KADANT INC 10-Q

Item 1 – Financial Statements KADANT INC. Condensed Consolidated Balance Sheet (Unaudited) April 4, 2026 January 3, 2026 (In thousands, except share and per share amounts) Assets Current Assets: Cash and cash equivalents $ 117,025 $ 119,551 Restricted cash 2,792 3,130 Accounts receivable, net of allowances of $ 5,334 and $ 5,149 172,376 158,567 Inventories 214,831 206,854 Contract assets 5,921 6,599 Other current assets 49,698 47,232 Total Current Assets 562,643 541,933 Property, Plant, and Equipment, net of accumulated depreciation of $ 178,135 and $ 173,586 193,286 196,656 Other Assets 66,465 67,592 Intangible Assets, Net (Note 1) 341,170 350,376 Goodwill (Note 1) 551,088 555,621 Total Assets $ 1,714,652 $ 1,712,178 Liabilities and Stockholders' Equity Current Liabilities: Current maturities of long-term obligations (Note 5) $ 3,161 $ 3,129 Accounts payable 55,481 53,362 Accrued payroll and employee benefits 37,906 47,348 Accrued warranty costs 10,491 11,848 Customer deposits 64,466 56,867 Advanced billings 10,190 9,605 Other current liabilities 45,739 46,012 Total Current Liabilities 227,434 228,171 Long-Term Obligations (Note 5) 360,200 371,372 Long-Term Deferred Income Taxes 63,378 62,479 Other Long-Term Liabilities 57,491 59,089 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 136,360 138,844 Retained earnings 966,899 945,641 Treasury stock at cost, 2,815,702 and 2,835,165 shares ( 68,996 ) ( 69,473 ) Accumulated other comprehensive items (Note 7) ( 38,805 ) ( 35,349 ) Total Kadant Stockholders' Equity 995,604 979,809 Noncontrolling interests 10,545 11,258 Total Stockholders' Equity 1,006,149 991,067 Total Liabilities and Stockholders' Equity $ 1,714,652 $ 1,712,178 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 April 4, 2026 March 29, 2025 (In thousands, except per share amounts) Revenue (Notes 1 and 9) $ 281,505 $ 239,210 Costs and Operating Expenses: Cost of revenue 154,802 128,880 Selling, general, and administrative expenses 82,538 71,221 Research and development expenses 4,056 3,523 241,396 203,624 Operating Income 40,109 35,586 Interest Income 351 517 Interest Expense ( 4,484 ) ( 3,822 ) Other Expense, Net ( 13 ) ( 16 ) Income Before Provision for Income Taxes 35,963 32,265 Provision for Income Taxes (Note 4) 10,142 7,828 Net Income 25,821 24,437 Net Income Attributable to Noncontrolling Interests ( 312 ) ( 374 ) Net Income Attributable to Kadant $ 25,509 $ 24,063 Earnings per Share Attributable to Kadant (Note 3) Basic $ 2.16 $ 2.05 Diluted $ 2.16 $ 2.04 Weighted Average Shares (Note 3) Basic 11,794 11,760 Diluted 11,802 11,776 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 April 4, 2026 March 29, 2025 (In thousands) Net Income $ 25,821 $ 24,437 Other Comprehensive Items: Foreign currency translation adjustment ( 3,486 ) 10,009 Pension and other post-retirement liability adjustments, net (net of tax (benefit) provision of $( 2 ) and $ 1 ) ( 5 ) 4 Other comprehensive items ( 3,491 ) 10,013 Comprehensive Income 22,330 34,450 Comprehensive Income Attributable to Noncontrolling Interests ( 277 ) ( 443 ) Comprehensive Income Attributable to Kadant $ 22,053 $ 34,007 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) Three Months Ended April 4, 2026 March 29, 2025 (In thousands) Operating Activities Net income attributable to Kadant $ 25,509 $ 24,063 Net income attributable to noncontrolling interests 312 374 Net income 25,821 24,437 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 14,647 12,013 Stock-based compensation expense 2,916 2,757 Provision for (recovery of) losses on accounts receivable 272 ( 240 ) Other items, net 3,509 2,337 Changes in assets and liabilities, net of effects of acquisitions: Accounts receivable ( 14,323 ) ( 1,068 ) Contract assets 697 6,310 Inventories ( 9,214 ) ( 5,516 ) Other assets ( 1,635 ) ( 1,368 ) Accounts payable 2,522 ( 1,658 ) Customer deposits 7,308 ( 827 ) Other liabilities ( 10,604 ) ( 14,342 ) Net cash provided by operating activities 21,916 22,835 Investing Activities Acquisition holdback payment ( Note 2 ) ( 1,157 ) — Purchases of property, plant, and equipment ( 3,258 ) ( 3,836 ) Proceeds from sale of property, plant, and equipment 489 — Net cash used in investing activities ( 3,926 ) ( 3,836 ) Financing Activities Proceeds from issuance of long-term obligations 9,000 8,000 Repayment of short- and long-term obligations ( 19,129 ) ( 22,563 ) Tax withholding payments related to stock-based compensation ( 4,923 ) ( 6,036 ) Dividends paid ( 4,008 ) ( 3,762 ) Proceeds from issuance of Company common stock — 2,101 Dividends paid to noncontrolling interests ( 990 ) ( 825 ) Net cash used in financing activities ( 20,050 ) ( 23,085 ) Exchange Rate Effect on Cash, Cash Equivalents, and Restricted Cash ( 804 ) 1,945 Decrease in Cash, Cash Equivalents, and Restricted Cash ( 2,864 ) ( 2,141 ) Cash, Cash Equivalents, and Restricted Cash at Beginning of Period 122,681 95,946 Cash, Cash Equivalents, and Restricted Cash at End of Period $ 119,817 $ 93,805 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 April 4, 2026 (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 January 3, 2026 14,624,159 $ 146 $ 138,844 $ 945,641 2,835,165 $ ( 69,473 ) $ ( 35,349 ) $ 11,258 $ 991,067 Net income — — — 25,509 — — — 312 25,821 Dividend declared – Common Stock, $ 0.36 per share — — — ( 4,251 ) — — — — ( 4,251 ) Activity under stock plans — — ( 2,484 ) — ( 19,463 ) 477 — — ( 2,007 ) Dividends paid to noncontrolling interest — — — — — — — ( 990 ) ( 990 ) Other comprehensive items — — — — — — ( 3,456 ) ( 35 ) ( 3,491 ) Balance at April 4, 2026 14,624,159 $ 146 $ 136,360 $ 966,899 2,815,702 $ ( 68,996 ) $ ( 38,805 ) $ 10,545 $ 1,006,149 Three Months Ended March 29, 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 — — — 24,063 — — — 374 24,437 Dividend declared – Common Stock, $ 0.34 per share — — — ( 4,004 ) — — — — ( 4,004 ) Activity under stock plans — — ( 1,908 ) — ( 29,780 ) 729 — — ( 1,179 ) Dividend paid to noncontrolling interest — — — — — — — ( 825 ) ( 825 ) Other comprehensive items — — — — — — 9,944 69 10,013 Balance at March 29, 2025 14,624,159 $ 146 $ 128,272 $ 879,752 2,848,300 $ ( 69,795 ) $ ( 62,424 ) $ 10,619 $ 886,570 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 April 4, 2026, its results of operations, comprehensive income, cash flows and stockholders' equity for the three-month periods ended April 4, 2026 and March 29, 2025. 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 January 3, 2026 has been derived from the consolidated financial statements contained in the Company's Annual Report on Form 10-K for the fiscal year ended January 3, 2026 (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 three months ended April 4, 2026. Supplemental Cash Flow Information Three Months Ended (In thousands) April 4, 2026 March 29, 2025 Cash Paid for Interest $ 4,253 $ 3,657 Cash Paid for Income Taxes, Net of Refunds $ 9,457 $ 11,109 Non-Cash Investing Activities: Reduction in fair value of assets acquired $ 1,490 $ — Reduction in fair value of liabilities assumed $ 1,490 $ — Purchases of property, plant, and equipment in accounts payable $ 1,296 $ 463 Non-Cash Financing Activities: Issuance of Company common stock upon vesting of restricted stock units $ 5,626 $ 5,033 Dividends declared but unpaid $ 4,251 $ 4,004 8 Table of Contents KADANT INC. Notes to Condensed Consolidated Financial Statements (Unaudited) 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) April 4, 2026 January 3, 2026 March 29, 2025 December 28, 2024 Cash and cash equivalents $ 117,025 $ 119,551 $ 91,678 $ 94,660 Restricted cash 2,792 3,130 2,127 1,286 Total Cash, Cash Equivalents, and Restricted Cash $ 119,817 $ 122,681 $ 93,805 $ 95,946 Inventories The components of inventories are as follows: April 4, 2026 January 3, 2026 (In thousands) Raw Materials $ 92,102 $ 92,674 Work in Process 51,760 44,455 Finished Goods (includes $ 5,095 and $ 3,556 at customer locations) 70,969 69,725 $ 214,831 $ 206,854 Intangible Assets, Net Acquired intangible assets by major asset class are as follows: (In thousands) Gross Accumulated Amortization Currency Translation Net April 4, 2026 Definite-Lived Customer relationships $ 414,746 $ ( 154,612 ) $ ( 5,197 ) $ 254,937 Product technology 96,744 ( 56,416 ) ( 2,086 ) 38,242 Tradenames 23,926 ( 6,439 ) ( 401 ) 17,086 Other 25,221 ( 22,535 ) ( 563 ) 2,123 560,637 ( 240,002 ) ( 8,247 ) 312,388 Indefinite-Lived Tradenames 29,059 — ( 277 ) 28,782 Acquired Intangible Assets $ 589,696 $ ( 240,002 ) $ ( 8,524 ) $ 341,170 January 3, 2026 Definite-Lived Customer relationships $ 414,629 $ ( 148,139 ) $ ( 4,483 ) $ 262,007 Product technology 96,744 ( 54,929 ) ( 2,076 ) 39,739 Tradenames 23,926 ( 6,106 ) ( 366 ) 17,454 Other 25,221 ( 22,443 ) ( 574 ) 2,204 560,520 ( 231,617 ) ( 7,499 ) 321,404 Indefinite-Lived Tradenames 29,059 — ( 87 ) 28,972 Acquired Intangible Assets $ 589,579 $ ( 231,617 ) $ ( 7,586 ) $ 350,376 9 Table of Contents KADANT INC. Notes to Condensed Consolidated Financial Statements (Unaudited) 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. 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 January 3, 2026 Gross balance $ 139,759 $ 306,319 $ 195,081 $ 641,159 Accumulated impairment losses — ( 85,538 ) — ( 85,538 ) Net balance 139,759 220,781 195,081 555,621 2026 Activity Measurement period adjustments for 2025 acquisitions — ( 1,566 ) — ( 1,566 ) Currency translation ( 1,223 ) ( 1,258 ) ( 486 ) ( 2,967 ) Total 2026 activity ( 1,223 ) ( 2,824 ) ( 486 ) ( 4,533 ) Balance at April 4, 2026 Gross balance 138,536 303,495 194,595 636,626 Accumulated impairment losses — ( 85,538 ) — ( 85,538 ) Net balance $ 138,536 $ 217,957 $ 194,595 $ 551,088 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. 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: Three Months Ended (In thousands) April 4, 2026 March 29, 2025 Balance at Beginning of Year $ 11,848 $ 10,664 Provision charged to expense 522 1,009 Usage ( 1,854 ) ( 1,728 ) Currency translation ( 25 ) 171 Balance at End of Period $ 10,491 $ 10,116 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. 10 Table of Contents KADANT INC. Notes to Condensed Consolidated Financial Statements (Unaudited) The following table presents revenue by revenue recognition method: Three Months Ended April 4, March 29, (In thousands) 2026 2025 Point in Time $ 266,160 $ 217,668 Over Time 15,345 21,542 $ 281,505 $ 239,210 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 April 4, March 29, (In thousands) 2026 2025 Revenue by Product Type: Parts and consumables $ 209,499 $ 179,308 Capital 72,006 59,902 $ 281,505 $ 239,210 Revenue by Geography (based on customer location): North America $ 166,563 $ 159,870 Europe 62,202 49,341 Asia 30,756 18,702 Rest of world 21,984 11,297 $ 281,505 $ 239,210 See Note 9 , Business Segment Information, for information on the disaggregation of revenue by reportable segment. The following table presents contract balances from contracts with customers: April 4, 2026 January 3, 2026 (In thousands) Contract Assets $ 5,921 $ 6,599 Contract Liabilities $ 76,852 $ 69,093 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 $ 32,008,000 in the first quarter of 2026 and $ 17,559,000 in the first quarter of 2025 that was included in the contract liabilities balance at the beginning of 2026 and 2025, respectively. The majority of the Company's contracts for capital equipment products have an original expected duration of one year or less. Certain capital equipment product 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 $ 26,575,000 as of April 4, 2026. The Company will recognize revenue for these performance obligations as they are satisfied, approximately 80 % of which is expected to occur within the next twelve months and the remaining 20 % thereafter. 11 Table of Contents KADANT INC. Notes to Condensed Consolidated Financial Statements (Unaudited) Note Receivable The Company entered into several agreements with the local government in China, which became effective in 2022, to sell its then-existing manufacturing building and land use rights at one of its subsidiaries in China and relocate to a new facility. 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 local government in China has made various interim payments and the outstanding receivable was $ 13,795,000 at April 4, 2026, 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 $ 9,294,000 at April 4, 2026 and $ 9,115,000 at January 3, 2026, 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 April 4, 2026, the Company believes that it has appropriately accounted for any liability for unrecognized tax benefits. To the extent the Company prevails in matters for which a liability for an unrecognized tax benefit is established, the statute of limitations expires for a tax jurisdiction year, or the Company is required to pay amounts in excess of the liability, its effective tax rate in a given financial statement period may be affected. In December 2021, the Organisation for Economic Co-operation and Development (OECD) released model rules introducing a new 15% global minimum tax for large multinational enterprises with an annual global revenue exceeding 750,000,000 euros (Pillar Two Rules). Since the release of the Pillar Two Rules, the OECD has issued multiple 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 for fiscal years beginning in fiscal 2024. 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. In January 2026, the OECD released additional administrative guidance (Side-by-Side package) introducing new safe harbors. The package includes an elective Side-by-Side safe harbor that, subject to adoption into local law, may exempt eligible U.S. parented multinational groups from the application of certain aspects of the global minimum tax regime for fiscal years beginning on or after January 1, 2026. The Company continues to evaluate the applicability of available safe harbors, monitor developments in OECD guidance and related local-country implementation, and assess the potential impact on the Company’s future Pillar Two compliance obligations and effective tax rate. 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 Section 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 was no material impact from the OBBBA provisions during the 12 Table of Contents KADANT INC. Notes to Condensed Consolidated Financial Statements (Unaudited) three months ended April 4, 2026. The Company will continue to monitor the impact of the OBBBA and any additional clarifications or interpretive guidance related to the OBBBA as it is released. Recent Accounting Pronouncements Income Statement – Reporting Comprehensive Income – Expense Disaggregation Disclosure (Topic 220). In November 2024, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (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. 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. The Company adopted this ASU during the first quarter of 2026, which did not have an impact on its consolidated financial statements. Intangibles - Goodwill and Other-Internal-Use Software (Subtopic 350-40): Targeted Improvements to the Accounting for Internal-Use Software. In September 2025, FASB issued 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. Interim Reporting (Topic 270): Narrow-Scope Improvements. In December 2025, the FASB issued ASU No. 2025-11, which clarifies the guidance to improve the consistency of interim reporting. This ASU provides a comprehensive list of required interim disclosures and introduces a disclosure principle requiring entities to disclose events since the end of the last annual reporting period that have had a material impact on the entity. This ASU is effective for fiscal year 2028, with early adoption permitted. The Company is currently evaluating the effect that the adoption of this ASU will have on its consolidated financial statements. 2. Acquisitions 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 $ 674,000 in the first quarter of 2026 and are included in selling, general and administrative (SG&A) expenses in the accompanying condensed consolidated statement of income. 2026 See Note 11 , Subsequent Events, for information regarding the Company's April 2026 acquisition. 2025 During the three months ended April 4, 2026, the Company recorded measurement period adjustments related to its acquisitions of Babbini S.p.A. and G.P.S. Engineering S.r.l (collectively, Babbini), acquired on July 9, 2025, and Clyde Industries Holdings, Inc. and its subsidiaries (collectively, Clyde Industries), acquired on October 7, 2025. These adjustments reflect new information obtained about facts and circumstances that existed as of the respective acquisition dates and resulted in revisions to the preliminary purchase price allocations. The measurement period adjustments were not material to the Company's financial position or results of operations for the three months ended April 4, 2026. 13 Table of Contents KADANT INC. Notes to Condensed Consolidated Financial Statements (Unaudited) The following table summarizes the aggregate estimated fair values of assets acquired and liabilities assumed in connection with the acquisitions of Babbini and Clyde Industries. (In thousands) Total Cash and Cash Equivalents $ 10,304 Accounts Receivable 22,991 Inventories 39,511 Other Current Assets 4,588 Property, Plant and Equipment 23,036 Other Assets 4,929 Definite-Lived Intangible Assets Customer relationships 80,580 Tradenames 7,390 Product technology 4,825 Goodwill 55,731 Total assets acquired $ 253,885 Accounts Payable $ 6,790 Customer Deposits 9,831 Other Current Liabilities 14,103 Long-Term Obligations 91 Deferred Income Taxes 17,054 Other Long-Term Liabilities 5,499 Total liabilities assumed 53,368 Net assets acquired $ 200,517 Purchase Price: Cash Paid $ 200,517 The Company is continuing to evaluate certain components of the purchase price allocations related to its acquisitions of Babbini and Clyde Industries, and may record additional measurement period adjustments in future periods as new information becomes available. The Company expects the remaining purchase price adjustments will primarily relate to the valuation of deferred income taxes and inventory. The measurement period will not exceed one year from the respective acquisition dates. 2024 On August 21, 2024, the Company acquired a technology company, which is included in its Material Handling segment. The total purchase price was approximately $ 11,785,000 , which included cash paid of $ 8,843,000 , net of cash acquired, a post-closing holdback payment of $ 1,157,000 , which was paid during the first quarter of 2026, and contingent consideration with a fair value of $ 1,785,000 as of the acquisition date. 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 $ 12,079,000 , calculated using the foreign currency spot rate at April 4, 2026. The valuation of the contingent consideration is dependent on the following assumptions: the probability of successful achievement of certain revenue targets, forecasted revenue, revenue volatility, and discount rate. See Note 8 , Fair Value Measurements and Fair Value of Financial Instruments, for additional information related to the fair value of the contingent consideration assumed in the acquisition. 14 Table of Contents KADANT INC. Notes to Condensed Consolidated Financial Statements (Unaudited) 3. Earnings per Share Basic and diluted earnings per share (EPS) were calculated as follows: Three Months Ended (In thousands, except per share amounts) April 4, 2026 March 29, 2025 Net Income Attributable to Kadant $ 25,509 $ 24,063 Basic Weighted Average Shares 11,794 11,760 Effect of Restricted Stock Units and Employee Stock Purchase Plan Shares 8 16 Diluted Weighted Average Shares 11,802 11,776 Basic Earnings per Share $ 2.16 $ 2.05 Diluted Earnings per Share $ 2.16 $ 2.04 The effect of outstanding and unvested restricted stock units (RSUs) of the Company’s common stock totaling 46,000 shares in the first quarter of 2026 and 26,000 shares in the first quarter of 2025 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 $ 10,142,000 in the first quarter of 2026 and $ 7,828,000 in the first quarter of 2025. The effective tax rate of 28.2 % in the first quarter of 2026 was higher than the Company’s statutory rate of 21% primarily due to the distribution of the Company’s worldwide earnings, nondeductible expenses, and state taxes. The effective tax rate of 24.3 % in the first quarter 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, 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. 5. Long-Term Obligations Long-term obligations are as follows: April 4, 2026 January 3, 2026 (In thousands) Revolving Credit Facility, due 2030 $ 355,411 $ 366,707 Senior Promissory Notes, due 2026 to 2028 4,990 4,990 Finance Leases, due 2026 to 2029 2,105 1,781 Other Borrowings, due 2026 to 2031 855 1,023 Total 363,361 374,501 Less: Current Maturities of Long-Term Obligations ( 3,161 ) ( 3,129 ) Long-Term Obligations $ 360,200 $ 371,372 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 The Company's unsecured multi-currency revolving credit facility dated as of March 1, 2017 (as amended and restated to date, the Credit Agreement) matures on September 26, 2030 and has a borrowing capacity of $ 750,000,000 , in addition to an uncommitted, unsecured incremental borrowing facility of $ 200,000,000 . 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, 15 Table of Contents KADANT INC. Notes to Condensed Consolidated Financial Statements (Unaudited) 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, 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, 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. As of April 4, 2026, the outstanding balance under the Credit Agreement was $ 355,411,000 , which included $ 78,411,000 of euro-denominated borrowings. The Company had $ 394,600,000 of committed borrowing capacity available as of April 4, 2026, which was primarily 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 details on the Company's borrowings to fund its April 2026 acquisition. The weighted average interest rate for the outstanding balance under the Credit Agreement was 4.52 % as of April 4, 2026 and 4.49 % as of January 3, 2026. 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 April 4, 2026, 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 $ 2,916,000 in the first quarter of 2026 and $ 2,757,000 in the first quarter of 2025 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 $ 17,329,000 at April 4, 2026, which will be recognized over a weighted average period of 2.0 years. 16 Table of Contents KADANT INC. Notes to Condensed Consolidated Financial Statements (Unaudited) Non-Employee Director RSUs On March 11, 2026, the Company granted an aggregate of 2,565 RSUs to its non-employee directors with an aggregate grant date fair value of $ 850,000 . Twenty-five percent of the RSUs vest on the last day of each fiscal quarter in 2026, subject to the director's continued service through the applicable vesting date. Performance-based RSUs On March 10, 2026, the Company granted performance-based RSUs to certain of its officers, which represented, in aggregate, the right to receive 18,665 shares (target RSU amount), with an aggregate grant date fair value of $ 6,186,000 . 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 2026 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 2027, 2028, and 2029, provided that the officer is employed by the Company on the applicable vesting dates. Time-based RSUs On March 10, 2026, the Company granted time-based RSUs representing 13,658 shares to certain of its officers and employees with an aggregate grant date fair value of $ 4,526,000 . These time-based RSUs vest in three equal annual installments on March 10 of 2027, 2028, and 2029, 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 Pension and Other Post-Retirement Benefit Liability Adjustments Total Balance at January 3, 2026 $ ( 35,369 ) $ 20 $ ( 35,349 ) Other comprehensive items before reclassifications ( 3,451 ) ( 2 ) ( 3,453 ) Reclassifications from AOCI — ( 3 ) ( 3 ) Net current period other comprehensive items ( 3,451 ) ( 5 ) ( 3,456 ) Balance at April 4, 2026 $ ( 38,820 ) $ 15 $ ( 38,805 ) 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. 17 Table of Contents KADANT INC. Notes to Condensed Consolidated Financial Statements (Unaudited) 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 April 4, 2026 (In thousands) Level 1 Level 2 Level 3 Total Assets: Money market funds and time deposits (a) $ 9,679 $ — $ — $ 9,679 Banker's acceptance drafts (b) $ — $ 9,294 $ — $ 9,294 Liabilities: Contingent consideration (c) $ — $ — $ 2,002 $ 2,002 Fair Value as of January 3, 2026 (In thousands) Level 1 Level 2 Level 3 Total Assets: Money market funds and time deposits (a) $ 14,139 $ — $ — $ 14,139 Banker's acceptance drafts (b) $ — $ 9,115 $ — $ 9,115 Liabilities: Contingent consideration (c) $ — $ — $ 1,941 $ 1,941 (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. The Company uses the market approach technique to value its Level 1 and Level 2 financial assets and liabilities, and there were no changes in valuation techniques during the first quarter of 2026. 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 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. There were no changes in the valuation techniques or significant unobservable inputs used in measuring the contingent consideration during the first quarter of 2026. The following table provides a rollforward of the change in the fair value of the contingent consideration as determined by Level 3 inputs: Three Months Ended (In thousands) April 4, 2026 March 29, 2025 Balance at Beginning of Year $ 1,941 $ 1,678 Currency translation 61 21 Balance at End of Period $ 2,002 $ 1,699 The carrying value and fair value of debt obligations, excluding lease obligations, are as follows: April 4, 2026 January 3, 2026 (In thousands) Carrying Value Fair Value Carrying Value Fair Value Debt Obligations: Revolving credit facility $ 355,411 $ 355,411 $ 366,707 $ 366,707 Senior promissory notes 4,990 5,058 4,990 4,981 Other 855 855 1,023 1,023 $ 361,256 $ 361,324 $ 372,720 $ 372,711 18 Table of Contents KADANT INC. Notes to Condensed Consolidated Financial Statements (Unaudited) 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 revolving credit facility is based on observable market interest rates and credit spreads available for similar instruments, which represent Level 2 measurements. 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 aggregates its operating segments into its reportable segments where they contain similar products and economic characteristics, and share 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 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, paper and tissue, food, energy, defense, and numerous 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, process timber, and optimize industrial steam boiler efficiency 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. • 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, home lawn and garden, professional lawn, turf and ornamental applications, and for oil and grease absorption. 19 Table of Contents KADANT INC. Notes to Condensed Consolidated Financial Statements (Unaudited) The following tables present financial information for the Company's reportable segments: Three Months Ended April 4, 2026 (In thousands) Flow Control Industrial Processing Material Handling Total Revenue $ 98,608 $ 123,038 $ 59,859 $ 281,505 Cost of revenue 46,642 70,747 37,413 154,802 Gross Profit 51,966 52,291 22,446 126,703 Gross Profit Margin 52.7 % 42.5 % 37.5 % 45.0 % Operating Expenses: Selling expenses 15,190 13,877 7,092 36,159 General and administrative expenses 10,008 11,826 4,765 26,599 Research and development expenses 1,395 2,084 577 4,056 Intangible asset amortization expense 1,270 4,427 2,688 8,385 Other segment items ( 101 ) 164 ( 142 ) ( 79 ) Segment Operating Income $ 24,204 $ 19,913 $ 7,466 $ 51,583 Segment Operating Income Margin 24.5 % 16.2 % 12.5 % Corporate Expenses (a) ( 11,474 ) Interest Expense, Net (b) ( 4,133 ) Other Expense, Net (b) ( 13 ) Income Before Provision for Income Taxes $ 35,963 (In thousands) Flow Control Industrial Processing Material Handling Corporate Total Other Segment Disclosures Depreciation expense (c) $ 1,927 $ 3,110 $ 1,212 $ 13 $ 6,262 Capital expenditures $ 1,022 $ 863 $ 1,236 $ 137 $ 3,258 Three Months Ended March 29, 2025 (In thousands) Flow Control Industrial Processing Material Handling Total Revenue $ 92,441 $ 89,524 $ 57,245 $ 239,210 Cost of revenue 43,168 50,076 35,636 128,880 Gross Profit 49,273 39,448 21,609 110,330 Gross Profit Margin 53.3 % 44.1 % 37.7 % 46.1 % Operating Expenses: Selling expenses 14,779 10,177 6,468 31,424 General and administrative expenses 8,813 8,387 4,241 21,441 Research and development expenses 1,351 1,606 566 3,523 Intangible asset amortization expense 1,493 2,378 2,828 6,699 Other segment items 85 68 ( 29 ) 124 Segment Operating Income $ 22,752 $ 16,832 $ 7,535 $ 47,119 Segment Operating Income Margin 24.6 % 18.8 % 13.2 % Corporate Expenses (a) ( 11,533 ) Interest Expense, Net (b) ( 3,305 ) Other Expense, Net (b) ( 16 ) Income Before Provision for Income Taxes $ 32,265 20 Table of Contents KADANT INC. Notes to Condensed Consolidated Financial Statements (Unaudited) Three Months Ended March 29, 2025 (continued) (In thousands) Flow Control Industrial Processing Material Handling Corporate Total Other Segment Disclosures Depreciation expense (c) $ 1,798 $ 2,347 $ 1,158 $ 11 $ 5,314 Capital expenditures $ 1,509 $ 1,325 $ 999 $ 3 $ 3,836 April 4, 2026 January 3, 2026 (In thousands) Total Assets (d) Flow Control $ 459,804 $ 450,911 Industrial Processing 824,425 826,062 Material Handling 410,957 411,813 Corporate (e) 19,466 23,392 $ 1,714,652 $ 1,712,178 (a) Primarily consists of general and administrative expenses. (b) The Company does not allocate interest expense, net and other expense, net to its segments. (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. 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 $ 8,482,000 at April 4, 2026 and $ 9,556,000 at January 3, 2026 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 January 29, 2026, the Company entered into a definitive agreement to acquire the shares of voestalpine BÖHLER Profil GmbH & Co KG and voestalpine BÖHLER Profil VerwaltungsGmbH. The acquisition was completed on April 30, 2026 for 157,000,000 euros in cash, 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 the 21 Table of Contents KADANT INC. Notes to Condensed Consolidated Financial Statements (Unaudited) Company's Industrial Processing segment. The Company expects several synergies in connection with this acquisition, including expanding product sales into new markets by leveraging its global sales network and relationships, broadening its product portfolio, strengthening its position in the markets it serves, leveraging the acquired workforce, and achieving internal production efficiencies. The excess of the purchase price for this acquisition over the fair value of the net assets acquired will be recorded as goodwill. 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. Borrowings Under the Credit Agreement In April 2026, the Company borrowed 155,000,000 euros under its revolving credit facility, pursuant to the terms of the Credit Agreement, to fund the Kadant Profil acquisition. 22 Table of Contents KADANT INC.