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): July 28, 2010
KADANT INC.
(Exact Name of Registrant as Specified in its Charter)
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Delaware
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1-11406
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52-1762325
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(State or Other Jurisdiction
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(Commission File Number)
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(IRS Employer
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of Incorporation)
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Identification No.)
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One Technology Park Drive
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Westford, Massachusetts
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01886
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(Address of Principal Executive Offices)
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(Zip Code)
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(978) 776-2000
Registrant's telephone number, including area code
Not Applicable
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:
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o
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Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
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Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
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o
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Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
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Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
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KADANT INC.
Item 2.02 Results of Operations and Financial Condition.
On July 28, 2010, Kadant Inc. (the “Company”) announced its financial results for the fiscal quarter ended July 3, 2010. 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.
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(c) Exhibit
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The following exhibit relating to Item 2.02 shall be deemed to be furnished and not filed.
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Exhibit
No
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Description of Exhibit
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99
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Press Release issued by the Company on July 28, 2010
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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.
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KADANT INC.
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Date: July 28, 2010
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By
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/s/ Thomas M. O’Brien
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Thomas M. O’Brien
Executive Vice President and
Chief Financial Officer
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3
Exhibit 99
NEWS
[LOGO]
0;
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 Results for Second Quarter 2010
and Raises Full Year 2010 EPS Guidance
WESTFORD, Mass., July 28, 2010 – Kadant Inc. (NYSE:KAI) reported revenues from continuing operations of $69.1 million in the second quarter of 2010, an increase of $19.0 million, or 38 percent, compared to $50.1 million in the second quarter of 2009. Revenues in the second quarter of 2010 included a $0.7 million, or 1 percent, decrease from foreign currency translation compared to the second quarter of 2009. Operating income from continuing operations in the second quarter of 2010 was $7.3 million compared to a loss of $1.2 million in the second quarter of 2009. Operating loss in the second quarter of 2009 included restructuring costs of $1.0 million. Net income in the second quarter of 2010 was $5.2 million, or $.42 per diluted share, versus a net loss of $1.2 million, or $.10 per diluted share, in the second quarter of 2009. Net l
oss in the second quarter of 2009 included after-tax restructuring costs of $0.7 million, or $.06 per diluted share.
“Our performance in the second quarter met or exceeded our expectations in several key areas,” said Jonathan W. Painter, president and chief executive officer of Kadant. “Diluted EPS was $.42 in the second quarter of 2010, compared to our GAAP diluted EPS guidance of $.38 to $.40. Our reported diluted EPS included $.02 of incremental tax provision due to a higher effective tax rate compared to our guidance and $.01 of expenses related to a small acquisition we completed earlier this month. Our stronger EPS results were largely due to higher product gross margins which, at 45 percent, were the highest quarterly margins in the company’s history. Gross margins were higher than last year’s quarter in both our capital and aftermarket products and reflected better ma
rgins on capital projects as well as lower manufacturing costs resulting from the restructuring efforts we undertook in 2009.
“Revenues of $69.1 million were at the high end of our guidance, which was $67 to $69 million, and were up 38 percent over the second quarter of 2009, including a 66 percent increase in water management revenues. Revenues in this product line were at their highest level since the fourth quarter of 2006, and were particularly strong in both capital and aftermarket products in North America.
“Our working capital management continued to improve and our cash results were also encouraging. Operating cash flows were $9.0 million in the second quarter, an increase of 86 percent over the second quarter of 2009. We ended the quarter with a net cash position of over $24 million, or approximately $1.93 per diluted share.
“Bookings also exceeded our expectations. Bookings in the second quarter were $74 million, up 57 percent over the second quarter of 2009 and 6 percent over the first quarter of 2010. The sequential increase was largely due to several large stock preparation system orders, while our bookings for parts and consumables were down 6 percent sequentially. Sequential bookings in our fluid-handling and accessories product lines declined 14 percent and 7 percent, respectively, supporting our earlier view of a weaker second half of 2010.
“Overall, we had an outstanding first half of 2010, but as we look at the second half of the year we expect several key factors to influence our results. We expect a slowdown in bookings from the levels in the first half, which we believe included some pent-up demand from earlier periods. Also, we believe that gross margins will decline from the first half levels partly due to an unfavorable product mix in the second half of the year. And finally, our higher effective tax rate has the effect of lowering diluted EPS by $.04 for the year
-more-
compared to our previous guidance. As a result, we expect to report GAAP diluted EPS of $.21 to $.23 from continuing operations in the third quarter of 2010 on revenues of $60 to $62 million. For the full year, we expect to achieve GAAP diluted EPS of $1.20 to $1.25 from continuing operations, revised from our previous estimate of $1.10 to $1.20, on revenues of $255 to $260 million, revised from our previous estimate of $255 to $265 million.”
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 foreign currency translation, adjusted operating income, earnings before interest, taxes, depreciation, and amortization (EBITDA), and adjusted EBITDA.
We present increases or decreases in revenues excluding the effect of foreign currency translation to provide investors insight into underlying revenue trends. In addition, we exclude from certain financial measures restructuring costs and certain gains and losses to give investors additional insight into our quarterly and annual operating performance, especially when compared to quarters in which such items had greater or lesser effect, or no effect. In addition, these items are excluded as they are either isolated or cannot be expected to occur again with any regularity or predictability and we believe are not indicative of our normal operating results.
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 a better 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 responsi
ve 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.
Adjusted EBITDA and adjusted operating income in the six-month period ended July 3, 2010 exclude net pre-tax gains of $0.3 million, including restructuring costs of $0.2 million, net of gains of $0.5 million from the sale of assets and a curtailment of a pension liability. Adjusted EBITDA and adjusted operating income exclude restructuring costs of $1.0 million and $1.8 million in the three and six-month periods ended July 4, 2009, respectively.
Reconciliations of the non-GAAP financial measures to the most directly comparable GAAP financial measures are set forth in the accompanying tables.
Conference Call
Kadant will hold its earnings conference call on Thursday, July 29, 2010, at 11 a.m. Eastern time. To listen, call 800-709-2159 within the U.S., or 973-582-2810 outside the U.S. Please reference Event ID number 86959297. You can also listen to the call live on the Web by visiting www.kadant.com and clicking on “Investors.” An audio archive of the call will be available on our Web site until August 27, 2010.
-more-
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Financial Highlights (unaudited)
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(In thousands, except per share amounts and percentages)
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Three Months Ended
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Six Months Ended
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Consolidated Statement of Operations
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July 3, 2010
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July 4, 2009
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July 3, 2010
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July 4, 2009
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Revenues
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$ | 69,136 | $ | 50,132 | $ | 130,257 | $ | 115,089 | ||||||||
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Costs and Operating Expenses:
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Cost of revenues
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37,968 | 29,348 | 72,214 | 69,665 | ||||||||||||
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Selling, general, and administrative expenses
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22,681 | 19,248 | 43,805 | 41,453 | ||||||||||||
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Research and development expenses
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1,206 | 1,722 | 2,578 | 3,192 | ||||||||||||
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Restructuring costs and other income, net (a)
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(21 | ) | 1,013 | (323 | ) | 1,770 | ||||||||||
| 61,834 | 51,331 | 118,274 | 116,080 | |||||||||||||
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Operating Income (Loss)
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7,302 | (1,199 | ) | 11,983 | (991 | ) | ||||||||||
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Interest Income
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32 | 92 | 70 | 299 | ||||||||||||
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Interest Expense
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(339 | ) | (507 | ) | (697 | ) | (1,320 | ) | ||||||||
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Income (Loss) from Continuing Operations before Income
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Tax Provision (Benefit)
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6,995 | (1,614 | ) | 11,356 | (2,012 | ) | ||||||||||
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Income Tax Provision (Benefit)
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1,717 | (398 | ) | 2,433 | 2,066 | |||||||||||
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Income (Loss) from Continuing Operations
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5,278 | (1,216 | ) | 8,923 | (4,078 | ) | ||||||||||
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Loss from Discontinued Operation, Net of Tax
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(5 | ) | (5 | ) | (9 | ) | (9 | ) | ||||||||
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Net Income (Loss)
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5,273 | (1,221 | ) | 8,914 | (4,087 | ) | ||||||||||
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Net Loss (Income) Attributable to Noncontrolling Interest
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(53 | ) | 28 | (83 | ) | 3 | ||||||||||
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Net Income (Loss) Attributable to Kadant
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$ | 5,220 | $ | (1,193 | ) | $ | 8,831 | $ | (4,084 | ) | ||||||
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Amounts Attributable to Kadant:
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Income (Loss) from Continuing Operations
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$ | 5,225 | $ | (1,188 | ) | $ | 8,840 | $ | (4,075 | ) | ||||||
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Loss from Discontinued Operation, Net of Tax
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(5 | ) | (5 | ) | (9 | ) | (9 | ) | ||||||||
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Net Income (Loss) Attributable to Kadant
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$ | 5,220 | $ | (1,193 | ) | $ | 8,831 | $ | (4,084 | ) | ||||||
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Basic and Diluted Earnings (Loss) per Share from Continuing
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Operations Attributable to Kadant
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$ | .42 | $ | (.10 | ) | $ | .71 | $ | (.33 | ) | ||||||
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Basic and Diluted Earnings (Loss) per Share Attributable
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to Kadant
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$ | .42 | $ | (.10 | ) | $ | .71 | $ | (.33 | ) | ||||||
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Weighted Average Shares
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Basic
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12,426 | 12,265 | 12,418 | 12,386 | ||||||||||||
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Diluted
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12,549 | 12,265 | 12,521 | 12,386 | ||||||||||||
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Increase
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Excluding Effect
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Three Months Ended
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of Currency
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Revenues by Product Line
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July 3, 2010
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July 4, 2009
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Increase
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Translation (b,d)
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Stock-Preparation Equipment
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$ | 25,004 | $ | 16,444 | $ | 8,560 | $ | 9,132 | ||||||||
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Fluid-Handling
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20,070 | 15,101 | 4,969 | 4,997 | ||||||||||||
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Accessories
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12,711 | 10,877 | 1,834 | 1,952 | ||||||||||||
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Water-Management
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8,567 | 5,151 | 3,416 | 3,385 | ||||||||||||
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Other
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601 | 422 | 179 | 146 | ||||||||||||
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Pulp and Papermaking Systems Segment
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66,953 | 47,995 | 18,958 | 19,612 | ||||||||||||
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Other (c)
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2,183 | 2,137 | 46 | 46 | ||||||||||||
| $ | 69,136 | $ | 50,132 | $ | 19,004 | $ | 19,658 | |||||||||
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Increase
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(Decrease)
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Excluding Effect
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Six Months Ended
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Increase
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of Currency
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July 3, 2010
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July 4, 2009
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(Decrease)
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Translation (b,d)
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Stock-Preparation Equipment
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$ | 42,759 | $ | 45,618 | $ | (2,859 | ) | $ | (2,738 | ) | ||||||
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Fluid-Handling
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40,135 | 30,838 | 9,297 | 8,238 | ||||||||||||
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Accessories
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25,206 | 22,404 | 2,802 | 2,331 | ||||||||||||
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Water-Management
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15,071 | 10,286 | 4,785 | 4,531 | ||||||||||||
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Other
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1,251 | 836 | 415 | 310 | ||||||||||||
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Pulp and Papermaking Systems Segment
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124,422 | 109,982 | 14,440 | 12,672 | ||||||||||||
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Other (c)
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5,835 | 5,107 | 728 | 728 | ||||||||||||
| $ | 130,257 | $ | 115,089 | $ | 15,168 | $ | 13,400 | |||||||||
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Three Months Ended
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Increase
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Sequential Revenues by Product Line
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July 3, 2010
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April 3, 2010
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(Decrease)
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Stock-Preparation Equipment
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$ | 25,004 | $ | 17,755 | $ | 7,249 | ||||||
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Fluid-Handling
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20,070 | 20,065 | 5 | |||||||||
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Accessories
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12,711 | 12,495 | 216 | |||||||||
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Water-Management
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8,567 | 6,504 | 2,063 | |||||||||
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Other
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601 | 650 | (49 | ) | ||||||||
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Pulp and Papermaking Systems Segment
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66,953 | 57,469 | 9,484 | |||||||||
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Other (c)
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2,183 | 3,652 | (1,469 | ) | ||||||||
| $ | 69,136 | $ | 61,121 | $ | 8,015 | |||||||
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Three Months Ended
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Six Months Ended
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Business Segment Information (c)
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July 3, 2010
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July 4, 2009
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July 3, 2010
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July 4, 2009
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Revenues:
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Pulp and Papermaking Systems
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$ | 66,953 | $ | 47,995 | $ | 124,422 | $ | 109,982 | ||||||||
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Other
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2,183 | 2,137 | 5,835 | 5,107 | ||||||||||||
| $ | 69,136 | $ | 50,132 | $ | 130,257 | $ | 115,089 | |||||||||
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Gross Profit Margin:
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Pulp and Papermaking Systems
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45 | % | 41 | % | 44 | % | 40 | % | ||||||||
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Other
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51 | % | 45 | % | 51 | % | 39 | % | ||||||||
| 45 | % | 41 | % | 45 | % | 39 | % | |||||||||
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Operating Income (Loss):
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Pulp and Papermaking Systems
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$ | 10,895 | $ | 700 | $ | 17,199 | $ | 3,582 | ||||||||
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Corporate and Other
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(3,593 | ) | (1,899 | ) | (5,216 | ) | (4,573 | ) | ||||||||
| $ | 7,302 | $ | (1,199 | ) | $ | 11,983 | $ | (991 | ) | |||||||
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Adjusted Operating Income (Loss) (d):
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Pulp and Papermaking Systems
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$ | 10,874 | $ | 1,713 | $ | 16,876 | $ | 5,352 | ||||||||
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Corporate and Other
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(3,593 | ) | (1,899 | ) | (5,216 | ) | (4,573 | ) | ||||||||
| $ | 7,281 | $ | (186 | ) | $ | 11,660 | $ | 779 | ||||||||
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Bookings from Continuing Operations:
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Pulp and Papermaking Systems
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$ | 72,811 | $ | 45,586 | $ | 139,779 | $ | 90,852 | ||||||||
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Other
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1,445 | 1,735 | 4,664 | 4,826 | ||||||||||||
| $ | 74,256 | $ | 47,321 | $ | 144,443 | $ | 95,678 | |||||||||
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Capital Expenditures from Continuing Operations:
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Pulp and Papermaking Systems
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$ | 534 | $ | 743 | $ | 1,060 | $ | 1,855 | ||||||||
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Corporate and Other
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219 | 140 | 232 | 185 | ||||||||||||
| $ | 753 | $ | 883 | $ | 1,292 | $ | 2,040 | |||||||||
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Three Months Ended
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Six Months Ended
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Cash Flow and Other Data from Continuing Operations
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July 3, 2010
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July 4, 2009
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July 3, 2010
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July 4, 2009
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Cash Provided by Operations
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$ | 8,963 | $ | 4,820 | $ | 8,408 | $ | 18,587 | ||||||||
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Depreciation and Amortization Expense
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1,697 | 1,876 | 3,355 | 3,719 | ||||||||||||
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Balance Sheet Data
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July 3, 2010
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Jan. 2, 2010
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Assets
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Cash and Cash Equivalents
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$ | 47,206 | $ | 45,675 | ||||
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Accounts Receivable, net
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39,355 | 36,436 | ||||||
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Inventories
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40,903 | 37,435 | ||||||
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Unbilled Contract Costs and Fees
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4,416 | 3,370 | ||||||
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Other Current Assets
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7,424 | 8,355 | ||||||
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Property, Plant and Equipment, net
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36,400 | 38,415 | ||||||
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Intangible Assets
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26,443 | 28,071 | ||||||
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Goodwill
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92,670 | 97,622 | ||||||
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Other Assets
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11,528 | 12,277 | ||||||
| $ | 306,345 | $ | 307,656 | |||||
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Liabilities and Shareholders' Investment
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Accounts Payable
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$ | 21,877 | $ | 17,612 | ||||
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Short- and Long-term Debt
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23,000 | 23,250 | ||||||
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Other Liabilities
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67,189 | 72,763 | ||||||
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Total Liabilities
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$ | 112,066 | $ | 113,625 | ||||
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Shareholders' Investment
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$ | 194,279 | $ | 194,031 | ||||
| $ | 306,345 | $ | 307,656 | |||||
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Three Months Ended
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Six Months Ended
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EBITDA Data
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July 3, 2010
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July 4, 2009
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July 3, 2010
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July 4, 2009
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Consolidated
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Net Income (Loss) Attributable to Kadant
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$ | 5,220 | $ | (1,193 | ) | $ | 8,831 | $ | (4,084 | ) | ||||||
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Net Income (Loss) Attributable to Noncontrolling Interest
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53 | (28 | ) | 83 | (3 | ) | ||||||||||
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Loss from Discontinued Operation, Net of Tax
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5 | 5 | 9 | 9 | ||||||||||||
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Income Tax Provision (Benefit)
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1,717 | (398 | ) | 2,433 | 2,066 | |||||||||||
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Interest Expense, net
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307 | 415 | 627 | 1,021 | ||||||||||||
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Restructuring costs and other income, net (a)
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(21 | ) | 1,013 | (323 | ) | 1,770 | ||||||||||
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Adjusted Operating Income (Loss) (d)
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7,281 | (186 | ) | 11,660 | 779 | |||||||||||
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Depreciation and Amortization
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1,697 | 1,876 | 3,355 | 3,719 | ||||||||||||
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Adjusted EBITDA (d)
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$ | 8,978 | $ | 1,690 | $ | 15,015 | $ | 4,498 | ||||||||
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Pulp and Papermaking Systems
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GAAP Operating Income
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$ | 10,895 | $ | 700 | $ | 17,199 | $ | 3,582 | ||||||||
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Restructuring costs and other income, net (a)
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(21 | ) | 1,013 | (323 | ) | 1,770 | ||||||||||
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Adjusted Operating Income (Loss) (d)
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10,874 | 1,713 | 16,876 | 5,352 | ||||||||||||
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Depreciation and Amortization
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1,578 | 1,759 | 3,119 | 3,488 | ||||||||||||
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Adjusted EBITDA (d)
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$ | 12,452 | $ | 3,472 | $ | 19,995 | $ | 8,840 | ||||||||
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Corporate and Other (c)
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||||||||||||||||
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GAAP Operating Loss
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$ | (3,593 | ) | $ | (1,899 | ) | $ | (5,216 | ) | $ | (4,573 | ) | ||||
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Depreciation and Amortization
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119 | 117 | 236 | 231 | ||||||||||||
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EBITDA (d)
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$ | (3,474 | ) | $ | (1,782 | ) | $ | (4,980 | ) | $ | (4,342 | ) | ||||
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(a)
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Includes pre-tax restructuring costs of $198, net of a pre-tax gain of $219, in the three-month period ended July 3, 2010 and pre-tax restructuring costs of $1,013 in the three-month period ended July 4, 2009. Includes pre-tax restructuring costs of $181, net of a pre-tax gain of $504, in the six-month period ended July 3, 2010 and pre-tax restructuring costs of $1,770 in the six-month period ended July 4, 2009.
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(b)
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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.
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(c)
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"Other" includes the results from the Fiber-based Products business.
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(d)
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Represents a non-GAAP financial measure.
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About Kadant
Kadant Inc. is a leading supplier to the global pulp and paper industry, with a range of products and services for improving efficiency and quality in pulp and paper production, including paper machine accessories and systems for stock preparation, fluid handling, and water management. Our fluid-handling products are also used to optimize production in the steel, rubber, plastics, food, and textile 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 $226 million in 2009 and 1,600 employees in 16 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, and industry and economic outlook. Important factors that could cause actual results to differ materially from those indicated by such statements are set forth under the heading “Risk Factors” in Kadant’s quarterly report on Form 10-Q for the period ended April 3, 2010. 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; international sales and operations;
competition; soundness of suppliers and customers; our debt obligations; restrictions in our credit agreement; soundness of financial institutions; litigation and warranty costs related to our discontinued operation; our acquisition strategy; future restructurings; factors influencing our fiber-based products business; protection of patents and proprietary rights; 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.
###