8-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

______________________________________________________________

FORM 8-K

CURRENT REPORT

Pursuant to Section 13 or 15(d) of the

Securities Exchange Act of 1934

Date of report (Date of earliest event reported): February 23, 2017

KADANT INC.

(Exact Name of Registrant as Specified in its Charter)

Delaware	1-11406	52-1762325
(State or Other Jurisdiction	(Commission File Number)	(IRS Employer
of Incorporation)		Identification No.)

One Technology Park Drive
Westford, Massachusetts	01886
(Address of Principal Executive Offices)	(Zip Code)

(978) 776-2000

Registrant's telephone number, including area code

Not Applicable

(Former Name or Former Address, if Changed Since Last Report)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

o Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

o Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

o Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

o Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

KADANT INC.

Item 2.02 Results of Operations and Financial Condition.

On February 23, 2017, Kadant Inc. (the “Company”) announced its financial results for the fiscal quarter and year ended December 31, 2016. The full text of the press release issued in connection with the announcement is furnished as Exhibit 99 to this Current Report on Form 8-K.

The information in this Form 8-K (including Exhibit 99) shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934 (the “Exchange Act”) or otherwise subject to the liabilities of that section, nor shall it be deemed incorporated by reference in any filing under the Securities Act of 1933 or the Exchange Act, except as expressly set forth by specific reference in such a filing.

Item 9.01 Financial Statements and Exhibits.

(d) Exhibit
The following exhibit relating to Item 2.02 shall be deemed to be furnished and not filed.
Exhibit     No.	Description of Exhibit
99	Press Release issued by the Company on February 23, 2017.

2

KADANT INC.

SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

		KADANT INC.
Date: February 23, 2017	By	/s/ Michael J. McKenney
		Michael J. McKenney Senior Vice President and    Chief Financial Officer

3

EX-99

Exhibit 99

KADANT INC.

One Technology Park Drive

Westford, MA 01886

NEWS

Kadant Reports Fourth Quarter and Fiscal Year 2016 Results

Q4 Bookings Increase 20% Sequentially

WESTFORD, Mass. - February 23, 2017 - Kadant Inc. (NYSE: KAI) reported its financial results for the fourth quarter and fiscal year ended December 31, 2016.

Fourth Quarter Financial Highlights

• Revenue was $100 million vs. $108 million

• Gross margin was 46% 

• Diluted EPS was $0.69 vs. $0.94

• Net Income was $8 million vs. $10 million

• Adjusted EBITDA was $14.1 million vs. $17.2 million

• Bookings were $114 million vs. $76 million

• Cash flows from operations were $16 million vs. $12 million

Fiscal Year Financial Highlights

• Revenue was a record $414 million vs. $390 million

• Gross margin was 45.5%

• Diluted EPS was $2.88 vs. $3.10; Adjusted Diluted EPS was $3.10 vs. $3.13

• Net Income was $32 million vs. $34 million

• Adjusted EBITDA was a record $61.9 million vs. $61.5 million

• Bookings were $403 million vs. $376 million

• Cash flows from operations were $51 million vs. $40 million

Note: Adjusted diluted EPS and adjusted EBITDA are non-GAAP measures that exclude certain items as detailed later in this press release under the heading “Use of Non-GAAP Financial Measures.”

Management Commentary

“We are pleased to report fourth quarter earnings that exceeded our guidance and represented a strong finish to 2016 with record full year revenue and adjusted EBITDA,” said Jonathan W. Painter, president and chief executive officer. “Although revenue was down from a record performance in last year’s fourth quarter, we had a 10 percent increase in revenue from parts and consumables, which represented 64 percent of fourth quarter revenue. This favorable revenue mix led to a 290 basis point increase in gross margin.

“One of the highlights of the quarter was our bookings which increased 20 percent sequentially and 50 percent year-on-year, representing the third best bookings quarter in our history. Importantly, our parts and consumables bookings were up 11 percent over the fourth quarter of last year and 6 percent sequentially, driven by a strong performance in North America. We also had strong capital bookings in China in the fourth quarter and see a fairly active market for capital projects in China in 2017. 

“As was the case with the fourth quarter, we faced difficult comparisons with the full year 2015, which was an exceptionally strong year for Kadant. Within that context, we were pleased with our overall performance in 2016. We achieved record revenue of $414 million, despite over $8 million in negative foreign currency translation impact, and we maintained a strong gross margin of 45.5 percent. 2016 was also a very strong year for operating cash flows, which reached a near-record $51 million, up from $40 million in 2015.”  

Fourth Quarter 2016 Financials

Revenue was $100.2 million, a 7 percent decline compared to the fourth quarter of 2015, inclusive of $12.0 million from an acquisition and a negative impact of $1.7 million from foreign currency translation. Revenue was $107.6 million in the fourth quarter of 2015. Gross margin was 46.0 percent. Net income was $7.7 million, or $0.69 per diluted share, compared to $10.4 million, or $0.94 per diluted share, in the fourth quarter of 2015. Adjusted EBITDA was $14.1 million, a decrease of 18 percent from $17.2 million in the fourth quarter of 2015. Operating income was $10.7 million versus $14.4 million in the fourth quarter of 2015. Cash flows from operations were $16.3 million, up 32 percent from $12.3 million in the comparable quarter of 2015. Bookings increased 50 percent to $113.6 million from $75.5 million in the comparable period of 2015, inclusive of the net effect of a $12.1 million increase from an acquisition, a $16.1 million booking reversal in the fourth quarter of 2015, and a negative impact of $2.3 million from foreign currency translation.

Fiscal Year 2016 Financials 

Revenue increased 6 percent year-over-year to a record $414.1 million for fiscal 2016, inclusive of $40.8 million from an acquisition and a negative impact of $8.4 million from foreign currency translation. Full year 2015 revenue was $390.1 million. Gross margin was 45.5 percent. Net income was $32.1 million, or $2.88 per diluted share, compared to $34.4 million, or $3.10 per diluted share, in 2015. Adjusted diluted EPS was $3.10 for the full year 2016, compared to $3.13 in 2015. Adjusted EBITDA increased 1 percent to a record $61.9 million from $61.5 million in 2015. Operating income was $45.6 million in 2016, compared to $50.1 million in the prior year. Cash flows from operations increased 26 percent to $51.0 million compared to $40.4 million last year. Bookings were $403.5 million, up 7 percent, including the net effect of a $39.4 million increase from an acquisition, a $16.1 million booking reversal in 2015, and a $9.1 million decrease from foreign currency translation. In 2015, bookings were $376.1 million.

Summary and Outlook

“2016 was a year of solid execution for Kadant,” Mr. Painter continued. “We moved forward with several product developments and other initiatives designed to support our expectations of modest organic growth over the long term. In addition, we succeeded in completing an important acquisition that brings potential revenue synergies. We intend to supplement our internal growth with acquisitions, but remain disciplined in considering those opportunities that meet our criteria.

“Looking ahead, we expect 2017 to be a record year for both revenue and EPS. Based on our current visibility, we expect to report GAAP diluted EPS of $3.13 to $3.23 on revenue of $423 million to $433 million. The 2017 guidance includes an unfavorable foreign currency translation effect of $7 million on revenue and $0.10 on diluted EPS compared to 2016. For the first quarter of 2017, we expect GAAP diluted EPS of $0.62 to $0.66 on revenue of $97 million to $100 million.”

Conference Call

Kadant will hold a webcast with a slide presentation for investors on Thursday, February 23, 2017, at 4:30 p.m. eastern time to discuss its fourth quarter and fiscal year performance, as well as future expectations. To access the webcast, including the slideshow and accompanying audio, go to www.kadant.com and click on “Investors.” To listen to the webcast via teleconference, call 888-326-8410 within the U.S., or +1-704-385-4884 outside the U.S. and reference participant passcode 39878251. 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. A replay of the webcast will be available on our website through March 24, 2017.

Shortly after the webcast, Kadant will post its updated general investor presentation incorporating the fourth quarter and fiscal year results on our website at www.kadant.com under the “Investors” section.

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 revenue excluding the effect of acquisitions and foreign currency translation, adjusted operating income, adjusted net income, adjusted diluted EPS, adjusted earnings before interest, taxes, depreciation, and amortization (adjusted EBITDA), adjusted EBITDA margin, and free cash flow.

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.

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.

Revenue included $12.0 million and $40.8 million from an acquisition in the fourth quarter and fiscal year 2016, respectively. Revenue also included $1.7 million and $8.4 million unfavorable foreign currency translation effects in the fourth quarter and fiscal year 2016, respectively. We present increases or decreases in revenue excluding the effect of acquisitions and foreign currency translation to provide investors insight into underlying revenue trends.

Adjusted operating income, adjusted EBITDA, adjusted EBITDA margin, adjusted net income, and adjusted diluted EPS exclude acquisition costs, restructuring costs, other income, and expense related to acquired profit in inventory and backlog. 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 or income or none at all.

Adjusted operating income, adjusted EBITDA, and adjusted EBITDA margin exclude:

• Pre-tax gain on the sale of assets of $0.3 million in 2016 and pre-tax restructuring costs of $0.5 million in 2015.

• Pre-tax acquisition costs of $1.8 million in 2016.

• Pre-tax expense related to acquired profit in inventory and backlog of $1.9 million in 2016 and $0.2 million in 2015.

Adjusted net income and adjusted diluted EPS exclude:

• After-tax gain on the sale of assets of $0.2 million ($0.3 million net of tax of $0.1 million) in 2016 and after-tax restructuring costs of $0.4 million ($0.5 million net of tax of $0.1 million) in 2015.

• After-tax acquisition costs of $1.6 million ($1.8 million net of tax of $0.2 million) in 2016.

• After-tax expense related to acquired profit in inventory and backlog of $1.4 million ($1.9 million net of tax of $0.5 million) in 2016 and $0.1 million ($0.2 million net of tax of $0.1 million) in 2015.

• A benefit from discrete tax items of $0.3 million in 2016. The benefit from discrete tax items was primarily due to the reversal of valuation allowances on certain deferred tax assets in the U.S.

We also report free cash flows, which is calculated as cash flows from continuing operations less capital expenditures of $5.8 million in 2016 and $5.5 million in 2015. This measure provides a view of the continuing operations’ ability to generate cash for use in acquisitions and other investing and financing activities.

Reconciliations of the non-GAAP financial measures to the most directly comparable GAAP financial measures are set forth in this press release.

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Financial Highlights (unaudited)
(In thousands, except per share amounts and percentages)
			Three Months Ended						Twelve Months Ended
Consolidated Statement of Income			Dec. 31, 2016			Jan. 2, 2016			Dec. 31, 2016			Jan. 2, 2016
Revenues			$	100,241		$	107,600		$	414,126		$	390,107
Costs and Operating Expenses:
	Cost of revenues		54,168			61,207			225,737			209,982
	Selling, general, and administrative expenses		33,658			30,324			135,753			122,814
	Research and development expenses		1,740			1,430			7,380			6,677
	Restructuring costs and other income		—			215			(317		)	515
			89,566			93,176			368,553			339,988
Operating Income			10,675			14,424			45,573			50,119
Interest Income			94			50			269			200
Interest Expense			(379		)	(247		)	(1,293		)	(948		)
Income from Continuing Operations Before Provision
	for Income Taxes		10,390			14,227			44,549			49,371
Provision for Income Taxes			2,583			3,798			12,083			14,762
Income from Continuing Operations			7,807			10,429			32,466			34,609
Income from Discontinued Operation, Net of Tax			—			18			3			74
Net Income			7,807			10,447			32,469			34,683
Net Income Attributable to Noncontrolling Interest			(74		)	(62		)	(392		)	(294		)
Net Income Attributable to Kadant			$	7,733		$	10,385		$	32,077		$	34,389
Earnings per Share Attributable to Kadant:
		Basic	$	0.71		$	0.96		$	2.95		$	3.16
		Diluted	$	0.69		$	0.94		$	2.88		$	3.10
Weighted Average Shares:
		Basic	10,915			10,767			10,869			10,867
		Diluted	11,236			11,021			11,149			11,094
			Three Months Ended						Three Months Ended
Adjusted Net Income and Adjusted Diluted EPS (b)			Dec. 31, 2016			Dec. 31, 2016			Jan. 2, 2016			Jan. 2, 2016
Net Income and Diluted EPS Attributable to Kadant, as Reported			$	7,733		$	0.69		$	10,385		$	0.94
Net Income and Diluted EPS from Discontinued Operation			—			—			(18		)	—
Net Income and Diluted EPS from Continuing Operations, as Reported			7,733			0.69			10,367			0.94
Adjustments for the Following:
	Restructuring Costs, Net of Tax		—						142			0.01
Adjusted Net Income and Adjusted Diluted EPS			$	7.733		$	0.69		$	10,509		$	0.95

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		Twelve Months Ended						Twelve Months Ended
		Dec. 31, 2016			Dec. 31, 2016			Jan. 2, 2016			Jan. 2, 2016
Net Income and Diluted EPS Attributable to Kadant, as Reported		$	32,077		$	2.88		$	34,389		$	3.10
Net Income and Diluted EPS from Discontinued Operation		(3		)	—			(74		)	(0.01		)
Net Income and Diluted EPS from Continuing Operations, as Reported		32,074			2.88			34,315			3.09
Adjustments for the Following:
	Acquisition Costs, Net of Tax	1,625			0.15			—			—
	Amortization of Acquired Profit in Inventory and Backlog, Net of Tax	1,359			0.12			104			0.01
	Benefit from Discrete Tax Items	(261		)	(0.02		)	—
	Restructuring Costs and Other Income, Net of Tax	(247		)	(0.02		)	351			0.03
Adjusted Net Income and Adjusted Diluted EPS		$	34,550		$	3.10		$	34,770		$	3.13
											Increase
											(Decrease)
											Excluding Effect
		Three Months Ended						Increase (Decrease)			of Currency
Revenues by Product Line		Dec. 31, 2016			Jan. 2, 2016						Translation (a,b)
Stock-Preparation		$	39,220		$	46,716		$	(7,496	)	$	(7,020	)
Doctoring, Cleaning, & Filtration		25,564			24,379			1,185			2,098
Fluid-Handling		21,241			23,497			(2,256		)	(1,985		)
	Papermaking Systems	86,025			94,592			(8,567		)	(6,907		)
	Wood Processing Systems	11,413			10,477			936			936
	Fiber-Based Products	2,803			2,531			272			272
		$	100,241		$	107,600		$	(7,359	)	$	(5,699	)
											Increase
											(Decrease)
											Excluding Effect
		Twelve Months Ended						Increase (Decrease)			of Currency
		Dec. 31, 2016			Jan. 2, 2016						Translation (a,b)
Stock-Preparation		$	171,378		$	148,341		$	23,037		$	24,631
Doctoring, Cleaning, & Filtration		105,938			101,523			4,415			8,111
Fluid-Handling		89,145			92,797			(3,652		)	(1,866		)
	Papermaking Systems	366,461			342,661			23,800			30,876
	Wood Processing Systems	36,850			36,387			463			1,780
	Fiber-Based Products	10,815			11,059			(244		)	(244		)
		$	414,126		$	390,107		$	24,019		$	32,412

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									Increase
									(Decrease)
									Excluding Effect
		Three Months Ended				Increase (Decrease)			of Currency
Sequential Revenues by Product Line		Dec. 31, 2016		Oct. 1, 2016					Translation (a,b)
Stock-Preparation		$	39,220	$	44,099	$	(4,879	)	$	(4,035	)
Doctoring, Cleaning, & Filtration		25,564		28,955		(3,391		)	(2,855		)
Fluid-Handling		21,241		23,024		(1,783		)	(1,352		)
	Papermaking Systems	86,025		96,078		(10,053		)	(8,242		)
	Wood Processing Systems	11,413		7,962		3,451			3,721
	Fiber-Based Products	2,803		1,479		1,324			1,324
		$	100,241	$	105,519	$	(5,278	)	$	(3,197	)
									Increase
									(Decrease)
									Excluding Effect
		Three Months Ended				Increase (Decrease)			of Currency
Revenues by Geography (c)		Dec. 31, 2016		Jan. 2, 2016					Translation (a,b)
North America		$	47,430	$	53,325	$	(5,895	)	$	(5,516	)
Europe		29,622		20,736		8,886			9,450
Asia		17,247		26,701		(9,454		)	(8,427		)
Rest of World		5,942		6,838		(896		)	(1,206		)
		$	100,241	$	107,600	$	(7,359	)	$	(5,699	)
									Increase
									(Decrease)
									Excluding Effect
		Twelve Months Ended				Increase (Decrease)			of Currency
		Dec. 31, 2016		Jan. 2, 2016					Translation (a,b)
North America		$	203,063	$	224,480	$	(21,417	)	$	(19,086	)
Europe		115,233		73,077		42,156			43,325
Asia		62,703		65,750		(3,047		)	339
Rest of World		33,127		26,800		6,327			7,834
		$	414,126	$	390,107	$	24,019		$	32,412
									Increase
									(Decrease)
									Excluding Effect
		Three Months Ended				Increase (Decrease)			of Currency
Sequential Revenues by Geography (c)		Dec. 31, 2016		Oct. 1, 2016					Translation (a,b)
North America		$	47,430	$	46,994	$	436		$	781
Europe		29,622		31,686		(2,064		)	(978		)
Asia		17,247		18,466		(1,219		)	(691		)
Rest of World		5,942		8,373		(2,431		)	(2,309		)
		$	100,241	$	105,519	$	(5,278	)	$	(3,197	)

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												Increase
												(Decrease)
												Excluding Effect
			Three Months Ended						Increase (Decrease)			of Currency
Bookings by Product Line			Dec. 31, 2016			Jan. 2, 2016						Translation (a)
Stock-Preparation			$	55,648		$	23,090		$	32,558		$	33,752
Doctoring, Cleaning, & Filtration			23,923			20,918			3,005			3,845
Fluid-Handling			19,360			19,662			(302		)	(42		)
	Papermaking Systems		98,931			63,670			35,261			37,555
	Wood Processing Systems		11,202			8,709			2,493			2,493
	Fiber-Based Products		3,477			3,159			318			318
			$	113,610		$	75,538		$	38,072		$	40,366
												Increase
												(Decrease)
												Excluding Effect
			Twelve Months Ended						Increase (Decrease)			of Currency
			Dec. 31, 2016			Jan. 2, 2016						Translation (a)
Stock-Preparation			$	158,876		$	138,108		$	20,768		$	23,113
Doctoring, Cleaning, & Filtration			110,064			98,593			11,471			15,288
Fluid-Handling			85,696			91,943			(6,247		)	(4,749		)
	Papermaking Systems		354,636			328,644			25,992			33,652
	Wood Processing Systems		38,183			37,309			874			2,327
	Fiber-Based Products		10,641			10,140			501			501
			$	403,460		$	376,093		$	27,367		$	36,480
			Three Months Ended						Twelve Months Ended
Business Segment Information			Dec. 31, 2016			Jan. 2, 2016			Dec. 31, 2016			Jan. 2, 2016
Gross Margin:
		Papermaking Systems	46.7		%	42.7		%	45.9		%	45.9		%
		Other	41.2		%	46.1		%	42.2		%	48.3		%
			46.0		%	43.1		%	45.5		%	46.2		%
Operating Income:
		Papermaking Systems	$	12,680		$	15,230		$	57,427		$	56,789
		Corporate and Other	(2,005		)	(806		)	(11,854		)	(6,670		)
			$	10,675		$	14,424		$	45,573		$	50,119
Adjusted Operating Income (b) (g):
		Papermaking Systems	$	12,680		$	15,445		$	60,601		$	57,492
		Corporate and Other	(2,005		)	(806		)	(11,587		)	(6,670		)
			$	10,675		$	14,639		$	49,014		$	50,822
Capital Expenditures:
		Papermaking Systems	$	2,163		$	1,227		$	5,504		$	4,639
		Corporate and Other	62			184			300			840
			$	2,225		$	1,411		$	5,804		$	5,479

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		Three Months Ended				Twelve Months Ended
Cash Flow and Other Data		Dec. 31, 2016		Jan. 2, 2016		Dec. 31, 2016			Jan. 2, 2016
Cash Provided by Operations (h)		$	16,261	$	12,330	$	51,000		$	40,410
Depreciation and Amortization Expense		3,392		2,574		14,326			10,821
						Twelve Months Ended
Free Cash Flow Reconciliation						Dec. 31, 2016			Jan. 2, 2016
Cash Provided by Operations, as Reported						$	51,000		$	40,410
Capital Expenditures						(5,804		)	(5,479		)
Free Cash Flow (b)						$	45,196		$	34,931
Balance Sheet Data						Dec. 31, 2016			Jan. 2, 2016
Assets
Cash, Cash Equivalents, and Restricted Cash						$	73,569		$	66,936
Accounts Receivable, net						65,963			64,321
Inventories						54,951			56,758
Unbilled Contract Costs and Fees						3,068			6,580
Other Current Assets						9,799			10,525
Property, Plant and Equipment, net						47,704			42,293
Intangible Assets						52,730			38,032
Goodwill						151,455			119,051
Other Assets						11,452			11,002
						$	470,691		$	415,498
Liabilities and Stockholders' Equity
Accounts Payable						$	23,929		$	24,418
Short- and Long-term Debt						61,494			31,250
Capital Lease Obligations						4,917			—
Other Liabilities						96,072			91,885
	Total Liabilities					186,412			147,553
	Stockholders' Equity					284,279			267,945
						$	470,691		$	415,498

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Adjusted Operating Income and Adjusted EBITDA		Three Months Ended						Twelve Months Ended
Reconciliation		Dec. 31, 2016			Jan. 2, 2016			Dec. 31, 2016			Jan. 2, 2016
Consolidated
	Net Income Attributable to Kadant	$	7,733		$	10,385		$	32,077		$	34,389
	Net Income Attributable to Noncontrolling Interest	74			62			392			294
	Income from Discontinued Operation, Net of Tax	—			(18		)	(3		)	(74		)
	Provision for Income Taxes	2,583			3,798			12,083			14,762
	Interest Expense, net	285			197			1,024			748
	Operating Income	10,675			14,424			45,573			50,119
	Restructuring Costs and Other Income	—			215			(317		)	515
	Acquisition Costs (d)	—			—			1,832			—
	Acquired Backlog Amortization (e)	—			—			1,468			107
	Acquired Profit in Inventory (f)	—			—			458			81
	Adjusted Operating Income (b)	10,675			14,639			49,014			50,822
	Depreciation and Amortization	3,392			2,574			12,858			10,714
	Adjusted EBITDA (b)	$	14,067		$	17,213		$	61,872		$	61,536
Papermaking Systems
	Operating Income	$	12,680		$	15,230		$	57,427		$	56,789
	Restructuring Costs and Other Income	—			215			(317		)	515
	Acquisition Costs (d)	—			—			1,565			—
	Acquired Backlog Amortization (e)	—			—			1,468			107
	Acquired Profit in Inventory (f)	—			—			458			81
	Adjusted Operating Income (b)	12,680			15,445			60,601			57,492
	Depreciation and Amortization	2,686			1,875			10,045			7,791
	Adjusted EBITDA (b)	$	15,366		$	17,320		$	70,646		$	65,283
Corporate and Other
	Operating Loss	$	(2,005	)	$	(806	)	$	(11,854	)	$	(6,670	)
	Acquisition Costs (d)	—			—			267			—
	Adjusted Operating Loss (b)	(2,005		)	(806		)	(11,587		)	(6,670		)
	Depreciation and Amortization	706			699			2,813			2,923
	Adjusted EBITDA (b)	$	(1,299	)	$	(107	)	$	(8,774	)	$	(3,747	)
(a)	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.
(b)	Represents a non-GAAP financial measure.
(c)	Geographic revenues are attributed to regions based on customer location.
(d)	Represents transaction costs related to our acquisition of RT Holding GmbH, the parent corporation of a group of companies known as the PAALGROUP.
(e)	Represents intangible amortization expense associated with acquired backlog.
(f)	Represents expense within cost of revenues associated with acquired profit in inventory.
(g)	See reconciliation to the most directly comparable GAAP financial measure under "Adjusted Operating Income and Adjusted EBITDA Reconciliation."
(h)	Prior period amounts have been restated to conform to the current period presentation as a result of the adoption of the Financial Accounting Standards Board's Accounting Standards Update No. 2016-09.

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About Kadant

Kadant Inc. is a global supplier of high-value, critical components and engineered systems used in process industries worldwide. The Company’s products, technologies, and services play an integral role in enhancing process efficiency, optimizing energy utilization, and maximizing productivity in resource-intensive industries. Kadant is based in Westford, Massachusetts, with 2,000 employees in 18 countries worldwide. For more information, visit www.kadant.com.

Safe Harbor Statement

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 future financial and operating performance, demand for our products, and economic and industry outlook. 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 annual report on Form 10-K for the year ended January 2, 2016 and subsequent filings with the Securities and Exchange Commission. These include risks and uncertainties relating to adverse changes in global and local economic conditions; the variability and difficulty in accurately predicting revenues from large capital equipment and systems projects; the variability and uncertainties in sales of capital equipment in China; currency fluctuations; our customers’ ability to obtain financing for capital equipment projects; changes in government regulations and policies; the oriented strand board market and levels of residential construction activity; development and use of digital media; price increases or shortages of raw materials; dependence on certain suppliers; international sales and operations; economic conditions and regulatory changes caused by the United Kingdom’s likely exit from the European Union; disruption in production; our acquisition strategy; our internal growth strategy; competition; soundness of suppliers and customers; our effective tax rate; future restructurings; soundness of financial institutions; our debt obligations; restrictions in our credit agreement; loss of key personnel; reliance on third-party research; 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.

Contacts

Investor Contact Information:

Michael McKenney, 978-776-2000

mike.mckenney@kadant.com

or

Media Contact Information:

Wes Martz, 269-278-1715

wes.martz@kadant.com

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