What changed in this filing

/stocks — the workspaceLOADING

Item 1. Financial Statements

2022-08-10 compared with 2022-05-11 · 144 added, 109 removed, 470 unchanged (35% of the section changed)

46 unchanged sentences

Condensed Consolidated Statement of Income

Three Months Ended

2022 April 3,

Three Months Ended Six Months Ended

(In thousands, except per share amounts)

23 unchanged sentences

Condensed Consolidated Statement of Comprehensive Income

Three Months Ended

2022 April 3,

Three Months Ended Six Months Ended

(In thousands)

4 unchanged sentences

Deferred gain on cash flow hedges (net of tax provision of $ 46 , $ 21 , $ 114 and $ 40 )

146 65 423 178

Other comprehensive items ( 19,187 ) 4,159 ( 21,185 ) ( 450 )

5 unchanged sentences

Condensed Consolidated Statement of Cash Flows

Three Months Ended

2022 April 3,

Six Months Ended

(In thousands)

12 unchanged sentences

Accounts receivable ( 12,336 ) ( 15,321 )

Contract assets ( 409 ) 1,231

Unbilled revenue ( 3,694 ) 1,005

Inventories ( 26,816 ) ( 7,312 )

14 unchanged sentences

Dividends paid ( 5,936 ) ( 5,664 )

Net cash used in financing activities ( 27,003 ) ( 15,582 )

Net cash (used in) provided by financing activities ( 45,388 ) 32,698

Exchange Rate Effect on Cash, Cash Equivalents, and Restricted Cash ( 5,418 ) ( 803 )

6 unchanged sentences

Condensed Consolidated Statement of Stockholders' Equity

Three Months Ended April 2, 2022

Three Months Ended July 2, 2022

(In thousands, except share and per share amounts) Common

5 unchanged sentences

Shares Amount Shares Amount

Balance at January 1, 2022 14,624,159 $ 146 $ 115,888 $ 551,848 3,003,419 $ ( 73,596 ) $ ( 30,350 ) $ 1,680 $ 565,616

Balance at April 2, 2022 14,624,159 $ 146 $ 112,651 $ 590,009 2,964,786 $ ( 72,649 ) $ ( 32,302 ) $ 1,883 $ 599,738

Net income — — — 26,170 — — — 239 26,409

3 unchanged sentences

Other comprehensive items — — — — — — ( 19,077 ) ( 110 ) ( 19,187 )

Balance at April 2, 2022 14,624,159 $ 146 $ 112,651 $ 590,009 2,964,786 $ ( 72,649 ) $ ( 32,302 ) $ 1,883 $ 599,738

Three Months Ended April 3, 2021

Balance at July 2, 2022 14,624,159 $ 146 $ 114,825 $ 613,146 2,962,186 $ ( 72,586 ) $ ( 51,379 ) $ 2,012 $ 606,164

Six Months Ended July 2, 2022

(In thousands, except share and per share amounts) Common

7 unchanged sentences

Net income — — — 67,362 — — — 488 67,850

Dividend declared – Common Stock, $ 0.25 per share

Dividends declared – Common Stock, $ 0.52 per share

— — — ( 6,064 ) — — — — ( 6,064 )

1 unchanged sentence

Other comprehensive items — — — — — — ( 21,029 ) ( 156 ) ( 21,185 )

Balance at July 2, 2022 14,624,159 $ 146 $ 114,825 $ 613,146 2,962,186 $ ( 72,586 ) $ ( 51,379 ) $ 2,012 $ 606,164

Three Months Ended July 3, 2021

(In thousands, except share and per share amounts) Common

Stock Capital in

Excess of Par Value Retained Earnings Treasury

Stock Accumulated

Comprehensive Items Noncontrolling Interest Total

Stockholders' Equity

Shares Amount Shares Amount

Balance at April 3, 2021 14,624,159 $ 146 $ 108,064 $ 493,067 3,046,379 $ ( 74,649 ) $ ( 24,040 ) $ 1,720 $ 504,308

Net income — — — 22,864 — — — 163 23,027

Dividend declared – Common Stock, $ 0.25 per share

— — — ( 2,895 ) — — — — ( 2,895 )

Activity under stock plans — — 2,465 — ( 2,525 ) 62 — — 2,527

Other comprehensive items — — — — — — 4,151 8 4,159

Balance at July 3, 2021 14,624,159 $ 146 $ 110,529 $ 513,036 3,043,854 $ ( 74,587 ) $ ( 19,889 ) $ 1,891 $ 531,126

Six Months Ended July 3, 2021

(In thousands, except share and per share amounts) Common

Stock Capital in

Excess of Par Value Retained Earnings Treasury

Stock Accumulated

Comprehensive Items Noncontrolling Interest Total

Stockholders' Equity

Shares Amount Shares Amount

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 — — — 39,425 — — — 398 39,823

Dividends declared – Common Stock, $ 0.50 per share

— — — ( 5,789 ) — — — — ( 5,789 )

Activity under stock plans — — ( 295 ) — ( 38,065 ) 932 — — 637

Other comprehensive items — — — — — — ( 397 ) ( 53 ) ( 450 )

Balance at July 3, 2021 14,624,159 $ 146 $ 110,529 $ 513,036 3,043,854 $ ( 74,587 ) $ ( 19,889 ) $ 1,891 $ 531,126

The accompanying notes are an integral part of these condensed consolidated financial statements.

8 unchanged sentences

Interim Financial Statements

The interim condensed consolidated financial statements and related notes presented have been prepared by the Company, are unaudited, and, in the opinion of management, reflect all adjustments of a normal recurring nature necessary for a fair statement of the Company's financial position at April 2, 2022, its results of operations, comprehensive income, cash flows and stockholders' equity for the three-month periods ended April 2, 2022 and April 3, 2021.

The interim condensed consolidated financial statements and related notes presented have been prepared by the Company, are unaudited, and, in the opinion of management, reflect all adjustments of a normal recurring nature necessary for a fair statement of the Company's financial position at July 2, 2022, its results of operations, comprehensive income, and stockholders' equity for the three- and six-month periods ended July 2, 2022 and July 3, 2021 and its cash flows for the six-month periods ended July 2, 2022 and July 3, 2021.

Interim results are not necessarily indicative of results for a full year or for any other interim period.

The condensed consolidated balance sheet presented as of January 1, 2022 has been derived from the consolidated financial statements contained in the Company's Annual Report on Form 10-K for the fiscal year ended January 1, 2022.

The condensed consolidated financial statements and related notes are presented as permitted by the rules and regulations of the Securities and Exchange Commission (SEC) for Form 10-Q and do not contain certain information included in the annual consolidated financial statements and related notes of the Company.

The condensed consolidated financial statements and notes included herein should be read in conjunction with the consolidated financial statements and related notes included in the Company's Annual Report on Form 10-K for the fiscal year ended January 1, 2022, filed with the SEC.

The condensed consolidated financial statements and notes included herein should be read in conjunction with the consolidated financial statements and related notes included in the Annual Report.

Financial Statement Presentation

Certain reclassifications have been made to prior periods to conform with the current period presentation.

Specifically, the Company reclassified the change in customer deposits within operating activities from other 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, in the Condensed Consolidated Statement of Cash Flows.

Use of Estimates and Critical Accounting Policies

2 unchanged sentences

Although the Company makes every effort to ensure the accuracy of the estimates and assumptions used in the preparation of its condensed consolidated financial statements or in the application of accounting policies, if business conditions were different, or if the Company were to use different estimates and assumptions, it is possible that materially different amounts could be reported in the Company's condensed consolidated financial statements.

Note 1 to the consolidated financial statements in the Company's Annual Report on Form 10-K for the fiscal year ended January 1, 2022 describes the significant accounting estimates and policies used in preparation of the consolidated financial statements.

There have been no material changes in the Company’s significant accounting policies during the three months ended April 2, 2022.

Notes to Condensed Consolidated Financial Statements

Note 1 to the consolidated financial statements in the Annual Report describes the significant accounting estimates and policies used in preparation of the consolidated financial statements.

There have been no material changes in the Company’s significant accounting policies during the six months ended July 2, 2022.

Supplemental Cash Flow Information

Three Months Ended

(In thousands) April 2,

2022 April 3,

Six Months Ended

(In thousands) July 2,

Cash Paid for Interest $ 2,408 $ 1,968

Cash Paid for Income Taxes, Net of Refunds $ 19,167 $ 12,475

Notes to Condensed Consolidated Financial Statements

Six Months Ended

(In thousands) July 2,

Non-Cash Investing Activities:

10 unchanged sentences

The following table provides a reconciliation of cash, cash equivalents, and restricted cash reported within the Company's condensed consolidated balance sheet that are shown in aggregate in the accompanying condensed consolidated statement of cash flows:

(In thousands) April 2,

2022 April 3,

(In thousands) July 2,

2021 January 1,

11 unchanged sentences

Intangible Assets, Net

Gross intangible assets were $ 340,947,000 at April 2, 2022 and January 1, 2022.

Gross intangible assets were $ 340,947,000 at July 2, 2022 and January 1, 2022.

Intangible assets are recorded at fair value at the date of acquisition.

2 unchanged sentences

The Company amortizes definite-lived intangible assets over lives that have been determined based on the anticipated cash flow benefits of the intangible asset.

Accumulated amortization was $ 141,122,000 at April 2, 2022 and $ 135,327,000 at January 1, 2022.

Accumulated amortization was $ 146,117,000 at July 2, 2022 and $ 135,327,000 at January 1, 2022.

Notes to Condensed Consolidated Financial Statements

9 unchanged sentences

Total 2022 activity ( 5,938 ) ( 3,271 ) ( 3,569 ) ( 12,778 )

Balance at April 2, 2022

Balance at July 2, 2022

Gross balance 117,651 211,711 140,256 469,618

3 unchanged sentences

Measurement period adjustments in 2022 were not material to the Company's results of operations.

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 and liabilities assumed and the valuation of acquired intangibles, which may result in adjustments to the assets and liabilities, including goodwill.

Warranty Obligations

4 unchanged sentences

The changes in the carrying amount of product warranty obligations are as follows:

Three Months Ended

(In thousands) April 2,

2022 April 3,

Six Months Ended

(In thousands) July 2,

Balance at Beginning of Year $ 7,298 $ 7,064

11 unchanged sentences

The following table presents revenue by revenue recognition method:

Three Months Ended

April 2, April 3,

Three Months Ended Six Months Ended

July 2, July 3, July 2, July 3,

(In thousands) 2022 2021 2022 2021

4 unchanged sentences

The following table presents the disaggregation of revenue by product type and geography:

Three Months Ended

April 2, April 3,

Three Months Ended Six Months Ended

July 2, July 3, July 2, July 3,

(In thousands) 2022 2021 2022 2021

21 unchanged sentences

These advance payments will be recognized as revenue when the Company's performance obligations have been satisfied, which typically occurs when the product has shipped and control of the asset has transferred to the customer.

The Company recognized revenue of $ 34,477,000 in the first quarter of 2022 and $ 17,140,000 in the first quarter of 2021 that was included in the contract liabilities balance at the beginning of 2022 and 2021, respectively.

The Company recognized revenue of $ 13,424,000 in the second quarter of 2022 and $ 10,070,000 in the second quarter of 2021, $ 47,901,000 in the first six months of 2022 and $ 27,210,000 in the first six months of 2021 that was included in the contract liabilities balance at the beginning of 2022 and 2021, respectively.

The majority of the Company's contracts for capital equipment have an original expected duration of one year or less.

Certain capital contracts require long 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 April 2, 2022 was $ 48,599,000 .

The Company will recognize revenue for these performance obligations as they are satisfied, approximately 56 % of which is expected to occur within the next twelve months and the remaining 44 % after the first quarter of 2023.

The Company will recognize revenue for these performance obligations as they are satisfied, approximately 52 % of which is expected to occur within the next twelve months and the remaining 48 % after the second quarter of 2023.

Notes to Condensed Consolidated Financial Statements

3 unchanged sentences

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 $ 8,147,000 at April 2, 2022 and $ 8,049,000 at January 1, 2022, are included in accounts receivable in the accompanying condensed 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.

These drafts, which totaled $ 7,107,000 at July 2, 2022 and $ 8,049,000 at January 1, 2022, are included in accounts receivable in the accompanying condensed 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.

Recent Accounting Pronouncements Not Yet Adopted

4 unchanged sentences

The guidance in this ASU is applicable to the Company's existing contracts and hedging relationships that reference LIBOR and may be adopted prospectively through December 31, 2022.

The Company is currently evaluating the effects that the adoption of this ASU will have on its consolidated financial statements.

The Company does not expect that the adoption of this ASU will have an impact on its consolidated financial statements.

Business Combinations (Topic 805), Accounting for Contract Assets and Contract Liabilities from Contracts with Customers.

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) .

In October 2021, the FASB issued ASU No.

2021-08, which requires entities to recognize and measure contract assets and contract liabilities acquired in a business combination in accordance with ASU No.

2014-09, Revenue from Contracts with Customers (Topic 606) .

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.

This new guidance is effective on a prospective basis in fiscal 2023, with early adoption permitted.

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.

The impact of the adoption of this ASU on the Company’s consolidated financial statements will be dependent on the contract assets and liabilities acquired in future business combinations.

Gain on Sale and Other Expense, Net

3 unchanged sentences

As a result, the Company recognized a gain on the sale of these assets of $ 20,190,000 , or $ 15,143,000 , net of deferred taxes of $ 5,047,000 , in the first quarter of 2022.

A $ 16,082,000 receivable was recognized for the present value of the remaining amount of the sale proceeds, which is due the earlier of when the government sells the property or within two years from the effective date of the agreements.

A receivable of $ 16,082,000 was recognized for the present value of the remaining amount of the sale proceeds, which is due the earlier of when the government sells the property or within two years from the effective date of the agreements.

The amount of the receivable recorded at July 2, 2022 was $ 15,398,000 .

This receivable is included in other assets in the accompanying condensed consolidated balance sheet.

3 unchanged sentences

Basic and diluted earnings per share (EPS) were calculated as follows:

Three Months Ended

2022 April 3,

Three Months Ended Six Months Ended

(In thousands, except per share amounts)

5 unchanged sentences

Diluted Earnings per Share $ 2.24 $ 1.96 $ 5.77 $ 3.39

The effect of outstanding and unvested restricted stock units (RSUs) of the Company's common stock totaling 17,000 shares in the first quarter of 2022 and 44,000 shares in the first quarter of 2021 were not included in the computation of diluted EPS for the respective periods as the effect would have been antidilutive or, for unvested performance-based RSUs, the performance conditions had not been met as of the end of the reporting periods.

The effect of outstanding and unvested restricted stock units (RSUs) of the Company's common stock totaling 8,000 shares in the second quarter of 2022 and 9,000 shares in the second quarter of 2021, 13,000 shares in the first six months of 2022 and 27,000 in the first six months of 2021 were not included in the computation of diluted EPS for the respective periods as the effect would have been antidilutive or, for unvested performance-based RSUs, the performance conditions had not been met as of the end of the reporting periods.

Provision for Income Taxes

The provision for income taxes was $ 13,378,000 in the first three months of 2022 and $ 5,561,000 in the first three months of 2021.

The effective tax rate of 24 % in the first three months of 2022 was higher than the Company's statutory rate of 21% primarily due to the distribution of the Company's worldwide earnings, nondeductible expenses, state taxes, and tax expense associated with the Global Intangible Low-Taxed Income (GILTI) provisions.

These increases in tax expense were offset in part by a decrease in tax related to the net excess income tax benefits from stock-based compensation arrangements and the reversal of tax reserves associated with uncertain tax positions.

The effective tax rate of 25 % in the first three months of 2021 was higher than the Company's statutory rate of 21% primarily due to nondeductible expenses, the distribution of the Company's worldwide earnings, state taxes, and tax expense associated with the GILTI provisions.

These increases in tax expense were offset in part by a decrease in tax related to the net excess income tax benefits from stock-based compensation arrangements.

The provision for income taxes was $ 23,329,000 in the first six months of 2022 and $ 14,510,000 in the first six months of 2021.

The effective tax rates of 26 % and 27 % in the first six months of 2022 and 2021, respectively, were higher than the Company's statutory rate of 21% primarily due to the distribution of the Company's worldwide earnings, nondeductible expenses, and state taxes, and for the first six months of 2021, tax expense associated with the Global Intangible Low-Taxed Income provisions.

For the first six months of 2022 and 2021, these increases in tax expense were offset in part by a decrease in tax related to the net excess income tax benefits from stock-based compensation arrangements.

Short- and Long-Term Obligations

13 unchanged sentences

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 .

Notes to Condensed Consolidated Financial Statements

$ 150,000,000 .

Interest on borrowings outstanding accrues and is payable in arrears calculated at one of the following rates selected by the Company:

(i) the Base Rate, as defined, plus an applicable margin of 0 % to 1.25 %, or (ii) Eurocurrency Rate, CDOR Rate and RFR (with a zero percent floor), as applicable and as defined, plus an applicable margin of 1 % to 2.25 %.

(i) the Base Rate, as defined, plus an applicable margin of 0 % to 1.25 %, or (ii) Eurocurrency Rate,

Notes to Condensed Consolidated Financial Statements

CDOR Rate and RFR (with a zero percent floor), as applicable and as defined, plus an applicable margin of 1 % to 2.25 %.

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.

2 unchanged sentences

Loans under the Credit Agreement are guaranteed by certain domestic subsidiaries of the Company.

As of April 2, 2022, the outstanding balance under the Credit Agreement was $ 229,483,000 , which included $ 78,483,000 of euro-denominated borrowings.

As of April 2, 2022, the Company had $ 169,977,000 of borrowing capacity available under its Credit Agreement, which was calculated by translating its foreign-denominated borrowings using borrowing date foreign exchange rates.

The weighted average interest rate for the outstanding balance under the Credit Agreement was 1.73 % as of April 2, 2022.

As of July 2, 2022, the outstanding balance under the Credit Agreement was $ 210,450,000 , which included $ 70,450,000 of euro-denominated borrowings.

As of July 2, 2022, the Company had $ 189,004,000 of borrowing capacity available under its Credit Agreement, which was calculated by translating its foreign-denominated borrowings using borrowing date foreign exchange rates.

The weighted average interest rate for the outstanding balance under the Credit Agreement was 2.49 % as of July 2, 2022.

See Note 8 , Derivatives, under the heading Interest Rate Swap Agreement, for information relating to the swap agreement.

7 unchanged sentences

Debt Compliance

As of April 2, 2022, the Company was in compliance with the covenants related to its debt obligations.

As of July 2, 2022, the Company was in compliance with the covenants related to its debt obligations.

Finance Leases

4 unchanged sentences

The interest rate on the outstanding obligation is 1.79 %.

The secured loan receivable, which is included in other current assets in the accompanying condensed consolidated balance sheet, was $ 1,435,000 at April 2, 2022.

The lease arrangement provides for a fixed price purchase option, net of the projected loan receivable, of $ 1,469,000 at the end of the lease term in August 2022.

If the Company does not exercise the purchase option for the facility, it will receive cash from the landlord to settle the loan receivable.

As of April 2, 2022, $ 3,152,000 was outstanding under this obligation.

Other borrowings also include $ 968,000 of short-term obligations and $ 2,925,000 of debt obligations outstanding at April 2, 2022 assumed in the acquisition of The Clouth Group of Companies (Clouth), which mature on various dates ranging from 2022 through 2028.

The secured loan receivable, which is included in other current assets in the accompanying condensed consolidated balance sheet, was $ 1,414,000 at July 2, 2022.

The lease arrangement provides for a fixed price purchase option, net of the projected loan receivable, of $ 1,387,000 at the end of the lease term in August 2022, In the second quarter of 2022, the Company exercised its purchase option and issued a notice of intent to the landlord to purchase the facility.

As of July 2, 2022, $ 2,920,000 was outstanding under this obligation.

Other borrowings also include $ 804,000 of short-term obligations and $ 2,563,000 of debt obligations outstanding at July 2, 2022 assumed in the acquisition of The Clouth Group of Companies (Clouth), which mature on various dates ranging from 2022 through 2028.

Notes to Condensed Consolidated Financial Statements

Stock-Based Compensation

The Company recognized stock-based compensation expense of $ 2,260,000 in the first quarter of 2022 and $ 1,499,000 in the first quarter of 2021 within selling, general, and administrative (SG&A) expenses in the accompanying condensed consolidated statement of income.

The Company recognized stock-based compensation expense of $ 2,276,000 in the second quarter of 2022 and $ 2,527,000 in the second quarter of 2021, $ 4,536,000 in the first six months of 2022, and $ 3,516,000 in the first six months of 2021 within selling, general, and administrative (SG&A) expenses in the accompanying condensed consolidated statement of income.

The Company recognizes compensation expense for all stock-based awards granted to employees and directors based on the grant date estimate of fair value for those awards.

2 unchanged sentences

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.

Unrecognized compensation expense related to stock-based compensation totaled approximately $ 11,628,000 at April 2, 2022, which will be recognized over a weighted average period of 2.0 years.

Unrecognized compensation expense related to stock-based compensation totaled approximately $ 10,331,000 at July 2, 2022, which will be recognized over a weighted average period of 1.8 years.

In May 2022, the Company granted an aggregate of 5,175 RSUs to its non-employee directors with a grant date fair value of $ 935,000 .

Of these 5,175 RSUs, 4,705 were granted to its incumbent non-employee directors with the remaining 470 RSUs granted to the Company's new non-employee director who became a director effective as of May 1, 2022.

For the incumbent non-employee directors, half of these RSUs vested on June 1, 2022 with the remaining RSUs to vest ratably on the last day of the third and fourth fiscal quarters of 2022.

For the new non-employee director, half of the RSUs will vest on the last day of the third fiscal quarter and the other half on the last day of the fourth fiscal quarter of 2022.

Accumulated Other Comprehensive Items

8 unchanged sentences

( 21,492 ) 40 423 ( 21,029 )

Balance at April 2, 2022 $ ( 31,334 ) $ ( 783 ) $ ( 185 ) $ ( 32,302 )

Balance at July 2, 2022 $ ( 50,588 ) $ ( 752 ) $ ( 39 ) $ ( 51,379 )

Amounts reclassified from AOCI are as follows:

Three Months Ended

(In thousands) April 2,

2022 April 3,

Three Months Ended Six Months Ended

(In thousands) July 2,

2021 Statement of Income Line Item

7 unchanged sentences

Income tax benefit 2 4 5 8 Provision for income taxes

( 6 ) ( 10 ) ( 13 ) ( 20 )

Cash Flow Hedges (a)

1 unchanged sentence

( 83 ) ( 113 ) ( 194 ) ( 222 ) Interest expense

Total expense before income taxes

( 111 ) ( 109 )

Income tax benefit

27 26 Provision for income taxes

Income tax benefit 20 27 47 53 Provision for income taxes

( 63 ) ( 86 ) ( 147 ) ( 169 )

18 unchanged sentences

The fair values of forward currency-exchange contracts that are designated as fair value hedges and forward currency-exchange contracts that are not designated as hedges are recognized currently in earnings.

Gains and losses reported within SG&A expenses in the accompanying condensed consolidated statement of income associated with the Company's forward currency-exchange contracts that were not designated as hedges were not material for the three-month periods ended April 2, 2022 and April 3, 2021.

Gains and losses reported within SG&A expenses in the accompanying condensed consolidated statement of income associated with the Company's forward currency-exchange contracts that were not designated as hedges were not material for the three- and six-month periods ended July 2, 2022 and July 3, 2021.

The following table summarizes the fair value of derivative instruments in the accompanying condensed consolidated balance sheet:

April 2, 2022 January 1, 2022

July 2, 2022 January 1, 2022

Balance Sheet Location Asset (Liability) (a) Notional Amount (b) Asset (Liability) (a) Notional Amount

1 unchanged sentence

Derivatives Designated as Hedging Instruments:

Derivative in an Asset Position:

2018 Swap Agreement Other Current Assets $ 3 $ 15,000 $ — $ —

Derivatives in a Liability Position:

Forward currency-exchange contract Other Current Liabilities $ ( 66 ) $ 842 $ ( 44 ) $ 842

Forward currency-exchange contracts Other Current Liabilities $ ( 56 ) $ 430 $ ( 44 ) $ 842

2018 Swap Agreement Other Long-Term Liabilities $ — $ — $ ( 550 ) $ 15,000

2 unchanged sentences

Forward currency-exchange contracts Other Current Assets $ — $ — $ 14 $ 1,200

Derivative in a Liability Position:

Forward currency-exchange contract Other Current Liabilities $ ( 2 ) $ 189 $ — $ —

(a) See Note 9 , Fair Value Measurements and Fair Value of Financial Instruments, for the fair value measurements relating to these financial instruments.

1 unchanged sentence

Notes to Condensed Consolidated Financial Statements

The following table summarizes the activity in AOCI associated with the Company's derivative instruments designated as cash flow hedges as of and for the three months ended April 2, 2022:

The following table summarizes the activity in AOCI associated with the Company's derivative instruments designated as cash flow hedges as of and for the six months ended July 2, 2022:

(In thousands) Interest Rate Swap

1 unchanged sentence

Contract Total

Unrealized (Loss) Gain, Net of Tax, at January 1, 2022 $ ( 429 ) $ ( 33 ) $ ( 462 )

Unrealized Loss, Net of Tax, at January 1, 2022 $ ( 429 ) $ ( 33 ) $ ( 462 )

Loss reclassified to earnings (a) 147 — 147

Gain (loss) recognized in AOCI 284 ( 8 ) 276

Unrealized Loss, Net of Tax, at April 2, 2022 $ ( 136 ) $ ( 49 ) $ ( 185 )

Unrealized Gain (Loss), Net of Tax, at July 2, 2022 $ 2 $ ( 41 ) $ ( 39 )

(a) See Note 7 , Accumulated Other Comprehensive Items, for the income statement classification.

As of April 2, 2022, the Company expects to reclassify losses of $ 184,000 from AOCI to earnings over the next twelve months based on the estimated cash flows of the 2018 Swap Agreement and the maturity date of the forward currency-exchange contract.

As of July 2, 2022, the Company expects to reclassify losses of $ 39,000 from AOCI to earnings over the next twelve months based on the estimated cash flows of the 2018 Swap Agreement and the maturity date of the forward currency-exchange contract.

Fair Value Measurements and Fair Value of Financial Instruments

5 unchanged sentences

The following table presents the fair value hierarchy for those assets and liabilities measured at fair value on a recurring basis:

Fair Value as of April 2, 2022

Fair Value as of July 2, 2022

(In thousands) Level 1 Level 2 Level 3 Total

2 unchanged sentences

2018 Swap Agreement $ — $ 3 $ — $ 3

Forward currency-exchange contract $ — $ 66 $ — $ 66

Forward currency-exchange contracts (b) $ — $ 58 $ — $ 58

Fair Value as of January 1, 2022

4 unchanged sentences

2018 Swap Agreement $ — $ 550 $ — $ 550

Forward currency-exchange contracts $ — $ 44 $ — $ 44

Forward currency-exchange contract $ — $ 44 $ — $ 44

(a) Included in accounts receivable in the accompanying condensed consolidated balance sheet.

The Company uses the market approach technique to value its financial assets and liabilities, and there were no changes in valuation techniques during the first three months of 2022.

Banker's acceptance drafts are carried at face value, which approximates their fair value due to the short-term nature of the negotiable instrument.

The fair values of the forward

(b) Includes derivatives designated as hedging instruments of $ 56,000 and derivatives not designated as hedging instruments of $ 2,000 .

Notes to Condensed Consolidated Financial Statements

currency-exchange contracts are based on quoted forward foreign exchange rates at the reporting date.

The Company uses the market approach technique to value its financial assets and liabilities, and there were no changes in valuation techniques during the first six months of 2022.

Banker's acceptance drafts are carried at face value, which approximates their fair value due to the short-term nature of the negotiable instrument.

The fair values of the forward currency-exchange contracts are based on quoted forward foreign exchange rates at the reporting date.

The fair value of the 2018 Swap Agreement is based on USD LIBOR yield curves at the reporting date.

2 unchanged sentences

The carrying value and fair value of debt obligations, excluding lease obligations, are as follows:

April 2, 2022 January 1, 2022

July 2, 2022 January 1, 2022

Carrying Value Fair Value Carrying Value Fair Value

22 unchanged sentences

In addition, the Company manufactures and sells biodegradable, absorbent granules used as carriers in agricultural applications and for oil and grease absorption.

Notes to Condensed Consolidated Financial Statements

The following table presents financial information for the Company's reportable operating segments:

Three Months Ended

April 2, April 3,

Three Months Ended Six Months Ended

July 2, July 3, July 2, July 3,

(In thousands) 2022 2021 2022 2021

3 unchanged sentences

$ 221,649 $ 195,811 $ 448,129 $ 368,274

Notes to Condensed Consolidated Financial Statements

Three Months Ended

April 2, April 3,

(In thousands) 2022 2021

Income Before Provision for Income Taxes

Flow Control (a,c) $ 22,707 $ 19,324 $ 44,432 $ 34,770

Industrial Processing (d) 38,159 11,106

Material Handling (b,e) 5,844 4,169

Corporate (f) ( 9,755 ) ( 7,294 )

Industrial Processing (d,f) 15,285 17,248 53,444 28,354

Material Handling (b,e,f) 8,701 5,281 14,545 9,450

Corporate (g,f) ( 9,225 ) ( 8,843 ) ( 18,980 ) ( 16,137 )

Total operating income 37,468 33,010 93,441 56,437

Interest expense, net (g) ( 1,132 ) ( 1,046 )

Other expense, net (g) ( 22 ) ( 24 )

Interest expense, net (h) ( 1,089 ) ( 1,010 ) ( 2,221 ) ( 2,056 )

Other expense, net (h) ( 19 ) ( 24 ) ( 41 ) ( 48 )

$ 36,360 $ 31,976 $ 91,179 $ 54,333

1 unchanged sentence

Flow Control $ 1,031 $ 368 $ 1,556 $ 702

Industrial Processing 1,952 1,804

Industrial Processing (i) 5,073 1,191 7,025 2,995

Material Handling 843 495 1,227 616

1 unchanged sentence

$ 6,947 $ 2,059 $ 9,815 $ 4,318

(a) Includes Clouth's results in 2022, which was acquired between July 19, 2021 and August 10, 2021.

(b) Includes the East Chicago Machine Tool Corporation (Balemaster) results in 2022, which was acquired on August 23, 2021.

(d) Includes a gain on the sale of a facility of $ 20,190,000 and non-cash charges for the write-off of an indemnification asset of $ 575,000 and the write-down of machinery and equipment of $ 182,000 in the three months ended April 2, 2022.

(e) Includes acquisition-related expenses of $ 717,000 in the three months ended April 2, 2022 and $ 274,000 in the three months ended April 3, 2021.

(a) Includes results in 2022 from Clouth, which was acquired between July 19, 2021 and August 10, 2021.

(b) Includes results in 2022 from the East Chicago Machine Tool Corporation (Balemaster), which was acquired on August 23, 2021.

(c) Includes acquisition costs of $ 62,000 in the six months ended July 2, 2022 and $ 239,000 and $ 1,236,000 in the three and six months ended July 3, 2021, respectively.

(d) Includes a gain on the sale of a facility of $ 20,190,000 , non-cash charges for the write-off of an indemnification asset of $ 575,000 , and the write-down of machinery and equipment of $ 182,000 in the six months ended July 2, 2022.

Includes acquisition-related expenses of $ 53,000 and $ 140,000 in the three and six months ended July 3, 2021, respectively.

Acquisition-related expenses include acquisition costs and amortization expense associated with acquired backlog.

(f) Represents general and administrative expenses.

(g) The Company does not allocate interest and other expense, net to its segments.

(e) Includes acquisition-related expenses of $ 717,000 in the six months ended July 2, 2022 and $ 338,000 and $ 612,000 in the three and six months ended July 3, 2021, respectively.

(f) Includes a reclassification of acquisition costs from Corporate to the Industrial Processing and Material Handling segments in the three and six months ended July 3, 2021.

The results in the three months ended July 3, 2021, include a decrease in operating loss for Corporate of $ 364,000 and a decrease in operating income of $ 53,000 and $ 311,000 for the Industrial Processing and Material Handling segments, respectively, and a decrease in operating loss for Corporate of $ 665,000 and a decrease in operating income of $ 80,000 and $ 585,000 for the Industrial Processing and Material Handling segments, respectively, in the six months ended July 3, 2021.

(g) Represents general and administrative expenses.

(h) The Company does not allocate interest and other expense, net to its segments.

(i) Includes capital expenditures of $ 3,128,000 and $ 3,242,000 in the three and six months ended July 2, 2022, respectively, associated with the construction of a manufacturing facility and building relocation project in China.

See Note 2 , Gain on Sale and Other Expense, Net.

Notes to Condensed Consolidated Financial Statements

Commitments and Contingencies

4 unchanged sentences

Banker's acceptance drafts transferred to vendors are subject to customary right of recourse provisions prior to their scheduled maturity dates.

The Company had $ 8,419,000 at April 2, 2022 and $ 9,593,000 at January 1, 2022 of banker's acceptance drafts subject to recourse, which were transferred to vendors and had not reached their scheduled maturity dates.

The Company had $ 11,080,000 at July 2, 2022 and $ 9,593,000 at January 1, 2022 of banker's acceptance drafts subject to recourse, which were transferred to vendors and had not reached their scheduled maturity dates.

Historically, the banker's acceptance drafts have settled upon maturity without any claim of recourse against the Company.

3 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.

Notes to Condensed Consolidated Financial Statements

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

What changed 10-Q

Item 1. Financial Statements