Kadant Inc.

11/10/2026 | Press release | Distributed by Public on 11/10/2026 13:15

Quarterly Report for Quarter Ending October 3, 2026 (Form 10-Q)

Management's Discussion and Analysis of Financial Condition and Results of Operations
When we use the terms "we," "us," "our," and the "Company," we mean Kadant Inc., a Delaware corporation, and its consolidated subsidiaries, taken as a whole, unless the context otherwise indicates.
This Quarterly Report on Form 10-Q and the documents we incorporate by reference in this report include forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended (Exchange Act), and Section 27A of the Securities Act of 1933, as amended. These forward-looking statements are not statements of historical fact and may include statements regarding possible or assumed future results of operations. Forward-looking statements are subject to risks and uncertainties and are based on the beliefs and assumptions of our management, using information currently available to our management. When we use words such as "believes," "expects," "anticipates," "intends," "plans," "estimates," "seeks," "should," "likely," "will," "would," "may," "continue," "could," or similar expressions, we are making forward-looking statements.
Forward-looking statements are not guarantees of performance. They involve risks, uncertainties, and assumptions. Our future results of operations may differ materially from those expressed in the forward-looking statements. Many of the important factors that will determine these results are beyond our ability to control or predict. You should not put undue reliance on any forward-looking statements. We undertake no obligation to publicly update any forward-looking statement, whether as a result of new information, future events, or otherwise. For a discussion of important factors that may cause our actual results to differ materially from those suggested by the forward-looking statements, you should read carefully the section captioned Risk Factors, included in Part I, Item 1A, of our Annual Report on Form 10-K for the fiscal year ended January 3, 2026 (Annual Report), as further amended in Part II, Item 1A, within this report, and as may be further amended and/or restated in subsequent filings with the SEC.
Overview
Company Background
We are a global supplier of technologies and engineered systems that drive Sustainable Industrial Processing®. Our products and services play an integral role in enhancing efficiency, optimizing energy utilization, and maximizing productivity in process industries while helping our 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 our business.
Our financial results are presented in three reportable segments consisting of our Flow Control segment, Industrial Processing segment, and Material Handling segment. A description of each reportable segment is as follows:
•Flow Control - Custom-engineered products, systems, and technologies that control the flow of fluids used in industrial and commercial applications to keep critical processes running efficiently in the packaging, paper and tissue, food, energy, defense, and numerous other industrial sectors. Our primary products include rotary sealing devices, steam systems, expansion joints, doctor systems, roll and fabric cleaning devices, and filtration and fiber recovery systems.
•Industrial Processing - Equipment, machinery, and technologies used to recycle paper and paperboard, process timber, and optimize industrial steam boiler efficiency 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 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. Our primary products include conveying and vibratory equipment and balers. In addition, we manufacture and sell biodegradable, absorbent granules used as carriers in agricultural, home lawn and garden, professional lawn, turf and ornamental applications, and for oil and grease absorption.
See Note 9, Business Segment Information, in the accompanying condensed consolidated financial statements for financial information on our reportable segments.
Industry and Business Overview
Unless otherwise indicated, references to 2026 and 2025 in the Industry and Business Overview discussion below refer to the first nine months of each of the respective fiscal years.
KADANT INC.
Consolidated bookings increased 21% to $924.0 million in 2026 compared to 2025 driven by a 13% contribution from acquisitions, and higher demand for both parts and consumables and capital equipment products.
Parts and consumables bookings increased 21% in 2026 compared to 2025 and represented 72% of consolidated bookings, driven by demand in the core end markets we serve, as well as more recent demand supporting the defense industry and factory modernization and automation. Demand for our parts and consumables products remained stable throughout 2026, supported by our large global installed base, which continues to generate recurring business from aftermarket parts, maintenance upgrades, and related service requirements.
Capital equipment bookings increased 20% in 2026 compared to 2025, including 10% organic growth. The organic increase was led by our Industrial Processing segment where capital equipment demand remained relatively stable during 2026, but exceeded levels experienced in the comparatively weak 2025 period. Despite the increased capital equipment bookings in 2026, uncertainty persists regarding the timing of large capital equipment project orders. Customer inquiries and quotation activity remain healthy across all our segments; however, volatility in trade policies, inflationary pressures, and ongoing geopolitical conflicts have contributed to higher input-cost pressures and broader economic uncertainty. These factors have contributed to customer caution in approving large capital projects, resulting in extended approval cycles and increased variability in the timing of orders. This trend is particularly pronounced in our Industrial Processing segment, where average capital order values are significantly higher than in our other segments. As a result, the pipeline of large capital orders awaiting final customer approval has increased, and we remain optimistic about converting these opportunities into bookings in 2027.
Overall, we expect bookings in the full year 2026 to exceed full year 2025 levels, due to strong contributions from our recent acquisitions and stable growth in demand for our products. Looking forward, we 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 growth opportunities related to industrial automation and modernization investments, infrastructure spending, and investments 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 10% in 2026 compared to 2025, reflecting strong demand across all regions for our parts and consumables products, especially in North America, where stronger demand benefited from factory automation projects. Demand for our capital equipment products was limited as customers remained cautious about capital spending amid market uncertainty. We expect demand for our products in this segment to remain stable for the remainder of 2026 and anticipate long-term strength in this segment due to its diversified market exposure.
•Industrial Processing - Our Industrial Processing segment bookings increased 43% in 2026 compared to 2025, including a 34% contribution from acquisitions. Organic bookings increased 7% in 2026 with higher bookings at our fiber processing product line offsetting weaker demand at our wood processing product line. Organic bookings at our fiber processing product line increased 31% in 2026 due to the execution of previously delayed projects and a favorable comparison to a weak 2025 period impacted by economic and tariff-related uncertainty. Organic bookings at our wood processing product line decreased 5% in 2026 due to softer demand for wood products. Elevated financing and construction costs have dampened consumer confidence resulting in a decline in new construction in the United States, leading to reduced demand for oriented strand board, lumber, and our wood processing products. Mills have responded with production curtailments and extended downtime. Overall, this segment continues to be negatively impacted by the volatility in the timing of capital project orders. Quotation activity remains high and project discussions continue across most regions; however, customers continue to defer larger capital investments. We expect demand for our capital equipment products to strengthen during the remainder of 2026, while demand for our parts and consumables products is expected to remain stable.
•Material Handling - Our Material Handling segment bookings increased 6% in 2026 compared to 2025, reflecting strong demand in North America for our parts and consumables products, particularly at our conveying and vibratory businesses. In the current environment, customers continue to prioritize maintenance spending and smaller incremental investments over large expansion projects. We expect demand for our products in this segment to remain stable for the remainder of 2026. Looking ahead, we believe infrastructure spending and continued data center expansion will provide future growth opportunities.
Our global operations have been and continue to be affected by challenging market conditions fueled by volatility in trade policies, inflationary pressures, and geopolitical uncertainty. We expect these conditions to persist, especially for large capital equipment projects where the order timing is uncertain. Nevertheless, we believe that the fundamentals of our business remain strong, supported by our established market position in key product lines, experienced global operations teams, and long-term strength of our end markets. For more information related to these challenges, and other factors impacting our
KADANT INC.
business, please see Risk Factors, included in Part I, Item 1A, of our Annual Report, as further amended in Part II, Item 1A, within this report, and as may be further amended and/or restated in subsequent filings with the SEC.
International Sales
Approximately half of our sales are to customers outside the United States, mainly in Europe, Asia, and Canada. As a result, our financial performance can be materially affected by currency exchange rate fluctuations between the U.S. dollar and foreign currencies. To mitigate the impact of foreign currency transaction fluctuations, we generally seek to charge our customers in the same currency in which our operating costs are incurred. Additionally, we may enter into forward currency exchange contracts to hedge certain firm purchase and sale commitments denominated in currencies other than our subsidiaries' functional currencies. We currently do not use derivative instruments to hedge our exposure to exchange rate fluctuations created by the translation into the U.S. dollar of our foreign subsidiaries' results that are in functional currencies other than the U.S. dollar.
Global Trade
The United States has imposed tariffs in the past and more recently proposed and implemented new tariffs on certain imports, which have increased and will continue to increase the cost of some of the parts and equipment we import. In addition, foreign countries have implemented and may in the future implement additional retaliatory tariffs in response to these actions by the United States, which have negatively impacted and may in the future negatively impact our operations. Although we are working to mitigate the impact of tariffs through pricing and sourcing strategies, we cannot be sure these strategies will effectively mitigate the impact of these costs. For more information on risks associated with our global operations, including tariffs, please see Risk Factors, included in Part I, Item 1A, of our Annual Report, as further amended in Part II, Item 1A, within this report, and as may be further amended and/or restated in subsequent filings with the SEC.
Acquisitions
We expect that a significant driver of our long-term growth will be through the acquisition of businesses and technologies that complement or augment our existing products and services or may involve entry into a new process industry. We have acquired several businesses in recent years and continue to pursue acquisition opportunities.
On 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 $170.2 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
Third Quarter 2026 Compared with Third Quarter 2025
Revenue
The following table presents the change in revenue by segment between the third quarters of 2026 and 2025, and those changes excluding the effect of acquisitions and foreign currency translation which we refer to as change in organic revenue. Organic revenue excludes the effect of acquisitions for the four quarterly reporting periods following the date of the acquisition. The presentation of the change in organic revenue is a non-GAAP measure. We believe this non-GAAP measure helps investors gain an understanding of our underlying operations consistent with how management measures and forecasts its performance, especially when comparing such results to prior periods. This non-GAAP measure should not be considered superior to or a substitute for the corresponding U.S. generally accepted accounting principles (GAAP) measure.
KADANT INC.
Revenue by reportable segment in the third quarters of 2026 and 2025 is as follows:
Three Months Ended Increase (Decrease)
Acquisitions
Currency Translation
(Non-GAAP)
Change in Organic Revenue
(In thousands, except percentages) October 3,
2026 		September 27,
2025 		% Change Increase (Decrease) % Change
Flow Control $ 102,382 $ 94,839 $ 7,543 8% $ - $ 738 $ 6,805 7%
Industrial Processing 143,402 106,393 37,009 35% 30,998 (323) 6,334 6%
Material Handling
67,376 70,335 (2,959) (4)% - 131 (3,090) (4)%
Consolidated $ 313,160 $ 271,567 $ 41,593 15% $ 30,998 $ 546 $ 10,049 4%
Consolidated revenue increased 15% in the third quarter of 2026, including an 11% contribution from acquisitions. Organic revenue increased 4%, reflecting stable demand for both parts and consumables and capital equipment products. Increased revenue in North America and Asia was partially offset by weaker performance in Europe, as macroeconomic uncertainties have led to more cautious capital spending.
Revenue at our Flow Control segment increased 8% in the third quarter of 2026, driven by higher demand for our parts and consumables products in our core end markets, as well as more recent demand supporting the defense industry and factory modernization and automation. Revenue also benefited from the fulfillment of several large orders originally scheduled for the fourth quarter. Stronger demand in North America offset weaker performance in Europe, reflecting challenging market conditions in the region.
Revenue at our Industrial Processing segment increased 35% in the third quarter of 2026, largely due to contributions from our recent acquisitions. Organic revenue increased 6% due to higher demand for our capital equipment products in North America and Asia, including projects focused on energy efficiency and modernization. These increases were partially offset by weaker demand in Europe, reflecting challenging market conditions, higher input costs, and continued customer caution in purchasing decisions.
Revenue at our Material Handling segment decreased 4% in the third quarter of 2026 due to lower capital equipment revenue at our baling businesses resulting from customer-requested delivery delays. The decrease was partially offset by higher demand for our parts and consumables products at our conveying and vibratory businesses in North America.
Gross Profit Margin
Gross profit margin by reportable segment in the third quarters of 2026 and 2025 is as follows:
Three Months Ended Basis Point Change
October 3,
2026 		September 27,
2025
Flow Control 53.0% 51.9% 110 bps
Industrial Processing 42.0% 43.6% (160) bps
Material Handling 37.9% 38.5% (60) bps
Consolidated 44.7% 45.2% (50) bps
Consolidated gross profit margin decreased to 44.7% in the third quarter of 2026 from 45.2% in the third quarter of 2025 primarily due to lower margins achieved on our capital equipment products. Incremental profit in inventory amortization expense and post-acquisition profit deferrals at our most recent acquisition lowered gross profit margin by 0.8 percentage points, which was largely offset by an increase of 0.6 percentage points from tariff refunds.
Within our reportable segments, gross profit margin:
•Increased to 53.0% at our Flow Control segment from 51.9% in the 2025 period, primarily due to higher margins achieved on our parts and consumables products, as well as a higher proportion of parts and consumables revenue in the 2026 period.
•Decreased to 42.0% at our Industrial Processing segment from 43.6% in the 2025 period. Incremental profit in inventory amortization expense and post-acquisition profit deferrals at our most recent acquisition lowered gross profit margin by 1.7 percentage points, which was partially offset by an increase of 0.7 percentage points from tariff refunds.
KADANT INC.
•Decreased to 37.9% at our Material Handling segment from 38.5% in the 2025 period, primarily due to lower margins achieved on our capital equipment products, partially offset by a higher proportion of parts and consumables product revenue, which increased to 57% of revenue compared to 52% in the 2025 period.
Selling, General, and Administrative Expenses
Selling, general, and administrative (SG&A) expenses by reportable segment and Corporate in the third quarters of 2026 and 2025 are as follows:
Three Months Ended
(In thousands, except percentages) October 3,
2026 		September 27,
2025 		Increase (Decrease) % Change
Flow Control $ 24,592 $ 25,380 $ (788) (3)%
Industrial Processing 32,039 25,453 6,586 26%
Material Handling 13,966 13,919 47 -%
Corporate 12,108 11,087 1,021 9%
Consolidated $ 82,705 $ 75,839 $ 6,866 9%
Consolidated as a Percentage of Revenue 26.4% 27.9%
Consolidated SG&A expenses increased $6.9 million, or 9%, in the third quarter of 2026 compared to the third quarter of 2025, primarily due to the inclusion of $6.1 million of operating expenses and $2.3 million of intangible amortization expense from acquisitions, partially offset by a decrease of $2.0 million in acquisition-related costs. Acquisition-related costs included in SG&A consist of acquisition costs and backlog amortization expense.
Within our reportable segments and Corporate, SG&A expenses:
•Decreased $0.8 million at our Flow Control segment primarily due to an increase of $0.3 million in foreign currency transaction gains and a $0.3 million decrease in external commissions.
•Increased $6.6 million at our Industrial Processing segment primarily due to the inclusion of $6.1 million of operating expenses and $2.3 million of intangible amortization expense from acquisitions, partially offset by a decrease of $1.8 million of acquisition costs.
•Increased $1.0 million at Corporate largely due to higher professional service fees.
Interest Expense
Interest expense increased to $5.6 million in the third quarter of 2026 from $3.1 million in the third quarter of 2025 due to increased borrowings under our revolving credit facility, which were primarily used to fund our acquisitions, partially offset by a lower weighted-average interest rate.
Provision for Income Taxes
Provision for income taxes increased to $12.8 million in the third quarter of 2026 from $11.8 million in the third quarter of 2025.
The effective tax rate of 26.4% in the third quarter of 2026 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 a benefit from research and development tax credits.
The effective tax rate of 29.5% in the third quarter of 2025 was higher than our statutory rate of 21% primarily due to an increase in liabilities for uncertain tax positions, the distribution of our worldwide earnings, nondeductible expenses, state taxes, and the cost of repatriating the earnings of certain foreign subsidiaries. These items were offset in part by a net tax benefit from the remeasurement of certain deferred income tax assets and liabilities due to the decrease to Germany's future statutory tax rate enacted in July 2025 and foreign tax credits.
Net Income
Net income increased to $35.7 million in the third quarter of 2026 from $28.1 million in the third quarter of 2025 primarily due to a $10.9 million increase in operating income, offset in part by a $2.5 million increase in interest expense and a $1.0 million increase in provision for income taxes (see discussions above for further details).
KADANT INC.
First Nine Months 2026 Compared with First Nine Months 2025
Revenue
The following table presents changes in revenue and organic revenue by segment between the first nine months of 2026 and 2025. Organic revenue is a non-GAAP measure as defined above in the results of operations for the third quarter of 2026 compared with the third quarter of 2025.
Revenue by segment in the first nine months of 2026 and 2025 is as follows:
Nine Months Ended Acquisitions Currency Translation
(Non-GAAP)
Change in Organic Revenue

(In thousands, except percentages) 		October 3,
2026 		September 27,
2025 		Increase % Change Increase % Change
Flow Control $ 301,300 $ 283,227 $ 18,073 6% $ - $ 7,927 $ 10,146 4%
Industrial Processing 410,240 291,854 118,386 41% 98,904 4,204 15,278 5%
Material Handling 196,000 190,963 5,037 3% - 2,332 2,705 1%
Consolidated $ 907,540 $ 766,044 $ 141,496 18% $ 98,904 $ 14,463 $ 28,129 4%
Consolidated revenue increased 18% in the first nine months of 2026, including a 13% increase attributable to acquisitions. Organic revenue increased 4%, primarily due to higher demand for our capital equipment products at our Industrial Processing segment and, to a lesser extent, stable demand for our aftermarket parts at our Flow Control segment. Higher demand in North America and Asia was partially offset by lower demand in Europe, where challenging economic conditions have contributed to weaker organic performance.
Revenue at our Flow Control segment increased 6% in the first nine months of 2026 driven by higher demand for our parts and consumables products, particularly in North America and Asia. Demand in Europe was tempered by ongoing geopolitical tensions, energy price volatility, and macroeconomic uncertainty, which contributed to more cautious customer spending. Demand for our capital equipment products in the first nine months of 2026 was impacted by weak conditions in the pulp and paper industry, including mill closures, production curtailments, and industry consolidation.
Revenue at our Industrial Processing segment increased 41% in the first nine months of 2026, largely due to contributions from our recent acquisitions. Organic revenue increased 5%, driven by higher capital shipments in 2026 compared to the weaker performance in the prior-year period when tariff-related uncertainty led to constrained capital spending. Geographically, increased demand for our capital equipment in North America and Asia was partially offset by lower demand in Europe, where constrained market conditions have led customers to defer major capital expenditures.
Revenue at our Material Handling segment increased 3% in the first nine months of 2026, primarily due to higher demand for our parts and consumables products across all regions as customers focused their spending on maintenance and critical replacement parts.
Gross Profit Margin
Gross profit margin by segment in the first nine months of 2026 and 2025 is as follows:
Nine Months Ended Basis Point Change
October 3,
2026 		September 27,
2025
Flow Control 52.7% 53.0% (30) bps
Industrial Processing 41.7% 43.4% (170) bps
Material Handling 37.7% 38.3% (60) bps
Consolidated 44.5% 45.7% (120) bps
Consolidated gross profit margin decreased to 44.5% in the first nine months of 2026 from 45.7% in the first nine months of 2025 largely due to lower margins achieved on our capital equipment products. Incremental profit in inventory amortization expense and post-acquisition profit deferrals at our most recent acquisition lowered gross profit margin by 0.8 percentage points, which was largely offset by an increase of 0.6 percentage points from tariff refunds.
KADANT INC.
Within our reportable segments, gross profit margin:
•Decreased to 52.7% at our Flow Control segment from 53.0% in the 2025 period primarily due to lower margins achieved on our parts and consumables products.
•Decreased to 41.7% at our Industrial Processing segment from 43.4% in the 2025 period primarily due to a lower proportion of higher-margin parts and consumables revenue, which declined to 72% of revenue from 77% in the 2025 period. In addition, incremental profit in inventory amortization expense and post-acquisition profit deferrals at our most recent acquisition lowered gross profit margin by 1.7 percentage points, which was partially offset by an increase of 0.8 percentage points from tariff refunds.
•Decreased to 37.7% at our Material Handling segment from 38.3% in the 2025 period due to lower margins achieved on our capital equipment products, partially offset by a higher proportion of parts and consumables product revenue, which increased to 60% of revenue compared to 58% in the 2025 period.
Selling, General, and Administrative Expenses
SG&A expenses by reportable segment and Corporate in the first nine months of 2026 and 2025 are as follows:
Nine Months Ended

(In thousands, except percentages) 		October 3,
2026 		September 27,
2025
Increase
% Change
Flow Control $ 77,214 $ 76,435 $ 779 1%
Industrial Processing 91,343 70,024 21,319 30%
Material Handling 42,725 41,431 1,294 3%
Corporate 35,602 33,111 2,491 8%
Consolidated $ 246,884 $ 221,001 $ 25,883 12%
Consolidated as a Percentage of Revenue 27.2% 28.8%
Consolidated SG&A expenses increased $25.9 million, or 12%, in the first nine months of 2026 compared to the first nine months of 2025, primarily due to the inclusion of $17.6 million of operating expenses and $6.6 million of intangible amortization expense from acquisitions, and a $4.0 million unfavorable impact from foreign currency translation. These increases were partially offset by a decrease of $2.5 million in acquisition-related costs.
Within our reportable segments and Corporate, SG&A expenses:
•Increased $0.8 million at our Flow Control segment due to a $2.2 million unfavorable impact from foreign currency translation, partially offset by a $0.7 million reduction in acquisition-related costs and a $0.7 million decrease in external commissions.
•Increased $21.3 million at our Industrial Processing segment principally due to the inclusion of $17.6 million of operating expenses and $6.6 million of intangible amortization expense from acquisitions, and a $1.1 million unfavorable impact from foreign currency translation, partially offset by a decrease of $1.7 million of acquisition costs and a $0.7 million decrease in bad debt expense.
•Increased $1.3 million at our Material Handling segment primarily due to a $0.7 million unfavorable impact from foreign currency translation and a $0.6 million increase in external commissions.
•Increased $2.5 million at Corporate primarily reflecting the impact of an intellectual property settlement received in 2025.
Interest Expense
Interest expense increased to $15.4 million in the first nine months of 2026 from $10.2 million in the first nine months of 2025 primarily due to higher borrowings under our revolving credit facility, which were primarily used to fund our acquisitions. 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 $36.1 million in the first nine months of 2026 from $29.4 million in the first nine months of 2025.
KADANT INC.
The effective tax rate of 27.7% in the first nine 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 27.1% in the first nine months of 2025 was higher than our statutory rate of 21% primarily due to nondeductible expenses, the distribution of our worldwide earnings, state taxes, and the cost of repatriating the earnings of certain foreign subsidiaries. These items were offset in part by a net tax benefit from the remeasurement of certain deferred income tax assets and liabilities due to the decrease to Germany's future statutory rate enacted in July 2025 and foreign tax credits.
Net Income
Net income increased to $94.4 million in the first nine months of 2026 from $79.2 million in the first nine months of 2025 primarily due to a $27.0 million increase in operating income, offset in part by a $5.1 million increase in interest expense and a $6.7 million increase in provision for income taxes (see discussions above for further details).
Non-GAAP Key Performance Indicators
In addition to the financial measures prepared in accordance with GAAP, we use certain non-GAAP financial measures, including organic revenue (defined as revenue excluding the effect of acquisitions and foreign currency translation), adjusted operating income, earnings before interest, taxes, depreciation, and amortization (EBITDA), adjusted EBITDA, adjusted EBITDA margin (defined as adjusted EBITDA divided by revenue), and free cash flow (defined as cash flow provided by operating activities less capital expenditures).
We use organic revenue to understand our trends and to forecast and evaluate our financial performance and compare revenue to prior periods (see discussion in Revenue above). Adjusted operating income, adjusted EBITDA, and adjusted EBITDA margin exclude amortization expense related to acquired intangible assets, profit in inventory, and backlog (collectively, purchase accounting expenses); acquisition costs; and other income or expense, as indicated. We exclude purchase accounting expenses and acquisition costs to provide a more meaningful and consistent comparison of our operating results over time and with peer companies. While we have a history of acquisition activity, such transactions do not occur on a predictable cycle, and the size and nature of these transactions will vary. We believe it is important for investors to understand that these intangible assets were recorded as part of purchase accounting and that they contribute to revenue generation. We also exclude other items when they are not indicative of our core operating results and are not comparable to other periods, which have differing levels of incremental costs, expenditures or income, or none at all. Additionally, we use free cash flow in order to provide insight on our ability to generate cash for acquisitions and debt repayments, as well as for other investing and financing activities.
We believe these non-GAAP financial measures, when taken together with the corresponding GAAP financial measures, provide meaningful supplemental information regarding our performance by excluding certain items that may not be indicative of our core business, operating results, or future outlook. 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. Such measures are also used by us in our financial and operating decision-making and for compensation purposes. We also believe this information is responsive to investors' requests and gives them additional measures of our performance.
Our non-GAAP financial measures are not meant to be considered superior to or a substitute for the results of operations or cash flows prepared in accordance with GAAP. In addition, our non-GAAP financial measures have limitations associated with their use as compared to the most directly comparable GAAP measures, in that they may be different from, and therefore not comparable to, similar measures used by other companies.
KADANT INC.
A reconciliation of adjusted operating income, adjusted EBITDA, and adjusted EBITDA margin from net income attributable to Kadant is as follows:
Three Months Ended Nine Months Ended
(In thousands, except percentages) October 3,
2026
September 27,
2025 		October 3,
2026 		September 27,
2025
Net Income Attributable to Kadant $ 35,072
$ 27,722 $ 93,049 $ 77,944
Net Income Attributable to Noncontrolling Interests
613
393 1,304 1,247
Provision for Income Taxes 12,799
11,766 36,123 29,416
Interest Expense, Net 5,046
2,716 13,998 8,920
Other Expense, Net 23
19 68 52
Operating Income 53,553
42,616 144,542 117,579
Intangible Asset Amortization Expense
8,843
6,521 25,854 19,174
Profit in Inventory Amortization Expense (a)
1,252
465 3,862 500
Backlog Amortization Expense (b)
-
165 - 746
Acquisition Costs 453
2,253 1,731 3,498
Indemnification Asset Reversal (Provision) (c) 337
- 212 (29)
Other Costs
- 287 - 287
Adjusted Operating Income (d) (non-GAAP measure)
64,438
52,307 176,201 141,755
Depreciation Expense
7,267
5,711 20,447 16,559
Adjusted EBITDA (non-GAAP measure)
$ 71,705
$ 58,018 $ 196,648 $ 158,314
Adjusted EBITDA Margin (non-GAAP measure)
22.9%
21.4% 21.7% 20.7%
(a) Represents amortization expense within cost of revenue associated with acquired profit in inventory.
(b) Represents intangible amortization expense associated with acquired backlog.
(c) Represents the net indemnification asset reversal or provision related to the release of or establishment of tax reserves associated with uncertain tax positions.
(d) Reflects new methodology, announced on February 19, 2026, to exclude intangible amortization expense.
A reconciliation of free cash flow from cash flow provided by operating activities is as follows:
Three Months Ended Nine Months Ended
(In thousands) October 3,
2026 		September 27,
2025 		October 3,
2026 		September 27,
2025
Cash Provided by Operating Activities $ 62,901 $ 47,252 $ 138,327 $ 110,569
Capital Expenditures (a) (4,767) (3,194) (18,972) (10,998)
Free Cash Flow (non-GAAP measure)
$ 58,134 $ 44,058 $ 119,355 $ 99,571
(a) Includes $5.8 million paid in the nine months ended October 3, 2026 for the purchase of a previously leased manufacturing facility in the Flow Control segment.
Liquidity and Capital Resources
Consolidated working capital was $348.0 million at October 3, 2026, compared with $313.8 million at January 3, 2026. Cash and cash equivalents were $133.9 million at October 3, 2026, compared with $119.6 million at January 3, 2026, which included cash and cash equivalents held by our foreign subsidiaries of $118.6 million at October 3, 2026 and $100.3 million at January 3, 2026.
KADANT INC.
Cash Flow
Cash flow information for the first nine months of 2026 and 2025 is as follows:
Nine Months Ended
(In thousands) October 3,
2026 		September 27,
2025
Net Cash Provided by Operating Activities $ 138,327 $ 110,569
Net Cash Used in Investing Activities (190,008) (26,227)
Net Cash Provided by (Used in) Financing Activities 71,770 (59,302)
Exchange Rate Effect on Cash, Cash Equivalents, and Restricted Cash (4,163) 5,927
Increase in Cash, Cash Equivalents, and Restricted Cash $ 15,926 $ 30,967
Operating Activities
Cash provided by operating activities increased to $138.3 million in the first nine months of 2026 from $110.6 million in the first nine 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 nine months of 2026 were primarily attributable to increases in accounts receivable and contract assets and decreases in customer deposits. Accounts receivable and contract assets used $22.5 million of cash, primarily due to the timing of billings and customer payments. Customer deposits used $7.8 million of cash, primarily due to the timing of capital equipment orders. These uses of cash were partially offset by $7.7 million of cash provided by a decrease in inventories.
Significant operating cash outflows associated with working capital in the first nine months of 2025 were primarily attributable to increases in inventories and accounts receivable and decreases in other liabilities. A net increase in inventories used cash of $12.9 million, accounts receivable used cash of $7.7 million due to the timing of shipments, and other liabilities used cash of $10.4 million primarily related to incentive compensation payments. These cash outflows were partially offset by customer deposits, which provided $7.2 million of cash due to higher capital equipment orders, and contract assets, which provided $8.9 million of cash primarily due to the timing of billings on contracts accounted for over time.
Investing Activities
Cash used in investing activities was $190.0 million in the first nine months of 2026, compared with $26.2 million in the first nine months of 2025. The increase in 2026 was primarily attributable to $171.9 million of acquisition consideration, net of cash acquired, including $170.2 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 $19.0 million in the first nine months of 2026, compared with $11.0 million in the first nine months of 2025, largely due to the purchase of a manufacturing facility that had previously been leased.
Financing Activities
Cash provided by financing activities was $71.8 million in the first nine months of 2026, compared with cash used of $59.3 million in the first nine months of 2025. The increase in the first nine 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 $100.6 million. In the first nine months of 2025, borrowings under our revolving credit facility were $29.0 million and repayments of long-term obligations were $69.4 million. Cash dividends paid to stockholders increased to $12.5 million in 2026, compared with $11.8 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. In the first nine months of 2026, exchange rate changes resulted in a $4.2 million decrease in cash, cash equivalents, and restricted cash primarily due to the strengthening of the U.S. dollar against the euro and, to a lesser extent, the Swedish krona, partially offset by the weakening of the U.S. dollar against the Chinese renminbi. In the first nine months of 2025, exchange rate changes resulted in a $5.9 million increase in cash, cash equivalents, and restricted cash
KADANT INC.
primarily due 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.
During the second quarter of 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 October 3, 2026, outstanding borrowings under the Credit Agreement totaled $447.5 million, including $233.5 million of euro-denominated borrowings. We had $300.5 million of available committed borrowing capacity, as well as an additional $200.0 million of uncommitted, unsecured incremental borrowing capacity. 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 October 3, 2026, our leverage ratio was 1.49 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.
Additional Liquidity and Capital Resources
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 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 $12.5 million in the first nine months of 2026. On September 10, 2026, we declared a quarterly cash dividend of $0.36 per share totaling $4.3 million that will be paid on November 12, 2026. Future declarations of dividends are subject to our board of directors' approval and may be adjusted as business needs or market conditions change. The declaration of cash dividends is subject to our compliance with the covenant in our Credit Agreement related to our consolidated leverage ratio.
We plan to make expenditures of approximately $9.0 to $11.0 million during the remainder of 2026 for property, plant, and equipment.
As of October 3, 2026, we had approximately $170.6 million of total unremitted foreign earnings. It is our intent to indefinitely reinvest $101.0 million of these earnings to support the current and future capital needs of our foreign operations, including debt repayments, if any. In the first nine months of 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.
We believe that existing cash and cash equivalents, along with future cash generated from operations, and our existing borrowing capacity will be sufficient to meet the capital requirements of our operations for the next 12 months and the foreseeable future.
Application of Critical Accounting Policies and Estimates
Management's discussion and analysis of financial condition and results of operations is based upon our condensed consolidated financial statements, which have been prepared in accordance with GAAP. The preparation of these condensed consolidated financial statements requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent liabilities, and the reported amounts of revenue and expenses during the reporting period. Our critical accounting policies are defined as those that entail significant judgments and uncertainties, and could potentially result in materially different results under different assumptions and conditions. Management evaluates its estimates on an ongoing basis based on historical experience, current economic and market conditions, and other assumptions management believes are reasonable. We believe that our most critical accounting policies which are significant to our consolidated financial statements, and which involve the most complex or subjective decisions or assessments, are those described in Management's Discussion and Analysis of Financial Condition and Results of Operations under the heading Application of Critical Accounting Estimates in Part II, Item 7, of our Annual Report. There have been no material changes to these critical accounting policies since the end of fiscal 2025 that warrant disclosure.
Recent Accounting Pronouncements
See Note 1, under the heading Recent Accounting Pronouncements, in the accompanying condensed consolidated financial statements for details.
KADANT INC.
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