What changed in this filing

/stocks — the workspaceLOADING

Item 2. Management’s Discussion and Analysis

2026-08-12 compared with 2026-05-13 · 193 added, 112 removed, 154 unchanged (66% of the section changed)

21 unchanged sentences

• 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.

Our primary products include fiber processing systems and recycling equipment, chemical pulping equipment, debarkers, stranders, chippers, custom-engineered profiles and industrial blades, 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.

3 unchanged sentences

Industry and Business Overview

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.

Consolidated bookings increased 16% to $312 million in the second quarter of 2026 compared to the second quarter of 2025, led by contributions from our recent acquisitions, and record demand for our parts and consumables products at our Industrial Processing segment.

Our large installed base throughout the world continues to generate a stable stream of recurring

business from aftermarket parts, maintenance upgrades, and related service requirements.

Parts and consumables product bookings increased 25% compared to the second quarter of 2025 and represented 72% of consolidated bookings.

Capital equipment product bookings decreased 3% compared to the second quarter of 2025.

While customer requests and quotation activity remain healthy across all our segments, the timing for securing large capital equipment project orders remains uncertain.

The volatility in trade policies, inflation, and geopolitical conflicts have led to pressure on input costs.

As a result, customers remain cautious in approving large capital projects pending greater clarity regarding input costs and broader economic conditions.

This has led to longer customer approval cycles and increased volatility in the timing of capital project orders.

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.

Based on the current level of quote activity, we anticipate stronger capital bookings in the second half of 2026 compared to the first half.

Overall, we expect bookings in 2026 to exceed 2025 levels, largely driven by our Industrial Processing segment and 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.

Additionally, we anticipate growth opportunities related to industrial automation and modernization investments as well as in the energy and defense sectors.

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

• 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.

• Flow Control – Our Flow Control segment bookings increased 11% compared to the second quarter of 2025, reflecting strong demand for our parts and consumables products across all regions.

Stronger demand in North America, fueled by factory automation projects, was tempered by weaker demand in Europe, which was negatively impacted by mill closures and low factory utilization rates.

Demand for our capital equipment products was limited as customers remained cautious regarding their capital spending decisions amid market uncertainty.

We expect consistent demand for the remainder of 2026 and long-term strength in this segment due to its diversified market exposure.

• Industrial Processing – Our Industrial Processing segment bookings increased 29% compared to the second quarter of 2025, as recent acquisitions drove record aftermarket parts bookings in the quarter.

Demand for our capital equipment products was negatively impacted by the volatility in timing of capital project orders.

Quotation activity remains high and project discussions continue across most regions, however, customers continue to defer larger capital investments.

Overall, we expect demand for our capital equipment products to strengthen in the second half of 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 stable in 2026.

• Material Handling – Our Material Handling segment bookings increased 3% compared to the second quarter of 2025, reflecting stable demand as customers balance challenging macroeconomic conditions.

In this environment, customers are prioritizing maintenance spending and smaller incremental investments over large expansion projects.

We expect modest growth in demand for our products in this segment to continue for the remainder of 2026.

Our global operations have been and continue to be impacted by complex market conditions fueled by volatile trade policies, inflationary pressures, and geopolitical tensions.

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

9 unchanged sentences

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

The United States has imposed tariffs in the past and more recently proposed and implemented new tariffs on certain imports, which has and will continue to increase the cost of some of the parts and equipment we import.

In addition, foreign countries have implemented and may in the future implement additional retaliatory tariffs in response to these actions by the United States, which have negatively impacted and may in the future negatively impact our operations.

The United States has imposed tariffs in the past and more recently proposed and implemented new tariffs on certain imports, which have and will continue to increase the cost of some of the parts and equipment we import.

In addition, foreign

countries have implemented and may in the future implement additional retaliatory tariffs in response to these actions by the United States, which have negatively impacted and may in the future negatively impact our operations.

Although we are working to mitigate the impact of tariffs through pricing and sourcing strategies, we cannot be sure these strategies will effectively mitigate the impact of these costs.

2 unchanged sentences

We have acquired several businesses in recent years and continue to pursue acquisition opportunities.

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).

On April 30, 2026, we completed the acquisition of voestalpine BÖHLER Profil GmbH & Co KG and voestalpine BÖHLER Profil VerwaltungsGmbH for a net purchase price of $170.1 million.

Upon closing, the acquired entities were renamed 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.

See Note 2 , Acquisitions, in the accompanying condensed consolidated financial statements for further details.

Results of Operations

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.

Second Quarter 2026 Compared with Second Quarter 2025

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

3 unchanged sentences

generally accepted accounting principles (GAAP) measure.

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

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

Three Months Ended Increase

1 unchanged sentence

Change in Organic Revenue

(In thousands, except percentages) April 4,

2026 March 29,

2025 % Change Increase (Decrease)

(In thousands, except percentages) July 4,

2026 June 28,

2025 % Change Increase % Change

Flow Control $ 100,310 $ 95,947 $ 4,363 5% $ — $ 2,394 $ 1,969 2%

3 unchanged sentences

Consolidated $ 312,875 $ 255,267 $ 57,608 23% $ 33,922 $ 4,079 $ 19,607 8%

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.

Consolidated revenue increased 23% in the second quarter of 2026, including a 13% increase from acquisitions.

Organic revenue increased 8%, including a 23% increase in sales of capital equipment products led by our Industrial Processing segment, and steady demand for our parts and consumables products.

Revenue at our Flow Control segment increased 5% in the second quarter of 2026, primarily driven by higher demand for our parts and consumables products, especially in North America and Asia.

In addition, capital equipment product revenue increased in China due to the completion of several large projects.

Revenue at our Industrial Processing segment increased 50% in the second quarter of 2026, primarily due to contributions from our recent acquisitions and the favorable effect of foreign currency translation.

Organic revenue increased 13%, reflecting a higher volume of capital projects in the quarter compared to the prior-year period.

Organic revenue from capital equipment products was strongest in North America, while Europe was comparatively weaker due to constrained market conditions, which have impacted input costs and continued to influence our customers’ decision-making process.

Revenue at our Material Handling segment increased 8% in the second quarter of 2026, reflecting strong demand for both capital equipment and aftermarket parts products.

The increase was primarily driven by our business in Europe, which benefited from a large refurbishment project during the quarter.

Gross Profit Margin

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

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

Three Months Ended Basis Point Change

2026 March 29,

2026 June 28,

Flow Control 52.5% 53.8% (130) bps

Industrial Processing 40.7% 42.6% (190) bps

Material Handling 37.6% 38.7% (110) bps

Consolidated 43.8% 45.9% (210) bps

Consolidated gross profit margin decreased to 43.8% in the second quarter of 2026 from 45.9% in the second quarter of 2025 due to several factors.

The proportion of higher-margin aftermarket parts revenue decreased to 68% in 2026 compared to 71% in 2025.

In addition, our gross profit margins for both aftermarket parts and capital equipment products were adversely affected by the product mix within these categories.

Gross profit margin in our Industrial Processing segment was negatively affected by the lower gross margin profile associated with recent acquisitions.

Within our reportable segments, gross profit margin:

• Decreased to 52.5% at our Flow Control segment from 53.8% in the 2025 period primarily due to lower margins achieved on our parts and consumables products and an unfavorable mix of capital equipment projects in the period.

• Decreased to 40.7% at our Industrial Processing segment from 42.6% in the 2025 period due to the lower gross margin profile associated with recent acquisitions.

In addition, gross profit margin was negatively impacted by a decrease in the proportion of higher-margin parts and consumables product revenue, which decreased to 69% of revenue in the second quarter of 2026 compared to 76% in the 2025 period, and lower margins achieved on our aftermarket parts products.

• Decreased to 37.6% at our Material Handling segment from 38.7% in the 2025 period due to lower margins achieved on our capital equipment products.

Selling, General, and Administrative Expenses

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

Three Months Ended

(In thousands, except percentages) July 4,

2026 June 28,

2025 Increase % Change

Flow Control $ 26,255 $ 25,885 $ 370 1%

1 unchanged sentence

Material Handling 14,356 14,004 352 3%

Corporate 12,020 10,491 1,529 15%

Consolidated $ 81,641 $ 73,941 $ 7,700 10%

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.

Consolidated as a Percentage of Revenue 26.1% 29.0%

Consolidated SG&A expenses increased $7.7 million, or 10%, in the second quarter of 2026 compared to the second quarter of 2025, primarily due to the inclusion of $7.9 million of SG&A expenses from recent acquisitions.

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

• Increased $0.4 million at our Flow Control segment primarily due to a net unfavorable impact from foreign currency transaction and translation.

• Increased $5.4 million at our Industrial Processing segment primarily due to $7.9 million of SG&A expenses from acquisitions, offset in part by a $1.4 million shift from foreign currency losses in the 2025 period to gains in the 2026 period and a $0.5 million decrease in bad debt expense.

• Increased $0.4 million at our Material Handling segment primarily due to a $0.2 million unfavorable impact from foreign currency translation and incremental selling-related costs.

• Increased $1.5 million at Corporate due to a benefit received in 2025 related to an intellectual property settlement.

Interest Expense

Interest expense increased to $5.3 million in the second quarter of 2026 from $3.3 million in the second quarter of 2025 due to increased borrowings under our revolving credit facility, which were primarily used to fund our acquisitions during the second half of 2025 and first half of 2026, partially offset by a lower weighted-average interest rate.

Provision for Income Taxes

Provision for income taxes increased to $13.2 million in the second quarter of 2026 from $9.8 million in the second quarter of 2025.

The effective tax rate of 28.6% in the second quarter of 2026 was higher than our statutory rate of 21%, primarily due to the distribution of our worldwide earnings, state taxes, and nondeductible expenses.

The effective tax rate of 26.9% in the second quarter of 2025 was higher than our statutory rate of 21% primarily due to the distribution of our worldwide earnings, state taxes, nondeductible expenses, and the cost of repatriating the earnings of certain foreign subsidiaries.

These items were offset in part by foreign tax credits.

Net income increased to $32.8 million in the second quarter of 2026 from $26.6 million in the second quarter of 2025 primarily due to a $11.5 million increase in operating income, offset in part by a $2.0 million increase in interest expense and a $3.4 million increase in provision for income taxes (see discussions above for further details).

First Six Months 2026 Compared with First Six Months 2025

The following table presents changes in revenue and organic revenue by segment between the first six months of 2026 and 2025.

Organic revenue is a non-GAAP measure as defined above in the results of operations for the second quarter of 2026 compared with the second quarter of 2025.

Revenue by segment in the first six months of 2026 and 2025 is as follows:

Six Months Ended Acquisitions Currency Translation (Non-GAAP)

Change in Organic Revenue

(In thousands, except percentages) July 4,

2026 June 28,

2025 Increase % Change Increase % Change

Flow Control $ 198,918 $ 188,388 $ 10,530 6% $ — $ 7,189 $ 3,341 2%

Industrial Processing 266,838 185,461 81,377 44% 67,906 4,527 8,944 5%

Material Handling 128,624 120,628 7,996 7% — 2,201 5,795 5%

Consolidated $ 594,380 $ 494,477 $ 99,903 20% $ 67,906 $ 13,917 $ 18,080 4%

Consolidated revenue increased 20% in the first six months of 2026, including a 14% increase from acquisitions.

Organic revenue increased 4%, primarily due to higher demand for our capital equipment products compared to the first six months of 2025, and steady demand for our parts and consumables products.

Geographically, the economic effects of the conflicts in the Middle East contributed to weaker organic performance in Europe.

Revenue at our Flow Control segment increased 6% and organic revenue increased 2% in the first six months of 2026, primarily driven by higher demand for parts and consumables products across all regions, except Europe.

Ongoing geopolitical tensions, energy price volatility, and macroeconomic uncertainty have contributed to more cautious spending in Europe.

Increased capital equipment product revenue in China due to the completion of several large projects was more than offset by weaker capital equipment demand in other regions.

Revenue at our Industrial Processing segment increased 44% in the first six months of 2026, primarily due to our recent acquisitions and the favorable effect of foreign currency translation.

Organic revenue increased 5%, reflecting higher demand for our capital equipment products, partially offset by lower demand for our parts and consumables products.

Revenue at our Material Handling segment increased 7% in the first six months of 2026, driven by strong demand for both aftermarket and capital equipment products.

Gross Profit Margin

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

Six Months Ended Basis Point Change

2026 June 28,

Flow Control 52.6% 53.6% (100) bps

Industrial Processing 41.5% 43.3% (180) bps

Material Handling 37.5% 38.2% (70) bps

Consolidated 44.4% 46.0% (160) bps

Consolidated gross profit margin decreased to 44.4% in the first six months of 2026 from 46.0% in the first six months of 2025.

The proportion of higher-margin aftermarket parts revenue decreased to 71% in 2026 compared to 73% in 2025.

In addition, gross profit margins for both aftermarket parts and capital equipment products were adversely affected by the product mix within these categories.

Gross profit margin in our Industrial Processing segment was negatively affected by the lower gross margin profile associated with recent acquisitions.

Within our reportable segments, gross profit margin:

• Decreased to 52.6% at our Flow Control segment from 53.6% 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 41.5% at our Industrial Processing segment from 43.3% in the 2025 period due to the lower gross margin profile associated with recent acquisitions.

In addition, gross profit margin was impacted by lower margins achieved on our aftermarket products due in part to several large parts orders in the 2025 period.

Gross margin was also negatively impacted by a decrease in the proportion of higher-margin parts and consumables product revenue, which decreased to 72% of revenue in the first six months of 2026 compared to 78% in the first six months of 2025.

• Decreased to 37.5% at our Material Handling segment from 38.2% in the 2025 period due to lower margins achieved on our capital equipment products.

Selling, General, and Administrative Expenses

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)

SG&A expenses by reportable segment and Corporate in the first six months of 2026 and 2025 are as follows:

Six Months Ended

(In thousands, except percentages) July 4,

2026 June 28,

2025 Increase

Flow Control $ 52,622 $ 51,055 $ 1,567 3%

4 unchanged sentences

Consolidated as a Percentage of Revenue 27.6% 29.4%

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.

Consolidated SG&A expenses increased $19.0 million, or 13%, in the first six months of 2026 compared to the first six months of 2025, primarily due to the inclusion of $15.8 million of SG&A expenses from acquisitions and an unfavorable impact from foreign currency translation of $3.9 million.

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

• 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 $1.6 million at our Flow Control segment due to a $2.1 million unfavorable impact from foreign currency translation, offset in part by a $0.5 million reduction in backlog amortization expense.

• Increased $14.7 million at our Industrial Processing segment principally due to $15.8 million of SG&A expenses from acquisitions, partially offset by a $0.5 million reduction in bad debt expense.

• Increased $1.2 million at our Material Handling segment primarily due to a $0.6 million unfavorable impact from foreign currency translation and incremental selling-related costs.

• Increased $1.5 million at Corporate due to a benefit received in 2025 related to an intellectual property settlement.

Interest Expense

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.

Interest expense increased to $9.8 million in the first six months of 2026 from $7.2 million in the first six months of 2025 due to higher borrowings under our revolving credit facility used to finance acquisitions during the second half of 2025 and first half of 2026, partially offset by a lower weighted-average interest rate.

We expect interest expense to remain higher than prior-year levels for the remainder of 2026, primarily due to borrowings used to finance our April 2026 acquisition of Kadant Profil.

Provision for Income Taxes

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).

Provision for income taxes increased to $23.3 million in the first six months of 2026 from $17.7 million in the first six months of 2025.

The effective tax rate of 28.4% in the first six months of 2026 was higher than our statutory rate of 21% primarily due to the distribution of our worldwide earnings, state taxes, and nondeductible expenses.

The effective tax rate of 25.7% in the first six months 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.

Net income increased to $58.7 million in the first six months of 2026 from $51.1 million in the first six months of 2025 primarily due to a $16.0 million increase in operating income, offset in part by a $2.6 million increase in interest expense and a $5.7 million increase in provision for income taxes (see discussions above for further details).

Non-GAAP Key Performance Indicators

10 unchanged sentences

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.

We believe that the inclusion of such measures helps investors gain an understanding of our underlying operating performance and future prospects, consistent with how management measures and forecasts our performance, especially when comparing such results to previous periods or forecasts and to the performance of our competitors.

and to the performance of our competitors.

Such measures are also used by us in our financial and operating decision-making and for compensation purposes.

3 unchanged sentences

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

Three Months Ended

(In thousands, except percentages) April 4,

Three Months Ended Six Months Ended

(In thousands, except percentages) July 4,

2026 June 28,

Net Income Attributable to Kadant $ 32,468

$ 26,159 $ 57,977 $ 50,222

Net Income Attributable to Noncontrolling Interests

Provision for Income Taxes 13,182

9,822 23,324 17,650

Interest Expense, Net 4,819

2,899 8,952 6,204

Other Expense, Net 32

Operating Income 50,880

39,377 90,989 74,963

Intangible Asset Amortization Expense

6,333 17,011 12,653

Profit in Inventory Amortization Expense (a)

1 unchanged sentence

Acquisition Costs 604

908 1,278 1,245

Indemnification Asset Provision (c)

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

46,844 111,763 89,448

Depreciation Expense

5,534 13,180 10,848

Adjusted EBITDA (non-GAAP measure)

$ 52,378 $ 124,943 $ 100,296

Adjusted EBITDA Margin (non-GAAP measure)

20.5% 21.0% 20.3%

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

3 unchanged sentences

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

Three Months Ended

(In thousands) April 4,

2026 March 29,

Three Months Ended Six Months Ended

(In thousands) July 4,

2026 June 28,

Cash Provided by Operating Activities $ 53,510 $ 40,482 $ 75,426 $ 63,317

Capital Expenditures

(3,258) (3,836)

Capital Expenditures (a) (10,947) (3,968) (14,205) (7,804)

Free Cash Flow (non-GAAP measure)

$ 42,563 $ 36,514 $ 61,221 $ 55,513

(a) Includes $5.8 million paid in the second quarter of 2026 for the purchase of a previously leased manufacturing facility in the Flow Control segment.

Liquidity and Capital Resources

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,

Consolidated working capital was $356.7 million at July 4, 2026, compared with $313.8 million at January 3, 2026.

Cash and cash equivalents were $134.5 million at July 4, 2026, compared with $119.6 million at January 3, 2026, which included cash and cash equivalents held by our foreign subsidiaries o f $114.5 million at July 4, 2026 and $100.3 million at January 3, 2026.

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

Six Months Ended

(In thousands) July 4,

2026 June 28,

Net Cash Provided by Operating Activities $ 75,426 $ 63,317

Net Cash Used in Investing Activities (185,093) (6,940)

Net Cash Used in Financing Activities

(20,050) (23,085)

Net Cash Provided by (Used in) Financing Activities 127,379 (61,476)

Exchange Rate Effect on Cash, Cash Equivalents, and Restricted Cash (2,769) 6,341

Decrease in Cash, Cash Equivalents, and Restricted Cash

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

Increase in Cash, Cash Equivalents, and Restricted Cash $ 14,943 $ 1,242

Operating Activities

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.

Cash provided by operating activities increased to $75.4 million in the first six months of 2026 from $63.3 million in the first six months 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 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.

Significant operating cash outflows associated with working capital in the first six months of 2026 were primarily attributable to increases in accounts receivable and contract assets and decreases in customer deposits and other liabilities.

Accounts receivable and contract assets used $9.7 million of cash, primarily due to the timing of billings and customer payments.

Customer deposits used $7.5 million of cash, primarily due to the timing of capital equipment orders, and other liabilities used $8.4 million of cash, primarily related to incentive compensation payments.

Significant cash outflows associated with working capital in the first six months of 2025 were primarily attributable to a decrease in other liabilities and an increase in inventory.

Purchases of inventory used cash of $14.8 million, and other current liabilities used cash of $13.4 million primarily related to incentive compensation payments.

These cash outflows were partially offset by customer deposits, which provided $9.4 million of cash due to higher capital equipment orders, and contract assets, which provided $7.7 million of cash primarily due to the timing of billings on contracts accounted for over time.

Investing Activities

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.

Cash used in investing activities was $185.1 million in the first six months of 2026, compared with $6.9 million in the first six months of 2025.

The increase in 2026 was primarily attributable to $171.8 million of acquisition consideration, net of cash acquired, including $170.1 million for the acquisition of Kadant Profil and $1.7 million of post-closing payments related to acquisitions completed in 2024.

Capital expenditures increased to $14.2 million in the first six months of 2026, compared with $7.8 million in the first six months of 2025, primarily due to the purchase of a manufacturing facility that had previously been leased.

Financing Activities

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.

In addition, taxes paid related to the vesting of equity awards were $4.9 million in 2026 and $6.0 million in 2025.

Cash provided by financing activities was $127.4 million in the first six months of 2026, compared with cash used of $61.5 million in the first six months of 2025.

The increase in the first six months of 2026 primarily reflected higher net borrowings under our revolving credit facility, including borrowings of $190.9 million used primarily to finance the acquisition of Kadant Profil, partially offset by repayments of long-term obligations of $49.2 million.

In the first six months of 2025, borrowings under our revolving credit facility were $8.0 million and repayments of long-term obligations were $56.9 million.

Cash dividends paid to stockholders increased to $8.3 million in 2026, compared with $7.8 million in 2025.

Taxes paid related to the vesting of equity awards decreased to $4.9 million in 2026, compared with $6.1 million in 2025.

Exchange Rate Effect on Cash, Cash Equivalents, and Restricted Cash

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

The $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.

The $2.8 million decrease in cash, cash equivalents, and restricted cash in the first six months of 2026 related to exchange rates was primarily attributable to the strengthening of the U.S.

dollar against the euro and Swedish krona, 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.

The $6.3 million increase in cash, cash equivalents, and restricted cash in the first six 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.

Borrowing Capacity and Debt Obligations

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.

In April 2026, we borrowed approximately $181.8 million of euro-denominated debt under our revolving credit facility to fund the acquisition of Kadant Profil.

As of July 4, 2026, our outstanding balance under the Credit Agreement was $502.5 million, which included $245.5 million of euro-denominated borrowings, and we had $248.7 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.

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.

As of July 4, 2026, our leverage ratio was 1.72 and we were in compliance with our debt covenants.

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

1 unchanged sentence

On May 21, 2026, our board of directors approved the repurchase of up to $50.0 million of our equity securities during the period from May 21, 2026 to May 21, 2027.

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.

We did not repurchase any shares of our common stock under this authorization or under our previous authorization that expired on May 15, 2026.

We paid cash dividends of $8.3 million in the first six months of 2026.

On May 21, 2026, we declared a quarterly cash dividend of $0.36 per share totaling $4.3 million that will be paid on August 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.

1 unchanged sentence

We plan to make expenditures of approximately $12.0 to $16.0 million during the remainder of 2026 for property, plant, and equipment.

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

As of July 4, 2026, we had approximately $150.3 million of total unremitted foreign earnings.

It is our intent to indefinitely reinvest $93.8 million of these earnings to support the current and future capital needs of our foreign operations, including debt repayments, if any.

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.

In the first six months 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 $2.9 million.

12 unchanged sentences

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