QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
(State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) |
Title of each class | Trading Symbol(s) | Name of each exchange on which registered | ||||||||||||
☒ | Accelerated filer | ☐ | ||||||||||||
Non-accelerated filer | ☐ | Smaller reporting company | ||||||||||||
Emerging growth company |
Page | ||||||||
PART I: Financial Information | ||||||||
PART II: Other Information | ||||||||
July 3, 2021 | January 2, 2021 | |||||||||||||
(In thousands, except share and per share amounts) | ||||||||||||||
Assets | ||||||||||||||
Current Assets: | ||||||||||||||
Cash and cash equivalents | $ | $ | ||||||||||||
Restricted cash (Notes 1 and 11) | ||||||||||||||
Accounts receivable, net of allowances of $ | ||||||||||||||
Inventories | ||||||||||||||
Unbilled revenue | ||||||||||||||
Other current assets | ||||||||||||||
Total Current Assets | ||||||||||||||
Property, Plant, and Equipment, net of accumulated depreciation of $ | ||||||||||||||
Other Assets | ||||||||||||||
Intangible Assets, Net | ||||||||||||||
Goodwill | ||||||||||||||
Total Assets | $ | $ | ||||||||||||
Liabilities and Stockholders' Equity | ||||||||||||||
Current Liabilities: | ||||||||||||||
Current maturities of long-term obligations (Note 4) | $ | $ | ||||||||||||
Accounts payable | ||||||||||||||
Accrued payroll and employee benefits | ||||||||||||||
Customer deposits | ||||||||||||||
Advanced billings | ||||||||||||||
Other current liabilities | ||||||||||||||
Total Current Liabilities | ||||||||||||||
Long-Term Obligations (Note 4) | ||||||||||||||
Other Long-Term Liabilities | ||||||||||||||
Commitments and Contingencies (Note 10) | ||||||||||||||
Stockholders' Equity: | ||||||||||||||
Preferred stock, $ | ||||||||||||||
Common stock, $ | ||||||||||||||
Capital in excess of par value | ||||||||||||||
Retained earnings | ||||||||||||||
Treasury stock at cost, | ( | ( | ||||||||||||
Accumulated other comprehensive items (Note 6) | ( | ( | ||||||||||||
Total Kadant Stockholders' Equity | ||||||||||||||
Noncontrolling interest | ||||||||||||||
Total Stockholders' Equity | ||||||||||||||
Total Liabilities and Stockholders' Equity | $ | $ |
Three Months Ended | Six Months Ended | |||||||||||||||||||||||||
July 3, 2021 | June 27, 2020 | July 3, 2021 | June 27, 2020 | |||||||||||||||||||||||
(In thousands, except per share amounts) | ||||||||||||||||||||||||||
Revenue (Notes 1 and 9) | $ | $ | $ | $ | ||||||||||||||||||||||
Costs and Operating Expenses: | ||||||||||||||||||||||||||
Cost of revenue | ||||||||||||||||||||||||||
Selling, general, and administrative expenses | ||||||||||||||||||||||||||
Research and development expenses | ||||||||||||||||||||||||||
Restructuring costs | ||||||||||||||||||||||||||
Operating Income | ||||||||||||||||||||||||||
Interest Income | ||||||||||||||||||||||||||
Interest Expense | ( | ( | ( | ( | ||||||||||||||||||||||
Other Expense, Net | ( | ( | ( | ( | ||||||||||||||||||||||
Income Before Provision for Income Taxes | ||||||||||||||||||||||||||
Provision for Income Taxes (Note 3) | ||||||||||||||||||||||||||
Net Income | ||||||||||||||||||||||||||
Net Income Attributable to Noncontrolling Interest | ( | ( | ( | ( | ||||||||||||||||||||||
Net Income Attributable to Kadant | $ | $ | $ | $ | ||||||||||||||||||||||
Earnings per Share Attributable to Kadant (Note 2) | ||||||||||||||||||||||||||
Basic | $ | $ | $ | $ | ||||||||||||||||||||||
Diluted | $ | $ | $ | $ | ||||||||||||||||||||||
Weighted Average Shares (Note 2) | ||||||||||||||||||||||||||
Basic | ||||||||||||||||||||||||||
Diluted | ||||||||||||||||||||||||||
Three Months Ended | Six Months Ended | |||||||||||||||||||||||||
July 3, 2021 | June 27, 2020 | July 3, 2021 | June 27, 2020 | |||||||||||||||||||||||
(In thousands) | ||||||||||||||||||||||||||
Net Income | $ | $ | $ | $ | ||||||||||||||||||||||
Other Comprehensive Items: | ||||||||||||||||||||||||||
Foreign currency translation adjustment | ( | ( | ||||||||||||||||||||||||
Post-retirement liability adjustments, net (net of tax provision of $ | ( | |||||||||||||||||||||||||
Effect of post-retirement plan settlement | ( | |||||||||||||||||||||||||
Deferred gain (loss) on cash flow hedges (net of tax provision (benefit) of $ | ( | ( | ||||||||||||||||||||||||
Other comprehensive items | ( | ( | ||||||||||||||||||||||||
Comprehensive Income | ||||||||||||||||||||||||||
Comprehensive Income Attributable to Noncontrolling Interest | ( | ( | ( | ( | ||||||||||||||||||||||
Comprehensive Income Attributable to Kadant | $ | $ | $ | $ |
Six Months Ended | ||||||||||||||
July 3, 2021 | June 27, 2020 | |||||||||||||
(In thousands) | ||||||||||||||
Operating Activities | ||||||||||||||
Net income attributable to Kadant | $ | $ | ||||||||||||
Net income attributable to noncontrolling interest | ||||||||||||||
Net income | ||||||||||||||
Adjustments to reconcile net income to net cash provided by operating activities: | ||||||||||||||
Depreciation and amortization | ||||||||||||||
Stock-based compensation expense | ||||||||||||||
(Benefit) provision for losses on accounts receivable | ( | |||||||||||||
Loss on sale of property, plant, and equipment | ||||||||||||||
Other items, net | ( | ( | ||||||||||||
Changes in current assets and liabilities, net of effects of acquisitions: | ||||||||||||||
Accounts receivable | ( | |||||||||||||
Unbilled revenue | ||||||||||||||
Inventories | ( | ( | ||||||||||||
Other current assets | ( | |||||||||||||
Accounts payable | ( | |||||||||||||
Other current liabilities | ( | |||||||||||||
Net cash provided by operating activities | ||||||||||||||
Investing Activities | ||||||||||||||
Acquisitions, net of cash acquired | ( | ( | ||||||||||||
Purchases of property, plant, and equipment | ( | ( | ||||||||||||
Proceeds from sale of property, plant, and equipment | ||||||||||||||
Other | ||||||||||||||
Net cash used in investing activities | ( | ( | ||||||||||||
Financing Activities | ||||||||||||||
Repayment of long-term obligations | ( | ( | ||||||||||||
Proceeds from issuance of long-term obligations (Note 4) | ||||||||||||||
Tax withholding payments related to stock-based compensation | ( | ( | ||||||||||||
Dividends paid | ( | ( | ||||||||||||
Proceeds from issuance of Company common stock | ||||||||||||||
Net cash provided by (used in) financing activities | ( | |||||||||||||
Exchange Rate Effect on Cash, Cash Equivalents, and Restricted Cash | ( | ( | ||||||||||||
Increase (Decrease) in Cash, Cash Equivalents, and Restricted Cash | ( | |||||||||||||
Cash, Cash Equivalents, and Restricted Cash at Beginning of Period | ||||||||||||||
Cash, Cash Equivalents, and Restricted Cash at End of Period | $ | $ |
Three Months Ended July 3, 2021 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
(In thousands, except share and per share amounts) | Common Stock | Capital in Excess of Par Value | Retained Earnings | Treasury Stock | Accumulated Other Comprehensive Items | Noncontrolling Interest | Total Stockholders' Equity | |||||||||||||||||||||||||||||||||||||||||||||||||
Shares | Amount | Shares | Amount | |||||||||||||||||||||||||||||||||||||||||||||||||||||
Balance at April 3, 2021 | $ | $ | $ | $ | ( | $ | ( | $ | $ | |||||||||||||||||||||||||||||||||||||||||||||||
Net income | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||||||||
Dividend declared – Common Stock, $ | — | — | — | ( | — | — | — | — | ( | |||||||||||||||||||||||||||||||||||||||||||||||
Activity under stock plans | — | — | — | ( | — | — | ||||||||||||||||||||||||||||||||||||||||||||||||||
Other comprehensive items | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||||||||
Balance at July 3, 2021 | $ | $ | $ | $ | ( | $ | ( | $ | $ | |||||||||||||||||||||||||||||||||||||||||||||||
Six Months Ended July 3, 2021 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
(In thousands, except share and per share amounts) | Common Stock | Capital in Excess of Par Value | Retained Earnings | Treasury Stock | Accumulated Other Comprehensive Items | Noncontrolling Interest | Total Stockholders' Equity | |||||||||||||||||||||||||||||||||||||||||||||||||
Shares | Amount | Shares | Amount | |||||||||||||||||||||||||||||||||||||||||||||||||||||
Balance at January 2, 2021 | $ | $ | $ | $ | ( | $ | ( | $ | $ | |||||||||||||||||||||||||||||||||||||||||||||||
Net income | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||||||||
Dividends declared – Common Stock, $ | — | — | — | ( | — | — | — | — | ( | |||||||||||||||||||||||||||||||||||||||||||||||
Activity under stock plans | — | — | ( | — | ( | — | — | |||||||||||||||||||||||||||||||||||||||||||||||||
Other comprehensive items | — | — | — | — | — | — | ( | ( | ( | |||||||||||||||||||||||||||||||||||||||||||||||
Balance at July 3, 2021 | $ | $ | $ | $ | ( | $ | ( | $ | $ |
Three Months Ended June 27, 2020 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
(In thousands, except share and per share amounts) | Common Stock | Capital in Excess of Par Value | Retained Earnings | Treasury Stock | Accumulated Other Comprehensive Items | Noncontrolling Interest | Total Stockholders' Equity | |||||||||||||||||||||||||||||||||||||||||||||||||
Shares | Amount | Shares | Amount | |||||||||||||||||||||||||||||||||||||||||||||||||||||
Balance at March 28, 2020 | $ | $ | $ | $ | ( | $ | ( | $ | $ | |||||||||||||||||||||||||||||||||||||||||||||||
Net income | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||||||||
Dividend declared – Common Stock, $ | — | — | — | ( | — | — | — | — | ( | |||||||||||||||||||||||||||||||||||||||||||||||
Activity under stock plans | — | — | — | ( | — | — | ||||||||||||||||||||||||||||||||||||||||||||||||||
Other comprehensive items | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||||||||
Balance at June 27, 2020 | $ | $ | $ | $ | ( | $ | ( | $ | $ | |||||||||||||||||||||||||||||||||||||||||||||||
Six Months Ended June 27, 2020 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
(In thousands, except share and per share amounts) | Common Stock | Capital in Excess of Par Value | Retained Earnings | Treasury Stock | Accumulated Other Comprehensive Items | Noncontrolling Interest | Total Stockholders' Equity | |||||||||||||||||||||||||||||||||||||||||||||||||
Shares | Amount | Shares | Amount | |||||||||||||||||||||||||||||||||||||||||||||||||||||
Balance at December 28, 2019 | $ | $ | $ | $ | ( | $ | ( | $ | $ | |||||||||||||||||||||||||||||||||||||||||||||||
Net income | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||||||||
Dividends declared – Common Stock, $ | — | — | — | ( | — | — | — | — | ( | |||||||||||||||||||||||||||||||||||||||||||||||
Activity under stock plans | — | — | — | ( | — | — | ||||||||||||||||||||||||||||||||||||||||||||||||||
Other comprehensive items | — | — | — | — | — | — | ( | ( | ||||||||||||||||||||||||||||||||||||||||||||||||
Balance at June 27, 2020 | $ | $ | $ | $ | ( | $ | ( | $ | $ |
Six Months Ended | ||||||||||||||
(In thousands) | July 3, 2021 | June 27, 2020 | ||||||||||||
Cash Paid for Interest | $ | $ | ||||||||||||
Cash Paid for Income Taxes, Net of Refunds | $ | $ | ||||||||||||
Non-Cash Investing Activities: | ||||||||||||||
Fair value of assets acquired | $ | $ | ||||||||||||
Cash paid for acquired businesses | ( | ( | ||||||||||||
Liabilities Assumed of Acquired Businesses | $ | $ | ||||||||||||
Purchases of property, plant, and equipment in accounts payable | $ | $ | ||||||||||||
Non-Cash Financing Activities: | ||||||||||||||
Issuance of Company common stock upon vesting of restricted stock units | $ | $ | ||||||||||||
Dividends declared but unpaid | $ | $ |
(In thousands) | July 3, 2021 | June 27, 2020 | January 2, 2021 | December 28, 2019 | ||||||||||||||||||||||
Cash and cash equivalents | $ | $ | $ | $ | ||||||||||||||||||||||
Restricted cash | ||||||||||||||||||||||||||
Total Cash, Cash Equivalents, and Restricted Cash | $ | $ | $ | $ |
July 3, 2021 | January 2, 2021 | |||||||||||||
(In thousands) | ||||||||||||||
Raw Materials | $ | $ | ||||||||||||
Work in Process | ||||||||||||||
Finished Goods | ||||||||||||||
$ | $ |
(In thousands) | Gross | Accumulated Amortization | Currency Translation | Net | ||||||||||||||||||||||
July 3, 2021 | ||||||||||||||||||||||||||
Definite-Lived | ||||||||||||||||||||||||||
Customer relationships | $ | $ | ( | $ | ( | $ | ||||||||||||||||||||
Product technology | ( | ( | ||||||||||||||||||||||||
Tradenames | ( | ( | ||||||||||||||||||||||||
Other | ( | ( | ||||||||||||||||||||||||
( | ( | |||||||||||||||||||||||||
Indefinite-Lived | ||||||||||||||||||||||||||
Tradenames | — | |||||||||||||||||||||||||
Acquired Intangible Assets | $ | $ | ( | $ | ( | $ | ||||||||||||||||||||
January 2, 2021 | ||||||||||||||||||||||||||
Definite-Lived | ||||||||||||||||||||||||||
Customer relationships | $ | $ | ( | $ | ( | $ | ||||||||||||||||||||
Product technology | ( | ( | ||||||||||||||||||||||||
Tradenames | ( | ( | ||||||||||||||||||||||||
Other | ( | ( | ||||||||||||||||||||||||
( | ( | |||||||||||||||||||||||||
Indefinite-Lived | ||||||||||||||||||||||||||
Tradenames | — | |||||||||||||||||||||||||
Acquired Intangible Assets | $ | $ | ( | $ | ( | $ |
(In thousands) | Flow Control | Industrial Processing | Material Handling | Total | ||||||||||||||||||||||
Balance at January 2, 2021 | ||||||||||||||||||||||||||
Gross balance | $ | $ | $ | $ | ||||||||||||||||||||||
Accumulated impairment losses | ( | ( | ||||||||||||||||||||||||
Net balance | ||||||||||||||||||||||||||
2021 Adjustments | ||||||||||||||||||||||||||
Currency translation | ( | ( | ( | |||||||||||||||||||||||
Acquisition | ||||||||||||||||||||||||||
Total 2021 adjustments | ( | ( | ( | |||||||||||||||||||||||
Balance at July 3, 2021 | ||||||||||||||||||||||||||
Gross balance | ||||||||||||||||||||||||||
Accumulated impairment losses | ( | ( | ||||||||||||||||||||||||
Net balance | $ | $ | $ | $ | ||||||||||||||||||||||
Six Months Ended | ||||||||||||||
(In thousands) | July 3, 2021 | June 27, 2020 | ||||||||||||
Balance at Beginning of Year | $ | $ | ||||||||||||
Provision charged to expense | ||||||||||||||
Usage | ( | ( | ||||||||||||
Currency translation | ( | ( | ||||||||||||
Balance at End of Period | $ | $ |
Three Months Ended | Six Months Ended | |||||||||||||||||||||||||
July 3, | June 27, | July 3, | June 27, | |||||||||||||||||||||||
(In thousands) | 2021 | 2020 | 2021 | 2020 | ||||||||||||||||||||||
Point in Time | $ | $ | $ | $ | ||||||||||||||||||||||
Over Time | ||||||||||||||||||||||||||
$ | $ | $ | $ |
Three Months Ended | Six Months Ended | |||||||||||||||||||||||||
July 3, | June 27, | July 3, | June 27, | |||||||||||||||||||||||
(In thousands) | 2021 | 2020 | 2021 | 2020 | ||||||||||||||||||||||
Revenue by Product Type: | ||||||||||||||||||||||||||
Parts and Consumables | $ | $ | $ | $ | ||||||||||||||||||||||
Capital | ||||||||||||||||||||||||||
$ | $ | $ | $ | |||||||||||||||||||||||
Revenue by Geography (based on customer location): | ||||||||||||||||||||||||||
North America | $ | $ | ||||||||||||||||||||||||
Europe | ||||||||||||||||||||||||||
Asia | ||||||||||||||||||||||||||
Rest of World | ||||||||||||||||||||||||||
$ | $ | $ | $ |
July 3, 2021 | January 2, 2021 | |||||||||||||
(In thousands) | ||||||||||||||
Accounts Receivable | $ | $ | ||||||||||||
Contract Assets | $ | $ | ||||||||||||
Contract Liabilities | $ | $ |
Three Months Ended | Six Months Ended | |||||||||||||||||||||||||
July 3, 2021 | June 27, 2020 | July 3, 2021 | June 27, 2020 | |||||||||||||||||||||||
(In thousands, except per share amounts) | ||||||||||||||||||||||||||
Net Income Attributable to Kadant | $ | $ | $ | $ | ||||||||||||||||||||||
Basic Weighted Average Shares | ||||||||||||||||||||||||||
Effect of Stock Options, Restricted Stock Units and Employee Stock Purchase Plan Shares | ||||||||||||||||||||||||||
Diluted Weighted Average Shares | ||||||||||||||||||||||||||
Basic Earnings per Share | $ | $ | $ | $ | ||||||||||||||||||||||
Diluted Earnings per Share | $ | $ | $ | $ |
July 3, 2021 | January 2, 2021 | |||||||||||||
(In thousands) | ||||||||||||||
Revolving Credit Facility, due 2023 | $ | $ | ||||||||||||
Senior Promissory Notes, due 2023 to 2028 | ||||||||||||||
Finance Leases, due 2021 to 2025 | ||||||||||||||
Other Borrowings, due 2021 to 2023 | ||||||||||||||
Total | ||||||||||||||
Less: Current Maturities of Long-Term Obligations | ( | ( | ||||||||||||
Long-Term Obligations | $ | $ |
(In thousands) | Foreign Currency Translation Adjustment | Post-Retirement Benefit Liability Adjustments | Deferred Loss on Cash Flow Hedges | Total | ||||||||||||||||||||||
Balance at January 2, 2021 | $ | ( | $ | ( | $ | ( | $ | ( | ||||||||||||||||||
Other comprehensive items before reclassifications | ( | ( | ||||||||||||||||||||||||
Reclassifications from AOCI | ||||||||||||||||||||||||||
Net current period other comprehensive items | ( | ( | ||||||||||||||||||||||||
Balance at July 3, 2021 | $ | ( | $ | ( | $ | ( | $ | ( | ||||||||||||||||||
Three Months Ended | Six Months Ended | |||||||||||||||||||||||||||||||
(In thousands) | July 3, 2021 | June 27, 2020 | July 3, 2021 | June 27, 2020 | Statement of Income Line Item | |||||||||||||||||||||||||||
Post-retirement Benefit Plans | ||||||||||||||||||||||||||||||||
Recognized net actuarial loss | $ | ( | $ | ( | $ | ( | $ | ( | Other expense, net | |||||||||||||||||||||||
Amortization of prior service cost | ( | ( | ( | ( | Other expense, net | |||||||||||||||||||||||||||
Total expense before income taxes | ( | ( | ( | ( | ||||||||||||||||||||||||||||
Income tax benefit | Provision for income taxes | |||||||||||||||||||||||||||||||
( | ( | ( | ||||||||||||||||||||||||||||||
Cash Flow Hedges (a) | ||||||||||||||||||||||||||||||||
Interest rate swap agreements | ( | ( | ( | ( | Interest expense | |||||||||||||||||||||||||||
Forward currency-exchange contracts | ( | Cost of revenue | ||||||||||||||||||||||||||||||
Total expense before income taxes | ( | ( | ( | ( | ||||||||||||||||||||||||||||
Income tax benefit | Provision for income taxes | |||||||||||||||||||||||||||||||
( | ( | ( | ( | |||||||||||||||||||||||||||||
Total Reclassifications | $ | ( | $ | ( | $ | ( | $ | ( |
July 3, 2021 | January 2, 2021 | |||||||||||||||||||||||||||||||
Balance Sheet Location | Asset (Liability) (a) | Notional Amount (b) | Asset (Liability) (a) | Notional Amount | ||||||||||||||||||||||||||||
(In thousands) | ||||||||||||||||||||||||||||||||
Derivatives Designated as Hedging Instruments: | ||||||||||||||||||||||||||||||||
Derivatives in an Asset Position: | ||||||||||||||||||||||||||||||||
Forward currency-exchange contract | Other Current Assets | $ | $ | $ | $ | |||||||||||||||||||||||||||
Derivatives in a Liability Position: | ||||||||||||||||||||||||||||||||
Forward currency-exchange contract | Other Current Liabilities | $ | ( | $ | $ | $ | ||||||||||||||||||||||||||
2018 Swap Agreement | Other Long-Term Liabilities | $ | ( | $ | $ | ( | $ | |||||||||||||||||||||||||
Derivatives Not Designated as Hedging Instruments: | ||||||||||||||||||||||||||||||||
Derivatives in an Asset Position: | ||||||||||||||||||||||||||||||||
Forward currency-exchange contracts | Other Current Assets | $ | $ | $ | $ | |||||||||||||||||||||||||||
Derivatives in a Liability Position: | ||||||||||||||||||||||||||||||||
Forward currency-exchange contracts | Other Current Liabilities | $ | $ | $ | ( | $ |
(In thousands) | Interest Rate Swap Agreement | Forward Currency- Exchange Contract | Total | |||||||||||||||||
Unrealized (Loss) Gain, Net of Tax, at January 2, 2021 | $ | ( | $ | $ | ( | |||||||||||||||
Loss reclassified to earnings (a) | ||||||||||||||||||||
Gain (loss) recognized in AOCI | ( | |||||||||||||||||||
Unrealized Loss, Net of Tax, at July 3, 2021 | $ | ( | $ | ( | $ | ( |
Fair Value as of July 3, 2021 | ||||||||||||||||||||||||||
(In thousands) | Level 1 | Level 2 | Level 3 | Total | ||||||||||||||||||||||
Assets: | ||||||||||||||||||||||||||
Money market funds and time deposits | $ | $ | $ | $ | ||||||||||||||||||||||
Banker's acceptance drafts (a) | $ | $ | $ | $ | ||||||||||||||||||||||
Liabilities: | ||||||||||||||||||||||||||
2018 Swap Agreement | $ | $ | $ | $ | ||||||||||||||||||||||
Forward currency-exchange contract | $ | $ | $ | $ |
Fair Value as of January 2, 2021 | ||||||||||||||||||||||||||
(In thousands) | Level 1 | Level 2 | Level 3 | Total | ||||||||||||||||||||||
Assets: | ||||||||||||||||||||||||||
Money market funds and time deposits | $ | $ | $ | $ | ||||||||||||||||||||||
Banker's acceptance drafts (a) | $ | $ | $ | $ | ||||||||||||||||||||||
Forward currency-exchange contracts | $ | $ | $ | $ | ||||||||||||||||||||||
Liabilities: | ||||||||||||||||||||||||||
2018 Swap Agreement | $ | $ | $ | $ | ||||||||||||||||||||||
Forward currency-exchange contracts | $ | $ | $ | $ |
July 3, 2021 | January 2, 2021 | |||||||||||||||||||||||||
Carrying Value | Fair Value | Carrying Value | Fair Value | |||||||||||||||||||||||
(In thousands) | ||||||||||||||||||||||||||
Debt Obligations: | ||||||||||||||||||||||||||
Revolving credit facility | $ | $ | $ | $ | ||||||||||||||||||||||
Senior promissory notes | ||||||||||||||||||||||||||
$ | $ | $ | $ |
Three Months Ended | Six Months Ended | |||||||||||||||||||||||||
July 3, | June 27, | July 3, | June 27, | |||||||||||||||||||||||
(In thousands) | 2021 | 2020 | 2021 | 2020 | ||||||||||||||||||||||
Revenue | ||||||||||||||||||||||||||
Flow Control | $ | $ | $ | $ | ||||||||||||||||||||||
Industrial Processing | ||||||||||||||||||||||||||
Material Handling | ||||||||||||||||||||||||||
$ | $ | $ | $ | |||||||||||||||||||||||
Income Before Provision for Income Taxes | ||||||||||||||||||||||||||
Flow Control (a) | $ | $ | $ | $ | ||||||||||||||||||||||
Industrial Processing (b) | ||||||||||||||||||||||||||
Material Handling | ||||||||||||||||||||||||||
Corporate (c) | ( | ( | ( | ( | ||||||||||||||||||||||
Total operating income | ||||||||||||||||||||||||||
Interest expense, net (d) | ( | ( | ( | ( | ||||||||||||||||||||||
Other expense, net (d) | ( | ( | ( | ( | ||||||||||||||||||||||
$ | $ | $ | $ | |||||||||||||||||||||||
Capital Expenditures | ||||||||||||||||||||||||||
Flow Control | $ | $ | $ | $ | ||||||||||||||||||||||
Industrial Processing | ||||||||||||||||||||||||||
Material Handling | ||||||||||||||||||||||||||
Corporate | ||||||||||||||||||||||||||
$ | $ | $ | $ | |||||||||||||||||||||||
Three Months Ended | Six Months Ended | |||||||||||||||||||||||||
July 3, 2021 | June 27, 2020 | July 3, 2021 | June 27, 2020 | |||||||||||||||||||||||
(In thousands, except per share amounts) | ||||||||||||||||||||||||||
Revenue | $ | $ | $ | $ | ||||||||||||||||||||||
Net Income Attributable to Kadant | $ | $ | $ | $ | ||||||||||||||||||||||
Earnings per Share Attributable to Kadant | ||||||||||||||||||||||||||
Basic | $ | $ | $ | $ | ||||||||||||||||||||||
Diluted | $ | $ | $ | $ |
(Non-GAAP) | ||||||||||||||||||||||||||||||||||||||||||||
Three Months Ended | Currency Translation | Change in Organic Revenue | ||||||||||||||||||||||||||||||||||||||||||
(In thousands, except percentages) | July 3, 2021 | June 27, 2020 | Total Increase | % Change | Increase | % Change | ||||||||||||||||||||||||||||||||||||||
Flow Control | $ | 70,762 | $ | 51,365 | $ | 19,397 | 38 | % | $ | 3,787 | $ | 15,610 | 30 | % | ||||||||||||||||||||||||||||||
Industrial Processing | 82,681 | 65,673 | 17,008 | 26 | % | 6,213 | 10,795 | 16 | % | |||||||||||||||||||||||||||||||||||
Material Handling | 42,368 | 35,822 | 6,546 | 18 | % | 1,574 | 4,972 | 14 | % | |||||||||||||||||||||||||||||||||||
Consolidated Revenue | $ | 195,811 | $ | 152,860 | $ | 42,951 | 28 | % | $ | 11,574 | $ | 31,377 | 21 | % |
Three Months Ended | Basis Point Change | ||||||||||||||||||||||
July 3, 2021 | June 27, 2020 | ||||||||||||||||||||||
Flow Control | 52.8% | 53.5% | (70) | bps | |||||||||||||||||||
Industrial Processing | 40.1% | 40.9% | (80) | bps | |||||||||||||||||||
Material Handling | 34.9% | 33.8% | 110 | bps | |||||||||||||||||||
Consolidated Gross Profit Margin | 43.6% | 43.5% | 10 | bps |
Three Months Ended | ||||||||||||||||||||||||||||||||||||||
(In thousands, except percentages) | July 3, 2021 | % of Revenue | June 27, 2020 | % of Revenue | Increase (Decrease) | % Change | ||||||||||||||||||||||||||||||||
Flow Control | $ | 17,064 | 24 | % | $ | 15,798 | 31 | % | $ | 1,266 | 8% | |||||||||||||||||||||||||||
Industrial Processing | 14,367 | 17 | % | 14,920 | 23 | % | (553) | (4)% | ||||||||||||||||||||||||||||||
Material Handling | 8,682 | 20 | % | 8,094 | 23 | % | 588 | 7% | ||||||||||||||||||||||||||||||
Corporate | 9,154 | N/A | 6,261 | N/A | 2,893 | 46% | ||||||||||||||||||||||||||||||||
Consolidated SG&A Expenses | $ | 49,267 | 25 | % | $ | 45,073 | 29 | % | $ | 4,194 | 9% |
(Non-GAAP) | ||||||||||||||||||||||||||||||||||||||||||||||||||
Six Months Ended | Currency Translation | Acquisition | Change in Organic Revenue | |||||||||||||||||||||||||||||||||||||||||||||||
(In thousands, except percentages) | July 3, 2021 | June 27, 2020 | Total Increase | % Change | Increase | % Change | ||||||||||||||||||||||||||||||||||||||||||||
Flow Control | $ | 134,516 | $ | 108,514 | $ | 26,002 | 24 | % | $ | 5,417 | $ | — | $ | 20,585 | 19 | % | ||||||||||||||||||||||||||||||||||
Industrial Processing | 151,835 | 130,382 | 21,453 | 16 | % | 9,240 | 509 | 11,704 | 9 | % | ||||||||||||||||||||||||||||||||||||||||
Material Handling | 81,923 | 73,091 | 8,832 | 12 | % | 2,929 | — | 5,903 | 8 | % | ||||||||||||||||||||||||||||||||||||||||
Consolidated Revenue | $ | 368,274 | $ | 311,987 | $ | 56,287 | 18 | % | $ | 17,586 | $ | 509 | $ | 38,192 | 12 | % |
Six Months Ended | Basis Point Change | ||||||||||||||||||||||
July 3, 2021 | June 27, 2020 | ||||||||||||||||||||||
Flow Control | 53.0% | 53.2% | (20) | bps | |||||||||||||||||||
Industrial Processing | 40.3% | 39.7% | 60 | bps | |||||||||||||||||||
Material Handling | 34.8% | 34.7% | 10 | bps | |||||||||||||||||||
Consolidated Gross Profit Margin | 43.7% | 43.2% | 50 | bps |
Six Months Ended | ||||||||||||||||||||||||||||||||||||||
(In thousands, except percentages) | July 3, 2021 | % of Revenue | June 27, 2020 | % of Revenue | Increase | % Change | ||||||||||||||||||||||||||||||||
Flow Control | $ | 34,568 | 26 | % | $ | 31,740 | 29 | % | $ | 2,828 | 9% | |||||||||||||||||||||||||||
Industrial Processing | 30,030 | 20 | % | 28,740 | 22 | % | 1,290 | 4% | ||||||||||||||||||||||||||||||
Material Handling | 17,468 | 21 | % | 16,775 | 23 | % | 693 | 4% | ||||||||||||||||||||||||||||||
Corporate | 16,632 | N/A | 13,410 | N/A | 3,222 | 24% | ||||||||||||||||||||||||||||||||
Consolidated SG&A Expenses | $ | 98,698 | 27 | % | $ | 90,665 | 29 | % | $ | 8,033 | 9% |
Six Months Ended | ||||||||||||||
(In thousands) | July 3, 2021 | June 27, 2020 | ||||||||||||
Net Cash Provided by Operating Activities | $ | 63,478 | $ | 28,208 | ||||||||||
Net Cash Used in Investing Activities | (3,869) | (10,652) | ||||||||||||
Net Cash Provided by (Used in) Financing Activities | 32,698 | (23,414) | ||||||||||||
Exchange Rate Effect on Cash, Cash Equivalents, and Restricted Cash | (803) | (1,466) | ||||||||||||
Increase (Decrease) in Cash, Cash Equivalents, and Restricted Cash | $ | 91,504 | $ | (7,324) |
Exhibit Number | ||||||||
Description of Exhibit | ||||||||
10.1 | ||||||||
10.2 | ||||||||
31.1 | ||||||||
31.2 | ||||||||
32 | ||||||||
101.INS | Inline XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document. | |||||||
101.SCH | Inline XBRL Taxonomy Extension Schema Document. | |||||||
101.CAL | Inline XBRL Taxonomy Extension Calculation Linkbase Document. | |||||||
101.DEF | Inline XBRL Taxonomy Extension Definition Linkbase Document. | |||||||
101.LAB | Inline XBRL Taxonomy Extension Label Linkbase Document. | |||||||
101.PRE | Inline XBRL Taxonomy Extension Presentation Linkbase Document. | |||||||
104 | Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101). |
KADANT INC. | |||||
Date: August 11, 2021 | /s/ Michael J. McKenney | ||||
Michael J. McKenney | |||||
Executive Vice President and Chief Financial Officer | |||||
(Principal Financial Officer) |
Date: August 11, 2021 | /s/ Jeffrey L. Powell | ||||
Jeffrey L. Powell | |||||
President and Chief Executive Officer |
Date: August 11, 2021 | /s/ Michael J. McKenney | ||||
Michael J. McKenney | |||||
Executive Vice President and Chief Financial Officer |
Dated: August 11, 2021 | /s/ Jeffrey L. Powell | ||||
Jeffrey L. Powell | |||||
President and Chief Executive Officer | |||||
/s/ Michael J. McKenney | |||||
Michael J. McKenney | |||||
Executive Vice President and Chief Financial Officer |
Condensed Consolidated Balance Sheet (Unaudited) (Parenthetical) - USD ($) $ in Thousands |
Jul. 03, 2021 |
Jan. 02, 2021 |
---|---|---|
Stockholders' Equity: | ||
Allowance for credit losses | $ 2,654 | $ 2,977 |
Accumulated depreciation | $ 112,428 | $ 107,832 |
Preferred stock, par value (in dollars per share) | $ 0.01 | $ 0.01 |
Preferred stock, authorized (in shares) | 5,000,000 | 5,000,000 |
Preferred stock, issued (in shares) | 0 | 0 |
Common stock, par value (in dollars per share) | $ 0.01 | $ 0.01 |
Common stock, authorized (in shares) | 150,000,000 | 150,000,000 |
Common stock, issued (in shares) | 14,624,159 | 14,624,159 |
Treasury stock (in shares) | 3,043,854 | 3,081,919 |
Condensed Consolidated Statement of Income (Unaudited) - USD ($) shares in Thousands, $ in Thousands |
3 Months Ended | 6 Months Ended | ||
---|---|---|---|---|
Jul. 03, 2021 |
Jun. 27, 2020 |
Jul. 03, 2021 |
Jun. 27, 2020 |
|
Income Statement [Abstract] | ||||
Revenue (Notes 1 and 9) | $ 195,811 | $ 152,860 | $ 368,274 | $ 311,987 |
Costs and Operating Expenses: | ||||
Cost of revenue | 110,493 | 86,412 | 207,241 | 177,216 |
Selling, general, and administrative expenses | 49,267 | 45,073 | 98,698 | 90,665 |
Research and development expenses | 3,041 | 2,798 | 5,898 | 5,874 |
Restructuring costs | 0 | 456 | 0 | 456 |
Total Costs and Operating Expenses | 162,801 | 134,739 | 311,837 | 274,211 |
Operating Income | 33,010 | 18,121 | 56,437 | 37,776 |
Interest Income | 56 | 37 | 121 | 88 |
Interest Expense | (1,066) | (1,931) | (2,177) | (4,390) |
Other Expense, Net | (24) | (31) | (48) | (63) |
Income Before Provision for Income Taxes | 31,976 | 16,196 | 54,333 | 33,411 |
Provision for Income Taxes (Note 3) | 8,949 | 4,474 | 14,510 | 9,033 |
Net Income | 23,027 | 11,722 | 39,823 | 24,378 |
Net Income Attributable to Noncontrolling Interest | (163) | (115) | (398) | (240) |
Net Income Attributable to Kadant | $ 22,864 | $ 11,607 | $ 39,425 | $ 24,138 |
Earnings per Share Attributable to Kadant (Note 2) | ||||
Basic (in dollars per share) | $ 1.97 | $ 1.01 | $ 3.41 | $ 2.11 |
Diluted (in dollars per share) | $ 1.96 | $ 1.00 | $ 3.39 | $ 2.09 |
Weighted Average Shares (Note 2) | ||||
Basic (in shares) | 11,579 | 11,482 | 11,566 | 11,457 |
Diluted (in shares) | 11,650 | 11,552 | 11,631 | 11,530 |
Condensed Consolidated Statement of Comprehensive Income (Unaudited) - USD ($) $ in Thousands |
3 Months Ended | 6 Months Ended | ||
---|---|---|---|---|
Jul. 03, 2021 |
Jun. 27, 2020 |
Jul. 03, 2021 |
Jun. 27, 2020 |
|
Statement of Comprehensive Income [Abstract] | ||||
Net Income | $ 23,027 | $ 11,722 | $ 39,823 | $ 24,378 |
Other Comprehensive Items: | ||||
Foreign currency translation adjustment | 4,089 | 4,742 | (661) | (7,832) |
Post-retirement liability adjustments, net (net of tax provision of $2, $0, $12 and $20) | 5 | (2) | 33 | 48 |
Effect of post-retirement plan settlement | 0 | 0 | 0 | (119) |
Deferred gain (loss) on cash flow hedges (net of tax provision (benefit) of $21, $(3), $40 and $(122)) | 65 | (24) | 178 | (326) |
Other comprehensive items | 4,159 | 4,716 | (450) | (8,229) |
Comprehensive Income | 27,186 | 16,438 | 39,373 | 16,149 |
Comprehensive Income Attributable to Noncontrolling Interest | (171) | (140) | (345) | (254) |
Comprehensive Income Attributable to Kadant | $ 27,015 | $ 16,298 | $ 39,028 | $ 15,895 |
Condensed Consolidated Statement of Comprehensive Income (Unaudited) (Parenthetical) - USD ($) $ in Thousands |
3 Months Ended | 6 Months Ended | ||
---|---|---|---|---|
Jul. 03, 2021 |
Jun. 27, 2020 |
Jul. 03, 2021 |
Jun. 27, 2020 |
|
Other Comprehensive Items: | ||||
Post-retirement liability adjustments, net, tax | $ 2 | $ 0 | $ 12 | $ 20 |
Deferred gain (loss) on cash flow hedges, tax | $ 21 | $ (3) | $ 40 | $ (122) |
Condensed Consolidated Statement of Stockholders' Equity (Unaudited) - Parenthetical - $ / shares |
3 Months Ended | 6 Months Ended | ||
---|---|---|---|---|
Jul. 03, 2021 |
Jun. 27, 2020 |
Jul. 03, 2021 |
Jun. 27, 2020 |
|
Statement of Stockholders' Equity [Abstract] | ||||
Dividend declared – Common Stock (in dollars per share) | $ 0.25 | $ 0.24 | $ 0.50 | $ 0.48 |
Nature of Operations and Summary of Significant Accounting Policies |
6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Accounting Policies [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Nature of Operations and Summary of Significant Accounting Policies | Nature of Operations and Summary of Significant Accounting Policies Nature of Operations Kadant Inc. was incorporated in Delaware in November 1991 and trades on the New York Stock Exchange under the ticker symbol "KAI." Kadant Inc. (together with its subsidiaries, the Company) is a global supplier of high-value, critical components and engineered systems used in process industries worldwide. Its products, technologies, and services play an integral role in enhancing process efficiency, optimizing energy utilization, and maximizing productivity in resource-intensive industries. 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 3, 2021, its results of operations, comprehensive income, and stockholders' equity for the three- and six-month periods ended July 3, 2021 and June 27, 2020 and its cash flows for the six-month periods ended July 3, 2021 and June 27, 2020. Interim results are not necessarily indicative of results for a full year or for any other interim period. The condensed consolidated balance sheet presented as of January 2, 2021 has been derived from the consolidated financial statements contained in the Company's Annual Report on Form 10-K for the fiscal year ended January 2, 2021. The condensed consolidated financial statements and related notes are presented as permitted by the rules and regulations of the Securities and Exchange Commission (SEC) for Form 10-Q and do not contain certain information included in the annual consolidated financial statements and related notes of the Company. The condensed consolidated financial statements and notes included herein should be read in conjunction with the consolidated financial statements and related notes included in the Company's Annual Report on Form 10-K for the fiscal year ended January 2, 2021, filed with the SEC. Use of Estimates and Critical Accounting Policies The preparation of financial statements in conformity with U.S. generally accepted accounting principles (GAAP) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenue and expenses during the reporting period. Although the Company makes every effort to ensure the accuracy of the estimates and assumptions used in the preparation of its condensed consolidated financial statements or in the application of accounting policies, if business conditions were different, or if the Company were to use different estimates and assumptions, it is possible that materially different amounts could be reported in the Company's condensed consolidated financial statements. Note 1 to the consolidated financial statements in the Company's Annual Report on Form 10-K for the fiscal year ended January 2, 2021 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 3, 2021. Supplemental Cash Flow Information
Restricted Cash The Company's restricted cash generally serves as collateral for certain banker's acceptance drafts issued to vendors and for bank guarantees associated with providing assurance to customers that the Company will fulfill certain customer obligations entered into in the normal course of business. The majority of the bank guarantees will expire over the next twelve months. Restricted cash at July 3, 2021 also included $84,249,000 related to funds held in escrow for an acquisition that occurred in the third quarter of 2021. See Note 11, Subsequent Event, for further details. 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:
Inventories The components of inventories are as follows:
Intangible Assets, Net Acquired intangible assets by major asset class are as follows:
Intangible assets are recorded at fair value at the date of acquisition. Subsequent impairment charges are reflected as a reduction in the gross balance, as applicable. Definite-lived intangible assets are stated net of accumulated amortization and currency translation in the accompanying condensed consolidated balance sheet. The Company amortizes definite-lived intangible assets over lives that have been determined based on the anticipated cash flow benefits of the intangible asset. Goodwill The changes in the carrying amount of goodwill by segment are as follows:
Warranty Obligations The Company's contracts covering the sale of its products include warranty provisions that provide assurance to its customers that the products will comply with agreed-upon specifications during a defined period of time. The Company provides for the estimated cost of product warranties at the time of sale based on historical occurrence rates and repair costs, as well as knowledge of any specific warranty problems that indicate projected warranty costs may vary from historical patterns. The Company negotiates the terms regarding warranty coverage and length of warranty depending on the products and applications. 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:
Revenue Recognition Most of the Company’s revenue relates to products and services that require minimal customization and is recognized at a point in time for each performance obligation under the contract when the customer obtains control of the goods or service. The remaining portion of the Company’s revenue is recognized on an over time basis based on an input method that compares the costs incurred to date to the total expected costs required to satisfy the performance obligation. Contracts are accounted for on an over time basis when they include products which have no alternative use and an enforceable right to payment over time. Most of the contracts recognized on an over time basis are for large capital projects. These projects are highly customized for the customer and, as a result, would include a significant cost to rework in the event of cancellation. The following table presents revenue by revenue recognition method:
The Company disaggregates its revenue from contracts with customers by reportable operating segment, product type and geography as this best depicts how its revenue is affected by economic factors. The following table presents the disaggregation of revenue by product type and geography:
See Note 9, Business Segment Information, for information on the disaggregation of revenue by reportable operating segment. The following table presents contract balances from contracts with customers:
Contract assets represent unbilled revenue associated with revenue recognized on contracts accounted for on an over time basis, which will be billed in future periods based on the contract terms. Contract liabilities consist of customer deposits, advanced billings, and deferred revenue. Deferred revenue is included in other current liabilities in the accompanying condensed consolidated balance sheet. Contract liabilities will be recognized as revenue in future periods once the revenue recognition criteria are met. The majority of the contract liabilities relate to advance payments on contracts accounted for at a point in time. 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 $10,070,000 in the second quarter of 2021, $7,158,000 in the second quarter of 2020, $27,210,000 in the first six months of 2021 and $26,866,000 in the first six months of 2020 that was included in the contract liabilities balance at the beginning of 2021 and 2020. The majority of the Company's contracts for capital equipment have an original expected duration of one year or less. Certain capital contracts require long lead times and could take up to 24 months to complete. For contracts with an original expected duration of over one year, the aggregate amount of the transaction price allocated to the remaining unsatisfied or partially unsatisfied performance obligations as of July 3, 2021 was $12,994,000. The Company will recognize revenue for these performance obligations as they are satisfied, approximately 39% of which is expected to occur within the next twelve months and the remaining 61% within the following twelve months. Banker's Acceptance Drafts Included in Accounts Receivable The Company's Chinese subsidiaries may receive banker's acceptance drafts from customers as payment for their trade accounts receivable. The drafts are non-interest bearing obligations of the issuing bank and mature within six months of the origination date. 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 $10,793,000 at July 3, 2021 and $9,445,000 at January 2, 2021, 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 Recently Adopted Accounting Pronouncements Income Taxes (Topic 740), Simplifying the Accounting for Income Taxes. In December 2019, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No. 2019-12, which simplifies the accounting for income taxes by removing certain exceptions to the general principles in Topic 740 and by clarifying and amending existing guidance, including the recognition of franchise tax, the treatment of a step up in the tax basis of goodwill, and the timing for recognition of enacted changes in tax laws or rates in the interim period annual effective tax rate computation. This new guidance is effective in fiscal 2021, and the transition requirements are primarily prospective. The Company adopted this ASU prospectively at the beginning of fiscal 2021 and its adoption did not have an impact on the condensed consolidated financial statements. Recent Accounting Pronouncements Not Yet Adopted Reference Rate Reform (Topic 848), Facilitation of the Effects of Reference Rate Reform on Financial Reporting. In March 2020, the FASB issued ASU No. 2020-04, which provides optional expedients and exceptions for applying GAAP to contracts, hedging relationships, and other transactions affected by the discontinuation of reference rates, such as the London Interbank Offered Rate (LIBOR), if certain criteria are met. Generally, contract modifications related to reference rate reform may be considered an event that does not require remeasurement or reassessment of a previous accounting determination at the modification date. The guidance in this ASU is applicable to the Company's existing contracts and hedging relationships that reference LIBOR and may be adopted prospectively through December 31, 2022. The Company is currently evaluating the effects that the adoption of this ASU will have on its consolidated financial statements.
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Earnings per Share |
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Earnings Per Share [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Earnings per Share | Earnings per Share Basic and diluted earnings per share (EPS) were calculated as follows:
The effect of outstanding and unvested restricted stock units (RSUs) of the Company's common stock totaling 9,000 shares in the second quarter of 2021, 36,000 shares in the second quarter of 2020, 27,000 in the first six months of 2021, and 39,000 in the first six months of 2020 was 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.
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Provision for Income Taxes |
6 Months Ended |
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Jul. 03, 2021 | |
Income Tax Disclosure [Abstract] | |
Provision for Income Taxes | Provision for Income Taxes The provision for income taxes was $14,510,000 in the first six months of 2021 and $9,033,000 in the first six months of 2020. The effective tax rate of 27% in the first six months of 2021 was higher than the Company's statutory rate of 21% primarily due to the distribution of the Company's worldwide earnings, nondeductible expenses, state taxes, and tax expense associated with the Global Intangible Low-Taxed Income (GILTI) provisions. These increases in tax expense were offset in part by a decrease in tax related to the net excess income tax benefits from stock-based compensation arrangements. The effective tax rate of 27% in the first six months of 2020 was higher than the Company's statutory rate of 21% primarily due to nondeductible expenses, the distribution of the Company's worldwide earnings, state taxes, and tax expense associated with GILTI provisions. These increases in tax expense were offset in part by a decrease in tax related to the net excess income tax benefits from stock-based compensation arrangements. |
Long-Term Obligations |
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Debt Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Long-Term Obligations | Long-Term Obligations Long-term obligations are as follows:
See Note 8, Fair Value Measurements and Fair Value of Financial Instruments, for the fair value information related to the Company's long-term obligations. Revolving Credit Facility The Company entered into an unsecured multi-currency revolving credit facility, dated as of March 1, 2017 (as amended and restated to date, the Credit Agreement). Pursuant to the Credit Agreement, the Company has a borrowing capacity of $400,000,000, with an uncommitted, unsecured incremental borrowing facility of $150,000,000, with a maturity date of December 14, 2023. 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, plus an applicable margin of 0% to 1.25%, or (ii) LIBOR (with a zero percent floor), as defined, plus an applicable margin of 1% to 2.25%. The Base Rate is calculated as the highest of (a) the federal funds rate plus 0.50%, (b) the prime rate as published by Citizens Bank, N.A. (Citizens Bank) and (c) thirty-day U.S. dollar LIBOR (USD LIBOR), as defined, plus 0.50%. The applicable margin is determined based upon the ratio of the Company's total debt, net of unrestricted cash up to $30,000,000 and certain debt obligations, to earnings before interest, taxes, depreciation, and amortization as defined in the Credit Agreement. The obligations under the Credit Agreement may be accelerated upon the occurrence of an event of default, which includes customary events of default under such financing arrangements. In addition, the Credit Agreement contains negative covenants applicable to the Company and its subsidiaries, including financial covenants requiring the Company to maintain a maximum consolidated leverage ratio of 3.75 to 1.00, or, if the Company elects, for the quarter during which a material acquisition occurs and for the three fiscal quarters thereafter, 4.00 to 1.00, and limitations on making certain restricted payments (including dividends and stock repurchases). Loans under the Credit Agreement are guaranteed by certain domestic subsidiaries of the Company. In the first six months of 2021, the Company borrowed an aggregate of $88,888,000 under the Credit Agreement, including $85,888,000 of euro-denominated borrowings, which was primarily used to fund an acquisition that closed in the third quarter of 2021. See Note 11, Subsequent Event, for further details. As of July 3, 2021, the outstanding balance under the Credit Agreement was $258,722,000, which included $113,722,000 of euro-denominated borrowings. As of July 3, 2021, the Company had $140,546,000 of borrowing capacity available under its Credit Agreement, which was calculated by translating its foreign-denominated borrowings using borrowing date foreign exchange rates. The weighted average interest rate for the outstanding balance under the Credit Agreement was 1.48% as of July 3, 2021. See Note 7, Derivatives, under the heading Interest Rate Swap Agreement, for information relating to the swap agreement used to hedge the Company’s exposure to movements in the three-month USD LIBOR on its U.S. dollar-denominated debt borrowed under the Credit Agreement. Senior Promissory Notes In 2018, the Company entered into an uncommitted, unsecured Multi-Currency Note Purchase and Private Shelf Agreement (Note Purchase Agreement). Simultaneous with the execution of the Note Purchase Agreement, the Company issued senior promissory notes (Initial Notes) in an aggregate principal amount of $10,000,000, with a per annum interest rate of 4.90% payable semiannually, and a maturity date of December 14, 2028. The Company is required to prepay a portion of the principal of the Initial Notes beginning on December 14, 2023 and each year thereafter, and may optionally prepay the principal on the Initial Notes, together with any prepayment premium, at any time (in a minimum amount of $1,000,000, or the foreign currency equivalent thereof, if applicable) in accordance with the Note Purchase Agreement. 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. In accordance with the Note Purchase Agreement, the Company may also issue additional senior promissory notes (together with the Initial Notes, the Senior Promissory Notes) up to an additional $115,000,000 until the earlier of December 14, 2021 or the thirtieth day after written notice to terminate the issuance and sale of additional notes pursuant to the Note Purchase Agreement. The Senior Promissory 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. Debt Compliance As of July 3, 2021, the Company was in compliance with the covenants related to its debt obligations. Finance Leases The Company's finance leases primarily relate to contracts for vehicles. Other Borrowings Other borrowings include a sale-leaseback financing arrangement for a manufacturing facility in Germany. Under this arrangement, the quarterly lease payment includes principal, interest, and a payment to the landlord toward a loan receivable. The interest rate on the outstanding obligation is 1.79%. The secured loan receivable, which is included in other assets in the accompanying condensed consolidated balance sheet, was $1,339,000 at July 3, 2021. The lease arrangement provides for a fixed price purchase option, net of the projected loan receivable, of $1,576,000 at the end of the lease term in August 2022. If the Company does not exercise the purchase option for the facility, the Company will receive cash from the landlord to settle the loan receivable. As of July 3, 2021, $3,573,000 was outstanding under this obligation.
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Stock-Based Compensation |
6 Months Ended |
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Jul. 03, 2021 | |
Share-based Payment Arrangement [Abstract] | |
Stock-Based Compensation | Stock-Based Compensation The Company recognized stock-based compensation expense of $2,527,000 in the second quarter of 2021, $1,877,000 in the second quarter of 2020, $4,026,000 in the first six months of 2021, and $3,516,000 in the first six months of 2020 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. The fair value of RSUs is based on the grant date price of the Company's common stock, reduced by the present value of estimated dividends foregone during the requisite service period. For time-based RSUs, compensation expense is recognized ratably over the requisite service period for the entire award based on the grant date fair value, and net of actual forfeitures recorded when they occur. For performance-based RSUs, compensation expense is recognized ratably over the requisite service period for each separately vesting portion of the award based on the grant date fair value, net of actual forfeitures recorded when they occur, and remeasured each reporting period until the total number of RSUs to be issued is known. Unrecognized compensation expense related to stock-based compensation totaled approximately $11,872,000 at July 3, 2021 and will be recognized over a weighted average period of 1.9 years. On May 19, 2021, the Company granted an aggregate of 5,045 RSUs to its non-employee directors with a grant date fair value of $850,000. Half of these RSUs vested on June 1, 2021 and the remaining RSUs will vest ratably on the last day of the third and fourth fiscal quarters of 2021.
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Accumulated Other Comprehensive Items |
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Equity [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Accumulated Other Comprehensive Items | Accumulated Other Comprehensive Items Comprehensive income combines net income and other comprehensive items, which represent certain amounts that are reported as components of stockholders' equity in the accompanying condensed consolidated balance sheet. Changes in each component of accumulated other comprehensive items (AOCI), net of tax, are as follows:
Amounts reclassified from AOCI are as follows:
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Derivatives |
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Derivative Instruments and Hedging Activities Disclosure [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Derivatives | Derivatives 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. dollar-denominated debt. The 2018 Swap Agreement has a $15,000,000 notional value and expires on June 30, 2023. On a quarterly basis, the Company receives three-month USD LIBOR, which is subject to a zero percent floor, and pays a fixed rate of interest of 3.15% plus an applicable margin as defined in the Credit Agreement. The Company designated its 2018 Swap Agreement as a cash flow hedge and structured it to be 100% effective. Unrealized gains and losses related to the fair value of the 2018 Swap Agreement are recorded to AOCI, net of tax. In the event of early termination, the Company will receive from or pay to the counterparty the fair value of the 2018 Swap Agreement, and the unrealized gain or loss outstanding will be recognized in earnings. The counterparty to the 2018 Swap Agreement could demand an early termination of that agreement if the Company were to be in default under the Credit Agreement, or any agreement that amends or replaces the Credit Agreement in which the counterparty is a member, and if it were to be unable to cure the default. See Note 4, Long-Term Obligations, for further details. Forward Currency-Exchange Contracts 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. Such exposures result from assets and liabilities that are denominated in currencies other than the functional currencies of the Company's subsidiaries. Forward currency-exchange contracts that hedge forecasted accounts receivable or accounts payable are designated as cash flow hedges and unrecognized gains and losses are recorded to AOCI, net of tax. Deferred gains and losses are recognized in the statement of income in the period in which the underlying transaction occurs. 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 3, 2021 and June 27, 2020. The following table summarizes the fair value of derivative instruments in the accompanying condensed consolidated balance sheet:
(a) See Note 8, Fair Value Measurements and Fair Value of Financial Instruments, for the fair value measurements relating to these financial instruments. (b) The 2021 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 3, 2021:
As of July 3, 2021, the Company expects to reclassify losses of $348,000 from AOCI to earnings over the next twelve months based on the estimated cash flows of the 2018 Swap Agreement and the maturity date of the forward currency-exchange contract.
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Fair Value Measurements and Fair Value of Financial Instruments |
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Fair Value Disclosures [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Fair Value Measurements and Fair Value of Financial Instruments | Fair Value Measurements and Fair Value of Financial Instruments Fair value measurement is defined as the price that would be received to sell an asset or paid to transfer a liability in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants at the measurement date. A fair value hierarchy is established, which prioritizes the inputs used in measuring fair value into three broad levels as follows: •Level 1—Quoted prices in active markets for identical assets or liabilities. •Level 2—Inputs, other than quoted prices in active markets, that are observable either directly or indirectly. •Level 3—Unobservable inputs based on the Company's own assumptions. The following table presents the fair value hierarchy for those assets and liabilities measured at fair value on a recurring basis:
(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 2021. Banker's acceptance drafts are carried at face value, which approximates their fair value due to the short-term nature of the negotiable instrument. The fair values of the forward currency-exchange contracts are based on quoted forward foreign exchange rates at the reporting date. The fair value of the 2018 Swap Agreement is based on USD LIBOR yield curves at the reporting date. The forward currency-exchange contracts and the 2018 Swap Agreement are hedges of either recorded assets or liabilities or anticipated transactions and represent the estimated amount the Company would receive or pay upon liquidation of the contracts. Changes in values of the underlying hedged assets and liabilities or anticipated transactions are not reflected in the table above. The carrying value and fair value of debt obligations, excluding lease obligations and other borrowings, are as follows:
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Business Segment Information |
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Segment Reporting [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Business Segment Information | Business Segment Information The Company has combined its operating entities into three reportable operating segments: Flow Control, Industrial Processing, and Material Handling. The Flow Control segment consists of the fluid-handling and doctoring, cleaning, & filtration product lines; the Industrial Processing segment consists of the wood processing and stock-preparation product lines; and the Material Handling segment consists of the conveying and screening, baling, and fiber-based product lines. 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. •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. In addition, the Company provides industrial automation and digitization solutions to process industries. •Material Handling – Products and engineered systems used to handle bulk and discrete materials for secondary processing or transport in the aggregates, mining, food, and waste management industries, among others. The Company's primary products include conveying and vibratory equipment and balers. In addition, the Company 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:
(a) Includes acquisition costs of $239,000 in the three months ended July 3, 2021 and $1,236,000 in the six months ended July 3, 2021 and restructuring costs of $456,000 in the three- and six-month periods ended June 27, 2020. (b) Includes $435,000 of acquisition-related expense in the three- and six-month periods ended June 27, 2020. Acquisition-related expenses include amortization expense associated with backlog and acquisition costs. (c) Represents general and administrative expenses. (d) The Company does not allocate interest and other expense, net to its segments.
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Commitments and Contingencies |
6 Months Ended |
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Jul. 03, 2021 | |
Commitments and Contingencies Disclosure [Abstract] | |
Commitments and Contingencies | Commitments and Contingencies Right of Recourse In the ordinary course of business, the Company's Chinese subsidiaries may receive banker's acceptance drafts from customers as payment for their trade accounts receivable. The drafts are non-interest bearing obligations of the issuing bank and mature within six months of the origination date. The Company's Chinese subsidiaries may use these banker's acceptance drafts prior to the scheduled maturity date to settle outstanding accounts payable with vendors. Banker's acceptance drafts transferred to vendors are subject to customary right of recourse provisions prior to their scheduled maturity dates. The Company had $9,723,000 at July 3, 2021 and $7,568,000 at January 2, 2021 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. Litigation From time to time, the Company is subject to various claims and legal proceedings covering a range of matters that arise in the ordinary course of business. Such litigation may include, but is not limited to, claims and counterclaims by and against the Company for breach of contract or warranty, canceled contracts, product liability, or bankruptcy-related claims. For legal proceedings in which a loss is probable and estimable, the Company accrues a loss based on the low end of the range of estimated loss when there is no better estimate within the range. If the Company were found to be liable for any of the claims or counterclaims against it, the Company would incur a charge against earnings for amounts in excess of legal accruals.
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Subsequent Event |
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Subsequent Events [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Subsequent Event | Subsequent Event Acquisition In the third quarter of 2021, Kadant Germany Holding GmbH, a subsidiary of the Company, acquired all partnership interests and shares in The Clouth Group of Companies (Clouth), for approximately 78,000,000 euros, or $92,000,000, net of cash acquired and debt assumed. The majority of the Clouth companies were acquired on July 19, 2021 and the acquisition of the last legal entity occurred on August 10, 2021. The Company funded the purchase price with existing cash and borrowings of approximately $82,877,000 of euro-denominated funds under the Credit Agreement, of which $78,749,000 was borrowed in the second quarter of 2021. At July 3, 2021, $84,249,000 of the purchase price was held in escrow and was classified as restricted cash in the accompanying condensed consolidated balance sheet. Clouth is a leading manufacturer of doctor blades and related equipment used in the production of paper, packaging, and tissue and will be included within the Company's Flow Control segment. The Company expects several synergies in connection with this acquisition, including deepening the Company's presence in the growing ceramic blade market and expansion of sales at its existing businesses by leveraging Clouth's complementary global geographic footprint. Clouth has two manufacturing facilities in Germany and one in Poland and generated revenue of approximately 41,000,000 euros in 2020. The excess of the purchase price for the acquisition of Clouth over the net assets acquired will be recorded as goodwill. The purchase price allocation for this acquisition is not presented as the preliminary valuation of Clouth has not been completed. Unaudited Supplemental Pro Forma Information Had the acquisition of Clouth been completed as of the beginning of 2020, the Company’s pro forma results of operations for the three- and six-month periods ended July 3, 2021 and June 27, 2020 would have been as follows:
The historical consolidated financial information of the Company and Clouth has been adjusted in the pro forma information above to give effect to pro forma events that are directly attributable to the acquisition and related financing arrangements, are expected to have a continuing impact on the Company, and are factually supportable. Pro forma results include the following non-recurring pro forma adjustments that were directly attributable to the acquisition: •Estimated pre-tax charge to cost of revenue of $1,753,000 in the three months ended June 27, 2020 and $3,505,000 in the six months ended June 27, 2020, for the sale of inventory revalued at the date of acquisition. •Estimated pre-tax charge to SG&A expenses of $239,000 in the three months ended June 27, 2020 and $1,673,000 in the six months ended June 27, 2020 and reversal of $239,000 in the three months ended July 3, 2021 and $1,236,000 in the six months ended July 3, 2021, for acquisition costs and intangible asset amortization related to acquired backlog. •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 acquisition of Clouth occurred as of the beginning of 2020, or that may result in the future.
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Nature of Operations and Summary of Significant Accounting Policies (Policies) |
6 Months Ended |
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Jul. 03, 2021 | |
Accounting Policies [Abstract] | |
Use of Estimates and Critical Accounting Policies | Use of Estimates and Critical Accounting Policies The preparation of financial statements in conformity with U.S. generally accepted accounting principles (GAAP) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenue and expenses during the reporting period. Although the Company makes every effort to ensure the accuracy of the estimates and assumptions used in the preparation of its condensed consolidated financial statements or in the application of accounting policies, if business conditions were different, or if the Company were to use different estimates and assumptions, it is possible that materially different amounts could be reported in the Company's condensed consolidated financial statements.
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Restricted Cash | The Company's restricted cash generally serves as collateral for certain banker's acceptance drafts issued to vendors and for bank guarantees associated with providing assurance to customers that the Company will fulfill certain customer obligations entered into in the normal course of business. The majority of the bank guarantees will expire over the next twelve months. |
Intangible Assets, Net | Intangible assets are recorded at fair value at the date of acquisition. Subsequent impairment charges are reflected as a reduction in the gross balance, as applicable. Definite-lived intangible assets are stated net of accumulated amortization and currency translation in the accompanying condensed consolidated balance sheet. The Company amortizes definite-lived intangible assets over lives that have been determined based on the anticipated cash flow benefits of the intangible asset. |
Warranty Obligations | Warranty Obligations The Company's contracts covering the sale of its products include warranty provisions that provide assurance to its customers that the products will comply with agreed-upon specifications during a defined period of time. The Company provides for the estimated cost of product warranties at the time of sale based on historical occurrence rates and repair costs, as well as knowledge of any specific warranty problems that indicate projected warranty costs may vary from historical patterns. The Company negotiates the terms regarding warranty coverage and length of warranty depending on the products and applications. The Company's liability for warranties is included in other current liabilities in the accompanying condensed consolidated balance sheet.
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Revenue Recognition | Revenue Recognition Most of the Company’s revenue relates to products and services that require minimal customization and is recognized at a point in time for each performance obligation under the contract when the customer obtains control of the goods or service. The remaining portion of the Company’s revenue is recognized on an over time basis based on an input method that compares the costs incurred to date to the total expected costs required to satisfy the performance obligation. Contracts are accounted for on an over time basis when they include products which have no alternative use and an enforceable right to payment over time. Most of the contracts recognized on an over time basis are for large capital projects. These projects are highly customized for the customer and, as a result, would include a significant cost to rework in the event of cancellation. The Company disaggregates its revenue from contracts with customers by reportable operating segment, product type and geography as this best depicts how its revenue is affected by economic factors.Contract assets represent unbilled revenue associated with revenue recognized on contracts accounted for on an over time basis, which will be billed in future periods based on the contract terms. Contract liabilities consist of customer deposits, advanced billings, and deferred revenue. Deferred revenue is included in other current liabilities in the accompanying condensed consolidated balance sheet. Contract liabilities will be recognized as revenue in future periods once the revenue recognition criteria are met. The majority of the contract liabilities relate to advance payments on contracts accounted for at a point in time. 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 $10,070,000 in the second quarter of 2021, $7,158,000 in the second quarter of 2020, $27,210,000 in the first six months of 2021 and $26,866,000 in the first six months of 2020 that was included in the contract liabilities balance at the beginning of 2021 and 2020. The majority of the Company's contracts for capital equipment have an original expected duration of one year or less. Certain capital contracts require long lead times and could take up to 24 months to complete. For contracts with an original expected duration of over one year, the aggregate amount of the transaction price allocated to the remaining unsatisfied or partially unsatisfied performance obligations as of July 3, 2021 was $12,994,000. The Company will recognize revenue for these performance obligations as they are satisfied, approximately 39% of which is expected to occur within the next twelve months and the remaining 61% within the following twelve months.
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Banker's Acceptance Drafts Included in Accounts Receivable | Banker's Acceptance Drafts Included in Accounts ReceivableThe Company's Chinese subsidiaries may receive banker's acceptance drafts from customers as payment for their trade accounts receivable. The drafts are non-interest bearing obligations of the issuing bank and mature within six months of the origination date. 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 $10,793,000 at July 3, 2021 and $9,445,000 at January 2, 2021, 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 | Recently Adopted Accounting Pronouncements Income Taxes (Topic 740), Simplifying the Accounting for Income Taxes. In December 2019, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No. 2019-12, which simplifies the accounting for income taxes by removing certain exceptions to the general principles in Topic 740 and by clarifying and amending existing guidance, including the recognition of franchise tax, the treatment of a step up in the tax basis of goodwill, and the timing for recognition of enacted changes in tax laws or rates in the interim period annual effective tax rate computation. This new guidance is effective in fiscal 2021, and the transition requirements are primarily prospective. The Company adopted this ASU prospectively at the beginning of fiscal 2021 and its adoption did not have an impact on the condensed consolidated financial statements. Recent Accounting Pronouncements Not Yet Adopted Reference Rate Reform (Topic 848), Facilitation of the Effects of Reference Rate Reform on Financial Reporting. In March 2020, the FASB issued ASU No. 2020-04, which provides optional expedients and exceptions for applying GAAP to contracts, hedging relationships, and other transactions affected by the discontinuation of reference rates, such as the London Interbank Offered Rate (LIBOR), if certain criteria are met. Generally, contract modifications related to reference rate reform may be considered an event that does not require remeasurement or reassessment of a previous accounting determination at the modification date. The guidance in this ASU is applicable to the Company's existing contracts and hedging relationships that reference LIBOR and may be adopted prospectively through December 31, 2022. The Company is currently evaluating the effects that the adoption of this ASU will have on its consolidated financial statements.
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Derivatives | 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. Such exposures result from assets and liabilities that are denominated in currencies other than the functional currencies of the Company's subsidiaries. Forward currency-exchange contracts that hedge forecasted accounts receivable or accounts payable are designated as cash flow hedges and unrecognized gains and losses are recorded to AOCI, net of tax. Deferred gains and losses are recognized in the statement of income in the period in which the underlying transaction occurs. 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. |
Fair Value Measurement | 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 2021. Banker's acceptance drafts are carried at face value, which approximates their fair value due to the short-term nature of the negotiable instrument. The fair values of the forward currency-exchange contracts are based on quoted forward foreign exchange rates at the reporting date. The fair value of the 2018 Swap Agreement is based on USD LIBOR yield curves at the reporting date. The forward currency-exchange contracts and the 2018 Swap Agreement are hedges of either recorded assets or liabilities or anticipated transactions and represent the estimated amount the Company would receive or pay upon liquidation of the contracts. Changes in values of the underlying hedged assets and liabilities or anticipated transactions are not reflected in the table above.The carrying value of the Company's revolving credit facility approximates the fair value as the obligation bears variable rates of interest, which adjust frequently, based on prevailing market rates. The fair value of the senior promissory notes is primarily calculated based on quoted market rates plus an applicable margin available to the Company at the respective period ends, which represent Level 2 measurements. |
Nature of Operations and Summary of Significant Accounting Policies (Tables) |
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Accounting Policies [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Supplemental Cash Flow Information |
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Cash and Cash Equivalents | 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:
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Restricted Cash | 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:
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Inventories | The components of inventories are as follows:
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Acquired Intangible Assets | Acquired intangible assets by major asset class are as follows:
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Changes in the Carrying Amount of Goodwill | The changes in the carrying amount of goodwill by segment are as follows:
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Warranty Obligations | The changes in the carrying amount of product warranty obligations are as follows:
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Revenue by Product Line, Product Type, Geography, and Revenue Recognition Method | The following table presents revenue by revenue recognition method:
The following table presents the disaggregation of revenue by product type and geography:
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Balances from Contracts with Customers | The following table presents contract balances from contracts with customers:
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Earnings per Share (Tables) |
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Earnings Per Share [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Basic and Diluted Earnings Per Share | Basic and diluted earnings per share (EPS) were calculated as follows:
|
Long-Term Obligations (Tables) |
6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Jul. 03, 2021 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Debt Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Long-Term Obligations | Long-term obligations are as follows:
|
Accumulated Other Comprehensive Items (Tables) |
6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jul. 03, 2021 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Equity [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Components of Accumulated Other Comprehensive Items | Changes in each component of accumulated other comprehensive items (AOCI), net of tax, are as follows:
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Reclassification Out of Accumulated Other Comprehensive Items | Amounts reclassified from AOCI are as follows:
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Derivatives (Tables) |
6 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jul. 03, 2021 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Derivative Instruments and Hedging Activities Disclosure [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Fair Value of Derivative Instruments | The following table summarizes the fair value of derivative instruments in the accompanying condensed consolidated balance sheet:
(a) See Note 8, Fair Value Measurements and Fair Value of Financial Instruments, for the fair value measurements relating to these financial instruments. (b) The 2021 notional amounts are indicative of the level of the Company's recurring derivative activity.
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Activity in Accumulated Other Comprehensive Items (OCI) | 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 3, 2021:
|
Fair Value Measurements and Fair Value of Financial Instruments (Tables) |
6 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Jul. 03, 2021 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Fair Value Disclosures [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Fair Value of Assets and Liabilities Measured on a Recurring Basis | The following table presents the fair value hierarchy for those assets and liabilities measured at fair value on a recurring basis:
(a)Included in accounts receivable in the accompanying condensed consolidated balance sheet.
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Carrying Value and Fair Value of Debt Obligations | The carrying value and fair value of debt obligations, excluding lease obligations and other borrowings, are as follows:
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Business Segment Information (Tables) |
6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jul. 03, 2021 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Segment Reporting [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Business Segment Reporting Information | The following table presents financial information for the Company's reportable operating segments:
(a) Includes acquisition costs of $239,000 in the three months ended July 3, 2021 and $1,236,000 in the six months ended July 3, 2021 and restructuring costs of $456,000 in the three- and six-month periods ended June 27, 2020. (b) Includes $435,000 of acquisition-related expense in the three- and six-month periods ended June 27, 2020. Acquisition-related expenses include amortization expense associated with backlog and acquisition costs. (c) Represents general and administrative expenses. (d) The Company does not allocate interest and other expense, net to its segments.
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Subsequent Event (Tables) |
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Subsequent Events [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Unaudited Supplemental Pro Forma Information | Had the acquisition of Clouth been completed as of the beginning of 2020, the Company’s pro forma results of operations for the three- and six-month periods ended July 3, 2021 and June 27, 2020 would have been as follows:
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Nature of Operations and Summary of Significant Accounting Policies - Supplemental Cash Flow Information (Details) - USD ($) $ in Thousands |
6 Months Ended | |
---|---|---|
Jul. 03, 2021 |
Jun. 27, 2020 |
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Accounting Policies [Abstract] | ||
Cash Paid for Interest | $ 1,968 | $ 4,186 |
Cash Paid for Income Taxes, Net of Refunds | 12,475 | 7,036 |
Non-Cash Investing Activities: | ||
Fair value of assets acquired | 197 | 9,164 |
Cash paid for acquired businesses | (159) | (7,537) |
Liabilities Assumed of Acquired Businesses | 38 | 1,627 |
Purchases of property, plant, and equipment in accounts payable | 169 | 150 |
Non-Cash Financing Activities: | ||
Issuance of Company common stock upon vesting of restricted stock units | 3,628 | 4,027 |
Dividends declared but unpaid | $ 2,895 | $ 2,760 |
Nature of Operations and Summary of Significant Accounting Policies - Narrative (Details) - USD ($) $ in Thousands |
3 Months Ended | 6 Months Ended | |||
---|---|---|---|---|---|
Jul. 03, 2021 |
Jun. 27, 2020 |
Jul. 03, 2021 |
Jun. 27, 2020 |
Jan. 02, 2021 |
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Accounting Policies [Abstract] | |||||
Bank guarantees, expiration period | 12 months | ||||
Funds held in escrow | $ 84,249 | $ 84,249 | |||
Revenue recognized | 10,070 | $ 7,158 | 27,210 | $ 26,866 | |
Revenue, remaining performance obligation, amount | 12,994 | $ 12,994 | |||
Banker's acceptance drafts, maturity period | 6 months | ||||
Banker's acceptance drafts | $ 10,793 | $ 10,793 | $ 9,445 |
Nature of Operations and Summary of Significant Accounting Policies - Cash, Cash Equivalents, and Restricted Cash (Details) - USD ($) $ in Thousands |
Jul. 03, 2021 |
Jan. 02, 2021 |
Jun. 27, 2020 |
Dec. 28, 2019 |
---|---|---|---|---|
Accounting Policies [Abstract] | ||||
Cash and cash equivalents | $ 73,436 | $ 65,682 | $ 57,499 | $ 66,786 |
Restricted cash | 84,708 | 958 | 3,450 | 1,487 |
Total Cash, Cash Equivalents, and Restricted Cash | $ 158,144 | $ 66,640 | $ 60,949 | $ 68,273 |
Nature of Operations and Summary of Significant Accounting Policies - Inventories (Details) - USD ($) $ in Thousands |
Jul. 03, 2021 |
Jan. 02, 2021 |
---|---|---|
Accounting Policies [Abstract] | ||
Raw Materials | $ 48,879 | $ 46,413 |
Work in Process | 24,189 | 17,692 |
Finished Goods | 41,248 | 42,709 |
Total Inventories | $ 114,316 | $ 106,814 |
Nature of Operations and Summary of Significant Accounting Policies - Warranty Obligations (Details) - USD ($) $ in Thousands |
6 Months Ended | |
---|---|---|
Jul. 03, 2021 |
Jun. 27, 2020 |
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Changes in the carrying amount of accrued warranty costs [Roll Forward] | ||
Balance at Beginning of Year | $ 7,064 | $ 6,467 |
Provision charged to expense | 2,709 | 2,675 |
Usage | (2,255) | (2,721) |
Currency translation | (74) | (67) |
Balance at End of Period | $ 7,444 | $ 6,354 |
Nature of Operations and Summary of Significant Accounting Policies - Revenue Recognition by Product Line, Product Type, Geography and Revenue Recognition Method (Details) - USD ($) $ in Thousands |
3 Months Ended | 6 Months Ended | ||
---|---|---|---|---|
Jul. 03, 2021 |
Jun. 27, 2020 |
Jul. 03, 2021 |
Jun. 27, 2020 |
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Disaggregation of Revenue [Line Items] | ||||
Revenues | $ 195,811 | $ 152,860 | $ 368,274 | $ 311,987 |
Parts and Consumables | ||||
Disaggregation of Revenue [Line Items] | ||||
Revenues | 124,975 | 97,261 | 243,082 | 202,358 |
Capital | ||||
Disaggregation of Revenue [Line Items] | ||||
Revenues | 70,836 | 55,599 | 125,192 | 109,629 |
Point in Time | ||||
Disaggregation of Revenue [Line Items] | ||||
Revenues | 175,479 | 129,797 | 329,896 | 265,889 |
Over Time | ||||
Disaggregation of Revenue [Line Items] | ||||
Revenues | 20,332 | 23,063 | 38,378 | 46,098 |
North America | ||||
Disaggregation of Revenue [Line Items] | ||||
Revenues | 106,767 | 88,718 | 201,859 | 182,541 |
Europe | ||||
Disaggregation of Revenue [Line Items] | ||||
Revenues | 55,827 | 37,916 | 100,468 | 73,930 |
Asia | ||||
Disaggregation of Revenue [Line Items] | ||||
Revenues | 24,729 | 16,237 | 46,542 | 32,145 |
Rest of World | ||||
Disaggregation of Revenue [Line Items] | ||||
Revenues | $ 8,488 | $ 9,989 | $ 19,405 | $ 23,371 |
Nature of Operations and Summary of Significant Accounting Policies - Revenue from Contract with Customers (Details) - USD ($) $ in Thousands |
Jul. 03, 2021 |
Jan. 02, 2021 |
---|---|---|
Accounting Policies [Abstract] | ||
Accounts Receivable | $ 106,791 | $ 91,540 |
Contract Assets | 6,481 | 7,576 |
Contract Liabilities | $ 52,031 | $ 39,269 |
Nature of Operations and Summary of Significant Accounting Policies - Performance Obligations Narrative (Details) |
Jul. 03, 2021 |
---|---|
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date [Axis]: 2021-07-04 | |
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction [Line Items] | |
Revenue, remaining performance obligation, percent | 39.00% |
Revenue, remaining performance obligation, expected timing of satisfaction, period | 12 months |
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date [Axis]: 2022-07-04 | |
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction [Line Items] | |
Revenue, remaining performance obligation, percent | 61.00% |
Revenue, remaining performance obligation, expected timing of satisfaction, period | 12 months |
Earnings per Share - Basic and Diluted Earnings Per Share (Details) - USD ($) $ / shares in Units, shares in Thousands, $ in Thousands |
3 Months Ended | 6 Months Ended | ||
---|---|---|---|---|
Jul. 03, 2021 |
Jun. 27, 2020 |
Jul. 03, 2021 |
Jun. 27, 2020 |
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Income Amounts Attributable to Parent, Disclosures [Abstract] | ||||
Net Income Attributable to Kadant | $ 22,864 | $ 11,607 | $ 39,425 | $ 24,138 |
Basic Weighted Average Shares (in shares) | 11,579 | 11,482 | 11,566 | 11,457 |
Effect of Stock Options, Restricted Stock Units and Employee Stock Purchase Plan Shares (in shares) | 71 | 70 | 65 | 73 |
Diluted Weighted Average Shares (in shares) | 11,650 | 11,552 | 11,631 | 11,530 |
Basic Earnings per Share (in dollars per share) | $ 1.97 | $ 1.01 | $ 3.41 | $ 2.11 |
Diluted Earnings per Share (in dollars per share) | $ 1.96 | $ 1.00 | $ 3.39 | $ 2.09 |
Earnings per Share - Narrative (Details) - shares shares in Thousands |
3 Months Ended | 6 Months Ended | ||
---|---|---|---|---|
Jul. 03, 2021 |
Jun. 27, 2020 |
Jul. 03, 2021 |
Jun. 27, 2020 |
|
Restricted Stock Units (RSUs) | ||||
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items] | ||||
Amount of antidilutive securities excluded from computation of EPS (in shares) | 9 | 36 | 27 | 39 |
Provision for Income Taxes - Narrative (Details) - USD ($) $ in Thousands |
3 Months Ended | 6 Months Ended | ||
---|---|---|---|---|
Jul. 03, 2021 |
Jun. 27, 2020 |
Jul. 03, 2021 |
Jun. 27, 2020 |
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Income Tax Disclosure [Abstract] | ||||
Provision for income taxes | $ 8,949 | $ 4,474 | $ 14,510 | $ 9,033 |
Effective tax rate | 27.00% | 27.00% |
Long-Term Obligations - Schedule of Long-Term Obligations (Details) - USD ($) $ in Thousands |
Jul. 03, 2021 |
Jan. 02, 2021 |
---|---|---|
Debt Instrument [Line Items] | ||
Finance Leases, due 2021 to 2025 | $ 1,395 | $ 1,631 |
Total | 273,725 | 233,474 |
Less: Current Maturities of Long-Term Obligations | (1,355) | (1,474) |
Long-Term Obligations | 272,370 | 232,000 |
Revolving Credit Facility, due 2023 | ||
Debt Instrument [Line Items] | ||
Long-term debt | 258,722 | 217,963 |
Senior Promissory Notes, due 2023 to 2028 | ||
Debt Instrument [Line Items] | ||
Long-term debt | 10,000 | 10,000 |
Other Borrowings, due 2021 to 2023 | ||
Debt Instrument [Line Items] | ||
Other Borrowings, due 2021 to 2023 | $ 3,608 | $ 3,880 |
Stock-Based Compensation - Narrative (Details) - USD ($) $ in Thousands |
3 Months Ended | 6 Months Ended | |||
---|---|---|---|---|---|
May 19, 2021 |
Jul. 03, 2021 |
Jun. 27, 2020 |
Jul. 03, 2021 |
Jun. 27, 2020 |
|
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||||
Stock-based compensation expense | $ 2,527 | $ 1,877 | $ 4,026 | $ 3,516 | |
Unrecognized compensation expense related to stock awards | $ 11,872 | $ 11,872 | |||
Recognition period | 1 year 10 months 24 days | ||||
Restricted Stock Units (RSUs) | |||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||||
Number of units granted (in shares) | 5,045 | ||||
Aggregate grant date fair value | $ 850 |
Derivatives - Narrative (Details) - USD ($) |
6 Months Ended | |
---|---|---|
Jul. 03, 2021 |
Dec. 29, 2018 |
|
Derivatives, Fair Value [Line Items] | ||
Net unrealized losses included in AOCI expected to be reclassified to earnings over the next 12 months | $ 348,000 | |
Cash Flow Hedging | Designated as Hedging Instrument | 2018 Swap Agreement | ||
Derivatives, Fair Value [Line Items] | ||
Derivative, notional amount | $ 15,000,000 | |
Fixed rate of interest | 3.15% | |
Rate of effectiveness of derivative agreement | 100.00% | |
Cash Flow Hedging | Designated as Hedging Instrument | Forward currency-exchange contract | ||
Derivatives, Fair Value [Line Items] | ||
Period over which entity manages its level of exposure of risk | 12 months |
Derivatives - Activity in Accumulated Other Comprehensive Items (OCI) (Details) $ in Thousands |
6 Months Ended |
---|---|
Jul. 03, 2021
USD ($)
| |
AOCI Including Portion Attributable to Noncontrolling Interest, Net of Tax [Roll Forward] | |
Beginning balance | $ 496,905 |
Ending balance | 531,126 |
Cash Flow Hedges | |
AOCI Including Portion Attributable to Noncontrolling Interest, Net of Tax [Roll Forward] | |
Beginning balance | (828) |
Loss reclassified to earnings | 169 |
Gain (loss) recognized in AOCI | 9 |
Ending balance | (650) |
Cash Flow Hedges | Interest Rate Swap Agreement | |
AOCI Including Portion Attributable to Noncontrolling Interest, Net of Tax [Roll Forward] | |
Beginning balance | (846) |
Loss reclassified to earnings | 169 |
Gain (loss) recognized in AOCI | 32 |
Ending balance | (645) |
Cash Flow Hedges | Forward currency-exchange contract | |
AOCI Including Portion Attributable to Noncontrolling Interest, Net of Tax [Roll Forward] | |
Beginning balance | 18 |
Loss reclassified to earnings | 0 |
Gain (loss) recognized in AOCI | (23) |
Ending balance | $ (5) |
Fair Value Measurements and Fair Value of Financial Instruments - Carrying Value and Fair Value of Debt Obligations (Details) - USD ($) $ in Thousands |
Jul. 03, 2021 |
Jan. 02, 2021 |
---|---|---|
Carrying Value | ||
Debt Obligations: | ||
Revolving credit facility | $ 258,722 | $ 217,963 |
Senior promissory notes | 10,000 | 10,000 |
Debt obligations | 268,722 | 227,963 |
Fair Value | ||
Debt Obligations: | ||
Revolving credit facility | 258,722 | 217,963 |
Senior promissory notes | 11,095 | 11,157 |
Debt obligations | $ 269,817 | $ 229,120 |
Commitments and Contingencies - Narrative (Details) - USD ($) $ in Thousands |
6 Months Ended | |
---|---|---|
Jul. 03, 2021 |
Jan. 02, 2021 |
|
Commitments and Contingencies Disclosure [Abstract] | ||
Banker's acceptance drafts, maturity period | 6 months | |
Banker's acceptance drafts with recourse | $ 9,723 | $ 7,568 |
Subsequent Event - Pro Forma Information (Details) - USD ($) $ / shares in Units, $ in Thousands |
3 Months Ended | 6 Months Ended | ||
---|---|---|---|---|
Jul. 03, 2021 |
Jun. 27, 2020 |
Jul. 03, 2021 |
Jun. 27, 2020 |
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Pro Forma Information | ||||
Cost of revenue | $ 110,493 | $ 86,412 | $ 207,241 | $ 177,216 |
Selling, general, and administrative expenses | 49,267 | 45,073 | 98,698 | 90,665 |
The Clouth Group of Companies | ||||
Subsequent Event [Line Items] | ||||
Revenues | 207,740 | 164,248 | 392,128 | 334,796 |
Net Income Attributable to Kadant | $ 23,663 | $ 10,276 | $ 41,522 | $ 20,147 |
Earnings per Share Attributable to Kadant: | ||||
Basic (in dollars per share) | $ 2.04 | $ 0.89 | $ 3.59 | $ 1.76 |
Diluted (in dollars per share) | $ 2.03 | $ 0.89 | $ 3.57 | $ 1.75 |
The Clouth Group of Companies | Fair Value Adjustment to Inventory | ||||
Pro Forma Information | ||||
Cost of revenue | $ 1,753 | $ 3,505 | ||
The Clouth Group of Companies | Acquisition-related Costs | ||||
Pro Forma Information | ||||
Selling, general, and administrative expenses | $ 239 | $ 1,673 | ||
Amortization | $ 239 | $ 1,236 |
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