What changed in this filing

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Item 1. Financial Statements

2022-11-09 compared with 2022-08-10 · 130 added, 100 removed, 514 unchanged (31% of the section changed)

46 unchanged sentences

Condensed Consolidated Statement of Income

Three Months Ended Six Months Ended

Three Months Ended Nine Months Ended

2022 October 2,

2021 October 1,

2022 October 2,

(In thousands, except per share amounts)

4 unchanged sentences

Research and development expenses 3,245 2,649 9,574 8,547

Gain on sale and other expense, net (Note 2) — — ( 20,008 ) —

Gain on sale and other costs, net (Note 2) 72 — ( 19,936 ) —

185,624 171,061 540,312 482,898

16 unchanged sentences

Condensed Consolidated Statement of Comprehensive Income

Three Months Ended Six Months Ended

Three Months Ended Nine Months Ended

2022 October 2,

2021 October 1,

2022 October 2,

(In thousands)

12 unchanged sentences

Condensed Consolidated Statement of Cash Flows

Six Months Ended

Nine Months Ended

2022 October 2,

(In thousands)

6 unchanged sentences

Stock-based compensation expense 6,576 6,230

Provision for losses (benefit) on accounts receivable 433 ( 241 )

Provision for losses on accounts receivable 685 116

Gain on the sale of assets (Note 2) ( 20,190 ) —

20 unchanged sentences

Dividends paid ( 8,969 ) ( 8,559 )

Dividend paid to noncontrolling interest ( 630 ) ( 560 )

Net cash (used in) provided by financing activities ( 62,112 ) 66,714

7 unchanged sentences

Condensed Consolidated Statement of Stockholders' Equity

Three Months Ended July 2, 2022

Three Months Ended October 1, 2022

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

5 unchanged sentences

Shares Amount Shares Amount

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

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

Net income — — — 27,487 — — — 184 27,671

2 unchanged sentences

Activity under stock plans — — 1,982 — ( 1,628 ) 40 — — 2,022

Dividend paid to noncontrolling interest — — — — — — — ( 630 ) ( 630 )

Other comprehensive items — — — — — — ( 22,580 ) ( 111 ) ( 22,691 )

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

Balance at October 1, 2022 14,624,159 $ 146 $ 116,807 $ 637,601 2,960,558 $ ( 72,546 ) $ ( 73,959 ) $ 1,455 $ 609,504

Nine Months Ended October 1, 2022

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

10 unchanged sentences

Activity under stock plans — — 919 — ( 42,861 ) 1,050 — — 1,969

Dividend paid to noncontrolling interest — — — — — — — ( 630 ) ( 630 )

Other comprehensive items — — — — — — ( 43,609 ) ( 267 ) ( 43,876 )

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

Balance at October 1, 2022 14,624,159 $ 146 $ 116,807 $ 637,601 2,960,558 $ ( 72,546 ) $ ( 73,959 ) $ 1,455 $ 609,504

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

Condensed Consolidated Statement of Stockholders' Equity (continued)

Three Months Ended October 2, 2021

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

5 unchanged sentences

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

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

Net income — — — 20,461 — — — 237 20,698

2 unchanged sentences

Activity under stock plans — — 2,164 — ( 5,225 ) 128 — — 2,292

Dividend paid to noncontrolling interest — — — — — — — ( 560 ) ( 560 )

Noncontrolling interest acquired — — — — — — — 653 653

Purchase of shares of noncontrolling interest — — — — — — — ( 686 ) ( 686 )

Other comprehensive items — — — — — — ( 7,200 ) ( 36 ) ( 7,236 )

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

Balance at October 2, 2021 14,624,159 $ 146 $ 112,693 $ 530,596 3,038,629 $ ( 74,459 ) $ ( 27,089 ) $ 1,499 $ 543,386

Nine Months Ended October 2, 2021

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

10 unchanged sentences

Activity under stock plans — — 1,869 — ( 43,290 ) 1,060 — — 2,929

Dividend paid to noncontrolling interest — — — — — — — ( 560 ) ( 560 )

Noncontrolling interest acquired — — — — — — — 653 653

Purchase of shares of noncontrolling interest — — — — — — — ( 686 ) ( 686 )

Other comprehensive items — — — — — — ( 7,597 ) ( 89 ) ( 7,686 )

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

Balance at October 2, 2021 14,624,159 $ 146 $ 112,693 $ 530,596 3,038,629 $ ( 74,459 ) $ ( 27,089 ) $ 1,499 $ 543,386

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 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.

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 October 1, 2022, its results of operations, comprehensive income, and stockholders' equity for the three- and nine-month periods ended October 1, 2022 and October 2, 2021 and its cash flows for the nine-month periods ended October 1, 2022 and October 2, 2021.

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

10 unchanged sentences

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.

There have been no material changes in the Company’s significant accounting policies during the nine months ended October 1, 2022.

Supplemental Cash Flow Information

Six Months Ended

(In thousands) July 2,

Nine Months Ended

(In thousands) October 1,

2022 October 2,

Cash Paid for Interest $ 3,907 $ 3,091

1 unchanged sentence

Notes to Condensed Consolidated Financial Statements

Six Months Ended

(In thousands) July 2,

Nine Months Ended

(In thousands) October 1,

2022 October 2,

Non-Cash Investing Activities:

Fair value of assets acquired $ ( 1,568 ) $ 197

Cash paid for acquired businesses ( 62 ) ( 159 )

Liabilities Assumed of Acquired Businesses $ ( 1,630 ) $ 38

Fair value of assets (adjusted) acquired $ ( 1,768 ) $ 185,424

Cash received (paid) for acquired businesses 138 ( 149,961 )

Liabilities (adjusted) assumed of acquired businesses $ ( 1,630 ) $ 35,463

Purchase of property with outstanding loan receivable $ 1,397 $ —

Purchases of property, plant, and equipment in accounts payable $ 36 $ 914

6 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) July 2,

(In thousands) October 1,

2022 October 2,

2021 January 1,

11 unchanged sentences

Intangible Assets, Net

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

Gross intangible assets were $ 340,947,000 at October 1, 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 $ 146,117,000 at July 2, 2022 and $ 135,327,000 at January 1, 2022.

Accumulated amortization was $ 151,001,000 at October 1, 2022 and $ 135,327,000 at January 1, 2022.

Notes to Condensed Consolidated Financial Statements

9 unchanged sentences

Total 2022 activity ( 10,236 ) ( 7,953 ) ( 5,732 ) ( 23,921 )

Balance at July 2, 2022

Balance at October 1, 2022

Gross balance 113,353 207,029 138,093 458,475

9 unchanged sentences

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

Six Months Ended

(In thousands) July 2,

Nine Months Ended

(In thousands) October 1,

2022 October 2,

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

1 unchanged sentence

Usage ( 3,361 ) ( 3,106 )

Acquisitions — 429

Currency translation ( 877 ) ( 210 )

8 unchanged sentences

The following table presents revenue by revenue recognition method:

Three Months Ended Six Months Ended

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

Three Months Ended Nine Months Ended

October 1, October 2, October 1, October 2,

(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 Six Months Ended

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

Three Months Ended Nine Months Ended

October 1, October 2, October 1, October 2,

(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 $ 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 Company recognized revenue of $ 11,912,000 in the third quarter of 2022 and $ 3,973,000 in the third quarter of 2021, $ 59,813,000 in the first nine months of 2022 and $ 31,183,000 in the first nine 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 July 2, 2022 was $ 61,659,000 .

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.

The Company will recognize revenue for these performance obligations as they are satisfied, approximately 64 % of which is expected to occur within the next twelve months and the remaining 36 % after the third 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 $ 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.

These drafts, which totaled $ 6,755,000 at October 1, 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

12 unchanged sentences

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

Gain on Sale and Other Costs, Net

Gain on Sale of Assets

The Company entered into several agreements with the local government in China to sell the existing manufacturing building and land use rights of one of its subsidiaries in China for approximately $ 25,159,000 .

3 unchanged sentences

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 .

The receivable outstanding at October 1, 2022 was $ 14,646,000 .

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

In addition, the Company recognized an impairment charge of $ 182,000 in the first quarter of 2022 associated with the write-down of certain fixed assets that will not be moved to the new facility.

During the first quarter of 2022, the Company recognized an impairment charge of $ 182,000 associated with the write-down of certain fixed assets that will not be moved to the new manufacturing facility in China as discussed above.

During the third quarter of 2022, the Company recorded restructuring costs within its Flow Control segment of $ 72,000 , which consisted of severance costs related to the termination of two employees.

This restructuring plan was initiated in the fourth quarter of 2021 to eliminate a redundant ceramic blade manufacturing operation that resulted from the Company's acquisition of The Clouth Group of Companies (Clouth) in the third quarter of 2021.

Notes to Condensed Consolidated Financial Statements

1 unchanged sentence

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

Three Months Ended Six Months Ended

Three Months Ended Nine Months Ended

2022 October 2,

2021 October 1,

2022 October 2,

(In thousands, except per share amounts)

5 unchanged sentences

Diluted Earnings per Share $ 2.35 $ 1.75 $ 8.12 $ 5.14

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.

The effect of outstanding and unvested restricted stock units (RSUs) of the Company's common stock totaling 4,000 shares in the third quarter of 2022 and 3,000 shares in the third quarter of 2021, 10,000 shares in the first nine months of 2022 and 19,000 in the first nine 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 $ 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.

The provision for income taxes was $ 33,075,000 in the first nine months of 2022 and $ 21,252,000 in the first nine months of 2021.

The effective tax rate of 26 % in the first nine 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, and state taxes.

The effective tax rate of 26 % in the first nine months of 2021 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 provisions.

These increases in tax expenses in the first nine months of 2021 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

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,

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 %.

$ 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 %.

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 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.

As of October 1, 2022, the outstanding balance under the Credit Agreement was $ 195,036,000 , which included $ 71,036,000 of euro-denominated borrowings.

As of October 1, 2022, the Company had $ 206,284,000 of borrowing capacity available under its Credit Agreement, which was calculated by translating its foreign-denominated borrowings using the administrative agent's borrowing date foreign exchange rates.

The weighted average interest rate for the outstanding balance under the Credit Agreement was 3.50 % as of October 1, 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 July 2, 2022, the Company was in compliance with the covenants related to its debt obligations.

As of October 1, 2022, the Company was in compliance with the covenants related to its debt obligations.

Finance Leases

1 unchanged sentence

Other Borrowings

Other borrowings include a sale-leaseback financing arrangement for a manufacturing facility in Germany.

Under this arrangement, the quarterly lease payment includes principal, interest, and a payment to the landlord toward a loan receivable.

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 $ 1,414,000 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.

Prior to August 2022, the Company's other borrowings included a sale-leaseback financing arrangement for a manufacturing facility in Germany.

This arrangement provided for a fixed price purchase option of the facility from the landlord at the end of the lease term in August 2022.

The Company exercised this option and acquired the facility from the landlord for 2,722,000 euros, or approximately $ 2,730,000 .

The Company applied its outstanding loan receivable due from the landlord of 1,393,000 euros, or approximately $ 1,397,000 , towards the purchase of the facility.

Other borrowings also include $ 637,000 of short-term obligations and $ 2,212,000 of debt obligations outstanding at October 1, 2022 assumed in the acquisition of 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 $ 2,276,000 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 recognized stock-based compensation expense of $ 2,040,000 in the third quarter of 2022 and $ 2,204,000 in the third quarter of 2021, $ 6,576,000 in the first nine months of 2022, and $ 6,230,000 in the first nine 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 $ 10,331,000 at July 2, 2022, which will be recognized over a weighted average period of 1.8 years.

Unrecognized compensation expense related to stock-based compensation totaled approximately $ 8,366,000 at October 1, 2022, which will be recognized over a weighted average period of 1.7 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.

For the incumbent non-employee directors, 50 % of these RSUs vested on June 1, 2022, 25 % of these RSUs vested on the last day of the third fiscal quarter of 2022 and the remaining 25 % are to vest on the last day of the fourth fiscal quarter of 2022.

For the new non-employee director, 50 % of the RSUs vested on the last day of the third fiscal quarter of 2022 and the other half are to vest on the last day of the fourth fiscal quarter of 2022.

Accumulated Other Comprehensive Items

2 unchanged sentences

(In thousands) Foreign

Adjustment Post-Retirement Benefit Liability Adjustments Deferred Loss on Cash Flow Hedges Total

Adjustment Post-Retirement Benefit Liability Adjustments Deferred Gain (Loss) on Cash Flow Hedges Total

Balance at January 1, 2022 $ ( 29,096 ) $ ( 792 ) $ ( 462 ) $ ( 30,350 )

3 unchanged sentences

( 44,179 ) 64 506 ( 43,609 )

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

Balance at October 1, 2022 $ ( 73,275 ) $ ( 728 ) $ 44 $ ( 73,959 )

Amounts reclassified from AOCI are as follows:

Three Months Ended Six Months Ended

(In thousands) July 2,

Three Months Ended Nine Months Ended

(In thousands) October 1,

2022 October 2,

2021 October 1,

2022 October 2,

2021 Statement of Income Line Item

32 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- and six-month periods ended July 2, 2022 and July 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 nine-month periods ended October 1, 2022 and October 2, 2021.

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

July 2, 2022 January 1, 2022

October 1, 2022 January 1, 2022

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

4 unchanged sentences

Derivatives in a Liability Position:

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

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

Forward currency-exchange contracts Other Current Liabilities $ ( 82 ) $ 430 $ ( 44 ) $ 842

Derivatives Not Designated as Hedging Instruments:

6 unchanged sentences

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 six months ended July 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 nine months ended October 1, 2022:

(In thousands) Interest Rate Swap

4 unchanged sentences

Gain (loss) recognized in AOCI 363 ( 29 ) 334

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

Unrealized Gain (Loss), Net of Tax, at October 1, 2022 $ 106 $ ( 62 ) $ 44

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

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.

As of October 1, 2022, the Company expects to reclassify gains of $ 44,000 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 July 2, 2022

Fair Value as of October 1, 2022

(In thousands) Level 1 Level 2 Level 3 Total

13 unchanged sentences

Notes to Condensed Consolidated Financial Statements

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.

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 nine 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.

4 unchanged sentences

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

July 2, 2022 January 1, 2022

October 1, 2022 January 1, 2022

Carrying Value Fair Value Carrying Value Fair Value

8 unchanged sentences

Business Segment Information

The Company has combined its operating entities into three reportable operating segments:

The Company has three reportable operating segments:

Flow Control, Industrial Processing, and Material Handling.

13 unchanged sentences

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

Three Months Ended Six Months Ended

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

Three Months Ended Nine Months Ended

October 1, October 2, October 1, October 2,

(In thousands) 2022 2021 2022 2021

5 unchanged sentences

Flow Control (a,c) $ 22,874 $ 17,129 $ 67,306 $ 51,899

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 )

Industrial Processing (d) 17,550 16,095 70,994 44,449

Material Handling (b,e) 6,945 3,491 21,490 12,941

Corporate (f) ( 8,483 ) ( 7,987 ) ( 27,463 ) ( 24,124 )

Total operating income 38,886 28,728 132,327 85,165

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

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

Interest expense, net (g) ( 1,450 ) ( 1,265 ) ( 3,671 ) ( 3,321 )

Other expense, net (g) ( 19 ) ( 23 ) ( 60 ) ( 71 )

$ 37,417 $ 27,440 $ 128,596 $ 81,773

1 unchanged sentence

Flow Control $ 868 $ 1,128 $ 2,424 $ 1,830

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

Industrial Processing (h) 4,654 1,725 11,679 4,720

Material Handling 854 505 2,081 1,121

1 unchanged sentence

$ 6,376 $ 3,370 $ 16,191 $ 7,688

(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.

(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.

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

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

(c) Includes acquisition-related expenses of $ 410,000 and $ 254,000 in the three and nine months ended October 1, 2022, respectively, and $ 2,706,000 and $ 3,942,000 in the three and nine months ended October 2, 2021, respectively.

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

Includes restructuring costs of $ 72,000 in the three and nine months ended October 1, 2022, respectively.

(d) Includes a gain on the sale of a facility of $ 20,190,000 (see Note 2 , Gain on Sale and Other Costs, Net) 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 nine months ended October 1, 2022.

(e) Includes acquisition-related expenses of $ 717,000 in the nine months ended October 1, 2022 and $ 799,000 and $ 1,411,000 in the three and nine months ended October 2, 2021, respectively.

(f) Represents general and administrative expenses.

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

(h) Includes capital expenditures of $ 2,155,000 and $ 5,397,000 in the three and nine months ended October 1, 2022, respectively, associated with the construction of a manufacturing facility in China.

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

Notes to Condensed Consolidated Financial Statements

5 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 $ 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.

The Company had $ 9,793,000 at October 1, 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.

4 unchanged sentences

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