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 segments consisting of the Flow Control segment, Industrial Processing segment, and Material Handling segment.

The interim condensed consolidated financial statements and related notes presented have been prepared by the Company, are unaudited, and, in the opinion of management, reflect all adjustments of a normal recurring nature necessary for a fair statement of the Company's financial position at June 28, 2025, its results of operations, comprehensive income, and stockholders' equity for the three- and six-month periods ended June 28, 2025 and June 29, 2024, and its cash flows for the six-month periods ended June 28, 2025 and June 29, 2024. 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 December 28, 2024 has been derived from the consolidated financial statements contained in the Company's Annual Report on Form 10-K for the fiscal year ended December 28, 2024 (Annual Report). 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 Annual Report.

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 Annual Report describes the significant accounting estimates and policies used in preparation of the consolidated financial statements. There have been no material changes in the Company’s significant accounting policies during the six months ended June 28, 2025.


	Six Months Ended
(In thousands)	June 28, 2025		June 29, 2024
Cash Paid for Interest	$	6,993	$	9,703
Cash Paid for Income Taxes, Net of Refunds	$	23,825	$	23,286

Non-Cash Investing Activities:
Fair value of assets acquired	$	—	$	341,105
Fair value of liabilities assumed	$	—	$	31,894
Fair value of noncontrolling interest acquired	$	—	$	9,319

Purchases of property, plant, and equipment in accounts payable	$	1,090	$	618

The Company's restricted cash generally serves as collateral 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 and for certain banker's acceptance drafts issued to vendors. The majority of these restrictions will expire over the next twelve months.


(In thousands)	Gross		Accumulated Amortization		Currency Translation		Net
June 28, 2025
Definite-Lived
Customer relationships	$	334,168	$	(136,922)	$	(4,440)	$	192,806
Product technology	92,206		(52,084)		(2,171)		37,951
Tradenames	16,534		(5,530)		(369)		10,635
Other	25,221		(22,020)		(588)		2,613
	468,129		(216,556)		(7,568)		244,005
Indefinite-Lived
Tradenames	29,059		—		(91)		28,968
Acquired Intangible Assets	$	497,188	$	(216,556)	$	(7,659)	$	272,973


(In thousands)	Gross		Accumulated Amortization		Currency Translation		Net
December 28, 2024
Definite-Lived
Customer relationships	$	334,066	$	(127,664)	$	(8,607)	$	197,795
Product technology	92,106		(49,294)		(3,245)		39,567
Tradenames	16,536		(5,084)		(481)		10,971
Other	25,221		(21,280)		(668)		3,273
	467,929		(203,322)		(13,001)		251,606
Indefinite-Lived
Tradenames	29,059		—		(1,171)		27,888
Acquired Intangible Assets	$	496,988	$	(203,322)	$	(14,172)	$	279,494

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.


(In thousands)	Flow Control		Industrial Processing		Material Handling		Total
Balance at December 28, 2024
Gross balance	$	132,205	$	243,066	$	189,436	$	564,707
Accumulated impairment losses	—		(85,538)		—		(85,538)
Net balance	132,205		157,528		189,436		479,169
2025 Activity

Measurement period adjustments for 2024 acquisitions	(173)		—		321		148
Currency translation	7,598		5,856		5,053		18,507
Total 2025 activity	7,425		5,856		5,374		18,655
Balance at June 28, 2025
Gross balance	139,630		248,922		194,810		583,362
Accumulated impairment losses	—		(85,538)		—		(85,538)
Net balance	$	139,630	$	163,384	$	194,810	$	497,824

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.

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 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 equipment 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.


	Three Months Ended				Six Months Ended
	June 28,		June 29,		June 28,		June 29,
(In thousands)	2025		2024		2025		2024
Revenue by Product Type:
Parts and consumables	$	181,783	$	172,745	$	361,091	$	343,875
Capital	73,484		102,020		133,386		179,865
	$	255,267	$	274,765	$	494,477	$	523,740

Revenue by Geography (based on customer location):
North America	$	157,968	$	172,543	$	317,838	$	329,034
Europe	63,230		63,193		112,571		118,980
Asia	20,941		24,970		39,643		47,524
Rest of world	13,128		14,059		24,425		28,202
	$	255,267	$	274,765	$	494,477	523,740

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 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 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 $13,238,000 in the second quarter of 2025 and $23,473,000 in the second quarter of 2024, and $30,797,000 in the first six months of 2025 and $57,139,000 in the first six months of 2024 that was included in the contract liabilities balance at the beginning of 2025 and 2024, respectively. The majority of the Company's contracts for capital equipment have an original expected duration of one year or less. Certain capital equipment contracts require longer lead times and could take up to 24 months to complete. For contracts with an original expected duration of over one year, the aggregate amount of the transaction price allocated to the remaining unsatisfied or partially unsatisfied performance obligations was $34,055,000 as of June 28, 2025. The Company will recognize revenue for these performance obligations as they are satisfied, approximately 51% of which is expected to occur within the next twelve months and the remaining 49% thereafter.

The Company entered into several agreements with the local government in China, which became effective in the first quarter of 2022, to sell its then existing manufacturing building and land use rights at one of its subsidiaries in China within its Industrial Processing segment for $25,159,000 and relocate to a new facility (China Transaction). The Company received a 31% down payment and the remaining amount was due on the earlier of the sale of the property by the local government or two years from the effective date of the agreements. Since December 2024, the government has paid $1,383,000 and the remaining outstanding receivable was $13,942,000 as of June 28, 2025, which is included in other current assets in the accompanying condensed consolidated balance sheet. The Company expects this receivable will be repaid in full, although the timing is uncertain.

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 $6,287,000 at June 28, 2025 and $5,299,000 at December 28, 2024, are included in accounts receivable in the accompanying condensed consolidated balance sheet until the subsidiary sells the drafts to a bank and receives a discounted amount, transfers the banker's acceptance drafts in settlement of current accounts payable prior to maturity, or obtains cash payment on the scheduled maturity date.

In accordance with Accounting Standards Codification (ASC) 740, Income Taxes (ASC 740), the Company recognizes deferred income taxes based on the expected future tax consequences of differences between the financial statement basis and the tax basis of assets and liabilities, calculated using enacted tax rates in effect for the year in which these differences are expected to reverse. 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 June 28, 2025, the Company believes that it has appropriately accounted for any liability for unrecognized tax benefits. To the extent the Company prevails in matters for which a liability for an unrecognized tax benefit is established, the statute of limitations expires for a tax jurisdiction year, or the Company is required to pay amounts in excess of the liability, its effective tax rate in a given financial statement period may be affected.

In December 2021, the Organisation for Economic Co-operation and Development (OECD) released model rules introducing a new 15% global minimum tax for large multinational enterprises with an annual global revenue exceeding 750,000,000 euros (Pillar Two Rules). Since the release of the Pillar Two Rules, the OECD has issued four tranches of administrative guidance, as well as guidance on transitional safe harbor relief. Various countries, including the member states of the European Union, have adopted the Pillar Two Rules into their domestic laws, with certain rules coming into effect beginning in fiscal 2024. Some countries are in the process of drafting legislation for adoption in future years. While the Pillar Two Rules serve as a framework for implementing the minimum tax, countries may enact domestic laws that vary slightly from the Pillar Two Rules and may also adjust domestic tax incentives to align with the Pillar Two Rules on different timelines. The Company continues to monitor developments of the Pillar Two Rules and evaluate the potential impact they may have on the jurisdictions in which it operates, including eligibility to qualify for transitional safe harbor relief. To date, the Pillar Two Rules have not had a material impact on the Company's effective tax rate or consolidated financial statements, and the Company does not expect the Pillar Two Rules to have a material impact on its effective tax rate or consolidated financial statements for the fiscal year ending January 3, 2026.

On July 4, 2025, the One Big Beautiful Bill Act (OBBBA) was enacted in the U.S. The OBBBA includes significant provisions, such as the permanent extension of certain expiring provisions of the Tax Cuts and Jobs Act, modifications to the international tax framework and the restoration of favorable tax treatment for certain business provisions. The Company is currently assessing the impact of OBBBA on its consolidated financial statements.

Income Taxes – Improvements to Income Tax Disclosures (Topic 740). In December 2023, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No. 2023-09, to improve income tax disclosure requirements, primarily through enhanced disclosures related to the income tax rate reconciliation and income taxes paid. This ASU is effective for fiscal year-end 2025, with early adoption permitted and may be applied retrospectively. The Company is currently evaluating the effects that the adoption of this ASU will have on its consolidated financial statements.