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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)

☒ | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 27, 2025
OR

☐ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ________ to _________
Commission file number 001-11406
KADANT INC.
(Exact name of registrant as specified in its charter)

Delaware |  | 52-1762325
(State or other jurisdiction of incorporation or organization) |  | (I.R.S. Employer Identification No.)

One Technology Park Drive
Westford, Massachusetts 01886
(Address of principal executive offices, including zip code)
(978) 776-2000
(Registrant's telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Securities Exchange Act of 1934:

Title of each class |  | Trading Symbol(s) |  | Name of each exchange on which registered
Common Stock, $.01 par value |  | KAI |  | New York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of "large accelerated filer", "accelerated filer", "smaller reporting company", and "emerging growth company" in Rule 12b-2 of the Exchange Act.

Large accelerated filer | ☒ |  | Accelerated filer | ☐
Non-accelerated filer | ☐ |  | Smaller reporting company | ☐
|  |  | Emerging growth company | ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒
As of October 24, 2025, the registrant had 11,778,135 shares of common stock outstanding.

Table of Contents
Kadant Inc.
Report on Form 10-Q
For the Quarterly Period Ended September 27, 2025
Table of Contents

|  | Page
PART I: Financial Information
Item 1. | Financial Statements (unaudited) |
| Condensed Consolidated Balance Sheet as of September 27, 2025 and December 28, 2024 | 3
| Condensed Consolidated Statement of Income for the three- and nine-month periods ended September 27, 2025 and September 2 8, 2024 | 4
| Condensed Consolidated Statement of Comprehensive Income for the three- and nine-month periods ended September 2 7, 2025 and September 2 8, 2024 | 5
| Condensed Consolidated Statement of Cash Flows for the nine-month periods ended September 2 7, 2025 and September 2 8, 2024 | 6
| Condensed Consolidated Statement of Stockholders' Equity for the three- and nine-month periods ended September 2 7, 2025 and September 2 8, 2024 | 7
| Notes to Condensed Consolidated Financial Statements | 8
Item 2. | Management's Discussion and Analysis of Financial Condition and Results of Operations | 23
Item 3. | Quantitative and Qualitative Disclosures About Market Risk | 34
Item 4. | Controls and Procedures | 34
PART II: Other Information
Item 1A. | Risk Factors | 34
Item 5. | Other Information | 36
Item 6. | Exhibits | 36

Table of Contents
PART 1 – FINANCIAL INFORMATION
Item 1 – Financial Statements
KADANT INC.
Condensed Consolidated Balance Sheet
(Unaudited)

|  | September 27, 2025 |  | December 28, 2024
(In thousands, except share and per share amounts) |  |
Assets |  |  |  |
Current Assets: |  |  |  |
Cash and cash equivalents |  | $ | 124,493 |  |  | $ | 94,660 |
Restricted cash |  | 2,420 |  |  | 1,286 |
Accounts receivable, net of allowances of $5,508 and $4,403 |  | 158,781 |  |  | 142,462 |
Inventories |  | 179,705 |  |  | 146,092 |
Contract assets |  | 9,866 |  |  | 18,408 |
Other current assets |  | 44,696 |  |  | 39,418 |
Total Current Assets |  | 519,961 |  |  | 442,326 |
Property, Plant, and Equipment, net of accumulated depreciation of $164,461 and $145,359 |  | 177,381 |  |  | 170,331 |
Other Assets |  | 67,029 |  |  | 59,025 |
Intangible Assets, Net (Note 1) |  | 270,775 |  |  | 279,494 |
Goodwill (Note 1) |  | 497,088 |  |  | 479,169 |
Total Assets |  | $ | 1,532,234 |  |  | $ | 1,430,345 |
Liabilities and Stockholders' Equity |  |  |  |
Current Liabilities: |  |  |  |
Current maturities of long-term obligations (Note 5) |  | $ | 3,386 |  |  | $ | 3,376 |
Accounts payable |  | 50,625 |  |  | 51,062 |
Accrued payroll and employee benefits |  | 45,539 |  |  | 43,815 |
Accrued warranty costs |  | 10,389 |  |  | 10,664 |
Customer deposits |  | 49,124 |  |  | 35,887 |
Advanced billings |  | 9,280 |  |  | 7,641 |
Other current liabilities |  | 44,172 |  |  | 39,120 |
Total Current Liabilities |  | 212,515 |  |  | 191,565 |
Long-Term Obligations (Note 5) |  | 254,619 |  |  | 285,151 |
Long-Term Deferred Income Taxes |  | 46,029 |  |  | 41,850 |
Other Long-Term Liabilities |  | 57,564 |  |  | 53,651 |
Commitments and Contingencies (Note 10) |  |  |  |
Stockholders' Equity: |  |  |  |
Preferred stock, $.01 par value, 5,000,000 shares authorized; none issued |  | — |  |  | — |
Common stock, $.01 par value, 150,000,000 shares authorized; 14,624,159 shares issued |  | 146 |  |  | 146 |
Capital in excess of par value |  | 133,912 |  |  | 130,180 |
Retained earnings |  | 925,624 |  |  | 859,693 |
Treasury stock at cost, 2,846,024 and 2,878,080 shares |  | (69,738) |  |  | (70,524) |
Accumulated other comprehensive items (Note 7) |  | (40,097) |  |  | (72,368) |
Total Kadant Stockholders' Equity |  | 949,847 |  |  | 847,127 |
Noncontrolling interests |  | 11,660 |  |  | 11,001 |
Total Stockholders' Equity |  | 961,507 |  |  | 858,128 |
Total Liabilities and Stockholders' Equity |  | $ | 1,532,234 |  |  | $ | 1,430,345 |

The accompanying notes are an integral part of these condensed consolidated financial statements.
3

Table of Contents
KADANT INC.
Condensed Consolidated Statement of Income
(Unaudited)

|  | Three Months Ended |  | Nine Months Ended
|  | September 27, 2025 |  | September 28, 2024 |  | September 27, 2025 |  | September 28, 2024
(In thousands, except per share amounts) |  |  |  |
Revenue (Notes 1 and 9) |  | $ | 271,567 |  |  | $ | 271,614 |  |  | $ | 766,044 |  |  | $ | 795,354 |
Costs and Operating Expenses: |  |  |  |  |  |  |  |
Cost of revenue |  | 148,906 |  |  | 150,175 |  |  | 416,011 |  |  | 441,066 |
Selling, general, and administrative expenses |  | 75,839 |  |  | 69,043 |  |  | 221,001 |  |  | 209,352 |
Research and development expenses |  | 3,919 |  |  | 3,409 |  |  | 11,166 |  |  | 10,621 |
Other costs |  | 287 |  |  | — |  |  | 287 |  |  | — |
|  | 228,951 |  |  | 222,627 |  |  | 648,465 |  |  | 661,039 |
Operating Income |  | 42,616 |  |  | 48,987 |  |  | 117,579 |  |  | 134,315 |
Interest Income |  | 373 |  |  | 407 |  |  | 1,329 |  |  | 1,386 |
Interest Expense |  | (3,089) |  |  | (5,516) |  |  | (10,249) |  |  | (15,386) |
Other Expense, Net |  | (19) |  |  | (16) |  |  | (52) |  |  | (48) |
Income Before Provision for Income Taxes |  | 39,881 |  |  | 43,862 |  |  | 108,607 |  |  | 120,267 |
Provision for Income Taxes (Note 4) |  | 11,766 |  |  | 11,964 |  |  | 29,416 |  |  | 31,810 |
Net Income |  | 28,115 |  |  | 31,898 |  |  | 79,191 |  |  | 88,457 |
Net Income Attributable to Noncontrolling Interests |  | (393) |  |  | (312) |  |  | (1,247) |  |  | (891) |
Net Income Attributable to Kadant |  | $ | 27,722 |  |  | $ | 31,586 |  |  | $ | 77,944 |  |  | $ | 87,566 |
Earnings per Share Attributable to Kadant (Note 3) |  |  |  |  |  |  |  |
Basic |  | $ | 2.35 |  |  | $ | 2.69 |  |  | $ | 6.62 |  |  | $ | 7.46 |
Diluted |  | $ | 2.35 |  |  | $ | 2.68 |  |  | $ | 6.61 |  |  | $ | 7.44 |
Weighted Average Shares (Note 3) |  |  |  |  |  |  |  |
Basic |  | 11,777 |  |  | 11,745 |  |  | 11,771 |  |  | 11,737 |
Diluted |  | 11,802 |  |  | 11,780 |  |  | 11,790 |  |  | 11,763 |

The accompanying notes are an integral part of these condensed consolidated financial statements.
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Table of Contents
KADANT INC.
Condensed Consolidated Statement of Comprehensive Income
(Unaudited)

|  | Three Months Ended |  | Nine Months Ended
|  | September 27, 2025 |  | September 28, 2024 |  | September 27, 2025 |  | September 28, 2024
(In thousands) |  |  |  |
Net Income |  | $ | 28,115 |  |  | $ | 31,898 |  |  | $ | 79,191 |  |  | $ | 88,457 |
Other Comprehensive Items: |  |  |  |  |  |  |  |
Foreign currency translation adjustment |  | (2,552) |  |  | 13,643 |  |  | 32,495 |  |  | (1,781) |
Post-retirement liability adjustments, net (net of tax of $1, $2, $4 and $3) |  | 2 |  |  | 4 |  |  | 13 |  |  | 7 |
Deferred gain on cash flow hedges (net of tax of $0, $0, $0 and $13) |  | — |  |  | — |  |  | — |  |  | 38 |
Other comprehensive items |  | (2,550) |  |  | 13,647 |  |  | 32,508 |  |  | (1,736) |
Comprehensive Income |  | 25,565 |  |  | 45,545 |  |  | 111,699 |  |  | 86,721 |
Comprehensive Income Attributable to Noncontrolling Interests |  | (387) |  |  | (378) |  |  | (1,484) |  |  | (871) |
Comprehensive Income Attributable to Kadant |  | $ | 25,178 |  |  | $ | 45,167 |  |  | $ | 110,215 |  |  | $ | 85,850 |

The accompanying notes are an integral part of these condensed consolidated financial statements.
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Table of Contents
KADANT INC.
Condensed Consolidated Statement of Cash Flows
(Unaudited)

|  | Nine Months Ended
|  | September 27, 2025 |  | September 28, 2024
(In thousands) |  |
Operating Activities |  |  |  |
Net income attributable to Kadant |  | $ | 77,944 |  |  | $ | 87,566 |
Net income attributable to noncontrolling interests |  | 1,247 |  |  | 891 |
Net income |  | 79,191 |  |  | 88,457 |
Adjustments to reconcile net income to net cash provided by operating activities: |  |  |  |
Depreciation and amortization |  | 36,479 |  |  | 36,505 |
Stock-based compensation expense |  | 8,516 |  |  | 7,926 |
Provision for bad debts |  | 1,045 |  |  | 893 |
Non-cash impairment costs |  | 287 |  |  | — |
Other items, net |  | 3,722 |  |  | 2,834 |
Changes in assets and liabilities, net of effects of acquisitions: |  |  |  |
Accounts receivable |  | (7,715) |  |  | (10,409) |
Contract assets |  | 8,913 |  |  | (4,180) |
Inventories |  | (12,931) |  |  | 10,196 |
Other assets |  | 901 |  |  | (512) |
Accounts payable |  | (4,653) |  |  | 8,695 |
Customer deposits |  | 7,249 |  |  | (21,556) |
Other liabilities |  | (10,435) |  |  | (15,474) |
Net cash provided by operating activities |  | 110,569 |  |  | 103,375 |
Investing Activities |  |  |  |
Acquisitions, net of cash acquired (Note 2) |  | (16,483) |  |  | (302,024) |
Purchases of property, plant, and equipment |  | (10,998) |  |  | (15,430) |
Proceeds from sale of property, plant, and equipment |  | 136 |  |  | 1,320 |
Other investing activities |  | 1,118 |  |  | 263 |
Net cash used in investing activities |  | (26,227) |  |  | (315,871) |
Financing Activities |  |  |  |
Proceeds from issuance of long-term obligations |  | 29,033 |  |  | 305,211 |
Repayment of short- and long-term obligations |  | (69,360) |  |  | (91,378) |
Tax withholding payments related to stock-based compensation |  | (6,099) |  |  | (5,881) |
Dividends paid |  | (11,770) |  |  | (10,914) |
Proceeds from issuance of Company common stock |  | 2,101 |  |  | 1,605 |
Dividends paid to noncontrolling interests |  | (825) |  |  | (1,346) |
Acquisition of subsidiary shares from noncontrolling interest |  | — |  |  | (523) |
Payment of debt issuance costs (Note 5) |  | (2,382) |  |  | — |
Net cash (used in) provided by financing activities |  | (59,302) |  |  | 196,774 |
Exchange Rate Effect on Cash, Cash Equivalents, and Restricted Cash |  | 5,927 |  |  | (997) |
Increase (Decrease) in Cash, Cash Equivalents, and Restricted Cash |  | 30,967 |  |  | (16,719) |
Cash, Cash Equivalents, and Restricted Cash at Beginning of Period |  | 95,946 |  |  | 106,453 |
Cash, Cash Equivalents, and Restricted Cash at End of Period |  | $ | 126,913 |  |  | $ | 89,734 |

See Note 1, Nature of Operations and Summary of Significant Accounting Policies,
under the heading Supplemental Cash Flow Information for further details.
The accompanying notes are an integral part of these condensed consolidated financial statements.
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Table of Contents
KADANT INC.
Condensed Consolidated Statement of Stockholders' Equity
(Unaudited)

|  | Three Months Ended September 27, 2025
(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 Interests |  | Total Stockholders' Equity
| Shares |  | Amount |  |  |  | Shares |  | Amount |  |  |
Balance at June 28, 2025 |  | 14,624,159 |  |  | $ | 146 |  |  | $ | 131,279 |  |  | $ | 901,907 |  |  | 2,846,846 |  |  | $ | (69,759) |  |  | $ | (37,553) |  |  | $ | 11,273 |  |  | $ | 937,293 |
Net income |  | — |  |  | — |  |  | — |  |  | 27,722 |  |  | — |  |  | — |  |  | — |  |  | 393 |  |  | 28,115 |
Dividend declared – Common Stock, $0.34 per share |  | — |  |  | — |  |  | — |  |  | (4,005) |  |  | — |  |  | — |  |  | — |  |  | — |  |  | (4,005) |
Activity under stock plans |  | — |  |  | — |  |  | 2,633 |  |  | — |  |  | (822) |  |  | 21 |  |  | — |  |  | — |  |  | 2,654 |
Other comprehensive items |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | (2,544) |  |  | (6) |  |  | (2,550) |
Balance at September 27, 2025 |  | 14,624,159 |  |  | $ | 146 |  |  | $ | 133,912 |  |  | $ | 925,624 |  |  | 2,846,024 |  |  | $ | (69,738) |  |  | $ | (40,097) |  |  | $ | 11,660 |  |  | $ | 961,507 |
|  | Nine Months Ended September 27, 2025
(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 Interests |  | Total Stockholders' Equity
| Shares |  | Amount |  |  |  | Shares |  | Amount |  |  |
Balance at December 28, 2024 |  | 14,624,159 |  |  | $ | 146 |  |  | $ | 130,180 |  |  | $ | 859,693 |  |  | 2,878,080 |  |  | $ | (70,524) |  |  | $ | (72,368) |  |  | $ | 11,001 |  |  | $ | 858,128 |
Net income |  | — |  |  | — |  |  | — |  |  | 77,944 |  |  | — |  |  | — |  |  | — |  |  | 1,247 |  |  | 79,191 |
Dividends declared – Common Stock, $1.02 per share |  | — |  |  | — |  |  | — |  |  | (12,013) |  |  | — |  |  | — |  |  | — |  |  | — |  |  | (12,013) |
Activity under stock plans |  | — |  |  | — |  |  | 3,732 |  |  | — |  |  | (32,056) |  |  | 786 |  |  | — |  |  | — |  |  | 4,518 |
Dividend paid to noncontrolling interest |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | (825) |  |  | (825) |
Other comprehensive items |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | 32,271 |  |  | 237 |  |  | 32,508 |
Balance at September 27, 2025 |  | 14,624,159 |  |  | $ | 146 |  |  | $ | 133,912 |  |  | $ | 925,624 |  |  | 2,846,024 |  |  | $ | (69,738) |  |  | $ | (40,097) |  |  | $ | 11,660 |  |  | $ | 961,507 |

|  | Three Months Ended September 28, 2024
(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 Interests |  | Total Stockholders' Equity
| Shares |  | Amount |  |  |  | Shares |  | Amount |  |  |
Balance at June 29, 2024 |  | 14,624,159 |  |  | $ | 146 |  |  | $ | 124,892 |  |  | $ | 811,595 |  |  | 2,879,638 |  |  | $ | (70,563) |  |  | $ | (58,359) |  |  | $ | 10,675 |  |  | $ | 818,386 |
Net income |  | — |  |  | — |  |  | — |  |  | 31,586 |  |  | — |  |  | — |  |  | — |  |  | 312 |  |  | 31,898 |
Dividend declared – Common Stock, $0.32 per share |  | — |  |  | — |  |  | — |  |  | (3,759) |  |  | — |  |  | — |  |  | — |  |  | — |  |  | (3,759) |
Activity under stock plans |  | — |  |  | — |  |  | 2,594 |  |  | — |  |  | (803) |  |  | 20 |  |  | — |  |  | — |  |  | 2,614 |
Other comprehensive items |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | 13,581 |  |  | 66 |  |  | 13,647 |
Balance at September 28, 2024 |  | 14,624,159 |  |  | $ | 146 |  |  | $ | 127,486 |  |  | $ | 839,422 |  |  | 2,878,835 |  |  | $ | (70,543) |  |  | $ | (44,778) |  |  | $ | 11,053 |  |  | $ | 862,786 |
|  | Nine Months Ended September 28, 2024
(In thousands, except share and per share amounts) |  | Common Stock |  | Capital in Excess of Par Value |  | Retained Earnings |  | Treasury Stock |  | Accumulated Other Comprehensive Items |  | Noncontrolling Interests |  | Total Stockholders' Equity
| Shares |  | Amount |  |  |  | Shares |  | Amount |  |  |
Balance at December 30, 2023 |  | 14,624,159 |  |  | $ | 146 |  |  | $ | 124,940 |  |  | $ | 763,131 |  |  | 2,915,978 |  |  | $ | (71,453) |  |  | $ | (43,062) |  |  | $ | 2,538 |  |  | $ | 776,240 |
Net income |  | — |  |  | — |  |  | — |  |  | 87,566 |  |  | — |  |  | — |  |  | — |  |  | 891 |  |  | 88,457 |
Dividends declared – Common Stock, $0.96 per share |  | — |  |  | — |  |  | — |  |  | (11,275) |  |  | — |  |  | — |  |  | — |  |  | — |  |  | (11,275) |
Activity under stock plans |  | — |  |  | — |  |  | 2,740 |  |  | — |  |  | (37,143) |  |  | 910 |  |  | — |  |  | — |  |  | 3,650 |
Noncontrolling interests acquired |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | 9,319 |  |  | 9,319 |
Acquisition of subsidiary shares |  | — |  |  | — |  |  | (194) |  |  | — |  |  | — |  |  | — |  |  | — |  |  | (329) |  |  | (523) |
Dividend paid to noncontrolling interest |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | (1,346) |  |  | (1,346) |
Other comprehensive items |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | (1,716) |  |  | (20) |  |  | (1,736) |
Balance at September 28, 2024 |  | 14,624,159 |  |  | $ | 146 |  |  | $ | 127,486 |  |  | $ | 839,422 |  |  | 2,878,835 |  |  | $ | (70,543) |  |  | $ | (44,778) |  |  | $ | 11,053 |  |  | $ | 862,786 |

The accompanying notes are an integral part of these condensed consolidated financial statements.
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Table of Contents
KADANT INC.
Notes to Condensed Consolidated Financial Statements
(Unaudited)
1. 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 segments consisting of the Flow Control segment, Industrial Processing segment, and Material Handling segment.
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 September 27, 2025, its results of operations, comprehensive income, and stockholders' equity for the three- and nine-month periods ended September 27, 2025 and September 28, 2024, and its cash flows for the nine-month periods ended September 27, 2025 and September 28, 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.
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 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 nine months ended September 27, 2025.
Supplemental Cash Flow Information

|  | Nine Months Ended
(In thousands) |  | September 27, 2025 |  | September 28, 2024
Cash Paid for Interest |  | $ | 9,824 |  |  | $ | 15,034 |
Cash Paid for Income Taxes, Net of Refunds |  | $ | 33,530 |  |  | $ | 33,288 |
Non-Cash Investing Activities: |  |  |  |
Fair value of assets acquired |  | $ | 35,470 |  |  | $ | 360,021 |
Fair value of liabilities assumed |  | $ | 14,124 |  |  | $ | 35,575 |
Fair value of noncontrolling interests acquired |  | $ | — |  |  | $ | 9,319 |
Fair value of contingent consideration |  | $ | — |  |  | $ | 1,785 |
Purchases of property, plant, and equipment in accounts payable |  | $ | 398 |  |  | $ | 590 |

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KADANT INC.
Notes to Condensed Consolidated Financial Statements
(Unaudited)

|  | Nine Months Ended
(In thousands) |  | September 27, 2025 |  | September 28, 2024
Non-Cash Financing Activities: |  |  |  |
Issuance of Company common stock upon vesting of restricted stock units |  | $ | 5,761 |  |  | $ | 5,364 |
Dividends declared but unpaid |  | $ | 4,005 |  |  | $ | 3,759 |

Restricted Cash
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.
The following table provides a reconciliation of cash, cash equivalents, and restricted cash reported within the accompanying condensed consolidated balance sheet that are shown in aggregate in the accompanying condensed consolidated statement of cash flows:

(In thousands) |  | September 27, 2025 |  | September 28, 2024 |  | December 28, 2024 |  | December 30, 2023
Cash and cash equivalents |  | $ | 124,493 |  |  | $ | 88,407 |  |  | $ | 94,660 |  |  | $ | 103,832 |
Restricted cash |  | 2,420 |  |  | 1,327 |  |  | 1,286 |  |  | 2,621 |
Total Cash, Cash Equivalents, and Restricted Cash |  | $ | 126,913 |  |  | $ | 89,734 |  |  | $ | 95,946 |  |  | $ | 106,453 |

Inventories
The components of inventories are as follows:

|  | September 27, 2025 |  | December 28, 2024
(In thousands) |  |
Raw Materials |  | $ | 70,825 |  |  | $ | 60,750 |
Work in Process |  | 42,725 |  |  | 27,692 |
Finished Goods (includes $972 and $554 at customer locations) |  | 66,155 |  |  | 57,650 |
|  | $ | 179,705 |  |  | $ | 146,092 |

Intangible Assets, Net
Acquired intangible assets by major asset class are as follows:

(In thousands) |  | Gross |  | Accumulated Amortization |  | Currency Translation |  | Net
September 27, 2025 |  |  |  |  |  |  |  |
Definite-Lived |  |  |  |  |  |  |  |
Customer relationships |  | $ | 336,746 |  |  | $ | (141,731) |  |  | $ | (4,802) |  |  | $ | 190,213 |
Product technology |  | 93,327 |  |  | (53,475) |  |  | (2,219) |  |  | 37,633 |
Tradenames |  | 17,826 |  |  | (5,775) |  |  | (384) |  |  | 11,667 |
Other |  | 25,221 |  |  | (22,261) |  |  | (588) |  |  | 2,372 |
|  | 473,120 |  |  | (223,242) |  |  | (7,993) |  |  | 241,885 |
Indefinite-Lived |  |  |  |  |  |  |  |
Tradenames |  | 29,059 |  |  | — |  |  | (169) |  |  | 28,890 |
Acquired Intangible Assets |  | $ | 502,179 |  |  | $ | (223,242) |  |  | $ | (8,162) |  |  | $ | 270,775 |

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KADANT INC.
Notes to Condensed Consolidated Financial Statements
(Unaudited)

(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.
During the nine months ended September 27, 2025, the Company recognized intangible assets of $5,278,000 associated with its July 2025 acquisition (see Note 2, Acquisition) and incremental intangibles of $200,000 related to a measurement period adjustment for a prior period acquisition. The Company also recognized an impairment charge of $287,000 in the third quarter of 2025 associated with previously acquired technology that will no longer be utilized, which is included in other costs in the accompanying condensed consolidated statement of income.
Goodwill
The changes in the carrying amount of goodwill by reportable segment are as follows:

(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 |  |  |  |  |  |  |  |
Acquisition (Note 2) |  | — |  |  | 816 |  |  | — |  |  | 816 |
Measurement period adjustments for 2024 acquisitions |  | (173) |  |  | — |  |  | 321 |  |  | 148 |
Currency translation |  | 7,195 |  |  | 4,830 |  |  | 4,930 |  |  | 16,955 |
Total 2025 activity |  | 7,022 |  |  | 5,646 |  |  | 5,251 |  |  | 17,919 |
Balance at September 27, 2025 |  |  |  |  |  |  |  |
Gross balance |  | 139,227 |  |  | 248,712 |  |  | 194,687 |  |  | 582,626 |
Accumulated impairment losses |  | — |  |  | (85,538) |  |  | — |  |  | (85,538) |
Net balance |  | $ | 139,227 |  |  | $ | 163,174 |  |  | $ | 194,687 |  |  | $ | 497,088 |

Measurement period adjustments for the Company's acquisitions completed in the second and third quarters of 2024 were not material to its financial position or results of operations in the first nine months of 2025.
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.
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KADANT INC.
Notes to Condensed Consolidated Financial Statements
(Unaudited)
The Company negotiates the terms regarding warranty coverage and length of warranty depending on the products and applications.
The changes in the carrying amount of product warranty obligations are as follows:

|  | Nine Months Ended
(In thousands) |  | September 27, 2025 |  | September 28, 2024
Balance at Beginning of Year |  | $ | 10,664 |  |  | $ | 8,154 |
Provision charged to expense |  | 3,320 |  |  | 4,463 |
Usage |  | (4,870) |  |  | (2,972) |
Acquisitions |  | 688 |  |  | 473 |
Currency translation |  | 587 |  |  | 37 |
Balance at End of Period |  | $ | 10,389 |  |  | $ | 10,155 |

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 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.
The following table presents revenue by revenue recognition method:

|  | Three Months Ended |  | Nine Months Ended
|  | September 27, |  | September 28, |  | September 27, |  | September 28,
(In thousands) |  | 2025 |  | 2024 |  | 2025 |  | 2024
Point in Time |  | $ | 254,491 |  |  | $ | 238,971 |  |  | $ | 706,995 |  |  | $ | 701,199 |
Over Time |  | 17,076 |  |  | 32,643 |  |  | 59,049 |  |  | 94,155 |
|  | $ | 271,567 |  |  | $ | 271,614 |  |  | $ | 766,044 |  |  | $ | 795,354 |

The Company disaggregates its revenue from contracts with customers by reportable 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 |  | Nine Months Ended
|  | September 27, |  | September 28, |  | September 27, |  | September 28,
(In thousands) |  | 2025 |  | 2024 |  | 2025 |  | 2024
Revenue by Product Type: |  |  |  |  |  |  |  |
Parts and consumables |  | $ | 188,366 |  |  | $ | 176,961 |  |  | $ | 549,457 |  |  | $ | 520,836 |
Capital |  | 83,201 |  |  | 94,653 |  |  | 216,587 |  |  | 274,518 |
|  | $ | 271,567 |  |  | $ | 271,614 |  |  | $ | 766,044 |  |  | $ | 795,354 |
Revenue by Geography (based on customer location): |  |  |  |  |  |  |  |
North America |  | $ | 165,708 |  |  | $ | 172,186 |  |  | $ | 483,546 |  |  | $ | 501,220 |
Europe |  | 65,869 |  |  | 57,309 |  |  | 178,440 |  |  | 176,289 |
Asia |  | 23,893 |  |  | 26,724 |  |  | 63,536 |  |  | 74,248 |
Rest of world |  | 16,097 |  |  | 15,395 |  |  | 40,522 |  |  | 43,597 |
|  | $ | 271,567 |  |  | $ | 271,614 |  |  | $ | 766,044 |  |  | 795,354 |

See Note 9, Business Segment Information, for information on the disaggregation of revenue by reportable segment.
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KADANT INC.
Notes to Condensed Consolidated Financial Statements
(Unaudited)
The following table presents contract balances from contracts with customers:

|  | September 27, 2025 |  | December 28, 2024
(In thousands) |  |
Contract Assets |  | $ | 9,866 |  |  | $ | 18,408 |
Contract Liabilities |  | $ | 60,258 |  |  | $ | 46,062 |

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 $6,064,000 in th e third quarter of 2025 and $8,897,000 in the third quarter of 2024, and $36,861,000 in the first nine months of 2025 and $66,036,000 in the first nine 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 $27,990,000 as of September 27, 2025. The Company will recognize revenue for these performance obligations as they are satisfied, approximately 78% of which is expected to occur within the next twelve months and the remaining 22% thereafter.
Note Receivable - China Transaction
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, with the remaining balance due on the earlier of the sale of the property by the local government or two years from the effective date of the agreements. To date, the government has paid $1,803,000, and the remaining receivable was $13,592,000 as of September 27, 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.
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 $8,861,000 at September 27, 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.
Income Taxes
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 September 27, 2025, the Company believes that it has appropriately accounted for any liability for unrecognized tax
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KADANT INC.
Notes to Condensed Consolidated Financial Statements
(Unaudited)
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 five 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 United States. 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, including 100% bonus depreciation, domestic research cost expensing pursuant to Internal Revenue Code §174, and changes to the calculation of the interest expense limitation. The legislation has multiple effective dates, with certain provisions effective in 2025 and others implemented through 2027. There is no material impact of the OBBBA provisions to the Company's effective tax rate or consolidated financial statements for the quarter ended September 27, 2025. The Company is still evaluating any potential impact to cash tax payments related to the provisions of the OBBBA. The Company will continue to monitor the current and future impact of the OBBBA on its effective tax rate and consolidated financial statements as additional clarifications or interpretive guidance related to the OBBBA is released.
Recent Accounting Pronouncements Not Yet Adopted
Intangibles - Goodwill and Other-Internal-Use Software (Subtopic 350-40): Targeted Improvements to the Accounting for Internal-Use Software. In September 2025, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No. 2025-06 which improves the practicality of the guidance by removing all references to software development project stages so that the guidance is neutral to different software development methods. Under this ASU, eligible software development costs will begin capitalization when management has authorized and committed to funding the software project, it is probable that the project will be completed, and the software will be used to perform the function intended. This ASU is effective for fiscal year 2028, with early adoption permitted and may be applied retrospectively. The Company is currently evaluating the effect that the adoption of this ASU will have on its consolidated financial statements.
Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses for Accounts Receivable and Contract Assets. In July 2025, the FASB issued ASU No. 2025-05, to provide for a practical expedient permitting an entity to assume that conditions at the balance sheet date remained unchanged over the life of the asset when estimating expected credit losses for current accounts receivable and current contract assets accounted for under ASC 606, Revenue from Contracts with Customers. This ASU is effective for fiscal year 2026, with early adoption permitted. The amendments in this ASU should be applied prospectively. The Company is currently evaluating the effect that the adoption of this ASU will have on its consolidated financial statements.
Income Taxes – Improvements to Income Tax Disclosures (Topic 740). In December 2023, the FASB issued 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 and may be applied retrospectively. The Company is in the process of determining the financial disclosures required under this ASU and continues to evaluate the effect that the adoption of this ASU will have on its consolidated financial statements.
Income Statement – Reporting Comprehensive Income – Expense Disaggregation Disclosure (Topic 220). In November 2024, the FASB issued ASU No. 2024-03, to disaggregate operating expense into specific categories to provide enhanced transparency into the nature and function of expenses. This ASU is effective for fiscal year-end 2027 and interim periods beginning in fiscal 2028, with early adoption permitted and may be applied retrospectively. The Company is currently evaluating the effect that the adoption of this ASU will have on its consolidated financial statements.
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KADANT INC.
Notes to Condensed Consolidated Financial Statements
(Unaudited)
2. Acquisition
The Company's acquisitions are accounted for using the acquisition method of accounting and the results of the acquired businesses are included in its condensed consolidated financial statements from the date of acquisition. Historically, acquisitions have been made at prices above the fair value of identifiable net assets, resulting in goodwill. Acquisition costs were $2,253,000 in the third quarter of 2025 and $3,498,000 in the nine months ended September 27, 2025 and are included in selling, general and administrative (SG&A) expenses in the accompanying condensed consolidated statement of income.
On July 9, 2025, the Company acquired all the outstanding equity securities of Babbini S.p.A and G.P.S. Engineering S.r.l (collectively, Babbini), two Italy-based companies specializing in industrial dewatering and engineered power transmission solutions, for $16,483,000, net of cash acquired. The fair value of assets acquired totaled $35,470,000, including cash of $4,863,000, inventory of $13,825,000, property, plant, and equipment of $5,355,000, and intangible assets of $5,278,000. The fair value of liabilities assumed was $14,124,000, including customer deposits of $3,857,000 and accounts payable of $2,954,000. Babbini is part of the Company's Industrial Processing segment. The Company funded the acquisition through borrowings under its revolving credit facility.
See Note 11, Subsequent Events, for details on the Company's acquisition that occurred on October 7, 2025.
3. Earnings per Share
Basic and diluted earnings per share (EPS) were calculated as follows:

|  | Three Months Ended |  | Nine Months Ended
(In thousands, except per share amounts) |  | September 27, 2025 |  | September 28, 2024 |  | September 27, 2025 |  | September 28, 2024
Net Income Attributable to Kadant |  | $ | 27,722 |  |  | $ | 31,586 |  |  | $ | 77,944 |  |  | $ | 87,566 |
Basic Weighted Average Shares |  | 11,777 |  |  | 11,745 |  |  | 11,771 |  |  | 11,737 |
Effect of Restricted Stock Units and Employee Stock Purchase Plan Shares |  | 25 |  |  | 35 |  |  | 19 |  |  | 26 |
Diluted Weighted Average Shares |  | 11,802 |  |  | 11,780 |  |  | 11,790 |  |  | 11,763 |
Basic Earnings per Share |  | $ | 2.35 |  |  | $ | 2.69 |  |  | $ | 6.62 |  |  | $ | 7.46 |
Diluted Earnings per Share |  | $ | 2.35 |  |  | $ | 2.68 |  |  | $ | 6.61 |  |  | $ | 7.44 |

The effect of outstanding and unvested restricted stock units (RSUs) of the Company’s common stock totaling 5,000 shares in the third quarter of 2025, 5,000 shares in the third quarter of 2024, 19,000 in the first nine months of 2025 and 21,000 in the first nine months of 2024 were not included in the computation of diluted EPS for the respective periods as the effect would have been antidilutive or, for unvested performance-based RSUs, the performance conditions had not been met as of the end of the respective reporting periods.
4. Provision for Income Taxes
The provision for income taxes was $29,416,000 in the first nine months of 2025 and $31,810,000 in the first nine months of 2024.
The effective tax rate of 27% in the first nine months of 2025 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 the cost of repatriating the earnings of certain foreign subsidiaries. These items were offset in part by a net tax benefit from the re-measurement of certain deferred income tax assets and liabilities due to the decrease to Germany's future statutory tax rate enacted in July 2025 and foreign tax credits.
The effective tax rate of 26% in the first nine months of 2024 was higher than the Company's statutory rate of 21% primarily due to the distribution of the Company's worldwide earnings, nondeductible expenses, state taxes, and the cost of repatriating the earnings of certain foreign subsidiaries. These items were offset in part by foreign tax credits.
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KADANT INC.
Notes to Condensed Consolidated Financial Statements
(Unaudited)
5. Long-Term Obligations
Long-term obligations are as follows:

|  | September 27, 2025 |  | December 28, 2024
(In thousands) |  |
Revolving Credit Facility, due 2030 |  | $ | 248,075 |  |  | $ | 278,384 |
Senior Promissory Notes, due 2025 to 2028 |  | 6,660 |  |  | 6,660 |
Finance Leases, due 2025 to 2029 |  | 1,985 |  |  | 2,023 |
Other Borrowings, due 2025 to 2028 |  | 1,285 |  |  | 1,460 |
Total |  | 258,005 |  |  | 288,527 |
Less: Current Maturities of Long-Term Obligations |  | (3,386) |  |  | (3,376) |
Long-Term Obligations |  | $ | 254,619 |  |  | $ | 285,151 |

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
On September 26, 2025, the Company entered into an eighth amendment and joinder (the Eighth Amendment) to its unsecured multi-currency revolving credit facility, originally dated as of March 1, 2017 (as amended and restated to date, the Credit Agreement). The Eighth Amendment, among other things, increased the Company's aggregate borrowing capacity from $400,000,000 to $750,000,000 and extended the maturity date from November 30, 2027 to September 26, 2030. In addition to the increased committed borrowing capacity, an uncommitted, unsecured incremental borrowing facility of $200,000,000 continues to be available under the Credit Agreement.
Interest on borrowings outstanding under the Credit Agreement accrues and is payable in arrears calculated at one of the following rates selected by the Company: (i) the Base Rate, as defined, plus an applicable margin of 0.25% to 1.25%, or (ii) Eurocurrency Rate, Term SOFR, Term CORRA, AUD Rate, and RFR, as applicable and defined, plus an applicable margin of 1.25% to 2.25%. The margin is determined based upon the ratio of the Company's total debt, net of unrestricted cash up to $50,000,000, to earnings before interest, taxes, depreciation, and amortization as defined in the Credit Agreement. Additionally, the Credit Agreement requires the payment of a commitment fee payable in arrears on the available committed borrowing capacity under the Credit Agreement, which ranges from 0.150% to 0.350%.
Obligations under the Credit Agreement, which includes customary events of default under such financing arrangements, may be accelerated upon the occurrence of an event of default. 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, 4.25 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.
During the third quarter of 2025, the Company borrowed approximately $21,000,000 of euro-denominated debt to finance the acquisition of Babbini. As of September 27, 2025, the outstanding balance under the Credit Agreement was $248,075,000, which included $101,075,000 of euro-denominated borrowings. The Company had $501,968,000 of available committed borrowing capacity as of September 27, 2025, which was calculated by translating its foreign-denominated borrowings using the administrative agent's borrowing date foreign exchange rates, in addition to the $200,000,000 uncommitted, unsecured incremental borrowing facility. See Note 11, Subsequent Events, for the additional borrowings incurred under the Company's Credit Agreement in connection with its acquisition that occurred on October 7, 2025.
The weighted average interest rate for the outstanding balance under the Credit Agreement was 4.48% as of September 27, 2025 and 5.27% as of December 28, 2024.
During the third quarter of 2025, the Company incurred $2,549,000 of debt issuance costs related to the Eighth Amendment. Unamortized debt issuance costs related to the Credit Agreement, included in other assets in the accompanying condensed consolidated balance sheet, were $3,199,000 at September 27, 2025 and $993,000 at December 28, 2024 and are being amortized to interest expense using the straight-line method.
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KADANT INC.
Notes to Condensed Consolidated Financial Statements
(Unaudited)
Senior Promissory Notes
In 2018, the Company entered into an uncommitted, unsecured Multi-Currency Note Purchase and Private Shelf Agreement (Note Purchase Agreement). Simultaneously 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 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.
The Initial 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 Initial Notes are guaranteed by certain of the Company’s domestic subsidiaries.
Debt Compliance
As of September 27, 2025, the Company was in compliance with the covenants related to its debt obligations.
6. Stock-Based Compensation
The Company recognized stock-based compensation expense of $2,696,000 in the third quarter of 2025, $2,627,000 in the third quarter of 2024, $8,516,000 in the first nine months of 2025 and $7,926,000 in the first nine months of 2024 within SG&A expenses in the accompanying condensed consolidated statement of income. The Company recognizes compensation expense for all stock-based awards granted to employees and directors based on the grant date estimate of fair value for those awards. 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 $11,316,000 at September 27, 2025, which will be recognized over a weighted average period of 1.7 years.
Non-Employee Director RSUs
On May 14, 2025, the Company granted an aggregate of 2,635 RSUs to its non-employee directors with an aggregate grant date fair value of $850,000, of which 50% vested on June 1, 2025, 25% vested on the last day of the third fiscal quarter of 2025 and the remaining 25% will vest on the last day of the fourth fiscal quarter of 2025, subject to continued service as a director on the applicable vesting dates.
Performance-based RSUs
On March 4, 2025, the Company granted performance-based RSUs to certain of its officers, which represented, in aggregate, the right to receive 14,626 shares (target RSU amount), with an aggregate grant date fair value of $5,406,000. The RSUs are subject to adjustment based on the achievement of the performance measure selected for the fiscal year, which is a specified target for adjusted earnings before interest, taxes, depreciation, and amortization (target adjusted EBITDA) generated from operations for the fiscal year. The RSUs are adjusted by comparing the actual adjusted EBITDA for the performance period to the target adjusted EBITDA. Actual adjusted EBITDA between 50% and 100% of the target adjusted EBITDA results in an adjustment of 50% to 100% of the target RSU amount. Actual adjusted EBITDA between 100% and 115% of the target adjusted EBITDA results in an adjustment using a straight-line linear scale between 100% and 150% of the target RSU amount. Actual adjusted EBITDA in excess of 115% results in an adjustment capped at 150% of the target RSU amount. If actual adjusted EBITDA is below 50% of the target adjusted EBITDA for the 2025 fiscal year, these performance-based RSUs will be forfeited. The Company recognizes compensation expense based on the probable number of performance-based RSUs expected to vest. Following the adjustment, the performance-based RSUs will be subject to additional time-based vesting, and will vest in three equal annual installments on March 10 of 2026, 2027, and 2028, provided that the officer is employed by the Company on the applicable vesting dates.
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KADANT INC.
Notes to Condensed Consolidated Financial Statements
(Unaudited)
Time-based RSUs
On March 4, 2025, the Company granted time-based RSUs representing 11,199 shares to certain of its officers and employees with an aggregate grant date fair value of $4,139,000. These time-based RSUs vest in three equal annual installments on March 10 of 2026, 2027, and 2028, provided that a recipient is employed by the Company on the applicable vesting dates.
7. 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:

(In thousands) |  | Foreign Currency Translation Adjustment |  | Post-Retirement Benefit Liability Adjustments |  |  |  | Total
Balance at December 28, 2024 |  | $ | (72,416) |  |  | $ | 48 |  |  |  |  | $ | (72,368) |
Other comprehensive items before reclassifications |  | 32,258 |  |  | 10 |  |  |  |  | 32,268 |
Reclassifications from AOCI |  | — |  |  | 3 |  |  |  |  | 3 |
Net current period other comprehensive items |  | 32,258 |  |  | 13 |  |  |  |  | 32,271 |
Balance at September 27, 2025 |  | $ | (40,158) |  |  | $ | 61 |  |  |  |  | $ | (40,097) |

8. 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:

|  | Fair Value as of September 27, 2025
(In thousands) |  | Level 1 |  | Level 2 |  | Level 3 |  | Total
Assets: |  |  |  |  |  |  |  |
Money market funds and time deposits (a) |  | $ | 31,129 |  |  | $ | — |  |  | $ | — |  |  | $ | 31,129 |
Banker's acceptance drafts (b) |  | $ | — |  |  | $ | 8,861 |  |  | $ | — |  |  | $ | 8,861 |
Liabilities: |  |  |  |  |  |  |  |
Contingent consideration (c) |  | $ | — |  |  | $ | — |  |  | $ | 1,766 |  |  | $ | 1,766 |

|  | Fair Value as of December 28, 2024
(In thousands) |  | Level 1 |  | Level 2 |  | Level 3 |  | Total
Assets: |  |  |  |  |  |  |  |
Money market funds and time deposits (a) |  | $ | 21,248 |  |  | $ | — |  |  | $ | — |  |  | $ | 21,248 |
Banker's acceptance drafts (b) |  | $ | — |  |  | $ | 5,299 |  |  | $ | — |  |  | $ | 5,299 |
Liabilities: |  |  |  |  |  |  |  |
Forward currency-exchange contracts (d) |  | $ | — |  |  | $ | 39 |  |  | $ | — |  |  | $ | 39 |
Contingent consideration (c) |  | $ | — |  |  | $ | — |  |  | $ | 1,678 |  |  | $ | 1,678 |

(a)Included in cash and cash equivalents in the accompanying condensed consolidated balance sheet.
(b)Included in accounts receivable in the accompanying condensed consolidated balance sheet.
(c)Included in other long-term liabilities in the accompanying condensed consolidated balance sheet.
(d)Included in other current liabilities at December 28, 2024 in the accompanying condensed consolidated balance sheet.
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KADANT INC.
Notes to Condensed Consolidated Financial Statements
(Unaudited)
The Company uses the market approach technique to value its financial assets and liabilities, and there were no changes in valuation techniques during the first nine months of 2025. 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 forward currency-exchange contracts 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.
In connection with the acquisition of a technology company in August 2024, the Company assumed contingent consideration with an estimated fair value of $1,785,000, measured at the date of acquisition. The contingent consideration is payable upon the achievement of certain revenue performance targets earned between June 30, 2025 and June 30, 2027. The maximum future value of the contingent consideration subject to payment is approximately $11,445,000, calculated using the foreign currency spot rate at September 27, 2025.
The Company uses the income approach technique to estimate the fair value of its Level 3 contingent consideration, including valuation models that incorporate probability adjusted assumptions and simulations related to the achievement of milestones and the likelihood of making the related payment. The unobservable inputs used in the fair value measurements include the probability of successful achievement of certain revenue targets, forecasted revenue, revenue volatility, and discount rates. These assumptions were estimated based on a review of historical and projected results. Projected contingent consideration related to revenue-based payments are discounted back to the current period using a discounted cash flow model. Changes to the fair value of contingent consideration can result from changes to one or multiple inputs, including the discount rate, projected revenue, revenue volatility, and the assumed probabilities of successful achievement of certain revenue targets.
The following table provides a rollforward of the change in the fair value of the contingent consideration as determined by Level 3 inputs during the first nine months of 2025:

(In thousands) |  | Total
Balance at December 28, 2024 |  | $ | 1,678 |
Currency translation |  | 88 |
Balance at September 27, 2025 |  | $ | 1,766 |

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

|  | September 27, 2025 |  | December 28, 2024
(In thousands) |  | Carrying Value |  | Fair Value |  | Carrying Value |  | Fair Value
Debt Obligations: |  |  |  |  |  |  |  |
Revolving credit facility |  | $ | 248,075 |  |  | $ | 248,075 |  |  | $ | 278,384 |  |  | $ | 278,384 |
Senior promissory notes |  | 6,660 |  |  | 6,709 |  |  | 6,660 |  |  | 6,511 |
Other |  | 1,285 |  |  | 1,285 |  |  | 1,460 |  |  | 1,460 |
|  | $ | 256,020 |  |  | $ | 256,069 |  |  | $ | 286,504 |  |  | $ | 286,355 |

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 end, which represent Level 2 measurements.
9. Business Segment Information
The Company is a global supplier of technologies and engineered systems that drive Sustainable Industrial Processing and operates in three reportable segments consisting of its Flow Control segment, Industrial Processing segment, and Material Handling segment. The Company aggregated its operating segments into its reportable segments where they contained similar products and economic characteristics, and shared similar types of customers, and production and distribution methods. The Flow Control segment is comprised of its fluid-handling and its doctoring, cleaning, & filtration operating segments, and the Industrial Processing segment is comprised of its wood processing and its fiber processing operating segments.
Each of the Company's reportable segments is led by a segment vice president, who reports directly to the Chief Executive Officer (CEO). The Company has determined that its CEO is its Chief Operating Decision Maker (CODM) who is responsible for assessing performance and allocating resources. The CODM utilizes segment gross profit margin and segment
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Notes to Condensed Consolidated Financial Statements
(Unaudited)
operating income margin to evaluate the performance of each segment and allocate resources effectively. The CODM primarily reviews these profit measures in comparison to forecasts, trends, key performance targets, and results of industry peers to assess profitability, identify areas for improvement, and make strategic decisions regarding investments and resource allocation within each segment.
A description of each reportable 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, energy, 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, and optimize industrial steam boiler efficiency for use in the packaging, paper, tissue, wood products and food processing industries, among others. The Company's primary products include fiber processing systems and recycling equipment, chemical pulping equipment, debarkers, stranders, chippers, custom-engineered knife systems, industrial boiler cleaning technologies, and continuous dewatering equipment. 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 tables present financial information for the Company's reportable segments:

Three Months Ended September 27, 2025
(In thousands) |  | Flow Control |  | Industrial Processing |  | Material Handling |  | Total
Revenue |  | $ | 94,839 |  |  | $ | 106,393 |  |  | $ | 70,335 |  |  | $ | 271,567 |
Cost of revenue |  | 45,657 |  |  | 59,964 |  |  | 43,285 |  |  | 148,906 |
Gross Profit |  | 49,182 |  |  | 46,429 |  |  | 27,050 |  |  | 122,661 |
Gross Profit Margin |  | 51.9% |  | 43.6% |  | 38.5% |  | 45.2%
Operating Expenses: |  |  |  |  |  |  |  |
Selling expenses |  | 14,470 |  |  | 10,728 |  |  | 6,790 |  |  | 31,988 |
General and administrative expenses |  | 9,512 |  |  | 9,625 |  |  | 4,505 |  |  | 23,642 |
Research and development expenses |  | 1,460 |  |  | 1,861 |  |  | 598 |  |  | 3,919 |
Intangible asset amortization expense |  | 1,386 |  |  | 2,600 |  |  | 2,700 |  |  | 6,686 |
Other segment items (a) |  | 12 |  |  | 2,787 |  |  | (76) |  |  | 2,723 |
Segment Operating Income |  | $ | 22,342 |  |  | $ | 18,828 |  |  | $ | 12,533 |  |  | $ | 53,703 |
Segment Operating Income Margin |  | 23.6% |  | 17.7% |  | 17.8% |  |
Corporate Expenses (b) |  | (11,087) |
Interest Expense, Net |  | (2,716) |
Other Expense, Net |  | (19) |
Income Before Provision for Income Taxes |  | $ | 39,881 |

(In thousands) |  | Flow Control |  | Industrial Processing |  | Material Handling |  | Corporate |  | Total
Other Segment Disclosures |  |  |  |  |  |  |  |  |  |
Depreciation expense (c) |  | $ | 1,935 |  |  | $ | 2,621 |  |  | $ | 1,142 |  |  | $ | 13 |  |  | $ | 5,711 |
Capital expenditures |  | $ | 1,213 |  |  | $ | 783 |  |  | $ | 1,198 |  |  | $ | — |  |  | $ | 3,194 |

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Notes to Condensed Consolidated Financial Statements
(Unaudited)

Three Months Ended September 28, 2024
(In thousands) |  | Flow Control |  | Industrial Processing |  | Material Handling |  | Total
Revenue |  | $ | 97,521 |  |  | $ | 110,696 |  |  | $ | 63,397 |  |  | $ | 271,614 |
Cost of revenue |  | 46,984 |  |  | 62,011 |  |  | 41,180 |  |  | 150,175 |
Gross Profit |  | 50,537 |  |  | 48,685 |  |  | 22,217 |  |  | 121,439 |
Gross Profit Margin |  | 51.8% |  | 44.0% | —% | 35.0% |  | 44.7%
Operating Expenses: |  |  |  |  |  |  |  |
Selling expenses |  | 13,757 |  |  | 10,377 |  |  | 6,079 |  |  | 30,213 |
General and administrative expenses |  | 9,377 |  |  | 8,250 |  |  | 3,936 |  |  | 21,563 |
Research and development expenses |  | 1,465 |  |  | 1,392 |  |  | 550 |  |  | 3,407 |
Intangible asset amortization expense |  | 1,765 |  |  | 2,786 |  |  | 2,847 |  |  | 7,398 |
Other segment items (a) |  | (108) |  |  | (89) |  |  | 12 |  |  | (185) |
Segment Operating Income |  | $ | 24,281 |  |  | $ | 25,969 |  |  | $ | 8,793 |  |  | $ | 59,043 |
Segment Operating Income Margin |  | 24.9% |  | 23.5% |  | 13.9% |  |
Corporate Expenses (b) |  | (10,056) |
Interest Expense, Net |  | (5,109) |
Other Expense, Net |  | (16) |
Income Before Provision for Income Taxes |  | $ | 43,862 |

(In thousands) |  | Flow Control |  | Industrial Processing |  | Material Handling |  | Corporate |  | Total
Other Segment Disclosures |  |  |  |  |  |  |  |  |  |
Depreciation expense (c) |  | $ | 1,845 |  |  | $ | 2,418 |  |  | $ | 1,102 |  |  | $ | 12 |  |  | $ | 5,377 |
Capital expenditures |  | $ | 1,894 |  |  | $ | 1,209 |  |  | $ | 1,074 |  |  | $ | 8 |  |  | $ | 4,185 |

Nine Months Ended September 27, 2025
(In thousands) |  | Flow Control |  | Industrial Processing |  | Material Handling |  | Total
Revenue |  | $ | 283,227 |  |  | $ | 291,854 |  |  | $ | 190,963 |  |  | $ | 766,044 |
Cost of revenue |  | 133,114 |  |  | 165,106 |  |  | 117,791 |  |  | 416,011 |
Gross Profit |  | 150,113 |  |  | 126,748 |  |  | 73,172 |  |  | 350,033 |
Gross Profit Margin |  | 53.0% |  | 43.4% |  | 38.3% |  | 45.7%
Operating Expenses: |  |  |  |  |  |  |  |
Selling expenses |  | 43,727 |  |  | 31,756 |  |  | 20,083 |  |  | 95,566 |
General and administrative expenses |  | 28,348 |  |  | 27,184 |  |  | 13,384 |  |  | 68,916 |
Research and development expenses |  | 4,141 |  |  | 5,291 |  |  | 1,734 |  |  | 11,166 |
Intangible asset amortization expense |  | 4,289 |  |  | 7,414 |  |  | 8,217 |  |  | 19,920 |
Other segment items (a) |  | 71 |  |  | 3,957 |  |  | (253) |  |  | 3,775 |
Segment Operating Income |  | $ | 69,537 |  |  | $ | 51,146 |  |  | $ | 30,007 |  |  | $ | 150,690 |
Segment Operating Income Margin |  | 24.6% |  | 17.5% |  | 15.7% |  |
Corporate Expenses (b) |  | (33,111) |
Interest Expense, Net |  | (8,920) |
Other Expense, Net |  | (52) |
Income Before Provision for Income Taxes |  | $ | 108,607 |

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Notes to Condensed Consolidated Financial Statements
(Unaudited)

(In thousands) |  | Flow Control |  | Industrial Processing |  | Material Handling |  | Corporate |  | Total
Other Segment Disclosures |  |  |  |  |  |  |  |  |  |
Depreciation expense (c) |  | $ | 5,588 |  |  | $ | 7,436 |  |  | $ | 3,499 |  |  | $ | 36 |  |  | $ | 16,559 |
Capital expenditures |  | $ | 4,102 |  |  | $ | 3,703 |  |  | $ | 3,190 |  |  | $ | 3 |  |  | $ | 10,998 |

Nine Months Ended September 28, 2024
(In thousands) |  | Flow Control |  | Industrial Processing |  | Material Handling |  | Total
Revenue |  | $ | 276,493 |  |  | $ | 331,310 |  |  | $ | 187,551 |  |  | $ | 795,354 |
Cost of revenue |  | 130,352 |  |  | 191,062 |  |  | 119,652 |  |  | 441,066 |
Gross Profit |  | 146,141 |  |  | 140,248 |  |  | 67,899 |  |  | 354,288 |
Gross Profit Margin |  | 52.9% |  | 42.3% |  | 36.2% |  | 44.5%
Operating Expenses: |  |  |  |  |  |  |  |
Selling expenses |  | 41,016 |  |  | 31,143 |  |  | 18,531 |  |  | 90,690 |
General and administrative expenses |  | 27,051 |  |  | 25,796 |  |  | 12,175 |  |  | 65,022 |
Research and development expenses |  | 4,434 |  |  | 4,480 |  |  | 1,705 |  |  | 10,619 |
Intangible asset amortization expense |  | 3,522 |  |  | 8,346 |  |  | 9,385 |  |  | 21,253 |
Other segment items (a) |  | 597 |  |  | 423 |  |  | 581 |  |  | 1,601 |
Segment Operating Income |  | $ | 69,521 |  |  | $ | 70,060 |  |  | $ | 25,522 |  |  | $ | 165,103 |
Segment Operating Income Margin |  | 25.1% |  | 21.1% |  | 13.6% |  |
Corporate Expenses (b) |  | (30,788) |
Interest Expense, Net | (14,000) |
Other Expense, Net | (48) |
Income Before Provision for Income Taxes | $ | 120,267 |

(In thousands) |  | Flow Control |  | Industrial Processing |  | Material Handling |  | Corporate |  | Total
Other Segment Disclosures |  |  |  |  |  |  |  |  |  |
Depreciation expense (c) |  | $ | 4,921 |  |  | $ | 7,112 |  |  | $ | 3,183 |  |  | $ | 36 |  |  | $ | 15,252 |
Capital expenditures |  | $ | 5,729 |  |  | $ | 5,943 |  |  | $ | 3,737 |  |  | $ | 21 |  |  | $ | 15,430 |

|  | September 27, 2025 |  | December 28, 2024
(In thousands) |  |
Total Assets (d) |  |  |  |
Flow Control |  | $ | 460,436 |  |  | $ | 431,536 |
Industrial Processing |  | 610,483 |  |  | 569,817 |
Material Handling |  | 426,267 |  |  | 411,178 |
Corporate (e) |  | 35,048 |  |  | 17,814 |
|  | $ | 1,532,234 |  |  | $ | 1,430,345 |

(a)Primarily includes acquisition costs, indemnification asset provisions and reversals associated with uncertain tax positions, and certain gains and losses.
(b)Primarily consists of general and administrative expenses.
(c)Depreciation expense by reportable segment is included within cost of revenue and selling, general and administrative, and research and development expenses.
(d)Excludes intercompany receivables or payables and investment in subsidiary balances as the CODM uses total assets excluding these amounts as the measurement for the Company's segment assets.
(e)Corporate assets primarily consist of cash and cash equivalents, tax assets, right-of-use assets, and property, plant, and equipment, net.
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Notes to Condensed Consolidated Financial Statements
(Unaudited)
10. 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 generally 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 $8,046,000 at September 27, 2025 and $7,952,000 at December 28, 2024 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.
11. Subsequent Events
Acquisition
On October 7, 2025, the Company acquired Clyde Industries Holdings, Inc. and its subsidiaries (Clyde Industries) pursuant to a securities purchase agreement for $175,000,000 in cash, subject to customary adjustments. Clyde Industries is a manufacturer of highly engineered boiler efficiency and cleaning system technologies, with revenue of approximately $92,000,000 for its fiscal year ended February 28, 2025. Clyde Industries is headquartered in Atlanta, Georgia, with operations in Brazil, China, Indonesia, Canada, Finland, Columbia and India and has approximately 400 employees worldwide. Clyde Industries is part of the Company's Industrial Processing segment. As a result of the acquisition, the Company expects to expand its product sales into new markets by leveraging Clyde Industries' existing presence.
The Company has not yet completed its preliminary assessment of the fair value of the assets acquired and liabilities assumed in this acquisition, including the valuation of intangible assets and goodwill, due to the proximity of the acquisition to the issuance of these condensed consolidated financial statements. Accordingly and as permitted by ASC 80 5, Business Combinations, the Company is unable to provide further disclosures, including the allocation of the purchase price for this acquisition at this time.
Borrowings Under the Credit Agreement
In October 2025, the Company borrowed $170,000,000 under its existing revolving credit facility, pursuant to the terms of the Credit Agreement, to fund the Clyde Industries acquisition.
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Item 2 – Management's Discussion and Analysis of Financial Condition and Results of Operations
When we use the terms "we," "us," "our," and the "Company," we mean Kadant Inc., a Delaware corporation, and its consolidated subsidiaries, taken as a whole, unless the context otherwise indicates.
This Quarterly Report on Form 10-Q and the documents we incorporate by reference in this report include forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended (Exchange Act), and Section 27A of the Securities Act of 1933, as amended. These forward-looking statements are not statements of historical fact and may include statements regarding possible or assumed future results of operations. Forward-looking statements are subject to risks and uncertainties and are based on the beliefs and assumptions of our management, using information currently available to our management. When we use words such as "believes," "expects," "anticipates," "intends," "plans," "estimates," "seeks," "should," "likely," "will," "would," "may," "continue," "could," or similar expressions, we are making forward-looking statements.
Forward-looking statements are not guarantees of performance. They involve risks, uncertainties, and assumptions. Our future results of operations may differ materially from those expressed in the forward-looking statements. Many of the important factors that will determine these results are beyond our ability to control or predict. You should not put undue reliance on any forward-looking statements. We undertake no obligation to publicly update any forward-looking statement, whether as a result of new information, future events, or otherwise. For a discussion of important factors that may cause our actual results to differ materially from those suggested by the forward-looking statements, you should read carefully the section captioned Risk Factors, included in Part I, Item 1A, of our Annual Report on Form 10-K for the fiscal year ended December 28, 2024 (Annual Report), as further amended in Part II, Item 1A, within this report, and as may be further amended and/or restated in subsequent filings with the SEC.
Overview
Company Background
We are a global supplier of technologies and engineered systems that drive Sustainable Industrial Processing®. Our products and services play an integral role in enhancing efficiency, optimizing energy utilization, and maximizing productivity in process industries while helping our 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 our business.
Our financial results are presented in three reportable segments consisting of our Flow Control segment, Industrial Processing segment, and Material Handling segment. We have aggregated our operating segments into reportable segments where they contained similar products and economic characteristics, and shared similar types of customers, and production and distribution methods. Our Flow Control segment consists of our fluid-handling and doctoring, cleaning, & filtration operating segments and our Industrial Processing segment consists of our wood processing and fiber processing operating segments. A description of each reportable segment is as 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, energy, and other industrial sectors. Our 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, process timber, and optimize industrial steam boiler efficiency for use in the packaging, paper, tissue, wood products, and food processing industries, among others. Our primary products include fiber processing systems and recycling equipment, chemical pulping equipment, debarkers, stranders, chippers, custom engineered knife systems, industrial boiler cleaning technologies, and continuous dewatering equipment. In addition, we provide 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. Our primary products include conveying and vibratory equipment and balers. In addition, we manufacture and sell biodegradable, absorbent granules used as carriers in agricultural applications and for oil and grease absorption.
See Note 9, Business Segment Information, in the accompanying condensed consolidated financial statements for financial information on our reportable segments.
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Industry and Business Overview
Our consolidated bookings increased 3% to $763.9 million in the first nine months of 2025 compared to the first nine months of 2024, driven by increased demand for our parts and consumables products. Demand for our capital equipment products was flat compared to the first nine months of 2024 as market uncertainty has impacted our customers' capital investment decisions. This uncertainty was driven by escalating tariff rates on U.S. imports and exports impacting manufacturers’ input costs. Although certain country-specific tariffs have since been clarified, ongoing trade negotiations continue to impact the market. This evolving trade environment has resulted in longer quote-to-order conversion times for capital orders, with some customers delaying projects into 2026. While customers continue to invest in maintenance and mission-critical equipment, those with discretion over project timing are deferring capital expenditures pending greater clarity regarding input costs and broader economic conditions. This impact is more pronounced in our Industrial Processing segment, where average capital order values are significantly higher than in our other segments. In response, our operations teams continue to evaluate our exposure to both existing and proposed tariffs and develop and implement mitigation measures.
From a geographic perspective, the volatility in tariff rates have contributed to market uncertainty in North America, leading to cautious spending by manufacturers. In Europe, cost pressures and ongoing economic uncertainty related to trade tensions and geopolitical risks continue to impact market activity. In China, although government-led initiatives seek to stimulate domestic demand and manufacturing activity, escalating trade tensions with the United States are generally expected to have a negative impact.
Overall, we anticipate sequentially stronger bookings in the fourth quarter of 2025 and comparatively higher bookings for the full year 2025 compared to 2024, especially in our Industrial Processing segment. We see long-term strength in our end markets as customers continue to rely on our products to enhance productivity through more efficient production processes. In addition, we anticipate growth opportunities resulting from both proposed and enacted legislation in the United States and internationally that is designed to stimulate investment.
An overview of our business by reportable segment is as follows:
•Flow Control – Our Flow Control segment bookings increased 3% in the first nine months of 2025 compared to the first nine months of 2024. This increase was primarily driven by strong demand for our parts and consumables products, especially in North America, partially offset by weaker demand for our capital equipment products in most regions. While quote activity related to capital projects remains strong, there have been delays in the timing for securing orders as customers remain cautious regarding their capital spending decisions. In certain European markets, excess production capacity and declining demand have resulted in the closure of several mills, which has adversely affected demand for our capital equipment products. We expect demand in this segment to remain stable for the remainder of the year.
•Industrial Processing – Our Industrial Processing segment bookings increased 3% in the first nine months of 2025 compared to the first nine months of 2024, with strong performance at our wood processing product line, largely offset by weaker results in our fiber processing product line. Within our wood processing product line, capital equipment bookings increased 88% compared to the first nine months of 2024, primarily driven by demand from the engineered wood industry in North America, where customers select our products for their ability to maximize wood fiber utilization. Despite these positive results, overall demand for our capital equipment in the wood processing product line was constrained by uncertain market conditions. While quote activity for large capital projects remains active, tariff-related uncertainty has led to a lengthening in quote-to-order times as customers await improved market conditions, with some customers in Europe delaying capital orders into early 2026. Capital bookings at our fiber processing product line decreased 40% compared to the first nine months of 2024 due to constrained capital spending related to macroeconomic conditions. These conditions have led to the deferral of capital orders to the fourth quarter of 2025 and into 2026. Tariff-related uncertainty has had a greater impact in this segment due to the higher average capital order value and our customers’ ability to delay the timing of large capital projects. Despite this, demand for our aftermarket parts in our Industrial Processing segment has remained strong as customers prioritize maintenance spending. We expect steady demand for our aftermarket parts to continue for the remainder of 2025. In addition, we anticipate a strengthening in demand for our capital equipment in this segment in the fourth quarter of 2025, supported by the expected receipt of several orders currently in the pipeline.
•Material Handling – Our Material Handling segment bookings increased 4% in the first nine months of 2025 compared to the first nine months of 2024, due to increased demand for our capital equipment products at our conveying and vibratory business. This increase was driven by underground mineral mining projects where customers placed substantial equipment orders to meet their operational requirements. Our baling business experienced weaker demand for our capital equipment products in Europe where market conditions remain constrained, driven by a decline in used paper prices, uncertainty related to tariffs, and concerns over borrowing costs, all of which impact the timing of
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capital orders. However, the baling business has seen steady demand for its aftermarket parts as customers shift their near-term spending from larger capital projects to smaller aftermarket maintenance and replacement purchases. We expect demand in the Material Handling segment to remain stable for the remainder of 2025.
Our global operations have been and continue to be impacted by complex market conditions fueled by tariff-related uncertainty, inflationary pressures, and geopolitical tensions. We expect our operating environment to continue to be challenging, which creates continued uncertainty for the remainder of 2025. However, we believe that the fundamentals of our business remain strong, particularly given our solid market position in key product lines, solid global operations teams, and long-term strength of our end markets. For more information related to these challenges, and other factors impacting our business, please see Risk Factors, included in Part I, Item 1A, of our Annual Report, as further amended in Part II, Item IA, within this report, and as may be further amended and/or restated in subsequent filings with the SEC.
International Sales
Approximately half of o ur sales are to customers outside the United States, mainly in Europe, Asia, and Canada. As a result, our financial performance can be materially affected by currency exchange rate fluctuations between the U.S. dollar and foreign currencies. To mitigate the impact of foreign currency transaction fluctuations, we generally seek to charge our customers in the same currency in which our operating costs are incurred. Additionally, we may enter into forward currency exchange contracts to hedge certain firm purchase and sale commitments denominated in currencies other than our subsidiaries' functional currencies. We currently do not use derivative instruments to hedge our exposure to exchange rate fluctuations created by the translation into the U.S. dollar of our foreign subsidiaries' results that are in functional currencies other than the U.S. dollar.
Global Trade
The United States has imposed tariffs in the past and more recently proposed and implemented new tariffs on certain imports, which has and will continue to increase the cost of some of the parts and equipment we import. In addition, foreign countries have implemented and may in the future implement additional retaliatory tariffs in response to these actions by the United States, which have negatively impacted and may in the future negatively impact our operations. Although we are working to mitigate the impact of tariffs through pricing and sourcing strategies, we cannot be sure these strategies will effectively mitigate the impact of these costs. For more information on risks associated with our global operations, including tariffs, please see Risk Factors, included in Part I, Item 1A, of our Annual Report, as further amended in Part II, Item IA, within this report, and as may be further amended and/or restated in subsequent filings with the SEC.
Acquisitions
We expect that a significant driver of our long-term growth will be through the acquisition of businesses and technologies that complement or augment our existing products and services or may involve entry into a new process industry. We have acquired several businesses in recent years and continue to pursue acquisition opportunities.
On July 9, 2025, we acquired Babbini S.p.A and G.P.S. Engineering S.r.l (collectively, Babbini), two Italy-based companies specializing in industrial dewatering and engineered power transmission solutions, for approximately $16.5 million, net of cash acquired. On October 7, 2025, we acquired Clyde Industries Holdings, Inc. and its subsidiaries (Clyde Industries), a manufacturer of highly engineered boiler efficiency and cleaning system technologies, pursuant to a securities purchase agreement for $175.0 million in cash, subject to customary adjustments. Babbini and Clyde Industries are part of our Industrial Processing segment. See Note 2, Acquisition, and Note 11, Subsequent Events, in the accompanying condensed consolidated financial statements for further details.
Results of Operations
Third Quarter 2025 Compared With Third Quarter 2024
Revenue
The following table presents the change in revenue by segment between the third quarters of 2025 and 2024, and those changes excluding the effect of acquisitions and foreign currency translation which we refer to as change in organic revenue. Organic revenue excludes the effect of acquisitions for the four quarterly reporting periods following the date of the acquisition. The presentation of the change in organic revenue is a non-GAAP measure. We believe this non-GAAP measure helps investors gain an understanding of our underlying operations consistent with how management measures and forecasts its
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performance, especially when comparing such results to prior periods. This non-GAAP measure should not be considered superior to or a substitute for the corresponding U.S. generally accepted accounting principles (GAAP) measure.
Revenue by reportable segment in the third quarters of 2025 and 2024 is as follows:

|  | Three Months Ended |  | Increase (Decrease) |  |  |  | Acquisition |  | Currency Translation |  | (Non-GAAP) Change in Organic Revenue
(In thousands, except percentages) |  | September 27, 2025 |  | September 28, 2024 |  |  | % Change |  |  |  | Increase (Decrease) |  | % Change
Flow Control |  | $ | 94,839 |  |  | $ | 97,521 |  |  | $ | (2,682) |  |  | (3) | % |  | $ | — |  |  | $ | 2,014 |  |  | $ | (4,696) |  |  | (5) | %
Industrial Processing |  | 106,393 |  |  | 110,696 |  |  | (4,303) |  |  | (4) | % |  | 5,930 |  |  | 969 |  |  | (11,202) |  |  | (10) | %
Material Handling |  | 70,335 |  |  | 63,397 |  |  | 6,938 |  |  | 11 | % |  | — |  |  | 1,193 |  |  | 5,745 |  |  | 9 | %
Consolidated |  | $ | 271,567 |  |  | $ | 271,614 |  |  | $ | (47) |  |  | — | % |  | $ | 5,930 |  |  | $ | 4,176 |  |  | $ | (10,153) |  |  | (4) | %

Consolidated revenue was $271.6 million in both the third quarters of 2025 and 2024. Organic revenue decreased 4% primarily due to weak demand for our capital equipment products, especially at our Industrial Processing segment, as market uncertainty continued to impact our customers’ decision-making process. This market uncertainty was fueled by escalating tariff rates on U.S. imports and exports impacting manufacturers' input costs. While quote activity remains high, customers are more cautious regarding the timing of their capital expenditures, leading to a delay in securing orders. Demand for our parts and consumables products has remained strong, and notably, we had record parts and consumables revenue of $188.4 million in the third quarter of 2025.
Revenue at our Flow Control segment decreased 3% in the third quarter of 2025 driven by weaker demand for our capital equipment products in most regions. Ongoing mill closures and production curtailments along with merger activity have contributed to weak market conditions in the pulp and paper industry. Demand for our parts and consumables products has been stable with aftermarket parts revenue increasing 3% compared to the third quarter of 2024.
Revenue at our Industrial Processing segment decreased 4% in the third quarter of 2025. Organic revenue decreased 10% in the third quarter of 2025 compared to the 2024 period, primarily driven by comparatively weaker demand for our capital equipment products at our fiber processing and wood processing businesses in the 2025 period. Ongoing market uncertainty in both North America and Europe has resulted in a lengthening of quote-to-order times as customers await improved market conditions, causing some capital equipment orders to be delayed. Despite this, demand for our aftermarket parts has remained steady as customers focus their spending on critical parts and maintenance, resulting in a 4% increase in parts and consumables revenue in the third quarter of 2025 compared to 2024.
Revenue at our Material Handling segment increased 11% to a record $70.3 million in the third quarter of 2025 primarily due to strong performance at our baling businesses. Our European baling business had a 31% increase in revenue in the third quarter of 2025 driven by market demand for waste reduction and recycling products.
Gross Profit Margin
Gross profit margin by reportable segment in the third quarters of 2025 and 2024 is as follows:

|  | Three Months Ended |  | Basis Point Change
|  | September 27, 2025 |  | September 28, 2024 |
Flow Control |  | 51.9% |  | 51.8% |  | 10 | bps
Industrial Processing |  | 43.6% |  | 44.0% |  | (40) | bps
Material Handling |  | 38.5% |  | 35.0% |  | 350 | bps
Consolidated |  | 45.2% |  | 44.7% |  | 50 | bps

Consolidated gross profit margin increased to 45.2% in the third quarter of 2025 from 44.7% in the third quarter of 2024 due to an increase in the proportion of higher-margin parts and consumables revenue, which increased to 69% of consolidated revenue in the third quarter of 2025 compared to 65% in the prior year period. Gross profit margin included amortization expense related to acquired profit in inventory of $0.5 million in the third quarter of 2025, which lowered gross profit margin by 0.1 percentage points compared to expense of $1.2 million, which lowered gross profit margin by 0.5 percentage points in the 2024 period.
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Within our reportable segments, gross profit margin:
•Increased to 51.9% at our Flow Control segment from 51.8% in the 2024 period primarily due to an increase in the proportion of higher-margin parts and consumables revenue in 2025 and the inclusion of $0.7 million of amortization expense related to acquired profit in inventory, which lowered gross profit margin in 2024 by 0.8 percentage points. These increases were partially offset by lower margins achieved on our capital equipment products.
•Decreased to 43.6% at our Industrial Processing segment from 44.0% in the 2024 period due to lower margins achieved on our capital equipment products, partially offset by an increase in the proportion of higher-margin parts and consumables revenue in 2025.
•Increased to 38.5% at our Material Handling segment from 35.0% in the 2024 period due to higher margins achieved on our parts and consumables products.
Selling, General, and Administrative Expenses
Selling, general, and administrative (SG&A) expenses by reportable segm ent and Corp orate in the third quarters of 2025 and 2024 are as follows:

|  | Three Months Ended |  |  |
(In thousands, except percentages) |  | September 27, 2025 |  | September 28, 2024 |  | Increase |  | % Change
Flow Control |  | $ | 25,380 |  |  | $ | 24,791 |  |  | $ | 589 |  |  | 2%
Industrial Processing |  | 25,453 |  |  | 21,324 |  |  | 4,129 |  |  | 19%
Material Handling |  | 13,919 |  |  | 12,874 |  |  | 1,045 |  |  | 8%
Corporate |  | 11,087 |  |  | 10,054 |  |  | 1,033 |  |  | 10%
Consolidated |  | $ | 75,839 |  |  | $ | 69,043 |  |  | $ | 6,796 |  |  | 10%
Consolidated as a Percentage of Revenue |  | 27.9% |  | 25.4% |  |  |  |

Consolidated SG&A expenses increased $6.8 million, or 10%, in the third quarter of 2025 compared to the third quarter of 2024 primarily due to higher compensation-related costs, an increase of $1.3 million in acquisition-related costs, and the inclusion of $0.7 million of SG&A expenses from an acquisition. In addition, the weakening of the U.S. dollar resulted in a $1.4 million increase in SG&A expenses, including a $1.2 million unfavorable effect of foreign currency translation and a $0.2 million shift from foreign currency gains in the 2024 period to losses in the 2025 period.
Within our reportable segments and Corporate, SG&A expenses:
•Increased $0.6 million at our Flow Control segment principally due to the impact of the weakening of the U.S. dollar, which resulted in a $1.0 million increase in SG&A expenses, including $0.7 million from the unfavorable effect of foreign currency translation and $0.3 million from a shift from foreign currency gains in the 2024 period to losses in the 2025 period. These increases were partially offset by a decrease of $0.5 million in acquisition-related costs.
•Increased $4.1 million at our Industrial Processing segment principally due to increases of $2.1 million in acquisition costs, $0.7 million of SG&A expenses from an acquisition, and $0.5 million in bad debt expense.
•Increased $1.0 million at our Material Handling segment principally due to higher compensation expense, partially offset by a decrease of $0.3 million in acquisition-related costs.
•Increased $1.0 million at Corporate primarily due to a $1.2 million increase in compensation-related costs.
Interest Expense
Interest expense decreased to $3.1 million in the third quarter of 2025 from $5.5 million in the third quarter of 2024 due to decreased borrowings under our revolving credit facility and a lower weighted-average interest rate. We expect interest expense will increase significantly during the fourth quarter of 2025 as a result of the $170.0 million borrowed in October 2025 to fund our Clyde Industries acquisition.
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Provision for Income Taxes
Provision for income taxes decreased to $11.8 million in the third quarter of 2025 from $12.0 million in the third quarter of 2024.
The effective tax rate of 30% in the third quarter of 2025 was higher than our statutory rate of 21% primarily due to an increase in unrecognized tax benefits, the distribution of our worldwide earnings, nondeductible expenses, state taxes, and the cost of repatriating the earnings of certain foreign subsidiaries. These items were offset in part by a net tax benefit from the re-measurement of certain deferred income tax assets and liabilities due to the decrease to Germany's future statutory tax rate enacted in July 2025 and foreign tax credits.
The effective tax rate of 27% in the third quarter of 2024 was higher than our statutory rate of 21% primarily due to the distribution of our worldwide earnings, state taxes, nondeductible expenses, the cost of repatriating the earnings of certain foreign subsidiaries, and tax expenses associated with Global Intangible Low-Taxed Income provisions. These items were offset in part by foreign tax credits.
Net Income
Net income decreased to $28.1 million in the third quarter of 2025 from $31.9 million in the third quarter of 2024 primarily due to a $6.4 million decrease in operating income, offset in part by a $2.4 million decrease in interest expense and a $0.2 million decrease in provision for income taxes (see discussions above for further details).
First Nine Months 2025 Compared With First Nine Months 2024
Revenue
The following table presents changes in revenue and organic revenue by segment between the first nine months of 2025 and 2024. Organic revenue is a non-GAAP measure as defined above in the results of operations for the third quarter of 2025 compared with the third quarter of 2024.
Revenue by segment in the first nine months of 2025 and 2024 is as follows:

|  | Nine Months Ended |  |  |  |  |  | Acquisitions |  | Currency Translation |  | (Non-GAAP) Change in Organic Revenue
(In thousands, except percentages) |  | September 27, 2025 |  | September 28, 2024 |  | Increase (Decrease) |  | % Change |  |  |  | Increase (Decrease) |  | % Change
Flow Control |  | $ | 283,227 |  |  | $ | 276,493 |  |  | $ | 6,734 |  |  | 2% |  | $ | 8,216 |  |  | $ | 266 |  |  | $ | (1,748) |  |  | (1)%
Industrial Processing |  | 291,854 |  |  | 331,310 |  |  | (39,456) |  |  | (12)% |  | 5,930 |  |  | (1,409) |  |  | (43,977) |  |  | (13)%
Material Handling |  | 190,963 |  |  | 187,551 |  |  | 3,412 |  |  | 2% |  | 611 |  |  | 1,664 |  |  | 1,137 |  |  | 1%
Consolidated |  | $ | 766,044 |  |  | $ | 795,354 |  |  | $ | (29,310) |  |  | (4)% |  | $ | 14,757 |  |  | $ | 521 |  |  | $ | (44,588) |  |  | (6)%

Consolidated revenue decreased 4% to $766.0 million in the first nine months of 2025, while organic revenue decreased 6% primarily due to weaker demand for our capital equipment products, especially at our Industrial Processing segment. The volatility of the tariff rates on imports to the United States originally proposed in early 2025 and then subsequently modified, led to a significant slowdown in the timing of securing large capital orders. As a result, capital revenue decreased 23% in the first nine months of 2025 compared to 2024. From a geographic perspective, organic revenue was impacted by softening demand across all regions due to weak macroeconomic conditions fueled by trade tensions and geopolitical issues. While customers delayed large capital expenditures, the demand for our parts and consumables was steady, resulting in a 3% increase in parts and consumables revenue compared to the first nine months of 2024.
Revenue at our Flow Control segment increased 2% in the first nine months of 2025. Organic revenue decreased 1% in the first nine months of 2025 due to lower demand for our capital equipment products, especially in North America, as a result of challenging market conditions. This decrease was partially offset by higher demand for parts and consumables products with strength in North America offsetting weaker market conditions in Europe.
Revenue at our Industrial Processing segment decreased 12% in the first nine months of 2025. Organic revenue decreased 13% in the first nine months of 2025 largely due to reduced demand for our capital equipment products at our wood processing businesses. While there is active quote activity for large capital projects, tariff-related uncertainty has increased the time for securing orders with certain orders being delayed to the fourth quarter of 2025 or into 2026. Capital revenue also decreased at our fiber processing businesses in the first nine months of 2025 across all regions, especially in China where trade tensions were further compounded by sluggish economic conditions resulting in more cautious capital spending. Given the
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delay in committing to major capital expenditures, many customers focused their spending on critical parts and maintenance. As a result, there was solid demand for our parts and consumables products in this segment, with a 4% increase in aftermarket parts revenue in the first nine months of 2025 compared to the first nine months of 2024.
Revenue at our Material Handling segment increased 2%, led by higher demand at our baling businesses for both capital equipment and parts and consumables products. This increase was partially offset by weaker demand for our capital equipment products at our conveying and vibratory business in North America driven by the tariff-related market uncertainty, which tempered demand and delayed the execution of capital projects.
Gross Profit Margin
Gross profit margin by segment in the first nine months of 2025 and 2024 is as follows:

|  | Nine Months Ended |  | Basis Point Change
|  | September 27, 2025 |  | September 28, 2024 |
Flow Control |  | 53.0% |  | 52.9% |  | 10 | bps
Industrial Processing |  | 43.4% |  | 42.3% |  | 110 | bps
Material Handling |  | 38.3% |  | 36.2% |  | 210 | bps
Consolidated |  | 45.7% |  | 44.5% |  | 120 | bps

Consolidated gross profit margin increased to 45.7% in the first nine months of 2025 from 44.5% in the first nine months of 2024 due to an increase in the proportion of higher-margin parts and consumables revenue, which increased to 72% of consolidated revenue in the first nine months of 2025 compared to 65% in in the first nine months of 2024. Gross profit margin included amortization expense related to acquired profit in inventory of $0.5 million, which lowered gross profit margin by 0.1 percentage points in the first nine months of 2025 compared to expense of $4.1 million, which lowered gross profit margin by 0.6 percentage points in the 2024 period.
Within our reportable segments, gross profit margin:
•Increased to 53.0% at our Flow Control segment from 52.9% in the 2024 period primarily due to an increase in the proportion of higher-margin parts and consumables revenue in 2025 and the inclusion of $1.0 million of amortization expense related to acquired profit in inventory in the 2024 period, which decreased gross profit margin in 2024 by 0.3 percentage points.
•Increased to 43.4% at our Industrial Processing segment from 42.3% in the 2024 period due to an increase in the proportion of higher-margin parts and consumables revenue in 2025 and a decrease in amortization expense related to acquired profit in inventory in the first nine months of 2025 compared to the 2024 period. These increases were partially offset by lower margins achieved on our capital equipment products.
•Increased to 38.3% at our Material Handling segment from 36.2% in the 2024 period due to higher margins achieved on our capital equipment products in 2025 and, to a lesser extent, the inclusion of $1.0 million of amortization expense related to acquired profit in inventory in the 2024 period, which decreased gross profit margin in 2024 by 0.6 percentage points.
Selling, General, and Administrative Expenses
SG&A expenses by reportable segment and Corporate in the first nine months of 2025 and 2024 are as follows:

|  | Nine Months Ended |  |  |
(In thousands, except percentages) |  | September 27, 2025 |  | September 28, 2024 |  | Increase |  | % Change
Flow Control |  | $ | 76,435 |  |  | $ | 72,186 |  |  | $ | 4,249 |  |  | 6%
Industrial Processing |  | 70,024 |  |  | 65,708 |  |  | 4,316 |  |  | 7%
Material Handling |  | 41,431 |  |  | 40,672 |  |  | 759 |  |  | 2%
Corporate |  | 33,111 |  |  | 30,786 |  |  | 2,325 |  |  | 8%
Consolidated |  | $ | 221,001 |  |  | $ | 209,352 |  |  | $ | 11,649 |  |  | 6%
Consolidated as a Percentage of Revenue |  | 28.8% |  | 26.3% |  |  |  |

Consolidated SG&A expenses as a percentage of revenue increased to 28.8% in the first nine months of 2025 compared with 26.3% in the first nine months of 20 24 due in part to the comparatively lower revenue in 2025. Consolidated
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SG&A expenses increased $11.6 million, or 6%, primarily due to the inclusion of $6.2 million of SG&A expenses from acquisitions and higher compensation-related costs. In addition, the weakening of the U.S. dollar resulted in a $1.9 million increase in SG&A expenses, including a $1.4 million shift from foreign currency gains in the 2024 period to losses in the 2025 period, and $0.5 million from the unfavorable effect of foreign currency translation.
Within our reportable segments and Corporate, SG&A expenses:
•Increased $4.2 million at our Flow Control segment principally due to the inclusion of $4.5 million of SG&A expenses from acquisitions and a $1.3 million increase in SG&A expense due to the unfavorable impact of foreign currency, including a $1.0 million shift from foreign currency gains in the 2024 period to losses in the 2025 period. These increases were partially offset by a decrease of $0.9 million in acquisition-related costs.
•Increased $4.3 million at our Industrial Processing segment due to an increase of $2.6 million of acquisition costs, $0.7 million of SG&A expenses from an acquisition, and a $0.3 million increase in SG&A expense due to the unfavorable impact of foreign currency.
•Increased $0.8 million at our Material Handling segment principally due to an increase of $1.0 million of SG&A expenses from acquisitions, higher compensation-related costs, and a $0.3 million unfavorable effect of foreign currency. These increases were partially offset by a decrease of $2.2 million in acquisition-related costs.
•Increased $2.3 million at Corporate due to a $1.9 million increase in compensation expense and a $1.1 million increase in insurance expense, offset by a decrease in legal costs primarily due to an intellectual property settlement.
Interest Expense
Interest expense decreased to $10.2 million in the first nine months of 2025 from $15.4 million in the first nine months of 2024 due t o a lower weighted-average interest rate and, to a lesser extent, decreased borrowings under our revolving credit facility.
Provision for Income Taxes
Provision for income taxes decreased to $29.4 million in the first nine months of 2025 from $31.8 million in the first nine months of 2024.
The effective tax rate of 27% in the first nine months of 2025 was higher than our statutory rate of 21% primarily due to nondeductible expenses, the distribution of our worldwide earnings, state taxes, and the cost of repatriating the earnings of certain foreign subsidiaries. These items were offset in part by a net tax benefit from the re-measurement of certain deferred income tax assets and liabilities due to the decrease to Germany's future statutory rate enacted in July 2025 and foreign tax credits.
The effective tax rate of 26% in the first nine months of 2024 was higher than our statutory rate of 21% primarily due to the distribution of our worldwide earnings, nondeductible expenses, state taxes, and the cost of repatriating the earnings of certain foreign subsidiaries. These items were offset in part by foreign tax credits.
Net Income
Net income decreased to $79.2 million in the first nine months of 2025 from $88.5 million in the first nine months of 2024 primarily due to a $16.7 million decrease in operating income, offset in part by a $5.1 million decrease in interest expense and a $2.4 million decrease in provision for income taxes (see discussions above for further details).
Non-GAAP Key Performance Indicators
In addition to the financial measures prepared in accordance with GAAP, we use certain non-GAAP financial measures, including organic revenue (defined as revenue excluding the effect of acquisitions and foreign currency translation), adjusted operating income, earnings before interest, taxes, depreciation, and amortization (EBITDA), adjusted EBITDA, adjusted EBITDA margin (defined as adjusted EBITDA divided by revenue), and free cash flow (defined as cash flow provided by operations less capital expenditures).
We use organic revenue to understand our trends and to forecast and evaluate our financial performance and compare revenue to prior periods (see discussion in Revenue above). Adjusted operating income, adjusted EBITDA, and adjusted EBITDA margin exclude acquisition costs, amortization expense related to acquired profit in inventory and backlog, and other income or expense, as indicated. These items are excluded as they are not indicative of our core operating results and are not comparable to other periods, which have differing levels of incremental costs, expenditures or income, or none at all. Additionally, we use free cash flow in order to provide insight on our ability to generate cash for acquisitions and debt
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repayments, as well as for other investing and financing activities.
We believe these non-GAAP financial measures, when taken together with the corresponding GAAP financial measures, provide meaningful supplemental information regarding our performance by excluding certain items that may not be indicative of our core business, operating results, or future outlook. We believe that the inclusion of such measures helps investors gain an understanding of our underlying operating performance and future prospects, consistent with how management measures and forecasts our performance, especially when comparing such results to previous periods or forecasts and to the performance of our competitors. Such measures are also used by us in our financial and operating decision-making and for compensation purposes. We also believe this information is responsive to investors' requests and gives them additional measures of our performance.
Our non-GAAP financial measures are not meant to be considered superior to or a substitute for the results of operations or cash flows prepared in accordance with GAAP. In addition, our non-GAAP financial measures have limitations associated with their use as compared to the most directly comparable GAAP measures, in that they may be different from, and therefore not comparable to, similar measures used by other companies.
A reconciliation of adjusted operating income, adjusted EBITDA, and adjusted EBITDA margin from net income attributable to Kadant is as follows:

|  | Three Months Ended |  | Nine Months Ended
(In thousands, except percentages) |  | September 27, 2025 |  | September 28, 2024 |  | September 27, 2025 |  | September 28, 2024
Net Income Attributable to Kadant |  | $ | 27,722 |  | $ | 31,586 |  |  | $ | 77,944 |  |  | $ | 87,566 |
Net Income Attributable to Noncontrolling Interests |  | 393 |  | 312 |  |  | 1,247 |  |  | 891 |
Provision for Income Taxes |  | 11,766 |  | 11,964 |  |  | 29,416 |  |  | 31,810 |
Interest Expense, Net |  | 2,716 |  | 5,109 |  |  | 8,920 |  |  | 14,000 |
Other Expense, Net |  | 19 |  | 16 |  |  | 52 |  |  | 48 |
Operating Income |  | 42,616 |  | 48,987 |  |  | 117,579 |  |  | 134,315 |
Acquisition Costs |  | 2,253 |  | 469 |  |  | 3,498 |  |  | 2,533 |
Acquired Profit in Inventory Amortization (a) |  | 465 |  | 1,205 |  |  | 500 |  |  | 4,065 |
Acquired Backlog Amortization (b) |  | 165 |  | 687 |  |  | 746 |  |  | 2,181 |
Other Costs |  | 287 |  | — |  |  | 287 |  |  | — |
Indemnification Asset (Provision) Reversal (c) |  | — |  | (175) |  |  | (29) |  |  | (151) |
Adjusted Operating Income (non-GAAP measure) |  | 45,786 |  | 51,173 |  |  | 122,581 |  |  | 142,943 |
Depreciation and Amortization |  | 12,232 |  | 12,088 |  |  | 35,733 |  |  | 34,324 |
Adjusted EBITDA (non-GAAP measure) |  | $ | 58,018 |  | $ | 63,261 |  |  | $ | 158,314 |  |  | $ | 177,267 |
Adjusted EBITDA Margin (non-GAAP measure) |  | 21.4% |  | 23.3% |  | 20.7% |  | 22.3%

(a) Represents amortization expense within cost of revenue associated with acquired profit in inventory.
(b) Represents intangible amortization expense associated with acquired backlog.
(c) Represents the provision for or reversal of indemnification assets related to the establishment or release of tax reserves associated with uncertain tax positions.
A reconciliation of free cash flow from cash flow provided by operating activities is as follows:

|  | Three Months Ended |  | Nine Months Ended
(In thousands) |  | September 27, 2025 |  | September 28, 2024 |  | September 27, 2025 |  | September 28, 2024
Cash Provided by Operating Activities |  | $ | 47,252 |  |  | $ | 52,478 |  |  | $ | 110,569 |  |  | $ | 103,375 |
Capital Expenditures |  | (3,194) |  |  | (4,185) |  |  | (10,998) |  |  | (15,430) |
Free Cash Flow (non-GAAP measure) |  | $ | 44,058 |  |  | $ | 48,293 |  |  | $ | 99,571 |  |  | $ | 87,945 |

Liquidity and Capital Resources
Consolidated working capital was $307.4 million at September 27, 2025, compared with $250.8 million at December 28, 2024. Cash and cash equivalents were $124.5 million at September 27, 2025, compared with $94.7 million at December 28, 2024, which included cash and cash equivalents held by our foreign subsidiaries o f $86.3 million at September 27, 2025 and $73.8 million at December 28, 2024.
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Cash Flow
Cash flow information in the first nine months of 2025 and 2024 is as follows:

|  | Nine Months Ended
(In thousands) |  | September 27, 2025 |  | September 28, 2024
Net Cash Provided by Operating Activities |  | $ | 110,569 |  |  | $ | 103,375 |
Net Cash Used in Investing Activities |  | (26,227) |  |  | (315,871) |
Net Cash (Used in) Provided by Financing Activities |  | (59,302) |  |  | 196,774 |
Exchange Rate Effect on Cash, Cash Equivalents, and Restricted Cash |  | 5,927 |  |  | (997) |
Increase (Decrease) in Cash, Cash Equivalents, and Restricted Cash |  | $ | 30,967 |  |  | $ | (16,719) |

Operating Activities
Cash provided by operating activities increased to $110.6 million in the first nine months of 2025 from $103.4 million in the first nine months of 2024 due in large part to the increase in cash received from customer deposits. Our operating cash flows are primarily generated from cash received from customers, offset by cash payments for items such as inventory, employee compensation, operating leases, income taxes, and interest payments on outstanding debt obligations.
Significant operating cash outflows associated with working capital in the nine months of 2025 related to inventory, other liabilities, and accounts receivable. Purchases of inventory used cash of $12.9 million and other liabilities used cash of $10.4 million, primarily related to incentive compensation payments. In addition, an increase in accounts receivable used cash of $7.7 million due to timing of shipments. These uses of cash were offset in part by cash received from customer deposits of $7.2 million due to the timing of capital equipment orders and cash received from contract assets of $8.9 million related to contracts accounted for on an over time basis.
Significant cash outflows associated with working capital in the first nine months of 2024 related to accounts receivable, customer deposits and other liabilities. An increase in accounts receivable used cash of $10.4 million primarily due to our revenue growth, and a decrease in customer deposits used cash of $21.6 million due to a reduction in capital equipment orders. Other liabilities used cash of $15.5 million primarily related to incentive compensation payments. These uses of cash were offset in part by cash provided from the shipment of inventory of $10.2 million and increases in accounts payable of $8.7 million related to inventory purchases and the timing of payments.
Investing Activities
Cash used in investing activities was $26.2 million in the first nine months of 2025, compared with $315.9 million in the first nine months of 2024. Cash used in investing activities in the first nine months of 2025 included consideration paid for an acquisition, net of cash acquired, of $16.5 million and capital expenditures of $11.0 million. Cash used in investing activities in the first nine months of 2024 included consideration paid for acquisitions, net of cash acquired, of $302.0 million and capital expenditures of $15.4 million.
Financing Activities
Cash used in financing activities was $59.3 million in the nine months of 2025, compared with cash provided by financing activities of $196.8 million in the first nine months of 2024. Borrowings under our revolving credit facility, which were primarily used to fund our 2025 and 2024 acquisitions, were $29.0 million in 2025 compared to $305.2 million in 2024. Repayments of short- and long-term obligations were $69.4 million in 2025 and $91.4 million in 2024. Cash dividends paid to stockholders were $11.8 million in 2025 and $10.9 million in 2024. In addition, taxes paid related to the vesting of equity awards were $6.1 million in 2025 and $5.9 million in 2024.
Exchange Rate Effect on Cash, Cash Equivalents, and Restricted Cash
The exchange rate effect on cash, cash equivalents, and restricted cash represents the impact of translation of cash balances at our foreign subsidiaries. The $5.9 million increase in cash, cash equivalents, and restricted cash in the first nine months of 2025 related to exchange rates was primarily attributable to the weakening of the U.S. dollar against the euro and, to a lesser extent, the Swedish krona, and the Canadian dollar. The $1.0 million decrease in cash, cash equivalents, and restricted cash in the first nine months of 2024 was primarily attributable to the strengthening of the U.S. dollar against the Mexican peso and, to a lesser extent, the Brazilian real and the Canadian dollar.
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Borrowing Capacity and Debt Obligations
On September 26, 2025, we entered into an eighth amendment and joinder (the Eighth Amendment) to our unsecured multi-currency revolving credit facility originally entered into on March 1, 2017 (as amended and restated to date, the Credit Agreement). The Eighth Amendment, among other things, increased our aggregate borrowing capacity from $400.0 million to $750.0 million and extended the maturity date from November 30, 2027 to September 26, 2030. In addition to the increased committed borrowing capacity, an uncommitted, unsecured incremental borrowing facility of $200.0 million continues to be available under the Credit Agreement. In the first nine months of 2025, we borrowed $29.0 million under our revolving credit facility, the majority of which was used to fund our acquisition of Babbini.
As of September 27, 2025, our outstanding balance under the Credit Agreement was $248.1 million, which included $101.1 million of euro-denominated borrowings, and we had $502.0 million of available committed borrowing capacity, in addition to a $200.0 million uncommitted, unsecured incremental borrowing facility. Under our debt agreements, our leverage ratio must be less than 3.75 or, if we elect, for the quarter during which a material acquisition occurs and for the three fiscal quarters thereafter, must be less than 4.25. As of September 27, 2025, our leverage ratio was 0.94 and we were in compliance with our debt covenants.
In October 2025, we borrowed $170.0 million under our revolving credit facility to fund the acquisition of Clyde Industries. Borrowings under our revolving credit facility bear variable rates of interest and adjust frequently based on prevailing market rates and the terms of our Credit Agreement. The interest rate related to this debt was approximately 5.4% at the time of the borrowing. Following this acquisition, we had available committed borrowing capacity of $332.0 million under the revolving credit facility, in addition to the uncommitted, unsecured incremental borrowing facility of $200.0 million.
See Note 5, Long-Term Obligations and Note 11, Subsequent Events, in the accompanying condensed consolidated financial statements for additional information regarding our debt obligations.
Additional Liquidity and Capital Resources
On May 15, 2025, our board of directors approved the repurchase of up to $50.0 million of our equity securities during the period from May 15, 2025 to May 15, 2026. We did not repurchase any shares of our common stock under this authorization or our previous $50.0 million authorization that expired on May 16, 2025.
We paid cash dividends of $11.8 million in the first nine months of 2025. On September 4, 2025, we declared a quarterly cash dividend of $0.34 per share totaling $4.0 million that will be paid on November 6, 2025. Future declarations of dividends are subject to our board of directors' approval and may be adjusted as business needs or market conditions change. The declaration of cash dividends is subject to our compliance with the covenant in our Credit Agreement related to our consolidated leverage ratio.
We plan to make expenditures of approximately $10.0 to $12.0 million during the remainder of 2025 for property, plant, and equipment.
As of September 27, 2025, we had approximately $137.7 million of total unremitted foreign earnings. It is our intent to indefinitely reinvest $74.3 million of these earnings to support the current and future capital needs of our foreign operations, including debt repayments, if any. In the first nine months of 2025, we recorded withholding taxes on the earnings in certain foreign subsidiaries that we plan to repatriate in the foreseeable future. The foreign withholding taxes that would be required if we were to remit the indefinitely-reinvested foreign earnings to the United States would be approximately $2.0 million.
We believe that existing cash and cash equivalents, along with future cash generated from operations, and our existing borrowing capacity will be sufficient to meet the capital requirements of our operations for the next 12 months and the foreseeable future.
Application of Critical Accounting Policies and Estimates
Management's discussion and analysis of financial condition and results of operations is based upon our condensed consolidated financial statements, which have been prepared in accordance with GAAP. The preparation of these condensed consolidated financial statements requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent liabilities, and the reported amounts of revenue and expenses during the reporting period. Our critical accounting policies are defined as those that entail significant judgments and uncertainties, and could potentially result in materially different results under different assumptions and conditions. Management evaluates its estimates on an ongoing basis based on historical experience, current economic and market conditions, and other assumptions management believes are reasonable. We believe that our most critical accounting policies which are significant to our consolidated financial statements, and which involve the most complex or subjective decisions or assessments, are those described in Management's Discussion and Analysis of Financial Condition and Results of Operations under the heading Application of Critical Accounting
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Estimates in Part II, Item 7, of our Annual Report. There have been no material changes to these critical accounting policies since the end of fiscal 2024 that warrant disclosure.
Recent Accounting Pronouncements
See Note 1, under the heading Recent Accounting Pronouncements Not Yet Adopted, in the accompanying condensed consolidated financial statements for details.
Item 3 – Quantitative and Qualitative Disclosures About Market Risk
Our exposure to market risk from changes in interest rates and foreign currency exchange rates has not changed materially from our exposure as disclosed in Part II, Item 7A, of our Annual Report.
Item 4 – Controls and Procedures
Evaluation of Disclosure Controls and Procedures
Our management, under the supervision and with the participation of our Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of our disclosure controls and procedures as of September 27, 2025. The term "disclosure controls and procedures," as defined in Securities Exchange Act Rules 13a-15(e) and 15d-15(e), means controls and other procedures of a company that are designed to ensure that information required to be disclosed by the company in the reports that it files or submits under the Exchange Act is recorded, processed, summarized, and reported, within the time periods specified in the SEC's rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is accumulated and communicated to the company's management, including its principal executive and principal financial officers, as appropriate to allow timely decisions regarding required disclosure. Management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving their objectives and management necessarily applies its judgment in evaluating the cost-benefit relationship of possible controls and procedures. Based upon the evaluation of our disclosure controls and procedures as of September 27, 2025, our Chief Executive Officer and Chief Financial Officer concluded that as of September 27, 2025, our disclosure controls and procedures were effective at the reasonable assurance level.
Changes in Internal Control over Financial Reporting
Management's assessment of the effectiveness of internal control over financial reporting includes internal controls over financial reporting systems and internal processes at Key Knife, Inc., KWS Manufacturing Company, Ltd. and Dynamic Sealing Technologies LLC, which were excluded from management's assessment in 2024. There have not been any changes in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Securities Exchange Act of 1934, as amended) during the fiscal quarter ended September 27, 2025 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
PART II – OTHER INFORMATION
Item 1A – Risk Factors
Careful consideration should be given to the factors discussed in Part I, Item 1A, Risk Factors, in our Annual Report for the fiscal year ended December 28, 2024, which could materially affect our business, financial condition or future results, in addition to the information set forth in this Quarterly Report on Form 10-Q. Except for the revised risk factor below regarding "Operating globally subjects us to changes in government regulations and policies in multiple jurisdictions around the world, including those related to tariffs and trade barriers, taxation, exchange controls and political risks," there have been no material changes from the risk factors disclosed in our Annual Report.
Operating globally subjects us to changes in government regulations and policies in multiple jurisdictions around the world, including those related to tariffs and trade barriers, taxation, exchange controls and political risks.
Changes in government policies, political unrest, economic sanctions, trade embargoes, or other adverse trade regulations can negatively impact our business. Non-U.S. markets contribute a substantial portion of our revenues, and we intend to continue expanding our presence in these regions. For example, we operate businesses in Mexico and Canada and benefit from the United States-Mexico-Canada Agreement (USMCA). If the United States were to withdraw from or materially modify the USMCA or impose significant tariffs or taxes on goods imported into the United States, the cost of our products
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could significantly increase or no longer be priced competitively, which in turn could have a material adverse effect on our business and results of operations.
Since February 2025, the Trump administration has relied on the International Emergency Economic Powers Act (IEEPA) to impose a series of tariffs on U.S. trading partners. In February 2025, the Trump administration imposed a 25% tariff on Canada and Mexico for non-USMCA originating goods, and a 20% tariff on China (the trafficking tariffs). As of October 29, 2025, the trafficking tariffs on Canada, Mexico, and China are 35%, 25% and 20%, respectively.
In addition, on April 2, 2025, President Trump announced a 10% "baseline" tariff on all U.S. trading partners effective April 5, 2025 and higher, country-specific reciprocal tariffs on 57 countries (the reciprocal tariffs). The reciprocal tariffs do not apply to Canada, Mexico and a few other countries. Although the Trump administration subsequently paused the country-specific reciprocal tariffs for all countries except China, President Trump issued an executive order on July 31, 2025 imposing new country-specific reciprocal tariffs ranging from 10-41% on 69 countries, effective August 7, 2025. Several countries, including the United Kingdom and the European Union, have reached trade agreements with the United States that include reductions in the country-specific reciprocal tariffs and other commitments. Negotiations with numerous other countries continue.
On November 1, 2025, President Trump announced the United States and China reached a framework agreement that will result in the suspension of the country-specific reciprocal tariff on China until November 10, 2026, and reduce the trafficking tariff on China from 20% to 10%, effective November 10, 2025. China will remain subject to a reciprocal tariff of 10%.
Our business has been negatively affected by these tariffs and may be negatively affected in the future by this quickly evolving tariff situation and the economic uncertainty created thereby.
Our business is also affected by various product or sector-specific tariffs that the United States imposes on trading partners. Certain products imported from China, including pulp and paper machinery, are subject to tariffs imposed by the Office of the United States Trade Representative, pursuant to Section 301 of the Trade Act of 1974. The tariffs on pulp and paper machinery are set at 25%. In addition, the U.S. Department of Commerce has imposed tariffs of 50% on numerous categories of steel and aluminum products, under Section 232 of the Trade Expansion Act of 1962, and has expanded these tariffs to include certain derivative steel and aluminum products. On July 30, 2025, President Trump announced the results of a Section 232 investigation on copper, imposing a 50% tariff on imports of semi-finished copper and copper derivatives, effective August 1, 2025. We import products that are impacted by these tariffs. While we try to mitigate the impact of the existing and other proposed tariffs by the Trump administration through pricing and sourcing strategies, we cannot be certain how our customers and competitors will react to the actions we take. The tariffs have and could in the future negatively affect our ability to compete against competitors who do not manufacture in China and/or are not subject to the tariffs.
The United States has tightened trade sanctions targeting countries like China and Russia. For example, since 2018 the United States has imposed various trade and economic sanctions targeting certain persons in Russia and certain types of business with Russia. The United States has continued to expand export control restrictions applicable to certain Chinese firms and continued its assessment of new controls for "emerging foundational technologies," escalating U.S.-China tension concerning technology. Moreover, tensions between the United States and China have increased and future actions by the United States or Chinese governments may impact our operations in and imports from China, as well as sales to and from China. In response, Russia and China have begun considering and, in some cases, implementing trade sanctions that could affect U.S.-owned businesses. The imposition of trade sanctions has and may in the future continue to make it generally more difficult to do business in Russia and China and cause delays or prevent shipment of products or services performed by our personnel, or to receive payment for products or services.
Additionally, the military conflict between Russia and Ukraine and the global response to it has and may in the future adversely impact our revenues, gross margins and financial results. The United States, the European Union, and many other countries have imposed sanctions on Russia, individuals in Russia and Russian businesses, including several large banks. In 2024, our sales to Russia were minimal at $2.6 million. As a result of the international sanctions regime in place against Russia, it has become extremely difficult to sell any of our equipment or services into Russia. Any proposed sales into Russia are evaluated on a case-by-case basis, taking into account the risks related to the sale, the costs associated with ensuring compliance with applicable sanctions and the likelihood of receiving payment from either party's banks. It is not possible to predict the broader or longer-term consequences of this conflict, which could include further sanctions, embargoes, regional instability, geopolitical shifts and adverse effects on macroeconomic conditions, security conditions, currency exchange rates and financial markets. Such geopolitical instability and uncertainty has and could continue to have in the future a negative impact on our ability to sell to, ship products to, collect payments from, and support customers in certain regions based on trade restrictions, embargoes and export control law restrictions, and logistics restrictions, and could increase the costs, risks and adverse impacts from these new challenges. The conflict between Russia and Ukraine, as well as other conflicts such as those in the Middle East, may also have the effect of heightening other risks disclosed in our Annual Report, any of which could materially and adversely affect our business and results of operations. Such risks include, but are not limited to, adverse effects on
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macroeconomic conditions, including inflation and business and consumer spending; disruptions to our global technology infrastructure, including through cyberattack, ransomware attack, or cyber-intrusion; adverse changes in international trade policies and relations; our ability to maintain or increase our prices, including any fuel surcharges in response to rising fuel costs; the energy crisis resulting from the Russia-Ukraine conflict, particularly in Europe; our ability to implement and execute our business strategy; disruptions in global supply chains; our exposure to foreign currency fluctuations; and constraints, volatility, or disruption in the capital markets. Such restrictions have and may in the future continue to have a material adverse impact on our business and operating results.
Item 5 – Other Information
Insider Trading Arrangements
None of our directors or officers adopted or terminated a Rule 10b5-1 trading arrangement or adopted or terminated a non-Rule 10b5-1 trading arrangement (as defined in Item 408(c) of Regulation S-K) during the quarter ended September 27, 2025.
Item 6 – Exhibits

Exhibit Number |  | Description of Exhibit
2.1 |  | Securities Purchase Agreement dated as of October 7, 2025, by and among Clyde Industries Holdings, Inc., Clyde Industries Holdings, L.P., and Kadant Inc. (1)
10.1 |  | Eighth Amendment and Joinder to Amended and Restated Credit Agreement dated as of September 26, 2025, among the Registrant, as Borrower, the Subsidiary Guarantors party thereto, the Foreign Subsidiary Borrowers from time to time parties thereto, the several lenders from time to time parties thereto, and Citizens Bank, N.A., as Administrative Agent and Multicurrency Administrative Agent. (filed as Ex hibit 10.1 to the Regist rant's Current Report on Form 8-K [File No. 001-1140 6] filed with the Commission on October 2, 2025 and incorporated in this document by reference).
31.1 |  | Certification of the Principal Executive Officer of the Registrant Pursuant to Rule 13a-14(a) and Rule 15d-14(a) of the Securities Exchange Act of 1934, as amended.
31.2 |  | Certification of the Principal Financial Officer of the Registrant Pursuant to Rule 13a-14(a) and Rule 15d-14(a) of the Securities Exchange Act of 1934, as amended.
32 |  | Certification of the Chief Executive Officer and the Chief Financial Officer of the Registrant Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
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).

(1) | Certain portions of this exhibit are considered confidential and have been omitted from this filing pursuant to Item 601(b)(2) of Regulation S-K. The Company agrees to furnish supplementally a copy of any omitted portions to the U.S. Securities and Exchange Commission upon request.

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SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

| KADANT INC.
Date: November 5, 2025 | /s/ Michael J. McKenney
| Michael J. McKenney
| Executive Vice President and Chief Financial Officer
| (Principal Financial Officer)

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