What changed in this filing

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Item 1. Financial Statements

2023-11-08 compared with 2023-08-09 · 170 added, 91 removed, 502 unchanged (34% of the section changed)

1 unchanged sentence

Condensed Consolidated Balance Sheet

September 30,

2023 December 31,

43 unchanged sentences

Condensed Consolidated Statement of Income

Three Months Ended Six Months Ended

Three Months Ended Nine Months Ended

September 30,

2023 October 1,

2022 September 30,

2023 October 1,

(In thousands, except per share amounts)

23 unchanged sentences

Condensed Consolidated Statement of Comprehensive Income

Three Months Ended Six Months Ended

Three Months Ended Nine Months Ended

September 30,

2023 October 1,

2022 September 30,

2023 October 1,

(In thousands)

12 unchanged sentences

Condensed Consolidated Statement of Cash Flows

Six Months Ended

Nine Months Ended

September 30,

2023 October 1,

(In thousands)

28 unchanged sentences

Dividends paid ( 9,825 ) ( 8,969 )

Dividend paid to noncontrolling interest — ( 630 )

Other financing activities ( 63 ) —

8 unchanged sentences

Condensed Consolidated Statement of Stockholders' Equity

Three Months Ended July 1, 2023

Three Months Ended September 30, 2023

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

5 unchanged sentences

Shares Amount Shares Amount

Balance at April 1, 2023 14,624,159 $ 146 $ 117,547 $ 685,325 2,920,678 $ ( 71,569 ) $ ( 49,085 ) $ 1,941 $ 684,305

Balance at July 1, 2023

14,624,159 $ 146 $ 120,117 $ 711,664 2,918,261 $ ( 71,509 ) $ ( 49,547 ) $ 2,154 $ 713,025

Net income — — — 30,864 — — — 175 31,039

3 unchanged sentences

Other comprehensive items — — — — — — ( 9,044 ) ( 64 ) ( 9,108 )

Balance at July 1, 2023 14,624,159 $ 146 $ 120,117 $ 711,664 2,918,261 $ ( 71,509 ) $ ( 49,547 ) $ 2,154 $ 713,025

Six Months Ended July 1, 2023

Balance at September 30, 2023 14,624,159 $ 146 $ 122,444 $ 739,133 2,917,063 $ ( 71,480 ) $ ( 58,591 ) $ 2,265 $ 733,917

Nine Months Ended September 30, 2023

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

11 unchanged sentences

Other comprehensive items — — — — — — ( 4,013 ) ( 28 ) ( 4,041 )

Balance at July 1, 2023 14,624,159 $ 146 $ 120,117 $ 711,664 2,918,261 $ ( 71,509 ) $ ( 49,547 ) $ 2,154 $ 713,025

Three Months Ended July 2, 2022

Balance at September 30, 2023 14,624,159 $ 146 $ 122,444 $ 739,133 2,917,063 $ ( 71,480 ) $ ( 58,591 ) $ 2,265 $ 733,917

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

Condensed Consolidated Statement of Stockholders' Equity (continued)

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

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.

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 1, 2023, its results of operations, comprehensive income, and stockholders' equity for the three- and six-month periods ended July 1, 2023 and July 2, 2022 and its cash flows for the six-month periods ended July 1, 2023 and July 2, 2023.

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 September 30, 2023, its results of operations, comprehensive income, and stockholders' equity for the three- and nine-month periods ended September 30, 2023 and October 1, 2022 and its cash flows for the nine-month periods ended September 30, 2023 and October 1, 2022.

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 December 31, 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 December 31, 2022 (the Annual Report).

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.

5 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 1, 2023.

There have been no material changes in the Company’s significant accounting policies during the nine months ended September 30, 2023.

Supplemental Cash Flow Information

Six Months Ended

(In thousands) July 1,

Nine Months Ended

(In thousands) September 30,

2023 October 1,

Cash Paid for Interest $ 6,341 $ 3,907

2 unchanged sentences

Reduction in fair value of assets acquired $ ( 270 ) $ ( 1,768 )

Cash received (paid) for acquired businesses 277 ( 62 )

Cash received for acquired businesses

Increase (decrease) in liabilities assumed $ 7 $ ( 1,630 )

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

Purchases of property, plant, and equipment in accounts payable $ 749 $ 36

Notes to Condensed Consolidated Financial Statements

Six Months Ended

(In thousands) July 1,

Nine Months Ended

(In thousands) September 30,

2023 October 1,

Non-Cash Financing Activities:

5 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 1,

(In thousands) September 30,

2023 October 1,

2022 December 31,

4 unchanged sentences

The components of inventories are as follows:

September 30,

2023 December 31,

5 unchanged sentences

Intangible Assets, Net

Gross intangible assets were $ 342,742,000 at July 1, 2023 and $ 343,130,000 at December 31, 2022.

Gross intangible assets were $ 342,742,000 at September 30, 2023 and $ 343,130,000 at December 31, 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 $ 165,300,000 at July 1, 2023 and $ 155,834,000 at December 31, 2022.

Accumulated amortization was $ 169,804,000 at September 30, 2023 and $ 155,834,000 at December 31, 2022.

Notes to Condensed Consolidated Financial Statements

9 unchanged sentences

Total 2023 activity ( 609 ) ( 224 ) ( 305 ) ( 1,138 )

Balance at July 1, 2023

Balance at September 30, 2023

Gross balance 117,700 209,695 142,460 469,855

7 unchanged sentences

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

Six Months Ended

(In thousands) July 1,

Nine Months Ended

(In thousands) September 30,

2023 October 1,

Balance at Beginning of Year $ 7,283 $ 7,298

11 unchanged sentences

The following table presents revenue by revenue recognition method:

Three Months Ended Six Months Ended

July 1, July 2, July 1, July 2,

Three Months Ended Nine Months Ended

September 30, October 1, September 30, October 1,

(In thousands) 2023 2022 2023 2022

4 unchanged sentences

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

Three Months Ended Six Months Ended

July 1, July 2, July 1, July 2,

Three Months Ended Nine Months Ended

September 30, October 1, September 30, October 1,

(In thousands) 2023 2022 2023 2022

3 unchanged sentences

$ 244,182 $ 224,510 $ 718,993 $ 672,639

Revenue by Geography (based on customer location) (a):

Revenue by Geography (based on customer location):

North America $ 133,780 $ 126,699 401,618 375,115

3 unchanged sentences

$ 244,182 $ 224,510 $ 718,993 $ 672,639

(a) The components of revenue by geography in the three and six months ended July 2, 2022 have been recast to conform to the current period presentation.

See Note 10 , Business Segment Information, for information on the disaggregation of revenue by reportable operating segment.

The following table presents contract balances from contracts with customers:

September 30,

2023 December 31,

8 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 $ 20,212,000 in the second quarter of 2023 and $ 13,424,000 in the second quarter of 2022, and $ 47,228,000 in the first six months of 2023 and $ 47,901,000 in the first six months of 2022 that was included in the contract liabilities balance at the beginning of 2023 and 2022, respectively.

The Company recognized revenue of $ 9,613,000 in the third quarter of 2023 and $ 11,912,000 in the third quarter of 2022, and $ 56,841,000 in the first nine months of 2023 and $ 59,813,000 in the first nine months of 2022 that was included in the contract liabilities balance at the beginning of 2023 and 2022, respectively.

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

Certain capital equipment 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

The Company will recognize revenue for these performance obligations as they are satisfied, approximately 74 % of which is expected to occur within the next twelve months and the remaining 26 % after the third quarter of 2024.

Notes to Condensed Consolidated Financial Statements

was $ 54,925,000 as of July 1, 2023.

The Company will recognize revenue for these performance obligations as they are satisfied, approximately 75 % of which is expected to occur within the next twelve months and the remaining 25 % after the second quarter of 2024.

Banker's Acceptance Drafts Included in Accounts Receivable

2 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 $ 3,550,000 at July 1, 2023 and $ 5,729,000 at December 31, 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 $ 8,558,000 at September 30, 2023 and $ 5,729,000 at December 31, 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

Business Combinations - Joint Venture Formations (Topic 805), Recognition and Initiation Measurement.

In August 2023, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No.

2023-05, to address the diversity in practice on the accounting treatment of joint venture formations.

Under this ASU, a joint venture is required to apply a new basis of accounting at its formation date by valuing the net assets contributed at fair value for both business and asset transactions.

The value of the net assets in total is then allocated to individual assets and liabilities by applying Topic 805 with certain exceptions.

This new guidance is effective for joint ventures with a formation date on or after January 1, 2025 and is required to be applied prospectively.

Additionally, joint ventures with a formation date prior to January 1, 2025, have an option to elect to apply the guidance retrospectively, provided adequate information is available.

The impact of the adoption of this ASU on the Company's consolidated financial statements will be dependent upon joint ventures formed in future periods.

Gain on Sale and Other Costs, Net

A summary of the items included in gain on sale and other costs, net is as follows:

Three Months Ended Nine Months Ended

September 30, October 1, September 30, October 1,

(In thousands) 2023 2022 2023 2022

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 $ 25,159,000 and relocate to a new facility (the China Transaction).

$ — $ — $ — $ ( 20,190 )

Relocation Costs

Restructuring Costs 398 72 398 72

Impairment Costs 36 — 36 182

$ 969 $ 72 $ 1,043 $ ( 19,936 )

Gain on Sale of Assets

The agreements became effective in the first quarter of 2022 after a 31 % down payment was received, including 25 % in 2021 and 6 % in the first quarter of 2022, and a land use right in a new location was secured.

1 unchanged sentence

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 subsidiary, which is part of the Industrial Processing segment, will continue to occupy its current facility until construction of its new facility is complete, which is expected during the second half of 2023.

The subsidiary, which is part of the Industrial Processing segment, relocated to its new facility during the third quarter of 2023.

Notes to Condensed Consolidated Financial Statements

A summary of the change in the outstanding receivable on the China Transaction is as follows:

(In thousands) July 1, 2023

(In thousands) Total

Balance at Inception $ 17,294

6 unchanged sentences

Currency translation ( 794 )

Balance at July 1, 2023 (included in other current assets)

Other costs of $ 74,000 in the second quarter of 2023 and $ 182,000 in the first quarter of 2022 consisted of charges in the Company's Industrial Processing segment associated with the China Transaction for the write-down of certain fixed assets that will not be moved to the new manufacturing facility in China and facility moving costs.

Balance at September 30, 2023 (included in other current assets)

Relocation Costs

As part of the China Transaction, the Company incurred costs of $ 535,000 in the third quarter of 2023 and $ 609,000 in the first nine months of 2023 related to the relocation of machinery and equipment and administrative offices to the new manufacturing facility.

Restructuring and Impairment Costs

The Company initiated restructuring plans within its Flow Control segment as follows:

• During the third quarter of 2023, the Company initiated a restructuring plan to consolidate a small manufacturing operation into a larger facility in Germany (2023 Restructuring Plan).

The Company recorded total restructuring and impairment charges of $ 434,000 in the third quarter of 2023 and first nine months of 2023, which consisted of severance costs of $ 369,000 for the termination of 10 employees, asset-write downs of $ 36,000 , and facility and other closure costs of $ 29,000 .

• During the fourth quarter of 2021, the Company initiated a restructuring plan to eliminate a redundant ceramic blade manufacturing operation in France (2021 Restructuring Plan).

The Company recorded additional restructuring costs of $ 72,000 in the third quarter and first nine months of 2022 related to this plan, which consisted of severance costs for the termination of two employees.

A summary of the changes in accrued restructuring costs included in other current liabilities in the accompanying condensed consolidated balance sheet, which are expected to be paid in the fourth quarter of 2023 and early 2024, are as follows:

(In thousands)

Severance Costs Facility and Other Closure Costs Total

2021 Restructuring Plan

Balance at December 31, 2022

$ 189 $ 200 $ 389

Usage ( 187 ) ( 199 ) ( 386 )

Currency translation ( 2 ) ( 1 ) ( 3 )

Balance at September 30, 2023

2023 Restructuring Plan

Provision $ 369 $ 29 $ 398

Usage ( 23 ) — ( 23 )

Currency translation ( 10 ) ( 1 ) ( 11 )

Balance at September 30, 2023

$ 336 $ 28 $ 364

In addition, the Company recorded an impairment charge of $ 182,000 in the first nine months of 2022 for the write-down of certain fixed assets that were not moved to the new facility related to the China Transaction.

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

September 30,

2023 October 1,

2022 September 30,

2023 October 1,

(In thousands, except per share amounts)

5 unchanged sentences

Diluted Earnings per Share $ 2.63 $ 2.35 $ 7.57 $ 8.12

The effect of outstanding and unvested restricted stock units (RSUs) of the Company's common stock totaling 26,000 shares in the second quarter of 2023, 8,000 shares in the second quarter of 2022, 32,000 shares in the first six months of 2023 and 13,000 shares in the first six months of 2022 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 respective reporting periods.

The effect of outstanding and unvested restricted stock units (RSUs) of the Company's common stock totaling 5,000 shares in the third quarter of 2023, 4,000 shares in the third quarter of 2022, 23,000 shares in the first nine months of 2023 and 10,000 shares in the first nine months of 2022 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 respective reporting periods.

Provision for Income Taxes

The provision for income taxes was $ 20,945,000 in the first six months of 2023 and $ 23,329,000 in the first six months of 2022.

The effective tax rate of 26 % in the first six months of 2023 was higher than the Company's statutory rate of 21% primarily due to the distribution of the Company's worldwide earnings, state taxes, and nondeductible expenses.

The effective tax rate of 26 % in the first six 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.

These increases in ta x expense in the first six months of 2022 were offset in part by a decrease in tax expense related to the net excess income tax benefits from stock-based compensation arrangements.

The provision for income taxes was $ 31,761,000 in the first nine months of 2023 and $ 33,075,000 in the first nine months of 2022.

The effective tax rate of 26 % in the first nine months of 2023 and 2022 was higher than the Company's statutory rate of 21% primarily due to the distribution of the Company's worldwide earnings, state taxes, and nondeductible expenses.

Short- and Long-Term Obligations

Short- and long-term obligations are as follows:

September 30,

2023 December 31,

10 unchanged sentences

The Company's unsecured multi-currency revolving credit facility, originally entered into on March 1, 2017 (as amended and restated to date, the Credit Agreement) matures on November 30, 2027 and has a borrowing capacity of $ 400,000,000 , in addition to an uncommitted, unsecured incremental borrowing facility of $ 200,000,000 .

Notes to Condensed Consolidated Financial Statements

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

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, Term SOFR (plus a 10 basis point credit spread adjustment), CDOR Rate, and RFR, as applicable and defined, plus an applicable margin of 1.0 % to 2.25 %.

Notes to Condensed Consolidated Financial Statements

The margin is determined based upon the ratio of the Company's total debt, net of unrestricted cash up to $ 50,000,000 , to earnings before interest, taxes, depreciation, and amortization as defined in the Credit Agreement.

3 unchanged sentences

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

As of July 1, 2023, the outstanding balance under the Credit Agreement was $ 142,562,000 , which included $ 74,562,000 of euro-denominated borrowings.

The Company had $ 257,267,000 of borrowing capacity available as of July 1, 2023, which was calculated by translating its foreign-denominated borrowings using the administrative agent's borrowing date foreign exchange rates, in addition to the $ 200,000,000 uncommitted, unsecured incremental borrowing facility.

The weighted average interest rate for the outstanding balance under the Credit Agreement was 5.27 % as of July 1, 2023 and 4.33 % as of year-end 2022.

As of September 30, 2023, the outstanding balance under the Credit Agreement was $ 115,494,000 , which included $ 72,494,000 of euro-denominated borrowings.

The Company had $ 284,911,000 of borrowing capacity available as of September 30, 2023, which was calculated by translating its foreign-denominated borrowings using the administrative agent's borrowing date foreign exchange rates, in addition to the $ 200,000,000 uncommitted, unsecured incremental borrowing facility.

The weighted average interest rate for the outstanding balance under the Credit Agreement was 5.43 % as of September 30, 2023 and 4.33 % as of year-end 2022.

See Note 8 , Derivatives, under the heading Interest Rate Swap Agreement, for information relating to the swap agreement, which matured on June 30, 2023.

5 unchanged sentences

The Initial Notes are pari passu with the Company’s indebtedness under the Credit Agreement, and any other senior debt of the Company, subject to certain specified exceptions, and participate in a sharing agreement with respect to the obligations of the Company and its subsidiaries under the Credit Agreement.

The Senior Promissory Notes are guaranteed by certain of the Company’s domestic subsidiaries.

The Initial Notes are guaranteed by certain of the Company’s domestic subsidiaries.

Debt Compliance

As of July 1, 2023, the Company was in compliance with the covenants related to its debt obligations.

As of September 30, 2023, the Company was in compliance with the covenants related to its debt obligations.

Stock-Based Compensation

The Company recognized stock-based compensation expense of $ 2,648,000 in the second quarter of 2023, $ 2,276,000 in the second quarter of 2022, $ 4,886,000 in the first six months of 2023 and $ 4,536,000 in the first six months of 2022 within selling, general, and administrative (SG&A) expenses in the accompanying condensed consolidated statement of income.

The Company recognized stock-based compensation expense of $ 2,357,000 in the third quarter of 2023, $ 2,040,000 in the third quarter of 2022, $ 7,243,000 in the first nine months of 2023 and $ 6,576,000 in the first nine months of 2022 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 $ 12,021,000 at July 1, 2023, which will be recognized over a weighted average period of 1.8 years.

Unrecognized compensation expense related to stock-based compensation totaled approximately $ 9,716,000 at September 30, 2023, which will be recognized over a weighted average period of 1.7 years.

Notes to Condensed Consolidated Financial Statements

Non-Employee Director RSUs

In May 2023, the Company granted an aggregate of 4,340 RSUs to its non-employee directors with an aggregate grant date fair value of $ 849,000 , of which 50 % vested on June 1, 2023, 25 % vest on the last day of the third fiscal quarter of 2023 and the remaining 25 % vest on the last day of the fourth fiscal quarter of 2023.

In May 2023, the Company granted an aggregate of 4,340 RSUs to its non-employee directors with an aggregate grant date fair value of $ 849,000 , of which 50 % vested on June 1, 2023, 25 % vested on the last day of the third fiscal quarter of 2023 and the remaining 25 % are to vest on the last day of the fourth fiscal quarter of 2023.

Performance-based RSUs

20 unchanged sentences

( 3,903 ) ( 3 ) ( 107 ) ( 4,013 )

Balance at July 1, 2023 $ ( 49,351 ) $ ( 156 ) $ ( 40 ) $ ( 49,547 )

Balance at September 30, 2023 $ ( 58,391 ) $ ( 151 ) $ ( 49 ) $ ( 58,591 )

Notes to Condensed Consolidated Financial Statements

Amounts reclassified from AOCI are as follows:

Three Months Ended Six Months Ended

(In thousands) July 1,

Three Months Ended Nine Months Ended

(In thousands) September 30,

2023 October 1,

2022 September 30,

2023 October 1,

2022 Statement of Income Line Item

10 unchanged sentences

Interest rate swap agreement — ( 33 ) 136 ( 227 ) Interest expense

Income tax (provision) benefit ( 23 ) 20 ( 37 ) 47 Provision for income taxes

Income tax benefit (provision)

— 8 ( 37 ) 55 Provision for income taxes

— ( 25 ) 99 ( 172 )

2 unchanged sentences

Interest Rate Swap Agreement

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.

In 2018, the Company entered into an interest rate swap agreement (2018 Swap Agreement) with Citizens Bank, N.A.

to hedge its exposure to movements in USD LIBOR on its U.S.

dollar-denominated debt.

9 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 1, 2023 and July 2, 2022.

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 September 30, 2023 and October 1, 2022.

Notes to Condensed Consolidated Financial Statements

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

July 1, 2023 December 31, 2022

September 30, 2023 December 31, 2022

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

9 unchanged sentences

Derivatives in a Liability Position:

Forward currency-exchange contract Other Current Liabilities $ ( 1 ) $ 100 $ — $ —

Forward currency-exchange contracts

Other Current Liabilities $ ( 23 ) $ 801 $ — $ —

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

(b) The 2023 notional amounts are indicative of the level of the Company's recurring derivative activity.

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 1, 2023:

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 September 30, 2023:

(In thousands) Interest Rate Swap Agreement Forward Currency-Exchange Contract Total

1 unchanged sentence

Gain reclassified to earnings (a) ( 99 ) — ( 99 )

Gain recognized in AOCI — 1 1

Unrealized Loss, Net of Tax, at July 1, 2023 $ — $ ( 40 ) $ ( 40 )

Loss recognized in AOCI

— ( 8 ) ( 8 )

Unrealized Loss, Net of Tax, at September 30, 2023

$ — $ ( 49 ) $ ( 49 )

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

As of July 1, 2023, the Company expects to reclassify losses of $ 40,000 from AOCI to earnings over the next twelve months based on the maturity date of the forward currency-exchange contract.

As of September 30, 2023, the Company expects to reclassify losses of $ 49,000 from AOCI to earnings over the next twelve months based on the maturity date of the forward currency-exchange contract.

Fair Value Measurements and Fair Value of Financial Instruments

6 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 1, 2023

Fair Value as of September 30, 2023

(In thousands) Level 1 Level 2 Level 3 Total

11 unchanged sentences

(b) The 2018 Swap Agreement matured on June 30, 2023.

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 2023.

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 2023.

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 1, 2023 December 31, 2022

September 30, 2023 December 31, 2022

Carrying Value Fair Value Carrying Value Fair Value

18 unchanged sentences

• 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.

The Company's primary products include stock-preparation systems and recycling equipment, chemical pulping equipment, debarkers, stranders, chippers, and logging machinery.

The Company's primary products include stock-preparation systems and recycling equipment, chemical pulping equipment, debarkers, stranders and chippers.

In addition, the Company provides industrial automation and digitization solutions to process industries.

3 unchanged sentences

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

Three Months Ended Six Months Ended

July 1, July 2, July 1, July 2,

Three Months Ended Nine Months Ended

September 30, October 1, September 30, October 1,

(In thousands) 2023 2022 2023 2022

4 unchanged sentences

Income Before Provision for Income Taxes

Flow Control $ 25,821 $ 22,707 $ 50,010 $ 44,432

Industrial Processing (a) 16,978 15,285 32,945 53,444

Material Handling (b) 10,374 8,701 19,661 14,545

Corporate (c) ( 10,095 ) ( 9,225 ) ( 19,424 ) ( 18,980 )

Flow Control (a) $ 24,246 $ 22,874 $ 74,256 $ 67,306

Industrial Processing (b) 19,023 17,550 51,968 70,994

Material Handling (c) 10,345 6,945 30,006 21,490

Corporate (d) ( 10,070 ) ( 8,483 ) ( 29,494 ) ( 27,463 )

Total operating income 43,544 38,886 126,736 132,327

Interest expense, net (d) ( 1,929 ) ( 1,089 ) ( 4,000 ) ( 2,221 )

Other expense, net (d) ( 21 ) ( 19 ) ( 42 ) ( 41 )

Interest expense, net (e) ( 1,669 ) ( 1,450 ) ( 5,669 ) ( 3,671 )

Other expense, net (e) ( 20 ) ( 19 ) ( 62 ) ( 60 )

$ 41,855 $ 37,417 $ 121,005 $ 128,596

1 unchanged sentence

Flow Control $ 1,195 $ 868 $ 3,889 $ 2,424

Industrial Processing (e) 6,129 5,073 8,708 7,025

Industrial Processing (f) 7,299 4,654 16,007 11,679

Material Handling 350 854 2,170 2,081

1 unchanged sentence

$ 8,848 $ 6,376 $ 22,094 $ 16,191

(a) Includes other costs of $ 74,000 in the three and six months ended July 1, 2023 and $ 182,000 in the six months ended July 2, 2022.

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 in the six months ended July 2.

(b) Includes a non-cash charge for the write-off of an indemnification asset of $ 177,000 in the three and six months ended July 1, 2023 and acquisition-related expenses of $ 717,000 in the six months ended July 2, 2022.

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

(a) Includes restructuring and impairment costs of $ 434,000 in both the three and nine months ended September 30, 2023, and $ 72,000 in both the three and nine months ended October 1, 2022.

Includes acquisition-related expenses of $ 410,000 and $ 254,000 in the three and nine months ended October 1, 2022, respectively.

(b) Includes relocation costs of $ 535,000 and $ 609,000 in the three and nine months ended September 30, 2023, respectively.

Includes a gain on the sale of a facility of $ 20,190,000 , impairment costs of $ 182,000 (see Note 2 , Gain on Sale and Other Costs, Net), and a non-cash charge for the write-off of an indemnification asset of $ 575,000 in the nine months ended October 1, 2022.

Notes to Condensed Consolidated Financial Statements

(e) Includes capital expenditures of $ 3,108,000 and $ 3,287,000 in the three and six months ended July 1, 2023, respectively, and $ 3,128,000 and $ 3,242,000 in the three and six months ended July 2, 2022, respectively, related to the China Transaction.

(d) Represents general and administrative expenses.

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

(f) Includes capital expenditures of $ 2,476,000 and $ 5,763,000 in the three and nine months ended September 30, 2023, respectively, and $ 2,155,000 and $ 5,397,000 in the three and nine months ended October 1, 2022, respectively, related to the China Transaction.

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

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 $ 12,315,000 at July 1, 2023 and $ 11,238,000 at December 31, 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 $ 9,954,000 at September 30, 2023 and $ 11,238,000 at December 31, 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