarter ended December 28, 2019 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
+Added: There have not been any changes in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Securities Exchange Act of 1934, as amended) during the fiscal quarter ended January 2, 2021 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
Other Information
10 unchanged sentences
Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
−Removed: This information will be included under the headings "Stock Ownership" and "Equity Compensation Plan Information" in our 2020 proxy statement and is incorporated in this report by reference.
+Added: Except for the information concerning equity compensation plans, this information will be included under the heading "Stock Ownership" in our 2021 proxy statement and is incorporated in this Report by reference.
+Added: The following table provides information about the securities authorized for issuance under our equity compensation plans at year-end 2020:
+Added: Equity Compensation Plan Information
+Added: Plan Category Number of Securities
+Added: to be Issued upon
+Added: Outstanding Options,
+Added: Warrants, and
+Added: Rights Weighted Average Exercise Price of Outstanding Options, Warrants, and Rights Number of Securities
+Added: Remaining Available for Future Issuance Under Equity Compensation Plans (Excluding Securities Reflected in the First Column)
+Added: Equity compensation plans approved by security holders 147,578 (a) $ 24.44 (b) 465,457 (c)
+Added: Equity compensation plans not approved by security holders — $ — —
+Added: Total 147,578 (a) $ 24.44 (b) 465,457 (c)
+Added: __________________________________
+Added: (a) Consists of 27,225 shares of our common stock to be issued upon exercise of outstanding options under our Amended and Restated 2006 Equity Compensation Plan, as amended (the 2006 Plan), and 120,353 shares of our common stock issuable upon the vesting of restricted stock units and performance-based restricted stock units under the 2006 Plan.
+Added: (b) Consists of the weighted average exercise price of the 27,225 stock options outstanding on January 2, 2021.
+Added: The 120,353 shares of restricted stock units and performance-based restricted stock units outstanding on January 2, 2021 had a weighted average grant date fair value of $92.42.
+Added: (c) Includes an aggregate of 101,873 shares of common stock issuable under our employees' stock purchase plan in connection with current and future offering periods under the plan.
Certain Relationships and Related Transactions, and Director Independence
3 unchanged sentences
Exhibits and Financial Statement Schedules
−Removed: The following documents are filed as part of this report:
+Added: (a) The following documents are filed as part of this report:
(1) Consolidated Financial Statements (see Index on Page F-1 of this report):
10 unchanged sentences
Exhibit Index
−Removed: Description of Exhibit
−Removed: Stock and Asset Purchase Agreement by and among the Registrant, Kadant Northern U.S.
−Removed: LLC, Kadant Canada Corp., Kadant Northern UK Co.
−Removed: Ltd., Kadant Johnson Europe B.V., NII FPG Company, Nicholson Intellectual Property, Inc., Cascade Natural Resources, Inc.
−Removed: and Northern Industrial, Inc.
−Removed: dated as of May 24, 2017 (filed as Exhibit 2.1 to the Registrant's Quarterly Report on Form 10-Q for the quarter ended July 1, 2017 [File No.
−Removed: 001-11406] and incorporated in this document by reference).
+Added: Number Description of Exhibit
2.1 Equity Purchase Agreement by and among the Registrant, LLCP PCS Alternative Syntron, LLC, Syntron Material Handling Group, LLC, PCS Alternative Corp Seller 1, LLC, PCS Alternative Corp Seller 2, LLC, and SMH Equity, LLC and Levine Leichtman Capital Partners Private Capital Solutions, L.P., dated as of December 9, 2018 (filed as Exhibit 2.2 to the Registrant’s Annual Report on Form 10-K for the fiscal year ended December 29, 2018 [File No.
4 unchanged sentences
001-11406] filed with the Commission on November 25, 2014 and incorporated in this document by reference).
−Removed: Description of Securities Registered under Section 12 of the Securities Exchange Act of 1934.
+Added: 4.1 Description of Securities Registered under Section 12 of the Securities Exchange Act of 1934 (filed as Exhibit 4.1 to the Registrant's Annual Report on Form 10-K for the year ended December 28, 2019 [File No.
+Added: 001-11406] and incorporated in this document by reference).
10.1* Form of Indemnification Agreement between the Registrant and its directors and officers (filed as Exhibit 10.1 to the Registrant's Quarterly Report on Form 10-Q for the quarter ended June 30, 2001 [File No.
10 unchanged sentences
001-11406] and incorporated in this document by reference).
−Removed: Summary of non-employee director compensation of the Registrant (filed as Exhibit 10.3 to the Registrant's Quarterly Report on Form 10-Q for the quarter ended March 31, 2018 [File No.
+Added: 10.7* Summary of non-employee director compensation of the Registrant (filed as Exhibit 10.
+Added: 1 to the Registrant's Quarterly Report on Form 10-Q for the quarter ended March 28 , 20 20 [ File No.
001-11406 ] and incorporated in this document by reference).
3 unchanged sentences
Exhibit Index
−Removed: Description of Exhibit
+Added: Number Description of Exhibit
10.9* Form of Performance-Based Restricted Stock Unit Award Agreement between the Registrant and its executive officers used for restricted stock unit awards on or after March 5, 2014 (filed as Exhibit 10.1 to the Registrant's Quarterly Report on Form 10-Q for the quarter ended March 29, 2014 [File No.
20 unchanged sentences
Description of Exhibit
−Removed: Second Amendment, dated as of December 14, 2018, to the Amended and Restated Credit Agreement dated as of March 1, 2017 by and among the Registrant, the Foreign Subsidiary Borrowers from time to time parties thereto, the several banks and other financial institutions or entities from time to time parties thereto, Citizens Bank, N.A., as Administrative Agent and Multicurrency Administrative Agent (filed as Exhibit 10.25 to the Registrant’s Annual Report on Form 10-K for the fiscal year ended December 29, 2018 [File No.
+Added: 10.19 Second Amendment, dated as of December 14, 2018, to the Amended and Restated Credit Agreement dated as of March 1, 2017 by and among the Registrant, the Foreign Subsidiary Borrowers from time to time parties thereto, the several banks and other financial institutions or entities from time to time parties thereto, Citizens Bank, N.A., as Administrative Agent and Multicurrency Administrative Agent (filed as Exhibit 10.
+Added: 25 to the Registrant's Annual Report on Form 10-K for the year ended December 2 9 , 201 8 [File No.
001-11406] and incorporated in this document by reference).
+Added: 10.20 Third Amendment, dated as of March 16, 2020, to the Amended and Restated Credit Agreement dated as of March 1, 2017 by and among the Registrant, the Foreign Subsidiary Borrowers from time to time parties thereto, the several banks and other financial institutions or entities from time to time parties thereto, Citizens Bank, N.A., as Administrative Agent and Multicurrency Administrative Agent (filed as Exhibit 10.2 to the Registrant's Quarterly Report on Form 10-Q for the quarter ended March 28, 2020 [File No.
+Added: 001-11406] and incorporated in this document by reference).
10.21 Amended and Restated Guarantee Agreement dated as of March 1, 2017, among the Registrant, as Borrower, and each of the Subsidiary Guarantors, in favor of Citizens Bank, N.A., as Administrative Agent and as Multicurrency Administrative Agent for the bank and other financial institutions or entities from time to time parties to the Amended and Restated Credit Facility (filed as Exhibit 99.2 to the Registrant's Current Report on Form 8-K [File No.
6 unchanged sentences
001-11406] and incorporated in this document by reference).
−Removed: Promissory Note in the principal amount of $21,000,000 dated July 6, 2018, executed by the Registrant, Kadant Johnson LLC, Kadant Black Clawson LLC and Verus Lebanon, LLC in favor of Citizens Bank, N.A (filed as Exhibit 99.1 to the Registrant's Current Report on Form 8-K [File No.
−Removed: 001-11406] filed with the Commission on July 12, 2018 and incorporated in this document by reference).
−Removed: Mortgage, Security Agreement and Assignment of Leases and Rents dated July 6, 2018 executed by the Registrant in favor of Citizens Bank, N.A.
−Removed: relating to the real property and related personal property located in Auburn, Massachusetts.
−Removed: (filed as Exhibit 99.2 to the Registrant's Current Report on Form 8-K [File No.
−Removed: 001-11406] filed with the Commission on July 12, 2018 and incorporated in this document by reference).
−Removed: Mortgage dated July 6, 2018 by Kadant Johnson LLC in favor of Citizens Bank, N.A.
−Removed: relating to the real property and related personal property located in Three Rivers, Michigan (filed as Exhibit 99.3 to the Registrant's Current Report on Form 8-K [File No.
−Removed: 001-11406] filed with the Commission on July 12, 2018 and incorporated in this document by reference).
−Removed: Open-End Mortgage, Security Agreement, and Assignment of Leases and Rents dated July 6, 2018 by Verus Lebanon, LLC in favor of Citizens Bank, N.A.
−Removed: to the real property and related personal property located in Lebanon, Ohio (filed as Exhibit 99.4 to the Registrant's Current Report on Form 8-K [File No.
−Removed: 001-11406] filed with the Commission on July 12, 2018 and incorporated in this document by reference).
10.24 International Swap Dealers Association, Inc.
1 unchanged sentence
001-11406] filed with the Commission on August 11, 2005 and incorporated in this document by reference).
−Removed: Swap Confirmation dated January 16, 2015 between the Registrant and Citizens Bank, National Association (filed as Exhibit 10.2 to the Registrant's Quarterly Report on Form 10-Q for the quarter ended April 4, 2015 [File No.
−Removed: 001-11406] filed with the Commission on May 13, 2015 and incorporated in this document by reference).
−Removed: Exhibit Index
−Removed: Description of Exhibit
10.25 Swap Confirmation dated May 16, 2018 between the Registrant and Citizens Bank, National Association (filed as Exhibit 10.1 to the Registrant's Quarterly Report on Form 10-Q for the quarter ended June 30, 2018 [File No.
5 unchanged sentences
31.2 Certification of the Principal Financial Officer of the Registrant Pursuant to Rule 13a-14(a) and Rule 15d-14(a) of the Securities Exchange Act of 1934, as amended.
+Added: Exhibit Index
+Added: Description of Exhibit
32 Certification of the Chief Executive Officer and the Chief Financial Officer of the Registrant pursuant to 18 U.S.C.
Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
−Removed: Inline XBRL Instance Document - the instance document does not appear in the Interactive Data File
+Added: 101.INS Inline XBRL Instance Document - the instance document does not appear in the Interactive Data File
because its XBRL tags are embedded within the Inline XBRL document.
−Removed: Inline XBRL Taxonomy Extension Schema Document.
−Removed: Inline XBRL Taxonomy Extension Calculation Linkbase Document.
−Removed: Inline XBRL Taxonomy Extension Definition Linkbase Document.
−Removed: Inline XBRL Taxonomy Extension Label Linkbase Document.
−Removed: Inline XBRL Taxonomy Extension Presentation Linkbase Document.
+Added: 101.SCH Inline XBRL Taxonomy Extension Schema Document.
+Added: 101.CAL Inline XBRL Taxonomy Extension Calculation Linkbase Document.
+Added: 101.DEF Inline XBRL Taxonomy Extension Definition Linkbase Document.
+Added: 101.LAB Inline XBRL Taxonomy Extension Label Linkbase Document.
+Added: 101.PRE Inline XBRL Taxonomy Extension Presentation Linkbase Document.
104 Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101).
* Management contract or compensatory plan or arrangement.
−Removed: Submitted electronically herewith.
(1) The schedules to this document have been omitted from this filing pursuant to Item 601(b)(2) of Regulation S-K.
4 unchanged sentences
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, as amended, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
−Removed: February 25, 2020
+Added: March 2, 2021 By:
/s/ Jeffrey L.
5 unchanged sentences
Selwood, jointly and severally, his or her attorney-in-fact, with the power of substitution, for him or her in any and all capacities, to sign any amendments to this Annual Report on Form 10-K and to file the same, with exhibits thereto and other documents in connection therewith, with the Securities and Exchange Commission, hereby ratifying and confirming all that each of said attorneys-in-fact, or his substitute or substitutes, may do or cause to be done by virtue hereof.
−Removed: Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, this report has been signed below by the following persons on behalf of the Registrant and in the capacities indicated, on February 25, 2020.
+Added: Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, this report has been signed below by the following persons on behalf of the Registrant and in the capacities indicated, on March 2, 2021.
+Added: Signature Title
/s/ Jeffrey L.
−Removed: Chief Executive Officer, President and Director
−Removed: (Principal Executive Officer)
+Added: Powell Chief Executive Officer, President and Director
+Added: Powell (Principal Executive Officer)
/s/ Michael J.
−Removed: Executive Vice President and Chief Financial Officer
−Removed: (Principal Financial Officer)
+Added: McKenney Executive Vice President and Chief Financial Officer
+Added: McKenney (Principal Financial Officer)
/s/ Deborah S.
−Removed: Senior Vice President and Chief Accounting Officer
−Removed: (Principal Accounting Officer)
+Added: Selwood Senior Vice President and Chief Accounting Officer
+Added: Selwood (Principal Accounting Officer)
/s/ Jonathan W.
−Removed: Director and Executive Chairman of the Board
+Added: Painter Director and Chairman of the Board
+Added: Albertine Director
/s/ Thomas C.
−Removed: /s/ Erin L Russell
+Added: Leonard Director
+Added: /s/ Erin L Russell Director
/s/ William P.
+Added: Tully Director
Annual Report on Form 10-K
2 unchanged sentences
Report of Independent Registered Public Accounting Firm
−Removed: Consolidated Balance Sheet as of December 28, 2019 and December 29, 2018
−Removed: Consolidated Statement of Income for the fiscal years ended December 28, 2019, December 29, 2018, and December 30, 2017
−Removed: Consolidated Statement of Comprehensive Income for the fiscal years ended December 28, 2019, December 29, 2018, and December 30, 2017
−Removed: Consolidated Statement of Cash Flows for the fiscal years ended December 28, 2019, December 29, 2018, and December 30, 2017
−Removed: Consolidated Statement of Stockholders' Equity for the fiscal years ended December 28, 2019, December 29, 2018, and December 30, 2017
+Added: Consolidated Balance Sheet as of January 2, 2021 and December 28, 2019
+Added: Consolidated Statement of Income for the fiscal years ended January 2, 2021, December 28, 2019, and December 29, 2018
+Added: Consolidated Statement of Comprehensive Income for the fiscal years ended January 2, 2021, December 28, 2019, and December 29, 2018
+Added: Consolidated Statement of Cash Flows for the fiscal years ended January 2, 2021, December 28, 2019, and December 29, 2018
+Added: Consolidated Statement of Stockholders' Equity for the fiscal years ended January 2, 2021, December 28, 2019, and December 29, 2018
Notes to Consolidated Financial Statements
3 unchanged sentences
We have audited the accompanying consolidated balance sheets of Kadant Inc.
−Removed: and subsidiaries (the Company) as of December 28, 2019 and December 29, 2018, the related consolidated statements of income, comprehensive income, cash flows, and stockholders’ equity for each of the fiscal years in the three-year period ended December 28, 2019, and the related notes (collectively, the consolidated financial statements).
−Removed: We also have audited the Company’s internal control over financial reporting as of December 28, 2019, based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission.
−Removed: In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of the Company as of December 28, 2019 and December 29, 2018, and the results of its operations and its cash flows for each of the fiscal years in the three-year period ended December 28, 2019, in conformity with U.S.
+Added: and subsidiaries (the Company) as of January 2, 2021 and December 28, 2019, the related consolidated statements of income, comprehensive income, cash flows, and stockholders’ equity for each of the fiscal years in the three-year period ended January 2, 2021, and the related notes (collectively, the consolidated financial statements).
+Added: We also have audited the Company’s internal control over financial reporting as of January 2, 2021 based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission.
+Added: In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of the Company as of January 2, 2021 and December 28, 2019, and the results of its operations and its cash flows for each of the fiscal years in the three-year period ended January 2, 2021, in conformity with U.S.
generally accepted accounting principles.
−Removed: Also in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 28, 2019 based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission.
−Removed: The Company acquired Syntron Material Handling Group, LLC and certain of its affiliates (SMH) on January 2, 2019, and management excluded from its assessment of the effectiveness of the Company’s internal control over financial reporting as of December 28, 2019, SMH’s internal control over financial reporting associated with total assets of $196.9 million and total revenues of $83.4 million included in the consolidated financial statements of the Company as of and for the fiscal year ended December 28, 2019.
−Removed: Our audit of internal control over financial reporting of the Company also excluded an evaluation of the internal control over financial reporting of SMH.
+Added: Also in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of January 2, 2021 based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission.
Basis for Opinions
11 unchanged sentences
We believe that our audits provide a reasonable basis for our opinions.
−Removed: Report of Independent Registered Public Accounting Firm (continued)
Definition and Limitations of Internal Control Over Financial Reporting
5 unchanged sentences
Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
−Removed: Critical Audit Matters
−Removed: The critical audit matters communicated below are matters arising from the current period audit of the consolidated financial statements that were communicated or required to be communicated to the audit committee and that:
−Removed: (1) relate to accounts or disclosures that are material to the consolidated financial statements and (2) involved our especially challenging, subjective, or complex judgments.
−Removed: The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.
+Added: Report of Independent Registered Public Accounting Firm (continued)
+Added: Critical Audit Matter
+Added: The critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial statements that was communicated or required to be communicated to the audit committee and that:
+Added: (1) relates to accounts or disclosures that are material to the consolidated financial statements and (2) involved our especially challenging, subjective, or complex judgments.
+Added: The communication of a critical audit matter does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.
Assessment of uncertain tax positions
−Removed: As discussed in Notes 1 and 5 to the consolidated financial statements, the Company has recognized uncertain tax positions including associated interest and penalties amounting to $10.0 million.
+Added: As discussed in Note 1 to the consolidated financial statements, it is the Company’s policy to provide for uncertain tax positions and the related interest and penalties based upon management’s assessment of whether a tax benefit is more likely than not to be sustained upon examination by tax authorities.
+Added: As disclosed in Note 5 to the consolidated financial statements, the Company has recognized uncertain tax positions amounting to $8,337,000 as of January 2, 2021.
The Company’s tax positions are subject to audit by local taxing authorities across multiple global jurisdictions.
−Removed: Tax law can be complex and tax audits can take an extended period of time to resolve, accordingly, the ultimate outcome with respect to taxes the Company may owe may differ from the amounts recognized.
−Removed: We identified the assessment of uncertain tax positions as a critical audit matter because a higher degree of auditor judgment was required in evaluating the Company’s interpretation of, and compliance with, tax law globally across its multiple subsidiaries.
−Removed: In addition, a higher degree of auditor judgment was required in evaluating the Company’s estimate of the ultimate resolution of its tax positions.
−Removed: The primary procedures we performed to address this critical audit matter included the following.
−Removed: We tested certain internal controls over the Company’s uncertain tax positions process.
−Removed: This included controls related to the interpretation of tax law, identification of uncertain tax positions and its application in the liability estimation process.
+Added: Tax law can be complex and tax audits can take an extended period of time to resolve, and accordingly, the ultimate outcome with respect to taxes the Company may owe may differ from the amounts recognized.
+Added: We identified the assessment of uncertain tax positions as a critical audit matter.
+Added: Complex auditor judgment, including specialized skills and knowledge, was required in evaluating the Company’s interpretation of, and compliance with, tax law globally and the estimate of the amount of tax benefits expected to be realized.
+Added: The following are the primary procedures we performed to address this critical audit matter.
+Added: We evaluated the design and tested the operating effectiveness of certain internal controls related to the Company’s process to assess uncertain tax positions.
+Added: This included controls related to the identification of uncertain tax positions, interpretation of tax law and its application in the liability estimation process.
We involved domestic and international tax professionals with specialized skills and knowledge, who assisted in:
−Removed: obtaining an understanding and assessing filed and to be filed tax positions,
−Removed: assessing uncertain tax positions for compliance with applicable laws and regulations,
−Removed: evaluating the Company’s uncertain tax positions by developing an estimate of the uncertain tax positions using independent assumptions and comparing it to the Company's estimate, and
−Removed: assessing the expiration of statutes of limitations.
−Removed: Report of Independent Registered Public Accounting Firm (continued)
−Removed: Assessment of the acquisition date fair value of Syntron Material Handling Group, LLC’s customer relationship intangible asset
−Removed: As discussed in Notes 1 and 2 to the consolidated financial statements, on January 2, 2019, the Company acquired SMH for $176.9 million, net of cash acquired.
−Removed: As a result of the transaction, the Company recorded a $58.3 million intangible asset related to SMH’s customer relationships acquired on January 2, 2019.
−Removed: The Company estimates the fair value of acquisition-related intangible assets principally based on discounted projections of cash flows that will arise from identifiable intangible assets.
−Removed: We identified the assessment of the acquisition date fair value of SMH's customer relationship intangible asset as a critical audit matter.
−Removed: There was a high degree of judgment involved in evaluating certain of the Company’s internally developed assumptions used in determining the fair value of such asset.
−Removed: Specifically, the projected revenue growth rate was challenging to assess as it is highly dependent upon future economic factors and market conditions.
−Removed: The discount rate was challenging to assess as it is dependent on limited observable market information.
−Removed: The determination of the fair value of the customer relationship intangible asset was sensitive to possible changes in the projected revenue growth rate and the discount rate.
−Removed: The primary procedures we performed to address this critical audit matter included the following.
−Removed: We tested certain internal controls over the Company’s acquisition date valuation process, including controls related to the development of the projected revenue growth rate and the discount rate.
−Removed: We assessed the Company’s projected revenue growth rate by comparing planned revenue growth against publicly available industry growth rate data and the Company’s historical revenue growth rate from existing customers.
−Removed: We assessed the Company’s ability to accurately estimate revenue growth by comparing historical projections to actual amounts achieved for previously acquired businesses.
−Removed: We performed sensitivity analysis using alternative revenue growth rate assumptions to assess the impact of changes in those assumptions on the Company’s determination of fair value of the intangible assets.
−Removed: We evaluated the Company’s discount rate by assessing (1) the comparable company data used in determining the discount rate, and (2) the discount rate utilized in valuing the customer relationship assets in previously acquired businesses.
−Removed: We involved valuation professionals with specialized skills and knowledge, who assisted in:
−Removed: evaluating the selected discount rate by comparing it against a discount rate that was independently developed using publicly available market data for comparable companies,
−Removed: developing a fair value estimate of the customer relationship intangible asset using the Company’s cash flow projections and an independently developed discount rate and comparing it to the Company’s estimate, and
−Removed: performing sensitivity analysis using alternative discount rate assumptions.
+Added: • assessing tax positions for compliance with applicable laws and regulations
+Added: • evaluating the Company’s uncertain tax positions by developing independent expectations of the uncertain tax positions using independent assumptions and comparing them to the Company’s estimates
+Added: • assessing the expiration of statutes of limitations with applicable laws and regulations.
We have served as the Company's auditor since 2012.
Boston, Massachusetts
−Removed: February 25, 2020
+Added: March 2, 2021
2020 Financial Statements
Consolidated Balance Sheet
−Removed: (In thousands, except share and per share amounts)
−Removed: December 28, 2019
−Removed: December 29, 2018
+Added: (In thousands, except share and per share amounts) January 2, 2021 December 28, 2019
Current Assets:
1 unchanged sentence
Restricted cash 958 1,487
−Removed: Accounts receivable, less allowances of $2,698 and $2,897
−Removed: Unbilled revenues
+Added: Accounts receivable, net of allowances of $ 2,977 and $ 2,698
+Added: 91,540 95,740
+Added: Inventories 106,814 102,715
+Added: Unbilled revenue 7,576 13,162
Other current assets 17,250 17,686
Total Current Assets 289,820 297,576
−Removed: Property, Plant, and Equipment, at Cost, Net
−Removed: Other Assets (Note 9)
+Added: Property, Plant, and Equipment, Net 84,642 86,032
+Added: Other Assets 40,391 45,851
Intangible Assets, Net (Notes 1 and 2) 160,965 173,896
Goodwill (Notes 1 and 2) 351,753 336,032
+Added: Total Assets $ 927,571 $ 939,387
Liabilities and Stockholders' Equity
9 unchanged sentences
Long-Term Deferred Income Taxes (Note 5) 21,669 19,736
−Removed: Other Long-Term Liabilities (Note 3 and 9)
+Added: Other Long-Term Liabilities 42,309 48,229
Commitments and Contingencies (Note 7)
6 unchanged sentences
Treasury stock at cost, 3,081,919 and 3,214,888 shares
+Added: ( 75,519 ) ( 78,778 )
Accumulated other comprehensive items (Note 14) ( 19,492 ) ( 37,620 )
6 unchanged sentences
Consolidated Statement of Income
−Removed: (In thousands, except per share amounts)
−Removed: December 28, 2019
−Removed: December 29, 2018
−Removed: December 30, 2017
−Removed: Revenues (Note 1 and 12)
+Added: (In thousands, except per share amounts) January 2, 2021 December 28, 2019 December 29, 2018
+Added: Revenue (Notes 1 and 12) $ 635,028 $ 704,644 $ 633,786
Costs and Operating Expenses:
−Removed: Cost of revenues
+Added: Cost of revenue 357,722 410,884 355,505
Selling, general, and administrative expenses 181,905 192,525 177,414
1 unchanged sentence
Impairment and restructuring costs (Notes 1 and 8) 2,979 2,528 1,717
+Added: 553,904 616,821 545,188
Operating Income 81,124 87,823 88,598
4 unchanged sentences
Provision for Income Taxes (Note 5) 17,948 16,358 18,482
+Added: Net Income 55,739 52,564 61,046
Net Income Attributable to Noncontrolling Interest ( 543 ) ( 496 ) ( 633 )
1 unchanged sentence
Earnings per Share Attributable to Kadant (Note 13)
+Added: Basic $ 4.81 $ 4.63 $ 5.45
+Added: Diluted $ 4.77 $ 4.54 $ 5.30
Weighted Average Shares (Note 13)
−Removed: Cash Dividends Declared per Common Share
+Added: Basic 11,482 11,235 11,086
+Added: Diluted 11,564 11,457 11,400
The accompanying notes are an integral part of these consolidated financial statements.
1 unchanged sentence
Consolidated Statement of Comprehensive Income
−Removed: (In thousands)
−Removed: December 28, 2019
−Removed: December 29, 2018
−Removed: December 30, 2017
−Removed: Comprehensive Income
+Added: (In thousands) January 2, 2021 December 28, 2019 December 29, 2018
+Added: Net Income $ 55,739 $ 52,564 $ 61,046
Other Comprehensive Items:
1 unchanged sentence
Pension and other post-retirement liability adjustments, net (net of tax of $ 78 , $( 137 ), and $ 412 )
+Added: 180 ( 282 ) 1,248
Effect of pension and other post-retirement plan amendments (net of tax of $ 351 )
+Added: — — ( 1,087 )
Effect of pension and other post-retirement plan curtailments (net of tax of $ 1,183 )
Effect of pension and other post-retirement settlement and curtailment losses (net of tax of $ 0 , $( 653 ), and $ 347 )
−Removed: Deferred (loss) gain on cash flow hedges (net of tax of ($143), ($93), and $39)
+Added: ( 119 ) 3,826 1,078
+Added: Deferred loss on cash flow hedges (net of tax of $( 57 ), $( 143 ), and $( 93 ))
+Added: ( 184 ) ( 447 ) ( 276 )
Other Comprehensive Items 18,272 1,705 ( 12,739 )
5 unchanged sentences
Consolidated Statement of Cash Flows
−Removed: (In thousands)
−Removed: December 28, 2019
−Removed: December 29, 2018
−Removed: December 30, 2017
+Added: (In thousands) January 2, 2021 December 28, 2019 December 29, 2018
Operating Activities
1 unchanged sentence
Net income attributable to noncontrolling interest 543 496 633
+Added: Net income 55,739 52,564 61,046
Adjustments to reconcile net income to net cash provided by operating activities:
4 unchanged sentences
benefit plans settlement and curtailment losses — 5,887 1,425
−Removed: Impairment costs
−Removed: Deferred income tax (benefit) provision
+Added: Impairment charges (Note 1) 1,861 2,336 —
+Added: Deferred income tax provision (benefit) 142 ( 2,491 ) ( 4,240 )
Other items, net ( 677 ) ( 2,097 ) 1,310
−Removed: Contributions to U.S.
Changes in current assets and liabilities, net of effects of acquisitions:
Accounts receivable 7,116 6,553 ( 7,016 )
−Removed: Unbilled revenues
+Added: Unbilled revenue 6,073 2,559 ( 11,350 )
+Added: Inventories ( 89 ) ( 3,076 ) ( 6,577 )
Other current assets 1,221 ( 5,618 ) 3,820
9 unchanged sentences
Proceeds from issuance of long-term obligations 26,000 247,196 50,055
−Removed: Repayment of long-term obligations
+Added: Repayment of short- and long-term obligations ( 99,547 ) ( 126,315 ) ( 110,094 )
Dividends paid ( 10,903 ) ( 10,196 ) ( 9,644 )
2 unchanged sentences
Dividend paid to noncontrolling interest ( 525 ) ( 664 ) ( 465 )
−Removed: Payment of debt issuance costs (Note 6)
−Removed: Net cash provided by (used in) financing activities
+Added: Other financing activities ( 189 ) ( 56 ) ( 934 )
+Added: Net cash (used in) provided by financing activities ( 84,556 ) 112,450 ( 74,155 )
Exchange Rate Effect on Cash, Cash Equivalents, and Restricted Cash 4,584 ( 350 ) ( 3,195 )
−Removed: Increase (Decrease) in Cash, Cash Equivalents, and Restricted Cash
+Added: (Decrease) Increase in Cash, Cash Equivalents, and Restricted Cash ( 1,633 ) 22,156 ( 30,729 )
Cash, Cash Equivalents, and Restricted Cash at Beginning of Year 68,273 46,117 76,846
Cash, Cash Equivalents, and Restricted Cash at End of Year $ 66,640 $ 68,273 $ 46,117
−Removed: See Note 1 - Supplemental Cash Flow Information for further details.
+Added: See Note 1 , Nature of Operations and Summary of Significant Accounting Policies,
+Added: under the heading Supplemental Cash Flow Information for further details.
The accompanying notes are an integral part of these consolidated financial statements.
1 unchanged sentence
Consolidated Statement of Stockholders' Equity
−Removed: Capital in Excess of Par Value
−Removed: Retained Earnings
−Removed: Accumulated Other Comprehensive Items
−Removed: Noncontrolling Interest
−Removed: Total Stockholders' Equity
−Removed: (In thousands, except share and per
−Removed: Treasury Stock
−Removed: share amounts)
+Added: Capital in Excess of Par Value Retained Earnings Accumulated Other Comprehensive Items Noncontrolling Interest Total Stockholders' Equity
+Added: (In thousands, except share and per share amounts) Common Stock Treasury Stock
+Added: Shares Amount Shares Amount
Balance at December 30, 2017 14,624,159 $ 146 $ 103,221 $ 342,893 3,613,838 $ ( 88,554 ) $ ( 26,715 ) $ 1,513 $ 332,504
+Added: Net income — — — 60,413 — — — 633 61,046
+Added: Adoption of ASU No.
+Added: 2014-09 — — — 119 — — — — 119
+Added: Adoption of ASU No.
+Added: 2016-16 — — — ( 75 ) — — — — ( 75 )
Dividends declared – Common Stock, $ 0.88 per share
+Added: — — — ( 9,772 ) — — — — ( 9,772 )
Dividend paid to noncontrolling interest — — — — — — — ( 465 ) ( 465 )
2 unchanged sentences
Balance at December 29, 2018 14,624,159 $ 146 $ 104,731 $ 393,578 3,514,163 $ ( 86,111 ) $ ( 39,376 ) $ 1,603 $ 374,571
+Added: Net income — — — 52,068 — — — 496 52,564
Adoption of ASU No.
2016-02 (Note 1) — — — ( 17 ) — — — — ( 17 )
−Removed: Adoption of ASU No.
Dividends declared – Common Stock, $ 0.92 per share
+Added: — — — ( 10,380 ) — — — — ( 10,380 )
Dividend paid to noncontrolling interest — — — — — — — ( 664 ) ( 664 )
2 unchanged sentences
Balance at December 28, 2019 14,624,159 $ 146 $ 106,698 $ 435,249 3,214,888 $ ( 78,778 ) $ ( 37,620 ) $ 1,384 $ 427,079
−Removed: Adoption of ASU No.
−Removed: 2016-02 (Note 1)
+Added: Net income — — — 55,196 — — — 543 55,739
Dividends declared – Common Stock, $ 0.96 per share
−Removed: Dividend paid to noncontrolling interest
+Added: — — — ( 11,045 ) — — — — ( 11,045 )
Activity under stock plans — — 4,126 — ( 132,969 ) 3,259 — — 7,385
+Added: Dividend paid to noncontrolling interest — — — — — — — ( 525 ) ( 525 )
Other comprehensive items — — — — — — 18,128 144 18,272
−Removed: Balance at December 28, 2019
+Added: Balance at January 2, 2021 14,624,159 $ 146 $ 110,824 $ 479,400 3,081,919 $ ( 75,519 ) $ ( 19,492 ) $ 1,546 $ 496,905
The accompanying notes are an integral part of these consolidated financial statements.
5 unchanged sentences
(together with its subsidiaries, the Company) is a global supplier of high-value, critical components and engineered systems used in process industries worldwide.
−Removed: The Company has a diverse and large customer base, including most of the world's major paper producers and lumber and oriented strand board (OSB) manufacturers, as well as various mining and industrial processing companies that require bulk material handling solutions.
Its products, technologies, and services play an integral role in enhancing process efficiency, optimizing energy utilization, and maximizing productivity in resource-intensive industries.
−Removed: The Company's operations include three reportable operating segments, Papermaking Systems, Wood Processing Systems, and Material Handling Systems, and a separate product line, Fiber-based Products.
−Removed: See Note 12 , Business Segment and Geographical Information, for further details regarding all the Company's segments.
+Added: The ongoing COVID-19 pandemic has negatively affected the global economy, disrupted global supply chains, and resulted in significant travel and transport restrictions, which adversely affected the Company’s bookings and financial results for a substantial part of 2020.
+Added: The impact of the COVID-19 pandemic, including the resulting economic impact, continues to evolve and the Company is closely monitoring its impact on all aspects of its business and will continue to take actions that are in the best interests of its employees, customers, and stakeholders.
Noncontrolling Interest
−Removed: One of the Company's foreign subsidiaries that manufactures fluid-handling products is part of a joint venture agreement with an Italian company in which each holds a 50 percent ownership interest.
−Removed: The agreement provides the Company's subsidiary with the option to purchase the remaining 50 percent interest in the joint venture.
+Added: One of the Company's foreign subsidiaries that manufactures fluid-handling products is part of a joint venture agreement with an Italian company in which each holds a 50 % ownership interest.
+Added: The agreement provides the Company's subsidiary with the option to purchase the remaining 50 % interest in the joint venture.
Principles of Consolidation
1 unchanged sentence
All material intercompany accounts and transactions have been eliminated.
−Removed: The Company has adopted a fiscal year ending on the Saturday nearest to December 31.
−Removed: References to 2019 , 2018 , and 2017 are for the fiscal years ended December 28, 2019 , December 29, 2018 , and December 30, 2017 , respectively.
+Added: Typically, the Company's fiscal quarters and fiscal year consist of 13 and 52 weeks, respectively, ending on the Saturday closest to the end of the corresponding calendar quarter for its fiscal quarters and on the Saturday closest to December 31 for its fourth fiscal quarter and fiscal year.
+Added: As a result of the difference between the fiscal and calendar periods, a 53rd week is added to the Company's fiscal year every five or six years.
+Added: In a 53-week fiscal year, the Company's fourth fiscal quarter contains 14 weeks.
+Added: The Company's fiscal year ended January 2, 2021 (fiscal 2020) contained 53 weeks and its fiscal years ended December 28, 2019 (fiscal 2019) and December 29, 2018 (fiscal 2018) both contained 52 weeks.
+Added: Each quarter of fiscal 2020, 2019 and 2018 contained 13 weeks, except the fourth quarter of 2020, which contained 14 weeks.
Financial Statement Presentation
Effective at the beginning of 2019, the Company adopted Accounting Standards Update (ASU) No.
−Removed: 2014-09, Revenue from Contracts with Customers (Topic 606) (Topic 606), using the modified retrospective method.
−Removed: Results for 2019 and 2018 are presented under Topic 606, while 2017 amounts are not adjusted and are reported under the Company's prior method of reporting revenue recognition in accordance with Accounting Standards Codification (ASC), Revenue Recognition (Topic 605) (Topic 605).
−Removed: The impact on any financial statement line item arising from the application of Topic 606 compared to Topic 605 on the Company's results for the 2018 period was not material.
−Removed: Effective at the beginning of 2019, the Company adopted ASU No.
2016-02, Leases (Topic 842) (Topic 842), using the cumulative-effect adjustment method.
−Removed: Financial statement amounts and disclosures in 2019 are presented under Topic 842, while 2018 and 2017 are not adjusted and are reported under the Company's prior method of accounting for leases in accordance with ASC 840, Leases (Topic 840) (Topic 840), which did not require the recognition of operating leases on the balance sheet and is not comparative.
−Removed: U se of Estimates and Critical Accounting Policies
+Added: Consolidated statement of income amounts and disclosures in 2020 and 2019 are presented under Topic 842, while 2018 is not adjusted and is reported under the Company's prior method of accounting for leases in accordance with Accounting Standards Codification (ASC) 840, Leases (Topic 840) (Topic 840), which is allowed under the transition guidance in Topic 842.
+Added: Effective at the beginning of 2020, the Company realigned its business segments into three new reportable operating segments:
+Added: Flow Control, Industrial Processing, and Material Handling.
+Added: The Company previously reported its financial results by combining its operating entities into three reportable operating segments:
+Added: Papermaking Systems, Wood Processing Systems, and Material Handling Systems, and a separate product line, Fiber-based Products.
+Added: Financial information for 2019 and 2018 has been recast to conform to the new segment presentation.
+Added: See Note 12 , Business Segment and Geographical Information, for further detail regarding the Company's segments.
+Added: Use of Estimates and Critical Accounting Policies
The preparation of financial statements in conformity with U.S.
−Removed: generally accepted accounting principles (GAAP) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period.
−Removed: Although the Company makes every effort to ensure the accuracy of the estimates and assumptions used in the preparation of its condensed consolidated financial statements or in the application of accounting policies, if business conditions were different, or if the Company were to use different estimates and assumptions, it is possible that materially different amounts could be reported in the Company's condensed consolidated financial statements.
−Removed: Critical accounting policies are defined as those that entail significant judgments and estimates, and could potentially result in materially different results under different assumptions and conditions.
−Removed: The Company believes that the most critical accounting policies upon which its financial position depends, and which involve the most complex or subjective decisions or
+Added: generally accepted accounting principles (GAAP) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenue and expenses during the reporting period.
+Added: Although the Company makes every effort to ensure the accuracy of the estimates and assumptions used in the preparation of its condensed consolidated financial statements or in the application of accounting policies, if business
2020 Financial Statements
Notes to Consolidated Financial Statements
−Removed: Nature of Operations and Summary of Significant Accounting Policies (continued)
−Removed: assessments, concern revenue recognition, income taxes, the valuation of goodwill and intangible assets, inventories, and pension obligations.
−Removed: A discussion of the application of these and other accounting policies is included in Notes 1 and 3.
+Added: conditions were different, or if the Company were to use different estimates and assumptions, it is possible that materially different amounts could be reported in the Company's condensed consolidated financial statements.
+Added: Critical accounting policies are defined as those that entail significant judgments and estimates, and could potentially result in materially different results under different assumptions and conditions.
+Added: The Company believes that the most critical accounting policies upon which its financial position depends, and which involve the most complex or subjective decisions or assessments, concern income taxes, revenue recognition, the valuation of goodwill and intangible assets, and inventories.
+Added: A discussion of the application of these and other accounting policies is included within this note.
Revenue Recognition
−Removed: Effective at the beginning of 2018, the Company adopted Topic 606, using a modified retrospective method.
−Removed: Results for 2019 and 2018 are presented under Topic 606, while 2017 amounts are not adjusted and are reported in accordance with Topic 605.
−Removed: The impact on any financial statement line item arising from the application of Topic 606 compared to Topic 605 on the Company's results for the 2018 period was not material.
+Added: The Company recognizes revenue in accordance with ASC, Revenue from Contracts with Customers (Topic 606) .
Most of the Company’s revenue is recognized at a point in time for each performance obligation under the contract when the customer obtains control of the goods or service.
Most of the Company’s parts and consumables products and its capital products with minimal customization are accounted for at a point in time.
−Removed: The Company has made a policy election to not treat the obligation to ship as a separate performance obligation under the contract and, as a result, the associated shipping costs are reflected in cost of revenues when revenue is recognized.
+Added: The Company has made a policy election to not treat the obligation to ship as a separate performance obligation under the contract and, as a result, the associated shipping costs are reflected in cost of revenue when revenue is recognized.
The remaining portion of the Company’s revenue is recognized on an over time basis based on an input method that compares the costs incurred to date to the total expected costs required to satisfy the performance obligation.
Contracts are accounted for on an over time basis when they include products which have no alternative use and an enforceable right to payment over time.
−Removed: Most of the contracts recognized on an over time basis are for large capital projects within the Company’s Stock-Preparation product line and Material Handling Systems segment and, to a lesser extent, its Fluid-Handling and Doctoring, Cleaning, & Filtration product lines.
+Added: Most of the contracts recognized on an over time basis are for large capital projects.
These projects are highly customized for the customer and, as a result, would include a significant cost to rework in the event of cancellation.
The following table presents revenue by revenue recognition method:
−Removed: (In thousands)
−Removed: December 28, 2019
−Removed: December 29, 2018
+Added: (In thousands) January 2, 2021 December 28, 2019
Point in Time $ 557,702 $ 611,528
+Added: Over Time 77,326 93,116
+Added: $ 635,028 $ 704,644
The transaction price includes estimated variable consideration where applicable.
2 unchanged sentences
For contracts with multiple performance obligations, the transaction price is allocated to each performance obligation based on the relative stand-alone selling price.
−Removed: The Company disaggregates its revenue from contracts with customers by product line, product type and geography as this best depicts how its revenue is affected by economic factors.
−Removed: The following table presents the disaggregation of revenues by product type and geography:
−Removed: (In thousands)
−Removed: December 28, 2019
−Removed: December 29, 2018
−Removed: December 30, 2017
−Removed: Revenues by Product Type:
+Added: The Company disaggregates its revenue from contracts with customers by reportable operating segment, product type and geography as this best depicts how its revenue is affected by economic factors.
+Added: The following table presents the disaggregation of revenue by product type and geography:
+Added: (In thousands) January 2, 2021 December 28, 2019 December 29, 2018
+Added: Revenue by Product Type:
Parts and Consumables $ 417,545 $ 440,699 $ 374,433
−Removed: Revenues by Geography:
+Added: Capital 217,483 263,945 259,353
+Added: $ 635,028 $ 704,644 $ 633,786
+Added: Revenue by Geography (based on customer location):
North America $ 360,061 $ 386,952 $ 305,618
+Added: Europe 161,527 180,888 174,681
+Added: Asia 72,268 84,705 109,688
Rest of World 41,172 52,099 43,799
−Removed: See Note 12 , Business Segment and Geographical Information, for information on the disaggregation of revenues by segment and product line.
+Added: $ 635,028 $ 704,644 $ 633,786
+Added: See Note 12 , Business Segment and Geographical Information, for information on the disaggregation of revenue by reportable operating segment.
2020 Financial Statements
Notes to Consolidated Financial Statements
−Removed: Nature of Operations and Summary of Significant Accounting Policies (continued)
−Removed: The following tables presents contract balances from contracts with customers:
−Removed: (In thousands)
−Removed: December 28, 2019
−Removed: December 29, 2018
+Added: The following table presents contract balances from contracts with customers:
+Added: (In thousands) January 2, 2021 December 28, 2019
Accounts Receivable $ 91,540 $ 95,740
1 unchanged sentence
Contract Liabilities $ 39,269 $ 37,216
−Removed: Contract assets represent unbilled revenues associated with revenue recognized on contracts accounted for on an over time basis, which will be billed in future periods based on the contract terms.
+Added: Contract assets represent unbilled revenue associated with revenue recognized on contracts accounted for on an over time basis, which will be billed in future periods based on the contract terms.
Contract liabilities consist of customer deposits, advanced billings, and deferred revenue.
2 unchanged sentences
The majority of the contract liabilities relate to advance payments on contracts accounted for at a point in time.
−Removed: These advance payments will be recognized as revenue when the Company's performance obligations have been satisfied, which typically occurs within nine to twelve months after the product has shipped and control of the asset has transferred to the customer.
+Added: These advance payments will be recognized as revenue when the Company's performance obligations have been satisfied, which typically occurs when the product has shipped and control of the asset has transferred to the customer.
The Company recognized revenue of $ 30,426,000 in 2020 and $ 29,220,000 in 2019 that was included in the contract liabilities balance at the beginning of 2020 and 2019.
The majority of the Company's contracts for capital equipment have an original expected duration of one year or less.
−Removed: For contracts with an original expected duration of over one year, the aggregate amount of the transaction price allocated to the remaining partially unsatisfied performance obligations as of year-end 2019 was $ 13,176,000 .
−Removed: The Company will recognize revenue for these performance obligations as they are satisfied, approximately 90 % of which is expected to occur within the next twelve months .
−Removed: Customers in China will often settle their accounts receivable with a banker's acceptance draft, in which case cash settlement will be delayed until the draft matures or is settled prior to maturity.
+Added: Certain capital contracts require long lead times and could take up to 24 months to complete.
+Added: For contracts with an original expected duration of over one year, the aggregate amount of the transaction price allocated to the remaining unsatisfied or partially unsatisfied performance obligations as of year-end 2020 was $ 14,916,000 .
+Added: The Company will recognize revenue for these performance obligations as they are satisfied, approximately 50 % of which is expected to occur within the next twelve months and the remaining 50 % within twenty-four months .
+Added: Customers in China will often settle their accounts receivable with banker's acceptance drafts, in which case cash settlement will be delayed until the drafts mature or are settled prior to maturity.
For customers outside of China, final payment for the majority of the Company's products is received in the quarter following the product shipment.
Certain of the Company's contracts include a longer period before final payment is due, which is typically within one year of final shipment or transfer of control to the customer.
−Removed: The Company includes in revenue amounts invoiced for shipping and handling with the corresponding costs reflected in cost of revenues.
+Added: The Company includes in revenue amounts invoiced for shipping and handling with the corresponding costs reflected in cost of revenue.
Provisions for discounts, warranties, returns and other adjustments are provided for in the period in which the related sale was recorded.
Sales taxes, value-added taxes, and certain excise taxes collected from customers and remitted to governmental authorities are accounted for on a net basis and therefore are excluded from revenue.
−Removed: In 2017, the Company recognized revenue under ASC 605, "Revenue Recognition," (ASC 605), when the following criteria had been met:
−Removed: persuasive evidence of an arrangement existed, delivery had occurred or service had been rendered, the sales price was fixed or determinable, and collectability was reasonably assured.
−Removed: When the terms of the sale included customer acceptance provisions, and compliance with those provisions could not be demonstrated until customer acceptance, revenue was recognized upon such acceptance.
−Removed: Most of the Company's revenue in 2017 was recognized in accordance with these policies.
−Removed: However, when a sale arrangement involved multiple elements, such as equipment and installation, the Company determined whether the deliverables in the arrangement represented separate units of accounting.
−Removed: Revenue was allocated to each unit of accounting or element based on relative selling prices and was recognized as each element was delivered or completed.
−Removed: Additionally, revenues and profits on certain long-term contracts in 2017 were recognized using the percentage-of-completion method or the completed-contract method of accounting pursuant to ASC 605.
−Removed: Revenues recorded under the percentage-of-completion method were $ 27,676,000 in 2017 .
−Removed: For long-term contracts that did not meet the criteria under ASC 605 to be accounted for under the percentage-of-completion method in 2017, the Company recognized revenue using the completed-contract method.
−Removed: Accounts Receivable
−Removed: Accounts receivable are recorded at the invoiced amount and do not bear interest.
−Removed: The Company exercises judgment in determining its allowance for doubtful accounts, which is based on its historical collection experience, current trends, credit policies, specific customer collection issues, and accounts receivable aging categories.
−Removed: In determining this allowance, the Company looks at historical write-offs of its receivables.
−Removed: The Company also looks at current trends in the credit quality of its customer base as well as changes in its credit policies.
+Added: Accounts Receivable and Allowance for Credit Losses
+Added: Accounts receivable arise from sales on credit to customers, are recorded at the invoiced amount, and do not bear interest.
+Added: The Company establishes an allowance for credit losses to reduce accounts receivable to the net amount expected to be collected.
+Added: The Company exercises judgment in determining its allowance for credit losses, which is based on its historical collection and write-off experience, adjusted for current macroeconomic trends and conditions, credit policies, specific customer collection issues, and accounts receivable aging.
The Company performs ongoing credit evaluations of its customers and adjusts credit limits based upon payment history and each customer's current creditworthiness.
2 unchanged sentences
In some instances, the Company utilizes letters of credit to mitigate its credit exposure.
−Removed: 2019 Financial Statements
−Removed: Notes to Consolidated Financial Statements
−Removed: Nature of Operations and Summary of Significant Accounting Policies (continued)
−Removed: The changes in the allowance for doubtful accounts are as follows:
−Removed: (In thousands)
−Removed: December 28, 2019
−Removed: December 29, 2018
−Removed: December 30, 2017
+Added: The changes in the allowance for credit losses are as follows:
+Added: (In thousands) January 2, 2021 December 28, 2019 December 29, 2018
Balance at Beginning of Year $ 2,698 $ 2,897 $ 2,879
3 unchanged sentences
Balance at End of Year $ 2,977 $ 2,698 $ 2,897
+Added: 2020 Financial Statements
+Added: Notes to Consolidated Financial Statements
+Added: Banker's Acceptance Drafts Included in Accounts Receivable
The Company's Chinese subsidiaries may receive banker's acceptance drafts from customers as payment for their trade accounts receivable.
8 unchanged sentences
Should these factors or actual results differ from the Company's estimates, revisions to the estimated warranty liability would be required.
−Removed: The changes in the carrying amount of accrued warranty costs included in other current liabilities in the accompanying consolidated balance sheet are as follows:
−Removed: (In thousands)
−Removed: December 28, 2019
−Removed: December 29, 2018
+Added: The Company's liability for warranties is included in other current liabilities in the accompanying consolidated balance sheet.
+Added: The changes in the carrying amount of product warranty obligations are as follows:
+Added: (In thousands) January 2, 2021 December 28, 2019
Balance at Beginning of Year $ 6,467 $ 5,726
Provision charged to expense 5,555 4,727
+Added: Usage ( 5,439 ) ( 4,255 )
+Added: Acquisition — 303
Currency translation 481 ( 34 )
Balance at End of Year $ 7,064 $ 6,467
+Added: In accordance with Topic 842, the Company determines whether an arrangement is, or contains, a lease at inception.
+Added: Operating leases that have commenced are included in other assets, other current liabilities and other long-term liabilities in the accompanying consolidated balance sheet.
+Added: Classification of operating lease liabilities as either current or noncurrent is based on the expected timing of payments due under the Company’s lease obligations.
+Added: Right-of-use (ROU) assets represent the Company’s right to use an underlying asset for the lease term and lease liabilities represent the Company’s obligation to make lease payments arising from the lease.
+Added: Operating lease ROU assets and liabilities with original contract terms greater than 12 months are recognized based on the present value of the future minimum lease payments over the lease term at the commencement date.
+Added: Operating leases with an original term of 12 months or less are not recorded in the accompanying consolidated balance sheet.
+Added: In determining the present value of future lease payments, the Company utilizes either the rate implicit in the lease if that rate is readily determinable or its incremental secured borrowing rate commensurate with the term of the underlying lease.
+Added: Lease terms may include the effect of options to extend or terminate the lease when it is reasonably certain that the Company will exercise that option.
+Added: The Company recognizes operating lease expense for lease payments on a straight-line basis over the lease term.
+Added: Variable lease costs are not included in fixed lease payments and, as a result, are excluded from the measurement of the ROU assets and lease liabilities.
+Added: The Company expenses all variable lease costs as incurred, which were not material in 2020 and 2019.
+Added: As a lessee, the Company accounts for the lease and non-lease components of its real estate and equipment leases as a single lease component.
+Added: For vehicle leases, the Company does not combine lease and non-lease components.
+Added: See Note 9 , Leases, for additional information about the Company's lease obligations.
+Added: 2020 Financial Statements
+Added: Notes to Consolidated Financial Statements
In accordance with ASC 740, Income Taxes (ASC 740), the Company recognizes deferred income taxes based on the expected future tax consequences of differences between the financial statement basis and the tax basis of assets and liabilities, calculated using enacted tax rates in effect for the year in which these differences are expected to reverse.
3 unchanged sentences
The Company recognizes accrued interest and penalties related to unrecognized tax benefits in the provision for income taxes.
−Removed: At December 28, 2019 , the Company believes that it has appropriately accounted for any liability for unrecognized tax benefits.
−Removed: To the extent the Company prevails in matters for which a liability for an unrecognized tax benefit is established, the statute of
−Removed: 2019 Financial Statements
−Removed: Notes to Consolidated Financial Statements
−Removed: Nature of Operations and Summary of Significant Accounting Policies (continued)
−Removed: limitations expires for a tax jurisdiction year, or the Company is required to pay amounts in excess of the liability, its effective tax rate in a given financial statement period may be affected.
+Added: At January 2, 2021, the Company believes that it has appropriately accounted for any liability for unrecognized tax benefits.
+Added: To the extent the Company prevails in matters for which a liability for an unrecognized tax benefit is established, the statute of limitations expires for a tax jurisdiction year, or the Company is required to pay amounts in excess of the liability, its effective tax rate in a given financial statement period may be affected.
Earnings per Share
1 unchanged sentence
Diluted EPS is computed using the treasury stock method assuming the effect of all potentially dilutive securities, including stock options, restricted stock units (RSUs) and employee stock purchase plan shares.
−Removed: Cash and Cash Equivalents
−Removed: At year-end 2019 and year-end 2018 , the Company's cash equivalents included investments in money market funds and marketable securities, which had maturities of three months or less at the date of purchase.
+Added: Cash, Cash Equivalents, and Restricted Cash
+Added: At year-end 2020 and year-end 2019, cash equivalents included investments in money market funds and marketable securities, which had maturities of three months or less at the date of purchase.
The carrying amounts of cash equivalents approximate their fair values due to the short-term nature of these instruments.
−Removed: Restricted Cash
−Removed: The Company's restricted cash serves as collateral for bank guarantees primarily associated with providing assurance to customers that the Company will fulfill certain customer obligations entered into in the normal course of business.
+Added: Restricted cash serves as collateral for certain banker's acceptance drafts issued to vendors and for bank guarantees associated with providing assurance to customers that the Company will fulfill certain customer obligations entered into in the normal course of business.
The majority of the bank guarantees will expire over the next twelve months.
−Removed: The following table provides a reconciliation of cash, cash equivalents, and restricted cash reported within the Company's consolidated balance sheet that are shown in aggregate in the consolidated statement of cash flows:
−Removed: (In thousands)
−Removed: December 28, 2019
−Removed: December 29, 2018
−Removed: December 30, 2017
+Added: The following table provides a reconciliation of cash, cash equivalents, and restricted cash reported within the accompanying consolidated balance sheet that are shown in aggregate in the consolidated statement of cash flows:
+Added: (In thousands) January 2, 2021 December 28, 2019 December 29, 2018
Cash and cash equivalents $ 65,682 $ 66,786 $ 45,830
2 unchanged sentences
Supplemental Cash Flow Information
−Removed: (In thousands)
−Removed: December 28, 2019
−Removed: December 29, 2018
−Removed: December 30, 2017
+Added: (In thousands) January 2, 2021 December 28, 2019 December 29, 2018
Cash Paid for Interest $ 6,899 $ 12,344 $ 7,550
1 unchanged sentence
Non-Cash Investing Activities:
−Removed: Fair value of assets of acquired
+Added: Fair value of assets acquired $ 9,295 $ 207,223 $ —
Cash paid for acquired businesses ( 7,565 ) ( 179,693 ) —
Liabilities Assumed of Acquired Businesses $ 1,730 $ 27,530 $ —
+Added: 2020 Financial Statements
+Added: Notes to Consolidated Financial Statements
+Added: (In thousands) January 2, 2021 December 28, 2019 December 29, 2018
Non-cash additions to property, plant, and equipment $ 1,060 $ 626 $ 917
2 unchanged sentences
Dividends declared but unpaid $ 2,770 $ 2,628 $ 2,444
−Removed: 2019 Financial Statements
−Removed: Notes to Consolidated Financial Statements
−Removed: Nature of Operations and Summary of Significant Accounting Policies (continued)
Inventories are stated at the lower of cost (on a first-in, first-out;
1 unchanged sentence
The Company regularly reviews its quantities of inventories on hand and compares these amounts to the historical and forecasted usage of and demand for each particular product or product line.
−Removed: The Company records a charge to cost of revenues for excess and obsolete inventory to reduce the carrying value of inventories to net realizable value.
+Added: The Company records a charge to cost of revenue for excess and obsolete inventory to reduce the carrying value of inventories to net realizable value.
The components of inventories are as follows:
−Removed: (In thousands)
−Removed: December 28, 2019
−Removed: December 29, 2018
+Added: (In thousands) January 2, 2021 December 28, 2019
Raw Materials $ 46,413 $ 49,332
1 unchanged sentence
Finished Goods (includes $ 427 and $ 559 at customer locations)
+Added: 42,709 38,039
+Added: $ 106,814 $ 102,715
Property, Plant, and Equipment
7 unchanged sentences
Property, plant, and equipment consist of the following:
−Removed: (In thousands)
−Removed: December 28, 2019
−Removed: December 29, 2018
+Added: (In thousands) January 2, 2021 December 28, 2019
+Added: Land $ 7,676 $ 7,347
+Added: Buildings 60,702 58,509
Machinery, Equipment, and Leasehold Improvements 120,804 112,655
Construction in Progress 3,292 2,830
+Added: 192,474 181,341
Accumulated Depreciation and Amortization 107,832 95,309
+Added: $ 84,642 $ 86,032
Depreciation and amortization expense was $ 12,209,000 in 2020, $ 12,236,000 in 2019, and $ 9,386,000 in 2018.
2 unchanged sentences
Notes to Consolidated Financial Statements
−Removed: Nature of Operations and Summary of Significant Accounting Policies (continued)
Intangible Assets, Net
Acquired intangible assets by major asset class are as follows:
−Removed: (In thousands)
−Removed: December 28, 2019
+Added: (In thousands) Gross Accumulated
+Added: Amortization Currency
+Added: Translation Net
+Added: January 2, 2021
Definite-Lived
1 unchanged sentence
Product technology 56,111 ( 31,655 ) ( 1,005 ) 23,451
+Added: Tradenames 6,027 ( 2,946 ) ( 282 ) 2,799
+Added: Other 18,248 ( 14,369 ) ( 515 ) 3,364
+Added: 254,114 ( 114,458 ) ( 3,118 ) 136,538
Indefinite-Lived
+Added: Tradenames 24,100 — 327 24,427
Acquired Intangible Assets $ 278,214 $ ( 114,458 ) $ ( 2,791 ) $ 160,965
3 unchanged sentences
Product technology 56,011 ( 27,819 ) ( 1,709 ) 26,483
+Added: Tradenames 6,527 ( 2,421 ) ( 427 ) 3,679
+Added: Other 17,964 ( 13,295 ) ( 593 ) 4,076
+Added: 252,085 ( 95,333 ) ( 6,870 ) 149,882
Indefinite-Lived
+Added: Tradenames 24,100 — ( 86 ) 24,014
Acquired Intangible Assets $ 276,185 $ ( 95,333 ) $ ( 6,956 ) $ 173,896
−Removed: In the fourth quarter of 2019, the Company recorded impairment charges related to its definite- and indefinite-lived intangible assets totaling $ 2,336,000 and reclassified $ 1,300,000 of an indefinite-lived tradename to definite-lived.
−Removed: See Impairment of Long-Lived Assets within this note for further details.
+Added: Gross intangible assets include $ 3,907,000 for acquired intangible assets from acquisitions that occurred in 2020.
+Added: See Note 2 , Acquisitions, for further details.
+Added: In connection with its impairment analysis, the Company reduced its definite-lived intangible assets by $ 1,861,000 in 2020 and definite and indefinite-lived intangible assets by $ 2,336,000 in 2019.
+Added: Additionally, the Company reclassified $ 1,300,000 of an indefinite-lived tradename to definite-lived in 2019.
+Added: See Impairment of Long-Lived Assets under the heading Intangible Assets within this note for further details.
Intangible assets are initially recorded at fair value at the date of acquisition.
+Added: Subsequent impairment charges are reflected as a reduction in the gross balance, as applicable.
Definite-lived intangible assets are stated net of accumulated amortization and currency translation in the accompanying consolidated balance sheet.
12 unchanged sentences
Notes to Consolidated Financial Statements
−Removed: Nature of Operations and Summary of Significant Accounting Policies (continued)
The changes in the carrying amount of goodwill by segment are as follows:
−Removed: (In thousands)
−Removed: Papermaking Systems
−Removed: Wood Processing Systems
−Removed: Material Handling Systems
−Removed: Balance as of December 30, 2017
+Added: (In thousands) Flow Control Industrial Processing Material Handling Total
+Added: Balance as of December 29, 2018 (a)
Gross balance $ 98,261 $ 206,664 $ 38,758 $ 343,683
Accumulated impairment losses — ( 85,509 ) — ( 85,509 )
+Added: Net balance 98,261 121,155 38,758 258,174
2019 Adjustments
2 unchanged sentences
Total 2019 adjustments ( 581 ) 872 77,567 77,858
−Removed: Balance at December 29, 2018
+Added: Balance at December 28, 2019 (a)
Gross balance 97,680 207,536 116,325 421,541
Accumulated impairment losses — ( 85,509 ) — ( 85,509 )
+Added: Net balance 97,680 122,027 116,325 336,032
2020 Adjustments
2 unchanged sentences
Total 2020 adjustments 3,757 8,345 3,619 15,721
−Removed: Balance at December 28, 2019
+Added: Balance at January 2, 2021
Gross balance 101,437 215,881 119,944 437,262
Accumulated impairment losses — ( 85,509 ) — ( 85,509 )
+Added: Net balance $ 101,437 $ 130,372 $ 119,944 $ 351,753
+Added: (a) Goodwill amounts for 2019 and 2018 have been recast to conform to the current period presentation.
+Added: See Note 12 , Business Segment and Geographical Information, for further details regarding the Company's change in reportable operating segments.
Impairment of Long-Lived Assets
−Removed: The Company evaluates the recoverability of goodwill and indefinite-lived intangible assets as of the end of each fiscal year, or more frequently if events or changes in circumstances, such as a significant decline in sales, earnings, or cash flows, or material adverse changes in the business climate, indicate that the carrying value of an asset might be impaired.
−Removed: At year-end 2019, the Company performed a qualitative impairment analysis (Step 0) of its goodwill and determined that the asset was not impaired.
+Added: The Company evaluates the recoverability of goodwill and indefinite-lived intangible assets as of the end of each fiscal year, or more frequently if events or changes in circumstances indicate that it is more likely than not that the carrying value of an asset might be impaired.
+Added: Potential impairment indicators include a significant decline in sales, earnings, or cash flows, material adverse changes in the business climate, and a significant decline in the market capitalization due to a sustained decrease in the Company's stock price.
+Added: The Company assesses its long-lived assets other than goodwill and indefinite-lived intangible assets (definite-lived intangible assets) for impairment whenever facts and circumstances indicate that the carrying amounts may not be fully recoverable.
+Added: To analyze recoverability, the Company projects undiscounted net future cash flows over the remaining lives of such assets or asset groups.
+Added: If these projected cash flows were to be less than the carrying amounts, an impairment loss would be recognized, resulting in a write-down of the assets with a corresponding charge to earnings.
+Added: The impairment loss would be measured based upon the difference between the carrying amounts of the assets and their fair values calculated using projected discounted cash flows.
+Added: In March 2020, the Company experienced a significant decrease in market capitalization due to a decline in the Company’s stock price.
+Added: During that time, the overall U.S.
+Added: stock market also declined significantly amid market volatility driven by the uncertainty surrounding the COVID-19 pandemic.
+Added: Based on these occurrences, the Company concluded that a triggering event had occurred related to the indefinite-lived assets within its material handling reporting unit.
+Added: As a result, for each reporting period in 2020, the Company prepared a quantitative impairment analysis (Step 1) for its material handling reporting unit, which indicated that its fair value exceeded its carrying value and the indefinite-lived assets were not impaired.
+Added: 2020 Financial Statements
+Added: Notes to Consolidated Financial Statements
+Added: At year-end 2020, in connection with its annual impairment analysis, the Company performed a qualitative goodwill impairment assessment (Step 0) for all its reporting units, except the material handling reporting unit, which indicated that the fair value of each reporting unit exceeded its carrying value, and determined that the assets were no t impaired.
The impairment analysis included an assessment of certain qualitative factors including, but not limited to, the results of prior fair value calculations, the movement of the Company's share price and market capitalization, the reporting unit and overall financial performance, and macroeconomic and industry conditions.
1 unchanged sentence
Although the Company believes the factors considered in the impairment analysis are reasonable, significant changes in any one of the assumptions used could have produced a different result.
−Removed: At year-end 2018, the Company performed a quantitative goodwill impairment assessment (Step 1) for all of its reporting units, which indicated that the fair value of each reporting unit exceeded its carrying value, and determined that the asset was not impaired.
+Added: For its material handling reporting unit, the Company performed a quantitative goodwill impairment assessment (Step 1), which indicated that its fair value exceeded its carrying value for this reporting unit and determined that the asset was not impaired.
+Added: At year-end 2019, in connection with its annual impairment analysis, the Company performed a qualitative goodwill impairment assessment (Step 0) for all its reporting units and determined that the assets were no t impaired.
Goodwill by reporting unit is as follows:
−Removed: (In thousands)
−Removed: December 28, 2019
−Removed: December 29, 2018
−Removed: Stock-Preparation
+Added: (In thousands) January 2, 2021 December 28, 2019
+Added: Stock-Preparation (a) $ 19,685 $ 19,399
Fluid-Handling 65,755 63,382
Doctoring, Cleaning, & Filtration 35,682 34,297
−Removed: Wood Processing Systems
−Removed: Material Handling Systems
−Removed: 2019 Financial Statements
−Removed: Notes to Consolidated Financial Statements
−Removed: Nature of Operations and Summary of Significant Accounting Policies (continued)
+Added: Wood Processing 110,687 102,629
+Added: Material Handling (a) 119,944 116,325
+Added: $ 351,753 $ 336,032
+Added: (a) Goodwill balances as of December 28, 2019 have been recast to conform to the current period presentation.
+Added: See Note 12 , Business Segment and Geographical Information, for further details regarding the Company's change in reportable operating segments.
Intangible Assets
−Removed: At year-end 2019, the Company performed a qualitative impairment analysis on its indefinite-lived intangible assets and determined that the assets were not impaired, except for the indefinite-lived tradename associated with the Company's timber-harvesting product line discussed below.
−Removed: At year-end 2018, the Company performed a quantitative impairment analysis on its indefinite-lived intangible assets and determined that the assets were not impaired.
−Removed: The Company assesses its long-lived assets, other than goodwill and indefinite-lived intangible assets, for impairment whenever facts and circumstances indicate that the carrying amounts may not be fully recoverable.
−Removed: To analyze recoverability, the Company projects undiscounted net future cash flows over the remaining lives of such assets or asset groups.
−Removed: If these projected cash flows were to be less than the carrying amounts, an impairment loss would be recognized, resulting in a write-down of the assets with a corresponding charge to earnings.
−Removed: The impairment loss would be measured based upon the difference between the carrying amounts of the assets and their fair values calculated using projected cash flows.
−Removed: No indicators of impairment were identified in 2019 or 2018 , except for the definite-lived product technology associated with the Company's timber-harvesting product line discussed below.
−Removed: During 2019, the Company experienced a significant decrease in revenues and operating results in its timber-harvesting product line included in its Wood Processing Systems segment, which it acquired in 2017 as part of the Company's acquisition of the forest products business of NII FPG Company (NII FPG) (see Note 2 , Acquisitions).
+Added: At year-end 2020 and 2019, the Company performed a qualitative impairment analysis on its indefinite-lived intangible assets and determined that the assets were not impaired, except in 2019 related to the indefinite-lived tradename associated with its timber-harvesting product line discussed below.
+Added: No triggering events or indicators of impairment were identified in 2020 or 2019 related to the Company's definite-lived intangible assets, except for the definite-lived intangible assets associated with its timber-harvesting product line discussed below.
+Added: During 2019, the Company experienced a significant decrease in revenue and operating results in its timber-harvesting product line included in its Industrial Processing segment, which it acquired in 2017 as part of the acquisition of the forest products business of NII FPG Company (NII FPG).
The decrease was primarily driven by the deterioration of several market conditions in the Pacific Northwest, including a widespread timber shortage in this region and high stumpage fees.
These factors, along with a shift in demand for timber to the Southeastern part of the United States, resulted in sawmill closures in western Canada where the Company's steep terrain equipment is generally used.
−Removed: Given the decline in demand for this business' products, which the Company expects to continue into 2020, the Company performed a quantitative analysis of the recoverability of the related intangible assets.
+Added: Given the decline in demand for this business' products, which was expected to continue into 2020, the Company performed a quantitative analysis of the recoverability of the related intangible assets.
As a result of this analysis in which the income approach discounted cash flow methodology was used, the Company determined that the fair values of certain of the timber-harvesting product line's intangible assets were less than their carrying values, and therefore, recorded impairment charges in the fourth quarter of 2019 totaling $ 2,336,000 .
These impairment charges, which are included in impairment and restructuring costs in the accompanying consolidated statement of income, consist of $ 1,636,000 related to the definite-lived product technology of the timber-harvesting product line and $ 700,000 related to its indefinite-lived tradename.
−Removed: The Company reclassified the remaining carrying value of $ 1,300,000 related to the indefinite-lived tradename associated with the timber-harvesting product line to definite-lived tradenames, as the indefinite use of the tradename is no longer certain.
+Added: The Company then reclassified the remaining carrying value of $ 1,300,000 related to the indefinite-lived tradename associated with the timber-harvesting product line to definite-lived tradenames, as the indefinite use of the tradename became uncertain.
+Added: In the fourth quarter of 2020, due to the continued decline in demand for the timber-harvesting business' products, which is expected to continue into 2021, the Company performed a quantitative analysis of the recoverability of its intangible assets.
+Added: As a result of this analysis, the Company determined that the fair values of the timber-harvesting product line's definite-lived intangible assets related to customer relationships, product technology and tradename were less than their carrying values, and therefore recorded additional impairment charges in the fourth quarter of 2020 totaling $ 1,861,000 .
+Added: These impairment
+Added: 2020 Financial Statements
+Added: Notes to Consolidated Financial Statements
+Added: charges are included in impairment and restructuring costs in the accompanying consolidated statement of income.
+Added: The remaining intangible asset for the timber-harvesting product line is $ 481,000 .
Business Combinations
The Company's acquisitions have been accounted for using the purchase method of accounting under ASC 805, Business Combinations (ASC 805), and the results of the acquired businesses have been included in its consolidated financial statements from their respective dates of acquisition.
−Removed: The Company accounts for all transactions and events in which it obtains control over a business under ASC 805 to recognize the fair value of all assets and liabilities acquired and in establishing the acquisition date for all assets acquired and liabilities assumed.
+Added: The Company accounts for all transactions and events in which it obtains control over a business under ASC 805 by establishing the acquisition date and recognizing the fair value of all assets acquired and liabilities assumed.
The Company’s acquisitions have historically been made at prices above the fair value of identifiable net assets, resulting in goodwill, due to synergies expected to be realized by combining the businesses.
5 unchanged sentences
Foreign Currency Translation and Transactions
−Removed: All assets and liabilities of the Company's foreign subsidiaries are translated at fiscal year-end exchange rates, and revenues and expenses are translated at average exchange rates for each quarter in accordance with ASC 830, Foreign Currency Matters .
+Added: All assets and liabilities of the Company's foreign subsidiaries are translated at fiscal year-end exchange rates, and revenue and expenses are translated at average exchange rates for each quarter in accordance with ASC 830, Foreign Currency Matters .
Resulting translation adjustments are reflected in the "accumulated other comprehensive items" (AOCI) component of stockholders' equity (see Note 14 , Accumulated Other Comprehensive Items).
Foreign currency transaction gains and losses are included in the accompanying consolidated statement of income and are not material in the three years presented.
−Removed: 2019 Financial Statements
−Removed: Notes to Consolidated Financial Statements
−Removed: Nature of Operations and Summary of Significant Accounting Policies (continued)
Stock-Based Compensation
1 unchanged sentence
The fair value of RSUs is based on the grant date price of the Company's common stock, reduced by the present value of estimated dividends foregone during the requisite service period.
−Removed: The fair value of stock options is based on the Black-Scholes option-pricing model.
−Removed: For stock options and time-based RSUs, compensation expense is recognized ratably over the requisite service period for the entire award, and net of actual forfeitures recorded when they occur.
+Added: Compensation expense for time-based RSUs is recognized ratably over the requisite service period for the entire award, and net of actual forfeitures recorded when they occur.
For performance-based RSUs, compensation expense is recognized ratably over the requisite service period for each separately-vesting portion of the award based on the grant date fair value, net of actual forfeitures recorded when they occur, and remeasured each reporting period until the total number of RSUs to be issued is known.
10 unchanged sentences
These deferred gains and losses are recognized in the statement of income in the period in which the underlying anticipated transaction occurs.
−Removed: For derivatives designated as fair value hedges, the unrealized gains and losses resulting from the impact of currency exchange rate movements are recognized in earnings in the period in which the exchange rates change and offset the currency gains and losses on the underlying exposures being hedged.
+Added: For derivatives designated as fair value hedges, the unrealized gains and losses resulting from the impact of currency exchange rate movements are recognized in earnings in the period in which the exchange rates change and offset the
+Added: 2020 Financial Statements
+Added: Notes to Consolidated Financial Statements
+Added: currency gains and losses on the underlying exposures being hedged.
The Company performs an evaluation of the effectiveness of the hedge both at inception and on an ongoing basis.
2 unchanged sentences
Recently Adopted Accounting Pronouncements
−Removed: Leases (Topic 842) .
−Removed: In February 2016, the Financial Accounting Standards Board (FASB) issued ASU No.
−Removed: 2016-02, which requires a lessee to recognize a right-of-use (ROU) asset and a corresponding lease liability for operating leases, initially measured at the present value of the future lease payments, on its balance sheet.
−Removed: This ASU also requires a lessee to recognize a single lease cost, calculated so that the cost of the lease is allocated over the lease term, generally on a straight-line basis.
−Removed: The Company adopted this ASU as of the beginning of 2019 using the cumulative-effect adjustment method.
−Removed: As a result, prior period amounts were not restated and continue to be accounted for under Topic 840, Leases , which did not require the recognition of operating leases on the balance sheet and is not comparative.
−Removed: As permitted under ASC 842, the Company elected the package of practical expedients for expired or existing contracts, which does not require the reassessment of prior conclusions about lease identification, lease classification and initial direct costs.
−Removed: The Company also elected practical expedients relating to its ongoing accounting, including a short-term lease recognition exemption allowing lessees not to recognize ROU assets and liabilities with terms of 12 months or less and an election not to separate lease and non-lease components for all leases except vehicle leases.
−Removed: The adoption of this standard as of the beginning of 2019 resulted in increases of 2.3 % to total assets and 4.8 % to total liabilities and an immaterial decrease to retained earnings.
−Removed: In addition, the adoption of this ASU did not have a material impact on the Company’s condensed consolidated statements of income or cash flows.
−Removed: See Note 9 , Leases, for the required lease accounting disclosures.
−Removed: Derivatives and Hedging (Topic 815), Targeted Improvements in Accounting for Hedging Activity.
−Removed: In August 2017, the FASB issued ASU No.
−Removed: 2017-12, which revises hedge accounting to better portray the economic results of an entity’s risk management activities, simplifies hedge accounting guidance, and improves disclosures of hedge accounting arrangements.
−Removed: 2019 Financial Statements
−Removed: Notes to Consolidated Financial Statements
−Removed: Nature of Operations and Summary of Significant Accounting Policies (continued)
−Removed: Company adopted this ASU on a prospective basis at the beginning of 2019.
−Removed: The adoption of this ASU did not have an impact on the Company's condensed consolidated financial statements.
−Removed: Compensation-Retirement Benefits - Defined Benefit Plans - General (Subtopic 715-20), Disclosure Framework - Changes to the Disclosure Requirements for Defined Benefit Plans.
−Removed: In August 2018, the FASB issued ASU 2018-14, which removes, adds and clarifies several disclosure requirements for employers that sponsor defined benefit pension or other postretirement plans.
−Removed: This new guidance is effective on a retrospective basis for the Company in fiscal 2020.
−Removed: Early adoption is permitted.
−Removed: The Company elected to early adopt this ASU in the fourth quarter of 2019, which did not have a material effect on its consolidated financial statements.
−Removed: See Note 3 , Employee Benefit Plans, for revised disclosures.
−Removed: Recent Accounting Pronouncements Not Yet Adopted
Financial Instruments - Credit Losses (Topic 326), Measurement of Credit Losses on Financial Instruments.
−Removed: In June 2016, the FASB issued ASU No.
−Removed: 2016-13, which changes the way entities recognize impairment of financial assets measured at amortized costs, such as accounts receivable, by requiring immediate recognition of estimated credit losses expected to occur over their remaining lives.
−Removed: This new guidance is effective for the Company in fiscal 2020.
−Removed: The Company does not expect the adoption of this ASU will have a material impact on its consolidated financial statements.
+Added: In June 2016, the Financial Accounting Standards Board (FASB) issued ASU No.
+Added: 2016-13, which changes the way entities recognize impairment of financial assets, such as accounts receivable, by requiring immediate recognition of estimated credit losses expected to occur over their remaining lives.
+Added: During 2018 and 2019, the FASB issued additional guidance and clarification.
+Added: The Company adopted this ASU using a modified retrospective method at the beginning of fiscal 2020 and its adoption did not have a material impact on the consolidated financial statements.
+Added: See Accounts Receivable and Allowance for Credit Losses in this note for information on the Company's allowance for credit losses.
+Added: Recent Accounting Pronouncements Not Yet Adopted
+Added: Reference Rate Reform (Topic 848), Facilitation of the Effects of Reference Rate Reform on Financial Reporting.
+Added: In March 2020, the FASB issued ASU No.
+Added: 2020-04, which provides optional expedients and exceptions for applying GAAP to contracts, hedging relationships, and other transactions affected by the discontinuation of reference rates, such as the London Interbank Offered Rate (LIBOR), if certain criteria are met.
+Added: Generally, contract modifications related to reference rate reform may be considered an event that does not require remeasurement or reassessment of a previous accounting determination at the modification date.
+Added: The guidance in this ASU is applicable to the Company's existing contracts and hedging relationships that reference LIBOR and may be adopted prospectively through December 31, 2022.
+Added: The Company is currently evaluating the effects that the adoption of this ASU will have on its consolidated financial statements.
Income Taxes (Topic 740), Simplifying the Accounting for Income Taxes.
1 unchanged sentence
2019-12, which simplifies the accounting for income taxes by removing certain exceptions to the general principles in Topic 740 and by clarifying and amending existing guidance, including the recognition of franchise tax, the treatment of a step up in the tax basis of goodwill, and the timing for recognition of enacted changes in tax laws or rates in the interim period annual effective tax rate computation.
−Removed: This new guidance is effective for the Company in fiscal 2021, with early adoption permitted.
−Removed: The Company is currently evaluating the effects that the adoption of this ASU will have on its consolidated financial statements.
−Removed: In September 2019, the Company acquired certain assets of a business in Brazil for its Papermaking Systems segment for approximately $ 407,000 in cash.
−Removed: In January 2019, the Company acquired, directly and indirectly, all the outstanding equity interests of Syntron Material Handling Group, LLC and certain of its affiliates (SMH) pursuant to an equity purchase agreement, dated December 9, 2018, for $ 176,855,000 , net of cash acquired.
+Added: This new guidance is effective in fiscal 2021, and the transition requirements are primarily prospective.
+Added: The Company does not expect the adoption of this ASU to have a material impact on its consolidated financial statements.
+Added: On June 1, 2020, the Company’s Industrial Processing segment acquired Cogent Industrial Technologies Ltd.
+Added: (Cogent) for approximately $ 6,866,000 , net of cash acquired.
The Company funded the acquisition through borrowings under its revolving credit facility.
−Removed: SMH, which comprises the Company's Material Handling Systems segment, has manufacturing operations in Mississippi, United States, and China.
+Added: Intangible assets acquired primarily relate to customer relationships with a fair value of $ 3,350,000 .
+Added: Cogent, based in British Columbia, Canada, is an industrial automation and controls solution provider that offers expertise in process technology integration, industrial automation and controls, industrial safety, project management, and operational performance management systems.
+Added: On May 28, 2020, the Company’s Industrial Processing segment also acquired certain intellectual property from a company in Austria for $ 416,000 , of which $ 229,000 was paid in the second quarter of 2020.
+Added: The Company expects to pay the remaining amount no later than the first quarter of 2022.
+Added: Intangible assets acquired represent product technology with a fair value of $ 557,000 .
+Added: On September 3, 2019, the Company acquired certain assets of a business in Brazil for its Flow Control segment for approximately $ 407,000 in cash.
+Added: On January 2, 2019, the Company acquired, directly and indirectly, all the outstanding equity interests of Syntron Material Handling Group, LLC and certain of its affiliates (SMH) pursuant to an equity purchase agreement, dated December 9, 2018, for $ 176,855,000 , net of cash acquired.
+Added: The Company funded the acquisition through borrowings under its revolving credit facility.
+Added: 2020 Financial Statements
+Added: Notes to Consolidated Financial Statements
+Added: SMH, which is included in the Company's Material Handling segment, has manufacturing operations in Mississippi, United States, and China.
SMH is a leading provider of material handling equipment and systems to various process industries, including mining, aggregates, food processing, packaging, and pulp and paper.
−Removed: The Company expects several synergies in connection with this acquisition, including expansion of product sales into new markets by leveraging SMH's existing presence, strengthening of SMH's relationships in the pulp and paper industry, and sourcing efficiencies.
+Added: This acquisition continues to expand the Company into new markets by leveraging SMH's presence in the material handling industry.
Goodwill from the SMH acquisition was $ 78,592,000 , of which $ 59,195,000 is expected to be deductible for tax purposes over 15 years.
In addition, intangible assets acquired were $ 83,020,000 , of which $ 69,969,000 is expected to be deductible for tax purposes over 15 years.
−Removed: For 2019, the Company recorded revenues of $ 83,364,000 and operating income of $ 3,132,000 for SMH from the date of acquisition, including amortization expense of $ 4,872,000 associated with acquired profit in inventory and backlog and $ 843,000 of acquisition transaction costs.
−Removed: 2019 Financial Statements
−Removed: Notes to Consolidated Financial Statements
−Removed: Acquisitions (continued)
+Added: For 2019, the Company recorded revenue of $ 83,364,000 and operating income of $ 3,132,000 for SMH from the date of acquisition, including amortization expense of $ 4,872,000 associated with acquired profit in inventory and backlog and $ 843,000 of acquisition transaction costs.
The following table summarizes the estimated fair values of assets acquired and liabilities assumed and the purchase price for SMH.
−Removed: During the fourth quarter of 2019, the Company made an adjustment to reduce goodwill by $ 1,704,000 , principally due to a reduction of long-term deferred income tax liabilities as a result of the tax attributes acquired.
−Removed: (In thousands)
−Removed: January 2, 2019
+Added: (In thousands) January 2, 2019
Net Assets Acquired:
1 unchanged sentence
Accounts Receivable 10,275
+Added: Inventories 13,061
Property, Plant, and Equipment 7,383
+Added: Other Assets 12,054
Definite-Lived Intangible Assets
2 unchanged sentences
Indefinite-Lived Intangible Assets
+Added: Goodwill 78,592
Total assets acquired 206,816
10 unchanged sentences
Had the acquisition of SMH been completed as of the beginning of 2018, the Company’s pro forma results of operations for 2019 and 2018 would have been as follows:
−Removed: (In thousands, except per share amounts)
+Added: (In thousands, except per share amounts) December 28,
+Added: 2019 December 29,
+Added: Revenue $ 704,644 $ 719,142
Net Income Attributable to Kadant $ 56,409 $ 56,511
Earnings per Share Attributable to Kadant
−Removed: The historical consolidated financial information of the Company and SMH has been adjusted in the pro forma information to give effect to pro forma events that are directly attributable to the acquisition and related financing arrangements, are expected to have a continuing impact on the Company, and are factually supportable.
+Added: Basic $ 5.02 $ 5.10
+Added: Diluted $ 4.92 $ 4.96
2020 Financial Statements
Notes to Consolidated Financial Statements
−Removed: Acquisitions (continued)
+Added: The historical consolidated financial information of the Company and SMH has been adjusted in the pro forma information to give effect to pro forma events that are directly attributable to the acquisition and related financing arrangements, are expected to have a continuing impact on the Company, and are factually supportable.
Pro forma results include the following non-recurring pro forma adjustments that were directly attributable to the acquisition:
• Pre-tax charge to SG&A expenses of $ 843,000 in 2018 and reversal of $ 843,000 in 2019 for acquisition transaction costs.
−Removed: Pre-tax charge to cost of revenues of $ 3,549,000 in 2018 and reversal of $ 3,549,000 in 2019 for the sale of inventory revalued at the date of acquisition.
+Added: • Pre-tax charge to cost of revenue of $ 3,549,000 in 2018 and reversal of $ 3,549,000 in 2019 for the sale of inventory revalued at the date of acquisition.
• Pre-tax charge to SG&A expenses of $ 1,323,000 in 2018 and reversal of $ 1,323,000 in 2019 for intangible asset amortization related to acquired backlog.
1 unchanged sentence
These pro forma results of operations have been prepared for comparative purposes only, and they do not purport to be indicative of the results of operations that would have resulted had the acquisition of SMH occurred as of the beginning of 2018, or that may result in the future.
−Removed: On August 14, 2017, the Company acquired certain assets of Unaflex, LLC (Unaflex) for $ 31,274,000 in cash.
−Removed: The Company funded the acquisition through borrowings under its revolving credit facility.
−Removed: Unaflex, located principally in South Carolina, is a leading manufacturer of expansion joints and related products for process industries.
−Removed: This acquisition complemented the Company’s existing Fluid-Handling product line within its Papermaking Systems segment.
−Removed: The Company anticipated and continues to achieve several synergies in connection with this acquisition, including the expansion of sales by Unaflex through leveraging the Company’s sales efforts, as well as sourcing and manufacturing efficiencies.
−Removed: Goodwill from the Unaflex acquisition was $ 15,640,000 , all of which is expected to be deductible for tax purposes over 15 years.
−Removed: In addition, intangible assets acquired were $ 11,200,000 , all of which is expected to be deductible for tax purposes over 15 years.
−Removed: For 2017, the Company recorded revenues of $ 7,335,000 and operating income of $ 187,000 for Unaflex from its date of acquisition, including amortization expense of $ 176,000 associated with acquired profit in inventory, and $ 596,000 of acquisition transaction costs.
−Removed: On July 5, 2017, the Company acquired NII FPG pursuant to a Stock and Asset Purchase Agreement dated May 24, 2017, for $ 170,792,000 , net of cash acquired.
−Removed: In connection with the acquisition, the Company borrowed an aggregate $ 170,018,000 under its revolving credit facility, including $ 62,690,000 of Canadian dollar-denominated and $ 61,769,000 of euro-denominated borrowings.
−Removed: NII FPG, which has two primary manufacturing facilities located in Canada and Finland, is a global leader in the design and manufacture of equipment used by sawmills, veneer mills, and other manufacturers in the forest products industry.
−Removed: NII FPG also designs and manufactures logging equipment used in harvesting timber from forest plantations.
−Removed: This acquisition extended the Company's presence deeper into the forest products industry and complemented its existing Wood Processing Systems segment.
−Removed: Goodwill from the NII FPG acquisition was $ 85,432,000 , of which $ 33,993,000 is expected to be deductible for tax purposes over 15 years.
−Removed: In addition, intangible assets acquired were $ 72,812,000 , of which $ 10,044,000 is expected to be deductible for tax purposes over 15 years.
−Removed: For 2017, the Company recorded revenues of $ 48,363,000 and operating income of $ 1,238,000 for NII FPG from its date of acquisition, including amortization expense of $ 6,399,000 associated with acquired profit in inventory and backlog, and $ 4,764,000 of acquisition transaction costs.
−Removed: In addition, the Company paid $ 2,500,000 in cash in 2017 for another acquisition within the Fluid-Handling product line in the Company's Papermaking Systems segment.
−Removed: 2019 Financial Statements
−Removed: Notes to Consolidated Financial Statements
−Removed: Acquisitions (continued)
−Removed: The following table summarizes the estimated fair values of assets acquired and liabilities assumed and the purchase price for the Company's 2017 acquisitions.
−Removed: (In thousands)
−Removed: August 14, 2017
−Removed: October 30, 2017
−Removed: Net Assets Acquired:
−Removed: Cash and Cash Equivalents
−Removed: Accounts Receivable
−Removed: Property, Plant, and Equipment
−Removed: Definite-Lived Intangible Assets
−Removed: Customer relationships
−Removed: Product technology
−Removed: Indefinite-Lived Intangible Assets
−Removed: Total assets acquired
−Removed: Accounts Payable
−Removed: Customer Deposits
−Removed: Long-Term Deferred Income Taxes
−Removed: Other Liabilities
−Removed: Total liabilities assumed
−Removed: Net assets acquired
−Removed: Purchase Price:
−Removed: Cash Paid to Seller Borrowed Under the Revolving Credit Facility
−Removed: Total purchase price
−Removed: For NII FPG, the weighted-average amortization period for definite-lived intangible assets acquired is 12 years , including weighted-average amortization periods of 15 years for product technology, 11 years for customer relationships, and 4 years for other intangible assets.
−Removed: For Unaflex, the weighted average amortization period for definite-lived intangible assets acquired, including customer relationships, product technology and other intangible assets, is 10 years .
−Removed: For the other acquisition, the amortization period for customer relationships is 11 years .
−Removed: Unaudited Supplemental Pro Forma Information
−Removed: Had the acquisitions of NII FPG and Unaflex been completed as of the beginning of 2016, the Company’s pro forma results of operations for 2017 would have been as follows:
−Removed: (In thousands, except per share amounts)
−Removed: Net Income Attributable to Kadant
−Removed: Earnings per Share Attributable to Kadant
−Removed: 2019 Financial Statements
−Removed: Notes to Consolidated Financial Statements
−Removed: Acquisitions (continued)
−Removed: Pro forma results include the following non-recurring pro forma adjustments that were directly attributable to the acquisitions:
−Removed: Reversal of pre-tax charge to SG&A expenses of $ 5,360,000 in 2017 for acquisition transaction costs.
−Removed: Reversal of pre-tax charge to cost of revenues of $ 5,137,000 in 2017 for the sale of inventory revalued at the date of acquisition.
−Removed: Reversal of pre-tax charge to SG&A expenses of $ 1,438,000 in 2017 for intangible asset amortization related to acquired backlog.
−Removed: Reversal of pre-tax income of $ 852,000 in 2017 related to NII FPG's gain on the sale of a building.
−Removed: Tax effects related to pro forma adjustments.
−Removed: These pro forma results of operations have been prepared for comparative purposes only, and they do not purport to be indicative of the results of operations that would have resulted had the acquisitions of NII FPG and Unaflex occurred as of the beginning of 2016, or that may result in the future.
−Removed: The Company's pro forma results above exclude its other 2017 acquisition as those results would not have been materially different then the results presented above had they occurred at the beginning of 2016.
Employee Benefit Plans
4 unchanged sentences
Upon a change of control, as defined in the plans, all options or other awards become fully vested and all restrictions lapse.
−Removed: The Company had 409,295 shares available for grant under stock-based compensation plans at year-end 2019 .
+Added: The Company had 363,584 shares available for grant under these stock-based compensation plans at year-end 2020.
The Company generally issues its common stock out of treasury stock, to the extent available, for share issuances related to its stock-based compensation plans.
1 unchanged sentence
The fair value of RSUs is based on the grant date price of the Company's common stock, reduced by the present value of estimated dividends foregone during the requisite service period.
−Removed: The fair value of stock options is based on the Black-Scholes option-pricing model.
The components of pre-tax stock-based compensation expense included in SG&A expenses in the accompanying consolidated statement of income are as follows:
−Removed: (In thousands)
−Removed: December 28, 2019
−Removed: December 29, 2018
−Removed: December 30, 2017
+Added: (In thousands) January 2, 2021 December 28, 2019 December 29, 2018
+Added: RSU Awards $ 6,453 $ 6,616 $ 6,838
Employee Stock Purchase Plan Awards 323 199 189
+Added: Total $ 6,776 $ 6,815 $ 7,027
The Company grants RSUs to non-employee directors and certain employees.
2 unchanged sentences
The Company granted RSU awards consisting of 2,085 RSUs in 2020, 1,858 RSUs in 2019 and 2,700 RSUs in 2018 to each of its incumbent non-employee directors.
−Removed: Each RSU represents the right to receive one share of the Company's common stock upon vesting.
−Removed: Of the RSUs granted in 2019 and 2018, half of the RSUs vested on June 1 of each year and the remaining RSUs vested ratably on the last day of the third and fourth fiscal quarters of each year.
−Removed: The 2017 RSUs vested ratably on the last day of each fiscal quarter within the year.
+Added: Half of the RSUs vested on June 1 of each year and the remaining RSUs vested ratably on the last day of the third and fourth fiscal quarters of each year.
+Added: In addition, the Company granted RSU awards consisting of 1,042 RSUs in July 2020 to its new non-employee director (former executive director), which vested ratably on the last day of the third and fourth fiscal quarters of 2020.
+Added: Each RSU issued to the directors represents the right to receive one share of the Company's common stock upon vesting.
2020 Financial Statements
Notes to Consolidated Financial Statements
−Removed: Employee Benefit Plans (continued)
Performance-Based Restricted Stock Units
14 unchanged sentences
Unrecognized compensation expense related to the time-based RSUs totaled $ 3,292,000 at year-end 2020, and will be recognized over a weighted average period of 1.8 years.
+Added: Vesting of Restricted Stock Units
A summary of the activity of the Company's unvested RSUs in 2020 is as follows:
−Removed: (In thousands)
+Added: (In thousands) Weighted
Average Grant-
1 unchanged sentence
Unvested RSUs at December 28, 2019 135 $ 86.11
−Removed: Unvested RSUs at December 28, 2019
+Added: Granted 78 $ 88.22
+Added: Vested ( 92 ) $ 79.66
+Added: Forfeited ( 1 ) $ 87.75
+Added: Unvested RSUs at January 2, 2021 120 $ 92.42
The weighted average grant date fair value of RSUs granted was $ 88.22 in 2020, $ 86.50 in 2019, and $ 98.12 in 2018.
4 unchanged sentences
All options awarded in prior periods were granted at an exercise price equal to the fair market value of the Company's common stock on the date of grant.
−Removed: Stock options vested in three equal annual installments beginning on the first anniversary of the grant date, provided that the recipient remained employed by the Company on the applicable vesting dates and expire on the ten th anniversary of the grant date.
−Removed: All outstanding stock options are fully vested.
−Removed: The Company recognized compensation expense associated with these stock options ratably over the requisite service period for the entire award based on the grant date fair value, net of forfeitures.
+Added: All outstanding stock options are fully vested and expire on the tenth anniversary of the grant date.
There was no unrecognized compensation expense related to these stock options at year-end 2020.
1 unchanged sentence
Notes to Consolidated Financial Statements
−Removed: Employee Benefit Plans (continued)
−Removed: The Company used the Black-Scholes option-pricing model to determine the fair value of stock options, which was developed for use in estimating the fair value of traded options, which have no vesting restrictions and are fully transferable.
−Removed: Option-pricing models require the input of highly subjective assumptions, including expected stock price volatility.
−Removed: Expected stock price volatility was calculated based on a review of the Company's actual historic stock prices commensurate with the expected life of the award.
−Removed: The expected option life was derived based on a review of the Company's historic option holding periods, including consideration of the holding period inherent in currently vested but unexercised options.
−Removed: The expected annual dividend rate was calculated by dividing the Company's annual dividend by the closing stock price on the grant date.
−Removed: The risk-free interest rate is based on the yield on zero-coupon U.S.
−Removed: Treasury securities for a period that is commensurate with the expected term of the option.
−Removed: The compensation expense recognized for these equity-based awards was net of estimated forfeitures.
−Removed: Forfeitures were estimated based on an analysis of actual option forfeitures.
A summary of the Company's stock option activity in 2020 is as follows:
−Removed: (In thousands, except per share amounts)
−Removed: Options Outstanding at December 29, 2018
+Added: (In thousands, except per share amounts) Number
+Added: Shares Weighted
+Added: Price Weighted
+Added: Life Aggregate
Options Outstanding at December 28, 2019 74 $ 24.28
−Removed: Vested and Exercisable at December 28, 2019
−Removed: The closing price per share on the last trading day prior to year-end 2019 was $ 105.76 .
−Removed: There were no stock option exercises in 2017.
+Added: Exercised ( 47 ) $ 24.19
+Added: Options Outstanding at January 2, 2021 27 $ 24.44 1.8 years $ 3,173
+Added: Vested and Exercisable at January 2, 2021 27 $ 24.44 1.8 years $ 3,173
+Added: (a) The closing price per share on the last trading day prior to year-end 2020 was $ 140.98 .
A summary of the Company's stock option exercises in 2020, 2019 and 2018 are as follows:
−Removed: (In thousands)
−Removed: December 28, 2019
−Removed: December 29, 2018
+Added: (In thousands) January 2, 2021 December 28, 2019 December 29, 2018
Total Intrinsic Value of Options Exercised $ 4,071 $ 16,796 $ 515
Cash Received from Options Exercised $ 1,123 $ 4,454 $ 127
−Removed: Modified Awards
−Removed: On September 20, 2017, the Company entered into an executive transition agreement with its vice president, general counsel and secretary in connection with her retirement on July 1, 2018.
−Removed: This agreement included provisions for post-employment compensation and modifications to outstanding equity awards.
−Removed: The Company recognized $ 374,000 of post-employment compensation ratably through the retirement date.
−Removed: Pursuant to this agreement, all unvested RSUs vested at the retirement date.
−Removed: As of September 20, 2017, 4,254 RSUs were remeasured at a fair value of $ 93.82 per unit.
−Removed: The remaining compensation expense associated with the modified RSUs totaled $ 332,000 as of September 20, 2017, which was recognized ratably through the retirement date.
Employee Stock Purchase Plan
4 unchanged sentences
The Company issued 13,062 shares for 2020 (issued in 2020), 13,195 shares for 2019 (issued in 2020), and 10,439 shares for 2018 (issued in 2019) of its common stock under this plan.
−Removed: 2019 Financial Statements
−Removed: Notes to Consolidated Financial Statements
−Removed: Employee Benefit Plans (continued)
+Added: The Company had 101,873 shares available for grant under the employee stock purchase plan at year-end 2020.
401(k) Savings and Other Defined Contribution Plans
7 unchanged sentences
For these plans, the Company contributed and charged to expense $ 4,501,000 in 2020, $ 4,412,000 in 2019, and $ 3,705,000 in 2018.
−Removed: The increases in the Company's contributions to these benefit plans in 2019 and 2018 are primarily due to the acquisitions of SMH and Unaflex, respectively.
+Added: The increase in the Company's contributions in 2019 was primarily due to the acquisition of SMH.
Pension and Other Post-Retirement Benefits Plans
−Removed: Prior to its termination at year-end 2018, the Company sponsored a noncontributory defined benefit pension plan for eligible employees at one of its U.S.
+Added: Prior to its termination in 2018, the Company sponsored a noncontributory defined benefit pension plan for eligible employees at one of its U.S.
divisions and its corporate office (Retirement Plan).
9 unchanged sentences
subsidiaries.
−Removed: Prior to its termination at year-end 2018, the Company provided for a restoration plan (Restoration Plan) for certain executive officers which fully supplemented benefits lost under the Retirement Plan.
+Added: Prior to its termination in 2018, the Company provided for a restoration plan (Restoration Plan) for certain executive officers which fully supplemented benefits lost under the Retirement Plan.
In accordance with ASC 715, Compensation-Retirement Benefits (ASC 715), the Company recognizes the funded status of its defined benefit pension and other post-retirement benefit plans as an asset or liability and changes in the funded status through AOCI, net of tax.
−Removed: The amounts in AOCI are recognized as net periodic pension cost pursuant to the Company's historical accounting policy for amortizing such amounts.
+Added: The amounts in AOCI are recognized as net periodic pension cost pursuant to the Company's accounting policy for amortizing such amounts.
Further, actuarial gains and losses that arise in subsequent periods and are not recognized as net periodic benefit cost will be recognized as a component of AOCI, net of tax.
−Removed: In 2018, the Company's board of directors and its compensation committee approved amendments to freeze and terminate the Retirement Plan and Restoration Plan as of December 29, 2018 and, as a result, incurred a curtailment loss of $ 1,425,000 , which was reclassified from AOCI and included in other expense, net in the accompanying consolidated statement of income in the fourth quarter of 2018.
−Removed: Additionally, an effect of curtailment of $ 4,862,000 was recognized as a reduction in AOCI and accrued pension liability in the accompanying consolidated balance sheet at year-end 2018.
−Removed: In the fourth quarter of 2019, the Company settled its Retirement Plan obligation, which required adjustment based on the number of plan participants who elected to receive either a lump sum payment or an annuity, and the increased costs to purchase the annuity contracts due to changes in certain market conditions, including a decrease in long-term interest rates in 2019.
−Removed: As a result, the Company recognized a settlement loss of $ 5,887,000 , which is included in other expense, net in the accompanying consolidated statement of income, and was calculated as the sum of the unrecognized actuarial loss and $ 3,839,000 of additional cash to be paid, less the accrued pension liability.
−Removed: Subsequent to year-end 2019, the Company settled its Restoration Plan obligation of $ 2,427,000 by paying a lump sum to its plan participants.
−Removed: The Company does not plan to make any other material cash contributions to its other pension and post-retirement plans in 2020.
+Added: 2020 Financial Statements
+Added: Notes to Consolidated Financial Statements
+Added: Effective December 28, 2018, the Company's board of directors and its compensation committee approved amendments to freeze and terminate the Retirement Plan and Restoration Plan and, as a result, recognized a curtailment loss of $ 1,425,000 in 2018, which was reclassified from AOCI and included in other expense, net in the accompanying consolidated statement of income.
+Added: In 2019, the Company settled its Retirement Plan obligation, which required adjustment based on the number of plan participants who elected to receive either a lump sum payment or an annuity, and the increased costs to purchase the annuity contracts due to changes in certain market conditions, including a decrease in long-term interest rates in 2019.
+Added: As a result, the Company recognized a settlement loss of $ 5,887,000 in 2019, which was included in other expense, net in the accompanying consolidated statement of income, and was calculated as the sum of the unrecognized actuarial loss and $ 3,839,000 of additional cash to be paid, less the accrued pension liability.
+Added: In January 2020, the Company settled its Restoration Plan obligation of $ 2,427,000 by paying a lump sum to its plan participants resulting in a settlement loss of $ 57,000 in 2019, which was included in other expense, net in the accompanying consolidated statement of income.
+Added: The Company does not plan to make any material cash contributions to its pension and post-retirement plans in 2021.
The following table summarizes the change in benefit obligation;
5 unchanged sentences
2015-04, Compensation - Retirement Benefits (Topic 715) , the Company elects to measure its plan assets and benefit obligations as of December 31.
−Removed: 2019 Financial Statements
−Removed: Notes to Consolidated Financial Statements
−Removed: Employee Benefit Plans (continued)
−Removed: Other Post-Retirement
−Removed: (In thousands)
−Removed: December 28, 2019
−Removed: December 29, 2018
−Removed: December 28, 2019
−Removed: December 29, 2018
−Removed: December 28, 2019
−Removed: December 29, 2018
+Added: Pension Non-U.S.
+Added: Pension Other Post-Retirement
+Added: (In thousands) December 28, 2019 January 2, 2021 December 28, 2019 January 2, 2021 December 28, 2019
Change in Projected Benefit Obligation:
Projected benefit obligation at beginning of year $ 29,715 $ 4,168 $ 3,671 $ 3,742 $ 3,672
+Added: Service cost — 209 205 6 4
Interest cost 1,134 98 121 39 149
−Removed: Actuarial loss (gain)
+Added: Actuarial loss (gain) (a) 4,039 ( 94 ) 393 47 144
Benefits paid ( 966 ) ( 286 ) ( 184 ) ( 131 ) ( 232 )
−Removed: Plan amendment
−Removed: Effect of curtailment
Settlement payment ( 33,922 ) — — ( 2,427 ) —
17 unchanged sentences
Unrecognized prior service cost — 97 ( 38 ) — —
−Removed: The actuarial loss of $ 4,039,000 in 2019 resulted from the settlement of the Retirement Plan obligation in which participants' lump sum elections were lower than assumed, and the cost of the liabilities for the participants' annuity contracts increased primarily due to a decline in long-term interest rates in 2019.
−Removed: The actuarial gain of $ 2,674,000 in 2018 related to an increase in the Retirement Plan's weighted average discount rate and the impact of an updated mortality table, net of a decrease due to a change in the demographic mix.
−Removed: Other Post-Retirement
−Removed: (In thousands)
−Removed: December 28, 2019
−Removed: December 29, 2018
−Removed: December 28, 2019
−Removed: December 29, 2018
−Removed: December 28, 2019
−Removed: December 29, 2018
+Added: $ — $ ( 803 ) $ ( 1,072 ) $ ( 175 ) $ ( 144 )
+Added: (a) The actuarial loss of $ 4,039,000 in 2019 resulted from the settlement of the Retirement Plan obligation in which participants' lump sum elections were lower than assumed and the cost of annuity contracts increased primarily due to a decline in long-term interest rates.
+Added: 2020 Financial Statements
+Added: Notes to Consolidated Financial Statements
+Added: Pension Non-U.S.
+Added: Pension Other Post-Retirement
+Added: (In thousands) December 28, 2019 January 2, 2021 December 28, 2019 January 2, 2021 December 28, 2019
Changes in Amounts Included in Accumulated Other Comprehensive Items Before Tax:
2 unchanged sentences
Amortization of prior service cost — 55 6 — —
−Removed: Plan amendment
−Removed: Effect of curtailment
Settlement loss 5,887 — — — —
−Removed: Curtailment loss
Currency translation — ( 66 ) 18 3 —
−Removed: 2019 Financial Statements
−Removed: Notes to Consolidated Financial Statements
−Removed: Employee Benefit Plans (continued)
+Added: $ 3,205 $ 269 $ ( 353 ) $ ( 31 ) $ ( 75 )
The weighted average assumptions used to determine the benefit obligation are as follows:
−Removed: Other Post-Retirement
−Removed: December 28, 2019
−Removed: December 29, 2018
−Removed: December 28, 2019
−Removed: December 29, 2018
−Removed: December 28, 2019
−Removed: December 29, 2018
+Added: Pension Other Post-Retirement
+Added: January 2, 2021 December 28, 2019 January 2, 2021 December 28, 2019
Discount Rate 2.02 % 2.59 % 2.33 % 3.82 %
Rate of Compensation Increase 2.10 % 3.40 % 5.57 % 5.57 %
−Removed: The discount rates for pension and other post-retirement plans are based on market yields on high-quality corporate bonds currently available and expected to be available during the period to maturity of the benefits.
−Removed: For pension and post-retirement plans that have been closed to new participants thereby shortening the duration, the discount rate is determined based on discounting the projected benefit streams against the Citigroup Pension discount curve.
+Added: The discount rates are based on market yields on high-quality corporate or government bonds currently available and expected to be available for the duration of the obligation.
+Added: For plans that have been closed to new participants, the discount rate is determined based on discounting expected future payments using the FTSE Pension Discount Curve.
The projected benefit obligations and fair values of plan assets for the Company's pension plans with projected benefit obligations in excess of plan assets are as follows:
−Removed: (In thousands)
−Removed: December 28, 2019
−Removed: December 29, 2018
−Removed: December 28, 2019
−Removed: December 29, 2018
+Added: (In thousands) January 2, 2021 December 28, 2019
Projected Benefit Obligation $ 4,334 $ 4,168
1 unchanged sentence
The accumulated benefit obligations and fair values of plan assets for the Company's pension plans with accumulated benefit obligations in excess of plan assets are as follows:
−Removed: (In thousands)
−Removed: December 28, 2019
−Removed: December 29, 2018
−Removed: December 28, 2019
−Removed: December 29, 2018
+Added: (In thousands) January 2, 2021 December 28, 2019
Accumulated Benefit Obligation $ 2,601 $ 2,408
1 unchanged sentence
The components of net periodic benefit cost are as follows:
−Removed: Other Post-Retirement
−Removed: (In thousands)
−Removed: December 28, 2019
−Removed: December 29, 2018
−Removed: December 30, 2017
−Removed: December 28, 2019
−Removed: December 29, 2018
−Removed: December 30, 2017
−Removed: December 28, 2019
−Removed: December 29, 2018
−Removed: December 30, 2017
+Added: Pension Non-U.S.
+Added: Pension Other Post-Retirement
+Added: (In thousands) December 28, 2019 December 29, 2018 January 2, 2021 December 28, 2019 December 29, 2018 January 2, 2021 December 28, 2019 December 29, 2018
+Added: Service cost $ — $ 699 $ 209 $ 205 $ 173 $ 6 $ 4 $ 213
Interest cost 1,134 1,193 98 121 126 39 149 172
7 unchanged sentences
Notes to Consolidated Financial Statements
−Removed: Employee Benefit Plans (continued)
The weighted average assumptions used to determine net periodic benefit cost are as follows:
−Removed: Other Post-Retirement
−Removed: December 28, 2019
−Removed: December 29, 2018
−Removed: December 30, 2017
−Removed: December 28, 2019
−Removed: December 29, 2018
−Removed: December 30, 2017
−Removed: December 28, 2019
−Removed: December 29, 2018
−Removed: December 30, 2017
+Added: Pension Non-U.S.
+Added: Pension Other Post-Retirement
+Added: December 28, 2019 December 29, 2018 January 2, 2021 December 28, 2019 December 29, 2018 January 2, 2021 December 28, 2019 December 29, 2018
Discount Rate 4.10 % 3.51 % 1.73 % 2.58 % 3.49 % 3.82 % 4.33 % 3.58 %
1 unchanged sentence
Rate of Compensation Increase — % 3.00 % 2.89 % 2.81 % 3.97 % 5.57 % 5.57 % 3.05 %
−Removed: In developing the overall expected long-term return on plan assets assumption, a building block approach was used in which rates of return in excess of inflation were considered separately for equity securities, debt securities, and other assets.
−Removed: The excess returns were weighted by the representative target allocation and added along with an appropriate rate of inflation to develop the overall expected long-term return on plan assets assumption.
−Removed: The Company believes this determination is consistent with ASC 715, Compensation – Retirement Benefits .
−Removed: The fair values of the Company's noncontributory defined benefit retirement plan assets at year-end 2019 and year-end 2018 by asset category are as follows:
−Removed: December 28, 2019 Fair Value Measurement
−Removed: (In thousands)
−Removed: Quoted Prices
−Removed: in Active Markets
−Removed: Pension Plan Assets:
−Removed: Total assets at fair value
−Removed: December 29, 2018 Fair Value Measurement
−Removed: (In thousands)
−Removed: Quoted Prices
−Removed: in Active Markets
−Removed: Retirement Plan Assets:
−Removed: Mutual funds:
−Removed: Fixed income funds
−Removed: Investments measured at NAV
−Removed: Total assets at fair value
−Removed: Pension Plan Assets:
−Removed: Total assets at fair value
−Removed: 2019 Financial Statements
−Removed: Notes to Consolidated Financial Statements
−Removed: Employee Benefit Plans (continued)
−Removed: Description of Fair Value Measurements
−Removed: Level 1 – Quoted, active market prices for identical assets.
−Removed: Level 2 – Observable inputs other than Level 1 prices, based on model-derived valuations in which all significant inputs are observable in active markets.
−Removed: Level 3 – Unobservable inputs based on the Company's own assumptions.
−Removed: The following is a description of the valuation methodologies used for assets measured at fair value.
−Removed: There were no changes in valuation techniques during 2019 or 2018 .
−Removed: Mutual funds - Investments in money market, common stock index and fixed income funds.
−Removed: Share prices of the funds, referred to as a fund's Net Asset Value (NAV), are calculated daily based on the closing market prices and accruals of securities in the fund's total portfolio (total value of the fund) divided by the number of fund shares currently issued and outstanding.
−Removed: There are no redemption restrictions.
−Removed: Investments measured at NAV - Investments in common collective trusts that invest in a diversified blend of investment and non-investment grade fixed income securities and are valued at NAV provided by the fund administrator.
−Removed: The NAV is used as the practical expedient to estimate fair value.
−Removed: The NAVs of the funds are calculated monthly based on the closing market prices and accruals of securities in the fund's total portfolio (total value of the fund) divided by the number of fund shares currently issued and outstanding.
−Removed: Redemptions of the investments occur by contract at the respective fund's redemption date NAV.
+Added: The expected long-term return on plan assets for the Retirement Plan in fiscal 2019 equals the discount rate, which was valued using the FTSE Pension Discount Curve.
+Added: The expected long-term rate of return on plan assets for the U.S.
+Added: pension plan in fiscal 2018 and the non-U.S.
+Added: pension and other post-retirement plan for all years presented were determined based on the composition of plan investments, historical returns earned and future expectations.
+Added: The fair value of the Company’s non-U.S.
+Added: pension and other post-retirement plan assets were $ 1,228,000 at year-end 2020 and $ 1,037,000 at year end 2019.
+Added: The assets are invested in a diversified portfolio of government and corporate bonds, which are Level 1 investments and are valued at quoted prices for identical assets in active markets.
+Added: See N ote 11 , Fair Value Measurement and Fair Value of Financial Instruments, for the fair value hierarchy.
Estimated Future Benefit Payments
2 unchanged sentences
Post-retirement
−Removed: (In thousands)
+Added: (In thousands) Non-U.S.
+Added: 2021 $ 145 $ 131
+Added: 2026-2029 2,264 426
Stockholders' Equity
4 unchanged sentences
Notes to Consolidated Financial Statements
−Removed: The Tax Cuts and Jobs Act of 2017 (2017 Tax Act) was signed into law on December 22, 2017 and its provisions are generally effective for tax years beginning January 1, 2018.
−Removed: The most significant impacts of the 2017 Tax Act to the Company include a decrease in the federal corporate income tax rate from 35% to 21% , and a one-time mandatory transition tax on deemed repatriation of previously tax-deferred and unremitted foreign earnings.
−Removed: On December 22, 2017, the SEC staff issued Staff Accounting Bulletin No.
−Removed: 118 (SAB 118) related to the income tax accounting implications of the 2017 Tax Act, which provides guidance on accounting for the 2017 Tax Act’s impact.
−Removed: In accordance with SAB 118, the Company recorded a provisional net income tax expense of $ 7,487,000 , including the impact of state taxes, in the fourth quarter of 2017, which consisted of a provisional amount for the one-time mandatory transition tax of $ 10,303,000 , partially offset by a provisional net tax benefit of $ 2,816,000 for the re-measurement of the Company's deferred income tax assets and liabilities at the 21% federal corporate income tax rate.
−Removed: During 2018, the Company completed its accounting for the 2017 Tax Act under the SAB 118 guidance and recorded a net reduction of $ 138,000 to the 2017 provisional amount related to the one-time mandatory transition tax.
−Removed: While the 2017 Tax Act provides for a territorial tax system, beginning in 2018, it includes two new U.S.
−Removed: tax base erosion provisions, Global Intangible Low-Taxed Income (GILTI) and Base Erosion Anti-Abuse Tax (BEAT).
−Removed: The Company has elected to account for the GILTI tax in the period in which it is incurred and, therefore, has not provided the deferred income tax impact of GILTI in its consolidated financial statements.
−Removed: In addition, the Company is not subject to the minimum tax pursuant to the BEAT provisions, but may be subject to such provision in the future.
The components of income before provision for income taxes are as follows:
−Removed: (In thousands)
−Removed: December 28, 2019
−Removed: December 29, 2018
−Removed: December 30, 2017
+Added: (In thousands) January 2, 2021 December 28, 2019 December 29, 2018
+Added: Domestic $ 14,132 $ 93 $ ( 397 )
+Added: Foreign 59,555 68,829 79,925
+Added: $ 73,687 $ 68,922 $ 79,528
The components of the provision for income taxes are as follows:
−Removed: (In thousands)
−Removed: December 28, 2019
−Removed: December 29, 2018
−Removed: December 30, 2017
−Removed: Current (Benefit) Provision:
−Removed: Deferred (Benefit) Provision:
+Added: (In thousands) January 2, 2021 December 28, 2019 December 29, 2018
+Added: Current Provision (Benefit):
+Added: Federal $ 339 $ ( 264 ) $ 724
+Added: Foreign 16,800 18,778 21,829
+Added: State 667 335 169
+Added: 17,806 18,849 22,722
+Added: Deferred Provision (Benefit):
+Added: Federal 2,146 ( 453 ) ( 2,551 )
+Added: Foreign ( 2,361 ) ( 1,253 ) ( 1,761 )
+Added: State 357 ( 785 ) 72
+Added: 142 ( 2,491 ) ( 4,240 )
+Added: $ 17,948 $ 16,358 $ 18,482
The Company receives a tax deduction upon the exercise of nonqualified stock options and the vesting of RSUs.
The Company recognizes excess income tax benefits and tax deficiencies related to stock-based compensation arrangements as discrete items within the provision for income taxes in the reporting period in which they occur.
−Removed: The Company recognized an income tax benefit of $ 3,807,000 in 2019 , $ 1,097,000 in 2018 and $ 608,000 in 2017 in the Company's accompanying consolidated statement of income.
−Removed: 2019 Financial Statements
−Removed: Notes to Consolidated Financial Statements
−Removed: Income Taxes (continued)
+Added: The Company recognized an income tax benefit of $ 870,000 in 2020, $ 3,807,000 in 2019 and $ 1,097,000 in 2018 in the accompanying consolidated statement of income.
The provision for income taxes in the accompanying statement of income differs from the provision calculated by applying the statutory federal income tax rate to income before provision for income taxes due to the following:
−Removed: (In thousands)
−Removed: December 28, 2019
−Removed: December 29, 2018
−Removed: December 30, 2017
−Removed: Provision for Income Taxes at Statutory Rate (21% in 2019 and 2018 and 35% in 2017)
+Added: (In thousands) January 2, 2021 December 28, 2019 December 29, 2018
+Added: Provision for Income Taxes at Statutory Rate $ 15,474 $ 14,474 $ 16,701
Increases (Decreases) Resulting From:
2 unchanged sentences
Foreign tax rate differential 1,891 2,584 3,158
−Removed: (Reversal of) provision for tax benefit reserves, net
+Added: Reversal of tax benefit reserves, net ( 730 ) ( 286 ) ( 1,785 )
Change in valuation allowance ( 469 ) 81 141
4 unchanged sentences
Tax Cuts and Jobs Act — — ( 106 )
+Added: Other ( 615 ) 993 ( 375 )
+Added: $ 17,948 $ 16,358 $ 18,482
+Added: 2020 Financial Statements
+Added: Notes to Consolidated Financial Statements
Net deferred tax liability in the accompanying consolidated balance sheet consists of the following:
−Removed: (In thousands)
−Removed: December 28, 2019
−Removed: December 29, 2018
+Added: (In thousands) January 2, 2021 December 28, 2019
Deferred Tax Asset:
4 unchanged sentences
Capitalized research expenses 2,668 2,813
−Removed: Research and development
Employee compensation 3,189 3,630
−Removed: Allowance for doubtful accounts
+Added: Allowance for credit losses 397 351
Lease liabilities 6,855 7,543
+Added: Other 213 543
Deferred tax asset, gross 35,654 35,248
5 unchanged sentences
Provision for unremitted foreign earnings ( 1,233 ) ( 809 )
−Removed: Research and development
+Added: ROU assets ( 5,812 ) ( 6,433 )
+Added: Other ( 1,574 ) ( 943 )
Deferred tax liability ( 43,749 ) ( 42,745 )
3 unchanged sentences
The valuation allowance at year-end 2020 was $ 9,609,000 , consisting of $ 255,000 in the United States and $ 9,354,000 in foreign jurisdictions.
−Removed: The decrease in the valuation allowance in 2019 of $ 1,415,000 related primarily to tax rate changes and fluctuations in foreign currency exchange rates.
+Added: The increase in the valuation allowance in 2020 of $ 1,078,000 related primarily to tax rate changes and fluctuations in foreign currency exchange rates, partially offset by the expected utilization of net operating losses in one of the Company's foreign jurisdictions.
Compliance with ASC 740 requires the Company to periodically evaluate the necessity of establishing or adjusting a valuation allowance for deferred tax assets depending on whether it is more likely than not that a related tax benefit will be realized in future periods.
−Removed: When assessing the need for a valuation allowance in a tax jurisdiction, the Company evaluates the weight of all available evidence to determine whether it is more likely than not
−Removed: 2019 Financial Statements
−Removed: Notes to Consolidated Financial Statements
−Removed: Income Taxes (continued)
−Removed: that some portion or all of the deferred tax assets will not be realized.
+Added: When assessing the need for a valuation allowance in a tax jurisdiction, the Company evaluates the weight of all available evidence to determine whether it is more likely than not that some portion or all of the deferred tax assets will not be realized.
As part of this evaluation, the Company considers its cumulative three-year history of earnings before income taxes, taxable income in prior carryback years, future reversals of existing taxable temporary differences, prudent and feasible tax planning strategies, and expected future results of operations.
6 unchanged sentences
Of the foreign net operating loss carryforwards, $ 777,000 will expire in the years 2022 through 2028, and the remainder do not expire.
−Removed: The Company also had a carryforward of disallowed business interest expense of $ 2,151,000 from its acquisition of SMH in 2019 and foreign tax credits of $ 687,000 , of which $ 120,000 came from the acquisition of SMH.
+Added: As of year-end 2020, the Company also had U.S.
+Added: federal and state disallowed business interest expense carryforwards of $ 796,000 and $ 319,000 , respectively, of which $ 796,000 and $ 238,000 , respectively, came from its acquisition of SMH in 2019 and foreign tax credits of $ 320,000 , of which $ 120,000 came from the acquisition of SMH.
The disallowed business interest expense carryforward does not expire, and the foreign tax credit carryforward begins to expire in 2024.
1 unchanged sentence
At year-end 2020, the Company had approximately $ 293,676,000 of unremitted foreign earnings.
−Removed: During 2019, the Company repatriated $ 93,456,000 of previously taxed foreign earnings to the United States and recognized an associated tax benefit of $ 1,186,000 .
+Added: During 2020, the Company repatriated $ 1,682,000 of previously taxed foreign earnings to the United States and recognized a foreign exchange
+Added: 2020 Financial Statements
+Added: Notes to Consolidated Financial Statements
+Added: loss of $ 377,000 associated with these earnings.
The Company intends to repatriate the distributable reserves of select foreign subsidiaries back to the United States and has recognized $ 657,000 of net tax expense on the estimated repatriation amount during 2020.
4 unchanged sentences
In management's opinion, adequate provisions for income taxes have been made for all years subject to audit.
−Removed: As of year-end 2019 , the Company had $ 8,331,000 of unrecognized tax benefits which, if recognized, would reduce the effective tax rate.
+Added: As of year-end 2020, the Company had a liability of $ 8,337,000 for unrecognized tax benefits which, if recognized, would reduce the effective tax rate.
A reconciliation of the beginning and ending amount of unrecognized tax benefits at year-end 2020 and year-end 2019 is as follows:
−Removed: (In thousands)
−Removed: December 28, 2019
−Removed: December 29, 2018
+Added: (In thousands) January 2, 2021 December 28, 2019
Unrecognized Tax Benefits, Beginning of Year $ 8,331 $ 12,364
8 unchanged sentences
The Company has accrued $ 1,600,000 at year-end 2020 and $ 1,717,000 at year-end 2019 for the potential payment of interest and penalties.
−Removed: The interest and penalties included in the accompanying consolidated statement of income was an expense of $ 420,000 in 2019 and $ 544,000 in 2018 .
−Removed: The Company is currently under audit in certain tax jurisdictions.
−Removed: It is reasonably possible that over the next fiscal year the amount of liability for unrecognized tax benefits may be reduced by up to $ 767,000 primarily from the expiration of tax statutes of limitations.
+Added: The interest and penalties included in the accompanying consolidated statement of income was a benefit of $ 145,000 in 2020 and an expense of $ 420,000 in 2019.
+Added: The Company is currently under audit in certain tax jurisdictions, including an income tax examination by the Internal Revenue Service for the tax years 2017 and 2018.
+Added: It is reasonably possible that the potential outcome of current audits could result in a change to the Company's liability for unrecognized tax benefits over the next fiscal year;
+Added: however, the Company cannot reasonably estimate possible adjustments at this time.
+Added: It is also reasonably possible that over the next fiscal year the amount of liability for unrecognized tax benefits may be reduced by up to $ 290,000 primarily from the expiration of tax statutes of limitations.
The Company remains subject to U.S.
−Removed: Federal income tax examinations for the tax years 2016 through 2019, and to non-U.S.
+Added: Federal income tax examinations for the tax years 2019 and 2020, and to non-U.S.
income tax examinations for the tax years 2008 through 2020.
In addition, the Company remains subject to state and local income tax examinations in the United States for the tax years 2003 through 2020.
−Removed: 2019 Financial Statements
−Removed: Notes to Consolidated Financial Statements
Long-Term Obligations
Long-term obligations are as follows:
−Removed: (In thousands)
−Removed: December 28, 2019
−Removed: December 29, 2018
+Added: (In thousands) January 2, 2021 December 28, 2019
Revolving Credit Facility, due 2023 $ 217,963 $ 265,419
−Removed: Commercial Real Estate Loan, due 2020 to 2028
+Added: Commercial Real Estate Loan — 19,425
Senior Promissory Notes, due 2023 to 2028 10,000 10,000
2 unchanged sentences
Unamortized Debt Issuance Costs — ( 127 )
+Added: Total 233,474 301,025
Current Maturities of Long-Term Obligations ( 1,474 ) ( 2,851 )
1 unchanged sentence
See Note 10 , Derivatives, for the fair value information related to the Company's long-term obligations.
+Added: 2020 Financial Statements
+Added: Notes to Consolidated Financial Statements
Revolving Credit Facility
−Removed: In 2018, the Company entered into a second amendment (Second Amendment) to its existing amended and restated five -year, unsecured multi-currency revolving credit facility, dated as of March 1, 2017 (as amended, the Credit Agreement).
−Removed: Pursuant to the Second Amendment, the Company has a borrowing capacity of $ 400,000,000 , with an uncommitted unsecured incremental borrowing facility of $ 150,000,000 under its Credit Agreement, with a maturity date of December 14, 2023.
+Added: The Company entered into a five-year , unsecured multi-currency revolving credit facility, dated as of March 1, 2017 (as amended and restated to date, the Credit Agreement).
+Added: Pursuant to the Credit Agreement, the Company has a borrowing capacity of $ 400,000,000 , with an uncommitted, unsecured incremental borrowing facility of $ 150,000,000 and a maturity date of December 14, 2023.
Interest on borrowings outstanding accrues and is payable in arrears calculated at one of the following rates selected by the Company:
−Removed: (i) the Base Rate, plus an applicable margin of 0 % to 1.25 % , or (ii) the London Inter-Bank Offered Rate (LIBOR) (with a zero percent floor), as defined, plus an applicable margin of 1 % to 2.25 % .
+Added: (i) the Base Rate, plus an applicable margin of 0 % to 1.25 %, or (ii) LIBOR (with a zero percent floor), as defined, plus an applicable margin of 1 % to 2.25 %.
The Base Rate is calculated as the highest of (a) the federal funds rate plus 0.50 %, (b) the prime rate as published by Citizens Bank, N.A.
−Removed: (Citizens) and (c) thirty-day USD LIBOR, as defined, plus 0.50 % .
−Removed: The applicable margin is determined based upon the ratio of the Company's total debt, net of unrestricted cash up to $ 30,000,000 and certain debt obligations, to earnings before interest, taxes, depreciation, and amortization (EBITDA) as defined in the Credit Agreement.
−Removed: The obligations of the Company under the Credit Agreement may be accelerated upon the occurrence of an event of default, which includes customary events of default under such financing arrangements.
+Added: (Citizens) and (c) thirty-day U.S.
+Added: dollar LIBOR (USD LIBOR), as defined, plus 0.50 %.
+Added: The applicable margin is determined based upon the ratio of the Company's total debt, net of unrestricted cash up to $ 30,000,000 and certain debt obligations, to earnings before interest, taxes, depreciation, and amortization as defined in the Credit Agreement.
+Added: Obligations under the Credit Agreement may be accelerated upon the occurrence of an event of default, which includes customary events of default under such financing arrangements.
In addition, the Credit Agreement contains negative covenants applicable to the Company and its subsidiaries, including financial covenants requiring the Company to maintain a maximum consolidated leverage ratio of 3.75 to 1.00, or for the quarter during which a material acquisition occurs and for the three fiscal quarters thereafter, 4.00 to 1.00, and limitations on making certain restricted payments (including dividends and stock repurchases).
2 unchanged sentences
At year-end 2020, the outstanding balance under the Credit Agreement was $ 217,963,000 , and included $ 45,566,000 of euro-denominated borrowings and $ 4,398,000 of Canadian dollar-denominated borrowings.
−Removed: At year-end 2019 , the Company had $ 135,095,000 of borrowing capacity available under its Credit Agreement, which was calculated by translating its foreign-denominated borrowings using borrowing date foreign exchange rates.
−Removed: See Note 10 , Derivatives, under the heading Interest Rate Swap Agreements , for information relating to the swap agreements used to hedge the Company’s exposure to movements in the three-month LIBOR rate on its U.S.
+Added: At year-end 2020, the Company had $ 181,937,000 of borrowing capacity available under the Credit Agreement, which was calculated by translating its foreign-denominated borrowings using borrowing date foreign exchange rates.
+Added: See Note 10 , Derivatives, under the heading Interest Rate Swap Agreements , for information relating to the swap agreements used to hedge the Company’s exposure to movements in the three-month USD LIBOR on its U.S.
dollar-denominated debt borrowed under the Credit Agreement.
1 unchanged sentence
The weighted average interest rate for the outstanding balance under the Credit Agreement was 1.58 % as of year-end 2020.
−Removed: 2019 Financial Statements
−Removed: Notes to Consolidated Financial Statements
−Removed: Long-Term Obligations (continued)
Commercial Real Estate Loan
−Removed: In 2018, the Company and certain domestic subsidiaries borrowed $ 21,000,000 under a promissory note (Real Estate Loan) which is repayable in quarterly principal installments of $ 262,500 over a ten -year period with the remaining principal balance of $ 10,500,000 due upon maturity.
−Removed: Interest accrues and is payable quarterly in arrears at a fixed rate of 4.45 % per annum.
−Removed: Any voluntary prepayments are subject to a 2 % prepayment fee if paid in the twelve months following July 6, 2019 and are subject to a 1 % prepayment fee if paid in the twelve months following July 6, 2020.
−Removed: Thereafter, no prepayment fee will be applied to voluntary prepayment by the Company.
−Removed: The Real Estate Loan is secured by real estate and related personal property of the Company and certain of its domestic subsidiaries, pursuant to the mortgage and security agreements dated July 6, 2018 (Mortgage and Security Agreements).
−Removed: The obligations of the Company under the Real Estate Loan may be accelerated upon the occurrence of an event of default under the Real Estate Loan and the Mortgage and Security Agreements, which includes customary events of default for financings of this type.
−Removed: In addition, a default under the Credit Agreement or any successor credit facility would be an event of default under the Real Estate Loan.
−Removed: The effective interest rate for the Real Estate Loan, including amortization of debt issuance costs, was 4.60 % as of December 28, 2019 .
+Added: In 2018, the Company and certain domestic subsidiaries borrowed $ 21,000,000 under a ten-year promissory note (Real Estate Loan), which was repayable in quarterly principal installments of $ 262,500 with the remaining principal balance of $ 10,500,000 due July 6, 2028.
+Added: Interest accrued and was payable quarterly in arrears at a fixed rate of 4.45 % per annum.
+Added: In 2020, the Company prepaid the outstanding principal balance on the Real Estate Loan of $ 18,900,000 , together with accrued interest and a prepayment fee of 1.00 % of the outstanding principal balance, resulting in a loss on the extinguishment of debt of $ 189,000 , which is included in selling, general, and administrative expenses in the accompanying consolidated statement of income.
+Added: To prepay the Real Estate Loan, the Company used $ 19,000,000 of borrowings available under the Credit Agreement.
Senior Promissory Notes
3 unchanged sentences
The obligations of the Initial Notes may be accelerated upon an event of default as defined in the Note Purchase Agreement, which includes customary events of default under such financing arrangements.
−Removed: In accordance with the Note Purchase Agreement, the Company may also issue additional senior promissory notes (together with the Initial Notes, the Senior Promissory Notes) up to an additional $ 115,000,000 until the earlier of December 14, 2021 or the thirtieth day after written notice to terminate the issuance and sale of additional notes pursuant to the Note Purchase Agreement.
−Removed: The Senior Promissory Notes are pari passu with the Company’s indebtedness under the Credit Agreement, and any other senior debt of the Company, subject to certain specified exceptions, and participate in a sharing agreement with respect to the obligations of the Company and its subsidiaries under the Credit Agreement.
+Added: In accordance with the Note Purchase Agreement, the Company may also issue additional senior promissory notes (together with the Initial Notes, the Senior Promissory Notes) up to an additional $ 115,000,000 until the earlier of December
+Added: 2020 Financial Statements
+Added: Notes to Consolidated Financial Statements
+Added: 14, 2021 or the thirtieth day after written notice to terminate the issuance and sale of additional notes pursuant to the Note Purchase Agreement.
+Added: The Senior Promissory Notes are pari passu with the Company’s indebtedness under the Credit Agreement, and any other senior debt, subject to certain specified exceptions, and participate in a sharing agreement with respect to the obligations of the Company and its subsidiaries under the Credit Agreement.
The Senior Promissory Notes are guaranteed by certain of the Company’s domestic subsidiaries.
Annual Repayment Requirements
−Removed: The following schedule presents the annual repayment requirements for the Company’s long-term obligations, excluding its finance leases and its sales-leaseback financing arrangement, as of year-end 2019 .
+Added: The following schedule presents the annual repayment requirements for the Company’s Credit Agreement and Initial Notes as of year-end 2020.
(In thousands)
+Added: 2023 $ 219,630
2026 and Thereafter 5,000
4 unchanged sentences
See Note 9 , Leases, for further information relating to the Company's finance leases.
−Removed: 2019 Financial Statements
−Removed: Notes to Consolidated Financial Statements
−Removed: Long-Term Obligations (continued)
Other Borrowings
4 unchanged sentences
The lease arrangement provides for a fixed price purchase option, net of the projected loan receivable, of $ 1,625,000 at the end of the lease term in 2022.
−Removed: If the Company does not exercise the purchase option for the facility, the Company will receive cash from the landlord to settle the loan receivable.
+Added: If the Company does not exercise the purchase option for the facility, it will receive cash from the landlord to settle the loan receivable.
As of year-end 2020, $ 3,817,000 was outstanding under this obligation.
7 unchanged sentences
Outstanding letters of credit and bank guarantees issued on behalf of the Company, principally relating to performance obligations and customer deposit guarantees, totaled $ 18,596,000 at year-end 2020.
−Removed: Certain of the Company's contracts, particularly for stock-preparation and systems orders, require the Company to provide a standby letter of credit or bank guarantee to a customer as beneficiary, limited in amount to a negotiated percentage of the total contract value, in order to guarantee warranty and performance obligations of the Company under the contract.
+Added: Certain of the Company's contracts require the Company to provide a standby letter of credit or bank guarantee to a customer as beneficiary, limited in amount to a negotiated percentage of the total contract value, in order to guarantee warranty and performance obligations of the Company under the contract.
Typically, these standby letters of credit and bank guarantees expire without being drawn by the beneficiary.
+Added: 2020 Financial Statements
+Added: Notes to Consolidated Financial Statements
Right of Recourse
−Removed: In the ordinary course of business, the Company's subsidiaries in China may receive banker's acceptance drafts from customers as payment for their trade accounts receivable.
+Added: In the ordinary course of business, the Company's Chinese subsidiaries may receive banker's acceptance drafts from customers as payment for their trade accounts receivable.
The drafts are noninterest-bearing obligations of the issuing bank and mature within six months of the origination date.
−Removed: The Company's subsidiaries in China may use these banker's acceptance drafts prior to the scheduled maturity date to settle outstanding accounts payable with vendors.
+Added: The Company's Chinese subsidiaries may use these banker's acceptance drafts prior to the scheduled maturity date to settle outstanding accounts payable with vendors.
Banker's acceptance drafts transferred to vendors are subject to customary right of recourse provisions prior to their scheduled maturity dates.
9 unchanged sentences
If the Company were found to be liable for any of the claims or counterclaims against it, the Company would incur a charge against earnings for amounts in excess of legal accruals.
−Removed: 2019 Financial Statements
−Removed: Notes to Consolidated Financial Statements
Restructuring Costs
−Removed: During 2019, the Company experienced a significant decrease in revenues and operating results in its timber-harvesting product line included in its Wood Processing Systems segment, which was acquired in 2017 as part of the Company's acquisition of the forest products business of NII FPG (see Note 2 , Acquisitions).
−Removed: Given the decline in this business, which the Company expects to continue into 2020, the Company undertook a restructuring plan in the fourth quarter of 2019 and incurred $ 192,000 of severance costs, which are included in impairment and restructuring costs in the accompanying consolidated statement of income, associated with the reduction of six employees in Canada.
−Removed: The Company does not expect to incur additional charges related to this restructuring plan.
−Removed: In 2017, the Company constructed a 160,000 square foot manufacturing facility in the United States that integrated its U.S.
+Added: During 2020, the Company recorded restructuring costs of $ 1,118,000 , representing severance costs of $ 659,000 for 34 employees in its Flow Control segment, $ 277,000 for 26 employees in its Industrial Processing segment, and $ 182,000 for four employees in its Material Handling segment.
+Added: The Company also reduced its workforce by 21 employees in its Industrial Processing segment with no associated severance costs.
+Added: The Company took these cost-containment actions to reduce future payroll-related overhead and operating costs in response to the slowdown in the global economy, largely driven by the COVID-19 pandemic.
+Added: During 2019, the Company experienced a significant decrease in revenue and operating results in its timber-harvesting product line included in its Industrial Processing segment, which was acquired in 2017 as part of its acquisition of the forest products business of NII FPG.
+Added: Given the decline in this business, the Company undertook a restructuring plan in the fourth quarter of 2019 and incurred $ 192,000 of severance costs associated with the reduction of six employees in Canada.
+Added: In 2017, the Company constructed a 160,000 square foot manufacturing facility in the United States that integrated its Industrial Processing segment's U.S.
and Swedish papermaking stock-preparation product lines into a single manufacturing facility to achieve economies of scale and greater efficiencies.
−Removed: As a result of the consolidation and integration of these facilities, the Company developed a restructuring plan totaling $ 1,920,000 , primarily related to costs for the relocation of machinery and equipment and administrative offices, severance, and abandonment of leased facilities in the Papermaking Systems segment.
+Added: As a result of the consolidation and integration of these facilities, the Company developed a restructuring plan totaling $ 1,920,000 , primarily related to costs for the relocation of machinery and equipment and administrative offices, severance, and abandonment of leased facilities.
As a result of this plan, the Company recorded restructuring charges of $ 203,000 in 2017 associated with severance costs for the reduction of four employees in the United States and six employees in Sweden.
In 2018, the Company recorded additional restructuring costs of $ 1,717,000 related to this plan, including $ 1,318,000 primarily for the relocation of machinery and equipment and administrative offices, $ 454,000 associated with employee retention costs and abandonment of excess facility and other closure costs, and a reversal of $ 55,000 of severance costs no longer required.
−Removed: These costs are included in impairment and restructuring costs in the accompanying consolidated statement of income.
−Removed: The Company does not expect to incur additional charges related to this restructuring plan.
+Added: The Company does not expect to incur additional charges related to the above restructuring plans.
+Added: Restructuring costs are included in impairment and restructuring costs in the accompanying consolidated statement of income.
+Added: 2020 Financial Statements
+Added: Notes to Consolidated Financial Statements
A summary of the changes in accrued restructuring costs included in other accrued expenses in the accompanying consolidated balance sheet, which are expected to be paid in 2021, are as follows:
−Removed: (In thousands)
+Added: (In thousands) Severance Relocation Other (a) Total
2020 Restructuring Plan
+Added: Provision $ 1,118 $ — $ — $ 1,118
+Added: Usage ( 1,052 ) — — ( 1,052 )
Currency translation ( 5 ) — — ( 5 )
+Added: Balance at January 2, 2021 $ 61 $ — $ — $ 61
+Added: 2019 Restructuring Plan
+Added: Provision $ 192 $ — $ — $ 192
+Added: Usage ( 109 ) — — ( 109 )
+Added: Currency translation 1 — — 1
Balance at December 28, 2019 84 — — 84
+Added: Usage ( 90 ) — — ( 90 )
+Added: Currency translation 6 — — 6
+Added: Balance at January 2, 2021 $ — $ — $ — $ —
2017 Restructuring Plan
1 unchanged sentence
(Reversal) Provision ( 55 ) 1,318 454 1,717
+Added: Usage ( 77 ) ( 1,315 ) ( 448 ) ( 1,840 )
Currency translation ( 8 ) ( 3 ) ( 6 ) ( 17 )
Balance at December 29, 2018 63 — — 63
+Added: Usage — — — —
Balance at December 28, 2019 63 — — 63
−Removed: (a) Includes employee retention costs that are accrued ratably over the period through which employees must work to qualify for a payment and facility closure and clean-up costs.
−Removed: 2019 Financial Statements
−Removed: Notes to Consolidated Financial Statements
−Removed: Under ASC 842, Leases , the Company determines if an arrangement is a lease obligation at inception of the contract.
+Added: Usage ( 3 ) — — ( 3 )
+Added: Balance at January 2, 2021 $ 60 $ — $ — $ 60
+Added: (a) Includes employee retention costs that are accrued ratably over the period through which employees must work to qualify for a payment, as well as facility closure and clean-up costs.
The Company enters into operating and finance lease commitments primarily for its manufacturing and office space, vehicles, and equipment leases that expire on various dates over the next 14 years, some of which include one or more options to extend the lease for up to 5 years.
In addition, the Company leases land associated with certain of its buildings in Canada and China, under long-term leases expiring on various dates ranging from 2032 to 2062, one of which includes an assumed option to extend the lease for up to 10 years.
−Removed: The Company's operating lease ROU assets and corresponding lease liabilities with contract terms greater than 12 months are recognized based on the present value of the future minimum lease payments over the lease term at the commencement date.
−Removed: In determining the present value of future lease payments, the Company utilizes either the rate implicit in the lease if that rate is readily determinable or the Company’s incremental secured borrowing rate commensurate with the term of the underlying lease.
−Removed: In addition, the calculation may include options to extend or terminate the lease when it is reasonably certain that the Company will exercise that option.
−Removed: The Company recognizes its operating lease expense for lease payments on a straight-line basis over the lease term.
−Removed: Variable lease costs are not included in fixed lease payments and, as a result, are excluded from the measurement of the ROU assets and lease liabilities.
−Removed: The Company expenses all variable lease costs as incurred, which were not material for 2019 .
−Removed: The Company's lease agreements often contain lease and non-lease components.
−Removed: For real estate and equipment leases, the Company accounts for the lease and non-lease components as a single lease component.
−Removed: For vehicle leases, the Company does not combine lease and non-lease components.
The components of lease expense are as follows:
−Removed: (In thousands)
−Removed: December 28, 2019
+Added: (In thousands) January 2, 2021 December 28, 2019
Operating Lease Cost $ 5,602 $ 5,534
Short-Term Lease Cost 671 715
+Added: 2020 Financial Statements
+Added: Notes to Consolidated Financial Statements
+Added: (In thousands) January 2, 2021 December 28, 2019
Finance Lease Cost:
3 unchanged sentences
Total Lease Costs $ 7,504 $ 7,556
−Removed: The accompanying consolidated statement of income included expenses from operating leases of $ 5,575,000 in 2018 and $ 4,955,000 in 2017 recognized under Topic 840, the Company's previous lease accounting standard.
+Added: The accompanying consolidated statement of income included expenses from operating leases of $ 5,575,000 in 2018 recognized under Topic 840, the Company's previous lease accounting standard.
Supplemental cash flow information related to leases is as follows:
−Removed: (In thousands)
−Removed: December 28, 2019
+Added: (In thousands) January 2, 2021 December 28, 2019
Cash Paid for Amounts Included in the Measurement of Lease Liabilities:
5 unchanged sentences
Finance leases $ 622 $ 3,847
−Removed: Includes additions related to the transition adjustment for the adoption of ASC 842.
−Removed: The post-adoption additions of operating leases were $ 13,167,000 , of which $ 10,994,000 related to ROU assets obtained as part of the acquisition of SMH.
+Added: (a) Included in 2019 were additions related to the transition adjustment for the adoption of ASC 842.
+Added: The post-adoption additions of operating leases were $ 13,167,000 , of which $ 10,994,000 related to ROU assets obtained as part of the acquisition of SMH in 2019.
The post-adoption additions of finance leases were $ 2,496,000 , of which $ 528,000 related to ROU assets obtained as part of the acquisition of SMH.
−Removed: 2019 Financial Statements
−Removed: Notes to Consolidated Financial Statements
−Removed: Leases (continued)
Supplemental balance sheet information related to leases is as follows:
−Removed: (In thousands, except lease term and discount rate)
−Removed: Balance Sheet Line Item
−Removed: December 28, 2019
+Added: (In thousands) Balance Sheet Line Item January 2, 2021 December 28, 2019
Operating Leases:
−Removed: Short-term liabilities
−Removed: Other current liabilities
−Removed: Long-term liabilities
−Removed: Other long-term liabilities
+Added: ROU assets Other assets $ 25,460 $ 27,139
+Added: Short-term liabilities Other current liabilities $ 4,396 $ 4,184
+Added: Long-term liabilities Other long-term liabilities 22,198 24,411
Total operating lease liabilities $ 26,594 $ 28,595
Finance Leases:
−Removed: ROU assets, at cost
−Removed: Property, plant, and equipment, at cost
−Removed: ROU assets accumulated amortization
−Removed: accumulated depreciation and amortization
−Removed: ROU assets, net
−Removed: Property, plant, and equipment, net
−Removed: Short-term obligations
−Removed: Current maturities of long-term obligations
−Removed: Long-term obligations
−Removed: Long-term obligations
+Added: ROU assets, at cost Property, plant, and equipment, at cost $ 3,707 $ 3,775
+Added: ROU assets accumulated amortization Accumulated depreciation and amortization ( 2,108 ) ( 1,475 )
+Added: ROU assets, net Property, plant, and equipment, net $ 1,599 $ 2,300
+Added: Short-term obligations Current maturities of long-term obligations $ 915 $ 1,116
+Added: Long-term obligations Long-term obligations 716 1,192
Total finance lease liabilities $ 1,631 $ 2,308
−Removed: Weighted Average Remaining Lease Term:
+Added: 2020 Financial Statements
+Added: Notes to Consolidated Financial Statements
+Added: January 2, 2021 December 28, 2019
+Added: Weighted Average Remaining Lease Term (in years):
Operating leases 9.4 10.2
3 unchanged sentences
Finance leases 3.52 % 4.10 %
−Removed: As of December 28, 2019 , future lease payments for lease liabilities are as follows:
−Removed: (In thousands)
+Added: As of January 2, 2021, future lease payments for lease liabilities are as follows:
+Added: Operating Finance
+Added: (In thousands) Leases Leases
+Added: 2021 $ 5,332 $ 951
+Added: 2022 4,359 528
+Added: 2023 3,495 189
+Added: 2026 and Thereafter 13,480 —
Total Future Lease Payments 32,152 1,682
1 unchanged sentence
Present Value of Lease Payments $ 26,594 $ 1,631
−Removed: As of December 28, 2019 , the Company had no significant operating and finance leases that had not yet commenced.
−Removed: Supplemental information is presented for comparative purposes of the Company's fu ture minimum lease payments for noncancelable operating leases under Topic 840, its previous lease accounting standard, as follows:
−Removed: (In thousands)
−Removed: Total Future Minimum Lease Payments
−Removed: 2019 Financial Statements
−Removed: Notes to Consolidated Financial Statements
+Added: As of January 2, 2021, the Company had no significant operating and finance leases that had not yet commenced.
Interest Rate Swap Agreements
−Removed: In 2018, the Company entered into an interest rate swap agreement (2018 Swap Agreement) with Citizens which has a $ 15,000,000 notional value and expires on June 30, 2023.
−Removed: In 2015, the Company also entered into an interest rate swap agreement (2015 Swap Agreement) with Citizens which has a $ 10,000,000 notional value and expires on March 27, 2020.
−Removed: The swap agreements hedge the Company’s exposure to movements in the three-month LIBOR rate on U.S.
+Added: The Company has entered into interest rate swap agreements to hedge its exposure to movements in USD LIBOR on its U.S.
dollar-denominated debt.
−Removed: On a quarterly basis, the Company receives a three-month LIBOR rate and pays a fixed rate of interest of 3.15 % plus an applicable margin as defined in the Credit Agreement on the 2018 Swap Agreement and receives a three-month LIBOR rate and pays a fixed rate of interest of 1.50 % plus an applicable margin as defined in the Credit Agreement on the 2015 Swap Agreement.
−Removed: The 2018 Swap Agreement is subject to a zero percent floor on the three-month LIBOR rate.
−Removed: The interest rate swap agreements are designated as cash flow hedges and the Company has structured its interest rate swap agreements to be 100 % effective.
−Removed: Unrealized gains and losses related to the fair values of the swap agreements are recorded to AOCI, net of tax.
−Removed: In the event of early termination, the Company would receive from or pay to the counterparty the fair values of the interest rate swap agreements, and the unrealized gain or loss outstanding would be recognized in earnings.
−Removed: The counterparty to the interest rate swap agreements could demand an early termination of those agreements if the Company were to be in default under the Credit Agreement, or any agreement that amends or replaces the Credit Agreement in which the counterparty is a member, and if the Company were to be unable to cure the default (see Note 6 , Long-Term Obligations).
+Added: In 2018, the Company entered into an interest rate swap agreement (2018 Swap Agreement) with Citizens which has a $ 15,000,000 notional value and expires on June 30, 2023.
+Added: On a quarterly basis, the Company receives three-month USD LIBOR, which is subject to a zero percent floor, and pays a fixed rate of interest of 3.15 % plus an applicable margin as defined in the Credit Agreement.
+Added: In 2015, the Company entered into an interest rate swap agreement (2015 Swap Agreement) with Citizens which had a $ 10,000,000 notional value and expired on March 27, 2020.
+Added: Under the 2015 Swap Agreement, the Company received three-month USD LIBOR and paid a fixed rate of interest of 1.5 % plus an applicable margin as defined in the Credit Agreement.
+Added: The Company designated its 2018 Swap Agreement as a cash flow hedge and structured it to be 100 % effective.
+Added: Unrealized gains and losses related to the fair value of the 2018 Swap Agreement are recorded to AOCI, net of tax.
+Added: In the event of early termination of the 2018 Swap Agreement, the Company will receive from or pay to the counterparty the fair value of the interest rate swap agreement, and the unrealized gain or loss outstanding will be recognized in earnings.
+Added: The counterparty to the 2018 Swap Agreement could demand an early termination of that agreement if the Company were to be in default under the Credit Agreement, or any agreement that amends or replaces the Credit Agreement in which the counterparty is a member, and if it were to be unable to cure the default.
+Added: See Note 6 , Long-Term Obligations, for further details.
Forward Currency-Exchange Contracts
−Removed: The Company uses forward currency-exchange contracts that typically have maturities of twelve months or less to hedge exposures resulting from fluctuations in currency exchange rates.
+Added: The Company uses forward currency-exchange contracts that generally have maturities of twelve months or less to hedge exposures resulting from fluctuations in currency exchange rates.
Such exposures result from assets and liabilities that are denominated in currencies other than the functional currencies.
2 unchanged sentences
The fair values of forward currency-exchange contracts that are designated as fair value hedges and forward currency-exchange contracts that are not designated as hedges are recognized currently in earnings.
−Removed: The Company recognized within SG&A expenses in the accompanying consolidated statement of income losses of $ 46,000 in 2019 , $ 27,000 in 2018 and $ 1,367,000 in 2017 , associated with forward currency-exchange contracts that were not designated as hedges.
−Removed: The following table summarizes the fair value of the Company's derivative instruments in the accompanying consolidated balance sheet:
2020 Financial Statements
Notes to Consolidated Financial Statements
−Removed: Derivatives (continued)
−Removed: December 28, 2019
−Removed: December 29, 2018
−Removed: (In thousands)
−Removed: Balance Sheet
−Removed: (Liability) (a)
−Removed: (Liability) (a)
+Added: The Company recognized losses of $ 16,000 in 2020, $ 46,000 in 2019 and $ 27,000 in 2018 within SG&A expenses in the accompanying consolidated statement of income associated with forward currency-exchange contracts that were not designated as hedges.
+Added: The following table summarizes the fair value of derivative instruments in the accompanying consolidated balance sheet:
+Added: January 2, 2021 December 28, 2019
+Added: (In thousands) Balance Sheet
+Added: Location Asset
+Added: (Liability) (a) Notional
+Added: Amount (b) Asset
+Added: (Liability) (a) Notional
Derivatives Designated as Hedging Instruments:
Derivatives in an Asset Position:
−Removed: 2015 Swap Agreement
−Removed: Other Current Assets
−Removed: 2015 Swap Agreement
−Removed: Other Long-Term
−Removed: Forward currency-exchange contracts
−Removed: Other Long Term
+Added: 2015 Swap Agreement Other Current Assets $ — $ — $ 11 $ 10,000
+Added: Forward currency-exchange contract Other Current Assets $ 25 $ 842 $ — $ —
Derivatives in a Liability Position:
−Removed: Forward currency-exchange contracts
−Removed: Other Current
−Removed: 2018 Swap Agreement
−Removed: Other Long-Term
+Added: Forward currency-exchange contracts Other Current
+Added: Liabilities $ — $ — $ ( 75 ) $ 4,825
+Added: 2018 Swap Agreement Other Long-Term
+Added: Liabilities $ ( 1,099 ) $ 15,000 $ ( 770 ) $ 15,000
Derivatives Not Designated as Hedging Instruments:
Derivatives in an Asset Position:
−Removed: Forward currency-exchange contracts
−Removed: Other Current
+Added: Forward currency-exchange contracts Other Current Assets $ 12 $ 582 $ 3 $ 387
Derivatives in a Liability Position:
−Removed: Forward currency-exchange contracts
−Removed: Other Current
−Removed: See Note 11 for the fair value measurements relating to these financial instruments.
−Removed: The total 2019 notional amounts are indicative of the level of the Company's recurring derivative activity.
−Removed: The following table summarizes the activity in AOCI associated with the Company's derivative instruments designated as cash flow hedges as of and for the year ended December 28, 2019 :
−Removed: (In thousands)
−Removed: Interest Rate Swap
−Removed: Forward Currency-
−Removed: Exchange Contracts
−Removed: Unrealized Loss, Net of Tax, at December 29, 2018
−Removed: Loss reclassified to earnings (a)
−Removed: Loss recognized in AOCI
+Added: Forward currency-exchange contracts Other Current
+Added: Liabilities $ ( 7 ) $ 825 $ ( 43 ) $ 2,545
+Added: (a) See Note 11 , Fair Value Measurements and Fair Value of Financial Instruments, for the fair value measurements relating to these financial instruments.
+Added: (b) The year-end 2020 notional amounts are indicative of the level of the Company's recurring derivative activity during the year.
+Added: The following table summarizes the activity in AOCI associated with the Company's derivative instruments designated as cash flow hedges as of and for the year ended January 2, 2021:
+Added: (In thousands) Interest Rate Swap
+Added: Agreements Forward Currency-
+Added: Exchange Contracts Total
Unrealized Loss, Net of Tax, at December 28, 2019 $ ( 589 ) $ ( 55 ) $ ( 644 )
−Removed: See Note 14 for the income statement classification.
−Removed: At year-end 2019 , the Company expects to reclassify losses of $ 209,000 from AOCI to earnings over the next twelve months based on the estimated cash flows of the interest rate swap agreements and the maturity dates of the forward currency- exchange contracts.
+Added: Loss (gain) reclassified to earnings (a) 253 ( 21 ) 232
+Added: (Loss) gain recognized in AOCI ( 510 ) 94 ( 416 )
+Added: Unrealized (Loss) Gain, Net of Tax, at January 2, 2021 $ ( 846 ) $ 18 $ ( 828 )
+Added: (a) See Note 14 , Accumulated Other Comprehensive Items, for the income statement classification.
+Added: At year-end 2020, the Company expects to reclassify losses of $ 324,000 from AOCI to earnings over the next twelve months based on the estimated cash flows of the interest rate swap agreement and the maturity date of the forward currency- exchange contract.
Fair Value Measurements and Fair Value of Financial Instruments
Fair value measurement is defined as the price that would be received to sell an asset or paid to transfer a liability in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants at the measurement date.
−Removed: A fair value hierarchy is established, which prioritizes the inputs used in measuring fair value into three broad levels as follows:
2020 Financial Statements
Notes to Consolidated Financial Statements
−Removed: Fair Value Measurements and Fair Value of Financial Instruments (continued)
+Added: A fair value hierarchy is established, which prioritizes the inputs used in measuring fair value into three broad levels as follows:
• Level 1—Quoted prices in active markets for identical assets or liabilities.
2 unchanged sentences
The following table presents the fair value hierarchy for those assets and liabilities measured at fair value on a recurring basis:
−Removed: Fair Value as of December 28, 2019
−Removed: (In thousands)
+Added: Fair Value as of January 2, 2021
+Added: (In thousands) Level 1 Level 2 Level 3 Total
Money market funds and time deposits $ 8,054 $ — $ — $ 8,054
Banker's acceptance drafts (a) $ — $ 9,445 $ — $ 9,445
−Removed: 2015 Swap Agreement
Forward currency-exchange contracts $ — $ 37 $ — $ 37
2 unchanged sentences
Fair Value as of December 28, 2019
−Removed: (In thousands)
+Added: (In thousands) Level 1 Level 2 Level 3 Total
Money market funds and time deposits $ 9,920 $ — $ — $ 9,920
4 unchanged sentences
Forward currency-exchange contracts $ — $ 118 $ — $ 118
−Removed: Included in accounts receivable in the accompanying consolidated balance sheet.
+Added: (a) Included in accounts receivable in the accompanying consolidated balance sheet.
The Company uses the market approach technique to value its financial assets and liabilities, and there were no changes in valuation techniques during 2020.
−Removed: The Company's banker's acceptance drafts are carried at face value which approximates their fair value due to the short-term nature of the negotiable instrument.
−Removed: The fair values of the Company's forward currency-exchange contracts are based on quoted forward foreign exchange rates at the reporting date.
−Removed: The fair values of the Company's interest rate swap agreements are based on LIBOR yield curves at the reporting date.
+Added: Banker's acceptance drafts are carried at face value which approximates their fair value due to the short-term nature of the negotiable instrument.
+Added: The fair values of the forward currency-exchange contracts are based on quoted forward foreign exchange rates at the reporting date.
+Added: The fair values of the interest rate swap agreements are based on LIBOR yield curves at the reporting date.
The forward currency-exchange contracts and interest rate swap agreements are hedges of either recorded assets or liabilities or anticipated transactions and represent the estimated amount the Company would receive or pay upon liquidation of the contracts.
1 unchanged sentence
The carrying value and fair value of the Company's debt obligations, excluding lease obligations and other borrowings, are as follows:
−Removed: December 28, 2019
−Removed: December 29, 2018
−Removed: (In thousands)
+Added: January 2, 2021 December 28, 2019
+Added: (In thousands) Carrying
+Added: Value Carrying
Debt Obligations:
2 unchanged sentences
Senior promissory notes 10,000 11,157 10,000 10,803
−Removed: The carrying value of the Company's revolving credit facility approximates the fair value as the obligation bears variable rates of interest, which adjust frequently, based on prevailing market rates.
−Removed: The fair values of the commercial real estate loan and senior promissory notes are primarily calculated based on quoted market rates plus an applicable margin available to the Company at the respective period ends, which represent Level 2 measurements.
+Added: $ 227,963 $ 229,120 $ 294,844 $ 296,763
+Added: The carrying value of the revolving credit facility approximates the fair value as the obligation bears variable rates of interest, which adjust frequently, based on prevailing market rates.
+Added: The fair values of the commercial real estate loan, which was repaid in July 2020, and senior promissory notes are primarily calculated based on quoted market rates plus an applicable margin available to the Company at the respective period ends, which represent Level 2 measurements.
2020 Financial Statements
1 unchanged sentence
Business Segment and Geographical Information
−Removed: The Company has combined its operating entities into three reportable operating segments, Papermaking Systems, Wood Processing Systems, and Material Handling Systems, and a separate product line, Fiber-based Products, as described below.
+Added: The Company previously reported its financial results by combining its operating entities into three reportable operating segments:
+Added: Papermaking Systems, Wood Processing Systems, and Material Handling Systems, and a separate product line, Fiber-based Products, as described below.
In classifying operational entities into a particular segment, the Company has aggregated businesses with similar economic characteristics, products and services, production processes, customers, and methods of distribution.
−Removed: Papermaking Systems Segment – The Company develops, manufactures, and markets a range of equipment and products for the global papermaking, paper recycling, recycling and waste management, and other process industries.
−Removed: The Company's Papermaking Systems segment consists of the following product lines:
−Removed: Stock-Preparation;
−Removed: Fluid-Handling;
−Removed: and Doctoring, Cleaning, & Filtration.
−Removed: The Company's principal products include custom-engineered stock-preparation systems and equipment for the preparation of wastepaper for conversion into recycled paper and balers and related equipment used in the processing of recyclable and waste materials;
−Removed: fluid-handling systems and equipment used in industrial piping systems to compensate for movement and to efficiently transfer fluid, power, and data;
−Removed: doctoring systems and equipment and related consumables important to the efficient operation of paper machines and other industrial processes;
−Removed: and filtration and cleaning systems essential for draining, purifying, and recycling process water and cleaning fabrics, belts, and rolls in various process industries.
−Removed: Wood Processing Systems Segment – The Company develops, manufactures, and markets debarkers, stranders, chippers, logging machinery, and related equipment used in the harvesting and production of lumber and OSB.
−Removed: Material Handling Systems Segment – The Company develops, manufactures, and markets material handling equipment and systems, including vibratory and conveying equipment, to various process industries, including mining, aggregates, food processing, packaging, and pulp and paper.
−Removed: Fiber-based Products business – The Company manufactures and sells biodegradable, absorbent granules derived from papermaking by-products.
−Removed: These materials are primarily used as carriers in agricultural, home lawn and garden, professional lawn, turf and ornamental applications, and for oil and grease absorption.
+Added: During the first quarter of 2020, the Company changed its reportable operating segments to better align with its strategic initiatives to grow both organically and through acquisitions.
+Added: Such growth and diversification resulted in a change in the internal organization of the Company and how its chief operating decision maker makes operating decisions, assesses the performance of the business, and allocates resources.
+Added: The Company's financial results are reported in three new reportable operating segments:
+Added: Flow Control, Industrial Processing, and Material Handling.
+Added: The Flow Control segment consists of the fluid-handling and doctoring, cleaning, & filtration product lines;
+Added: the Industrial Processing segment consists of the wood processing and stock-preparation product lines (excluding baling products);
+Added: and the Material Handling segment consists of the conveying and screening, baling, and fiber-based product lines.
+Added: Financial information for 2019 and 2018 has been recast to conform to the new segment presentation.
+Added: A description of each segment follows.
+Added: • Flow Control – Custom-engineered products, systems, and technologies that control the flow of fluids used in industrial and commercial applications to keep critical processes running efficiently in the packaging, tissue, food, metals, and other industrial sectors.
+Added: The Company's products include rotary sealing devices, steam systems, expansion joints, doctor systems, roll and fabric cleaning devices, and filtration and fiber recovery systems.
+Added: • Industrial Processing – Equipment, machinery, and technologies used to recycle paper and paperboard and process timber for use in the packaging, tissue, wood products and alternative fuel industries, among others.
+Added: The Company's primary products include stock-preparation systems and recycling equipment, chemical pulping equipment, debarkers, stranders, chippers, and logging machinery.
+Added: In addition, the Company provides industrial automation and digitization solutions to process industries.
+Added: • Material Handling – Products and engineered systems used to handle bulk and discrete materials for secondary processing or transport in the aggregates, mining, food, and waste management industries, among others.
+Added: The Company's primary products include conveying and vibratory equipment and balers.
+Added: In addition, the Company manufactures and sells biodegradable, absorbent granules used as carriers in agricultural applications and for oil and grease absorption.
The following table presents financial information for the Company's reportable operating segments:
−Removed: (In thousands)
−Removed: December 28, 2019
−Removed: December 29, 2018
−Removed: December 30, 2017
−Removed: Business Segment Information
−Removed: Revenues by Product Line:
−Removed: Stock-Preparation
−Removed: Fluid-Handling
−Removed: Doctoring, Cleaning, & Filtration
−Removed: Papermaking Systems
−Removed: Wood Processing Systems
−Removed: Material Handling Systems (a)
−Removed: Fiber-based Products
+Added: (In thousands) January 2, 2021 December 28, 2019 December 29, 2018
+Added: Flow Control $ 225,444 $ 250,339 $ 247,966
+Added: Industrial Processing 261,577 301,948 314,229
+Added: Material Handling (a) 148,007 152,357 71,591
+Added: $ 635,028 $ 704,644 $ 633,786
Income Before Provision for Income Taxes
−Removed: Papermaking Systems (b)
−Removed: Wood Processing Systems (c)
−Removed: Material Handling Systems (a, d)
−Removed: Corporate and Fiber-based Products (e)
+Added: Flow Control (b) $ 51,530 $ 55,343 $ 52,928
+Added: Industrial Processing (c) 42,971 49,599 57,355
+Added: Material Handling (a, d) 14,375 11,600 8,077
+Added: Corporate (e) ( 27,752 ) ( 28,719 ) ( 29,762 )
Total operating income 81,124 87,823 88,598
1 unchanged sentence
Other expense, net (f, g) ( 195 ) ( 6,359 ) ( 2,417 )
+Added: $ 73,687 $ 68,922 $ 79,528
2020 Financial Statements
Notes to Consolidated Financial Statements
−Removed: Business Segment and Geographical Information (continued)
−Removed: (In thousands)
−Removed: December 28, 2019
−Removed: December 29, 2018
−Removed: December 30, 2017
−Removed: Total Assets:
−Removed: Papermaking Systems
−Removed: Wood Processing Systems
−Removed: Material Handling Systems (a)
−Removed: Corporate and Fiber-based Products (h)
+Added: (In thousands) January 2, 2021 December 28, 2019 December 29, 2018
+Added: Flow Control $ 263,141 $ 262,320 $ 256,140
+Added: Industrial Processing 379,965 375,194 374,512
+Added: Material Handling (a) 273,909 281,057 86,003
+Added: Corporate (h) 10,556 20,816 9,094
+Added: $ 927,571 $ 939,387 $ 725,749
Depreciation and Amortization
−Removed: Papermaking Systems
−Removed: Wood Processing Systems
−Removed: Material Handling Systems (a)
−Removed: Corporate and Fiber-based Products
+Added: Flow Control $ 6,333 $ 6,603 $ 5,971
+Added: Industrial Processing 13,163 13,012 13,660
+Added: Material Handling (a) 11,628 12,528 3,756
+Added: Corporate 210 247 181
+Added: $ 31,334 $ 32,390 $ 23,568
Capital Expenditures
−Removed: Papermaking Systems
−Removed: Wood Processing Systems
−Removed: Material Handling Systems (a)
−Removed: Corporate and Fiber-based Products
+Added: Flow Control $ 2,808 $ 2,639 $ 2,791
+Added: Industrial Processing 3,123 5,113 12,288
+Added: Material Handling (a) 1,539 2,144 1,312
+Added: Corporate 125 61 168
+Added: $ 7,595 $ 9,957 $ 16,559
Geographical Information
−Removed: Revenues (i):
United States $ 286,015 $ 309,957 $ 234,487
+Added: China 51,003 66,480 89,645
+Added: Canada 62,059 64,010 61,096
+Added: Germany 23,292 29,076 26,577
+Added: Finland 11,805 11,113 10,934
+Added: Other 200,854 224,008 211,047
+Added: $ 635,028 $ 704,644 $ 633,786
Long-lived Assets (j):
United States $ 40,293 $ 42,094 $ 35,446
−Removed: Comprised of the SMH business, which was acquired on January 2, 2019 (see Note 2 ).
−Removed: Includes $ 787,000 in 2017 of acquisition-related expenses, comprised of acquisition transaction costs and amortization of acquired profit in inventory and backlog.
−Removed: Includes restructuring costs of $ 1,717,000 in 2018 and $ 203,000 in 2017 (see Note 8 ).
−Removed: Includes $ 2,336,000 and $ 192,000 in 2019 of impairment and restructuring costs, respectively, related to the timber-harvesting product line (see Notes 1 and 8 ).
−Removed: Includes $ 252,000 in 2018 and $ 11,163,000 in 2017 of acquisition-related expenses.
−Removed: Includes $ 5,715,000 in 2019 of acquisition-related expenses, comprised of amortization expense associated with acquired profit in inventory and backlog and acquisition transaction costs.
−Removed: Corporate primarily includes general and administrative expenses, including $ 1,321,000 in 2018 of acquisition transaction costs.
−Removed: The Company does not allocate interest and other expense, net to its segments.
−Removed: Includes a settlement loss of $ 5,887,000 in 2019 and a curtailment loss of $ 1,425,000 in 2018 (see Note 3 ).
−Removed: Primarily includes Corporate and Fiber-based Products' cash and cash equivalents, tax assets, ROU assets, and property, plant, and equipment, net.
−Removed: Revenues are attributed to countries based on customer location.
−Removed: Represents property, plant, and equipment, net.
+Added: China 9,844 10,319 11,069
+Added: Finland 8,013 6,960 6,998
+Added: Canada 7,221 7,948 8,193
+Added: Germany 6,051 5,925 6,223
+Added: Other 13,220 12,786 12,228
+Added: $ 84,642 $ 86,032 $ 80,157
+Added: (a) Includes the SMH business in 2020 and 2019, which was acquired on January 2, 2019 (see Note 2 , Acquisitions).
+Added: (b) Includes restructuring costs of $ 659,000 in 2020.
+Added: (c) Includes $ 1,861,000 of impairment charges and $ 277,000 of restructuring costs in 2020.
+Added: Includes $ 2,336,000 of impairment charges and $ 192,000 of restructuring costs in 2019.
+Added: Includes restructuring costs of $ 1,717,000 in 2018.
+Added: Includes acquisition-related expenses of $ 679,000 in 2020 and $ 252,000 in 2018.
+Added: Acquisition-related expenses include amortization expense associated with backlog and acquisition costs.
+Added: (d) Includes restructuring costs of $ 182,000 in 2020.
+Added: Includes acquisition-related expenses of $ 350,000 in 2020 and $ 5,715,000 in 2019.
+Added: Acquisition-related expenses include amortization expense associated with acquired profit in inventory and backlog, and acquisition costs.
+Added: (e) Represents general and administrative expenses, including $ 1,321,000 of acquisition transaction costs in 2018.
+Added: (f) The Company does not allocate interest and other expense, net to its segments.
+Added: (g) Includes a settlement loss of $ 5,887,000 in 2019 and a curtailment loss of $ 1,425,000 in 2018.
+Added: (h) Primarily includes cash and cash equivalents, tax assets, ROU assets, and property, plant, and equipment, net.
+Added: (i) Revenue is attributed to countries based on customer location.
+Added: (j) Represents property, plant, and equipment, net.
2020 Financial Statements
2 unchanged sentences
Basic and diluted EPS were calculated as follows:
−Removed: (In thousands, except per share amounts)
−Removed: December 28, 2019
−Removed: December 29, 2018
−Removed: December 30, 2017
+Added: (In thousands, except per share amounts) January 2, 2021 December 28, 2019 December 29, 2018
Net Income Attributable to Kadant $ 55,196 $ 52,068 $ 60,413
8 unchanged sentences
Changes in each component of AOCI, net of tax, are as follows:
−Removed: (In thousands)
−Removed: Foreign Currency Translation Adjustment
−Removed: Pension and Other Post-Retirement Benefit Liability Adjustments
−Removed: Deferred Loss on Cash Flow Hedges
+Added: (In thousands) Foreign Currency Translation Adjustment Pension and Other Post-Retirement Benefit Liability Adjustments Deferred Loss on Cash Flow Hedges Total
Balance at December 28, 2019 $ ( 36,145 ) $ ( 831 ) $ ( 644 ) $ ( 37,620 )
−Removed: Other comprehensive loss before reclassifications
+Added: Other comprehensive items before reclassifications 18,251 93 ( 416 ) 17,928
Reclassifications from AOCI — ( 32 ) 232 200
Net current period other comprehensive items 18,251 61 ( 184 ) 18,128
−Removed: Balance at December 28, 2019
+Added: Balance at January 2, 2021 $ ( 17,894 ) $ ( 770 ) $ ( 828 ) $ ( 19,492 )
2020 Financial Statements
Notes to Consolidated Financial Statements
−Removed: Accumulated Other Comprehensive Items (continued)
Amounts reclassified out of AOCI are as follows:
−Removed: (In thousands)
−Removed: December 28, 2019
−Removed: December 29, 2018
−Removed: December 30, 2017
−Removed: Statement of Income Line Item
+Added: (In thousands) January 2, 2021 December 28, 2019 December 29, 2018 Statement of Income Line Item
Retirement Benefit Plans (a)
−Removed: Recognized net actuarial loss
−Removed: Other expense, net
−Removed: Amortization of prior service cost
−Removed: Other expense, net
−Removed: Settlement and curtailment losses
−Removed: Other expense, net
+Added: Recognized net actuarial loss $ ( 66 ) $ ( 70 ) $ ( 740 ) Other expense, net
+Added: Amortization of prior service cost ( 55 ) ( 6 ) ( 92 ) Other expense, net
+Added: Settlement and curtailment losses — ( 5,887 ) ( 1,425 ) Other expense, net
Total expense before income taxes ( 121 ) ( 5,963 ) ( 2,257 )
−Removed: Income tax (provision) benefit
−Removed: Provision for income taxes
+Added: Income tax benefit (provision) 153 ( 641 ) 549 Provision for income taxes
+Added: 32 ( 6,604 ) ( 1,708 )
Cash Flow Hedges (b)
−Removed: Interest rate swap agreements
−Removed: Interest expense
−Removed: Forward currency-exchange contracts
−Removed: Cost of revenues
+Added: Interest rate swap agreements ( 333 ) ( 8 ) ( 11 ) Interest expense
+Added: Forward currency-exchange contracts 28 ( 169 ) 22 Cost of revenue
Total (expense) income before income taxes ( 305 ) ( 177 ) 11
−Removed: Income tax benefit (provision)
−Removed: Provision for income taxes
+Added: Income tax benefit (provision) 73 54 ( 3 ) Provision for income taxes
+Added: ( 232 ) ( 123 ) 8
Total Reclassifications $ ( 200 ) $ ( 6,727 ) $ ( 1,700 )
−Removed: Included in the computation of net periodic benefit cost.
−Removed: See Note 3 for additional information.
−Removed: See Note 10 for additional information.
+Added: (a) Included in the computation of net periodic benefit cost.
+Added: See Note 3 , Employee Benefit Plans, for additional information.
+Added: (b) See Note 10 , Derivatives, for additional information.
Unaudited Quarterly Information
−Removed: 2019 (In thousands, except per share amounts)
+Added: 2020 (In thousands, except per share amounts) First Second Third Fourth
+Added: Revenue $ 159,127 $ 152,860 $ 154,610 $ 168,431
+Added: Gross Profit $ 68,323 $ 66,448 $ 68,316 $ 74,219
Net Income Attributable to Kadant $ 12,531 $ 11,607 $ 14,851 $ 16,207
Earnings per Share Attributable to Kadant
+Added: Basic $ 1.10 $ 1.01 $ 1.29 $ 1.41
+Added: Diluted $ 1.09 $ 1.00 $ 1.28 $ 1.40
Cash Dividends Declared per Common Share $ 0.24 $ 0.24 $ 0.24 $ 0.24
−Removed: 2018 (In thousands, except per share amounts)
+Added: 2019 (In thousands, except per share amounts) First Second Third Fourth
+Added: Revenue $ 171,316 $ 177,165 $ 173,504 $ 182,659
+Added: Gross Profit $ 70,515 $ 74,371 $ 74,247 $ 74,627
Net Income Attributable to Kadant $ 10,900 $ 16,304 $ 16,115 $ 8,749
Earnings per Share Attributable to Kadant
+Added: Basic $ 0.98 $ 1.46 $ 1.43 $ 0.77
+Added: Diluted $ 0.96 $ 1.42 $ 1.41 $ 0.76
Cash Dividends Declared per Common Share $ 0.23 $ 0.23 $ 0.23 $ 0.23
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.