What changed in this filing

/stocks — the workspaceLOADING

Item 1. Financial Statements

2024-08-07 compared with 2024-05-08 · 173 added, 112 removed, 582 unchanged (33% of the section changed)

51 unchanged sentences

Condensed Consolidated Statement of Income

Three Months Ended

2024 April 1,

Three Months Ended Six Months Ended

2023 June 29,

(In thousands, except per share amounts)

5 unchanged sentences

Research and development expenses 3,482 3,408 7,212 6,778

Other costs (Note 3)

226,364 201,975 438,412 391,619

5 unchanged sentences

Provision for Income Taxes (Note 5)

11,992 11,182 19,846 20,945

Net Income 31,574 29,946 56,559 58,205

10 unchanged sentences

Condensed Consolidated Statement of Comprehensive Income

Three Months Ended

2024 April 1,

Three Months Ended Six Months Ended

2023 June 29,

(In thousands)

3 unchanged sentences

Post-retirement liability adjustments, net (net of tax of $ 1 , $( 1 ), $ 1 and $( 3 ))

2 ( 2 ) 3 ( 8 )

Deferred gain (loss) on cash flow hedges (net of tax of $ — , $( 18 ), $ 13 and $( 32 ))

— ( 59 ) 38 ( 98 )

Other comprehensive items ( 5,200 ) ( 461 ) ( 15,383 ) 5,067

5 unchanged sentences

Condensed Consolidated Statement of Cash Flows

Three Months Ended

2024 April 1,

Six Months Ended

(In thousands)

30 unchanged sentences

Proceeds from issuance of Company common stock

Dividend paid to noncontrolling interest

Acquisition of subsidiary shares from noncontrolling interest (Note 2)

Other financing activities — ( 63 )

2 unchanged sentences

Exchange Rate Effect on Cash, Cash Equivalents, and Restricted Cash ( 3,491 ) 579

(Decrease) Increase in Cash, Cash Equivalents, and Restricted Cash

Decrease in Cash, Cash Equivalents, and Restricted Cash

( 31,275 ) ( 9,530 )

5 unchanged sentences

Condensed Consolidated Statement of Stockholders' Equity

Three Months Ended March 30, 2024

Three Months Ended June 29, 2024

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

2 unchanged sentences

Stock Accumulated

Comprehensive Items Noncontrolling Interests

Comprehensive Items Noncontrolling Interests Total

Stockholders' Equity

Shares Amount Shares Amount

Balance at December 30, 2023

Balance at March 30, 2024

14,624,159 $ 146 $ 122,253 $ 784,062 2,881,213 $ ( 70,601 ) $ ( 53,173 ) $ 12,081 $ 794,768

3 unchanged sentences

Activity under stock plans — — 2,833 — ( 1,575 ) 38 — — 2,871

Noncontrolling interests acquired ( Note 2 )

Acquisition of subsidiary shares (Note 2)

— — ( 194 ) — — — — ( 329 ) ( 523 )

Dividend paid to noncontrolling interest

— — — — — — — ( 1,346 ) ( 1,346 )

Other comprehensive items — — — — — — ( 5,186 ) ( 14 ) ( 5,200 )

Balance at March 30, 2024 14,624,159 $ 146 $ 122,253 $ 784,062 2,881,213 $ ( 70,601 ) $ ( 53,173 ) $ 12,081 $ 794,768

Three Months Ended April 1, 2023

Balance at June 29, 2024 14,624,159 $ 146 $ 124,892 $ 811,595 2,879,638 $ ( 70,563 ) $ ( 58,359 ) $ 10,675 $ 818,386

Six Months Ended June 29, 2024

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

2 unchanged sentences

Stock Accumulated

Comprehensive Items Noncontrolling Interest Total

Comprehensive Items Noncontrolling Interests Total

Stockholders' Equity

1 unchanged sentence

Balance at December 30, 2023 14,624,159 $ 146 $ 124,940 $ 763,131 2,915,978 $ ( 71,453 ) $ ( 43,062 ) $ 2,538 $ 776,240

Net income — — — 55,980 — — — 579 56,559

Dividends declared – Common Stock, $ 0.64 per share

— — — ( 7,516 ) — — — — ( 7,516 )

Activity under stock plans — — 146 — ( 36,340 ) 890 — — 1,036

Noncontrolling interests acquired (Note 2)

— — — — — — — 9,319 9,319

Acquisition of subsidiary shares (Note 2)

— — ( 194 ) — — — — ( 329 ) ( 523 )

Dividend paid to noncontrolling interest — — — — — — — ( 1,346 ) ( 1,346 )

Other comprehensive items — — — — — — ( 15,297 ) ( 86 ) ( 15,383 )

Balance at June 29, 2024 14,624,159 $ 146 $ 124,892 $ 811,595 2,879,638 $ ( 70,563 ) $ ( 58,359 ) $ 10,675 $ 818,386

Three Months Ended July 1, 2023

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

Net income — — — 29,734 — — — 212 29,946

3 unchanged sentences

Other comprehensive items — — — — — — ( 462 ) 1 ( 461 )

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

Six Months Ended July 1, 2023

(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 December 31, 2022 14,624,159 $ 146 $ 119,924 $ 660,644 2,949,997 $ ( 72,287 ) $ ( 54,578 ) $ 1,722 $ 655,571

Net income — — — 57,809 — — — 396 58,205

Dividends declared – Common Stock, $ 0.58 per share

— — — ( 6,789 ) — — — — ( 6,789 )

Activity under stock plans — — 193 — ( 31,736 ) 778 — — 971

Other comprehensive items — — — — — — 5,031 36 5,067

Balance at July 1, 2023 14,624,159

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

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 March 30, 2024, its results of operations, comprehensive income, cash flows, and stockholders' equity for the three-month periods ended March 30, 2024 and April 1, 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 June 29, 2024, its results of operations, comprehensive income, and stockholders' equity for the three- and six-month periods ended June 29, 2024 and July 1, 2023, and its cash flows for the six-month periods ended June 29, 2024 and July 1, 2023.

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

7 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 quarter ended March 30, 2024.

There have been no material changes in the Company’s significant accounting policies during the six months ended June 29, 2024.

Supplemental Cash Flow Information

Three Months Ended

(In thousands) March 30,

2024 April 1,

Six Months Ended

(In thousands) June 29,

Cash Paid for Interest $ 9,703 $ 4,443

1 unchanged sentence

Non-Cash Investing Activities:

Fair value of assets acquired

$ 266,061 $ —

Cash paid for businesses acquired

Fair value of assets acquired (adjusted) $ 341,105 $ ( 270 )

Cash (paid) received for businesses acquired (a)

( 299,892 ) 277

Liabilities assumed and noncontrolling interests acquired

Purchases of property, plant, and equipment in accounts payable $ 1,342 $ 299

Liabilities assumed (reduced) and noncontrolling interests acquired $ 41,213 $ ( 7 )

(a) Includes estimated post-closing adjustments, net.

Notes to Condensed Consolidated Financial Statements

Three Months Ended

(In thousands) March 30,

2024 April 1,

Six Months Ended

(In thousands) June 29,

Purchases of property, plant, and equipment in accounts payable $ 618 $ 1,134

Non-Cash Financing Activities:

5 unchanged sentences

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

(In thousands) March 30,

2024 April 1,

(In thousands) June 29,

2023 December 30,

16 unchanged sentences

Translation Net

March 30, 2024

June 29, 2024

Definite-Lived

25 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.

Intangible assets associated with the Company's 2024 acquisitions totaled $ 123,150,000 , which primarily related to customer relationships and product technology.

Intangible assets associated with the Company's 2024 acquisitions totaled $ 146,588,000 .

See Note 2 , Acquisitions, for further details.

11 unchanged sentences

Total 2024 activity 12,297 34,360 39,294 85,951

Balance at March 30, 2024

Balance at June 29, 2024

Gross balance 133,079 247,092 183,402 563,573

5 unchanged sentences

The Company negotiates the terms regarding warranty coverage and length of warranty depending on the products and applications.

Notes to Condensed Consolidated Financial Statements

The Company's liability for warranties is included in other current liabilities in the accompanying condensed consolidated balance sheet.

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

Notes to Condensed Consolidated Financial Statements

Three Months Ended

(In thousands) March 30,

2024 April 1,

Six Months Ended

(In thousands) June 29,

Balance at Beginning of Year $ 8,154 $ 7,283

11 unchanged sentences

The following table presents revenue by revenue recognition method:

Three Months Ended

March 30, April 1,

Three Months Ended Six Months Ended

June 29, July 1, June 29, July 1,

(In thousands) 2024 2023 2024 2023

4 unchanged sentences

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

Three Months Ended

March 30, April 1,

Three Months Ended Six Months Ended

June 29, July 1, June 29, July 1,

(In thousands) 2024 2023 2024 2023

22 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 $ 33,666,000 in the first quarter of 2024 and $ 27,016,000 in the first quarter of 2023 that was included in the contract liabilities balance at the beginning of 2024 and 2023, respectively.

The Company recognized revenue of $ 23,473,000 in the second quarter of 2024 and $ 20,212,000 in the second quarter of 2023, and $ 57,139,000 in the first six months of 2024 and $ 47,228,000 in the first six months of 2023 that was included in the contract liabilities balance at the beginning of 2024 and 2023, 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 was $ 37,026,000 as of March 30, 2024.

The Company will recognize revenue for these performance obligations as they are satisfied, approximately 78 % of which is expected to occur within the next twelve months and the remaining 22 % thereafter.

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 $ 6,723,000 at March 30, 2024 and $ 10,826,000 at December 30, 2023, 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 $ 7,574,000 at June 29, 2024 and $ 10,826,000 at December 30, 2023, 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.

In accordance with Accounting Standards Codification (ASC) 740, Income Taxes (ASC 740), the Company recognizes deferred income taxes based on the expected future tax consequences of differences between the financial statement basis and the tax basis of assets and liabilities, calculated using enacted tax rates in effect for the year in which these differences are expected to reverse.

3 unchanged sentences

The Company recognizes accrued interest and penalties related to unrecognized tax benefits in the provision for income taxes.

At March 30, 2024, the Company believes that it has appropriately accounted for any liability for unrecognized tax benefits.

At June 29, 2024, the Company believes that it has appropriately accounted for any liability for unrecognized tax benefits.

To the extent the Company prevails in matters for which a liability for an unrecognized tax benefit is established, the statute of limitations expires for a tax jurisdiction year, or the Company is required to pay amounts in excess of the liability, its effective tax rate in a given financial statement period may be affected.

In December 2021, the Organisation for Economic Co-operation and Development (OECD) released model rules introducing a new 15% global minimum tax for large multinational enterprises with an annual global revenue exceeding 750,000,000 euros (Pillar Two Rules).

Since the release of the Pillar Two Rules, the OECD has issued three tranches of administrative guidance, as well as guidance on transitional safe harbor relief.

Since the release of the Pillar Two Rules, the OECD has issued four tranches of administrative guidance, as well as guidance on transitional safe harbor relief.

Various countries, including the member states of the European Union, have adopted the Pillar Two Rules into their domestic laws, with certain rules coming into effect for fiscal years beginning in 2024.

27 unchanged sentences

Historically, acquisitions have been made at prices above the fair value of identifiable net assets, resulting in goodwill.

Acquisition costs were $ 1,124,000 in the first quarter of 2024 and are included in selling, general, and administrative (SG&A) expenses in the accompanying condensed consolidated statement of income.

The Company expects several synergies in connection with the acquisitions described below, including expansion of product sales into new markets by leveraging its global sales network and relationships, broadening its product portfolio, and strengthening its position in the wood processing and material handling markets.

Acquisition costs were $ 940,000 in the second quarter of 2024 and $ 2,064,000 in the first six months of 2024 and are included in selling, general, and administrative (SG&A) expenses in the accompanying condensed consolidated statement of income.

The Company funded the acquisitions primarily through borrowings under its revolving credit facility.

5 unchanged sentences

Goodwill from the Key Knife acquisition was $ 37,037,000 , of which $ 30,002,000 is expected to be deductible for tax purposes over 15 years.

In addition, intangible assets acquired were $ 94,550,000 , of which $ 79,600,000 is expected to be deductible for tax purposes over 15 years.

In addition, separately identifiable intangible assets acquired were $ 91,620,000 , of which $ 77,300,000 is expected to be deductible for tax purposes over 15 years.

As part of the acquisition, the Company acquired a 45 % interest in two of Key Knife's subsidiaries, increasing its noncontrolling interest liability by $ 9,319,000 based on the income valuation approach.

Under a put and purchase option as outlined in the securities purchase agreement, the seller can demand the Company purchase, or the Company can demand that the seller sell to the Company, the remaining interest in these subsidiaries at any time after December 31, 2027.

The purchase price would be based on a total enterprise value as defined in the original purchase agreement.

Notes to Condensed Consolidated Financial Statements

price would be based on a total enterprise value as defined in the original purchase agreement.

See Other Acquisitions below for additional information.

KWS Manufacturing Company, Ltd.

3 unchanged sentences

KWS is a leading manufacturer of conveying equipment for the bulk material handling industry, with revenue of approximately $ 45,000,000 for the twelve months ended September 30, 2023, and is part of the Company's Material Handling segment.

Goodwill from the KWS acquisition was $ 38,468,000 and intangibles assets were $ 28,600,000 , both of which are expected to be fully deductible for tax purposes over 15 years.

Goodwill from the KWS acquisition was $ 38,717,000 and separately identifiable intangibles assets were $ 28,500,000 , both of which are expected to be fully deductible for tax purposes over 15 years.

Dynamic Sealing Technologies LLC

On May 31, 2024, the Company acquired all of the outstanding equity securities of Dynamic Sealing Technologies LLC and affiliates (collectively, DSTI) for $ 53,661,000 , net of cash acquired and subject to a post-closing adjustment.

DSTI is a leading manufacturer of engineered fluid sealing and transfer solutions for rotating applications, with revenue of approximately $ 25,000,000 for the twelve months ended March 31, 2024, and is part of the Company's Flow Control segment.

Goodwill from the DSTI acquisition was $ 14,498,000 , of which $ 14,169,000 is expected to be deductible for tax purposes over 15 years.

In addition, separately identifiable intangible assets acquired were $ 23,490,000 , all of which are expected to be deductible for tax purposes over 15 years.

Other Acquisitions

On May 2, 2024, the Company acquired a service business in Germany, which is included in the Company's Material Handling segment, for $ 3,281,000 , net of cash acquired and subject to a post-closing adjustment.

On May 6, 2024, the Company acquired the remaining outstanding shares of a Key Knife subsidiary in which the Company previously held a noncontrolling interest for $ 523,000 in cash.

Notes to Condensed Consolidated Financial Statements

Purchase Price Allocation

The following table summarizes the aggregate estimated fair values of the net assets and noncontrolling interests acquired and purchase price for the Key Knife and KWS acquisitions:

The following table summarizes the aggregate estimated fair values of the net assets and noncontrolling interests acquired and purchase price for the 2024 acquisitions:

(In thousands) Total

9 unchanged sentences

Tradenames 9,215

Acquired backlog

Goodwill 92,095

9 unchanged sentences

Purchase Price:

Cash Paid at Closing

Post-closing Adjustments

Estimated Remaining Post-closing Adjustments, Net

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.

For the quarter ended March 30, 2024, the acquisitions had aggregate revenue of $ 24,296,000 and a net operating loss of $ 315,000 from the dates of acquisition, including amortization expense of $ 3,130,000 associated with acquired profit in inventory and backlog.

Measurement period adjustments were not material to the Company's financial position or results of operations in the second quarter of 2024.

The weighted-average amortization period for the definite-lived intangible assets related to the 2024 acquisitions is 17 years, including weighted-average amortization periods of 18 years for customer relationships, 12 years for product technology, and 20 years for tradenames.

Revenue and operating income for the three- and six-month periods ended June 29, 2024 associated with the 2024 acquisitions from their respective acquisition dates, are as follows:

Three Months Ended

Six Months Ended

2024 June 29,

(In thousands)

Revenue $ 27,302 $ 51,598

Operating Income, including acquisition-related costs (a) $ 1,439 $ 1,124

(a) Acquisition-related costs include acquired profit in inventory and backlog amortization expense and acquisition costs.

Notes to Condensed Consolidated Financial Statements

Unaudited Supplemental Pro Forma Information

Had the acquisitions of Key Knife and KWS been completed as of the beginning of 2023, the Company’s pro forma results of operations for the quarters ended March 30, 2024 and April 1, 2023 would have been as follows:

Three Months Ended

2024 April 1,

Had the Key Knife, KWS, and DSTI acquisitions been completed as of the beginning of 2023, the Company’s pro forma results of operations for the three- and six-month periods ended June 29, 2024 and July 1, 2023 would have been as follows:

Three Months Ended Six Months Ended

(In thousands, except per share amounts)

4 unchanged sentences

Diluted $ 2.70 $ 2.38 $ 5.00 $ 4.40

The historical consolidated pro forma financial information of the Company, Key Knife and KWS above has been adjusted to give effect to pro forma events that are (i) directly attributable to the acquisition and related financing arrangements, (ii) expected to have a continuing impact on the Company, and (iii) factually supportable.

The historical consolidated pro forma financial information of the Company, Key Knife, KWS, and DSTI above has been adjusted to give effect to pro forma events that are (i) directly attributable to the acquisition and related financing arrangements, (ii) expected to have a continuing impact on the Company, and (iii) factually supportable.

Pro forma results include the following non-recurring pro forma adjustments:

• Pre-tax charge to cost of revenue of $ 2,331,000 in 2023 and reversal in 2024, for the sale of inventory revalued at the date of acquisition.

• Pre-tax charge to SG&A expenses of $ 1,923,000 in 2023 and reversal in 2024, for acquisition costs and intangible asset amortization related to acquired backlog.

• Pre-tax charge to cost of revenue of $ 998,000 in the three months ended July 1, 2023 and $ 3,564,000 in the six months ended July 1, 2023 and reversal of $ 529,000 in the three months ended June 29, 2024 and $ 2,860,000 in the six months ended June 29, 2024 for the sale of inventory revalued at the date of acquisition.

• Pre-tax charge to SG&A expenses of $ 973,000 in the three months ended July 1, 2023 and $ 2,025,000 in the six months ended July 1, 2023 and reversal of $ 569,000 in the three months ended June 29, 2024 and $ 1,211,000 in the six months ended June 29, 2024 for intangible asset amortization related to acquired backlog.

• Pre-tax charge to SG&A expenses of $ 2,064,000 in the six months ended July 1, 2023 and reversal of $ 940,000 in the three months ended June 29, 2024 and $ 2,064,000 in the six months ended June 29, 2024 for acquisition costs.

• Estimated tax effects related to the pro forma adjustments.

These pro forma results of operations have been prepared for comparative purposes only, and they do not purport to be indicative of the results of operations that would have resulted had the acquisitions occurred as of the beginning of 2023, or that may result in the future.

The Company's pro forma results of operations exclude its other acquisitions in 2024 as the inclusion of its results would not have been materially different from the pro forma results presented above.

Restructuring and Other Costs

Restructuring Costs

2 unchanged sentences

The Company also incurred restructuring costs within its Flow Control segment of $ 366,000 in the fourth quarter of 2023 related to the termination of a contract at one of its operations in Germany.

Notes to Condensed Consolidated Financial Statements

A summary of the changes in accrued restructuring costs included in other current liabilities in the accompanying condensed consolidated balance sheet is as follows:

5 unchanged sentences

Currency translation ( 6 ) ( 10 ) ( 16 )

Balance at March 30, 2024

$ — $ 122 $ 122

The remaining accrued restructuring costs are expected to be paid by the end of the second quarter of 2024.

Notes to Condensed Consolidated Financial Statements

Balance at June 29, 2024

The Company incurred costs of $ 74,000 in the three- and six-month periods ended July 1, 2023 within its Industrial Processing segment related to the write-down of certain fixed assets that were not moved to a new manufacturing facility in China and facility moving costs.

Earnings per Share

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

Three Months Ended

2024 April 1,

Three Months Ended Six Months Ended

2023 June 29,

(In thousands, except per share amounts)

5 unchanged sentences

Diluted Earnings per Share $ 2.66 $ 2.54 $ 4.76 $ 4.94

The effect of outstanding and unvested restricted stock units (RSUs) of the Company’s common stock totaling 33,000 shares in the first quarter of 2024 and 38,000 shares in the first quarter of 2023 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 25,000 shares in the second quarter of 2024, 26,000 shares in the second quarter of 2023, 29,000 in the first six months of 2024 and 32,000 in the first six months of 2023 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 $ 7,854,000 in the first quarter of 2024 and $ 9,763,000 in the first quarter of 2023.

The effective tax rate of 24 % in the first quarter of 2024 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, the cost of repatriating the earnings of certain foreign subsidiaries, and tax expense associated with the Global Intangible Low-Taxed Income provisions.

These items were offset in part by net excess income tax benefits from stock-based compensation arrangements, foreign tax credits, and a tax benefit associated with a foreign exchange loss recognized upon the Company’s repatriation of certain previously taxed foreign earnings.

The effective tax rate of 26 % in the first quarter of 2023 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, offset in part by net excess income tax benefits from stock-based compensation arrangements.

The provision for income taxes was $ 19,846,000 in the first six months of 2024 and $ 20,945,000 in the first six months of 2023.

The effective tax rate of 26 % in the first six months of 2024 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 the cost of repatriating the earnings of certain foreign subsidiaries.

These items were offset in part by foreign tax credits and net excess income tax benefits from stock-based compensation arrangements.

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.

Notes to Condensed Consolidated Financial Statements

Long-Term Obligations

12 unchanged sentences

Revolving Credit Facility

Notes to Condensed Consolidated Financial Statements

$ 400,000,000 , in addition to an uncommitted, unsecured incremental borrowing facility of $ 200,000,000 .

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 .

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 %.

(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), Term CORRA, and RFR, as applicable and defined, plus an applicable margin of 1.0 % to 2.25 %.

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.

During the first quarter of 2024, the Company borrowed an aggregate of $ 234,000,000 under the Credit Agreement, which was primarily used to fund the Company's acquisitions of Key Knife and KWS.

During the first six months of 2024, the Company borrowed an aggregate of $ 295,200,000 under the Credit Agreement, which was primarily used to fund the Company's 2024 acquisitions.

See Note 2 , Acquisitions, for further details.

As of March 30, 2024, the outstanding balance under the Credit Agreement was $ 297,884,000 , which included $ 73,884,000 of euro-denominated borrowings.

The Company had $ 101,664,000 of borrowing capacity available as of March 30, 2024, 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 6.04 % as of March 30, 2024 and 5.24 % as of year-end 2023.

As of June 29, 2024, the outstanding balance under the Credit Agreement was $ 333,322,000 , which included $ 73,322,000 of euro-denominated borrowings.

The Company had $ 66,883,000 of borrowing capacity available as of June 29, 2024, 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 6.30 % as of June 29, 2024 and 5.24 % as of year-end 2023.

Senior Promissory Notes

3 unchanged sentences

The obligations of the Initial Notes may be accelerated upon an event of default as defined in the Note Purchase Agreement, which includes customary events of default under such financing arrangements.

Notes to Condensed Consolidated Financial Statements

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.

1 unchanged sentence

Debt Compliance

As of March 30, 2024, the Company was in compliance with the covenants related to its debt obligations.

As of June 29, 2024, the Company was in compliance with the covenants related to its debt obligations.

Stock-Based Compensation

The Company recognized stock-based compensation expense of $ 2,415,000 in the first quarter of 2024 and $ 2,238,000 in the first quarter of 2023 within SG&A expenses in the accompanying condensed consolidated statement of income.

The Company recognized stock-based compensation expense of $ 2,884,000 in the second quarter of 2024, $ 2,648,000 in the second quarter of 2023, $ 5,299,000 in the first six months of 2024 and $ 4,886,000 in the first six months of 2023 within 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 $ 15,745,000 at March 30, 2024, which will be recognized over a weighted average period of 2.1 years.

Notes to Condensed Consolidated Financial Statements

Unrecognized compensation expense related to stock-based compensation totaled approximately $ 13,840,000 at June 29, 2024, which will be recognized over a weighted average period of 1.9 years.

Non-Employee Director RSUs

On May 15, 2024, the Company granted an aggregate of 3,030 RSUs to its non-employee directors with an aggregate grant date fair value of $ 849,000 , of which 50 % vested on June 1, 2024, 25 % will vest on the last day of the third fiscal quarter of 2024 and the remaining 25 % will vest on the last day of the fourth fiscal quarter of 2024 subject to continued service as a director on the applicable vesting dates.

Performance-based RSUs

11 unchanged sentences

These time-based RSUs vest in three equal annual installments on March 10 of 2025, 2026, and 2027, provided that a recipient is employed by the Company on the applicable vesting dates.

Notes to Condensed Consolidated Financial Statements

Accumulated Other Comprehensive Items

7 unchanged sentences

( 15,338 ) 3 38 ( 15,297 )

Balance at March 30, 2024 $ ( 53,163 ) $ ( 10 ) $ — $ ( 53,173 )

Balance at June 29, 2024 $ ( 58,351 ) $ ( 8 ) $ — $ ( 58,359 )

The Company uses forward currency-exchange contracts that generally have maturities of twelve months or less to hedge exposures resulting from fluctuations in currency exchange rates.

3 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 March 30, 2024 and April 1, 2023.

Notes to Condensed Consolidated Financial Statements

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 June 29, 2024 and July 1, 2023.

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

March 30, 2024 December 30, 2023

June 29, 2024 December 30, 2023

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

11 unchanged sentences

(b) The 2024 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 foreign currency exchange contract designated as a cash flow hedge as of and for the three months ended March 30, 2024:

Notes to Condensed Consolidated Financial Statements

The following table summarizes the activity in AOCI associated with the Company's foreign currency exchange contract designated as a cash flow hedge as of and for the six months ended June 29, 2024:

(In thousands) Total

1 unchanged sentence

Loss recognized in AOCI 38

Unrealized Loss, Net of Tax, at March 30, 2024

Unrealized Loss, Net of Tax, at June 29, 2024

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 March 30, 2024

Fair Value as of June 29, 2024

(In thousands) Level 1 Level 2 Level 3 Total

2 unchanged sentences

Forward currency-exchange contracts $ — $ 25 $ — $ 25

Notes to Condensed Consolidated Financial Statements

Fair Value as of December 30, 2023

5 unchanged sentences

(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 quarter of 2024.

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 2024.

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

2 unchanged sentences

Changes in values of the underlying hedged assets and liabilities or anticipated transactions are not reflected in the table above.

Notes to Condensed Consolidated Financial Statements

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

March 30, 2024 December 30, 2023

June 29, 2024 December 30, 2023

Carrying Value Fair Value Carrying Value Fair Value

14 unchanged sentences

A description of each segment follows:

• Flow Control – Custom-engineered products, systems, and technologies that control the flow of fluids used in industrial and commercial applications to keep critical processes running efficiently in the packaging, tissue, food, metals, and other industrial sectors.

The Company's primary products include rotary sealing devices, steam systems, expansion joints, doctor systems, roll and fabric cleaning devices, and filtration and fiber recovery systems.

4 unchanged sentences

The Company's primary products include conveying and vibratory equipment and balers.

In addition, the Company

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

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

The following table presents financial information for the Company's reportable operating segments and includes the results of Key Knife, acquired on January 1, 2024, within the Industrial Processing segment, and the results of KWS, acquired on January 24, 2024, within the Material Handling segment.

The following tables present financial information for the Company's reportable operating segments and includes the results from the 2024 acquisitions from the date of acquisition.

See Note 2 , Acquisitions, for further details.

Three Months Ended

March 30, April 1,

Three Months Ended Six Months Ended

June 29, July 1, June 29, July 1,

(In thousands) 2024 2023 2024 2023

5 unchanged sentences

Income Before Provision for Income Taxes

Flow Control (a)

$ 23,530 $ 25,821 $ 45,240 $ 50,010

Industrial Processing (a)

Industrial Processing (b)

24,092 16,978 44,091 32,945

Material Handling (b)

Corporate (c)

Material Handling (c)

11,188 10,374 16,729 19,661

Corporate (d)

( 10,409 ) ( 10,095 ) ( 20,732 ) ( 19,424 )

Total operating income 48,401 43,078 85,328 83,192

Interest expense, net (d)

Interest expense, net (e)

( 4,833 ) ( 1,929 ) ( 8,891 ) ( 4,000 )

Other expense, net (d)

Other expense, net (e)

( 2 ) ( 21 ) ( 32 ) ( 42 )

3 unchanged sentences

Industrial Processing

1,851 6,129 4,734 8,708

Material Handling

1,157 1,358 2,663 1,820

Corporate 5 — 13 24

$ 4,974 $ 8,777 $ 11,245 $ 13,246

March 30, December 30,

(In thousands) 2024 2023

6 unchanged sentences

$ 1,456,032 $ 1,175,665

(a) Includes acquisition-related costs of $ 1,890,000 in 2024, including acquisition costs of $ 599,000 and amortization expense associated with acquired profit in inventory of $ 1,291,000 .

(b) Includes acquisition-related costs of $ 2,364,000 in 2024, including acquisition costs of $ 525,000 and amortization expense associated with acquired profit in inventory and backlog of $ 1,839,000 .

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

(a) Includes acquisition-related costs of $ 1,054,000 in the three and six months ended June 29, 2024.

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

(b) Includes acquisition-related costs of $ 383,000 in the three months ended June 29, 2024 and $ 2,273,000 in the six months ended June 29, 2024.

(c) Includes acquisition-related costs of $ 727,000 in the three months ended June 29, 2024 and $ 3,091,000 in the six months ended June 29, 2024.

(d) Represents general and administrative expenses.

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

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 $ 4,524,000 at March 30, 2024 and $ 9,090,000 at December 30, 2023 of banker's acceptance drafts subject to recourse, which were transferred to vendors and had not reached their scheduled maturity dates.

The Company had $ 5,162,000 at June 29, 2024 and $ 9,090,000 at December 30, 2023 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