What changed in this filing

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Item 1. Business

2022-03-01 compared with 2021-03-02 · 68 added, 50 removed, 234 unchanged (34% of the section changed)

1 unchanged sentence

trades on the New York Stock Exchange under the ticker symbol "KAI."

Unless otherwise noted, references to 2020, 2019, and 2018 in this Annual Report on Form 10-K are to our fiscal years ended January 2, 2021, December 28, 2019, and December 29, 2018, respectively.

Unless otherwise noted, references to 2021, 2020, and 2019 in this Annual Report on Form 10-K are to our fiscal years ended January 1, 2022, January 2, 2021, and December 28, 2019, respectively.

Description of Our Business

We are a global supplier of high-value, critical components and engineered systems used in process industries worldwide.

Our products, technologies, and services play an integral role in enhancing process efficiency, optimizing energy utilization, and maximizing productivity in resource-intensive industries.

Our operations are comprised of three reportable operating segments, Flow Control, Industrial Processing, and Material Handling.

We are a global supplier of technologies and engineered systems that drive Sustainable Industrial Processing.

Our products and services play an integral role in enhancing efficiency, optimizing energy utilization, and maximizing productivity in process industries while helping our customers advance their sustainability initiatives with products that reduce waste or generate more yield with fewer inputs, particularly fiber, energy, and water.

Producing more while consuming less is a core aspect of Sustainable Industrial Processing and a major element of the strategic focus of our three reportable operating segments:

Flow Control, Industrial Processing, and Material Handling.

We have a long and well-established history of developing, manufacturing, and servicing a range of products and equipment used in process industries such as paper, packaging, and tissue;

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We continue to pursue acquisition opportunities.

See Note 2 , Acquisitions, in the accompanying consolidated financial statements for further details of our recent acquisitions.

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 our bookings and results of operations for a substantial part of 2020.

The impact of the COVID-19 pandemic, including the resulting economic impact, continues to evolve and we are closely monitoring its impact on all aspects of our business and will continue to take actions that are in the best interests of our employees, customers, and stakeholders.

In 2021, we acquired all partnership interests and shares in The Clouth Group of Companies (Clouth) for $92.9 million, net of cash acquired plus debt assumed.

The majority of the Clouth companies were acquired on July 19, 2021 and the acquisition of the last legal entity occurred on August 10, 2021.

Clouth, which is included in our Flow Control segment, is a leading European manufacturer of doctor blades and related equipment used in the production of paper, packaging, and tissue.

On August 23, 2021, we acquired all the outstanding equity securities in East Chicago Machine Tool Corporation (Balemaster) and certain assets of affiliated companies for $53.7 million, net of cash acquired.

Balemaster, which is included in our Material Handling segment, is a leading U.S.

manufacturer of horizontal balers and related equipment used primarily for recycling packaging waste at corrugated box plants and large retail and distribution centers.

See Note 2 , Acquisitions, in the accompanying consolidated financial statements for further details regarding our recent acquisitions.

Business Segments and Products

We previously reported our financial results by combining operating entities into three reportable operating segments:

Papermaking Systems, Wood Processing Systems, and Material Handling Systems, and a separate product line, Fiber-based Products.

During the first quarter of 2020, we changed our reportable operating segments to better align with our strategic initiatives to grow both organically and through acquisitions.

See Note 12 , Business Segment and Geographical Information, in the accompanying consolidated financial statements for further detail regarding our segments.

Accordingly, we describe our business and products below in our three new reportable operating segments:

We report our financial results by combining operating entities into three reportable operating segments:

Flow Control, Industrial Processing, and Material Handling.

The Flow Control segment consists of our fluid-handling and doctoring, cleaning, & filtration product lines;

the Industrial Processing segment consists of our wood processing and stock-preparation product lines;

and the Material Handling segment consists of our conveying and vibratory, baling, and fiber-based product lines.

Note 12 , Business Segment and Geographical Information, in the accompanying consolidated financial statements for financial information regarding our segments.

Flow Control Segment

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A doctor system consists of the structure supporting the blade and the blade holder.

– Profiling systems:

We offer profiling systems that control moisture, web curl, and gloss during paper converting.

– Doctor blades:

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– Recycling and approach flow systems:

Our equipment includes pulping, screening, cleaning, and de-inking systems that blend pulp mixtures and remove contaminants, such as ink, glue, metals, and other impurities, to prepare them for entry into the paper machine during the production of recycled paper.

Our equipment includes pulping, screening, cleaning, and de-inking systems that process fiber and remove contaminants, such as ink, glue, metals, and other impurities, to prepare them for entry into the paper machine during the production of recycled paper.

– Virgin pulping process equipment:

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In addition, we manufacture and sell biodegradable, absorbent granules used as carriers in agricultural applications and for oil and grease absorption.

The Material Handling segment consists of our conveying and screening, baling, and fiber-based product lines.

Conveying and Screening

We develop, manufacture, and market conveying and screening equipment and systems to various process industries, including mining, aggregates, food processing, packaging, and pulp and paper.

Our principal conveying and screening products include:

The Material Handling segment consists of our conveying and vibratory, baling, and fiber-based product lines.

Conveying and Vibratory Equipment

We develop, manufacture, and market conveying and vibratory equipment and systems to various process industries, including mining, aggregates, food processing, packaging, and pulp and paper.

Our principal conveying and vibratory products include:

– Vibratory equipment:

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transport idlers, power terminal units, and electric controls, used to transport bulk materials in harsh above- and below-ground mining environments;

and screws, conveyors and bucket elevators used for material handling operations in agricultural, food, and paper markets.

and screw conveyors and bucket elevators used for material handling operations in agricultural, food, and paper markets.

We develop, manufacture, and market individual components and equipment for baling recyclable and waste materials to prepare them for secondary processing, transport, or storage.

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In addition, within our Flow Control, Industrial Processing, and Material Handling segments, no customer accounted for more than 10% of each of the respective segment's revenue.

Approximately 55% in 2020, 56% in 2019, and 63% in 2018, of our consolidated revenues were to customers outside the United States, principally in Europe, Asia and Canada.

Our backlog of firm orders was as follows:

(In millions) January 2, 2021 December 28, 2019

Approximately 58% in 2021, 55% in 2020, and 56% in 2019, of our consolidated revenue were to customers outside the United States, principally in Europe, Asia and Canada.

Our backlog of firm orders by segment are as follows:

(In millions) January 1, 2022 January 2, 2021

Flow Control $ 73.1 $ 48.7

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$ 309.9 $ 193.0

We anticipate that substantially all the backlog at year-end 2020 will be shipped or completed during 2021.

We anticipate that the majority of the backlog at year-end 2021 will be shipped or completed during 2022, with the remainder expected to be shipped or completed within 15 months after year-end 2022.

Some of our capital orders can be canceled by the customer upon payment of a cancellation fee.

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If these mills were unable or unwilling to supply us with sufficient fiber, we would be forced to find one or more alternative suppliers for this raw material.

To date, our raw materials have generally been available and we have not needed to maintain raw material inventories in excess of our current needs.

To date, our raw materials have generally been available to meet our current needs.

Patents, Licenses, and Trademarks

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We also rely on technical know-how, trade secrets, and trademarks to maintain our competitive position.

We also enter into license agreements with others to grant and/or receive rights to patents and know-how.

We also enter into license agreements with others to grant and/or receive rights to patents, trademarks, and know-how.

No particular patent, or related group of patents, is so important that its expiration or loss would significantly affect our operations.

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We license one of our two significant product brand names, Link-Belt®, from a third party pursuant to a trademark license agreement.

More than a third of our Material Handling segment revenue in 2020 was generated by sales of conveying equipment under the Link-Belt® name.

More than a quarter of our Material Handling segment revenue in 2021 was generated by sales of conveying equipment under the Link-Belt® name.

Under the terms of the license agreement, we have a worldwide, exclusive, royalty-free, perpetual license to use the Link-Belt® trademark in connection with such products.

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We believe that our operations comply in all material respects with applicable laws and regulations.

Our compliance with these requirements did not change during the past year, and is not expected to have a material adverse effect on our capital expenditures, earnings, or competitive position.

Our compliance with these requirements did not change during the past year, and is not expected to have a material adverse effect on our cash flows, earnings, or competitive position.

For more information on risks related to government regulations, please see Part I, Item 1A , “Risk Factors.”

Seasonal Influences

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We have numerous programs to attract and retain our talent, including leadership and executive development programs as well as technical and other training.

We build partnerships with universities and associations to promote future careers in manufacturing.

We partner with vocational schools, community colleges, universities and associations to promote future careers in manufacturing through training and apprenticeship programs.

We also have a well-established performance management and talent development process in which managers provide regular feedback and coaching to develop employees.

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Throughout the COVID-19 pandemic, we have remained focused on protecting the health and safety of our employees while meeting the needs of our customers.

Shortly after the outset of COVID-19, we adopted enhanced safety measures and practices across our facilities to protect employee health and safety and ensure a reliable supply of essential products to our customers.

These enhanced safety measures and practices included working remotely when employees are not required to be physically present, social distancing, wearing face coverings, adding safety and hygiene protocols within our facilities, restricting travel and other safeguards.

We have adopted enhanced safety measures and practices across our facilities to protect employee health and safety and ensure a reliable supply of essential products to our customers.

These enhanced safety measures and practices include encouraging vaccinations and the use of face coverings, adding safety and hygiene protocols within our facilities, and other safeguards.

We monitor and track the impact of COVID-19 on our employees and within our operations, and proactively modify or adopt new practices to promote their health and safety.

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McKenney 60 Executive Vice President and Chief Financial Officer (2002)

Krause 45 Senior Vice President, General Counsel, and Secretary (2018)

Mitchell 53 Senior Vice President, Corporate Development (2021)

Selwood 53 Senior Vice President and Chief Accounting Officer (2015)

Krause 44 Vice President, General Counsel, and Secretary (2018)

Flynn 70 Vice President (2019)

Thomas Andrew Blanchard 63 Vice President (2021)

Colwell 56 Vice President (2019)

Flynn 71 Vice President (2019)

Westerhout 57 Vice President (2021)

Powell has been our chief executive officer and a director since July 2019 and our president since April 2019.

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Powell was the chairman and chief executive officer of Castion Corporation from April 2003 through December 2007.

Langevin has been an executive vice president and chief operating officer since April 2019 and has supervisory responsibility for our fluid-handling, doctoring, cleaning, & filtration, and conveying and screening businesses.

Langevin, who will retire on March 31, 2022, has been an executive vice president and chief operating officer since April 2019 and has supervisory responsibility for our fluid-handling, doctoring, cleaning, & filtration, and conveying and vibratory businesses.

From March 2018 to April 2019, he served as executive vice president and co-chief operating officer.

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(now our Kadant Solutions division) and before that served as its senior vice president and vice president of operations.

Prior to 2001, Mr.

Prior to 2001,

Langevin managed several product groups and departments within Kadant Web Systems after joining us in 1986 as a product development engineer.

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McKenney held various financial positions at Albany International and Coopers & Lybrand LLP.

Selwood has been a senior vice president and our chief accounting officer since May 2019.

From June 2015 to May 2019, she was a vice president and our chief accounting officer.

She served as our corporate controller from 2007 to 2015 and as assistant controller from 2004 to 2007.

Prior to 2004, Ms.

Selwood held various financial positions at Arthur Andersen LLP and Genuity Inc.

Krause has been a vice president and our general counsel and secretary since July 2018.

She served as our deputy general counsel from December 2017 to July 2018.

Krause has been our senior vice president, general counsel, and secretary since November 2021 and served as our vice president, general counsel and secretary from July 2018 to November 2021.

She served as our deputy general counsel from December 2017 to June 2018.

Prior to joining us, Ms.

Krause was head of commerce cloud commercial legal of salesforce.com, inc., a global SAAS software company, from 2016 to 2017.

She previously served as an assistant general counsel of Demandware, Inc., a global SAAS software company, from 2014 to 2016, and assistant general counsel of Entegris, Inc., a multinational manufacturing company, from 2011 to 2014.

Krause was head of commerce cloud commercial legal at salesforce.com, inc., a global SAAS software company, from July 2016 to December 2017.

She previously served assistant general counsel of Demandware, Inc., a global SAAS software company, from January 2014 to July 2016, prior to its acquisition by salesforce.com, and was assistant general counsel of Entegris, Inc., a provider of advanced materials and materials handling solutions, from 2011 to 2014.

Prior to 2011, Ms.

Krause was a lawyer in the corporate transactional department of Wilmer Cutler Pickering Hale and Dorr LLP.

Flynn has been a vice president since July 2019 and has supervisory responsibility for our stock-preparation and baling product lines.

Prior to July 2019, Mr.

Flynn was president of our Kadant Black Clawson LLC subsidiary, which manufactures stock-preparation equipment primarily for the pulp and paper industry, from 2003 to 2019.

Colwell has been a vice president since July 2019 and has supervisory responsibility for our wood processing and fiber-based products businesses.

Prior to July 2019, Mr.

Colwell served as the president of Kadant Carmanah Design, a division of our subsidiary Kadant Canada Corp., from 2013 to 2019.

Mitchell has been our senior vice president, corporate development, since May 2019 and served as our vice president, corporate development from 2016 to 2019 and our director of corporate development from 2013 to 2016.

Prior to joining Kadant, Ms.

Mitchell was a principal at NewDelta Partners, an investment banking and strategic advisory firm, and investment director at 3i, a global private equity firm where she was responsible for investing in technology companies.

Selwood has been our senior vice president and chief accounting officer since May 2019 and served as our vice president and chief accounting officer from 2015 to 2019.

Prior to that, she served as our corporate controller from 2007 to 2015 and as assistant controller from 2004 to 2007.

Prior to 2004, Ms.

Selwood held various financial positions at Arthur Andersen LLP and Genuity Inc.

Blanchard has been our vice president since November 2021 with supervisory responsibility for portions of our Material Handling segment.

Blanchard previously served as the president of our Syntron Material Handling subsidiaries (SMH) since January 2019 when we acquired SMH.

He also served as the president of SMH from June 2014 to January 2019 prior to our acquisition.

SMH, which is part of our Material Handling segment, designs and manufactures conveyors and vibratory feeders for bulk material handling in the aggregates, mining and food industries.

Colwell has been our vice president since July 2019 with supervisory responsibility for our wood processing business, which is part of our Industrial Processing segment.

He previously had responsibility for our fiber-based products business from July 2019 to November 2021.

Colwell previously served as the president of Kadant Carmanah Design, a division of our subsidiary Kadant Canada Corp., from 2013 to 2019.

Carmanah, which is part of our wood processing business, designs and manufactures equipment for the oriented strand board industry.

Colwell previously served as the president and chief executive officer of Carmanah Design and Manufacturing Inc.

from April 2010 until its acquisition by us in November 2013.

Flynn has been our vice president since July 2019 with supervisory responsibility for our stock-preparation business, which is part of our Industrial Processing segment, and our baling product line, which is part of our Material Handling segment.

Prior to July 2019, Mr.

Flynn served as the president of our Kadant Black Clawson LLC subsidiary from 2003 to 2019.

Kadant Black Clawson manufactures stock-preparation equipment primarily for the pulp and paper industry.

Westerhout has been our vice president since November 2021 with supervisory responsibilities for our Flow Control segment.

Westerhout previously served as the vice president of our flow control subsidiaries in Europe since April 2014.

These businesses are part of our Flow Control segment.

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

What changed 10-K

Item 1. Business