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Item 2. Management’s Discussion and Analysis

2025-05-07 compared with 2024-11-06 · 149 added, 247 removed, 132 unchanged (75% of the section changed)

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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 Risk Factors included in Part I, Item 1A, of our Annual Report on Form 10-K for the fiscal year ended December 30, 2023 (Annual Report) and as may be further amended and/or restated in subsequent filings with the SEC.

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.

Company Background

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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 reported in three reportable operating segments:

Flow Control, Industrial Processing, and Material Handling.

The Flow Control segment consists of our fluid-handling and doctoring, cleaning, & filtration product lines;

the Industrial Processing segment consists of our wood processing and stock-preparation product lines;

and the Material Handling segment consists of our conveying and vibratory, baling, and fiber-based product lines.

A description of each segment is as follows:

Our financial results are reported 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 process recycled paper and timber for the packaging, tissue, wood products, and alternative fuel industries, among others.

Our primary products include stock-preparation systems and recycling equipment, chemical pulping equipment, debarkers, stranders, chippers and custom engineered knife systems.

• Industrial Processing – Equipment, machinery, and technologies used to recycle paper and paperboard and process timber for use in the packaging, tissue, wood products, and alternative fuel industries, among others.

Our primary products include fiber processing systems and recycling equipment, chemical pulping equipment, debarkers, stranders, chippers and custom engineered knife systems.

In addition, we provide industrial automation and digitization solutions to process industries.

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In addition, we manufacture and sell biodegradable, absorbent granules used as carriers in agricultural applications and for oil and grease absorption.

See Note 8 , Business Segment Information, in the accompanying condensed consolidated financial statements for financial information on our reportable segments.

Industry and Business Overview

Our consolidated bookings increased 15% to $240.3 million in the third quarter of 2024 compared to the third quarter of 2023, due to strong contributions from our recent acquisitions and increased demand for our parts and consumables products.

While demand for our parts and consumables products remains strong, we have seen a lengthening in the timing for securing capital orders as customers are being more cautious with some delaying large capital expenditures to later in the year or into 2025.

This is due to several factors, including economic uncertainty surrounding actions by central banks, macroeconomic conditions abroad, and the consolidation of some of our large customers.

These sluggish market conditions led to a 2% decrease

in organic bookings, which is defined as bookings excluding the effect of foreign currency translation and acquisitions, compared to the third quarter of 2023.

We anticipate stronger capital bookings in the fourth quarter of 2024 as customers prepare for 2025 projects, which we expect will result in sequentially higher bookings.

However, the timing of securing capital orders can be uncertain and could shift by quarter due to macroeconomic uncertainty or other factors.

The high percentage of aftermarket business at our recent acquisitions is expected to lead to increased annual bookings from our parts and consumables products in 2024.

Looking beyond 2024, we see long-term strength in our end markets as customers continue to turn to our products to help maximize productivity with more efficient production processes.

Our consolidated bookings increased 3% to $256.2 million in the first quarter of 2025 compared to the first quarter of 2024 due to record demand for our parts and consumables products, which increased to 74% of total bookings.

Within our segments, both our Flow Control and Industrial Processing segments had record demand for parts and consumables products as customers focused on critical parts and maintenance requirements.

While demand for our parts and consumables products remains strong, a lengthening in quote to order times for capital orders has resulted in a decline in capital bookings.

The Trump administration introduced new tariffs, subsequently modified and expanded them, and later reduced them for 90 days for most countries.

In addition, the Trump administration imposed a very high tariff rate on imports from China, with China initiating a retaliatory tariff on imports from the U.S.

These tariff changes have created significant uncertainty in the markets and impacted our customers’ decision-making process related to capital projects.

While investments in maintenance and mission-critical equipment continue, customers with flexibility in project timing are deferring capital expenditures until there is greater clarity regarding the tariff situation and the economy.

This impact is more pronounced in our Industrial Processing segment, where the average capital order size is significantly higher than in our other segments.

Our operations teams have been assessing their exposure to the currently enacted and proposed tariffs and are working on implementing mitigation measures.

From a geographic perspective, in North America the tariff situation has created uncertainty in the markets, which may lead to inflationary pressures.

In China, supportive government policies helped stimulate domestic demand and manufacturing activity, but the escalating trade tensions with the U.S.

are generally expected to have a negative effect.

In Europe, in addition to the trade policy uncertainty, sluggish market conditions have also been impacted by high interest rates and energy costs.

Overall, we expect stronger capital bookings in 2025 compared to 2024, especially in our Industrial Processing segment.

However, the timing for securing capital orders can be uncertain and could shift by quarter and into 2026 due in part to the outcome of the tariff negotiations and the timing of any tariff changes.

We expect steady demand for our aftermarket products to continue for the remainder of 2025.

We see long-term strength in our end markets as customers continue to rely on our products to help maximize productivity through more efficient production processes.

In addition, we see growth opportunities from proposed and adopted legislation in the U.S.

and abroad aimed at fueling investment, including those targeting environmental initiatives.

An overview of our business by segment is as follows:

• Flow Control – Our Flow Control segment bookings increased 7% compared to the third quarter of 2023, including a 12% increase from acquisitions.

Organic bookings decreased 5% compared to the third quarter of 2023 led by decreased demand for our capital equipment products in Europe as a result of challenging market conditions and a slowdown in manufacturing activity.

In Europe, there is continued uncertainty in the end markets we serve primarily due to geopolitical tensions and weak macroeconomic conditions.

In North America, demand for our capital equipment in 2024 has been impacted by mill shutdowns and the consolidation of some of our large customers.

We expect steady demand in our Flow Control segment in the fourth quarter of 2024.

• Industrial Processing – Our Industrial Processing segment bookings increased 27% compared to the third quarter of 2023, including 20% from acquisitions and 7% from organic bookings.

The increase in organic bookings was led by increased demand for our parts and consumables products, especially in North America.

We had stable demand for our capital equipment products in this segment in the third quarter of 2024 with increases at our stock-preparation business, offset in part by softness at our wood processing business.

The number of dormant or idle lines in the North American lumber industry has remained high as lumber producers await market improvement.

Demand for oriented strand board (OSB) was strong and mill operations drove solid parts and consumables bookings.

Weakness in new home starts in the U.S.

is expected to be offset by an uptick in home improvement projects, which will result in increased demand for OSB.

lumber, and our products.

We expect sequentially higher bookings in the fourth quarter of 2024 due to capital project activity.

• Material Handling – Our Material Handling segment bookings increased 10% compared to the third quarter of 2023, including a 19% increase from acquisitions.

Organic bookings decreased 9% compared to the third quarter of 2023 led by weak demand at our conveying and vibratory business where market conditions have caused customers to be more cautious with large capital expenditures.

However, the long-term outlook for the aggregates industry remains strong, particularly in North America, fueled by new infrastructure projects as a result of significant federal and state investment.

Organic bookings increased at our baling business due to strong demand for our capital products as more industries focus on waste reduction and recycling.

We expect demand in our Material Handling segment to remain stable in the fourth quarter of 2024.

Our global operations have been and continue to be impacted by complex market conditions fueled by inflationary pressures, geopolitical tensions, labor availability and uncertainty in the markets.

While the U.S economy has proven more resilient than predicted, growth in the European economy has slowed due to high interest rates and elevated inflation, and China's manufacturing activity has contracted.

We expect our operating environment to continue to be challenging, which creates continued uncertainty in the short-term.

and abroad aimed at fueling investment.

An overview of our business by reportable segment is as follows:

• Flow Control – Our Flow Control segment bookings increased 6% in the first quarter of 2025 compared to the first quarter of 2024 driven by record demand for our parts and consumables products.

Excluding acquisitions and the unfavorable effect of foreign currency translation, organic bookings decreased 1% compared to the prior year primarily due to constrained capital spending due to macroeconomic conditions, especially in North America and China.

We expect steady demand for the remainder of 2025 and long-term strength in our end markets.

• Industrial Processing – Our Industrial Processing segment bookings increased 3%, while organic bookings increased 6% in the first quarter of 2025 compared to the first quarter of 2024 due to record demand for our aftermarket products, partially offset by weak demand for our capital products at our fiber processing product line.

Our wood processing product line had record demand for aftermarket products in the first quarter of 2025 as customers focused their spending on critical parts required to keep machines operational.

While demand for our capital equipment at our wood processing product line also increased in the first quarter of 2025 compared to the prior year, it was constrained by uncertain market conditions.

Although there is ongoing quote activity for large capital projects, tariff-related uncertainty has led to a lengthening in quote to order times as customers wait for conditions to improve.

Some customers in Europe have already delayed capital orders until early 2026.

Bookings at our fiber processing product line decreased 7% compared to the first quarter of 2024 due to constrained capital spending related to macroeconomic conditions, especially in North America and Europe.

The tariff-related uncertainty has had a bigger impact on this segment due to the higher average order size and our customers’ ability to delay the timing for large capital projects.

• Material Handling – Our Material Handling segment bookings were flat compared to the first quarter of 2024, with strong performance at our baling business offset by weaker performance at our conveying and vibratory business.

Our baling business experienced record demand for our aftermarket products in the first quarter of 2025 as customers focused their expenditures on maintenance requirements.

This compares to relatively weak demand for our capital equipment products compared to the fourth quarter of 2024 as customers were hesitant to commit to capital expenditures.

Despite the overall increase in demand at our baling businesses, market conditions remain constrained, driven by a decline in used paper prices, market uncertainty related to tariffs and concerns over borrowing costs, all of which impact the timing of capital orders.

From a tariff perspective, we anticipate some competitive advantage at our North American baling business as customers evaluate the incremental tariff costs on foreign-made balers.

Our conveying and vibratory business had comparatively lower bookings in the first quarter of 2025 due to several large projects in the first quarter of 2024.

Bookings at this business increased sequentially, led by increased demand for our capital equipment products.

However, ongoing tariff-related uncertainty in the markets has tempered demand for our

capital equipment products, and we anticipate customers shifting their capital expenditures from larger capital projects to smaller aftermarket products in the short-term.

For the overall Material Handling segment, planned infrastructure projects and asset modernization in the recycling and waste management sectors are expected to lead to increased demand in 2025.

Our global operations have been and continue to be impacted by complex market conditions fueled by tariff-related uncertainty in the markets, inflationary pressures, geopolitical tensions, and labor availability.

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 and subsequent filings with the SEC.

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

Slightly more than half of our sales are to customers outside the United States, mainly in Europe, Asia, and Canada.

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.

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dollar of our foreign subsidiaries' results that are in functional currencies other than the U.S.

The United States imposes tariffs on certain imports from China, which has and will continue to increase the cost of some of the equipment that we import.

Although we have worked 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 and subsequent filings with the SEC.

We expect that a significant driver of our growth over the next several years will be the acquisition of businesses and technologies that complement or augment our existing products and services or may involve entry into a new process industry.

On January 1, 2024, we acquired Key Knife, Inc.

and certain of its affiliates (collectively, Key Knife) for $153.4 million, net of cash acquired.

Key Knife is a global supplier of engineered knife systems for custom chipping, planing, and flaking solutions for wood products industries, with revenue of approximately $65.0 million for the twelve months ended September 30, 2023, and is part of our Industrial Processing segment.

On January 24, 2024, we acquired KWS Manufacturing Company, Ltd.

(KWS) for $81.2 million, subject to a post-closing adjustment.

KWS is a leading manufacturer of conveying equipment for the bulk material handling industry, with revenue of approximately $45.0 million for the twelve months ended September 30, 2023, and is part of our Material Handling segment.

On May 31, 2024, we acquired Dynamic Sealing Technologies LLC and affiliates (collectively, DSTI) for $53.7 million, net of cash acquired and subject to a post-closing adjustment.

DSTI is a leading manufacturer of engineered fluid sealing and transfer solutions for rotating applications, with revenue of approximately $25.0 million for the twelve months ended March 31, 2024, and is part of our Flow Control segment.

We funded these acquisitions primarily through borrowings under our revolving credit facility.

We expect several synergies in connection with the acquisitions, including expansion of product sales into new markets by leveraging our global sales network and relationships, broadening our product portfolio, and strengthening our position in the various markets we serve.

See Note 2 , Acquisitions, in the accompanying condensed consolidated financial statements for further information related to our 2024 acquisitions.

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.

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.

Results of Operations

Third Quarter 2024 Compared With Third Quarter 2023

The following table presents the change in revenue by segment between the third quarters of 2024 and 2023, and those changes excluding the effect of foreign currency translation and acquisitions which we refer to as change in organic revenue.

First Quarter 2025 Compared With First Quarter 2024

The following table presents the change in revenue by segment between the first 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.

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generally accepted accounting principles (GAAP) measure.

Revenue by segment in the third quarters of 2024 and 2023 is as follows:

Three Months Ended Increase

Currency Translation Acquisitions

Revenue by reportable segment in the first quarters of 2025 and 2024 is as follows:

Three Months Ended Increase (Decrease)

Currency Translation

Change in Organic Revenue

(In thousands, except percentages) September 28,

2024 September 30,

(In thousands, except percentages) March 29,

2025 March 30,

2024 % Change Increase (Decrease)

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Consolidated $ 239,210 $ 248,975 $ (9,765) (4) % $ 8,012 $ (5,772) $ (12,005) (5) %

Consolidated revenue increased 11% in the third quarter of 2024, while organic revenue decreased 1%.

The decrease in organic revenue is largely due to decreased demand for capital equipment products at our Material Handling segment, partially offset by increased demand for our parts and consumables products, especially at our Industrial Processing segment.

From a geographic perspective, the majority of the organic revenue decrease was driven by softening demand in Europe due to weak macroeconomic conditions, offset in part by higher demand in North America where the U.S.

economy and industrial demand continued to demonstrate resiliency against inflationary pressures.

Revenue at our Flow Control segment increased 7% in the third quarter of 2024, including a 6% increase from acquisitions.

Organic revenue increased 2% in the third quarter of 2024 due to higher demand for our capital equipment products in North America driven by continued strength in the U.S.

economy and underlying packaging industry and, to a lesser extent, in China where the government has implemented initiatives to encourage investment activity.

This increase was offset by decreased demand for our capital equipment products in Europe as a result of challenging market conditions and a slowdown in manufacturing activity.

Revenue at our Industrial Processing segment increased 17% in the third quarter of 2024, including a 16% increase from acquisitions.

Organic revenue increased 2% due to increased demand for our parts and consumables products in North America.

Demand for replacement parts at our wood processing business remains strong, offsetting lower capital project activity resulting from continued weakness in new home starts.

At our stock-preparation business, increased demand for capital equipment products, primarily related to replacement and refurbishment projects in North America, was partially offset by decreased demand for our parts and consumable products in China and Europe.

Revenue at our Material Handling segment increased 7% in the third quarter of 2024, including a 17% increase from acquisitions.

Organic revenue decreased 10% due to weaker demand for our products in both North America and Europe.

At our vibratory and conveying business in North America, several large projects in the third quarter of 2023 resulted in comparatively lower revenue in the third quarter of 2024.

Constrained market conditions in Europe resulted in decreased demand for our baling products, especially our parts and consumables products.

Consolidated revenue decreased 4% in the first quarter of 2025, including a 3% increase from acquisitions and a 2% decrease from the unfavorable effect of foreign currency translation.

Organic revenue decreased 5% primarily due to weaker demand at our Industrial Processing segment, especially for our capital equipment products.

From a geographic perspective, organic revenue was impacted by softening demand, especially in Europe and Asia, due to weak macroeconomic conditions.

Revenue at our Flow Control segment increased 7%, including a 9% increase from acquisitions and a 3% decrease from the unfavorable effect of foreign currency translation.

Organic revenue increased 1% in the first quarter of 2025 driven by higher demand for our parts and consumable products at our doctoring, cleaning & filtration product line.

This increase was partially offset by lower demand for our capital equipment products in North America and Europe due to challenging market conditions.

Revenue at our Industrial Processing segment decreased 15% in the first quarter of 2025, while organic revenue decreased 13% primarily driven by reduced demand for our capital equipment products at both our wood processing and fiber processing businesses.

Capital equipment revenue decreased at our wood processing business, especially in North America, as economic uncertainty caused customers to delay major capital expenditures and focus their spending on critical parts.

As a result, our wood processing product line had record parts and consumables revenue in the first quarter of 2025.

Capital equipment revenue decreased at our fiber processing business due to depressed conditions, especially in China, which resulted in more cautious capital spending in the first quarter of 2025.

Revenue at our Material Handling segment increased 1% in the first quarter of 2025 led by higher demand for our parts and consumables products, especially at our baling business.

This increase was partially offset by a decrease in capital equipment revenue at our conveying and vibratory business in North America due in part to several large projects in the first quarter of 2024, which resulted in comparatively lower revenue in the first quarter of 2025.

Gross Profit Margin

Gross profit margin by segment in the third quarters of 2024 and 2023 is as follows:

Gross profit margin by reportable segment in the first quarters of 2025 and 2024 is as follows:

Three Months Ended Basis Point Change

September 28,

2024 September 30,

2025 March 30,

Flow Control 53.3% 53.9% (60) bps

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Consolidated 46.1% 44.6% 150 bps

Consolidated gross profit margin increased to 44.7% in the third quarter of 2024 compared with 43.3% in the third quarter of 2023 due to higher margins achieved on our capital equipment products across all our segments, especially at our Industrial Processing segment.

This increase was partially offset by the inclusion of $1.2 million of amortization expense related to acquired profit in inventory, which lowered consolidated gross profit margin in 2024 by 0.5 percentage points.

Within our operating segments, gross profit margin:

• Decreased to 51.8% at our Flow Control segment from 52.2% in the 2023 period primarily due to 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.

• Increased to 44.0% at our Industrial Processing segment from 39.5% in the 2023 period due to higher margins achieved on both our capital equipment and parts and consumable products, and, to a lesser extent, a higher proportion of parts and consumables revenue.

This was partially offset by the inclusion of $0.5 million of amortization expense related to acquired profit in inventory, which lowered gross profit margin in 2024 by 0.4 percentage points.

• Decreased to 35.0% at our Material Handling segment from 35.7% in the 2023 period primarily due to lower margins achieved on our parts and consumable products, partially offset by higher margins achieved on our capital equipment.

Consolidated gross profit margin increased to 46.1% in the first quarter of 2025 from 44.6% in the first quarter of 2024 due to an increase in the proportion of higher-margin parts and consumables revenue, which increased to 75% of total revenue in the first quarter of 2025 compared to 69% in in the first quarter of 2024, and the inclusion of $2.3 million of amortization expense related to acquired profit in inventory in the first quarter of 2024, which decreased consolidated gross profit margin in the first quarter of 2024 by 0.9 percentage points.

Within our reportable segments, gross profit margin:

• Decreased to 53.3% at our Flow Control segment from 53.9% in the 2024 period primarily 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 44.1% at our Industrial Processing segment from 41.7% in the 2024 period due to the inclusion of $1.3 million of amortization expense related to acquired profit in inventory in the 2024 period, which decreased gross profit margin in 2024 by 1.2 percentage points, and an increase in the proportion of higher-margin parts and consumables revenue in 2025.

• Increased to 37.7% at our Material Handling segment from 35.6% in the 2024 period due to 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 1.8 percentage points and, to a lesser extent, higher margins achieved on our capital equipment products in 2025.

Based on our assessment of the newly implemented tariffs currently in effect in the markets in which we operate, we anticipate our consolidated gross margins will be negatively impacted by incremental material costs of approximately $5.0 to $6.0 million in 2025, primarily affecting the second and third quarters, associated with tariffs costs that cannot be mitigated in the short-term.

This estimate is subject to change pending the outcome of ongoing tariff negotiations.

Selling, General, and Administrative Expenses

Selling, general, and administrative (SG&A) expenses by segment in the third quarters of 2024 and 2023 are as follows:

Selling, general, and administrative (SG&A) expenses by reportable segment and corporate in the first quarters of 2025 and 2024 are as follows:

Three Months Ended

(In thousands, except percentages) September 28,

2024 September 30,

2023 Increase % Change

(In thousands, except percentages) March 29,

2025 March 30,

2024 Increase (Decrease)

Flow Control $ 25,170 $ 23,424 $ 1,746 7%

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Consolidated as a Percentage of Revenue 29.8% 28.2%

Consolidated SG&A expenses as a percentage of revenue increased to 25% in the third quarter of 2024 from 24% in the third quarter of 20 23 due to the impact of our acquisitions and acquisition-related costs.

Consolidated SG&A expenses increased $11.2 million, or 19%, primarily due to the inclusion of $9.7 million of SG&A expenses from acquisitions and an incremental $1.2 million of acquisition-related costs.

Consolidated SG&A expenses as a percentage of revenue increased to 29.8% in 2025 compared to 28.2% in 2024 principally due to the decrease in revenue.

Consolidated SG&A expenses increased $0.9 million, or 1%, primarily due to the inclusion of $3.2 million of SG&A expenses from acquisitions made during the second and third quarters of 2024, partially offset by a $1.4 million favorable effect of foreign currency translation and a decrease of $1.2 million of acquisition-related costs.

Acquisition-related costs included in SG&A consist of amortization expense associated with acquired backlog and acquisition costs.

Within our operating segments, SG&A expenses:

• Increased $3.3 million at our Flow Control segment principally due to the inclusion of $2.2 million of SG&A expenses from acquisitions, $0.7 million of acquisition-related costs and increased compensation expense.

• Increase d $5.4 million at our Industrial Processing segment due to the inclusion of $4.8 million of SG&A expenses from acquisitions, $0.2 million of acquisition-related costs and increased compensation costs and travel expenses.

• Increased $2.5 million at our Material Handling segment principally due to the inclusion of $2.7 million of SG&A expenses from acquisitions and $0.3 million of acquisition-related costs, partially offset by a decrease in expense from sales incentives.

Other costs of $1.0 million in the third quarter of 2023 included the following:

• Relocation costs of $0.5 million within our Industrial Processing segment related to the write-down of certain fixed assets that were not moved to a new manufacturing facility in China and facility moving costs.

• Restructuring and impairment costs of $0.4 million within our Flow Control segment related to the consolidation of a small manufacturing operation into a larger facility in Germany (2023 Restructuring Plan).

This charge consisted of severance costs for the termination of 10 employees, asset write-downs, and facility and other closure costs.

Interest Expense

Interest expense increased to $5.5 million in the third quarter of 2024 from $2.1 million in the third quarter of 2023 due to increased borrowings under our revolving credit facility, which were primarily used to fund our acquisitions and, to a lesser extent, a higher weighted-average interest rate.

Provision for Income Taxes

Provision for income taxes increased to $12.0 million in the third quarter of 2024 from $10.8 million in the third quarter of 2023.

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 expense associated with the Global Intangible Low-Taxed Income provisions.

These items were offset in part by foreign tax credits.

The effective tax rate of 26% in the third quarter of 2023 was higher than our statutory rate of 21% primarily due to the distribution of our worldwide earnings and state taxes.

Net income increased to $31.9 million in the third quarter of 2024 from $31.0 million in the third quarter of 2023 primarily due to a $5.4 million increase in operating income, offset in part by a $3.4 million increase in interest expense and a $1.1 million increase in provision for income taxes (see discussions above for further details).

First Nine Months 2024 Compared With First Nine Months 2023

The following table presents changes in revenue and organic revenue by segment between the first nine months of 2024 and 2023.

Organic revenue is a non-GAAP measure as defined above in the results of operations for the third quarter of 2024 compared with the third quarter of 2023.

Revenue by segment in the first nine months of 2024 and 2023 is as follows:

Nine Months Ended Currency Translation Acquisitions (Non-GAAP)

Change in Organic Revenue

(In thousands, except percentages) September 28,

2024 September 30,

2023 Increase

% Change Increase (Decrease)

Flow Control $ 276,493 $ 276,048 $ 445 —% $ (600) $ 7,098 $ (6,053) (2)%

Industrial Processing 331,310 267,729 63,581 24% (2,026) 46,298 19,309 7%

Material Handling 187,551 175,216 12,335 7% 253 28,869 (16,787) (10)%

Consolidated $ 795,354 $ 718,993 $ 76,361 11% $ (2,373) $ 82,265 $ (3,531) —%

Consolidated revenue in the first nine months of 2024 increased 11%, while organic revenue remained flat.

Weaker demand at our Material Handling and Flow Control segments was largely offset by stronger demand at our Industrial Processing segment, especially for our capital equipment products.

From a geographic perspective, organic revenue was impacted by softening demand in Asia and Europe due to weak macroeconomic conditions, largely offset by stronger industrial demand in North America.

Revenue at our Flow Control segment remained flat while organic revenue decreased 2% in the first nine months of 2024 due to decreased demand for our capital equipment products in Europe reflecting the challenging market conditions and slowdown in manufacturing activity.

This decrease was partially offset by higher demand for our capital equipment products in North America driven by continued strength in the U.S.

economy and underlying packaging industry.

Revenue at our Industrial Processing segment increased 24% in the first nine months of 2024, including a 17% increase from acquisitions.

Organic revenue increased 7% in the first nine months of 2024 primarily due to increased demand for our capital equipment products at our stock-preparation and wood processing businesses and for our aftermarket products at our wood processing business.

Revenue from parts and consumables products increased 8% at our wood processing business due to maintenance requirements for our customers in North America.

At our stock-preparation business, capital equipment revenue increased 24% due to higher completion rates on large projects recognized on an over time basis in China and increased replacement and refurbishment projects in North America.

Revenue at our Material Handling segment increased 7% in the first nine months of 2024, including a 17% increase from acquisitions.

Organic revenue decreased 10% driven by weaker demand for our products in North America and Europe.

At our baling business in Europe, decreased demand for our capital equipment products resulted from weaker market conditions, which have lengthened quote-to-order times and delayed several large projects to later in the year.

At our conveying and vibratory business, several large parts orders associated with capital projects in the first nine months of 2023 resulted in comparatively lower organic parts and consumables revenue in the first nine months of 2024.

Gross Profit Margin

Gross profit margin by segment in the first nine months of 2024 and 2023 is as follows:

Nine Months Ended Basis Point Change

September 28,

2024 September 30,

Flow Control 52.9% 52.3% 60 bps

Industrial Processing 42.3% 39.8% 250 bps

Material Handling 36.2% 36.2% — bps

Consolidated 44.5% 43.7% 80 bps

Consolidated gross profit margin increased to 44.5% in the first nine months of 2024 compared with 43.7% in the first nine months of 2023 due to higher margins achieved on our capital equipment products across all our segments, especially at our Industrial Processing segment.

This increase was partially offset by the inclusion of $4.1 million of amortization expense related to acquired profit in inventory, which lowered consolidated gross profit margin in 2024 by 0.6 percentage points.

Within our operating segments, gross profit margin:

• Increased to 52.9% at our Flow Control segment from 52.3% in the 2023 period primarily due to higher margins achieved on our capital equipment products.

This increase was partially offset by the inclusion of $1.0 million of amortization expense related to acquired profit in inventory, which lowered gross profit margin in 2024 by 0.3 percentage points.

• Increased to 42.3% at our Industrial Processing segment from 39.8% in the 2023 period due to higher margins achieved on our capital equipment products and, to a lesser extent, a higher proportion of parts and consumables revenue.

These increases were partially offset by the inclusion of $2.1 million of amortization expense related to acquired profit in inventory, which lowered gross profit margin in 2024 by 0.7 percentage points.

• Remained flat at 36.2% at our Material Handling segment.

The impact of a higher proportion of parts and consumables revenue in 2024 was offset by the inclusion of $1.0 million of amortization expense related to acquired profit in inventory, which lowered gross profit margin in 2024 by 0.6 percentage points.

Selling, General, and Administrative Expenses

SG&A expenses by segment in the first nine months of 2024 and 2023 are as follows:

Nine Months Ended

(In thousands, except percentages) September 28,

2024 September 30,

2023 Increase % Change

Flow Control $ 72,186 $ 65,955 $ 6,231 9%

Industrial Processing 65,708 48,943 16,765 34%

Material Handling 40,672 32,070 8,602 27%

Corporate 30,786 29,473 1,313 4%

Consolidated $ 209,352 $ 176,441 $ 32,911 19%

Consolidated as a Percentage of Revenue 26% 25%

Consolidated SG&A expenses as a percentage of revenue increased to 26% in the first nine months of 2024 compared with 25% in the first nine months of 20 23 principally due to the impact of our acquisitions and acquisition-related costs.

Consolidated SG&A expenses increased $32.9 million, or 19%, primarily due to the inclusion of $25.3 million of SG&A expenses from acquisitions, $4.7 million of acquisition-related costs and increased compensation expense associated with new and existing personnel.

Within our operating segments, SG&A expenses:

• Increased $6.2 million at our Flow Control segment principally due to the inclusion of $2.9 million of SG&A expenses from acquisitions, $1.5 million of acquisition-related costs and increased compensation expense.

• Increased $16.8 million at our Industrial Processing segment due to the inclusion of $14.7 million of SG&A expenses from acquisitions, $0.8 million of acquisition-related costs and increased compensation expense associated with new and existing personnel.

These increases were partially offset by a $0.4 million favorable effect of foreign currency translation.

• Increased $8.6 million at our Material Handling segment primarily due to the inclusion of $7.7 million of SG&A expenses from acquisitions and $2.4 million of acquisition-related costs, partially offset by a decrease in expense related to external commissions and sales incentives.

• Increased $1.3 million at Corporate d ue to increased compensation expense and consulting costs.

Other costs of $1.0 million in the first nine months of 2023 included the following:

• Relocation costs of $0.6 million within our Industrial Processing segment related to the write-down of certain fixed assets that were not moved to a new manufacturing facility in China and facility moving costs.

• Restructuring and impairment costs of $0.4 million within our Flow Control segment related to the 2023 Restructuring Plan.

This charge consisted of severance costs for the termination of 10 employees, asset write-downs, and facility and other closure costs.

Within our reportable segments and corporate, SG&A expenses:

• Increased $1.7 million at our Flow Control segment principally due to the inclusion of $2.6 million of SG&A expenses from acquisitions and an increase of $0.3 million of acquisition-related costs, partially offset by a $0.7 million favorable effect of foreign currency translation.

• Decreased $1.5 million at our Industrial Processing segment due to a $0.6 million favorable effect of foreign currency translation and a decrease of $0.3 million of acquisition-related costs and $0.3 million in bad debt expense.

• Decreased $0.5 million at our Material Handling segment principally due to a decrease of $1.2 million of acquisition-related costs, partially offset by an increase of $0.6 million of SG&A expenses from acquisitions.

• Increased $1.2 million at Corporate due to annual wage increases and consulting costs.

Interest Expense

Interest expense increased to $15.4 million in the first nine months of 2024 from $6.7 million in the first nine months of 2023 due t o increased borrowings under our revolving credit facility, which were primarily used to fund our acquisitions and, to a lesser extent, a higher weighted-average interest rate.

Interest expense decreased to $3.8 million in the first quarter of 2025 from $4.7 million in the first quarter of 2024 due to decreased borrowings under our revolving credit facility and, to a lesser extent, a lower weighted-average interest rate.

Provision for Income Taxes

Provision for income taxes was $31.8 million in both the first nine months of 2024 and the first nine months of 2023.

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.

The effective tax rate of 26% in the first nine months of 2023 was higher than our statutory rate of 21% primarily due to the distribution of our worldwide earnings, state taxes, and nondeductible expenses.

Net income decreased to $88.5 million in the first nine months of 2024 from $89.2 million in the first nine months of 2023 primarily due to a $8.7 million increase in interest expense, offset in part by a $7.6 million increase in operating income (see discussions above for further details).

Provision for income taxes was $7.8 million in the first quarter of 2025 and $7.9 million in the first quarter of 2024.

The effective tax rate of 24% in the first quarter of 2025 was higher than our statutory rate of 21% primarily due to nondeductible expenses, the distribution of our worldwide earnings, and state taxes.

These items were offset in part by net

excess income tax benefits from stock-based compensation arrangements, the reversal of tax reserves associated with uncertain tax positions, and foreign tax credits.

The effective tax rate of 24% in the first quarter of 2024 was higher than our statutory rate of 21% primarily due to nondeductible expenses, the distribution of our worldwide earnings, state taxes, the cost of repatriating the earnings of certain foreign subsidiaries, and tax expense associated with the Global Intangible Low-Taxed Income provisions.

These items were offset in part by net excess income tax benefits from stock-based compensation arrangements, foreign tax credits, and a tax benefit associated with a foreign exchange loss recognized upon our repatriation of certain previously taxed foreign earnings.

Net income decreased to $24.4 million in the first quarter of 2025 from $25.0 million in the first quarter of 2024 primarily due to a $1.3 million decrease in operating income, offset in part by a $0.8 million decrease in interest expense (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 foreign currency translation and acquisitions), 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).

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 amortization expense related to acquired profit in inventory and backlog, acquisition costs, relocation costs, restructuring and impairment costs, 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.

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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 an additional measure of our performance.

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 is as follows:

Three Months Ended Nine Months Ended

(In thousands, except percentages) September 28,

2024 September 30,

2023 September 28,

2024 September 30,

A reconciliation of adjusted operating income, adjusted EBITDA, and adjusted EBITDA margin from net income attributable to Kadant is as follows:

Three Months Ended

(In thousands, except percentages) March 29,

2025 March 30,

Net Income Attributable to Kadant $ 24,063 $ 24,689

Net Income Attributable to Noncontrolling Interests

312 175 891 571

Provision for Income Taxes 7,828 7,854

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Acquired Profit in Inventory Amortization (a)

1,205 — 4,065 —

Acquired Backlog Amortization (b)

687 — 2,181 —

Acquisition Costs 337 1,124

Indemnification Asset (Provision) Reversal, Net (c)

(175) (50) (151) 127

Relocation Costs

Restructuring and Impairment Costs

Adjusted Operating Income (non-GAAP measure)

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Adjusted EBITDA Margin (non-GAAP measure)

23.3% 21.6% 22.3% 21.3%

(a) Represents amortization expense within cost of revenue associated with acquired profit in inventory.

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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 28,

2024 September 30,

2023 September 28,

2024 September 30,

Three Months Ended

(In thousands) March 29,

2025 March 30,

Cash Provided by Operating Activities $ 22,835 $ 22,831

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Liquidity and Capital Resources

Consolidated working capital was $264.3 million at September 28, 2024, compared with $225.8 million at December 30, 2023.

Cash and cash equivalents were $88.4 million at September 28, 2024, compared with $103.8 million at December 30, 2023, which included cash and cash equivalents held by our foreign subsidiaries o f $74.1 million at September 28, 2024 and $94.6 million at December 30, 2023.

Cash flow information in the first nine months of 2024 and 2023 is as follows:

Nine Months Ended

(In thousands) September 28,

2024 September 30,

Consolidated working capital was $266.1 million at March 29, 2025, compared with $250.8 million at December 28, 2024.

Cash and cash equivalents were $91.7 million at March 29, 2025, compared with $94.7 million at December 28, 2024, which included cash and cash equivalents held by our foreign subsidiaries o f $76.9 million at March 29, 2025 and $73.8 million at December 28, 2024.

Cash flow information in the first quarters of 2025 and 2024 is as follows:

Three Months Ended

(In thousands) March 29,

2025 March 30,

Net Cash Provided by Operating Activities $ 22,835 $ 22,831

Net Cash Used in Investing Activities (3,836) (237,263)

Net Cash Provided by (Used in) Financing Activities

Net Cash (Used in) Provided by Financing Activities

(23,085) 192,905

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Operating Activities

Cash provided by operating activities decreased to $103.4 million in the first nine months of 2024 from $106.3 million in the first nine months of 2023 primarily due to an increase in cash used for working capital.

Cash provided by operating activities was $22.8 million in both the first quarters of 2025 and 2024.

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 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.

Significant cash outflows associated with working capital in the first nine months of 2023 related to accounts payable and accounts receivable.

Decreases in accounts payable used cash of $12.9 million primarily due to the timing of payments.

An increase in accounts receivable used cash of $10.7 million mainly due to our revenue growth and the timing of shipments.

In addition, an increase in other liabilities provided cash of $5.9 million due in part to work performed by subcontractors and outside vendors.

Significant operating cash outflows associated with working capital in the first quarter of 2025 related to other liabilities and inventory.

Decreases in other liabilities used cash of $14.3 million primarily related to incentive compensation payments and purchases of inventory used cash of $5.5 million.

These uses of cash were offset in part by cash provided from the reduction in contract assets of $6.3 million related to contracts accounted for on an over time basis.

Significant cash outflows associated with working capital in the first quarter of 2024 related to other liabilities, accounts receivable, and inventory.

Decreases in other liabilities used cash of $15.3 million primarily related to incentive compensation payments.

Increases in accounts receivable used cash of $8.0 million mostly due to the timing of payments and purchases of inventory used cash of $6.7 million.

These uses of cash were offset in part by cash provided by an increase in accounts payable of $15.0 million related to inventory purchases and the timing of payments.

Investing Activities

Cash used in investing activities was $315.9 million in the first nine months of 2024, compared with $20.1 million in the first nine months of 2023.

Consideration paid for acquisitions, net of cash acquired, was $302.0 million in the first nine months of 2024.

Additionally, cash used in investing activities included capital expenditures of $15.4 million in the first nine months of 2024 and $22.1 million in the first nine months of 2023.

Cash used in investing activities was $3.8 million in the first quarter of 2025, compared with $237.3 million in the first quarter of 2024.

Cash used in investing activities in the first quarter of 2025 consisted of capital expenditures of $3.8 million.

Cash used in investing activities in the first quarter of 2024 included consideration paid for acquisitions, net of cash acquired, of $232.3 million and capital expenditures of $6.3 million.

Financing Activities

Cash provided by financing activities was $196.8 million in the first nine months of 2024, compared with cash used in financing activities of $85.7 million in the first nine months of 2023.

Borrowings under our revolving credit facility were $305.2 million in 2024, which were primarily used to fund our 2024 acquisitions.

Repayments of short- and long-term obligations were $91.4 million in 2024 compared to $71.9 million in 2023.

Cash used in financing activities was $23.1 million in the first quarter of 2025, compared with cash provided by financing activities of $192.9 million in the first quarter of 2024.

Borrowings under our revolving credit facility were $8.0 million in 2025 compared to $234.0 million in 2024, which was primarily used to fund our 2024 acquisitions.

Repayments of short- and long-term obligations were $22.6 million in 2025 and $33.5 million in 2024.

Cash dividends paid to stockholders were $3.8 million in 2025 and $3.4 million in 2024.

In addition, taxes paid related to the vesting of equity awards were $5.9 million in 2024 compared to $3.9 million in 2023.

In addition, taxes paid related to the vesting of equity awards were $6.0 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 $1.0 million decrease in cash, cash equivalents, and restricted cash in the first nine months of 2024 related to exchange rates 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.

The $1.3 million decrease in cash, cash equivalents, and restricted cash in the first nine months of 2023 was primarily attributable to the strengthening of the U.S.

dollar against the Chinese renminbi and, to a lesser extent, the euro and Swedish krona.

The $1.9 million increase in cash, cash equivalents, and restricted cash in the first quarter of 2025 related to exchange rates was primarily attributable to the weakening of the U.S.

dollar against the euro, the Swedish krona, and the Brazilian real.

The $2.3 million decrease in cash, cash equivalents, and restricted cash in the first quarter of 2024 was primarily attributable to the strengthening of the U.S.

dollar against the euro, the Canadian dollar, the Chinese renminbi and Swedish krona.

Borrowing Capacity and Debt Obligations

Our unsecured multi-currency revolving credit facility originally entered into on March 1, 2017 (as amended and restated to date, the Credit Agreement) matures on November 30, 2027 and has a total borrowing capacity of $400.0 million.

In the first nine months of 2024, we borrowed $305.2 million under our revolving credit facility, which was primarily used to fund our acquisitions.

As of September 28, 2024, our outstanding balance under the Credit Agreement was $314.5 million, which included $76.5 million of euro-denominated borrowings, and we had $85.3 million of available borrowing capacity, in addition to a $200.0 million uncommitted, unsecured incremental borrowing facility.

As of March 29, 2025, our outstanding balance under the Credit Agreement was $267.0 million, which included $74.0 million of euro-denominated borrowings, and we had $133.1 million of available 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 28, 2024, our leverage ratio was 1.13 and we were in compliance with our debt covenants.

As of March 29, 2025, our leverage ratio was 0.95 and we were in compliance with our debt covenants.

See Note 4 , Long-Term Obligations, in the accompanying condensed consolidated financial statements for additional information regarding our debt obligations.

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On May 16, 2024, our board of directors approved the repurchase of up to $50.0 million of our equity securities during the period from May 16, 2024 to May 16, 2025.

We have not repurchased any shares of our common stock under this authorization or our previous $50.0 million authorization that expired on May 18, 2024.

We paid cash dividends of $10.9 million in the first nine months of 2024.

On September 5, 2024, we declared a quarterly cash dividend of $0.32 per share totaling $3.8 million that will be paid on November 7, 2024.

Future declarations of dividends are subject to our board of directors' approval and may be adjusted as business needs or market conditions change.

We have not repurchased any shares of our common stock under this authorization.

We paid cash dividends of $3.8 million in the first quarter of 2025.

On March 5, 2025, we declared a quarterly cash dividend of $0.34 per share totaling $4.0 million that was paid on May 7, 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 $20.0 to $22.0 million during the remainder of 2025 for property, plant, and equipment.

As of September 28, 2024, we had approximately $292.4 million of total unremitted foreign earnings.

As of March 29, 2025, we had approximately $121.0 million of total unremitted foreign earnings.

It is our intent to indefinitely reinvest $60.4 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 2024, we recorded withholding taxes on the earnings in certain foreign subsidiaries that we plan to repatriate in the foreseeable future.

In the first quarter 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 $1.6 million.

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 2. Management’s Discussion and Analysis