What changed in this filing

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Item 2. Management’s Discussion and Analysis

2026-05-13 compared with 2025-11-05 · 139 added, 259 removed, 127 unchanged (76% 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 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.

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 January 3, 2026 (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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Our financial results are presented in three reportable segments consisting of our Flow Control segment, Industrial Processing segment, and Material Handling segment.

We have aggregated our operating segments into reportable segments where they contained similar products and economic characteristics, and shared similar types of customers, and production and distribution methods.

Our Flow Control segment consists of our fluid-handling and doctoring, cleaning, & filtration operating segments and our Industrial Processing segment consists of our wood processing and fiber processing operating segments.

A description of each reportable segment is as follows:

• Flow Control – Custom-engineered products, systems, and technologies that control the flow of fluids used in industrial and commercial applications to keep critical processes running efficiently in the packaging, tissue, food, metals, energy, and other industrial sectors.

• 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, paper and tissue, food, energy, defense, and numerous other industrial sectors.

Our primary products include rotary sealing devices, steam systems, expansion joints, doctor systems, roll and fabric cleaning devices, and filtration and fiber recovery systems.

• Industrial Processing – Equipment, machinery, and technologies used to recycle paper and paperboard, process timber, and optimize industrial steam boiler efficiency for use in the packaging, paper, tissue, wood products, and food processing industries, among others.

• Industrial Processing – Equipment, machinery, and technologies used to recycle paper and paperboard, process timber, and optimize industrial steam boiler efficiency in the packaging, paper, tissue, wood products, and food processing industries, among others.

Our primary products include fiber processing systems and recycling equipment, chemical pulping equipment, debarkers, stranders, chippers, custom-engineered knife systems, industrial boiler cleaning technologies, and continuous dewatering equipment.

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

• Material Handling – Products and engineered systems used to handle bulk and discrete materials for secondary processing or transport in the aggregates, mining, food, and waste management industries, among others.

Our primary products include conveying and vibratory equipment and balers.

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

In addition, we manufacture and sell biodegradable, absorbent granules used as carriers in agricultural, home lawn and garden, professional lawn, turf and ornamental applications, and for oil and grease absorption.

See Note 9 , Business Segment Information, in the accompanying condensed consolidated financial statements for financial information on our reportable segments.

Industry and Business Overview

Our consolidated bookings increased 3% to $763.9 million in the first nine months of 2025 compared to the first nine months of 2024, driven by increased demand for our parts and consumables products.

Demand for our capital equipment products was flat compared to the first nine months of 2024 as market uncertainty has impacted our customers' capital investment decisions.

This uncertainty was driven by escalating tariff rates on U.S.

imports and exports impacting manufacturers’ input costs.

Although certain country-specific tariffs have since been clarified, ongoing trade negotiations continue to impact the market.

This evolving trade environment has resulted in longer quote-to-order conversion times for capital orders, with some customers delaying projects into 2026.

While customers continue to invest in maintenance and mission-critical equipment, those with discretion over project timing are deferring capital expenditures pending greater clarity regarding input costs and broader economic conditions.

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

In response, our operations teams continue to evaluate our exposure to both existing and proposed tariffs and develop and implement mitigation measures.

From a geographic perspective, the volatility in tariff rates have contributed to market uncertainty in North America, leading to cautious spending by manufacturers.

In Europe, cost pressures and ongoing economic uncertainty related to trade tensions and geopolitical risks continue to impact market activity.

In China, although government-led initiatives seek to stimulate domestic demand and manufacturing activity, escalating trade tensions with the United States are generally expected to have a negative impact.

Overall, we anticipate sequentially stronger bookings in the fourth quarter of 2025 and comparatively higher bookings for the full year 2025 compared to 2024, especially in our Industrial Processing segment.

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

In addition, we anticipate growth opportunities resulting from both proposed and enacted legislation in the United States and internationally that is designed to stimulate investment.

Consolidated bookings increased 19% to a record $320.8 million in the first quarter of 2026 compared to the fourth quarter of 2025 with increased demand across all three segments.

Parts and consumables product bookings also reached a record level, increasing 15% compared to the fourth quarter of 2025, due in part to increased demand in anticipation of annual

maintenance shutdowns.

Capital equipment product bookings increased 29% sequentially, reflecting improved customer confidence as tariff-related uncertainty eased.

Customers, however, remain cautious with approvals for large capital projects pending greater clarity regarding input costs and broader economic conditions, which has more recently been impacted by the conflicts in the Middle East, resulting in a lengthening of quote-to-order times.

This dynamic is more pronounced in our Industrial Processing segment, where average capital order values are significantly higher than in our other segments.

We ended the quarter with a healthy backlog of $325.7 million.

Overall, we expect bookings in 2026 to exceed 2025 levels, largely driven by our Industrial Processing segment, where customer delays associated with pending orders from 2025 have resulted in a number of capital orders in the pipeline, combined with incremental contributions from our recent acquisitions.

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

Additionally, we anticipate incremental growth opportunities resulting from proposed and enacted legislation in the United States and internationally that is intended to stimulate investment.

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

• Flow Control – Our Flow Control segment bookings increased 3% in the first nine months of 2025 compared to the first nine months of 2024.

This increase was primarily driven by strong demand for our parts and consumables products, especially in North America, partially offset by weaker demand for our capital equipment products in most regions.

While quote activity related to capital projects remains strong, there have been delays in the timing for securing orders as customers remain cautious regarding their capital spending decisions.

In certain European markets, excess production capacity and declining demand have resulted in the closure of several mills, which has adversely affected demand for our capital equipment products.

We expect demand in this segment to remain stable for the remainder of the year.

• Industrial Processing – Our Industrial Processing segment bookings increased 3% in the first nine months of 2025 compared to the first nine months of 2024, with strong performance at our wood processing product line, largely offset by weaker results in our fiber processing product line.

Within our wood processing product line, capital equipment bookings increased 88% compared to the first nine months of 2024, primarily driven by demand from the engineered wood industry in North America, where customers select our products for their ability to maximize wood fiber utilization.

Despite these positive results, overall demand for our capital equipment in the wood processing product line was constrained by uncertain market conditions.

While quote activity for large capital projects remains active, tariff-related uncertainty has led to a lengthening in quote-to-order times as customers await improved market conditions, with some customers in Europe delaying capital orders into early 2026.

Capital bookings at our fiber processing product line decreased 40% compared to the first nine months of 2024 due to constrained capital spending related to macroeconomic conditions.

These conditions have led to the deferral of capital orders to the fourth quarter of 2025 and into 2026.

Tariff-related uncertainty has had a greater impact in this segment due to the higher average capital order value and our customers’ ability to delay the timing of large capital projects.

Despite this, demand for our aftermarket parts in our Industrial Processing segment has remained strong as customers prioritize maintenance spending.

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

In addition, we anticipate a strengthening in demand for our capital equipment in this segment in the fourth quarter of 2025, supported by the expected receipt of several orders currently in the pipeline.

• Material Handling – Our Material Handling segment bookings increased 4% in the first nine months of 2025 compared to the first nine months of 2024, due to increased demand for our capital equipment products at our conveying and vibratory business.

This increase was driven by underground mineral mining projects where customers placed substantial equipment orders to meet their operational requirements.

Our baling business experienced weaker demand for our capital equipment products in Europe where market conditions remain constrained, driven by a decline in used paper prices, uncertainty related to tariffs, and concerns over borrowing costs, all of which impact the timing of

capital orders.

However, the baling business has seen steady demand for its aftermarket parts as customers shift their near-term spending from larger capital projects to smaller aftermarket maintenance and replacement purchases.

We expect demand in the Material Handling segment to remain stable for the remainder of 2025.

• Flow Control – Our Flow Control segment bookings increased 19% compared to the fourth quarter of 2025, reflecting strong demand for both parts and consumables, as well as capital equipment products across all regions.

This performance follows the last three quarters of 2025, where bookings were constrained as customers remained cautious regarding their capital spending decisions amid market uncertainty.

We expect demand for both aftermarket parts and capital equipment products to increase in 2026 and continue to see long-term strength in our end markets.

• Industrial Processing – Our Industrial Processing segment bookings increased 19% compared to the fourth quarter of 2025, driven by strong demand for aftermarket parts.

Demand for our capital equipment products also increased sequentially, but was negatively impacted by the volatility in capital project timing.

Overall, we expect demand for our capital equipment products to strengthen in 2026, supported by the anticipated receipt of several large capital orders currently in the pipeline.

In addition, we expect demand for our aftermarket parts to remain steady in 2026.

• Material Handling – Our Material Handling segment bookings increased 17% compared to the fourth quarter of 2025, primarily driven by higher demand for aftermarket parts primarily in North America.

We expect steady demand for aftermarket parts and increased demand for capital equipment products in this segment in 2026.

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

We expect our operating environment to continue to be challenging, which creates continued uncertainty for the remainder of 2025.

However, we believe that the fundamentals of our business remain strong, particularly given our solid market position in key product lines, solid global operations teams, and long-term strength of our end markets.

For more information related to these challenges, and other factors impacting our business, please see Risk Factors, included in Part I, Item 1A, of our Annual Report, as further amended in Part II, Item IA , within this report, and as may be further amended and/or restated in subsequent filings with the SEC.

We expect our operating environment to continue to be challenging, especially for large capital equipment projects where the order timing is uncertain.

However, we believe that the fundamentals of our business remain strong, supported by our solid market position in key product lines, experienced global operations teams, and long-term strength of our end markets.

For more information related to these challenges, and other factors impacting our business, please see Risk Factors, included in Part I, Item 1A, of our Annual Report, as further amended in Part II, Item 1A , within this report, and as may be further amended and/or restated in subsequent filings with the SEC.

International Sales

Approximately half of o ur sales are to customers outside the United States, mainly in Europe, Asia, and Canada.

Approximately half of our 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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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.

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 1A , 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.

On July 9, 2025, we acquired Babbini S.p.A and G.P.S.

Engineering S.r.l (collectively, Babbini), two Italy-based companies specializing in industrial dewatering and engineered power transmission solutions, for approximately $16.5 million, net of cash acquired.

On October 7, 2025, we acquired Clyde Industries Holdings, Inc.

and its subsidiaries (Clyde Industries), a manufacturer of highly engineered boiler efficiency and cleaning system technologies, pursuant to a securities purchase agreement for $175.0 million in cash, subject to customary adjustments.

Babbini and Clyde Industries are part of our Industrial Processing segment.

See Note 2 , Acquisition, and Note 11 , Subsequent Events, in the accompanying condensed consolidated financial statements for further details.

On April 30, 2026, we completed the acquisition of voestalpine BÖHLER Profil GmbH & Co KG and voestalpine BÖHLER Profil VerwaltungsGmbH for 157.0 million euros, subject to certain customary adjustments.

At closing, the company names were changed to Kadant Profil GmbH & Co KG and Kadant Profil Verwaltungs GmbH (collectively, Kadant Profil).

Kadant Profil is a manufacturer of customized rolled profiles and industrial knife solutions for demanding industrial applications and is part of our Industrial Processing segment.

Results of Operations

Third Quarter 2025 Compared With Third Quarter 2024

The following table presents the change in revenue by segment between the third quarters of 2025 and 2024, and those changes excluding the effect of acquisitions and foreign currency translation which we refer to as change in organic revenue.

First Quarter 2026 Compared with First Quarter 2025

The following table presents the change in revenue by segment between the first quarters of 2026 and 2025, and those changes excluding the effect of acquisitions and foreign currency translation which we refer to as change in organic revenue.

Organic revenue excludes the effect of acquisitions for the four quarterly reporting periods following the date of the acquisition.

The presentation of the change in organic revenue is a non-GAAP measure.

We believe this non-GAAP measure helps investors gain an understanding of our underlying operations consistent with how management measures and forecasts its

performance, especially when comparing such results to prior periods.

We believe this non-GAAP measure helps investors gain an understanding of our underlying operations consistent with how management measures and forecasts its performance, especially when comparing such results to prior periods.

This non-GAAP measure should not be considered superior to or a substitute for the corresponding U.S.

generally accepted accounting principles (GAAP) measure.

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

Three Months Ended Increase (Decrease)

Revenue by reportable segment in the first quarters of 2026 and 2025 is as follows:

Three Months Ended Increase

Currency Translation

Change in Organic Revenue

(In thousands, except percentages) September 27,

2025 September 28,

(In thousands, except percentages) April 4,

2026 March 29,

2025 % Change Increase (Decrease)

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Consolidated $ 281,505 $ 239,210 $ 42,295 18% $ 33,984 $ 9,838 $ (1,527) (1) %

Consolidated revenue was $271.6 million in both the third quarters of 2025 and 2024.

Organic revenue decreased 4% primarily due to weak demand for our capital equipment products, especially at our Industrial Processing segment, as market uncertainty continued to impact our customers’ decision-making process.

This market uncertainty was fueled by escalating tariff rates on U.S.

imports and exports impacting manufacturers' input costs.

While quote activity remains high, customers are more cautious regarding the timing of their capital expenditures, leading to a delay in securing orders.

Demand for our parts and consumables products has remained strong, and notably, we had record parts and consumables revenue of $188.4 million in the third quarter of 2025.

Revenue at our Flow Control segment decreased 3% in the third quarter of 2025 driven by weaker demand for our capital equipment products in most regions.

Ongoing mill closures and production curtailments along with merger activity have contributed to weak market conditions in the pulp and paper industry.

Demand for our parts and consumables products has been stable with aftermarket parts revenue increasing 3% compared to the third quarter of 2024.

Revenue at our Industrial Processing segment decreased 4% in the third quarter of 2025.

Organic revenue decreased 10% in the third quarter of 2025 compared to the 2024 period, primarily driven by comparatively weaker demand for our capital equipment products at our fiber processing and wood processing businesses in the 2025 period.

Ongoing market uncertainty in both North America and Europe has resulted in a lengthening of quote-to-order times as customers await improved market conditions, causing some capital equipment orders to be delayed.

Despite this, demand for our aftermarket parts has remained steady as customers focus their spending on critical parts and maintenance, resulting in a 4% increase in parts and consumables revenue in the third quarter of 2025 compared to 2024.

Revenue at our Material Handling segment increased 11% to a record $70.3 million in the third quarter of 2025 primarily due to strong performance at our baling businesses.

Our European baling business had a 31% increase in revenue in the third quarter of 2025 driven by market demand for waste reduction and recycling products.

Consolidated revenue increased 18% in the first quarter of 2026, including a 14% increase from acquisitions.

Organic revenue decreased 1%, as modest growth from aftermarket parts was offset by lower sales of capital equipment products.

Demand for our parts and consumables products remained steady and represented 74% of total revenue in the first quarter of 2026.

Customers continue to exercise caution with respect to approvals of large capital projects, reflecting uncertainty related to trade policy, cost visibility, and interest rates.

This environment was further impacted by the economic effects from the conflicts in the Middle East.

As a result, quote-to-order times for large capital equipment projects have lengthened.

Geographically, volatility in tariffs and trade policies contributed to weaker organic performance in North America, which was partially offset by increased demand in China, driven by government-led initiatives aimed at stimulating domestic demand and manufacturing activity.

Revenue at our Flow Control segment increased 7% in the first quarter of 2026, primarily driven by higher demand for parts and consumables products across all regions.

In addition, capital equipment product revenue increased in China due to the completion of several large projects that had previously been delayed.

Revenue at our Industrial Processing segment increased 37% in the first quarter of 2026 due to acquisitions and the favorable effect of foreign currency translation.

Organic revenue decreased 4% reflecting constrained market conditions.

While some of the tariff-related uncertainty that began in 2025 has moderated, more recent geopolitical tensions have continued to influence our customers’ decision-making process.

Organic revenue from parts and consumables products decreased 3%, with the most significant decline in North America, and organic revenue from capital equipment products decreased 10%.

Despite these declines, quotation activity remains healthy, and bookings increased 19% in this segment compared to the fourth quarter of 2025.

Revenue at our Material Handling segment increased 5% in the first quarter of 2026, driven by strong demand for our parts and consumables products across all regions.

Gross Profit Margin

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

Gross profit margin by reportable segment in the first quarters of 2026 and 2025 is as follows:

Three Months Ended Basis Point Change

September 27,

2025 September 28,

Flow Control 51.9% 51.8% 10 bps

Industrial Processing 43.6% 44.0% (40) bps

Material Handling 38.5% 35.0% 350 bps

Consolidated 45.2% 44.7% 50 bps

Consolidated gross profit margin increased to 45.2% in the third quarter of 2025 from 44.7% in the third quarter of 2024 due to an increase in the proportion of higher-margin parts and consumables revenue, which increased to 69% of consolidated revenue in the third quarter of 2025 compared to 65% in the prior year period.

Gross profit margin included amortization expense related to acquired profit in inventory of $0.5 million in the third quarter of 2025, which lowered gross profit margin by 0.1 percentage points compared to expense of $1.2 million, which lowered gross profit margin by 0.5 percentage points in the 2024 period.

Within our reportable segments, gross profit margin:

• Increased to 51.9% at our Flow Control segment from 51.8% in the 2024 period primarily due to an increase in the proportion of higher-margin parts and consumables revenue in 2025 and the inclusion of $0.7 million of amortization expense related to acquired profit in inventory, which lowered gross profit margin in 2024 by 0.8 percentage points.

These increases were partially offset by lower margins achieved on our capital equipment products.

• Decreased to 43.6% at our Industrial Processing segment from 44.0% in the 2024 period due to lower margins achieved on our capital equipment products, partially offset by an increase in the proportion of higher-margin parts and consumables revenue in 2025.

• Increased to 38.5% at our Material Handling segment from 35.0% in the 2024 period due to higher margins achieved on our parts and consumables products.

Selling, General, and Administrative Expenses

Selling, general, and administrative (SG&A) expenses by reportable segm ent and Corp orate in the third quarters of 2025 and 2024 are as follows:

Three Months Ended

(In thousands, except percentages) September 27,

2025 September 28,

2024 Increase

Flow Control $ 25,380 $ 24,791 $ 589 2%

Industrial Processing 25,453 21,324 4,129 19%

Material Handling 13,919 12,874 1,045 8%

Corporate 11,087 10,054 1,033 10%

Consolidated $ 75,839 $ 69,043 $ 6,796 10%

Consolidated as a Percentage of Revenue 27.9% 25.4%

Consolidated SG&A expenses increased $6.8 million, or 10%, in the third quarter of 2025 compared to the third quarter of 2024 primarily due to higher compensation-related costs, an increase of $1.3 million in acquisition-related costs, and the inclusion of $0.7 million of SG&A expenses from an acquisition.

In addition, the weakening of the U.S.

dollar resulted in a $1.4 million increase in SG&A expenses, including a $1.2 million unfavorable effect of foreign currency translation and a $0.2 million shift from foreign currency gains in the 2024 period to losses in the 2025 period.

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

• Increased $0.6 million at our Flow Control segment principally due to the impact of the weakening of the U.S.

dollar, which resulted in a $1.0 million increase in SG&A expenses, including $0.7 million from the unfavorable effect of foreign currency translation and $0.3 million from a shift from foreign currency gains in the 2024 period to losses in the 2025 period.

These increases were partially offset by a decrease of $0.5 million in acquisition-related costs.

• Increased $4.1 million at our Industrial Processing segment principally due to increases of $2.1 million in acquisition costs, $0.7 million of SG&A expenses from an acquisition, and $0.5 million in bad debt expense.

• Increased $1.0 million at our Material Handling segment principally due to higher compensation expense, partially offset by a decrease of $0.3 million in acquisition-related costs.

• Increased $1.0 million at Corporate primarily due to a $1.2 million increase in compensation-related costs.

Interest Expense

Interest expense decreased to $3.1 million in the third quarter of 2025 from $5.5 million in the third quarter of 2024 due to decreased borrowings under our revolving credit facility and a lower weighted-average interest rate.

We expect interest expense will increase significantly during the fourth quarter of 2025 as a result of the $170.0 million borrowed in October 2025 to fund our Clyde Industries acquisition.

Provision for Income Taxes

Provision for income taxes decreased to $11.8 million in the third quarter of 2025 from $12.0 million in the third quarter of 2024.

The effective tax rate of 30% in the third quarter of 2025 was higher than our statutory rate of 21% primarily due to an increase in unrecognized tax benefits, the distribution of our worldwide earnings, nondeductible expenses, state taxes, and the cost of repatriating the earnings of certain foreign subsidiaries.

These items were offset in part by a net tax benefit from the re-measurement of certain deferred income tax assets and liabilities due to the decrease to Germany's future statutory tax rate enacted in July 2025 and foreign tax credits.

The effective tax rate of 27% in the third quarter of 2024 was higher than our statutory rate of 21% primarily due to the distribution of our worldwide earnings, state taxes, nondeductible expenses, the cost of repatriating the earnings of certain foreign subsidiaries, and tax expenses associated with Global Intangible Low-Taxed Income provisions.

These items were offset in part by foreign tax credits.

Net income decreased to $28.1 million in the third quarter of 2025 from $31.9 million in the third quarter of 2024 primarily due to a $6.4 million decrease in operating income, offset in part by a $2.4 million decrease in interest expense and a $0.2 million decrease in provision for income taxes (see discussions above for further details).

First Nine Months 2025 Compared With First Nine Months 2024

The following table presents changes in revenue and organic revenue by segment between the first nine months of 2025 and 2024.

Organic revenue is a non-GAAP measure as defined above in the results of operations for the third quarter of 2025 compared with the third quarter of 2024.

Revenue by segment in the first nine months of 2025 and 2024 is as follows:

Nine Months Ended Acquisitions Currency Translation (Non-GAAP)

Change in Organic Revenue

(In thousands, except percentages) September 27,

2025 September 28,

2024 Increase

% Change Increase (Decrease)

Flow Control $ 283,227 $ 276,493 $ 6,734 2% $ 8,216 $ 266 $ (1,748) (1)%

Industrial Processing 291,854 331,310 (39,456) (12)% 5,930 (1,409) (43,977) (13)%

Material Handling 190,963 187,551 3,412 2% 611 1,664 1,137 1%

Consolidated $ 766,044 $ 795,354 $ (29,310) (4)% $ 14,757 $ 521 $ (44,588) (6)%

Consolidated revenue decreased 4% to $766.0 million in the first nine months of 2025, while organic revenue decreased 6% primarily due to weaker demand for our capital equipment products, especially at our Industrial Processing segment.

The volatility of the tariff rates on imports to the United States originally proposed in early 2025 and then subsequently modified, led to a significant slowdown in the timing of securing large capital orders.

As a result, capital revenue decreased 23% in the first nine months of 2025 compared to 2024.

From a geographic perspective, organic revenue was impacted by softening demand across all regions due to weak macroeconomic conditions fueled by trade tensions and geopolitical issues.

While customers delayed large capital expenditures, the demand for our parts and consumables was steady, resulting in a 3% increase in parts and consumables revenue compared to the first nine months of 2024.

Revenue at our Flow Control segment increased 2% in the first nine months of 2025.

Organic revenue decreased 1% in the first nine months of 2025 due to lower demand for our capital equipment products, especially in North America, as a result of challenging market conditions.

This decrease was partially offset by higher demand for parts and consumables products with strength in North America offsetting weaker market conditions in Europe.

Revenue at our Industrial Processing segment decreased 12% in the first nine months of 2025.

Organic revenue decreased 13% in the first nine months of 2025 largely due to reduced demand for our capital equipment products at our wood processing businesses.

While there is active quote activity for large capital projects, tariff-related uncertainty has increased the time for securing orders with certain orders being delayed to the fourth quarter of 2025 or into 2026.

Capital revenue also decreased at our fiber processing businesses in the first nine months of 2025 across all regions, especially in China where trade tensions were further compounded by sluggish economic conditions resulting in more cautious capital spending.

delay in committing to major capital expenditures, many customers focused their spending on critical parts and maintenance.

As a result, there was solid demand for our parts and consumables products in this segment, with a 4% increase in aftermarket parts revenue in the first nine months of 2025 compared to the first nine months of 2024.

Revenue at our Material Handling segment increased 2%, led by higher demand at our baling businesses for both capital equipment and parts and consumables products.

This increase was partially offset by weaker demand for our capital equipment products at our conveying and vibratory business in North America driven by the tariff-related market uncertainty, which tempered demand and delayed the execution of capital projects.

Gross Profit Margin

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

Nine Months Ended Basis Point Change

September 27,

2025 September 28,

2026 March 29,

Flow Control 52.7%

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Consolidated 45.0%

Consolidated gross profit margin increased to 45.7% in the first nine months of 2025 from 44.5% in the first nine months of 2024 due to an increase in the proportion of higher-margin parts and consumables revenue, which increased to 72% of consolidated revenue in the first nine months of 2025 compared to 65% in in the first nine months of 2024.

Gross profit margin included amortization expense related to acquired profit in inventory of $0.5 million, which lowered gross profit margin by 0.1 percentage points in the first nine months of 2025 compared to expense of $4.1 million, which lowered gross profit margin by 0.6 percentage points in the 2024 period.

Consolidated gross profit margin decreased to 45.0% in the first quarter of 2026 from 46.1% in the first quarter of 2025.

This decrease was primarily attributable to the inclusion of $1.4 million of amortization expense related to acquired profit in inventory in the first quarter of 2026, which reduced gross profit margin by 0.5 percentage points, and a lower gross margin profile associated with the product mix.

Within our reportable segments, gross profit margin:

• Increased to 53.0% at our Flow Control segment from 52.9% in the 2024 period primarily due to an increase in the proportion of higher-margin parts and consumables revenue in 2025 and the inclusion of $1.0 million of amortization expense related to acquired profit in inventory in the 2024 period, which decreased gross profit margin in 2024 by 0.3 percentage points.

• Increased to 43.4% at our Industrial Processing segment from 42.3% in the 2024 period due to an increase in the proportion of higher-margin parts and consumables revenue in 2025 and a decrease in amortization expense related to acquired profit in inventory in the first nine months of 2025 compared to the 2024 period.

These increases were partially offset by lower margins achieved on our capital equipment products.

• Increased to 38.3% at our Material Handling segment from 36.2% in the 2024 period due to higher margins achieved on our capital equipment products in 2025 and, to a lesser extent, the inclusion of $1.0 million of amortization expense related to acquired profit in inventory in the 2024 period, which decreased gross profit margin in 2024 by 0.6 percentage points.

• Decreased to 52.7% at our Flow Control segment from 53.3% in the 2025 period primarily due to lower margins achieved on our parts and consumables products.

• Decreased to 42.5% at our Industrial Processing segment from 44.1% in the 2025 period due to the inclusion of $1.4 million of amortization expense related to acquired profit in inventory in the 2026 period, which decreased gross profit margin in 2026 by 1.1 percentage points, and a decrease in the proportion of higher-margin parts and consumables product revenue, which decreased to 76% of consolidated revenue in the first quarter of 2026 compared to 80% in the prior year period.

• Decreased to 37.5% at our Material Handling segment from 37.7% in the 2025 period due to lower margins achieved on our capital equipment products.

Selling, General, and Administrative Expenses

SG&A expenses by reportable segment and Corporate in the first nine months of 2025 and 2024 are as follows:

Nine Months Ended

(In thousands, except percentages) September 27,

2025 September 28,

2024 Increase

Selling, general, and administrative (SG&A) expenses by reportable segm ent and Corp orate in the first quarters of 2026 and 2025 are as follows:

Three Months Ended

(In thousands, except percentages) April 4,

2026 March 29,

2025 Increase (Decrease)

Flow Control $ 26,367 $ 25,170 $ 1,197 5%

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Consolidated as a Percentage of Revenue 29.3% 29.8%

Consolidated SG&A expenses as a percentage of revenue increased to 28.8% in the first nine months of 2025 compared with 26.3% in the first nine months of 20 24 due in part to the comparatively lower revenue in 2025.

SG&A expenses increased $11.6 million, or 6%, primarily due to the inclusion of $6.2 million of SG&A expenses from acquisitions and higher compensation-related costs.

In addition, the weakening of the U.S.

dollar resulted in a $1.9 million increase in SG&A expenses, including a $1.4 million shift from foreign currency gains in the 2024 period to losses in the 2025 period, and $0.5 million from the unfavorable effect of foreign currency translation.

Consolidated SG&A expenses increased $11.3 million, or 16%, in the first quarter of 2026 compared to the first quarter of 2025.

This increase was primarily attributable to $7.9 million of SG&A expenses from acquisitions and an unfavorable impact from foreign currency translation of $2.8 million.

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

• Increased $4.2 million at our Flow Control segment principally due to the inclusion of $4.5 million of SG&A expenses from acquisitions and a $1.3 million increase in SG&A expense due to the unfavorable impact of foreign currency, including a $1.0 million shift from foreign currency gains in the 2024 period to losses in the 2025 period.

These increases were partially offset by a decrease of $0.9 million in acquisition-related costs.

• Increased $4.3 million at our Industrial Processing segment due to an increase of $2.6 million of acquisition costs, $0.7 million of SG&A expenses from an acquisition, and a $0.3 million increase in SG&A expense due to the unfavorable impact of foreign currency.

• Increased $0.8 million at our Material Handling segment principally due to an increase of $1.0 million of SG&A expenses from acquisitions, higher compensation-related costs, and a $0.3 million unfavorable effect of foreign currency.

These increases were partially offset by a decrease of $2.2 million in acquisition-related costs.

• Increased $2.3 million at Corporate due to a $1.9 million increase in compensation expense and a $1.1 million increase in insurance expense, offset by a decrease in legal costs primarily due to an intellectual property settlement.

• Increased $1.2 million at our Flow Control segment primarily due to a $1.4 million unfavorable impact from foreign currency translation.

• Increased $9.3 million at our Industrial Processing segment primarily due to $7.9 million of SG&A expenses from acquisitions, a $0.9 million unfavorable impact from foreign currency translation and $0.3 million in incremental acquisition-related costs.

• Increased $0.9 million at our Material Handling segment primarily due to a $0.5 million unfavorable impact from foreign currency translation and incremental selling-related costs.

Interest Expense

Interest expense decreased to $10.2 million in the first nine months of 2025 from $15.4 million in the first nine months of 2024 due t o a lower weighted-average interest rate and, to a lesser extent, decreased borrowings under our revolving credit facility.

Interest expense increased to $4.5 million in the first quarter of 2026 from $3.8 million in the first quarter of 2025 due to increased borrowings under our revolving credit facility, partially offset by a lower weighted-average interest rate.

We expect interest expense will be higher for the remainder of 2026 compared to prior periods, primarily as a result of the borrowings used to finance our April 2026 acquisition of Kadant Profil.

Provision for Income Taxes

Provision for income taxes decreased to $29.4 million in the first nine months of 2025 from $31.8 million in the first nine months of 2024.

The effective tax rate of 27% in the first nine months of 2025 was higher than our statutory rate of 21% primarily due to nondeductible expenses, the distribution of our worldwide earnings, state taxes, and the cost of repatriating the earnings of certain foreign subsidiaries.

The effective tax rate of 26% in the first nine months of 2024 was higher than our statutory rate of 21% primarily due to the distribution of our worldwide earnings, nondeductible expenses, state taxes, and the cost of repatriating the earnings of certain foreign subsidiaries.

These items were offset in part by foreign tax credits.

Net income decreased to $79.2 million in the first nine months of 2025 from $88.5 million in the first nine months of 2024 primarily due to a $16.7 million decrease in operating income, offset in part by a $5.1 million decrease in interest expense and a $2.4 million decrease in provision for income taxes (see discussions above for further details).

Provision for income taxes increased to $10.1 million in the first quarter of 2026 from $7.8 million in the first quarter of 2025.

The effective tax rate of 28.2% in the first quarter of 2026 was higher than our statutory rate of 21% primarily due to the distribution of our worldwide earnings, nondeductible expenses, and state taxes.

The effective tax rate of 24.3% 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.

Net income increased to $25.8 million in the first quarter of 2026 from $24.4 million in the first quarter of 2025 primarily due to a $4.5 million increase in operating income, offset in part by a $0.7 million increase in interest expense and a $2.3 million increase in provision for income taxes (see discussions above for further details).

Non-GAAP Key Performance Indicators

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We use organic revenue to understand our trends and to forecast and evaluate our financial performance and compare revenue to prior periods (see discussion in Revenue above).

Adjusted operating income, adjusted EBITDA, and adjusted EBITDA margin exclude acquisition costs, amortization expense related to acquired profit in inventory and backlog, and other income or expense, as indicated.

These items are excluded as they are not indicative of our core operating results and are not comparable to other periods, which have differing levels of incremental costs, expenditures or income, or none at all.

Additionally, we use free cash flow in order to provide insight on our ability to generate cash for acquisitions and debt

repayments, as well as for other investing and financing activities.

Adjusted operating income, adjusted EBITDA, and adjusted EBITDA margin exclude amortization expense related to acquired intangible assets, profit in inventory, and backlog (collectively, purchase accounting expenses);

acquisition costs;

and other income or expense, as indicated.

We exclude purchase accounting expenses and acquisition costs to provide a more meaningful and consistent comparison of our operating results over time and with peer companies.

While we have a history of acquisition activity, such transactions do not occur on a predictable cycle, and the size and nature of these transactions will vary.

We believe it is important for investors to understand that these intangible assets were recorded as part of purchase accounting and that they contribute to revenue generation.

We also exclude other items when they are not indicative of our core operating results and are not comparable to other periods, which have differing levels of incremental costs, expenditures or income, or none at all.

Additionally, we use free cash flow in order to provide insight on our ability to generate cash for acquisitions and debt repayments, as well as for other investing and financing activities.

We believe these non-GAAP financial measures, when taken together with the corresponding GAAP financial measures, provide meaningful supplemental information regarding our performance by excluding certain items that may not be indicative of our core business, operating results, or future outlook.

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

Three Months Ended Nine Months Ended

(In thousands, except percentages) September 27,

2025 September 28,

2024 September 27,

2025 September 28,

Three Months Ended

(In thousands, except percentages) April 4,

Net Income Attributable to Kadant $ 25,509

Net Income Attributable to Noncontrolling Interests

393 312 1,247 891

Provision for Income Taxes 10,142

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Operating Income 40,109

Intangible Asset Amortization Expense

Profit in Inventory Amortization Expense (a)

Backlog Amortization Expense (b)

Acquisition Costs 674

Acquired Profit in Inventory Amortization (a)

465 1,205 500 4,065

Acquired Backlog Amortization (b)

165 687 746 2,181

Indemnification Asset (Provision) Reversal (c)

— (175) (29) (151)

Adjusted Operating Income (non-GAAP measure)

45,786 51,173 122,581 142,943

Depreciation and Amortization 12,232 12,088 35,733 34,324

Indemnification Asset Provision (c)

Adjusted Operating Income (d) (non-GAAP measure)

Depreciation Expense

Adjusted EBITDA (non-GAAP measure)

$ 58,018 $ 63,261 $ 158,314 $ 177,267

Adjusted EBITDA Margin (non-GAAP measure)

21.4% 23.3% 20.7% 22.3%

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

(b) Represents intangible amortization expense associated with acquired backlog.

(c) Represents the provision for or reversal of indemnification assets related to the establishment or release of tax reserves associated with uncertain tax positions.

(c) Represents the net indemnification asset provision related to the establishment of tax reserves associated with uncertain tax positions.

(d) Reflects new methodology, announced on February 19, 2026, to exclude intangible amortization expense.

A reconciliation of free cash flow from cash flow provided by operating activities is as follows:

Three Months Ended Nine Months Ended

(In thousands) September 27,

2025 September 28,

2024 September 27,

2025 September 28,

Three Months Ended

(In thousands) April 4,

2026 March 29,

Cash Provided by Operating Activities $ 21,916 $ 22,835

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Liquidity and Capital Resources

Consolidated working capital was $307.4 million at September 27, 2025, compared with $250.8 million at December 28, 2024.

Cash and cash equivalents were $124.5 million at September 27, 2025, compared with $94.7 million at December 28, 2024, which included cash and cash equivalents held by our foreign subsidiaries o f $86.3 million at September 27, 2025 and $73.8 million at December 28, 2024.

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

Nine Months Ended

(In thousands) September 27,

2025 September 28,

Consolidated working capital was $335.2 million at April 4, 2026, compared with $313.8 million at January 3, 2026.

Cash and cash equivalents were $117.0 million at April 4, 2026, compared with $119.6 million at January 3, 2026, which included cash and cash equivalents held by our foreign subsidiaries o f $107.2 million at April 4, 2026 and $100.3 million at January 3, 2026.

Cash flow information in the first quarters of 2026 and 2025 is as follows:

Three Months Ended

(In thousands) April 4,

2026 March 29,

Net Cash Provided by Operating Activities $ 21,916 $ 22,835

Net Cash Used in Investing Activities (3,926) (3,836)

Net Cash (Used in) Provided by Financing Activities (59,302) 196,774

Net Cash Used in Financing Activities

(20,050) (23,085)

Exchange Rate Effect on Cash, Cash Equivalents, and Restricted Cash (804) 1,945

Increase (Decrease) in Cash, Cash Equivalents, and Restricted Cash

Decrease in Cash, Cash Equivalents, and Restricted Cash

$ (2,864) $ (2,141)

Operating Activities

Cash provided by operating activities increased to $110.6 million in the first nine months of 2025 from $103.4 million in the first nine months of 2024 due in large part to the increase in cash received from customer deposits.

Cash provided by operating activities decreased to $21.9 million in the first quarter of 2026 from $22.8 million in the first quarter of 2025.

Our operating cash flows are primarily generated from cash received from customers, offset by cash payments for items such as inventory, employee compensation, operating leases, income taxes, and interest payments on outstanding debt obligations.

Significant operating cash outflows associated with working capital in the nine months of 2025 related to inventory, other liabilities, and accounts receivable.

Purchases of inventory used cash of $12.9 million and other liabilities used cash of $10.4 million, primarily related to incentive compensation payments.

In addition, an increase in accounts receivable used cash of $7.7 million due to timing of shipments.

These uses of cash were offset in part by cash received from customer deposits of $7.2 million due to the timing of capital equipment orders and cash received from contract assets of $8.9 million related to contracts accounted for on an over time basis.

Significant cash outflows associated with working capital in the first nine months of 2024 related to accounts receivable, customer deposits and other liabilities.

An increase in accounts receivable used cash of $10.4 million primarily due to our revenue growth, and a decrease in customer deposits used cash of $21.6 million due to a reduction in capital equipment orders.

Other liabilities used cash of $15.5 million primarily related to incentive compensation payments.

These uses of cash were offset in part by cash provided from the shipment of inventory of $10.2 million and increases in accounts payable of $8.7 million related to inventory purchases and the timing of payments.

Significant operating cash outflows associated with working capital in the first quarter of 2026 related to accounts receivable, inventory and other liabilities.

An increase in accounts receivable used cash of $14.3 million due to the timing of shipments, and purchases of inventory used cash of $9.2 million.

In addition, a decrease in other liabilities used cash of $10.6 million, primarily related to incentive compensation payments.

These uses of cash were offset in part by cash received from customer deposits of $7.3 million due to the timing of capital equipment product orders.

Significant 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.

Investing Activities

Cash used in investing activities was $26.2 million in the first nine months of 2025, compared with $315.9 million in the first nine months of 2024.

Cash used in investing activities in the first nine months of 2025 included consideration paid for an acquisition, net of cash acquired, of $16.5 million and capital expenditures of $11.0 million.

Cash used in investing activities in the first nine months of 2024 included consideration paid for acquisitions, net of cash acquired, of $302.0 million and capital expenditures of $15.4 million.

Cash used in investing activities was $3.9 million in the first quarter of 2026, compared with $3.8 million in the first quarter of 2025.

Cash used in investing activities in the first quarter of 2026 included capital expenditures of $3.3 million and a post-closing holdback payment of $1.2 million related to a 2024 acquisition.

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

Financing Activities

Cash used in financing activities was $59.3 million in the nine months of 2025, compared with cash provided by financing activities of $196.8 million in the first nine months of 2024.

Borrowings under our revolving credit facility, which were primarily used to fund our 2025 and 2024 acquisitions, were $29.0 million in 2025 compared to $305.2 million in 2024.

Repayments of short- and long-term obligations were $69.4 million in 2025 and $91.4 million in 2024.

Cash used in financing activities was $20.1 million in the first quarter of 2026, compared with $23.1 million in the first quarter of 2025.

Borrowings under our revolving credit facility were $9.0 million and repayments of short- and long-term obligations were $19.1 million in 2026 compared with borrowings under our revolving credit facility of $8.0 million and repayments of short- and long-term obligations of $22.6 million in 2025.

Cash dividends paid to stockholders were $4.0 million in 2026 and $3.8 million in 2025.

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The exchange rate effect on cash, cash equivalents, and restricted cash represents the impact of translation of cash balances at our foreign subsidiaries.

The $5.9 million increase in cash, cash equivalents, and restricted cash in the first nine months of 2025 related to exchange rates was primarily attributable to the weakening of the U.S.

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

The $1.0 million decrease in cash, cash equivalents, and restricted cash in the first nine months of 2024 was primarily attributable to the strengthening of the U.S.

dollar against the Mexican peso and, to a lesser extent, the Brazilian real and the Canadian dollar.

The $0.8 million decrease in cash, cash equivalents, and restricted cash in the first quarter of 2026 related to exchange rates was primarily attributable to the strengthening of the U.S.

dollar against several European currencies, offset in part by the weakening of the U.S.

dollar against the Chinese renminbi.

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.

Borrowing Capacity and Debt Obligations

On September 26, 2025, we entered into an eighth amendment and joinder (the Eighth Amendment) to our unsecured multi-currency revolving credit facility originally entered into on March 1, 2017 (as amended and restated to date, the Credit Agreement).

The Eighth Amendment, among other things, increased our aggregate borrowing capacity from $400.0 million to $750.0 million and extended the maturity date from November 30, 2027 to September 26, 2030.

In addition to the increased committed borrowing capacity, an uncommitted, unsecured incremental borrowing facility of $200.0 million continues to be available under the Credit Agreement.

In the first nine months of 2025, we borrowed $29.0 million under our revolving credit facility, the majority of which was used to fund our acquisition of Babbini.

As of September 27, 2025, our outstanding balance under the Credit Agreement was $248.1 million, which included $101.1 million of euro-denominated borrowings, and we had $502.0 million of available committed borrowing capacity, in addition to a $200.0 million uncommitted, unsecured incremental borrowing facility.

Under our debt agreements, our leverage ratio must be less than 3.75 or, if we elect, for the quarter during which a material acquisition occurs and for the three fiscal quarters thereafter, must be less than 4.25.

As of September 27, 2025, our leverage ratio was 0.94 and we were in compliance with our debt covenants.

In October 2025, we borrowed $170.0 million under our revolving credit facility to fund the acquisition of Clyde Industries.

Our unsecured multi-currency revolving credit facility entered into on March 1, 2017 (as amended and restated to date, the Credit Agreement) matures on September 26, 2030 and has a borrowing capacity of $750.0 million.

As of April 4, 2026, our outstanding balance under the Credit Agreement was $355.4 million, which included $78.4 million of euro-denominated borrowings, and we had $394.6 million of available committed borrowing capacity, in addition to a $200.0 million uncommitted, unsecured incremental borrowing facility.

Under our debt agreements, our leverage ratio must be less than 3.75 to 1 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 to 1.

As of April 4, 2026, our leverage ratio was 1.27 and we were in compliance with our debt covenants.

In April 2026, we borrowed 155.0 million euros under our revolving credit facility at an initial interest rate of 3.2% to fund our acquisition of Kadant Profil.

Borrowings under our revolving credit facility bear variable rates of interest and adjust frequently based on prevailing market rates and the terms of our Credit Agreement.

The interest rate related to this debt was approximately 5.4% at the time of the borrowing.

Following this acquisition, we had available committed borrowing capacity of $332.0 million under the revolving credit facility, in addition to the uncommitted, unsecured incremental borrowing facility of $200.0 million.

See Note 5 , Long-Term Obligations and Note 11 , Subsequent Events, in the accompanying condensed consolidated financial statements for additional information regarding our debt obligations.

Following this acquisition, we had available committed borrowing capacity of approximately $211.8 million under our revolving credit facility, in addition to the uncommitted, unsecured incremental borrowing facility of $200.0 million.

See Note 5 , Long-Term Obligations in the accompanying condensed consolidated financial statements for additional information regarding our debt obligations.

Additional Liquidity and Capital Resources

On May 15, 2025, our board of directors approved the repurchase of up to $50.0 million of our equity securities during the period from May 15, 2025 to May 15, 2026.

We did not repurchase any shares of our common stock under this authorization or our previous $50.0 million authorization that expired on May 16, 2025.

We paid cash dividends of $11.8 million in the first nine months of 2025.

On September 4, 2025, we declared a quarterly cash dividend of $0.34 per share totaling $4.0 million that will be paid on November 6, 2025.

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

We paid cash dividends of $4.0 million in the first quarter of 2026.

On March 11, 2026, we declared a quarterly cash dividend of $0.36 per share totaling $4.3 million that will be paid on May 13, 2026.

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

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We plan to make expenditures of approximately $20.0 to $24.0 million during the remainder of 2026 for property, plant, and equipment.

As of September 27, 2025, we had approximately $137.7 million of total unremitted foreign earnings.

As of April 4, 2026, we had approximately $153.6 million of total unremitted foreign earnings.

It is our intent to indefinitely reinvest $87.4 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 2025, 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 2026, we recorded withholding taxes on the earnings in certain foreign subsidiaries that we plan to repatriate in the foreseeable future.

The foreign withholding taxes that would be required if we were to remit the indefinitely-reinvested foreign earnings to the United States would be approximately $2.7 million.

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Management evaluates its estimates on an ongoing basis based on historical experience, current economic and market conditions, and other assumptions management believes are reasonable.

We believe that our most critical accounting policies which are significant to our consolidated financial statements, and which involve the most complex or subjective decisions or assessments, are those described in Management's Discussion and Analysis of Financial Condition and Results of Operations under the heading Application of Critical Accounting

Estimates in Part II, Item 7, of our Annual Report.

There have been no material changes to these critical accounting policies since the end of fiscal 2025 that warrant disclosure.

Recent Accounting Pronouncements

See Note 1 , under the heading Recent Accounting Pronouncements Not Yet Adopted , in the accompanying condensed consolidated financial statements for details.

See Note 1 , under the heading Recent Accounting Pronouncements , in the accompanying condensed consolidated financial statements for details.

Item 3 – Quantitative and Qualitative Disclosures About Market Risk

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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