Kadant Inc. (together with its subsidiaries, the Company) is a global supplier of technologies and engineered systems that drive Sustainable Industrial Processing®. Its products and services play an integral role in enhancing efficiency, optimizing energy utilization, and maximizing productivity in process industries while helping customers advance their sustainability initiatives with products that reduce waste or generate more yield with fewer inputs, particularly fiber, energy, and water. Producing more while consuming less is a core aspect of Sustainable Industrial Processing and a major element of the strategic focus of the Company's three reportable segments consisting of the Flow Control segment, Industrial Processing segment, and Material Handling segment.

The interim condensed consolidated financial statements and related notes presented have been prepared by the Company, are unaudited, and, in the opinion of management, reflect all adjustments of a normal recurring nature necessary for a fair statement of the Company's financial position at 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.

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.


	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

The Company's restricted cash generally serves as collateral for bank guarantees associated with providing assurance to customers that the Company will fulfill certain customer obligations entered into in the normal course of business and for certain banker's acceptance drafts issued to vendors. The majority of these restrictions will expire over the next twelve months.


(In thousands)	Gross		Accumulated Amortization		Currency Translation		Net
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


(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.


(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

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.

Most of the Company’s revenue relates to products and services that require minimal customization and is recognized at a point in time for each performance obligation under the contract when the customer obtains control of the goods or service. The remaining portion of the Company’s revenue is recognized over time based on an input method that compares the costs incurred to date to the total expected costs required to satisfy the performance obligation. Contracts are accounted for on an over time basis when they include products which have no alternative use and an enforceable right to payment over time. Most of the contracts recognized on an over time basis are for large capital equipment projects. These projects are highly customized for the customer and, as a result, would include a significant cost to rework in the event of cancellation.


	Three Months Ended				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

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 the 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.

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.

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.

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

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.

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.