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
−Removed: 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 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 2021 our internal control over financial reporting was effective based on the criteria issued by COSO.
+Added: In the third quarter of 2021, we acquired Clouth and Balemaster.
+Added: Our audited consolidated financial statements include the results of Clouth and Balemaster since their dates of acquisition, including total assets of $174.5 million and total revenue of $32.3 million as of and for the fiscal year ended January 1, 2022, but management's assessment does not include an assessment of the internal control over financial reporting of the Clouth and Balemaster businesses.
Because of inherent limitations, internal control over financial reporting may not prevent or detect misstatements.
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: Our independent registered public accountants, KPMG LLP, have issued an audit report on our internal control over financial reporting, which is included herein on page F-2 and incorporated into this Item 9A by reference.
+Added: Our independent registered public accountants, KPMG LLP, have issued an audit report on our internal control over financial reporting, which is included herein on pages F-2 and F-3 and incorporated into this Item 9A by reference.
Changes in Internal Control over Financial Reporting
2 unchanged sentences
Not applicable.
+Added: Disclosure Regarding Foreign Jurisdictions that Prevent Inspections
+Added: Not applicable.
Directors, Executive Officers, and Corporate Governance
20 unchanged sentences
Total 106,735 (a) $ — (b) 427,800 (c)
−Removed: __________________________________
−Removed: (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.
−Removed: (b) Consists of the weighted average exercise price of the 27,225 stock options outstanding on January 2, 2021.
−Removed: 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: (a) Consists of 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) Shares of restricted stock units and performance-based restricted stock units outstanding on January 1, 2022 had a weighted average grant date fair value of $127.70.
(c) Includes an aggregate of 91,643 shares of common stock issuable under our employees' stock purchase plan in connection with current and future offering periods under the plan.
2 unchanged sentences
Principal Accountant Fees and Services
−Removed: This information will be included under the heading "Independent Registered Public Accounting Firm" in our 2021 proxy statement and is incorporated in this report by reference.
+Added: Our independent registered public accounting firm is KPMG LLP , located in Boston, Massachusetts , auditor firm ID:
+Added: The information required by this item will be included under the heading "Independent Registered Public Accounting Firm" in our 2022 proxy statement and is incorporated in this report by reference.
Exhibits and Financial Statement Schedules
27 unchanged sentences
001-11406] and incorporated in this document by reference).
−Removed: 10.4* Amended and Restated Equity Incentive Plan of the Registrant (filed as Exhibit 10.5 to the Registrant's Annual Report on Form 10-K for the year ended January 3, 2009 [File No.
−Removed: 001-11406] and incorporated in this document by reference).
+Added: 10.4* Employment Contract Statutory Director between The Johnson Corporation Holland B.V.
+Added: and Fredrik H.
+Added: Westerhout dated November 29, 2004.
10.5* Amended and Restated 2006 Equity Incentive Plan of the Registrant effective as of May 17, 2017 (filed as Exhibit 10.3 to the Registrant's Quarterly Report on Form 10-Q for the quarter ended July 1, 2017 [File No.
2 unchanged sentences
001-11406] and incorporated in this document by reference).
−Removed: 10.7* Summary of non-employee director compensation of the Registrant (filed as Exhibit 10.
−Removed: 1 to the Registrant's Quarterly Report on Form 10-Q for the quarter ended March 28 , 20 20 [ File No.
+Added: 10.7* Summary of non-employee director compensation of the Registrant (filed as Exhibit 10.1 to the Registrant's Quarterly Report on Form 10-Q for the quarter ended April 3, 2021 [File No.
001-11406] and incorporated in this document by reference).
−Removed: 10.8* Transition and Executive Chairman Agreement between the Registrant and Jonathan W.
−Removed: Painter dated February 13, 2019 (filed as Exhibit 10.14 to the Registrant’s Annual Report on Form 10-K for the fiscal year ended December 29, 2018 [File No.
+Added: 10.8* Executive Transition Agreement between the Registrant and Eric T.
+Added: Langevin dated October 27, 2021 (filed as Exhibit 10 to the Registrant’s Quarterly Report on Form 10-Q for the quarter end ed O ctober 2 , 2021 [File No.
001-11406] and incorporated in this document by reference).
−Removed: Exhibit Index
−Removed: 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.
001-11406] and incorporated in this document by reference).
+Added: Exhibit Index
+Added: Number Description of Exhibit
10.10* Form of Time-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 10.2 to the Registrant's Quarterly Report on Form 10-Q for the quarter ended March 29, 2014 [File No.
001-11406] and incorporated in this document by reference).
−Removed: 10.11* Form of Stock Option Agreement between the Registrant and its executive officers used for stock option awards (filed as Exhibit 10.21 to the Registrant's Annual Report on Form 10-K for the year ended January 2, 2010 [File No.
−Removed: 001-11406] and incorporated in this document by reference).
−Removed: 10.12* Notice of Amendment to Stock Option Agreements between the Registrant and its executive officers used for stock option awards (filed as Exhibit 10.2 to the Registrant's Quarterly Report on Form 10-Q for the quarter ended September 28, 2013 [File No.
−Removed: 001-11406] and incorporated in this document by reference).
10.11* 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 31, 2018 [File No.
10 unchanged sentences
001-11406] and incorporated in this document by reference).
+Added: 10.17 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 year ended December 29, 2018 [File No.
+Added: 001-11406] and incorporated in this document by reference).
+Added: 10.18 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).
Exhibit Index
Description of Exhibit
−Removed: 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.
−Removed: 25 to the Registrant's Annual Report on Form 10-K for the year ended December 2 9 , 201 8 [File No.
+Added: 10.19 Fourth Amendment, dated as of May 4, 2021, 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, and Citizens Bank, N.A., as Administrative Agent and Multicurrency Administrative Agent (filed as Exhibit 10.1 to the Registrant's Quarterly Report on Form 10-Q for the quarter ended July 3, 2021 [File No.
001-11406] and incorporated in this document by reference).
−Removed: 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: 10.20 Joinder Agreement, dated as of May 4, 2021, 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, and 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 July 3, 2021 [File No.
001-11406] and incorporated in this document by reference).
+Added: 10.21 Fifth Amendment, dated as of December 9, 2021, 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, and Citizens Bank, N.A., as Administrative Agent and Multicurrency Administrative Agent.
10.22 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.
15 unchanged sentences
31.1 Certification of the Principal Executive Officer of the Registrant Pursuant to Rule 13a-14(a) and Rule 15d-14(a) of the Securities Exchange Act of 1934, as amended.
−Removed: 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.
Exhibit Index
Description of Exhibit
+Added: 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.
32 Certification of the Chief Executive Officer and the Chief Financial Officer of the Registrant pursuant to 18 U.S.C.
15 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: March 2, 2021 By:
+Added: March 1, 2022
/s/ Jeffrey L.
28 unchanged sentences
Report of Independent Registered Public Accounting Firm
−Removed: Consolidated Balance Sheet as of January 2, 2021 and December 28, 2019
−Removed: Consolidated Statement of Income for the fiscal years ended January 2, 2021, December 28, 2019, and December 29, 2018
−Removed: Consolidated Statement of Comprehensive Income for the fiscal years ended January 2, 2021, December 28, 2019, and December 29, 2018
−Removed: Consolidated Statement of Cash Flows for the fiscal years ended January 2, 2021, December 28, 2019, and December 29, 2018
−Removed: Consolidated Statement of Stockholders' Equity for the fiscal years ended January 2, 2021, December 28, 2019, and December 29, 2018
+Added: Consolidated Balance Sheet as of January 1, 2022 and January 2, 2021
+Added: Consolidated Statement of Income for the fiscal years ended January 1, 2022, January 2, 2021, and December 28, 2019
+Added: Consolidated Statement of Comprehensive Income for the fiscal years ended January 1, 2022, January 2, 2021, and December 28, 2019
+Added: Consolidated Statement of Cash Flows for the fiscal years ended January 1, 2022, January 2, 2021, and December 28, 2019
+Added: Consolidated Statement of Stockholders' Equity for the fiscal years ended January 1, 2022, January 2, 2021, and December 28, 2019
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 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: and subsidiaries (the Company) as of January 1, 2022 and January 2, 2021, 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 1, 2022, and the related notes (collectively, the consolidated financial statements).
We also have audited the Company’s internal control over financial reporting as of January 1, 2022, 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 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.
+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 1, 2022 and January 2, 2021, and the results of its operations and its cash flows for each of the fiscal years in the three-year period ended January 1, 2022, in conformity with U.S.
generally accepted accounting principles.
Also in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of January 1, 2022 based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission.
+Added: The Company acquired The Clouth Group of Companies (Clouth) and East Chicago Machine Tool Corporation (Balemaster) during the fiscal year ended January 1, 2022, and management excluded from its assessment of the effectiveness of the Company’s internal control over financial reporting as of January 1, 2022, Clouth’s and Balemaster’s internal control over financial reporting associated with total assets of $174.5 million and total revenues of $32.3 million included in the consolidated financial statements of the Company as of and for the fiscal year ended January 1, 2022.
+Added: Our audit of internal control over financial reporting of the Company also excluded an evaluation of the internal control over financial reporting of Clouth and Balemaster.
Basis for Opinions
14 unchanged sentences
A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company;
−Removed: (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company;
+Added: (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and
+Added: Report of Independent Registered Public Accounting Firm (continued)
+Added: expenditures of the company are being made only in accordance with authorizations of management and directors of the company;
and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.
1 unchanged sentence
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: Report of Independent Registered Public Accounting Firm (continued)
Critical Audit Matter
21 unchanged sentences
Consolidated Balance Sheet
−Removed: (In thousands, except share and per share amounts) January 2, 2021 December 28, 2019
+Added: (In thousands, except share and per share amounts) January 1, 2022 January 2, 2021
Current Assets:
4 unchanged sentences
Inventories 134,356 106,814
−Removed: Unbilled revenue 7,576 13,162
+Added: Contract assets 8,626 7,576
Other current assets 29,530 17,250
7 unchanged sentences
Current Liabilities:
−Removed: Current maturities of long-term obligations (Note 6) $ 1,474 $ 2,851
+Added: Short-term obligations and current maturities of long-term obligations (Note 6) $ 5,356 $ 1,474
Accounts payable 59,250 32,264
24 unchanged sentences
Consolidated Statement of Income
−Removed: (In thousands, except per share amounts) January 2, 2021 December 28, 2019 December 29, 2018
+Added: (In thousands, except per share amounts) January 1, 2022 January 2, 2021 December 28, 2019
Revenue (Notes 1 and 12) $ 786,579 $ 635,028 $ 704,644
3 unchanged sentences
Research and development expenses 11,403 11,298 10,884
−Removed: Impairment and restructuring costs (Notes 1 and 8) 2,979 2,528 1,717
+Added: Impairments and other costs, net (Notes 1 and 8) 465 2,979 2,528
669,869 553,904 616,821
17 unchanged sentences
Consolidated Statement of Comprehensive Income
−Removed: (In thousands) January 2, 2021 December 28, 2019 December 29, 2018
+Added: (In thousands) January 1, 2022 January 2, 2021 December 28, 2019
Net Income $ 84,881 $ 55,739 $ 52,564
3 unchanged sentences
( 22 ) 180 ( 282 )
−Removed: Effect of pension and other post-retirement plan amendments (net of tax of $ 351 )
−Removed: — — ( 1,087 )
−Removed: Effect of pension and other post-retirement plan curtailments (net of tax of $ 1,183 )
−Removed: Effect of pension and other post-retirement settlement and curtailment losses (net of tax of $ 0 , $( 653 ), and $ 347 )
+Added: Effect of pension plan settlement (net of tax of $ 0 , $ 0 , and $( 653 ))
— ( 119 ) 3,826
−Removed: Deferred loss on cash flow hedges (net of tax of $( 57 ), $( 143 ), and $( 93 ))
+Added: Deferred gain (loss) on cash flow hedges (net of tax of $ 118 , $( 57 ), and $( 143 ))
366 ( 184 ) ( 447 )
6 unchanged sentences
Consolidated Statement of Cash Flows
−Removed: (In thousands) January 2, 2021 December 28, 2019 December 29, 2018
+Added: (In thousands) January 1, 2022 January 2, 2021 December 28, 2019
Operating Activities
6 unchanged sentences
Provision for losses on accounts receivable 5 356 114
−Removed: (Gain) loss on sale of property, plant, and equipment ( 8 ) ( 79 ) 110
−Removed: benefit plans settlement and curtailment losses — 5,887 1,425
−Removed: Impairment charges (Note 1) 1,861 2,336 —
−Removed: Deferred income tax provision (benefit) 142 ( 2,491 ) ( 4,240 )
+Added: Gain on sale of property, plant, and equipment ( 375 ) ( 8 ) ( 79 )
+Added: pension benefit plan settlement loss — — 5,887
+Added: Impairment charges (Notes 1 and 8) 804 1,861 2,336
+Added: Deferred income tax (benefit) provision ( 1,384 ) 142 ( 2,491 )
Other items, net 6,333 4,720 5,390
−Removed: Changes in current assets and liabilities, net of effects of acquisitions:
+Added: Changes in assets and liabilities, net of effects of acquisitions:
Accounts receivable ( 16,737 ) 7,116 6,553
−Removed: Unbilled revenue 6,073 2,559 ( 11,350 )
+Added: Contract assets ( 1,222 ) 6,073 2,559
Inventories ( 11,173 ) ( 89 ) ( 3,076 )
−Removed: Other current assets 1,221 ( 5,618 ) 3,820
+Added: Other assets ( 15,033 ) ( 833 ) ( 7,559 )
Accounts payable 26,346 ( 15,620 ) 7,358
−Removed: Other current liabilities ( 1,340 ) ( 5,802 ) ( 11,912 )
+Added: Customer deposits 27,693 3,903 ( 5,686 )
+Added: Other liabilities 19,453 ( 8,586 ) ( 5,662 )
Net cash provided by operating activities 162,420 92,884 97,413
3 unchanged sentences
Proceeds from sale of property, plant, and equipment 1,740 145 398
+Added: Other investing activities 537 — —
Net cash used in investing activities ( 154,475 ) ( 14,545 ) ( 187,357 )
7 unchanged sentences
Other financing activities — ( 189 ) ( 56 )
−Removed: Net cash (used in) provided by financing activities ( 84,556 ) 112,450 ( 74,155 )
+Added: Net cash provided by (used in) financing activities 22,808 ( 84,556 ) 112,450
Exchange Rate Effect on Cash, Cash Equivalents, and Restricted Cash ( 3,232 ) 4,584 ( 350 )
−Removed: (Decrease) Increase in Cash, Cash Equivalents, and Restricted Cash ( 1,633 ) 22,156 ( 30,729 )
+Added: Increase (Decrease) in Cash, Cash Equivalents, and Restricted Cash 27,521 ( 1,633 ) 22,156
Cash, Cash Equivalents, and Restricted Cash at Beginning of Year 66,640 68,273 46,117
11 unchanged sentences
Adoption of ASU No.
−Removed: 2014-09 — — — 119 — — — — 119
−Removed: Adoption of ASU No.
+Added: 2016-02, Leases (Topic 842)
— — — ( 17 ) — — — — ( 17 )
6 unchanged sentences
Net income — — — 55,196 — — — 543 55,739
−Removed: Adoption of ASU No.
−Removed: 2016-02 (Note 1) — — — ( 17 ) — — — — ( 17 )
Dividends declared – Common Stock, $ 0.96 per share
3 unchanged sentences
Other comprehensive items — — — — — — 18,128 144 18,272
−Removed: Balance at December 28, 2019 14,624,159 $ 146 $ 106,698 $ 435,249 3,214,888 $ ( 78,778 ) $ ( 37,620 ) $ 1,384 $ 427,079
+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
Net income — — — 84,043 — — — 838 84,881
1 unchanged sentence
— — — ( 11,595 ) — — — — ( 11,595 )
−Removed: Activity under stock plans — — 4,126 — ( 132,969 ) 3,259 — — 7,385
Dividend paid to noncontrolling interest — — — — — — — ( 560 ) ( 560 )
+Added: Noncontrolling interest acquired (Note 2) — — — — — — — 367 367
+Added: Purchase of shares of noncontrolling interest (Note 2) — — — — — — — ( 389 ) ( 389 )
+Added: Activity under stock plans — — 5,064 — ( 78,500 ) 1,923 — — 6,987
Other comprehensive items — — — — — — ( 10,858 ) ( 122 ) ( 10,980 )
6 unchanged sentences
was incorporated in Delaware in November 1991 and trades on the New York Stock Exchange under the ticker symbol "KAI."
−Removed: (together with its subsidiaries, the Company) is a global supplier of high-value, critical components and engineered systems used in process industries worldwide.
−Removed: 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 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.
−Removed: 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.
+Added: (together with its subsidiaries, the Company) is a global supplier of technologies and engineered systems that drive Sustainable Industrial Processing.
+Added: Its products and services play an integral role in enhancing efficiency, optimizing energy utilization, and maximizing productivity in process industries while helping customers advance their sustainability initiatives with products that reduce waste or generate more yield with fewer inputs, particularly fiber, energy, and water.
+Added: Producing more while consuming less is a core aspect of Sustainable Industrial Processing and a major element of the strategic focus of the Company's three reportable operating segments:
+Added: Flow Control, Industrial Processing, and Material Handling.
Noncontrolling Interest
7 unchanged sentences
In a 53-week fiscal year, the Company's fourth fiscal quarter contains 14 weeks.
−Removed: 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: The Company's fiscal year ended January 1, 2022 (fiscal 2021 or 2021) contained 52 weeks, its fiscal year ended January 2, 2021 (fiscal 2020 or 2020) contained 53 weeks, and its fiscal year ended December 28, 2019 (fiscal 2019 or 2019) contained 52 weeks.
Each quarter of fiscal 2021, 2020 and 2019 contained 13 weeks, except the fourth quarter of 2020, which contained 14 weeks.
+Added: The impact of the additional week in 2020 was not material to the Company's financial results.
Financial Statement Presentation
−Removed: Effective at the beginning of 2019, the Company adopted Accounting Standards Update (ASU) No.
−Removed: 2016-02, Leases (Topic 842) (Topic 842), using the cumulative-effect adjustment method.
−Removed: 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.
−Removed: Effective at the beginning of 2020, the Company realigned its business segments into three new reportable operating segments:
−Removed: Flow Control, Industrial Processing, and Material Handling.
−Removed: The Company previously reported its financial results by combining its operating entities into three reportable operating segments:
−Removed: Papermaking Systems, Wood Processing Systems, and Material Handling Systems, and a separate product line, Fiber-based Products.
−Removed: Financial information for 2019 and 2018 has been recast to conform to the new segment presentation.
−Removed: See Note 12 , Business Segment and Geographical Information, for further detail regarding the Company's segments.
+Added: Certain reclassifications have been made to prior periods to conform with the current period presentation.
+Added: On the consolidated statement of cash flows, the Company reclassified the change in customer deposits within operating activities from other current liabilities to a separate line item and the changes in long-term assets and liabilities from other items, net to other assets and other liabilities, respectively.
Use of Estimates and Critical Accounting Policies
−Removed: 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 revenue 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
−Removed: 2020 Financial Statements
−Removed: Notes to Consolidated Financial Statements
−Removed: 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: The preparation of consolidated financial statements in conformity with U.S.
+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 consolidated 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 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 consolidated financial statements.
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.
1 unchanged sentence
A discussion of the application of these and other accounting policies is included within this note.
+Added: 2021 Financial Statements
+Added: Notes to Consolidated Financial Statements
Revenue Recognition
−Removed: The Company recognizes revenue in accordance with ASC, Revenue from Contracts with Customers (Topic 606) .
+Added: The Company recognizes revenue in accordance with Accounting Standards Codification (ASC) 606, Revenue from Contracts with Customers (ASC 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 revenue when revenue is recognized.
−Removed: 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.
+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 the cost of revenue when revenue is recognized.
+Added: The remaining portion of the Company's revenue is recognized over time 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.
2 unchanged sentences
The following table presents revenue by revenue recognition method:
−Removed: (In thousands) January 2, 2021 December 28, 2019
+Added: (In thousands) January 1, 2022 January 2, 2021 December 28, 2019
Point in Time $ 705,709 $ 557,702 $ 611,528
7 unchanged sentences
The following table presents the disaggregation of revenue by product type and geography:
−Removed: (In thousands) January 2, 2021 December 28, 2019 December 29, 2018
+Added: (In thousands) January 1, 2022 January 2, 2021 December 28, 2019
Revenue by Product Type:
9 unchanged sentences
See Note 12 , Business Segment and Geographical Information, for information on the disaggregation of revenue by reportable operating segment.
−Removed: 2020 Financial Statements
−Removed: Notes to Consolidated Financial Statements
The following table presents contract balances from contracts with customers:
−Removed: (In thousands) January 2, 2021 December 28, 2019
−Removed: Accounts Receivable $ 91,540 $ 95,740
+Added: (In thousands) January 1, 2022 January 2, 2021
Contract Assets $ 8,626 $ 7,576
Contract Liabilities $ 77,004 $ 39,269
−Removed: 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.
−Removed: Contract liabilities consist of customer deposits, advanced billings, and deferred revenue.
−Removed: Deferred revenue is included in other current liabilities in the accompanying consolidated balance sheet.
+Added: Contract assets in the accompanying consolidated balance sheet 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.
+Added: Contract liabilities consist of short- and long-term customer deposits, advanced billings, and deferred revenue.
+Added: Deferred revenue is included in other current liabilities and long-term customer deposits are included in other
+Added: 2021 Financial Statements
+Added: Notes to Consolidated Financial Statements
+Added: long-term liabilities in the accompanying consolidated balance sheet.
Contract liabilities will be recognized as revenue in future periods once the revenue recognition criteria are met.
1 unchanged sentence
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.
−Removed: 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.
+Added: Contract liabilities increased at year end 2021 principally due to capital equipment orders in the Industrial Processing segment's wood processing business, which the Company expects to recognize as revenue through 2023.
+Added: The Company recognized revenue of $ 33,128,000 in 2021 and $ 30,426,000 in 2020 that was included in the contract liabilities balance at the beginning of 2021 and 2020, respectively.
The majority of the Company's contracts for capital equipment have an original expected duration of one year or less.
−Removed: Certain capital contracts require long lead times and could take up to 24 months to complete.
+Added: Certain capital contracts require longer lead times and could take up to 24 months to complete.
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 2021 was $ 37,905,000 .
−Removed: 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: 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 % after December 31, 2022.
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.
13 unchanged sentences
The changes in the allowance for credit losses are as follows:
−Removed: (In thousands) January 2, 2021 December 28, 2019 December 29, 2018
+Added: (In thousands) January 1, 2022 January 2, 2021 December 28, 2019
Balance at Beginning of Year $ 2,977 $ 2,698 $ 2,897
3 unchanged sentences
Balance at End of Year $ 2,735 $ 2,977 $ 2,698
−Removed: 2020 Financial Statements
−Removed: Notes to Consolidated Financial Statements
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.
−Removed: The drafts are noninterest-bearing obligations of the issuing bank and mature within six months of the origination date.
+Added: The drafts are non-interest bearing obligations of the issuing bank and generally mature within six months of the origination date.
The Company's Chinese subsidiaries may sell the drafts at a discount to a third-party financial institution or transfer the drafts to vendors in settlement of current accounts payable prior to the scheduled maturity date.
These drafts, which totaled $ 8,049,000 at year-end 2021 and $ 9,445,000 at year-end 2020, are included in accounts receivable in the accompanying consolidated balance sheet until the subsidiary sells the drafts to a bank and receives a discounted amount, transfers the banker's acceptance drafts in settlement of current accounts payable prior to maturity, or obtains cash payment on the scheduled maturity date.
+Added: 2021 Financial Statements
+Added: Notes to Consolidated Financial Statements
Warranty Obligations
6 unchanged sentences
The changes in the carrying amount of product warranty obligations are as follows:
−Removed: (In thousands) January 2, 2021 December 28, 2019
+Added: (In thousands) January 1, 2022 January 2, 2021
Balance at Beginning of Year $ 7,064 $ 6,467
1 unchanged sentence
Usage ( 4,268 ) ( 5,439 )
−Removed: Acquisition — 303
+Added: Acquisitions 429 —
Currency translation ( 293 ) 481
Balance at End of Year $ 7,298 $ 7,064
−Removed: In accordance with Topic 842, the Company determines whether an arrangement is, or contains, a lease at inception.
−Removed: 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: In accordance with ASC 842, Leases (ASC 842), the Company determines whether an arrangement is, or contains, a lease at inception.
+Added: Operating lease liabilities are included in other current liabilities and other long-term liabilities and the corresponding right-of use (ROU) assets are included in other assets in the accompanying consolidated balance sheet.
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.
−Removed: 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: 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.
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.
8 unchanged sentences
See Note 9 , Leases, for additional information about the Company's lease obligations.
−Removed: 2020 Financial Statements
−Removed: 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 January 2, 2021, the Company believes that it has appropriately accounted for any liability for unrecognized tax benefits.
+Added: At January 1, 2022, the Company believes that it has appropriately accounted for any liability for
+Added: 2021 Financial Statements
+Added: Notes to Consolidated Financial Statements
+Added: unrecognized tax benefits.
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.
3 unchanged sentences
Cash, Cash Equivalents, and Restricted Cash
−Removed: 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.
+Added: At year-end 2021 and year-end 2020, cash equivalents included investments in money market funds and highly liquid short-term investments, 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 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.
−Removed: The majority of the bank guarantees will expire over the next twelve months.
+Added: The Company's restricted cash generally 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.
+Added: The majority of these restrictions will expire over the next twelve months.
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:
−Removed: (In thousands) January 2, 2021 December 28, 2019 December 29, 2018
+Added: (In thousands) January 1, 2022 January 2, 2021 December 28, 2019
Cash and cash equivalents $ 91,186 $ 65,682 $ 66,786
2 unchanged sentences
Supplemental Cash Flow Information
−Removed: (In thousands) January 2, 2021 December 28, 2019 December 29, 2018
+Added: (In thousands) January 1, 2022 January 2, 2021 December 28, 2019
Cash Paid for Interest $ 4,441 $ 6,899 $ 12,344
4 unchanged sentences
Liabilities Assumed of Acquired Businesses $ 38,316 $ 1,730 $ 27,530
−Removed: 2020 Financial Statements
−Removed: Notes to Consolidated Financial Statements
−Removed: (In thousands) January 2, 2021 December 28, 2019 December 29, 2018
Non-cash additions to property, plant, and equipment $ 363 $ 1,060 $ 626
6 unchanged sentences
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.
+Added: 2021 Financial Statements
+Added: Notes to Consolidated Financial Statements
The components of inventories are as follows:
−Removed: (In thousands) January 2, 2021 December 28, 2019
+Added: (In thousands) January 1, 2022 January 2, 2021
Raw Materials $ 59,177 $ 46,413
5 unchanged sentences
Property, plant, and equipment are stated at cost.
+Added: Assets acquired as part of a business combination are initially recorded at fair value.
The costs of additions and improvements are capitalized, while maintenance and repairs are charged to expense as incurred.
5 unchanged sentences
Property, plant, and equipment consist of the following:
−Removed: (In thousands) January 2, 2021 December 28, 2019
+Added: (In thousands) January 1, 2022 January 2, 2021
Land $ 11,011 $ 7,676
7 unchanged sentences
See Note 9 , Leases, for further details relating to assets under financing leases included in property, plant and equipment in the accompanying consolidated balance sheet.
−Removed: 2020 Financial Statements
−Removed: Notes to Consolidated Financial Statements
Intangible Assets, Net
13 unchanged sentences
Acquired Intangible Assets $ 340,947 $ ( 135,327 ) $ ( 6,277 ) $ 199,343
−Removed: December 28, 2019
+Added: 2021 Financial Statements
+Added: Notes to Consolidated Financial Statements
+Added: (In thousands) Gross Accumulated
+Added: Amortization Currency
+Added: Translation Net
+Added: January 2, 2021
Definite-Lived
12 unchanged sentences
See Impairment of Long-Lived Assets under the heading Intangible Assets within this note for further details.
−Removed: Intangible assets are initially recorded at fair value at the date of acquisition.
+Added: Intangible assets are recorded at fair value at the date of acquisition.
Subsequent impairment charges are reflected as a reduction in the gross balance, as applicable.
1 unchanged sentence
The Company amortizes definite-lived intangible assets over lives that have been determined based on the anticipated cash flow benefits of the intangible asset.
−Removed: Definite-lived intangible assets have a weighted average amortization period of 12 years.
−Removed: Amortization of definite-lived intangible assets was $ 19,125,000 in 2020, $ 20,154,000 in 2019, and $ 14,182,000 in 2018.
+Added: Definite-lived intangible assets as of year-end 2021 have a weighted average amortization period of 13 years.
+Added: Amortization of definite-lived intangible assets was $ 20,869,000 in 2021, $ 19,125,000 in 2020, and $ 20,154,000 in 2019 and was included in selling, general, and administrative (SG&A) expenses in the accompanying consolidated statement of income.
The estimated future amortization expense of definite-lived intangible assets is $ 20,994,000 in 2022;
10 unchanged sentences
(In thousands) Flow Control Industrial Processing Material Handling Total
−Removed: Balance as of December 29, 2018 (a)
+Added: Balance as of December 28, 2019
Gross balance $ 97,680 $ 207,536 $ 116,325 $ 421,541
1 unchanged sentence
Net balance 97,680 122,027 116,325 336,032
−Removed: 2019 Adjustments
−Removed: Acquisitions (Note 2) — — 78,592 78,592
+Added: 2020 Activity
+Added: Acquisition (Note 2) — 3,953 — 3,953
Currency translation 3,757 4,392 3,619 11,768
−Removed: Total 2019 adjustments ( 581 ) 872 77,567 77,858
−Removed: Balance at December 28, 2019 (a)
+Added: Total 2020 activity 3,757 8,345 3,619 15,721
+Added: Balance at January 2, 2021
Gross balance 101,437 215,881 119,944 437,262
1 unchanged sentence
Net balance 101,437 130,372 119,944 351,753
−Removed: 2020 Adjustments
−Removed: Acquisition (Note 2) — 3,953 — 3,953
+Added: 2021 Activity
+Added: Acquisitions (Note 2) 25,805 1,116 26,836 53,757
Currency translation ( 3,653 ) ( 2,015 ) ( 2,955 ) ( 8,623 )
−Removed: Total 2020 adjustments 3,757 8,345 3,619 15,721
+Added: Total 2021 activity 22,152 ( 899 ) 23,881 45,134
Balance at January 1, 2022
2 unchanged sentences
Net balance $ 123,589 $ 129,473 $ 143,825 $ 396,887
−Removed: (a) Goodwill amounts for 2019 and 2018 have been recast to conform to the current period presentation.
−Removed: 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
1 unchanged sentence
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.
−Removed: 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: The Company assesses its definite-lived intangible assets for impairment whenever facts and circumstances indicate that the carrying amounts may not be fully recoverable.
To analyze recoverability, the Company projects undiscounted net future cash flows over the remaining lives of such assets or asset groups.
1 unchanged sentence
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: At year-end 2021 and 2020, in connection with its annual impairment analysis, the Company performed a qualitative goodwill impairment assessment (Step 0) for each of its reporting units, except the material handling reporting unit in 2020 discussed below, which indicated that the fair value of each reporting unit exceeded its carrying value, and determined that the assets were not impaired.
+Added: 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 units' and the Company's overall financial performance, and macroeconomic and industry conditions.
+Added: The Company considered the qualitative factors and weighed the evidence obtained and determined that it was not more likely than not that the fair value of any of the respective reporting unit's assets was less than its carrying amount.
+Added: 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.
In March 2020, the Company experienced a significant decrease in market capitalization due to a decline in the Company’s stock price.
−Removed: During that time, the overall U.S.
+Added: During that time, the U.S.
stock market also declined significantly amid market volatility driven by the uncertainty surrounding the COVID-19 pandemic.
−Removed: 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.
−Removed: 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: Based on these occurrences, the Company concluded that a
2021 Financial Statements
Notes to Consolidated Financial Statements
−Removed: 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.
−Removed: 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.
−Removed: The Company considered the qualitative factors and weighed the evidence obtained and determined that it was not more likely than not that the fair value of any of the assets was less than its carrying amount.
−Removed: 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: 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.
−Removed: 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.
+Added: 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.
Goodwill by reporting unit is as follows:
−Removed: (In thousands) January 2, 2021 December 28, 2019
−Removed: Stock-Preparation (a) $ 19,685 $ 19,399
+Added: (In thousands) January 1, 2022 January 2, 2021
Fluid-Handling $ 64,003 $ 65,755
Doctoring, Cleaning, & Filtration 59,586 35,682
+Added: Stock-Preparation 20,819 19,685
Wood Processing 108,654 110,687
−Removed: Material Handling (a) 119,944 116,325
+Added: Material Handling 143,825 119,944
$ 396,887 $ 351,753
−Removed: (a) Goodwill balances as of December 28, 2019 have been recast to conform to the current period presentation.
−Removed: 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 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.
−Removed: 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.
−Removed: 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).
−Removed: 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.
−Removed: 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 was expected to continue into 2020, the Company performed a quantitative analysis of the recoverability of the related intangible assets.
−Removed: 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 .
−Removed: 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 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.
−Removed: 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.
−Removed: 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 .
−Removed: These impairment
−Removed: 2020 Financial Statements
−Removed: Notes to Consolidated Financial Statements
−Removed: charges are included in impairment and restructuring costs in the accompanying consolidated statement of income.
−Removed: The remaining intangible asset for the timber-harvesting product line is $ 481,000 .
+Added: At year-end 2021 and 2020, the Company performed a qualitative impairment analysis on its indefinite-lived intangible assets and determined that the assets were not impaired.
+Added: No triggering events or indicators of impairment were identified in 2021 or 2020 related to the Company's definite-lived intangible assets, except for the definite-lived intangible assets associated with its existing ceramic blade product line in France in 2021 and its timber-harvesting product line in 2020 both discussed below.
+Added: In the fourth quarter of 2021, the Company decided to exit its ceramic blade business in France, which became a redundant manufacturing operation as a result of its acquisition of The Clouth Group of Companies in the third quarter of 2021.
+Added: The Company expects to cease production in June 2022 and exit the facility by the end of 2022.
+Added: As a result of this decision, the Company recorded an impairment charge of $ 499,000 in the fourth quarter of 2021 related to its product technology intangible asset.
+Added: In the fourth quarter of 2020, due to the continued and anticipated decline in demand for the Company's timber-harvesting business' products, and following impairment charges totaling $ 2,336,000 in 2019 related to this business, the Company performed a quantitative analysis of the recoverability of the related intangible assets in which the income approach discounted cash flow methodology was used.
+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 totaling $ 1,861,000 in the fourth quarter of 2020.
+Added: The remaining intangible asset as of year-end 2021 for the timber-harvesting product line is $ 443,000 .
+Added: Impairment charges for 2021, 2020 and 2019 are included in impairment and other costs, net in the accompanying consolidated statement of income.
Business Combinations
6 unchanged sentences
Subsequent to the purchase price allocation period, any adjustment to assets acquired or liabilities assumed is included in operating results in the period in which the adjustment is determ ined.
−Removed: Acquisition transaction costs are recorded as incurred in selling, general, and administrative expenses (SG&A) in the accompanying consolidated statement of income and were $ 485,000 in 2020, $ 843,000 in 2019, and $ 1,321,000 in 2018.
+Added: Acquisition transaction costs are recorded as incurred in SG&A expenses in the accompanying consolidated statement of income and were $ 3,655,000 in 2021, $ 485,000 in 2020, and $ 843,000 in 2019.
+Added: 2021 Financial Statements
+Added: Notes to Consolidated Financial Statements
Foreign Currency Translation and Transactions
5 unchanged sentences
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: 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.
+Added: For time-based RSUs, compensation expense is recognized ratably over the requisite service period for the entire award based on the grant date fair value, 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.
7 unchanged sentences
The Company does not hold or engage in transactions involving derivative instruments for purposes other than risk management.
−Removed: ASC 815, Derivatives and Hedging , requires that all derivatives be recognized on the balance sheet at fair value.
+Added: ASC 815, Derivatives and Hedging , requires that all derivatives be recognized on the consolidated balance sheet at fair value.
For derivatives designated as cash flow hedges, the related gains or losses on these contracts are deferred as a component of AOCI.
−Removed: 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
−Removed: 2020 Financial Statements
−Removed: Notes to Consolidated Financial Statements
−Removed: currency gains and losses on the underlying exposures being hedged.
+Added: These deferred gains and losses are recognized in the consolidated statement of income in the period in which the underlying anticipated transaction occurs.
+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 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: Financial Instruments - Credit Losses (Topic 326), Measurement of Credit Losses on Financial Instruments.
−Removed: In June 2016, the Financial Accounting Standards Board (FASB) issued ASU No.
−Removed: 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.
−Removed: During 2018 and 2019, the FASB issued additional guidance and clarification.
−Removed: 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.
−Removed: See Accounts Receivable and Allowance for Credit Losses in this note for information on the Company's allowance for credit losses.
+Added: Income Taxes (Topic 740), Simplifying the Accounting for Income Taxes.
+Added: In December 2019, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No.
+Added: 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.
+Added: This new guidance is effective in fiscal 2021, and the transition requirements are primarily prospective.
+Added: The Company adopted this ASU prospectively at the beginning of fiscal 2021 and its adoption did not have an impact on the consolidated financial statements.
+Added: 2021 Financial Statements
+Added: Notes to Consolidated Financial Statements
Recent Accounting Pronouncements Not Yet Adopted
5 unchanged sentences
The Company is currently evaluating the effects that the adoption of this ASU will have on its consolidated financial statements.
−Removed: Income Taxes (Topic 740), Simplifying the Accounting for Income Taxes.
−Removed: In December 2019, the FASB issued ASU No.
−Removed: 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 in fiscal 2021, and the transition requirements are primarily prospective.
−Removed: The Company does not expect the adoption of this ASU to have a material impact on its consolidated financial statements.
−Removed: On June 1, 2020, the Company’s Industrial Processing segment acquired Cogent Industrial Technologies Ltd.
−Removed: (Cogent) for approximately $ 6,866,000 , net of cash acquired.
+Added: Business Combinations (Topic 805), Accounting for Contract Assets and Contract Liabilities from Contracts with Customers.
+Added: In October 2021, the FASB issued ASU 2021-08, which requires entities to recognize and measure contract assets and contract liabilities acquired in a business combination in accordance with ASU 2014-09, Revenue from Contracts with Customers (Topic 606) .
+Added: The guidance in this ASU will generally result in the Company recognizing contract assets and contract liabilities at amounts consistent with those recorded by the acquiree immediately before the acquisition date rather than at fair value.
+Added: This new guidance is effective on a prospective basis in fiscal 2023, with early adoption permitted.
+Added: The Company is currently evaluating the effect that the adoption of this ASU will have on its consolidated financial statements, which will be dependent on the contract assets and liabilities acquired in future business combinations.
+Added: In the third quarter of 2021, the Company acquired all partnership interests and shares in The Clouth Group of Companies (Clouth), for $ 92,864,000 , net of cash acquired plus debt assumed.
+Added: 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, which the Company accounted for as a noncontrolling interest during the period from July 19, 2021 to August 10, 2021.
+Added: The Company funded the purchase price with euro-denominated borrowings under its revolving credit facility and existing cash.
+Added: Clouth, which is included in the Company's Flow Control segment, is a leading manufacturer of doctor blades and related equipment used in the production of paper, packaging, and tissue.
+Added: The Company expects several synergies in connection with this acquisition, including deepening its presence in the growing ceramic blade market and expansion of sales at its existing businesses by leveraging Clouth's complementary global geographic footprint.
+Added: Clouth has three manufacturing facilities in Germany and one in Poland.
+Added: Goodwill from the Clouth acquisition was $ 25,806,000 , of which $ 6,836,000 is expected to be deductible for tax purposes over 15 years.
+Added: In addition, intangible assets acquired were $ 34,467,000 , of which $ 5,326,000 is expected to be deductible for tax purposes over 15 years.
+Added: The Company recorded revenue of $ 23,221,000 and an operating loss of $ 4,068,000 for Clouth from the date of acquisition, including amortization expense of $ 3,481,000 associated with acquired profit in inventory and backlog and $ 2,710,000 of acquisition transaction costs.
+Added: On August 23, 2021, the Company acquired all the outstanding equity securities in East Chicago Machine Tool Corporation (Balemaster) and certain assets of affiliated companies for $ 53,747,000 , net of cash acquired.
+Added: Balemaster, which is included in the Company's Material Handling segment, is a leading U.S.
+Added: manufacturer of horizontal balers and related equipment used primarily for recycling packaging waste at corrugated box plants and large retail and distribution centers.
+Added: The Company funded the purchase price with borrowings under its revolving credit facility.
+Added: The Company expects several synergies in connection with the acquisition, including expansion of its presence in the secondary material processing market and creation of new opportunities for leveraging its high-performance balers produced in Europe.
+Added: Goodwill from the Balemaster acquisition was $ 26,836,000 , none of which is deductible for tax purposes.
+Added: In addition, intangible assets acquired were $ 28,060,000 , none of which is deductible for tax purposes.
+Added: The Company recorded revenue of $ 9,038,000 and operating loss of $ 641,000 for Balemaster from the date of acquisition, including amortization expense of $ 2,042,000 associated with acquired profit in inventory and backlog and $ 782,000 of acquisition transaction costs.
+Added: In the fourth quarter of 2021, the Company acquired the assets of a business in India, which is included in its Industrial Processing segment, for approximately $ 2,882,000 .
+Added: The following table summarizes the estimated fair values of assets acquired and liabilities assumed and the purchase price for Clouth and the Company's other acquisitions in 2021.
+Added: The final purchase accounting and purchase price allocations remain subject to change as the Company continues to refine its preliminary valuation of certain acquired assets
+Added: 2021 Financial Statements
+Added: Notes to Consolidated Financial Statements
+Added: and liabilities assumed and the valuation of acquired intangibles, which may result in adjustments to the assets and liabilities, including goodwill.
+Added: Measurement period adjustments in 2021 did not have a material effect on the Company's consolidated balance sheet or statement of income.
+Added: (In thousands) Clouth Other Total
+Added: Net Assets Acquired:
+Added: Cash and Cash Equivalents $ 4,923 $ 3,757 $ 8,680
+Added: Accounts Receivable 6,808 1,641 8,449
+Added: Inventories 14,119 4,628 18,747
+Added: Property, Plant, and Equipment 24,498 5,143 29,641
+Added: Other Assets 5,309 3,167 8,476
+Added: Definite-Lived Intangible Assets
+Added: Customer relationships 20,192 23,100 43,292
+Added: Product technology 8,915 2,700 11,615
+Added: Tradenames — 1,400 1,400
+Added: Other 401 1,560 1,961
+Added: Indefinite-Lived Intangible Assets —
+Added: Tradenames 4,959 — 4,959
+Added: Goodwill 25,806 27,951 53,757
+Added: Total assets acquired 115,930 75,047 190,977
+Added: Short-term Obligations and Current Maturities of Long-term Obligations 1,393 — 1,393
+Added: Accounts Payable 1,287 797 2,084
+Added: Long-Term Deferred Income Taxes 9,465 6,698 16,163
+Added: Long-Term Obligations 4,244 — 4,244
+Added: Other Liabilities 7,391 7,166 14,557
+Added: Total liabilities assumed 23,780 14,661 38,441
+Added: Net assets acquired $ 92,150 $ 60,386 $ 152,536
+Added: Purchase Price:
+Added: Cash Paid $ 92,150 $ 60,386 $ 152,536
+Added: The weighted-average amortization period for Clouth's definite-lived intangible assets is 19 years, including weighted-average amortization periods of 24 years for customer relationships and 10 years for product technology.
+Added: The weighted-average amortization period for the Company's other acquisitions' definite-lived intangible assets is 16 years, including weighted-average amortization periods of 17 years for customer relationships, 13 years for product technology, and 16 years for tradenames.
+Added: Unaudited Supplemental Pro Forma Information
+Added: The following unaudited pro forma information provides the effect of the Company's 2021 acquisition of Clouth as if it had occurred at the beginning of 2020:
+Added: (In thousands, except per share amounts) January 1,
+Added: 2022 January 2,
+Added: Revenue $ 812,016 $ 682,248
+Added: Net Income Attributable to Kadant $ 90,184 $ 55,760
+Added: Earnings per Share Attributable to Kadant
+Added: Basic $ 7.79 $ 4.86
+Added: Diluted $ 7.74 $ 4.82
+Added: The historical consolidated financial information of the Company and Clouth has been adjusted in the pro forma information above to give effect to pro forma events that are (i) directly attributable to the acquisition and related financing arrangements, (ii) expected to have a continuing impact on the Company, and (iii) factually supportable.
+Added: 2021 Financial Statements
+Added: Notes to Consolidated Financial Statements
+Added: Pro forma results include the following non-recurring pro forma adjustments:
+Added: • Pre-tax charge to cost of revenue of $ 3,082,000 in 2020 and reversal of $ 3,082,000 in 2021, for the sale of inventory revalued at the date of acquisition.
+Added: • Pre-tax charge to SG&A expenses of $ 3,109,000 in 2020 and reversal of $ 2,710,000 in 2021 and $ 399,000 in 2021, for acquisition costs and intangible asset amortization related to acquired backlog, respectively.
+Added: • Estimated tax effects related to the pro forma adjustments.
+Added: Pro forma results in 2020 include a pre-tax gain of $ 4,409,000 from the forgiveness of a shareholder loan at Clouth.
+Added: 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 Clouth occurred as of the beginning of 2020, or that may result in the future.
+Added: The Company's pro forma results exclude the Company's other acquisitions in 2021 as the inclusion of those results would not have been materially different from the pro forma results presented above had the acquisitions occurred at the beginning of 2020.
+Added: On June 1, 2020, the Company acquired Cogent Industrial Technologies Ltd.
+Added: (Cogent), which is included in its Industrial Processing segment, for approximately $ 6,866,000 , net of cash acquired.
The Company funded the acquisition through borrowings under its revolving credit facility.
1 unchanged sentence
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.
−Removed: 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: On May 28, 2020, the Company also acquired certain intellectual property from a company in Austria, which is included in its Industrial Processing segment, for $ 416,000 , of which $ 229,000 was paid in the second quarter of 2020 and $ 125,000 in the first quarter of 2021.
The Company expects to pay the remaining amount no later than the first quarter of 2022.
−Removed: Intangible assets acquired represent product technology with a fair value of $ 557,000 .
−Removed: 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: Intangible assets acquired represent product technology with a fair value of $ 557,000 at acquisition date.
+Added: On September 3, 2019, the Company acquired certain assets of a business in Brazil, which is included in its Flow Control segment, for approximately $ 407,000 in cash.
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.
The Company funded the acquisition through borrowings under its revolving credit facility.
−Removed: 2020 Financial Statements
−Removed: Notes to Consolidated Financial Statements
−Removed: SMH, which is included in the Company's Material Handling segment, has manufacturing operations in Mississippi, United States, and China.
−Removed: 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: This acquisition continues to expand the Company into new markets by leveraging SMH's presence in the material handling industry.
+Added: SMH, which is included in the Company's Material Handling segment, has manufacturing operations in Mississippi, United States, and China, and is a leading provider of material handling equipment and systems to various process industries, including mining, aggregates, food processing, packaging, and pulp and paper.
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.
1 unchanged sentence
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.
+Added: 2021 Financial Statements
+Added: Notes to Consolidated Financial Statements
The following table summarizes the estimated fair values of assets acquired and liabilities assumed and the purchase price for SMH.
19 unchanged sentences
Purchase Price:
−Removed: Cash Paid to Seller Borrowed Under Revolving Credit Facility $ 179,286
+Added: Cash Paid $ 179,286
The weighted average amortization period for the definite-lived intangible assets above is 14 years, including weighted average amortization periods of 15 years for customer relationships, 14 years for product technology, and 8 years for other intangible assets.
Unaudited Supplemental Pro Forma Information
−Removed: 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:
+Added: The following unaudited pro forma information provides the effect of the Company's 2019 acquisition of SMH as if it had occurred at the beginning of 2018:
(In thousands, except per share amounts) December 28,
−Removed: 2019 December 29,
Revenue $ 704,644
1 unchanged sentence
Earnings per Share Attributable to Kadant
−Removed: Basic $ 5.02 $ 5.10
Diluted $ 4.92
+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.
+Added: Pro forma results include the following non-recurring pro forma adjustments, which have been included in the determination of pro forma net income for the year ended December 29, 2018 (not presented), as follows:
+Added: • Pre-tax reversal of $ 843,000 to SG&A expenses in 2019 for acquisition transaction costs.
+Added: • Pre-tax reversal of $ 3,549,000 to cost of revenue in 2019 for the sale of inventory revalued at the date of acquisition.
2021 Financial Statements
Notes to Consolidated Financial Statements
−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.
−Removed: Pro forma results include the following non-recurring pro forma adjustments that were directly attributable to the acquisition:
−Removed: • 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 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.
−Removed: • 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.
+Added: • Pre-tax reversal of $ 1,323,000 to SG&A expenses in 2019 for intangible asset amortization related to acquired backlog.
• Tax effects related to pro forma adjustments.
11 unchanged sentences
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) January 2, 2021 December 28, 2019 December 29, 2018
+Added: (In thousands) January 1, 2022 January 2, 2021 December 28, 2019
RSU Awards $ 8,224 $ 6,453 $ 6,616
6 unchanged sentences
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: 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: In addition, the Company granted RSU awards consisting of 1,042 RSUs in July 2020 to its then new non-employee director (former executive director), which vested ratably on the last day of the third and fourth fiscal quarters of 2020.
Each RSU issued to the directors represents the right to receive one share of the Company's common stock upon vesting.
−Removed: 2020 Financial Statements
−Removed: Notes to Consolidated Financial Statements
Performance-Based Restricted Stock Units
3 unchanged sentences
Following the adjustment, the RSUs are subject to additional time-based vesting, and vest in three equal annual installments, provided that the officer is employed by the Company on the applicable vesting dates.
−Removed: The Company recognizes compensation expense associated with performance-based RSUs 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.
+Added: The Company recognizes compensation expense associated with performance-based RSUs 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
+Added: 2021 Financial Statements
+Added: Notes to Consolidated Financial Statements
Unrecognized compensation expense related to the unvested performance-based RSUs totaled $ 3,231,000 at year-end 2021, and will be recognized over a weighted average period of 1.4 years.
10 unchanged sentences
A summary of the activity of the Company's unvested RSUs in 2021 is as follows:
−Removed: (In thousands) Weighted
+Added: (In thousands, except per share amounts) Units Weighted
Average Grant-
Date Fair Value
−Removed: Unvested RSUs at December 28, 2019 135 $ 86.11
+Added: Unvested RSUs at January 2, 2021 120 $ 92.42
Granted 49 $ 174.52
8 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: All outstanding stock options are fully vested and expire on the tenth anniversary of the grant date.
−Removed: There was no unrecognized compensation expense related to these stock options at year-end 2020.
−Removed: 2020 Financial Statements
−Removed: Notes to Consolidated Financial Statements
+Added: There were no stock options outstanding at year-end 2021 as all remaining stock options were exercised during the year.
A summary of the Company's stock option activity in 2021 is as follows:
1 unchanged sentence
Shares Weighted
−Removed: Price Weighted
−Removed: Life Aggregate
−Removed: Options Outstanding at December 28, 2019 74 $ 24.28
+Added: Options Outstanding at January 2, 2021 27 $ 24.44
Exercised ( 27 ) $ 24.44
−Removed: Options Outstanding at January 2, 2021 27 $ 24.44 1.8 years $ 3,173
−Removed: Vested and Exercisable at January 2, 2021 27 $ 24.44 1.8 years $ 3,173
−Removed: (a) The closing price per share on the last trading day prior to year-end 2020 was $ 140.98 .
−Removed: A summary of the Company's stock option exercises in 2020, 2019 and 2018 are as follows:
−Removed: (In thousands) January 2, 2021 December 28, 2019 December 29, 2018
+Added: Options Outstanding at January 1, 2022 — $ —
+Added: A summary of the Company's stock option exercises are as follows:
+Added: (In thousands) January 1, 2022 January 2, 2021 December 28, 2019
Total Intrinsic Value of Options Exercised $ 4,986 $ 4,071 $ 16,796
Cash Received from Options Exercised $ 665 $ 1,123 $ 4,454
+Added: 2021 Financial Statements
+Added: Notes to Consolidated Financial Statements
Employee Stock Purchase Plan
3 unchanged sentences
Shares purchased under the plan are subject to a one-year resale restriction and are purchased through payroll deductions of up to 10 % of each participating employee's gross wages.
−Removed: 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.
+Added: The Company issued 10,230 shares in 2021, 13,062 shares in 2020, and 13,195 shares for 2019 (issued in 2020) of its common stock under this plan.
The Company had 91,643 shares available for grant under the employee stock purchase plan at year-end 2021.
8 unchanged sentences
For these plans, the Company contributed and charged to expense $ 4,706,000 in 2021, $ 4,501,000 in 2020, and $ 4,412,000 in 2019.
−Removed: The increase in the Company's contributions in 2019 was primarily due to the acquisition of SMH.
−Removed: Pension and Other Post-Retirement Benefits Plans
−Removed: Prior to its termination in 2018, the Company sponsored a noncontributory defined benefit pension plan for eligible employees at one of its U.S.
−Removed: divisions and its corporate office (Retirement Plan).
−Removed: Funds for the Retirement Plan were contributed to a trustee to provide for current service and for any unfunded projected benefit obligation over a reasonable period.
−Removed: Certain of the Company’s non-U.S.
−Removed: subsidiaries also sponsor defined benefit pension plans covering certain employees at those subsidiaries.
−Removed: One of the non-U.S.
−Removed: pension plans also contributes funds to a trustee.
−Removed: The remaining non-U.S.
−Removed: pension plans are unfunded as permitted under their plans and applicable laws.
−Removed: Benefits under the Company’s pension plans are based on years of service and employee compensation.
−Removed: The Company also provides other post-retirement benefits under plans in the United States and at one of its non-U.S.
−Removed: subsidiaries.
−Removed: 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.
−Removed: 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 accounting policy for amortizing such amounts.
+Added: Pension and Other Post-Retirement Defined Benefits Plans
+Added: The Company sponsors pension and other post-retirement defined benefit plans covering employees at certain U.S.
+Added: and foreign subsidiaries.
+Added: In accordance with ASC 715, Compensation-Retirement Benefits (ASC 715), the Company recognizes the funded status of its plans as an asset or liability and changes in the funded status through AOCI, net of tax, in the accompanying consolidated balance sheet.
+Added: The amounts in AOCI are recognized as net periodic benefit 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: 2020 Financial Statements
−Removed: Notes to Consolidated Financial Statements
−Removed: 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.
−Removed: 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.
−Removed: 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.
−Removed: 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.
−Removed: The Company does not plan to make any material cash contributions to its pension and post-retirement plans in 2021.
−Removed: The following table summarizes the change in benefit obligation;
−Removed: the change in plan assets;
−Removed: the unfunded status;
−Removed: and the amounts recognized in the accompanying consolidated balance sheet for the Company's U.S.
−Removed: pension benefit plans and other post-retirement benefit plans.
−Removed: In accordance with ASU No.
−Removed: 2015-04, Compensation - Retirement Benefits (Topic 715) , the Company elects to measure its plan assets and benefit obligations as of December 31.
−Removed: Pension Non-U.S.
−Removed: Pension Other Post-Retirement
−Removed: (In thousands) December 28, 2019 January 2, 2021 December 28, 2019 January 2, 2021 December 28, 2019
−Removed: Change in Projected Benefit Obligation:
−Removed: Projected benefit obligation at beginning of year $ 29,715 $ 4,168 $ 3,671 $ 3,742 $ 3,672
−Removed: Service cost — 209 205 6 4
−Removed: Interest cost 1,134 98 121 39 149
−Removed: Actuarial loss (gain) (a) 4,039 ( 94 ) 393 47 144
−Removed: Benefits paid ( 966 ) ( 286 ) ( 184 ) ( 131 ) ( 232 )
−Removed: Settlement payment ( 33,922 ) — — ( 2,427 ) —
−Removed: Currency translation — 239 ( 38 ) ( 7 ) 5
−Removed: Projected benefit obligation at end of year $ — $ 4,334 $ 4,168 $ 1,269 $ 3,742
−Removed: Change in Plan Assets:
−Removed: Fair value of plan assets at beginning of year $ 28,729 $ 973 $ 726 $ 64 $ 44
−Removed: Actual return on plan assets 2,320 37 58 2 4
−Removed: Employer contributions 3,839 457 340 2,577 246
−Removed: Benefits paid ( 966 ) ( 286 ) ( 184 ) ( 131 ) ( 232 )
−Removed: Settlement payment ( 33,922 ) — — ( 2,427 ) —
−Removed: Currency translation — ( 35 ) 33 ( 3 ) 2
−Removed: Fair value of plan assets at end of year $ — $ 1,146 $ 973 $ 82 $ 64
−Removed: Unfunded Status $ — $ ( 3,188 ) $ ( 3,195 ) $ ( 1,187 ) $ ( 3,678 )
−Removed: Accumulated Benefit Obligation at End of Year $ — $ 3,572 $ 3,046 $ — $ —
−Removed: Amounts Included in the Balance Sheet:
−Removed: Current liability $ — $ ( 144 ) $ ( 189 ) $ ( 131 ) $ ( 2,569 )
−Removed: Non-current liability $ — $ ( 3,044 ) $ ( 3,006 ) $ ( 1,056 ) $ ( 1,109 )
−Removed: Amounts Included in Accumulated Other Comprehensive Items Before Tax:
−Removed: Unrecognized net actuarial loss $ — $ ( 900 ) $ ( 1,034 ) $ ( 175 ) $ ( 144 )
−Removed: Unrecognized prior service cost — 97 ( 38 ) — —
−Removed: $ — $ ( 803 ) $ ( 1,072 ) $ ( 175 ) $ ( 144 )
−Removed: (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.
−Removed: 2020 Financial Statements
−Removed: Notes to Consolidated Financial Statements
−Removed: Pension Non-U.S.
−Removed: Pension Other Post-Retirement
−Removed: (In thousands) December 28, 2019 January 2, 2021 December 28, 2019 January 2, 2021 December 28, 2019
−Removed: Changes in Amounts Included in Accumulated Other Comprehensive Items Before Tax:
−Removed: Net actuarial (loss) gain $ ( 2,714 ) $ 230 $ ( 402 ) $ ( 50 ) $ ( 88 )
−Removed: Amortization of net actuarial loss 32 50 25 16 13
−Removed: Amortization of prior service cost — 55 6 — —
−Removed: Settlement loss 5,887 — — — —
−Removed: Currency translation — ( 66 ) 18 3 —
−Removed: $ 3,205 $ 269 $ ( 353 ) $ ( 31 ) $ ( 75 )
−Removed: The weighted average assumptions used to determine the benefit obligation are as follows:
−Removed: Pension Other Post-Retirement
−Removed: January 2, 2021 December 28, 2019 January 2, 2021 December 28, 2019
−Removed: Discount Rate 2.02 % 2.59 % 2.33 % 3.82 %
−Removed: Rate of Compensation Increase 2.10 % 3.40 % 5.57 % 5.57 %
−Removed: 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.
−Removed: 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.
−Removed: 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) January 2, 2021 December 28, 2019
−Removed: Projected Benefit Obligation $ 4,334 $ 4,168
−Removed: Fair Value of Plan Assets $ 1,146 $ 973
−Removed: 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) January 2, 2021 December 28, 2019
−Removed: Accumulated Benefit Obligation $ 2,601 $ 2,408
−Removed: Fair Value of Plan Assets $ — $ —
−Removed: The components of net periodic benefit cost are as follows:
−Removed: Pension Non-U.S.
−Removed: Pension Other Post-Retirement
−Removed: (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
−Removed: Service cost $ — $ 699 $ 209 $ 205 $ 173 $ 6 $ 4 $ 213
−Removed: Interest cost 1,134 1,193 98 121 126 39 149 172
−Removed: Expected return on plan assets ( 995 ) ( 1,286 ) ( 60 ) ( 66 ) ( 42 ) ( 3 ) ( 4 ) ( 3 )
−Removed: Amortization of net actuarial loss 32 541 50 25 63 16 13 136
−Removed: Amortization of prior service cost — — 55 6 6 — — 86
−Removed: Settlement loss 5,887 — — — — — 57 —
−Removed: Curtailment loss — 1,116 — — — — — 309
−Removed: Net Periodic Benefit Cost $ 6,058 $ 2,263 $ 352 $ 291 $ 326 $ 58 $ 219 $ 913
−Removed: 2020 Financial Statements
−Removed: Notes to Consolidated Financial Statements
−Removed: The weighted average assumptions used to determine net periodic benefit cost are as follows:
−Removed: Pension Non-U.S.
−Removed: Pension Other Post-Retirement
−Removed: December 28, 2019 December 29, 2018 January 2, 2021 December 28, 2019 December 29, 2018 January 2, 2021 December 28, 2019 December 29, 2018
−Removed: Discount Rate 4.10 % 3.51 % 1.73 % 2.58 % 3.49 % 3.82 % 4.33 % 3.58 %
−Removed: Expected Long-Term Return on Plan Assets 4.10 % 4.50 % 5.89 % 9.22 % 7.43 % 5.89 % 9.22 % 7.43 %
−Removed: Rate of Compensation Increase — % 3.00 % 2.89 % 2.81 % 3.97 % 5.57 % 5.57 % 3.05 %
−Removed: 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.
−Removed: The expected long-term rate of return on plan assets for the U.S.
−Removed: pension plan in fiscal 2018 and the non-U.S.
−Removed: 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.
−Removed: The fair value of the Company’s non-U.S.
−Removed: pension and other post-retirement plan assets were $ 1,228,000 at year-end 2020 and $ 1,037,000 at year end 2019.
−Removed: 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.
−Removed: See N ote 11 , Fair Value Measurement and Fair Value of Financial Instruments, for the fair value hierarchy.
−Removed: Estimated Future Benefit Payments
−Removed: Expected benefit payments are based on the same assumptions used to measure the Company's benefit obligation at year-end 2020.
−Removed: Estimated future benefit payments during the next five years and in aggregate for the five years thereafter are as follows:
−Removed: Post-retirement
−Removed: (In thousands) Non-U.S.
−Removed: 2021 $ 145 $ 131
−Removed: 2026-2029 2,264 426
+Added: The Company records the non-service component of net periodic pension cost in other expense, net in the accompanying consolidated statement of income.
+Added: Other expense, net in 2019 included a loss of $ 5,887,000 related to the settlement of the Company’s noncontributory defined benefit pension plan for eligible employees at one of its U.S.
+Added: divisions and its corporate office (Retirement Plan).
+Added: The Retirement Plan was terminated in December 2018.
+Added: Other expense, net in 2019 also included activity related to the Retirement Plan prior to its settlement, including interest costs of $ 1,334,000 , net of an expected return on plan assets of $ 995,000 .
+Added: The weighted average assumptions used to determine net periodic benefit costs in 2019 for the Retirement Plan was 4.10 % for both the discount rate and expected return on plan assets, which were valued using the FTSE Pension Discount Curve.
+Added: In 2020, the Company made a settlement payment of $ 2,427,000 related to a restoration plan, also terminated in 2018, which fully supplemented benefits lost for certain executive officers under the Retirement Plan.
+Added: The remaining disclosure requirements related to the Company’s defined benefit plans are not material for the fiscal years presented.
Stockholders' Equity
5 unchanged sentences
The components of income before provision for income taxes are as follows:
−Removed: (In thousands) January 2, 2021 December 28, 2019 December 29, 2018
+Added: (In thousands) January 1, 2022 January 2, 2021 December 28, 2019
Domestic $ 26,599 $ 14,132 $ 93
2 unchanged sentences
The components of the provision for income taxes are as follows:
−Removed: (In thousands) January 2, 2021 December 28, 2019 December 29, 2018
+Added: (In thousands) January 1, 2022 January 2, 2021 December 28, 2019
Current Provision (Benefit):
12 unchanged sentences
The Company recognized an income tax benefit of $ 1,808,000 in 2021, $ 758,000 in 2020 and $ 3,754,000 in 2019 in the accompanying consolidated statement of income.
−Removed: 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) January 2, 2021 December 28, 2019 December 29, 2018
+Added: The provision for income taxes in the accompanying consolidated 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:
+Added: (In thousands) January 1, 2022 January 2, 2021 December 28, 2019
Provision for Income Taxes at Statutory Rate $ 23,531 $ 15,474 $ 14,474
Increases (Decreases) Resulting From:
−Removed: State income taxes, net of federal tax 807 ( 355 ) 164
−Removed: tax cost of foreign earnings 599 146 1,215
Foreign tax rate differential 2,819 1,891 2,584
−Removed: Reversal of tax benefit reserves, net ( 730 ) ( 286 ) ( 1,785 )
−Removed: Change in valuation allowance ( 469 ) 81 141
Nondeductible expenses 1,673 2,117 2,407
−Removed: Research and development tax credits ( 465 ) ( 381 ) ( 445 )
Excess tax benefit related to stock-based compensation ( 1,525 ) ( 661 ) ( 3,305 )
−Removed: Impact of the U.S.
−Removed: Tax Cuts and Jobs Act — — ( 106 )
+Added: State income taxes, net of federal income tax 863 807 ( 355 )
+Added: tax cost of foreign earnings 481 599 146
+Added: Reversal of tax benefit reserves, net ( 444 ) ( 730 ) ( 286 )
+Added: Research and development tax credits ( 454 ) ( 465 ) ( 381 )
+Added: Change in valuation allowance ( 31 ) ( 469 ) 81
Other 258 ( 615 ) 993
2 unchanged sentences
Notes to Consolidated Financial Statements
−Removed: Net deferred tax liability in the accompanying consolidated balance sheet consists of the following:
−Removed: (In thousands) January 2, 2021 December 28, 2019
+Added: The Company's net deferred tax liability consists of the following:
+Added: (In thousands) January 1, 2022 January 2, 2021
Deferred Tax Asset:
−Removed: Foreign, state, and alternative minimum tax credit carryforwards $ 472 $ 776
−Removed: Reserves and accruals 3,565 3,007
Net operating loss carryforwards $ 14,162 $ 13,719
+Added: Lease liabilities 6,393 6,855
Inventory basis difference 4,600 4,576
−Removed: Capitalized research expenses 2,668 2,813
Employee compensation 4,368 3,189
+Added: Reserves and accruals 3,167 3,565
+Added: Capitalized research expenses 2,349 2,668
+Added: Foreign, state, and alternative minimum tax credit carryforwards 508 472
Allowance for credit losses 420 397
−Removed: Lease liabilities 6,855 7,543
−Removed: Other 213 543
Deferred tax asset, gross 36,015 35,654
4 unchanged sentences
Fixed asset basis difference ( 6,009 ) ( 4,964 )
−Removed: Provision for unremitted foreign earnings ( 1,233 ) ( 809 )
ROU assets ( 5,431 ) ( 5,812 )
+Added: Provision for unremitted foreign earnings ( 559 ) ( 1,233 )
Other ( 1,819 ) ( 1,574 )
1 unchanged sentence
Net deferred tax liability $ ( 30,795 ) $ ( 17,704 )
−Removed: The deferred tax assets and liabilities are presented in the accompanying consolidated balance sheet within other assets and long-term deferred income taxes on a net basis by tax jurisdiction.
+Added: Deferred tax assets and liabilities are presented in the accompanying consolidated balance sheet within other assets and long-term deferred income taxes on a net basis by tax jurisdiction.
The Company has established valuation allowances related to certain domestic and foreign deferred tax assets on deductible temporary differences, tax losses, and tax credit carryforwards.
The valuation allowance at year-end 2021 was $ 9,212,000 , consisting of $ 190,000 in the United States and $ 9,022,000 in foreign jurisdictions.
−Removed: 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.
+Added: The decrease in the valuation allowance in 2021 of $ 397,000 is related primarily to fluctuations in foreign currency exchange rates and utilization of foreign net operating losses, partially offset by an increase in valuation allowance associated with acquired net operating losses.
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.
1 unchanged sentence
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.
−Removed: As of year-end 2020, the Company continued to maintain a valuation allowance in the United States against a portion of its state net operating loss carryforwards due to the uncertainty of future profitability in state jurisdictions.
+Added: As of year-end 2021, the Company continued to maintain a valuation allowance in the United States against a portion of its state net operating loss carryforwards due to the uncertainty of future profitability in certain state jurisdictions.
As of year-end 2021, the Company maintained valuation allowances in certain foreign jurisdictions because of the uncertainty of future profitability within those foreign jurisdictions.
1 unchanged sentence
federal and state net operating loss carryforwards of $ 2,304,000 and $ 30,830,000 , respectively, and foreign net operating loss carryforwards of $ 56,537,000 .
−Removed: federal net operating loss carryforwards, $ 72,000 expires in 2036 and the remainder do not expire.
+Added: federal net operating loss carryforward does not expire.
The state net operating loss carryforwards begin to expire in 2024 and a portion does not expire.
Of the foreign net operating loss carryforwards, $ 1,499,000 will expire in the years 2024 through 2041, and the remainder do not expire.
−Removed: As of year-end 2020, the Company also had U.S.
−Removed: 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.
+Added: As of year-end 2021, the Company also had state disallowed business interest expense carryforwards of $ 67,000 and foreign tax credits of $ 368,000 , 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.
4 unchanged sentences
Notes to Consolidated Financial Statements
−Removed: loss of $ 377,000 associated with these earnings.
+Added: gain of $ 517,000 associated with these earnings.
+Added: Of the earnings repatriated in 2021, $ 100,765,000 related to a distribution of shares of a foreign subsidiary.
The Company intends to repatriate the distributable reserves of select foreign subsidiaries back to the United States and has recognized $ 570,000 of net tax expense on the estimated repatriation amount during 2021.
−Removed: Except for these select foreign subsidiaries, the Company intends to indefinitely reinvest $ 271,572,000 of these earnings of its international subsidiaries in order to support the current and future capital needs of their operations in the foreign jurisdictions, including the repayment of the Company’s foreign debt.
+Added: Except for these select foreign subsidiaries, the Company intends to indefinitely reinvest $ 223,035,000 of these earnings of its foreign subsidiaries in order to support the current and future capital needs of their operations, including the repayment of the Company’s foreign debt.
The related foreign withholding taxes, which would be required if the Company were to remit these foreign earnings to the United States, would be approximately $ 4,116,000 .
3 unchanged sentences
As of year-end 2021, the Company had a liability of $ 9,731,000 for unrecognized tax benefits which, if recognized, would reduce the effective tax rate.
−Removed: 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) January 2, 2021 December 28, 2019
+Added: A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows:
+Added: (In thousands) January 1, 2022 January 2, 2021
Unrecognized Tax Benefits, Beginning of Year $ 8,337 $ 8,331
8 unchanged sentences
The Company has accrued $ 1,704,000 at year-end 2021 and $ 1,600,000 at year-end 2020 for the potential payment of interest and penalties.
−Removed: 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.
−Removed: 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.
−Removed: 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;
−Removed: however, the Company cannot reasonably estimate possible adjustments at this time.
−Removed: 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.
+Added: The interest and penalties included in the accompanying consolidated statement of income was a benefit of $ 129,000 in 2021 and $ 145,000 in 2020.
+Added: The Company is currently under audit in one of its foreign tax jurisdictions.
+Added: During 2021, the Company finalized its examination with the Internal Revenue Service for the tax years 2017 and 2018 with no material adjustments.
+Added: It is reasonably possible that over the next fiscal year the amount of liability for unrecognized tax benefits may be reduced by up to $ 1,367,000 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 2019 and 2020, and to non-U.S.
+Added: federal income tax examinations for the tax years 2019 through 2021, and to non-U.S.
income tax examinations for the tax years 2008 through 2021.
In addition, the Company remains subject to state and local income tax examinations in the United States for the tax years 2003 through 2021.
−Removed: Long-Term Obligations
−Removed: Long-term obligations are as follows:
−Removed: (In thousands) January 2, 2021 December 28, 2019
+Added: Short- and Long-Term Obligations
+Added: Short- and long-term obligations are as follows:
+Added: (In thousands) January 1, 2022 January 2, 2021
Revolving Credit Facility, due 2023 $ 250,267 $ 217,963
−Removed: Commercial Real Estate Loan — 19,425
Senior Promissory Notes, due 2023 to 2028 10,000 10,000
1 unchanged sentence
Other Borrowings, due 2022 to 2028 7,637 3,880
−Removed: Unamortized Debt Issuance Costs — ( 127 )
Total 269,514 233,474
−Removed: Current Maturities of Long-Term Obligations ( 1,474 ) ( 2,851 )
+Added: Short-Term Obligations and Current Maturities of Long-Term Obligations ( 5,356 ) ( 1,474 )
Long-Term Obligations $ 264,158 $ 232,000
3 unchanged sentences
Revolving Credit Facility
−Removed: 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).
−Removed: 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.
+Added: The Company entered into an 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 with 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) LIBOR (with a zero percent floor), as defined, plus an applicable margin of 1 % to 2.25 %.
−Removed: 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 U.S.
−Removed: dollar LIBOR (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 as defined in the Credit Agreement.
+Added: (i) the Base Rate, as defined, plus a margin of 0 % to 1.25 %, or (ii) Eurocurrency Rate, CDOR Rate, and RFR, (with a zero percent floor), as applicable and defined, plus a margin of 1 % to 2.25 %.
+Added: The 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.
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.
−Removed: 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).
+Added: 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, if the Company elects, 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).
Loans under the Credit Agreement are guaranteed by certain domestic subsidiaries of the Company.
−Removed: In addition, one of the Company’s foreign subsidiaries entered into a separate guarantee agreement limited to certain obligations of two foreign subsidiary borrowers.
−Removed: 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 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.
−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 USD LIBOR on its U.S.
−Removed: dollar-denominated debt borrowed under the Credit Agreement.
−Removed: Unamortized debt issuance costs related to the Credit Agreement, of $ 1,209,000 at year-end 2020 and $ 1,407,000 at year-end 2019, are included in other assets in the accompanying consolidated balance sheet, and are being amortized to interest expense using the straight-line method.
+Added: The Company borrowed an aggregate $ 151,944,000 under the Credit Agreement in fiscal 2021, including $ 89,944,000 of euro-denominated borrowings, which were primarily used to fund the Company's acquisitions during the year.
+Added: At year-end 2021, the outstanding balance under the Credit Agreement included $ 78,267,000 of euro-denominated borrowings.
+Added: The Company had $ 149,920,000 of borrowing capacity available at year-end 2021, which was calculated by translating its foreign-denominated borrowings using the borrowing date foreign exchange rate.
The weighted average interest rate for the outstanding balance under the Credit Agreement was 1.50 % as of year-end 2021.
−Removed: Commercial Real Estate Loan
−Removed: 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.
−Removed: Interest accrued and was payable quarterly in arrears at a fixed rate of 4.45 % per annum.
−Removed: 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.
−Removed: To prepay the Real Estate Loan, the Company used $ 19,000,000 of borrowings available under the Credit Agreement.
+Added: See Note 10 , Derivatives, under the heading Interest Rate Swap Agreements , for information relating to the Company's swap agreement.
Senior Promissory Notes
1 unchanged sentence
Simultaneous with the execution of the Note Purchase Agreement, the Company issued senior promissory notes (Initial Notes) in an aggregate principal amount of $ 10,000,000 , with a per annum interest rate of 4.90 % payable semiannually, and a maturity date of December 14, 2028.
−Removed: The Company is required to prepay a portion of the principal of the Initial Notes beginning on December 14, 2023 and each year thereafter, and may optionally prepay the principal on the Initial Notes, together with any prepayment premium, at any time (in a minimum amount of $ 1,000,000 , or the foreign currency equivalent thereof, if applicable) in accordance with the Note Purchase Agreement.
+Added: The Company is required to prepay a portion of the principal of the Initial Notes beginning on December 14, 2023 and each year thereafter, and may optionally prepay the principal on the Initial Notes, together with any prepayment premium, at any time in accordance with the Note Purchase Agreement.
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
−Removed: 2020 Financial Statements
−Removed: Notes to Consolidated Financial Statements
−Removed: 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, 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.
−Removed: The Senior Promissory Notes are guaranteed by certain of the Company’s domestic subsidiaries.
−Removed: Annual Repayment Requirements
−Removed: The following schedule presents the annual repayment requirements for the Company’s Credit Agreement and Initial Notes as of year-end 2020.
−Removed: (In thousands)
−Removed: 2023 $ 219,630
−Removed: 2026 and Thereafter 5,000
+Added: The Initial 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.
+Added: The Initial Notes are guaranteed by certain of the Company’s domestic subsidiaries.
Debt Compliance
1 unchanged sentence
Finance Leases
−Removed: The Company's finance leases primarily relate to contracts for its vehicles.
+Added: The Company's finance leases primarily relate to contracts for vehicles.
See Note 9 , Leases, for further information relating to the Company's finance leases.
3 unchanged sentences
The interest rate on the outstanding obligation is 1.79 %.
−Removed: The secured loan receivable, which is included in other assets in the accompanying consolidated balance sheet, was $ 1,247,000 at year-end 2020.
−Removed: 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, it will receive cash from the landlord to settle the loan receivable.
+Added: The secured loan receivable, which was included in other current assets in the accompanying consolidated balance sheet, was $ 1,408,000 at year-end 2021.
+Added: The lease arrangement provides for a fixed price purchase option, net of the projected loan receivable, of $ 1,508,000 at the end of the lease term in August 2022.
+Added: 2021 Financial Statements
+Added: Notes to Consolidated Financial Statements
+Added: 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 2021, $ 3,297,000 was outstanding under this obligation.
−Removed: The following schedule presents future minimum lease payments for the Company's sales-leaseback financing arrangement as of year-end 2020.
+Added: Other borrowings also include $ 4,331,000 of debt obligations outstanding at year-end 2021 assumed in the acquisition of Clouth, which has maturity dates ranging from 2022 to 2028 and interest rates up to 1.95 %.
+Added: Annual Repayment Requirements
+Added: The following schedule presents the annual repayment requirements for the Company’s short-and long-term obligations, excluding finance leases and the sale-leaseback financing arrangement, as of year-end 2021.
(In thousands)
−Removed: Total Minimum Lease Payments 2,258
−Removed: Imputed Interest ( 66 )
−Removed: Present Value of Minimum Lease Payments $ 2,192
+Added: 2027 and Thereafter 3,764
Commitments and Contingencies
3 unchanged sentences
Typically, these standby letters of credit and bank guarantees expire without being drawn by the beneficiary.
−Removed: 2020 Financial Statements
−Removed: Notes to Consolidated Financial Statements
Right of Recourse
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.
−Removed: The drafts are noninterest-bearing obligations of the issuing bank and mature within six months of the origination date.
+Added: The drafts are noninterest-bearing obligations of the issuing bank and generally mature within six months of the origination date.
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.
10 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.
+Added: 2021 Financial Statements
+Added: Notes to Consolidated Financial Statements
+Added: Other Costs, Net
Restructuring Costs
−Removed: 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: During 2021, the Company recorded restructuring costs totaling $ 481,000 within its Flow Control segment, including charges for the write-down of certain machinery and equipment of $ 226,000 and an ROU asset of $ 79,000 , and severance costs of $ 176,000 related to the reduction of three employees.
+Added: These actions were taken to eliminate a redundant ceramic blade manufacturing operation in France that resulted from the Company's acquisition of Clouth in the third quarter of 2021.
+Added: During 2020, the Company recorded restructuring costs totaling $ 1,118,000 , representing severance costs of $ 659,000 for 34 employees within 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.
The Company also reduced its workforce by 21 employees in its Industrial Processing segment with no associated severance costs.
−Removed: 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.
−Removed: 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: The Company took these cost-containment actions to reduce 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 within its Industrial Processing segment.
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.
−Removed: 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.
−Removed: 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.
−Removed: 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.
−Removed: 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: The Company does not expect to incur additional charges related to the above restructuring plans.
−Removed: Restructuring costs are included in impairment and restructuring costs in the accompanying consolidated statement of income.
−Removed: 2020 Financial Statements
−Removed: Notes to Consolidated Financial Statements
+Added: The Company expects to incur additional restructuring charges in 2022 primarily for severance and facility closure costs related to its 2021 restructuring plan, which are not expected to be significant.
+Added: The Company does not expect to incur additional charges related to the 2020 and 2019 restructuring plans.
+Added: Restructuring costs are included in impairment and other costs, net in the accompanying consolidated statement of income.
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 2022, are as follows:
−Removed: (In thousands) Severance Relocation Other (a) Total
+Added: (In thousands) Severance
2021 Restructuring Plan
Provision $ 176
−Removed: Usage ( 1,052 ) — — ( 1,052 )
Currency translation ( 1 )
4 unchanged sentences
Currency translation ( 5 )
−Removed: Balance at December 28, 2019 84 — — 84
−Removed: Usage ( 90 ) — — ( 90 )
−Removed: Currency translation 6 — — 6
Balance at January 2, 2021 61
+Added: Balance at January 1, 2022 $ —
2019 Restructuring Plan
−Removed: Balance at December 30, 2017 $ 203 $ — $ — $ 203
−Removed: (Reversal) Provision ( 55 ) 1,318 454 1,717
+Added: Provision $ 192
Usage ( 109 )
1 unchanged sentence
Balance at December 28, 2019 84
−Removed: Usage — — — —
−Removed: Balance at December 28, 2019 63 — — 63
−Removed: Usage ( 3 ) — — ( 3 )
+Added: Currency translation 6
Balance at January 2, 2021 $ —
−Removed: (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.
+Added: Other income consisted of a gain of $ 515,000 in 2021 related to the sale of a building in Theodore, Alabama, within the Company's Industrial Processing segment for net cash proceeds of $ 1,634,000 .
+Added: The building was vacated as part of the Company's 2017 restructuring plan to consolidate three of its stock-preparation operations into a single new facility, which was completed in 2018.
+Added: 2021 Financial Statements
+Added: Notes to Consolidated Financial Statements
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 13 years, some of which include one or more options to extend the lease for up to 5 years.
1 unchanged sentence
The components of lease expense are as follows:
−Removed: (In thousands) January 2, 2021 December 28, 2019
+Added: (In thousands) January 1, 2022 January 2, 2021 December 28, 2019
Operating Lease Cost $ 5,895 $ 5,602 $ 5,534
Short-Term Lease Cost 674 671 715
−Removed: 2020 Financial Statements
−Removed: Notes to Consolidated Financial Statements
−Removed: (In thousands) January 2, 2021 December 28, 2019
Finance Lease Cost:
3 unchanged sentences
Total Lease Costs $ 7,660 $ 7,504 $ 7,556
−Removed: 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) January 2, 2021 December 28, 2019
+Added: (In thousands) January 1, 2022 January 2, 2021 December 28, 2019
Cash Paid for Amounts Included in the Measurement of Lease Liabilities:
9 unchanged sentences
Supplemental balance sheet information related to leases is as follows:
−Removed: (In thousands) Balance Sheet Line Item January 2, 2021 December 28, 2019
+Added: (In thousands) Balance Sheet Line Item January 1, 2022 January 2, 2021
Operating Leases:
+Added: ROU assets (a) Other current assets $ 2,341 $ —
ROU assets Other assets 24,998 25,460
+Added: Total operating lease assets $ 27,339 $ 25,460
Short-term liabilities Other current liabilities $ 4,596 $ 4,396
1 unchanged sentence
Total operating lease liabilities $ 24,555 $ 26,594
+Added: 2021 Financial Statements
+Added: Notes to Consolidated Financial Statements
+Added: (In thousands) Balance Sheet Line Item January 1, 2022 January 2, 2021
Finance Leases:
2 unchanged sentences
ROU assets, net Property, plant, and equipment, net $ 1,587 $ 1,599
−Removed: Short-term obligations Current maturities of long-term obligations $ 915 $ 1,116
+Added: Short-term obligations Short-term obligations and current maturities of long-term obligations $ 862 $ 915
Long-term obligations Long-term obligations 748 716
Total finance lease liabilities $ 1,610 $ 1,631
−Removed: 2020 Financial Statements
−Removed: Notes to Consolidated Financial Statements
−Removed: January 2, 2021 December 28, 2019
+Added: (a) See Note 15 , Subsequent Event, for further details.
+Added: January 1, 2022 January 2, 2021
Weighted Average Remaining Lease Term (in years):
10 unchanged sentences
2024 3,292 178
+Added: 2025 2,727 17
2027 and Thereafter 11,343 —
4 unchanged sentences
Interest Rate Swap Agreements
−Removed: The Company has entered into interest rate swap agreements to hedge its exposure to movements in USD LIBOR on its U.S.
+Added: In 2018, the Company entered into an interest rate swap agreement (2018 Swap Agreement) with Citizens Bank to hedge its exposure to movements in USD LIBOR on its U.S.
dollar-denominated debt.
−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.
+Added: The 2018 Swap Agreement has a $ 15,000,000 notional value and expires on June 30, 2023.
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.
−Removed: 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.
−Removed: 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.
The Company designated its 2018 Swap Agreement as a cash flow hedge and structured it to be 100 % effective.
Unrealized gains and losses related to the fair value of the 2018 Swap Agreement are recorded to AOCI, net of tax.
−Removed: 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.
−Removed: 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.
−Removed: See Note 6 , Long-Term Obligations, for further details.
+Added: In the event of early termination, the Company will receive from or pay to the counterparty the fair value of the 2018 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
+Added: 2021 Financial Statements
+Added: Notes to Consolidated Financial Statements
+Added: counterparty is a member, and if it were to be unable to cure the default.
+Added: See Note 6 , Short- and Long-Term Obligations, for further details.
Forward Currency-Exchange Contracts
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.
−Removed: Such exposures result from assets and liabilities that are denominated in currencies other than the functional currencies.
+Added: Such exposures result from assets and liabilities that are denominated in currencies other than the functional currencies of the Company's subsidiaries.
Forward currency-exchange contracts that hedge forecasted accounts receivable or accounts payable are designated as cash flow hedges and unrecognized gains and losses are recorded to AOCI, net of tax.
1 unchanged sentence
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: 2020 Financial Statements
−Removed: Notes to Consolidated Financial Statements
−Removed: 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: Gains and losses reported within SG&A expenses in the accompanying consolidated statement of income associated with the Company's forward currency-exchange contracts that were not designated as hedges were not material in 2021, 2020, and 2019.
The following table summarizes the fair value of derivative instruments in the accompanying consolidated balance sheet:
−Removed: January 2, 2021 December 28, 2019
+Added: January 1, 2022 January 2, 2021
(In thousands) Balance Sheet
5 unchanged sentences
Derivatives in an Asset Position:
−Removed: 2015 Swap Agreement Other Current Assets $ — $ — $ 11 $ 10,000
Forward currency-exchange contract Other Current Assets $ — $ — $ 25 $ 842
Derivatives in a Liability Position:
−Removed: Forward currency-exchange contracts Other Current
+Added: Forward currency-exchange contract Other Current
Liabilities $ ( 44 ) $ 842 $ — $ —
13 unchanged sentences
Exchange Contracts Total
−Removed: Unrealized Loss, Net of Tax, at December 28, 2019 $ ( 589 ) $ ( 55 ) $ ( 644 )
−Removed: Loss (gain) reclassified to earnings (a) 253 ( 21 ) 232
−Removed: (Loss) gain recognized in AOCI ( 510 ) 94 ( 416 )
Unrealized (Loss) Gain, Net of Tax, at January 2, 2021 $ ( 846 ) $ 18 $ ( 828 )
+Added: Loss (gain) reclassified to earnings (a) 343 ( 119 ) 224
+Added: Gain recognized in AOCI 74 68 142
+Added: Unrealized Loss, Net of Tax, at January 1, 2022 $ ( 429 ) $ ( 33 ) $ ( 462 )
(a) See Note 14 , Accumulated Other Comprehensive Items, for the income statement classification.
At year-end 2021, the Company expects to reclassify losses of $ 337,000 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.
−Removed: Fair Value Measurements and Fair Value of Financial Instruments
−Removed: 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.
2021 Financial Statements
Notes to Consolidated Financial Statements
+Added: Fair Value Measurements and Fair Value of Financial Instruments
+Added: 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.
A fair value hierarchy is established, which prioritizes the inputs used in measuring fair value into three broad levels as follows:
9 unchanged sentences
2018 Swap Agreement $ — $ 550 $ — $ 550
−Removed: Forward currency-exchange contracts $ — $ 7 $ — $ 7
−Removed: Fair Value as of December 28, 2019
+Added: Forward currency-exchange contract $ — $ 44 $ — $ 44
+Added: Fair Value as of January 2, 2021
(In thousands) Level 1 Level 2 Level 3 Total
1 unchanged sentence
Banker's acceptance drafts (a) $ — $ 9,445 $ — $ 9,445
−Removed: 2015 Swap Agreement $ — $ 11 $ — $ 11
Forward currency-exchange contracts $ — $ 37 $ — $ 37
5 unchanged sentences
The fair values of the forward currency-exchange contracts are based on quoted forward foreign exchange rates at the reporting date.
−Removed: The fair values of the interest rate swap agreements are based on LIBOR yield curves at the reporting date.
−Removed: 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.
+Added: The fair value of the 2018 Swap Agreement is based on USD LIBOR yield curves at the reporting date.
+Added: The forward currency-exchange contracts and the 2018 Swap Agreement 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.
Changes in values of the underlying hedged assets and liabilities or anticipated transactions are not reflected in the table above.
−Removed: The carrying value and fair value of the Company's debt obligations, excluding lease obligations and other borrowings, are as follows:
−Removed: January 2, 2021 December 28, 2019
+Added: The carrying value and fair value of the Company's debt obligations, excluding lease obligations, are as follows:
+Added: January 1, 2022 January 2, 2021
(In thousands) Carrying
2 unchanged sentences
Revolving credit facility $ 250,267 $ 250,267 $ 217,963 $ 217,963
−Removed: Commercial real estate loan — — 19,425 20,541
Senior promissory notes 10,000 10,947 10,000 11,157
+Added: Other 4,331 4,331 — —
$ 264,598 $ 265,545 $ 227,963 $ 229,120
−Removed: 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.
−Removed: 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.
2021 Financial Statements
Notes to Consolidated Financial Statements
+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 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.
Business Segment and Geographical Information
−Removed: The Company previously reported its financial results by combining its operating entities into three reportable operating segments:
−Removed: Papermaking Systems, Wood Processing Systems, and Material Handling Systems, and a separate product line, Fiber-based Products, as described below.
−Removed: 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: 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.
−Removed: 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.
−Removed: The Company's financial results are reported in three new reportable operating segments:
+Added: The Company has combined its operating entities into three reportable operating segments:
Flow Control, Industrial Processing, and Material Handling.
The Flow Control segment consists of the fluid-handling and doctoring, cleaning, & filtration product lines;
−Removed: the Industrial Processing segment consists of the wood processing and stock-preparation product lines (excluding baling products);
−Removed: and the Material Handling segment consists of the conveying and screening, baling, and fiber-based product lines.
−Removed: Financial information for 2019 and 2018 has been recast to conform to the new segment presentation.
+Added: the Industrial Processing segment consists of the wood processing and stock-preparation product lines;
+Added: and the Material Handling segment consists of the conveying and vibratory, baling, and fiber-based product lines.
A description of each segment follows.
• 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.
−Removed: 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: The Company's primary products include rotary sealing devices, steam systems, expansion joints, doctor systems, roll and fabric cleaning devices, and filtration and fiber recovery systems.
• 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.
5 unchanged sentences
The following table presents financial information for the Company's reportable operating segments:
−Removed: (In thousands) January 2, 2021 December 28, 2019 December 29, 2018
−Removed: Flow Control $ 225,444 $ 250,339 $ 247,966
+Added: (In thousands) January 1, 2022 January 2, 2021 December 28, 2019
+Added: Flow Control (a) $ 288,788 $ 225,444 $ 250,339
Industrial Processing 328,762 261,577 301,948
−Removed: Material Handling (a) 148,007 152,357 71,591
+Added: Material Handling (b) 169,029 148,007 152,357
$ 786,579 $ 635,028 $ 704,644
Income Before Provision for Income Taxes
−Removed: Flow Control (b) $ 51,530 $ 55,343 $ 52,928
−Removed: Industrial Processing (c) 42,971 49,599 57,355
−Removed: Material Handling (a, d) 14,375 11,600 8,077
−Removed: Corporate (e) ( 27,752 ) ( 28,719 ) ( 29,762 )
+Added: Flow Control (a,c) $ 65,509 $ 51,530 $ 55,343
+Added: Industrial Processing (d) 66,569 42,971 49,599
+Added: Material Handling (b,e) 17,543 14,375 11,600
+Added: Corporate (f) ( 32,911 ) ( 27,752 ) ( 28,719 )
Total operating income 116,710 81,124 87,823
−Removed: Interest expense, net (f) ( 7,242 ) ( 12,542 ) ( 6,653 )
−Removed: Other expense, net (f, g) ( 195 ) ( 6,359 ) ( 2,417 )
+Added: Interest expense, net (g) ( 4,554 ) ( 7,242 ) ( 12,542 )
+Added: Other expense, net (g,h) ( 104 ) ( 195 ) ( 6,359 )
$ 112,052 $ 73,687 $ 68,922
−Removed: 2020 Financial Statements
−Removed: Notes to Consolidated Financial Statements
−Removed: (In thousands) January 2, 2021 December 28, 2019 December 29, 2018
−Removed: Flow Control $ 263,141 $ 262,320 $ 256,140
+Added: Flow Control (a) $ 382,379 $ 263,141 $ 262,320
Industrial Processing 405,575 379,965 375,194
−Removed: Material Handling (a) 273,909 281,057 86,003
−Removed: Corporate (h) 10,556 20,816 9,094
+Added: Material Handling (b) 334,785 273,909 281,057
+Added: Corporate (i) 9,473 10,556 20,816
$ 1,132,212 $ 927,571 $ 939,387
+Added: 2021 Financial Statements
+Added: Notes to Consolidated Financial Statements
+Added: (In thousands) January 1, 2022 January 2, 2021 December 28, 2019
Depreciation and Amortization
−Removed: Flow Control $ 6,333 $ 6,603 $ 5,971
+Added: Flow Control (a) $ 8,366 $ 6,333 $ 6,603
Industrial Processing 13,467 13,163 13,012
−Removed: Material Handling (a) 11,628 12,528 3,756
+Added: Material Handling (b) 12,341 11,628 12,528
Corporate 128 210 247
1 unchanged sentence
Capital Expenditures
−Removed: Flow Control $ 2,808 $ 2,639 $ 2,791
+Added: Flow Control (a) $ 4,128 $ 2,808 $ 2,639
Industrial Processing 6,412 3,123 5,113
−Removed: Material Handling (a) 1,539 2,144 1,312
+Added: Material Handling (b) 2,211 1,539 2,144
Corporate 20 125 61
1 unchanged sentence
Geographical Information
−Removed: United States $ 286,015 $ 309,957 $ 234,487
+Added: United States (b) $ 328,456 $ 286,015 $ 309,957
China 82,121 51,003 66,480
Canada 79,426 62,059 64,010
−Removed: Germany 23,292 29,076 26,577
−Removed: Finland 11,805 11,113 10,934
+Added: Germany (a) 37,178 23,292 29,076
+Added: France 28,258 19,725 21,054
Other 231,140 192,934 214,067
$ 786,579 $ 635,028 $ 704,644
−Removed: Long-lived Assets (j):
−Removed: United States $ 40,293 $ 42,094 $ 35,446
−Removed: China 9,844 10,319 11,069
−Removed: Finland 8,013 6,960 6,998
+Added: Long-lived Assets (k):
+Added: United States (b) $ 43,418 $ 40,293 $ 42,094
+Added: Germany (a) 25,188 6,051 5,925
Canada 8,460 7,221 7,948
−Removed: Germany 6,051 5,925 6,223
+Added: Finland 7,347 8,013 6,960
+Added: China 6,613 9,844 10,319
Other 16,963 13,220 12,786
$ 107,989 $ 84,642 $ 86,032
−Removed: (a) Includes the SMH business in 2020 and 2019, which was acquired on January 2, 2019 (see Note 2 , Acquisitions).
−Removed: (b) Includes restructuring costs of $ 659,000 in 2020.
−Removed: (c) Includes $ 1,861,000 of impairment charges and $ 277,000 of restructuring costs in 2020.
−Removed: Includes $ 2,336,000 of impairment charges and $ 192,000 of restructuring costs in 2019.
−Removed: Includes restructuring costs of $ 1,717,000 in 2018.
−Removed: Includes acquisition-related expenses of $ 679,000 in 2020 and $ 252,000 in 2018.
−Removed: Acquisition-related expenses include amortization expense associated with backlog and acquisition costs.
−Removed: (d) Includes restructuring costs of $ 182,000 in 2020.
−Removed: Includes acquisition-related expenses of $ 350,000 in 2020 and $ 5,715,000 in 2019.
+Added: (a) Includes the Clouth business in 2021, which was acquired between July 19, 2021 and August 10, 2021 (see Note 2 , Acquisitions).
+Added: (b) Includes the Balemaster business in 2021, which was acquired on August 23, 2021 (see Note 2 , Acquisitions).
+Added: (c) Includes acquisition-related expenses of $ 6,191,000 and impairment and restructuring charges of $ 980,000 in 2021.
Acquisition-related expenses include amortization expense associated with acquired profit in inventory and backlog, and acquisition costs.
−Removed: (e) Represents general and administrative expenses, including $ 1,321,000 of acquisition transaction costs in 2018.
−Removed: (f) The Company does not allocate interest and other expense, net to its segments.
−Removed: (g) Includes a settlement loss of $ 5,887,000 in 2019 and a curtailment loss of $ 1,425,000 in 2018.
−Removed: (h) Primarily includes cash and cash equivalents, tax assets, ROU assets, and property, plant, and equipment, net.
−Removed: (i) Revenue is attributed to countries based on customer location.
−Removed: (j) Represents property, plant, and equipment, net.
+Added: (d) Includes $ 1,861,000 of impairment charges in 2020 and $ 2,336,000 in 2019.
+Added: (e) Includes acquisition-related expenses of $ 2,851,000 in 2021, $ 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: (f) Represents general and administrative expenses.
+Added: (g) The Company does not allocate interest and other expense, net to its segments.
+Added: (h) Includes a pension plan settlement loss of $ 5,887,000 in 2019.
+Added: (i) Primarily includes cash and cash equivalents, tax assets, ROU assets, and property, plant, and equipment, net.
+Added: (j) Revenue is attributed to countries based on customer location.
+Added: (k) Represents property, plant, and equipment, net.
2021 Financial Statements
2 unchanged sentences
Basic and diluted EPS were calculated as follows:
−Removed: (In thousands, except per share amounts) January 2, 2021 December 28, 2019 December 29, 2018
+Added: (In thousands, except per share amounts) January 1, 2022 January 2, 2021 December 28, 2019
Net Income Attributable to Kadant $ 84,043 $ 55,196 $ 52,068
9 unchanged sentences
(In thousands) Foreign Currency Translation Adjustment Pension and Other Post-Retirement Benefit Liability Adjustments Deferred Loss on Cash Flow Hedges Total
−Removed: Balance at December 28, 2019 $ ( 36,145 ) $ ( 831 ) $ ( 644 ) $ ( 37,620 )
+Added: Balance at January 2, 2021 $ ( 17,894 ) $ ( 770 ) $ ( 828 ) $ ( 19,492 )
Other comprehensive items before reclassifications ( 11,202 ) ( 67 ) 142 ( 11,127 )
2 unchanged sentences
Balance at January 1, 2022 $ ( 29,096 ) $ ( 792 ) $ ( 462 ) $ ( 30,350 )
−Removed: 2020 Financial Statements
−Removed: Notes to Consolidated Financial Statements
Amounts reclassified out of AOCI are as follows:
−Removed: (In thousands) January 2, 2021 December 28, 2019 December 29, 2018 Statement of Income Line Item
−Removed: Retirement Benefit Plans (a)
+Added: (In thousands) January 1, 2022 January 2, 2021 December 28, 2019 Statement of Income Line Item
+Added: Retirement Benefit Plans
Recognized net actuarial loss $ ( 50 ) $ ( 66 ) $ ( 70 ) Other expense, net
Amortization of prior service cost ( 12 ) ( 55 ) ( 6 ) Other expense, net
−Removed: Settlement and curtailment losses — ( 5,887 ) ( 1,425 ) Other expense, net
+Added: Pension plan settlement loss — — ( 5,887 ) Other expense, net
Total expense before income taxes ( 62 ) ( 121 ) ( 5,963 )
1 unchanged sentence
( 45 ) 32 ( 6,604 )
−Removed: Cash Flow Hedges (b)
+Added: Cash Flow Hedges (a)
Interest rate swap agreements ( 451 ) ( 333 ) ( 8 ) Interest expense
Forward currency-exchange contracts — 28 ( 169 ) Cost of revenue
−Removed: Total (expense) income before income taxes ( 305 ) ( 177 ) 11
−Removed: Income tax benefit (provision) 73 54 ( 3 ) Provision for income taxes
+Added: Forward currency-exchange contracts 157 — — SG&A expense
+Added: Total expense before income taxes ( 294 ) ( 305 ) ( 177 )
+Added: Income tax benefit 70 73 54 Provision for income taxes
( 224 ) ( 232 ) ( 123 )
Total Reclassifications $ ( 269 ) $ ( 200 ) $ ( 6,727 )
−Removed: (a) Included in the computation of net periodic benefit cost.
−Removed: See Note 3 , Employee Benefit Plans, for additional information.
−Removed: (b) See Note 10 , Derivatives, for additional information.
−Removed: Unaudited Quarterly Information
−Removed: 2020 (In thousands, except per share amounts) First Second Third Fourth
−Removed: Revenue $ 159,127 $ 152,860 $ 154,610 $ 168,431
−Removed: Gross Profit $ 68,323 $ 66,448 $ 68,316 $ 74,219
−Removed: Net Income Attributable to Kadant $ 12,531 $ 11,607 $ 14,851 $ 16,207
−Removed: Earnings per Share Attributable to Kadant
−Removed: Basic $ 1.10 $ 1.01 $ 1.29 $ 1.41
−Removed: Diluted $ 1.09 $ 1.00 $ 1.28 $ 1.40
−Removed: Cash Dividends Declared per Common Share $ 0.24 $ 0.24 $ 0.24 $ 0.24
−Removed: 2019 (In thousands, except per share amounts) First Second Third Fourth
−Removed: Revenue $ 171,316 $ 177,165 $ 173,504 $ 182,659
−Removed: Gross Profit $ 70,515 $ 74,371 $ 74,247 $ 74,627
−Removed: Net Income Attributable to Kadant $ 10,900 $ 16,304 $ 16,115 $ 8,749
−Removed: Earnings per Share Attributable to Kadant
−Removed: Basic $ 0.98 $ 1.46 $ 1.43 $ 0.77
−Removed: Diluted $ 0.96 $ 1.42 $ 1.41 $ 0.76
−Removed: Cash Dividends Declared per Common Share $ 0.23 $ 0.23 $ 0.23 $ 0.23
+Added: (a) See Note 10 , Derivatives, for additional information.
+Added: 2021 Financial Statements
+Added: Notes to Consolidated Financial Statements
+Added: Subsequent Event
+Added: The Company's largest subsidiary in China, which manufactures stock-preparation equipment, is located in an area that has become primarily residential.
+Added: As a result, the Company entered into several agreements with the local government to sell its existing manufacturing building and land use rights for approximately $ 25,140,000 and build a new facility in another location.
+Added: These agreements will become effective when the Company receives the required down payment and secures a land use right in a new location.
+Added: As of year-end 2021, the Company has received a 25 % down payment on the agreed upon sale price with an additional required down payment of 6 % expected in the first quarter of 2022.
+Added: Once the agreements are effective, which is expected in the first quarter of 2022, the Company will recognize a gain on sale and a receivable for the remaining amount of the sale proceeds.
+Added: The remaining amount of the sale proceeds is due the earlier of when the government sells the property or within two years from the effective date of the agreements.
+Added: The Company's subsidiary will continue to occupy its current facility until construction on its new facility is complete.
+Added: As of year-end 2021, the carrying value of the existing building and land use right totaling $ 5,264,000 is included in other current assets in the accompanying consolidated balance sheet.
+Added: In addition, in the fourth quarter of 2021, the Company entered into an agreement for a new land use right valued at $ 3,719,000 , which is included in other assets in the accompanying consolidated balance sheet.
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.