| 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 technologies and engineered systems that drive Sustainable Industrial Processing. Its products and services play an integral role in enhancing efficiency, optimizing energy utilization, and maximizing productivity in process industries while helping customers advance their sustainability initiatives with products that reduce waste or generate more yield with fewer inputs, particularly fiber, energy, and water. Producing more while consuming less is a core aspect of Sustainable Industrial Processing and a major element of the strategic focus of the Company's three reportable operating segments: Flow Control, Industrial Processing, and Material Handling. Noncontrolling Interest One of the Company's foreign subsidiaries that manufactures fluid-handling products is part of a joint venture agreement with an Italian company in which each holds a 50% ownership interest. The agreement provides the Company's subsidiary with the option to purchase the remaining 50% interest in the joint venture. Principles of Consolidation The accompanying consolidated financial statements of the Company include the accounts of its wholly and majority-owned subsidiaries. All material intercompany accounts and transactions have been eliminated. Fiscal Year Typically, the Company's fiscal quarters and fiscal year consist of 13 and 52 weeks, respectively, ending on the Saturday closest to the end of the corresponding calendar quarter for its fiscal quarters and on the Saturday closest to December 31 for its fourth fiscal quarter and fiscal year. As a result of the difference between the fiscal and calendar periods, a 53rd week is added to the Company's fiscal year every five or six years. In a 53-week fiscal year, the Company's fourth fiscal quarter contains 14 weeks. The Company's fiscal year ended January 1, 2022 (fiscal 2021 or 2021) contained 52 weeks, its fiscal year ended January 2, 2021 (fiscal 2020 or 2020) contained 53 weeks, and its fiscal year ended December 28, 2019 (fiscal 2019 or 2019) contained 52 weeks. Each quarter of fiscal 2021, 2020 and 2019 contained 13 weeks, except the fourth quarter of 2020, which contained 14 weeks. The impact of the additional week in 2020 was not material to the Company's financial results. Financial Statement Presentation Certain reclassifications have been made to prior periods to conform with the current period presentation. On the consolidated statement of cash flows, the Company reclassified the change in customer deposits within operating activities from other current liabilities to a separate line item and the changes in long-term assets and liabilities from other items, net to other assets and other liabilities, respectively. Use of Estimates and Critical Accounting Policies The preparation of consolidated 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 consolidated 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 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 consolidated financial statements. Critical accounting policies are defined as those that entail significant judgments and estimates, and could potentially result in materially different results under different assumptions and conditions. The Company believes that the most critical accounting policies upon which its financial position depends, and which involve the most complex or subjective decisions or assessments, concern income taxes, revenue recognition, the valuation of goodwill and intangible assets, and inventories. A discussion of the application of these and other accounting policies is included within this note. Revenue Recognition The Company recognizes revenue in accordance with Accounting Standards Codification (ASC) 606, Revenue from Contracts with Customers (ASC 606). Most of the Company’s revenue is recognized at a point in time for each performance obligation under the contract when the customer obtains control of the goods or service. Most of the Company’s parts and consumables products and its capital products with minimal customization are accounted for at a point in time. The Company has made a policy election to not treat the obligation to ship as a separate performance obligation under the contract and, as a result, the associated shipping costs are reflected in the cost of revenue when revenue is recognized. The remaining portion of the Company's revenue is recognized over time 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: (In thousands) January 1, 2022 January 2, 2021 December 28, 2019 Point in Time $ 705,709 $ 557,702 $ 611,528 Over Time 80,870 77,326 93,116 $ 786,579 $ 635,028 $ 704,644 The transaction price includes estimated variable consideration where applicable. Such variable consideration relates to certain performance guarantees and rights to return the product. The Company estimates variable consideration as the most likely amount to which it expects to be entitled based on the terms of the contracts with customers and historical experience, where relevant. For contracts with multiple performance obligations, the transaction price is allocated to each performance obligation based on the relative stand-alone selling price. 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: (In thousands) January 1, 2022 January 2, 2021 December 28, 2019 Revenue by Product Type: Parts and Consumables $ 511,766 $ 417,545 $ 440,699 Capital 274,813 217,483 263,945 $ 786,579 $ 635,028 $ 704,644 Revenue by Geography (based on customer location): North America $ 420,382 $ 360,061 $ 386,952 Europe 220,578 161,527 180,888 Asia 103,810 72,268 84,705 Rest of World 41,809 41,172 52,099 $ 786,579 $ 635,028 $ 704,644 See Note 12 , Business Segment and Geographical Information, for information on the disaggregation of revenue by reportable operating segment. The following table presents contract balances from contracts with customers: (In thousands) January 1, 2022 January 2, 2021 Contract Assets $ 8,626 $ 7,576 Contract Liabilities $ 77,004 $ 39,269 Contract assets in the accompanying consolidated balance sheet 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 short- and long-term customer deposits, advanced billings, and deferred revenue. Deferred revenue is included in other current liabilities and long-term customer deposits are included in other long-term liabilities in the accompanying 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. Contract liabilities increased at year end 2021 principally due to capital equipment orders in the Industrial Processing segment's wood processing business, which the Company expects to recognize as revenue through 2023. The Company recognized revenue of $33,128,000 in 2021 and $30,426,000 in 2020 that was included in the contract liabilities balance at the beginning of 2021 and 2020, respectively. The majority of the Company's contracts for capital equipment have an original expected duration of one year or less. Certain capital contracts require longer lead times and could take up to 24 months to complete. For contracts with an original expected duration of over one year, the aggregate amount of the transaction price allocated to the remaining unsatisfied or partially unsatisfied performance obligations as of year-end 2021 was $37,905,000. The Company will recognize revenue for these performance obligations as they are satisfied, approximately 50% of which is expected to occur within the next twelve months and the remaining 50% after December 31, 2022. Customers in China will often settle their accounts receivable with banker's acceptance drafts, in which case cash settlement will be delayed until the drafts mature or are settled prior to maturity. For customers outside of China, final payment for the majority of the Company's products is received in the quarter following the product shipment. Certain of the Company's contracts include a longer period before final payment is due, which is typically within one year of final shipment or transfer of control to the customer. The Company includes in revenue amounts invoiced for shipping and handling with the corresponding costs reflected in cost of revenue. Provisions for discounts, warranties, returns and other adjustments are provided for in the period in which the related sale was recorded. Sales taxes, value-added taxes, and certain excise taxes collected from customers and remitted to governmental authorities are accounted for on a net basis and therefore are excluded from revenue. Accounts Receivable and Allowance for Credit Losses Accounts receivable arise from sales on credit to customers, are recorded at the invoiced amount, and do not bear interest. The Company establishes an allowance for credit losses to reduce accounts receivable to the net amount expected to be collected. The Company exercises judgment in determining its allowance for credit losses, which is based on its historical collection and write-off experience, adjusted for current macroeconomic trends and conditions, credit policies, specific customer collection issues, and accounts receivable aging. The Company performs ongoing credit evaluations of its customers and adjusts credit limits based upon payment history and each customer's current creditworthiness. The Company continuously monitors collections and payments from its customers. Account balances are charged off against the allowance when the Company believes it is probable the receivable will not be recovered. In some instances, the Company utilizes letters of credit to mitigate its credit exposure. The changes in the allowance for credit losses are as follows: (In thousands) January 1, 2022 January 2, 2021 December 28, 2019 Balance at Beginning of Year $ 2,977 $ 2,698 $ 2,897 Provision charged to expense 5 356 114 Accounts written off (178) (266) (263) Currency translation (69) 189 (50) Balance at End of Year $ 2,735 $ 2,977 $ 2,698 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 generally 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 $8,049,000 at year-end 2021 and $9,445,000 at year-end 2020, are included in accounts receivable in the accompanying 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. 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 the 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. While the Company engages in extensive product quality programs and processes, the Company's warranty obligation is affected by product failure rates, repair costs, service delivery costs incurred in correcting a product failure, and supplier warranties on parts delivered to the Company. Should these factors or actual results differ from the Company's estimates, revisions to the estimated warranty liability would be required. The Company's liability for warranties is included in other current liabilities in the accompanying consolidated balance sheet. The changes in the carrying amount of product warranty obligations are as follows: (In thousands) January 1, 2022 January 2, 2021 Balance at Beginning of Year $ 7,064 $ 6,467 Provision charged to expense 4,366 5,555 Usage (4,268) (5,439) Acquisitions 429 — Currency translation (293) 481 Balance at End of Year $ 7,298 $ 7,064 Leases In accordance with ASC 842, Leases (ASC 842), the Company determines whether an arrangement is, or contains, a lease at inception. Operating lease liabilities are included in other current liabilities and other long-term liabilities and the corresponding right-of use (ROU) assets are included in other assets in the accompanying consolidated balance sheet. Classification of operating lease liabilities as either current or noncurrent is based on the expected timing of payments due under the Company’s lease obligations. ROU assets represent the Company’s right to use an underlying asset for the lease term and lease liabilities represent the Company’s obligation to make lease payments arising from the lease. Operating lease ROU assets and liabilities with original contract terms greater than 12 months are recognized based on the present value of the future minimum lease payments over the lease term at the commencement date. Operating leases with an original term of 12 months or less are not recorded in the accompanying consolidated balance sheet. In determining the present value of future lease payments, the Company utilizes either the rate implicit in the lease if that rate is readily determinable or its incremental secured borrowing rate commensurate with the term of the underlying lease. Lease terms may include the effect of options to extend or terminate the lease when it is reasonably certain that the Company will exercise that option. The Company recognizes operating lease expense for lease payments on a straight-line basis over the lease term. Variable lease costs are not included in fixed lease payments and, as a result, are excluded from the measurement of the ROU assets and lease liabilities. The Company expenses all variable lease costs as incurred, which were not material in 2021 and 2020. As a lessee, the Company accounts for the lease and non-lease components of its real estate and equipment leases as a single lease component. For vehicle leases, the Company does not combine lease and non-lease components. See Note 9 , Leases, for additional information about the Company's lease obligations. Income Taxes In accordance with ASC 740, Income Taxes (ASC 740), the Company recognizes deferred income taxes based on the expected future tax consequences of differences between the financial statement basis and the tax basis of assets and liabilities, calculated using enacted tax rates in effect for the year in which these differences are expected to reverse. A tax valuation allowance is established, as needed, to reduce deferred tax assets to the amount expected to be realized. In the period in which it becomes more likely than not that some or all of the deferred tax assets will be realized, the valuation allowance will be adjusted. It is the Company's policy to provide for uncertain tax positions and the related interest and penalties based upon management's assessment of whether a tax benefit is more likely than not to be sustained upon examination by tax authorities. The Company recognizes accrued interest and penalties related to unrecognized tax benefits in the provision for income taxes. At January 1, 2022, the Company believes that it has appropriately accounted for any liability for unrecognized tax benefits. To the extent the Company prevails in matters for which a liability for an unrecognized tax benefit is established, the statute of limitations expires for a tax jurisdiction year, or the Company is required to pay amounts in excess of the liability, its effective tax rate in a given financial statement period may be affected. Earnings per Share Basic earnings per share (EPS) is computed by dividing net income attributable to Kadant by the weighted average number of shares outstanding during the year. Diluted EPS is computed using the treasury stock method assuming the effect of all potentially dilutive securities, including stock options, restricted stock units (RSUs) and employee stock purchase plan shares. Cash, Cash Equivalents, and Restricted Cash At year-end 2021 and year-end 2020, cash equivalents included investments in money market funds and highly liquid short-term investments, which had maturities of three months or less at the date of purchase. The carrying amounts of cash equivalents approximate their fair values due to the short-term nature of these instruments. 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 these restrictions will expire over the next twelve months. The following table provides a reconciliation of cash, cash equivalents, and restricted cash reported within the accompanying consolidated balance sheet that are shown in aggregate in the consolidated statement of cash flows: (In thousands) January 1, 2022 January 2, 2021 December 28, 2019 Cash and cash equivalents $ 91,186 $ 65,682 $ 66,786 Restricted cash 2,975 958 1,487 Total Cash, Cash Equivalents, and Restricted Cash $ 94,161 $ 66,640 $ 68,273 Supplemental Cash Flow Information (In thousands) January 1, 2022 January 2, 2021 December 28, 2019 Cash Paid for Interest $ 4,441 $ 6,899 $ 12,344 Cash Paid for Income Taxes, Net of Refunds $ 24,174 $ 17,506 $ 24,533 Non-Cash Investing Activities: Fair value of assets acquired $ 190,977 $ 9,295 $ 207,223 Cash paid for acquired businesses (152,661) (7,565) (179,693) Liabilities Assumed of Acquired Businesses $ 38,316 $ 1,730 $ 27,530 Non-cash additions to property, plant, and equipment $ 363 $ 1,060 $ 626 Non-Cash Financing Activities: Issuance of Company common stock upon vesting of RSUs $ 4,108 $ 4,781 $ 4,100 Dividends declared but unpaid $ 2,905 $ 2,770 $ 2,628 Inventories Inventories are stated at the lower of cost (on a first-in, first-out; or weighted average basis) or net realizable value and include materials, labor, and manufacturing overhead. The Company regularly reviews its quantities of inventories on hand and compares these amounts to the historical and forecasted usage of and demand for each particular product or product line. The Company records a charge to cost of revenue for excess and obsolete inventory to reduce the carrying value of inventories to net realizable value. The components of inventories are as follows: (In thousands) January 1, 2022 January 2, 2021 Raw Materials $ 59,177 $ 46,413 Work in Process 29,448 17,692 Finished Goods (includes $1,163 and $427 at customer locations) 45,731 42,709 $ 134,356 $ 106,814 Property, Plant, and Equipment Property, plant, and equipment are stated at cost. Assets acquired as part of a business combination are initially recorded at fair value. The costs of additions and improvements are capitalized, while maintenance and repairs are charged to expense as incurred. The Company provides for depreciation and amortization primarily using the straight-line method over the estimated useful lives of the property as follows: buildings, 10 to 40 years; machinery and equipment, 2 to 10 years; and leasehold improvements, the shorter of the term of the lease or the life of the asset. For construction in progress, no provision for depreciation is made until the assets are available and ready for use. Property, plant, and equipment consist of the following: (In thousands) January 1, 2022 January 2, 2021 Land $ 11,011 $ 7,676 Buildings 67,787 60,702 Machinery, Equipment, and Leasehold Improvements 136,656 120,804 Construction in Progress 6,567 3,292 222,021 192,474 Less: Accumulated Depreciation and Amortization 114,032 107,832 $ 107,989 $ 84,642 Depreciation and amortization expense was $13,433,000 in 2021, $12,209,000 in 2020, and $12,236,000 in 2019. See Note 9 , Leases, for further details relating to assets under financing leases included in property, plant and equipment in the accompanying consolidated balance sheet. Intangible Assets, Net Acquired intangible assets by major asset class are as follows: (In thousands) Gross Accumulated Currency Net January 1, 2022 Definite-Lived Customer relationships $ 217,021 $ (79,839) $ (3,455) $ 133,727 Product technology 67,230 (35,833) (1,752) 29,645 Tradenames 7,427 (3,405) (373) 3,649 Other 20,210 (16,250) (561) 3,399 311,888 (135,327) (6,141) 170,420 Indefinite-Lived Tradenames 29,059 — (136) 28,923 Acquired Intangible Assets $ 340,947 $ (135,327) $ (6,277) $ 199,343 (In thousands) Gross Accumulated Currency Net 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 Gross intangible assets include $63,228,000 for acquired intangible assets from acquisitions that occurred in 2021. See Note 2 , Acquisitions, for further details. In connection with its impairment analysis, the Company reduced its definite-lived intangible assets by $499,000 in 2021 and definite and indefinite-lived intangible assets by $1,861,000 in 2020. Additionally, the Company reclassified $1,300,000 of an indefinite-lived tradename to definite-lived in 2020. See Impairment of Long-Lived Assets under the heading Intangible Assets within this note for further details. 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 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. Definite-lived intangible assets as of year-end 2021 have a weighted average amortization period of 13 years. Amortization of definite-lived intangible assets was $20,869,000 in 2021, $19,125,000 in 2020, and $20,154,000 in 2019 and was included in selling, general, and administrative (SG&A) expenses in the accompanying consolidated statement of income. The estimated future amortization expense of definite-lived intangible assets is $20,994,000 in 2022; $18,725,000 in 2023; $17,830,000 in 2024; $15,754,000 in 2025; $15,119,000 in 2026; and $81,998,000 in the aggregate thereafter. Goodwill Goodwill represents the excess of the cost of an acquisition over the fair value of the identifiable net assets of the acquired business at the date of acquisition. The Company’s acquisitions have historically been made at prices above the fair value of the acquired net assets, resulting in goodwill, due to the expectation of synergies from combining the businesses. The changes in the carrying amount of goodwill by segment are as follows: (In thousands) Flow Control Industrial Processing Material Handling Total Balance as of December 28, 2019 Gross balance $ 97,680 $ 207,536 $ 116,325 $ 421,541 Accumulated impairment losses — (85,509) — (85,509) Net balance 97,680 122,027 116,325 336,032 2020 Activity Acquisition (Note 2) — 3,953 — 3,953 Currency translation 3,757 4,392 3,619 11,768 Total 2020 activity 3,757 8,345 3,619 15,721 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 Activity Acquisitions (Note 2) 25,805 1,116 26,836 53,757 Currency translation (3,653) (2,015) (2,955) (8,623) Total 2021 activity 22,152 (899) 23,881 45,134 Balance at January 1, 2022 Gross balance 123,589 214,982 143,825 482,396 Accumulated impairment losses — (85,509) — (85,509) Net balance $ 123,589 $ 129,473 $ 143,825 $ 396,887 Impairment of Long-Lived Assets The Company evaluates the recoverability of goodwill and indefinite-lived intangible assets as of the end of each fiscal year, or more frequently if events or changes in circumstances indicate that it is more likely than not that the carrying value of an asset might be impaired. Potential impairment indicators include a significant decline in sales, earnings, or cash flows, material adverse changes in the business climate, and a significant decline in the market capitalization due to a sustained decrease in the Company's stock price. The Company assesses its definite-lived intangible assets for impairment whenever facts and circumstances indicate that the carrying amounts may not be fully recoverable. To analyze recoverability, the Company projects undiscounted net future cash flows over the remaining lives of such assets or asset groups. If these projected cash flows were to be less than the carrying amounts, an impairment loss would be recognized, resulting in a write-down of the assets with a corresponding charge to earnings. The impairment loss would be measured based upon the difference between the carrying amounts of the assets and their fair values calculated using projected discounted cash flows. Goodwill At year-end 2021 and 2020, in connection with its annual impairment analysis, the Company performed a qualitative goodwill impairment assessment (Step 0) for each of its reporting units, except the material handling reporting unit in 2020 discussed below, which indicated that the fair value of each reporting unit exceeded its carrying value, and determined that the assets were not impaired. The impairment analysis included an assessment of certain qualitative factors including, but not limited to, the results of prior fair value calculations, the movement of the Company's share price and market capitalization, the reporting units' and the Company's overall financial performance, and macroeconomic and industry conditions. The Company considered the qualitative factors and weighed the evidence obtained and determined that it was not more likely than not that the fair value of any of the respective reporting unit's assets was less than its carrying amount. Although the Company believes the factors considered in the impairment analysis are reasonable, significant changes in any one of the assumptions used could have produced a different result. In March 2020, the Company experienced a significant decrease in market capitalization due to a decline in the Company’s stock price. During that time, the U.S. stock market also declined significantly amid market volatility driven by the uncertainty surrounding the COVID-19 pandemic. Based on these occurrences, the Company concluded that a triggering event had occurred related to the indefinite-lived assets within its material handling reporting unit. As a result, for each reporting period in 2020, the Company prepared a quantitative impairment analysis (Step 1) for its material handling reporting unit, which indicated that its fair value exceeded its carrying value and the indefinite-lived assets were not impaired. Goodwill by reporting unit is as follows: (In thousands) January 1, 2022 January 2, 2021 Fluid-Handling $ 64,003 $ 65,755 Doctoring, Cleaning, & Filtration 59,586 35,682 Stock-Preparation 20,819 19,685 Wood Processing 108,654 110,687 Material Handling 143,825 119,944 $ 396,887 $ 351,753 Intangible Assets At year-end 2021 and 2020, the Company performed a qualitative impairment analysis on its indefinite-lived intangible assets and determined that the assets were not impaired. No triggering events or indicators of impairment were identified in 2021 or 2020 related to the Company's definite-lived intangible assets, except for the definite-lived intangible assets associated with its existing ceramic blade product line in France in 2021 and its timber-harvesting product line in 2020 both discussed below. In the fourth quarter of 2021, the Company decided to exit its ceramic blade business in France, which became a redundant manufacturing operation as a result of its acquisition of The Clouth Group of Companies in the third quarter of 2021. The Company expects to cease production in June 2022 and exit the facility by the end of 2022. As a result of this decision, the Company recorded an impairment charge of $499,000 in the fourth quarter of 2021 related to its product technology intangible asset. In the fourth quarter of 2020, due to the continued and anticipated decline in demand for the Company's timber-harvesting business' products, and following impairment charges totaling $2,336,000 in 2019 related to this business, the Company performed a quantitative analysis of the recoverability of the related intangible assets in which the income approach discounted cash flow methodology was used. As a result of this analysis, the Company determined that the fair values of the timber-harvesting product line's definite-lived intangible assets related to customer relationships, product technology and tradename were less than their carrying values, and therefore recorded additional impairment charges totaling $1,861,000 in the fourth quarter of 2020. The remaining intangible asset as of year-end 2021 for the timber-harvesting product line is $443,000. Impairment charges for 2021, 2020 and 2019 are included in impairment and other costs, net in the accompanying consolidated statement of income. Business Combinations The Company's acquisitions have been accounted for using the purchase method of accounting under ASC 805, Business Combinations (ASC 805), and the results of the acquired businesses have been included in its consolidated financial statements from their respective dates of acquisition. The Company accounts for all transactions and events in which it obtains control over a business under ASC 805 by establishing the acquisition date and recognizing the fair value of all assets acquired and liabilities assumed. The Company’s acquisitions have historically been made at prices above the fair value of identifiable net assets, resulting in goodwill, due to synergies expected to be realized by combining the bu |
