XML 21 R10.htm IDEA: XBRL DOCUMENT
v3.21.1

Nature of Operations and Summary of Significant Accounting Policies | 3 Months Ended
--- | ---
Apr. 03, 2021
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 April 3, 2021, its results of operations, comprehensive income (loss), cash flows, and stockholders' equity for the three-month periods ended April 3, 2021 and March 28, 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 three months ended April 3, 2021. Supplemental Cash Flow Information
|  | Three Months Ended
(In thousands) |  | April 3, 2021 |  | March 28, 2020
Cash Paid for Interest |  | $ | 892 |  |  | $ | 2,212 |
Cash Paid for Income Taxes, Net of Refunds |  | $ | 5,344 |  |  | $ | 4,698 |
Non-Cash Investing Activities: |  |  |  |
Non-cash additions to property, plant, and equipment |  | $ | 169 |  |  | $ | 128 |
Non-Cash Financing Activities: |  |  |  |
Issuance of Company common stock upon vesting of restricted stock units |  | $ | 3,203 |  |  | $ | 3,670 |
Dividends declared but unpaid |  | $ | 2,894 |  |  | $ | 2,753 |
Restricted Cash The Company's restricted cash 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. The following table provides a reconciliation of cash, cash equivalents, and restricted cash reported within the Company's condensed consolidated balance sheet that are shown in aggregate in the accompanying condensed consolidated statement of cash flows:
(In thousands) |  | April 3, 2021 |  | March 28, 2020 |  | January 2, 2021 |  | December 28, 2019
Cash and cash equivalents |  | $ | 65,982 |  |  | $ | 60,012 |  |  | $ | 65,682 |  |  | $ | 66,786 |
Restricted cash |  | 726 |  |  | 2,063 |  |  | 958 |  |  | 1,487 |
Total Cash, Cash Equivalents, and Restricted Cash |  | $ | 66,708 |  |  | $ | 62,075 |  |  | $ | 66,640 |  |  | $ | 68,273 |
Inventories The components of inventories are as follows:
|  | April 3, 2021 |  | January 2, 2021
(In thousands) |  |
Raw Materials |  | $ | 45,697 |  |  | $ | 46,413 |
Work in Process |  | 23,789 |  |  | 17,692 |
Finished Goods |  | 43,104 |  |  | 42,709 |
|  | $ | 112,590 |  |  | $ | 106,814 |
Intangible Assets, Net Acquired intangible assets by major asset class are as follows:
(In thousands) |  | Gross |  | Accumulated Amortization |  | Currency Translation |  | Net
April 3, 2021 |  |  |  |  |  |  |  |
Definite-Lived |  |  |  |  |  |  |  |
Customer relationships |  | $ | 173,728 |  |  | $ | (68,910) |  |  | $ | (1,760) |  |  | $ | 103,058 |
Product technology |  | 56,111 |  |  | (32,557) |  |  | (1,200) |  |  | 22,354 |
Tradenames |  | 6,027 |  |  | (3,054) |  |  | (325) |  |  | 2,648 |
Other |  | 18,248 |  |  | (14,569) |  |  | (541) |  |  | 3,138 |
|  | 254,114 |  |  | (119,090) |  |  | (3,826) |  |  | 131,198 |
Indefinite-Lived |  |  |  |  |  |  |  |
Tradenames |  | 24,100 |  |  | — |  |  | 236 |  |  | 24,336 |
Acquired Intangible Assets |  | $ | 278,214 |  |  | $ | (119,090) |  |  | $ | (3,590) |  |  | $ | 155,534 |
January 2, 2021 |  |  |  |  |  |  |  |
Definite-Lived |  |  |  |  |  |  |  |
Customer relationships |  | $ | 173,728 |  |  | $ | (65,488) |  |  | $ | (1,316) |  |  | $ | 106,924 |
Product technology |  | 56,111 |  |  | (31,655) |  |  | (1,005) |  |  | 23,451 |
Tradenames |  | 6,027 |  |  | (2,946) |  |  | (282) |  |  | 2,799 |
Other |  | 18,248 |  |  | (14,369) |  |  | (515) |  |  | 3,364 |
|  | 254,114 |  |  | (114,458) |  |  | (3,118) |  |  | 136,538 |
Indefinite-Lived |  |  |  |  |  |  |  |
Tradenames |  | 24,100 |  |  | — |  |  | 327 |  |  | 24,427 |
Acquired Intangible Assets |  | $ | 278,214 |  |  | $ | (114,458) |  |  | $ | (2,791) |  |  | $ | 160,965 |
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:
(In thousands) |  | Flow Control |  | Industrial Processing |  | Material Handling |  | Total
Balance at January 2, 2021 |  |  |  |  |  |  |  |
Gross balance |  | $ | 101,437 |  |  | $ | 215,881 |  |  | $ | 119,944 |  |  | $ | 437,262 |
Accumulated impairment losses |  | — |  |  | (85,509) |  |  | — |  |  | (85,509) |
Net balance |  | 101,437 |  |  | 130,372 |  |  | 119,944 |  |  | 351,753 |
2021 Adjustment |  |  |  |  |  |  |  |
Currency translation |  | (1,273) |  |  | (466) |  |  | (1,510) |  |  | (3,249) |
Total 2021 adjustment |  | (1,273) |  |  | (466) |  |  | (1,510) |  |  | (3,249) |
Balance at April 3, 2021 |  |  |  |  |  |  |  |
Gross balance |  | 100,164 |  |  | 215,415 |  |  | 118,434 |  |  | 434,013 |
Accumulated impairment losses |  | — |  |  | (85,509) |  |  | — |  |  | (85,509) |
Net balance |  | $ | 100,164 |  |  | $ | 129,906 |  |  | $ | 118,434 |  |  | $ | 348,504 |
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:
|  | Three Months Ended
(In thousands) |  | April 3, 2021 |  | March 28, 2020
Balance at Beginning of Year |  | $ | 7,064 |  |  | $ | 6,467 |
Provision charged to expense |  | 1,664 |  |  | 1,270 |
Usage |  | (1,361) |  |  | (1,365) |
Currency translation |  | (133) |  |  | (162) |
Balance at End of Period |  | $ | 7,234 |  |  | $ | 6,210 |
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:
|  | Three Months Ended |  |
|  | April 3, |  | March 28, |  |  |  |
(In thousands) |  | 2021 |  | 2020 |  |  |  |
Point in Time |  | $ | 154,417 |  |  | $ | 136,092 |  |  |  |  |
Over Time |  | 18,046 |  |  | 23,035 |  |  |  |  |
|  | $ | 172,463 |  |  | $ | 159,127 |  |  |  |  |
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:
|  | Three Months Ended |  |
|  | April 3, |  | March 28, |  |  |  |
(In thousands) |  | 2021 |  | 2020 |  |  |  |
Revenue by Product Type: |  |  |  |  |  |  |  |
Parts and Consumables |  | $ | 118,107 |  |  | $ | 105,098 |  |  |  |  |
Capital |  | 54,356 |  |  | 54,029 |  |  |  |  |
|  | $ | 172,463 |  |  | $ | 159,127 |  |  |  |  |
Revenue by Geography (based on customer location): |  |  |  |  |  |  |  |
North America |  | $ | 95,092 |  |  | $ | 93,823 |  |  |  |  |
Europe |  | 44,641 |  |  | 36,014 |  |  |  |  |
Asia |  | 21,813 |  |  | 15,908 |  |  |  |  |
Rest of World |  | 10,917 |  |  | 13,382 |  |  |  |  |
|  | $ | 172,463 |  |  | $ | 159,127 |  |  |  |  |
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:
|  | April 3, 2021 |  | January 2, 2021
(In thousands) |  |
Accounts Receivable |  | $ | 104,378 |  |  | $ | 91,540 |
Contract Assets |  | $ | 6,204 |  |  | $ | 7,576 |
Contract Liabilities |  | $ | 48,286 |  |  | $ | 39,269 |
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 $17,140,000 in the first three months of 2021 and $19,708,000 in the first three 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 April 3, 2021 was $16,990,000. The Company will recognize revenue for these performance obligations as they are satisfied, approximately 48% of which is expected to occur within the next twelve months and the remaining 52% 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 noninterest-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 $10,347,000 at April 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.

X
- References No definition available. + Details
Name: | us-gaap_AccountingPoliciesAbstract
Namespace Prefix: | us-gaap_
Data Type: | xbrli:stringItemType
Balance Type: | na
Period Type: | duration

X
- Definition The entire disclosure for the business description and accounting policies concepts. Business description describes the nature and type of organization including but not limited to organizational structure as may be applicable to holding companies, parent and subsidiary relationships, business divisions, business units, business segments, affiliates and information about significant ownership of the reporting entity. Accounting policies describe all significant accounting policies of the reporting entity. + References Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 275 -URI http://asc.fasb.org/topic&trid=2134479 Reference 2: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 235 -URI http://asc.fasb.org/topic&trid=2122369 + Details
Name: | us-gaap_BusinessDescriptionAndAccountingPoliciesTextBlock
Namespace Prefix: | us-gaap_
Data Type: | nonnum:textBlockItemType
Balance Type: | na
Period Type: | duration