KADANT INC 10-Q

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. 4 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. 5 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. 6 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. 7 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 8 Table of Contents 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 9 Table of Contents 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. 10 Table of Contents 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. 11 Table of Contents 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 12 Table of Contents 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. 13 Table of Contents 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. 14 Table of Contents 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. 15 Table of Contents 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. 16 Table of Contents 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. 17 Table of Contents 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 18 Table of Contents KADANT INC. 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 19 Table of Contents KADANT INC. 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 20 Table of Contents KADANT INC. 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. 21 Table of Contents KADANT INC. 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. 22 Table of Contents KADANT INC.