KADANT INC

2. Acquisition

The Company's acquisitions are accounted for using the acquisition method of accounting and the results of the acquired businesses are included in its condensed consolidated financial statements from the date of acquisition. Historically, acquisitions have been made at prices above the fair value of identifiable net assets, resulting in goodwill. Acquisition costs were $2,253,000 in the third quarter of 2025 and $3,498,000 in the nine months ended September 27, 2025 and are included in selling, general and administrative (SG&A) expenses in the accompanying condensed consolidated statement of income.

On July 9, 2025, the Company acquired all the outstanding equity securities of Babbini S.p.A and G.P.S. Engineering S.r.l (collectively, Babbini), two Italy-based companies specializing in industrial dewatering and engineered power transmission solutions, for $16,483,000, net of cash acquired. The fair value of assets acquired totaled $35,470,000, including cash of $4,863,000, inventory of $13,825,000, property, plant, and equipment of $5,355,000, and intangible assets of $5,278,000. The fair value of liabilities assumed was $14,124,000, including customer deposits of $3,857,000 and accounts payable of $2,954,000. Babbini is part of the Company's Industrial Processing segment. The Company funded the acquisition through borrowings under its revolving credit facility.

See Note 11, Subsequent Events, for details on the Company's acquisition that occurred on October 7, 2025.