KADANT INC

Previous wording

Our financial results are presented in three reportable segments consisting of our Flow Control segment, Industrial Processing segment, and Material Handling segment. We have aggregated our operating segments into reportable segments where they contained similar products and economic characteristics, and shared similar types of customers, and production and distribution methods. Our Flow Control segment consists of our fluid-handling and doctoring, cleaning, & filtration operating segments and our Industrial Processing segment consists of our wood processing and fiber processing operating segments. A description of each reportable segment is as follows:

Current wording

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:

Previous wording

•Flow Control – Custom-engineered products, systems, and technologies that control the flow of fluids used in industrial and commercial applications to keep critical processes running efficiently in the packaging, tissue, food, metals, energy, and other industrial sectors. Our primary products include rotary sealing devices, steam systems, expansion joints, doctor systems, roll and fabric cleaning devices, and filtration and fiber recovery systems.

Current wording

•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.

Previous wording

•Industrial Processing – Equipment, machinery, and technologies used to recycle paper and paperboard, process timber, and optimize industrial steam boiler efficiency for use in the packaging, paper, tissue, wood products, and food processing industries, among others. Our primary products include fiber processing systems and recycling equipment, chemical pulping equipment, debarkers, stranders, chippers, custom engineered knife systems, industrial boiler cleaning technologies, and continuous dewatering equipment. In addition, we provide industrial automation and digitization solutions to process industries.

Current wording

•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.

Previous wording

•Material Handling – Products and engineered systems used to handle bulk and discrete materials for secondary processing or transport in the aggregates, mining, food, and waste management industries, among others. Our primary products include conveying and vibratory equipment and balers. In addition, we manufacture and sell biodegradable, absorbent granules used as carriers in agricultural applications and for oil and grease absorption.

Current wording

•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.

Previous wording

Overall, we anticipate sequentially stronger bookings in the fourth quarter of 2025 and comparatively higher bookings for the full year 2025 compared to 2024, especially in our Industrial Processing segment. We see long-term strength in our end markets as customers continue to rely on our products to enhance productivity through more efficient production processes. In addition, we anticipate growth opportunities resulting from both proposed and enacted legislation in the United States and internationally that is designed to stimulate investment.

Current wording

Overall, we expect bookings in 2026 to exceed 2025 levels, largely driven by our Industrial Processing segment, where customer delays associated with pending orders from 2025 have resulted in a number of capital orders in the pipeline, combined with incremental contributions from our recent acquisitions. We continue to see long-term strength in our end markets as customers rely on our products to enhance productivity through more efficient production processes. Additionally, we anticipate incremental growth opportunities resulting from proposed and enacted legislation in the United States and internationally that is intended to stimulate investment.

Previous wording

Our global operations have been and continue to be impacted by complex market conditions fueled by tariff-related uncertainty, inflationary pressures, and geopolitical tensions. We expect our operating environment to continue to be challenging, which creates continued uncertainty for the remainder of 2025. However, we believe that the fundamentals of our business remain strong, particularly given our solid market position in key product lines, solid global operations teams, and long-term strength of our end markets. For more information related to these challenges, and other factors impacting our business, please see Risk Factors, included in Part I, Item 1A, of our Annual Report, as further amended in Part II, Item IA, within this report, and as may be further amended and/or restated in subsequent filings with the SEC.

Current wording

Our global operations have been and continue to be impacted by complex market conditions fueled by tariff-related uncertainty, inflationary pressures, and geopolitical tensions. We expect our operating environment to continue to be challenging, especially for large capital equipment projects where the order timing is uncertain. However, we believe that the fundamentals of our business remain strong, supported by our solid market position in key product lines, experienced global operations teams, and long-term strength of our end markets. For more information related to these challenges, and other factors impacting our business, please see Risk Factors, included in Part I, Item 1A, of our Annual Report, as further amended in Part II, Item 1A, within this report, and as may be further amended and/or restated in subsequent filings with the SEC.

Previous wording

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. Although we are working to mitigate the impact of tariffs through pricing and sourcing strategies, we cannot be sure these strategies will effectively mitigate the impact of these costs. For more information on risks associated with our global operations, including tariffs, please see Risk Factors, included in Part I, Item 1A, of our Annual Report, as further amended in Part II, Item IA, within this report, and as may be further amended and/or restated in subsequent filings with the SEC.

Current wording

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. 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.

Previous wording

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

Current wording

The following table presents the change in revenue by segment between the first quarters of 2026 and 2025, and those changes excluding the effect of acquisitions and foreign currency translation which we refer to as change in organic revenue. Organic revenue excludes the effect of acquisitions for the four quarterly reporting periods following the date of the acquisition. The presentation of the change in organic revenue is a non-GAAP measure. We believe this non-GAAP measure helps investors gain an understanding of our underlying operations consistent with how management measures and forecasts its performance, especially when comparing such results to prior periods. This non-GAAP measure should not be considered superior to or a substitute for the corresponding U.S. generally accepted accounting principles (GAAP) measure.

Previous wording

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

Current wording

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

Previous wording

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

Current wording

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

Previous wording

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

Current wording

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

Previous wording

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

Current wording

•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.

Previous wording

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

Current wording

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

Previous wording

Interest expense decreased to $3.1 million in the third quarter of 2025 from $5.5 million in the third quarter of 2024 due to decreased borrowings under our revolving credit facility and a lower weighted-average interest rate. We expect interest expense will increase significantly during the fourth quarter of 2025 as a result of the $170.0 million borrowed in October 2025 to fund our Clyde Industries acquisition.

Current wording

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.

Previous wording

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

Current wording

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.

Previous wording

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

Current wording

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).

Previous wording

We use organic revenue to understand our trends and to forecast and evaluate our financial performance and compare revenue to prior periods (see discussion in Revenue above). Adjusted operating income, adjusted EBITDA, and adjusted EBITDA margin exclude acquisition costs, amortization expense related to acquired profit in inventory and backlog, and other income or expense, as indicated. These items are excluded as they are not indicative of our core operating results and are not comparable to other periods, which have differing levels of incremental costs, expenditures or income, or none at all. Additionally, we use free cash flow in order to provide insight on our ability to generate cash for acquisitions and debt repayments, as well as for other investing and financing activities.

Current wording

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.

Previous wording

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

Current wording

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

Previous wording

Consolidated working capital was $307.4 million at September 27, 2025, compared with $250.8 million at December 28, 2024. Cash and cash equivalents were $124.5 million at September 27, 2025, compared with $94.7 million at December 28, 2024, which included cash and cash equivalents held by our foreign subsidiaries of $86.3 million at September 27, 2025 and $73.8 million at December 28, 2024.

Current wording

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 of $107.2 million at April 4, 2026 and $100.3 million at January 3, 2026.

Previous wording

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

Current wording

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

Previous wording

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

Current wording

Cash provided by operating activities decreased to $21.9 million in the first quarter of 2026 from $22.8 million in the first quarter of 2025. Our operating cash flows are primarily generated from cash received from customers, offset by cash payments for items such as inventory, employee compensation, operating leases, income taxes, and interest payments on outstanding debt obligations.

Previous wording

Significant operating cash outflows associated with working capital in the nine months of 2025 related to inventory, other liabilities, and accounts receivable. Purchases of inventory used cash of $12.9 million and other liabilities used cash of $10.4 million, primarily related to incentive compensation payments. In addition, an increase in accounts receivable used cash of $7.7 million due to timing of shipments. These uses of cash were offset in part by cash received from customer deposits of $7.2 million due to the timing of capital equipment orders and cash received from contract assets of $8.9 million related to contracts accounted for on an over time basis.

Current wording

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.

Previous wording

Significant cash outflows associated with working capital in the first nine months of 2024 related to accounts receivable, customer deposits and other liabilities. An increase in accounts receivable used cash of $10.4 million primarily due to our revenue growth, and a decrease in customer deposits used cash of $21.6 million due to a reduction in capital equipment orders. Other liabilities used cash of $15.5 million primarily related to incentive compensation payments. These uses of cash were offset in part by cash provided from the shipment of inventory of $10.2 million and increases in accounts payable of $8.7 million related to inventory purchases and the timing of payments.

Current wording

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.

Previous wording

Cash used in investing activities was $26.2 million in the first nine months of 2025, compared with $315.9 million in the first nine months of 2024. Cash used in investing activities in the first nine months of 2025 included consideration paid for an acquisition, net of cash acquired, of $16.5 million and capital expenditures of $11.0 million. Cash used in investing activities in the first nine months of 2024 included consideration paid for acquisitions, net of cash acquired, of $302.0 million and capital expenditures of $15.4 million.

Current wording

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.

Previous wording

Cash used in financing activities was $59.3 million in the nine months of 2025, compared with cash provided by financing activities of $196.8 million in the first nine months of 2024. Borrowings under our revolving credit facility, which were primarily used to fund our 2025 and 2024 acquisitions, were $29.0 million in 2025 compared to $305.2 million in 2024. Repayments of short- and long-term obligations were $69.4 million in 2025 and $91.4 million in 2024. Cash dividends paid to stockholders were $11.8 million in 2025 and $10.9 million in 2024. In addition, taxes paid related to the vesting of equity awards were $6.1 million in 2025 and $5.9 million in 2024.

Current wording

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.

Previous wording

The exchange rate effect on cash, cash equivalents, and restricted cash represents the impact of translation of cash balances at our foreign subsidiaries. The $5.9 million increase in cash, cash equivalents, and restricted cash in the first nine months of 2025 related to exchange rates was primarily attributable to the weakening of the U.S. dollar against the euro and, to a lesser extent, the Swedish krona, and the Canadian dollar. The $1.0 million decrease in cash, cash equivalents, and restricted cash in the first nine months of 2024 was primarily attributable to the strengthening of the U.S. dollar against the Mexican peso and, to a lesser extent, the Brazilian real and the Canadian dollar.

Current wording

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. 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.

Previous wording

On September 26, 2025, we entered into an eighth amendment and joinder (the Eighth Amendment) to our unsecured multi-currency revolving credit facility originally entered into on March 1, 2017 (as amended and restated to date, the Credit Agreement). The Eighth Amendment, among other things, increased our aggregate borrowing capacity from $400.0 million to $750.0 million and extended the maturity date from November 30, 2027 to September 26, 2030. In addition to the increased committed borrowing capacity, an uncommitted, unsecured incremental borrowing facility of $200.0 million continues to be available under the Credit Agreement. In the first nine months of 2025, we borrowed $29.0 million under our revolving credit facility, the majority of which was used to fund our acquisition of Babbini.

Current wording

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.

Previous wording

As of September 27, 2025, our outstanding balance under the Credit Agreement was $248.1 million, which included $101.1 million of euro-denominated borrowings, and we had $502.0 million of available committed borrowing capacity, in addition to a $200.0 million uncommitted, unsecured incremental borrowing facility. Under our debt agreements, our leverage ratio must be less than 3.75 or, if we elect, for the quarter during which a material acquisition occurs and for the three fiscal quarters thereafter, must be less than 4.25. As of September 27, 2025, our leverage ratio was 0.94 and we were in compliance with our debt covenants.

Current wording

As of April 4, 2026, our outstanding balance under the Credit Agreement was $355.4 million, which included $78.4 million of euro-denominated borrowings, and we had $394.6 million of available committed borrowing capacity, in addition to a $200.0 million uncommitted, unsecured incremental borrowing facility. Under our debt agreements, our leverage ratio must be less than 3.75 to 1 or, if we elect, for the quarter during which a material acquisition occurs and for the three fiscal quarters thereafter, must be less than 4.25 to 1. As of April 4, 2026, our leverage ratio was 1.27 and we were in compliance with our debt covenants.

Previous wording

In October 2025, we borrowed $170.0 million under our revolving credit facility to fund the acquisition of Clyde Industries. Borrowings under our revolving credit facility bear variable rates of interest and adjust frequently based on prevailing market rates and the terms of our Credit Agreement. The interest rate related to this debt was approximately 5.4% at the time of the borrowing. Following this acquisition, we had available committed borrowing capacity of $332.0 million under the revolving credit facility, in addition to the uncommitted, unsecured incremental borrowing facility of $200.0 million.

Current wording

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.

Previous wording

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

Current wording

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

Previous wording

On May 15, 2025, our board of directors approved the repurchase of up to $50.0 million of our equity securities during the period from May 15, 2025 to May 15, 2026. We did not repurchase any shares of our common stock under this authorization or our previous $50.0 million authorization that expired on May 16, 2025.

Current wording

On May 15, 2025, our board of directors approved the repurchase of up to $50.0 million of our equity securities during the period from May 15, 2025 to May 15, 2026. We have not repurchased any shares of our common stock under this authorization.

Previous wording

We paid cash dividends of $11.8 million in the first nine months of 2025. On September 4, 2025, we declared a quarterly cash dividend of $0.34 per share totaling $4.0 million that will be paid on November 6, 2025. 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.

Current wording

We paid cash dividends of $4.0 million in the first quarter of 2026. On March 11, 2026, we declared a quarterly cash dividend of $0.36 per share totaling $4.3 million that will be paid on May 13, 2026. Future declarations of dividends are subject to our board of directors' approval and may be adjusted as business needs or market conditions change. The declaration of cash dividends is subject to our compliance with the covenant in our Credit Agreement related to our consolidated leverage ratio.

Previous wording

We plan to make expenditures of approximately $10.0 to $12.0 million during the remainder of 2025 for property, plant, and equipment.

Current wording

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

Previous wording

As of September 27, 2025, we had approximately $137.7 million of total unremitted foreign earnings. It is our intent to indefinitely reinvest $74.3 million of these earnings to support the current and future capital needs of our foreign operations, including debt repayments, if any. In the first nine months of 2025, we recorded withholding taxes on the earnings in certain foreign subsidiaries that we plan to repatriate in the foreseeable future. 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 $2.0 million.

Current wording

As of April 4, 2026, we had approximately $153.6 million of total unremitted foreign earnings. It is our intent to indefinitely reinvest $87.4 million of these earnings to support the current and future capital needs of our foreign operations, including debt repayments, if any. In the first quarter of 2026, we recorded withholding taxes on the earnings in certain foreign subsidiaries that we plan to repatriate in the foreseeable future. The foreign withholding taxes that would be required if we were to remit the indefinitely-reinvested foreign earnings to the United States would be approximately $2.7 million.

Previous wording

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

Current wording

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.

Previous wording

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

Current wording

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