EX-99 3 kaiform8kexhibit9911042013.htm KAI FORM 8-K EXHIBIT 99 11-04-2013
 
Exhibit 99
[LOGO]
NEWS
KADANT
AN ACCENT ON INNOVATION
One Technology Park Drive
Westford, MA 01886
Investor contact: Thomas M. O'Brien, 978-776-2000
Media contact: Wes Martz, 269-278-1715

Kadant Reports 2013 Third Quarter Results
Lowers Revenue Guidance for 2013
 
WESTFORD, Mass., November 4, 2013 – Kadant Inc. (NYSE:KAI) reported its financial results for the third quarter ended September 28, 2013.

Third Quarter 2013 Highlights
 
·
GAAP diluted earnings per share (EPS) from continuing operations was $0.57 in the third quarter of 2013 compared to $0.66 in the third quarter of 2012. Guidance was $0.47 to $0.49, which included $0.01 of restructuring costs. A higher effective tax rate reduced diluted EPS by $0.10 in the third quarter of 2013 compared to the third quarter of 2012.

·
Revenues were $91 million in the third quarter of 2013, including $7 million from acquisitions, compared to $87 million in the third quarter of 2012. Guidance was $88 to $90 million, including revenues from acquisitions.

·
Operating income was $10 million in both the third quarters of 2013 and 2012.

·
Bookings were $82 million in the third quarter of 2013, including $5 million from acquisitions, compared to $69 million in the third quarter of 2012. Bookings in the first nine months of 2013 were $259 million, increasing 15% compared to the first nine months of 2012, including 6% from acquisitions.

·
Cash flows from continuing operations were $13 million in both the third quarters of 2013 and 2012, and were $31 million in the first nine months of 2013 compared to $18 million in the first nine months of 2012.

·
Net cash was $59 million at the end of the third quarter and increased $10 million compared to the second quarter of 2013.

Management Commentary

"We had another solid quarter with strong cash flows and better than expected EPS performance," said Jonathan W. Painter, president and chief executive officer of Kadant. "GAAP diluted EPS from continuing operations was $0.57 and well above our guidance of $0.47 to $0.49 partly due to higher revenues. Our diluted EPS for the third quarter of 2013 included $0.05 from acquisition expenses.

"Revenues of $91 million in the third quarter of 2013 increased five percent compared to the third quarter of 2012, including increases of eight percent from acquisitions and two percent from foreign currency translation. Operating cash flows from continuing operations were $13 million in the third quarter of 2013 and we ended the quarter with net cash (cash less debt) of $59 million.

            "Bookings increased to $82 million in the third quarter of 2013 compared to $69 million in the third quarter of 2012, including $5 million from acquisitions. Parts and consumables bookings increased 21 percent to $54 million in the third quarter of 2013 compared to the third quarter of 2012, including a seven percent increase from acquisitions."

Third Quarter 2013

Kadant reported revenues of $91.3 million in the third quarter of 2013, an increase of $4.7 million, or five percent, compared with $86.6 million in the third quarter of 2012. Revenues in the third quarter of 2013 included $7.0 million from acquisitions and a $1.5 million increase from foreign currency translation compared to the third quarter of 2012. Operating income from continuing operations was $9.9 million in both the third quarters of 2013 and 2012. Net income from continuing operations was $6.5 million in the third quarter of 2013, or $0.57 per diluted share, compared to $7.6 million, or $0.66 per diluted share, in the third quarter of 2012.

Guidance

"Our solid diluted EPS performance during the first three quarters of 2013 has positioned us to finish 2013 as expected," Mr. Painter continued. "Looking forward, we expect to achieve GAAP diluted EPS from continuing operations of $0.47 to $0.49 in the fourth quarter of 2013 on revenues of $86 to $88 million. Our fourth quarter guidance includes estimated restructuring costs of $0.01. For the full year, we expect revenues of $336 to $338 million, revised from our previous estimate of $340 to $345 million. We expect to achieve GAAP diluted EPS from continuing operations of $2.02 to $2.04, which includes a gain of $0.12 on the sale of assets and restructuring costs of $0.13. This guidance does not include any results from the pending acquisition of Carmanah Design and Manufacturing Inc."

Conference Call

Kadant will hold a webcast with a slide presentation for investors on Tuesday, November 5, 2013, at 11 a.m. eastern time to discuss its third quarter performance, as well as future expectations. To access the webcast, including the slideshow and accompanying audio, go to www.kadant.com and click on the "Investors" tab. To listen to the webcast via teleconference, call 877-703-6107 within the U.S., or +1-857-244-7306 outside the U.S. and reference participant passcode 83375884. Prior to the call, our earnings release and the slides used in the webcast presentation will be filed with the Securities and Exchange Commission and will be available at www.sec.gov. An archive of the webcast presentation will be available on our Web site until December 6, 2013.

Shortly after the webcast, Kadant will post its updated general investor presentation incorporating the third quarter results on its Web site at www.kadant.com under the "Investors" tab.

Use of Non-GAAP Financial Measures

In addition to the financial measures prepared in accordance with generally accepted accounting principles (GAAP), we use certain non-GAAP financial measures, including increases or decreases in revenues excluding the effect of acquisitions and foreign currency translation, adjusted operating income, earnings before interest, taxes, depreciation, and amortization (EBITDA), and adjusted EBITDA.

We believe that 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 to 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 an additional measure of our performance.

We present increases or decreases in revenues excluding the effect of acquisitions and foreign currency translation to provide investors insight into underlying revenue trends.
 
Adjusted operating income and adjusted EBITDA exclude pre-tax restructuring costs of $2.0 million and a pre-tax gain on the sale of assets of $1.7 million in the nine-month period ended September 28, 2013. These items are excluded as they are not indicative of our core operating results and not comparable to other periods, which have differing levels of incremental costs or other income or none at all.

The non-GAAP financial measures included in this press release are not meant to be considered superior to or a substitute for the results of operations prepared in accordance with GAAP. In addition, the non-GAAP financial measures included in this press release 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.

Reconciliations of the non-GAAP financial measures to the most directly comparable GAAP financial measures are set forth in this press release.
-more-
 
Financial Highlights (unaudited)
  
   
   
   
 
(In thousands, except per share amounts and percentages)
  
   
   
   
 
 
  
   
   
   
 
   
  
Three Months Ended
    
Nine Months Ended
  
Consolidated Statement of Income
  
Sept. 28, 2013
    
Sept. 29, 2012
    
Sept. 28, 2013
    
Sept. 29, 2012
  
 
  
   
   
   
 
Revenues
  
$
91,315
    
$
86,601
    
$
249,684
    
$
253,696
  
 
                                
Costs and Operating Expenses:
                                
Cost of revenues
    
51,194
      
49,005
      
133,597
      
141,430
  
Selling, general, and administrative expenses
    
28,606
      
26,171
      
85,001
      
77,804
  
Research and development expenses
    
1,558
      
1,511
      
5,114
      
4,436
  
Restructuring costs and other (income) expense, net (a)
    
45
      
-
      
263
      
307
  
 
    
81,403
      
76,687
      
223,975
      
223,977
  
 
                                
Operating Income
    
9,912
      
9,914
      
25,709
      
29,719
  
Interest Income
    
155
      
63
      
406
      
231
  
Interest Expense
    
(239
)
    
(219
)
    
(635
)
    
(624
)
 
                                
Income from Continuing Operations before Provision
                                
for Income Taxes
    
9,828
      
9,758
      
25,480
      
29,326
  
Provision for Income Taxes
    
3,327
      
2,055
      
7,786
      
7,898
  
 
                                
Income from Continuing Operations
    
6,501
      
7,703
      
17,694
      
21,428
  
 
                                
(Loss) Income from Discontinued Operation, Net of Tax (b)
    
(14
)
    
844
      
(55
)
    
780
  
 
                                
Net Income
    
6,487
      
8,547
      
17,639
      
22,208
  
 
                                
Net Income Attributable to Noncontrolling Interest
    
(40
)
    
(86
)
    
(148
)
    
(151
)
 
                                
Net Income Attributable to Kadant
  
$
6,447
    
$
8,461
    
$
17,491
    
$
22,057
  
 
                                
Amounts Attributable to Kadant:
                                
Income from Continuing Operations
  
$
6,461
    
$
7,617
    
$
17,546
    
$
21,277
  
(Loss) Income from Discontinued Operation, Net of Tax
    
(14
)
    
844
      
(55
)
    
780
  
Net Income Attributable to Kadant
  
$
6,447
    
$
8,461
    
$
17,491
    
$
22,057
  
 
                                
Earnings per Share from Continuing Operations
                                
Attributable to Kadant:
                                
Basic
  
$
0.58
    
$
0.67
    
$
1.57
    
$
1.85
  
 
                                
Diluted
  
$
0.57
    
$
0.66
    
$
1.55
    
$
1.83
  
 
                                
Earnings per Share Attributable to Kadant:
                                
Basic
  
$
0.58
    
$
0.75
    
$
1.57
    
$
1.91
  
 
                                
Diluted
  
$
0.57
    
$
0.74
    
$
1.55
    
$
1.90
  
 
                                
Weighted Average Shares:
                                
Basic
    
11,153
      
11,341
      
11,165
      
11,523
  
 
                                
Diluted
    
11,365
      
11,491
      
11,321
      
11,633
  
 
                                
 
                          
Increase
  
 
                          
(Decrease)
  
 
                          
Excluding Effect
  
   
  
Three Months Ended
    
 
    
of Currency
  
 
Revenues by Product Line
  
Sept. 28, 2013
    
Sept. 29, 2012
    
Increase
(Decrease)
    
Translation (c,d)
  
 
                                
Stock-Preparation
  
$
38,827
    
$
34,492
    
$
4,335
    
$
3,255
  
Doctoring, Cleaning, & Filtration
    
28,801
      
27,095
      
1,706
      
1,463
  
Fluid-Handling
    
21,837
      
23,624
      
(1,787
)
    
(1,992
)
 
                                
Papermaking Systems Segment
    
89,465
      
85,211
      
4,254
      
2,726
  
Fiber-based Products
    
1,850
      
1,390
      
460
      
460
  
 
                                
   
  
$
91,315
    
$
86,601
    
$
4,714
    
$
3,186
  
 
                                
 
                          
Increase
  
 
                          
(Decrease)
  
 
                          
Excluding Effect
  
   
  
Nine Months Ended
    
 
    
of Currency
  
 
  
Sept. 28, 2013
    
Sept. 29, 2012
    
Increase
(Decrease)
    
Translation (c,d)
  
 
                                
Stock-Preparation
  
$
90,322
    
$
95,883
    
$
(5,561
)
  
$
(7,012
)
Doctoring, Cleaning, & Filtration
    
82,329
      
79,706
      
2,623
      
1,847
  
Fluid-Handling
    
68,464
      
69,733
      
(1,269
)
    
(1,461
)
 
                                
Papermaking Systems Segment
    
241,115
      
245,322
      
(4,207
)
    
(6,626
)
Fiber-based Products
    
8,569
      
8,374
      
195
      
195
  
 
                                
   
  
$
249,684
    
$
253,696
    
$
(4,012
)
  
$
(6,431
)
 
-more-
 
  
   
   
   
Increase
  
 
  
   
   
   
(Decrease)
  
 
  
   
   
   
Excluding Effect
  
  
  
Three Months Ended
        
of Currency
  
 
Sequential Revenues by Product Line
  
Sept. 28, 2013
    
June 29, 2013
    
Increase
(Decrease)
    
Translation (c,d)
  
 
  
   
   
   
 
Stock-Preparation
  
$
38,827
    
$
28,493
    
$
10,334
    
$
10,097
  
Doctoring, Cleaning, & Filtration
    
28,801
      
27,666
      
1,135
      
1,355
  
Fluid-Handling
    
21,837
      
23,094
      
(1,257
)
    
(1,082
)
 
                                
Papermaking Systems Segment
    
89,465
      
79,253
      
10,212
      
10,370
  
Fiber-based Products
    
1,850
      
2,912
      
(1,062
)
    
(1,062
)
 
                                
  
  
$
91,315
    
$
82,165
    
$
9,150
    
$
9,308
  
 
                                
 
                          
Increase
  
 
                          
(Decrease)
  
 
                          
Excluding Effect
  
  
  
Three Months Ended
    
 
    
of Currency
  
 
Revenues by Geography (e)
  
Sept. 28, 2013
    
Sept. 29, 2012
    
Increase
(Decrease)
    
Translation (c,d)
  
 
                                
North America
  
$
36,987
    
$
35,248
    
$
1,739
    
$
1,701
  
Europe
    
25,941
      
18,113
      
7,828
      
6,666
  
China
    
14,726
      
17,677
      
(2,951
)
    
(3,347
)
South America
    
8,032
      
5,873
      
2,159
      
2,231
  
Other
    
5,629
      
9,690
      
(4,061
)
    
(4,065
)
 
                                
  
  
$
91,315
    
$
86,601
    
$
4,714
    
$
3,186
  
 
                                
 
                          
Increase
  
 
                          
(Decrease)
  
 
                          
Excluding Effect
  
  
  
Nine Months Ended
    
 
    
of Currency
  
 
  
Sept. 28, 2013
    
Sept. 29, 2012
    
Increase
(Decrease)
    
Translation (c,d)
  
 
                                
North America
  
$
116,215
    
$
115,677
    
$
538
    
$
251
  
Europe
    
60,108
      
56,014
      
4,094
      
2,521
  
China
    
38,307
      
40,721
      
(2,414
)
    
(3,229
)
South America
    
20,024
      
17,381
      
2,643
      
2,904
  
Other
    
15,030
      
23,903
      
(8,873
)
    
(8,878
)
 
                                
  
  
$
249,684
    
$
253,696
    
$
(4,012
)
  
$
(6,431
)
 
                                
 
                          
Increase
  
 
                          
(Decrease)
  
 
                          
Excluding Effect
  
  
  
Three Months Ended
    
 
    
of Currency
  
 
Sequential Revenues by Geography
  
Sept. 28, 2013
    
June 29, 2013
    
Increase
(Decrease)
    
Translation (c,d)
  
 
                                
North America
  
$
36,987
    
$
40,350
    
$
(3,363
)
  
$
(3,243
)
Europe
    
25,941
      
16,594
      
9,347
      
9,029
  
China
    
14,726
      
12,353
      
2,373
      
2,275
  
South America
    
8,032
      
7,801
      
231
      
663
  
Other
    
5,629
      
5,067
      
562
      
584
  
 
                                
  
  
$
91,315
    
$
82,165
    
$
9,150
    
$
9,308
  
 
                                
  
  
Three Months Ended
    
Nine Months Ended
  
 
Business Segment Information
  
Sept. 28, 2013
    
Sept. 29, 2012
    
Sept. 28, 2013
    
Sept. 29, 2012
  
 
                                
Gross Profit Margin:
                                
Papermaking Systems
    
44.3
%
    
43.6
%
    
46.5
%
    
44.0
%
Fiber-based Products
    
26.7
%
    
30.4
%
    
46.1
%
    
50.7
%
 
                                
 
    
43.9
%
    
43.4
%
    
46.5
%
    
44.3
%
 
                                
Operating Income:
                                
Papermaking Systems
  
$
14,210
    
$
14,385
    
$
35,975
    
$
38,261
  
Corporate and Fiber-based Products
    
(4,298
)
    
(4,471
)
    
(10,266
)
    
(8,542
)
 
                                
  
  
$
9,912
    
$
9,914
    
$
25,709
    
$
29,719
  
 
                                
Adjusted Operating Income (d,f):
                                
Papermaking Systems
  
$
14,255
    
$
14,385
    
$
36,238
    
$
38,261
  
Corporate and Fiber-based Products
    
(4,298
)
    
(4,471
)
    
(10,266
)
    
(8,542
)
 
                                
  
  
$
9,957
    
$
9,914
    
$
25,972
    
$
29,719
  
 
                                
Bookings from Continuing Operations:
                                
Papermaking Systems
  
$
79,792
    
$
68,230
    
$
250,277
    
$
217,242
  
Fiber-based Products
    
1,844
      
1,113
      
8,769
      
7,106
  
 
                                
  
  
$
81,636
    
$
69,343
    
$
259,046
    
$
224,348
  
 
                                
Capital Expenditures from Continuing Operations:
                                
Papermaking Systems
  
$
1,427
    
$
578
    
$
3,825
    
$
1,339
  
Corporate and Fiber-based Products
    
150
      
95
      
324
      
175
  
 
                                
  
  
$
1,577
    
$
673
    
$
4,149
    
$
1,514
  
 
-more-
 
 
  
  
Three Months Ended
    
Nine Months Ended
  
Cash Flow and Other Data from Continuing Operations
  
Sept. 28, 2013
    
Sept. 29, 2012
    
Sept. 28, 2013
    
Sept. 29, 2012
  
 
 
  
   
   
   
 
Cash Provided by Operations
  
$
12,625
    
$
13,205
    
$
30,697
    
$
17,737
  
Depreciation and Amortization Expense
    
2,302
      
2,147
      
6,730
      
6,419
  
 
 
                                
 
 
                                
Balance Sheet Data
                  
Sept. 28, 2013
    
Dec. 29, 2012
  
 
 
                                
Assets
                                
Cash, Cash Equivalents, and Restricted Cash
                  
$
73,167
    
$
54,553
  
Accounts Receivable, net
                    
61,312
      
59,359
  
Inventories
                    
50,925
      
42,077
  
Unbilled Contract Costs and Fees
                    
3,608
      
2,800
  
Other Current Assets
                    
21,460
      
16,804
  
Property, Plant and Equipment, net
                    
42,105
      
39,168
  
Intangible Assets
                    
25,005
      
26,095
  
Goodwill
                    
110,337
      
107,947
  
Other Assets
                    
10,815
      
10,145
  
 
 
                                
 
 
                  
$
398,734
    
$
358,948
  
Liabilities and Stockholders' Equity
                                
Accounts Payable
                  
$
26,169
    
$
23,124
  
Short- and Long-term Debt
                    
14,500
      
6,875
  
Other Liabilities
                    
93,465
      
78,982
  
 
 
                                
Total Liabilities
                    
134,134
      
108,981
  
Stockholders' Equity
                    
264,600
      
249,967
  
 
 
                                
 
 
                  
$
398,734
    
$
358,948
  
 
 
                                
 
 
                                
 
  
Three Months Ended
    
Nine Months Ended
  
Adjusted Operating Income and Adjusted EBITDA
Reconciliation
  
Sept. 28, 2013
    
Sept. 29, 2012
    
Sept. 28, 2013
    
Sept. 29, 2012
  
 
 
                                
Consolidated
                                
Net Income Attributable to Kadant
  
$
6,447
    
$
8,461
    
$
17,491
    
$
22,057
  
Net Income Attributable to Noncontrolling Interest
    
40
      
86
      
148
      
151
  
Loss (Income) from Discontinued Operation, Net of Tax
    
14
      
(844
)
    
55
      
(780
)
Provision for Income Taxes
    
3,327
      
2,055
      
7,786
      
7,898
  
Interest Expense, net
    
84
      
156
      
229
      
393
  
 
 
                                
Operating Income
    
9,912
      
9,914
      
25,709
      
29,719
  
Restructuring costs and other income, net (a)
    
45
      
-
      
263
      
-
  
 
 
                                
Adjusted Operating Income (d)
    
9,957
      
9,914
      
25,972
      
29,719
  
Depreciation and Amortization
    
2,302
      
2,147
      
6,730
      
6,419
  
 
 
                                
Adjusted EBITDA (d)
  
$
12,259
    
$
12,061
    
$
32,702
    
$
36,138
  
 
 
                                
Papermaking Systems
                                
Operating Income
  
$
14,210
    
$
14,385
    
$
35,975
    
$
38,261
  
Restructuring costs and other income, net (a)
    
45
      
-
      
263
      
-
  
 
 
                                
Adjusted Operating Income (d)
    
14,255
      
14,385
      
36,238
      
38,261
  
Depreciation and Amortization
    
2,180
      
2,030
      
6,371
      
6,063
  
 
 
                                
Adjusted EBITDA (d)
  
$
16,435
    
$
16,415
    
$
42,609
    
$
44,324
  
 
 
                                
Corporate and Fiber-based Products
                                
Operating Loss
  
$
(4,298
)
  
$
(4,471
)
  
$
(10,266
)
  
$
(8,542
)
Depreciation and Amortization
    
122
      
117
      
359
      
356
  
 
 
                                
EBITDA (d)
  
$
(4,176
)
  
$
(4,354
)
  
$
(9,907
)
  
$
(8,186
)
 
 
                                
 
 
                                
(a)
Includes restructuring costs of $45 in the three-month period ended September 28, 2013 and restructuring costs of $2,003, net of a gain of $1,740 on the sale of assets, in the nine-month period ended September 28, 2013.
  
 
 
  
(b)
Income from discontinued operation in the three- and nine-month periods ended September 29, 2012 was due to the reduction in the reserve for the payment of claims related to the Composites LLC class action settlement.
  
 
 
                                
(c)
Represents the increase (decrease) resulting from the conversion of current period amounts reported in local currencies into U.S. dollars at the exchange rate of the prior period compared to the U.S. dollar amount reported in the prior period.
  
 
 
                                
(d)
Represents a non-GAAP financial measure.
                       
 
 
                                
(e)
Geographic revenues are attributed to regions based on customer location. 
          
 
 
                                
(f)
See reconciliation to the most directly comparable GAAP financial measure under "Adjusted Operating Income and Adjusted EBITDA Reconciliation."
  
-more-
 
About Kadant

Kadant Inc. is a leading supplier to the global pulp and paper industry. Our stock-preparation; fluid-handling; and doctoring, cleaning, and filtration products are designed to increase efficiency and improve quality in pulp and paper production. Many of our products, particularly in our Fluid-Handling product line, are also used to optimize production in other process industries. In addition, we produce granules from papermaking byproducts for agricultural and lawn and garden applications. Kadant is based in Westford, Massachusetts, with revenues of $332 million in 2012 and 1,600 employees in 17 countries worldwide. For more information, visit www.kadant.com.

The following constitutes a "Safe Harbor" statement under the Private Securities Litigation Reform Act of 1995: This press release contains forward-looking statements that involve a number of risks and uncertainties, including forward-looking statements about our expected future financial and operating performance, demand for our products, economic and industry outlook, and pending acquisition of Carmanah Design and Manufacturing Inc. Our actual results may differ materially from these forward-looking statements as a result of various important factors, including those set forth under the heading "Risk Factors" in Kadant's quarterly report on Form 10-Q for the period ended June 29, 2013. These include risks and uncertainties relating to our dependence on the pulp and paper industry; significance of sales and operation of manufacturing facilities in China; commodity and component price increases or shortages; international sales and operations; our acquisition strategy; our ability to consummate the pending acquisition, to successfully integrate the acquired business, and realize anticipated benefits of the acquisition; the future performance of the oriented strand board industry and housing markets; general economic conditions; our internal growth strategy; fluctuations in currency exchange rates; competition; soundness of suppliers and customers; our effective tax rate; future restructurings; soundness of financial institutions; our debt obligations; restrictions in our credit agreement; protection of patents and proprietary rights; failure of our information systems or breaches of data security; fluctuations in our share price; and anti-takeover provisions. We undertake no obligation to publicly update any forward-looking statement, whether as a result of new information, future events, or otherwise.


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