What changed in this filing

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Item 1. Financial Statements

2024-11-06 compared with 2024-08-07 · 162 added, 130 removed, 625 unchanged (32% of the section changed)

1 unchanged sentence

Condensed Consolidated Balance Sheet

September 28,

2024 December 30,

48 unchanged sentences

Condensed Consolidated Statement of Income

Three Months Ended Six Months Ended

2023 June 29,

Three Months Ended Nine Months Ended

September 28,

2024 September 30,

2023 September 28,

2024 September 30,

(In thousands, except per share amounts)

7 unchanged sentences

— 969 — 1,043

222,627 200,638 661,039 592,257

Operating Income 48,987 43,544 134,315 126,736

17 unchanged sentences

Condensed Consolidated Statement of Comprehensive Income

Three Months Ended Six Months Ended

2023 June 29,

Three Months Ended Nine Months Ended

September 28,

2024 September 30,

2023 September 28,

2024 September 30,

(In thousands)

3 unchanged sentences

Post-retirement liability adjustments, net (net of tax of $ 2 , $ 1 , $ 3 and $( 2 ))

2 ( 2 ) 3 ( 8 )

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

Deferred (loss) gain on cash flow hedges (net of tax of $ — , $( 3 ), $ 13 and $( 35 ))

— ( 9 ) 38 ( 107 )

6 unchanged sentences

Condensed Consolidated Statement of Cash Flows

Six Months Ended

Nine Months Ended

September 28,

2024 September 30,

(In thousands)

44 unchanged sentences

Condensed Consolidated Statement of Stockholders' Equity

Three Months Ended June 29, 2024

Three Months Ended September 28, 2024

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

5 unchanged sentences

Shares Amount Shares Amount

Balance at March 30, 2024

Balance at June 29, 2024

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

3 unchanged sentences

Activity under stock plans — — 2,594 — ( 803 ) 20 — — 2,614

Acquisition of subsidiary shares (Note 2)

— — ( 194 ) — — — — ( 329 ) ( 523 )

Dividend paid to noncontrolling interest

— — — — — — — ( 1,346 ) ( 1,346 )

Other comprehensive items — — — — — — 13,581 66 13,647

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

Balance at September 28, 2024 14,624,159 $ 146 $ 127,486 $ 839,422 2,878,835 $ ( 70,543 ) $ ( 44,778 ) $ 11,053 $ 862,786

Nine Months Ended September 28, 2024

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

16 unchanged sentences

Other comprehensive items — — — — — — ( 1,716 ) ( 20 ) ( 1,736 )

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

Balance at September 28, 2024 14,624,159 $ 146 $ 127,486 $ 839,422 2,878,835 $ ( 70,543 ) $ ( 44,778 ) $ 11,053 $ 862,786

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

Balance at September 30, 2023

$ 146 $ 122,444 $ 739,133 2,917,063 $ ( 71,480 ) $ ( 58,591 ) $ 2,265 $ 733,917

9 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 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.

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 28, 2024, its results of operations, comprehensive income, and stockholders' equity for the three- and nine-month periods ended September 28, 2024 and September 30, 2023, and its cash flows for the nine-month periods ended September 28, 2024 and September 30, 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 six months ended June 29, 2024.

There have been no material changes in the Company’s significant accounting policies during the nine months ended September 28, 2024.

Supplemental Cash Flow Information

Six Months Ended

(In thousands) June 29,

Nine Months Ended

(In thousands) September 28,

2024 September 30,

Cash Paid for Interest $ 15,034 $ 6,341

Cash Paid for Income Taxes, Net of Refunds $ 33,288 $ 34,037

Non-Cash Investing Activities:

Non-Cash Investing Activities (Note 2) :

Fair value of assets acquired (adjusted) $ 360,021 $ ( 270 )

Cash (paid) received for businesses acquired (a)

( 299,892 ) 277

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

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

Notes to Condensed Consolidated Financial Statements

Six Months Ended

(In thousands) June 29,

Fair value of liabilities assumed

Fair value of noncontrolling interest acquired

Fair value of contingent consideration

Purchases of property, plant, and equipment in accounts payable $ 590 $ 749

Notes to Condensed Consolidated Financial Statements

Nine Months Ended

(In thousands) September 28,

2024 September 30,

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) June 29,

(In thousands) September 28,

2024 September 30,

2023 December 30,

4 unchanged sentences

The components of inventories are as follows:

September 28,

2024 December 30,

10 unchanged sentences

Translation Net

June 29, 2024

September 28, 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 $ 146,588,000 .

Intangible assets recorded in connection with the Company's 2024 acquisitions totaled $ 153,895,000 .

See Note 2 , Acquisitions, for further details.

8 unchanged sentences

16,018 36,405 47,808 100,231

Fair value adjustment — ( 22 ) — ( 22 )

Measurement period adjustment for 2023 acquisition — ( 22 ) — ( 22 )

Currency translation 767 ( 680 ) 725 812

Total 2024 activity 16,785 35,703 48,533 101,021

Balance at June 29, 2024

Balance at September 28, 2024

Gross balance 137,567 248,435 192,641 578,643

8 unchanged sentences

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

Six Months Ended

(In thousands) June 29,

Nine Months Ended

(In thousands) September 28,

2024 September 30,

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

11 unchanged sentences

The following table presents revenue by revenue recognition method:

Three Months Ended Six Months Ended

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

Three Months Ended Nine Months Ended

September 28, September 30, September 28, September 30,

(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 Six Months Ended

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

Three Months Ended Nine Months Ended

September 28, September 30, September 28, September 30,

(In thousands) 2024 2023 2024 2023

12 unchanged sentences

The following table presents contract balances from contracts with customers:

September 28,

2024 December 30,

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 $ 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 Company recognized revenue of $ 8,897,000 in the third quarter of 2024 and $ 9,613,000 in the third quarter of 2023, and $ 66,036,000 in the first nine months of 2024 and $ 56,841,000 in the first nine 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 $ 27,262,000 as of June 29, 2024.

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

These drafts, which totaled $ 6,707,000 at September 28, 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 June 29, 2024, the Company believes that it has appropriately accounted for any liability for unrecognized tax benefits.

At September 28, 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.

3 unchanged sentences

Some countries are in the process of drafting legislation for adoption in future years.

While the Pillar

While the Pillar Two Rules serve as a framework for implementing the minimum tax, countries may enact domestic laws that vary slightly from

Notes to Condensed Consolidated Financial Statements

Two Rules serve as a framework for implementing the minimum tax, countries may enact domestic laws that vary slightly from the Pillar Two Rules and may also adjust domestic tax incentives to align with the Pillar Two Rules on different timelines.

The Company is monitoring developments of the Pillar Two Rules and is evaluating the potential impact they may have on the jurisdictions in which it operates.

the Pillar Two Rules and may also adjust domestic tax incentives to align with the Pillar Two Rules on different timelines.

The Company continues to monitor developments of the Pillar Two Rules and evaluate the potential impact they may have on the jurisdictions in which it operates, including eligibility to qualify for transitional safe harbor relief.

The Company does not expect the Pillar Two Rules to have a material impact on its effective tax rate or consolidated financial statements for the fiscal year ending December 28, 2024.

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.

Segment Reporting - Improving Reportable Segment Disclosures (Topic 280).

4 unchanged sentences

This ASU is effective for the Company's fiscal year ending December 28, 2024, and interim periods beginning in fiscal 2025, with early adoption permitted, and requires retrospective application to all prior periods presented in the financial statements.

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

This ASU will result in the Company including the additional disclosures in its consolidated financial statements when adopted.

Income Taxes - Improvements to Income Tax Disclosures (Topic 740) .

5 unchanged sentences

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

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.

Acquisition costs were $ 469,000 in the third quarter of 2024 and $ 2,533,000 in the nine months ended September 28, 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 each segment's markets.

3 unchanged sentences

and certain of its affiliates (collectively, Key Knife) pursuant to a securities purchase agreement dated December 22, 2023, for $ 153,386,000 , net of cash acquired.

The Company paid $ 156,925,000 at closing and $ 2,372,000 as a post-closing adjustment in the second quarter of 2024.

Key Knife is a global supplier of engineered knife systems for custom chipping, planing, and flaking solutions for wood products industries, with revenue of approximately $ 65,000,000 for the twelve months ended September 30, 2023, and is part of the Company's Industrial Processing segment.

3 unchanged sentences

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.

Notes to Condensed Consolidated Financial Statements

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

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

See Other Acquisitions below for additional information.

2 unchanged sentences

(KWS) for $ 81,247,000 , subject to a post-closing adjustment.

The Company paid $ 81,009,000 at closing and assumed a $ 238,000 overdraft.

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.

The Company paid $ 81,009,000 at closing and assumed a $ 238,000 bank overdraft.

Notes to Condensed Consolidated Financial Statements

Handling segment.

Goodwill from the KWS acquisition was $ 38,207,000 and separately identifiable intangibles assets were $ 28,500,000 , both of which are expected to be fully deductible for tax purposes over 15 years.

3 unchanged sentences

Goodwill from the DSTI acquisition was $ 15,580,000 , of which $ 15,251,000 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.

In addition, separately identifiable intangible assets acquired were $ 24,290,000 , all of which are expected to be fully deductible for tax purposes over 15 years.

Other Acquisitions

1 unchanged sentence

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.

On August 21, 2024, the Company acquired a technology company as part of its Material Handling segment.

The total purchase price was approximately $ 11,829,000 , which included cash paid at closing of $ 8,623,000 net of cash acquired, an estimated post-closing adjustment of $ 1,421,000 to be paid within 18 months of closing, and contingent consideration with a fair value of $ 1,785,000 .

The contingent consideration is payable upon the achievement of certain revenue performance targets earned between June 30, 2025 and June 30, 2027.

The maximum future value of the contingent consideration subject to payment is approximately $ 12,068,000 , calculated using the foreign currency spot rate at September 28, 2024.

The valuation of the contingent consideration is dependent on the following assumptions:

the probability of successful achievement of certain revenue targets, forecasted revenue, revenue volatility, and discount rate.

These assumptions were estimated based on a review of historical and projected results.

See Note 10 , Fair Value Measurements and Fair Value of Financial Instruments, for additional information related to the fair value of the contingent consideration assumed in the acquisition.

In August 2024, the Company acquired certain other assets for a total of $ 1,755,000 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 2024 acquisitions:

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

(In thousands) Total

20 unchanged sentences

Purchase Price:

Fair Value of Contingent Consideration ( Note 10)

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.

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

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, which may result in adjustments to the assets and liabilities, including goodwill.

The Company expects purchase price allocation adjustments will relate to the valuation of acquired intangibles, inventory, and deferred income taxes primarily associated with its acquisitions made in the second and third quarters of 2024.

Measurement period adjustments were not material to the Company's financial position or results of operations in the third quarter and first nine months 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 and operating income for the three- and nine-month periods ended September 28, 2024 associated with the 2024 acquisitions from their respective acquisition dates, are as follows:

(In thousands) Three Months Ended September 28, 2024

Nine Months Ended September 28, 2024

Revenue $ 30,477 $ 82,075

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.

Operating Income (a)

$ 1,651 $ 4,258

(a) Includes amortization expense associated with acquired profit in inventory and backlog of $ 1,892,000 in the three months ended September 28, 2024 and $ 6,246,000 in the nine months ended September 28, 2024.

Notes to Condensed Consolidated Financial Statements

Unaudited Supplemental Pro Forma Information

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)

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 nine-month periods ended September 28, 2024 and September 30, 2023 would have been as follows:

Three Months Ended Nine Months Ended

(In thousands, except per share amounts) September 28,

September 30,

September 28,

September 30,

Revenue $ 271,614 $ 278,202 $ 806,946 $ 821,052

3 unchanged sentences

Diluted $ 2.84 $ 2.47 $ 7.84 $ 6.84

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.

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 acquisitions 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 $ 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.

• Pre-tax charge to cost of revenue of $ 1,181,000 in the three months ended September 30, 2023 and $ 4,745,000 in the nine months ended September 30, 2023 and reversal of $ 1,181,000 in the three months ended September 28, 2024 and $ 4,041,000 in the nine months ended September 28, 2024 for the sale of inventory revalued at the date of acquisition.

• Pre-tax charge to SG&A expenses of $ 412,000 in the three months ended September 30, 2023 and $ 2,535,000 in the nine months ended September 30, 2023 and reversal of $ 680,000 in the three months ended September 28, 2024 and $ 1,855,000 in the nine months ended September 28, 2024 for intangible asset amortization related to acquired backlog.

• Pre-tax charge to SG&A expenses of $ 2,533,000 in the nine months ended September 30, 2023 and reversal of $ 469,000 in the three months ended September 28, 2024 and $ 2,533,000 in the nine months ended September 28, 2024 for acquisition costs.

• Estimated tax effects related to the pro forma adjustments.

1 unchanged sentence

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

Relocation Costs

The Company incurred costs of $ 535,000 in the third quarter of 2023 and $ 609,000 in the nine months ended September 30, 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.

Restructuring and Impairment Costs

The Company initiated a restructuring plan within its Flow Control segment in the third quarter of 2023 to consolidate a small manufacturing operation into a larger facility in Germany.

As part of this restructuring plan, the Company incurred restructuring and impairment costs totaling $ 400,000 , including severance costs of $ 335,000 for the termination of 10 employees, facility and other closure costs of $ 29,000 , and asset write-downs of $ 36,000 .

As part of this restructuring plan, the Company incurred restructuring and impairment costs totaling $ 434,000 in the third quarter and nine months ended September 30, 2023, including 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 .

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.

2 unchanged sentences

(In thousands) Severance Costs Contract Termination Costs Total

2023 Restructuring Plans

2023 Restructuring Plan

Balance at December 30, 2023

2 unchanged sentences

Currency translation ( 6 ) ( 10 ) ( 16 )

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.

Balance at September 28, 2024

Earnings per Share

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

Three Months Ended Six Months Ended

2023 June 29,

(In thousands, except per share amounts)

Three Months Ended Nine Months Ended

(In thousands, except per share amounts) September 28,

2024 September 30,

2023 September 28,

2024 September 30,

Net Income Attributable to Kadant $ 31,586 $ 30,864 $ 87,566 $ 88,673

4 unchanged sentences

Diluted Earnings per Share $ 2.68 $ 2.63 $ 7.44 $ 7.57

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.

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 2024, 5,000 shares in the third quarter of 2023, 21,000 in the first nine months of 2024 and 23,000 in the first nine 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 respective reporting periods.

Provision for Income Taxes

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.

The provision for income taxes was $ 31,810,000 in the first nine months of 2024 and $ 31,761,000 in the first nine months of 2023.

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

The effective tax rate of 26 % in the first nine 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

1 unchanged sentence

Long-term obligations are as follows:

September 28,

2024 December 30,

18 unchanged sentences

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

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.

During the first nine months of 2024, the Company borrowed an aggregate of $ 305,211,000 under the Credit Agreement, which was primarily used to fund the Company's 2024 acquisitions.

See Note 2 , Acquisitions, for further details.

As of 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.

As of September 28, 2024, the outstanding balance under the Credit Agreement was $ 314,467,000 , which included $ 76,467,000 of euro-denominated borrowings.

The Company had $ 85,321,000 of borrowing capacity available as of September 28, 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 5.82 % as of September 28, 2024 and 5.24 % as of year-end 2023.

Senior Promissory Notes

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Debt Compliance

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

As of September 28, 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 $ 2,884,000 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 recognized stock-based compensation expense of $ 2,627,000 in the third quarter of 2024, $ 2,357,000 in the third quarter of 2023, $ 7,926,000 in the first nine months of 2024 and $ 7,243,000 in the first nine 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.

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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 $ 13,840,000 at June 29, 2024, which will be recognized over a weighted average period of 1.9 years.

Unrecognized compensation expense related to stock-based compensation totaled approximately $ 11,319,000 at September 28, 2024, which will be recognized over a weighted average period of 1.7 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.

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 % vested on September 28, 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 vesting date.

Performance-based RSUs

21 unchanged sentences

( 1,761 ) 7 38 ( 1,716 )

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

Balance at September 28, 2024 $ ( 44,774 ) $ ( 4 ) $ — $ ( 44,778 )

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.

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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 June 29, 2024 and July 1, 2023.

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 28, 2024 and September 30, 2023.

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

June 29, 2024 December 30, 2023

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

(In thousands)

September 28, 2024 December 30, 2023

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

Derivatives Designated as Hedging Instruments:

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Forward currency-exchange contracts Other Current Assets $ 28 $ 839 $ 8 $ 701

Derivatives in a Liability Position:

Forward currency-exchange contracts

Other Current Liabilities $ ( 25 ) $ 1,693 $ — $ —

(a) See Note 10 , Fair Value Measurements and Fair Value of Financial Instruments, for the fair value measurements relating to these financial instruments.

1 unchanged sentence

Notes to Condensed Consolidated Financial Statements

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

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 nine months ended September 28, 2024:

(In thousands) Total

1 unchanged sentence

Loss recognized in AOCI 38

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

Unrealized Loss, Net of Tax, at September 28, 2024

Fair Value Measurements and Fair Value of Financial Instruments

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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 June 29, 2024

Fair Value as of September 28, 2024

(In thousands) Level 1 Level 2 Level 3 Total

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Forward currency-exchange contracts $ — $ 28 $ — $ 28

Contingent consideration ( Note 2 ) (b)

$ — $ — $ 1,862 $ 1,862

Fair Value as of December 30, 2023

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(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 six months of 2024.

(b) Included in other long-term liabilities 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 nine 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.

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

The Company estimates the fair value of contingent consideration through valuation models that incorporate probability adjusted assumptions and simulations related to the achievement of milestones and the likelihood of making the related payment.

The unobservable inputs used in the fair value measurements include the probability of successful achievement of certain revenue targets, forecasted revenue, revenue volatility, and discount rates.

Projected contingent

Notes to Condensed Consolidated Financial Statements

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

June 29, 2024 December 30, 2023

Carrying Value Fair Value Carrying Value Fair Value

consideration related to revenue-based payments are discounted back to the current period using a discounted cash flow model.

Changes to the fair value of contingent consideration can result from changes to one or multiple inputs, including the discount rate, projected revenue, revenue volatility, and the assumed probabilities of successful achievement of certain revenue targets.

The following table provides a rollforward of the change in the fair value of the contingent consideration as determined by level 3 inputs:

(In thousands)

Balance Measured at Inception ( Note 2 )

Currency translation

Balance at September 28, 2024

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

September 28, 2024 December 30, 2023

(In thousands) Carrying Value Fair Value Carrying Value Fair Value

Debt Obligations:

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Notes to Condensed Consolidated Financial Statements

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.

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

See Note 2 , Acquisitions, for further details.

Three Months Ended Six Months Ended

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

Three Months Ended Nine Months Ended

September 28, September 30, September 28, September 30,

(In thousands) 2024 2023 2024 2023

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( 5,109 ) ( 1,669 ) ( 14,000 ) ( 5,669 )

Other expense, net (e)

Other expense, net

( 16 ) ( 20 ) ( 48 ) ( 62 )

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$ 4,185 $ 8,848 $ 15,430 $ 22,094

September 28,

(In thousands) 2024 2023

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$ 1,489,340 $ 1,175,665

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

(a) Includes acquisition-related costs of $ 1,428,000 in the third quarter of 2024 and $ 2,482,000 in the nine months ended September 28, 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.

Includes restructuring and impairment costs of $ 434,000 in both the third quarter and the nine months ended September 30, 2023.

(b) Includes acquisition-related costs of $ 631,000 in the third quarter of 2024 and $ 2,904,000 in the nine months ended September 28, 2024.

Includes relocation costs of $ 535,000 in the third quarter of 2023 and $ 609,000 in the nine months ended September 30, 2023.

(c) Includes acquisition-related costs of $ 302,000 in the third quarter of 2024 and $ 3,393,000 in the nine months ended September 28, 2024.

(d) Represents general and administrative expenses.

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

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

Notes to Condensed Consolidated Financial Statements

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

The Company had $ 10,476,000 at September 28, 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