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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 15, 2018

KADANT INC.
(Exact Name of Registrant as Specified in its Charter)

Delaware
001-11406
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))
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
Emerging growth company ¨
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨




KADANT INC.

Item 2.02 Results of Operations and Financial Condition.

On February 15, 2018, Kadant Inc. (the “Company”) announced its financial results for the fiscal quarter and year ended December 30, 2017. 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
 
 
 

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 15, 2018
By
/s/ Michael J. McKenney
 
 
Michael J. McKenney
Senior Vice President and
   Chief Financial Officer

3


Exhibit
Exhibit 99
https://cdn.kscope.io/3b6e376e7dd4c9e85640650d399e8ff2-kadantlogoa16.jpg

KADANT INC.
One Technology Park Drive
Westford, MA 01886

NEWS

Kadant Reports Fourth Quarter and Fiscal Year 2017 Results
Record Revenue and Bookings in FY 2017

WESTFORD, Mass. - February 15, 2018 - Kadant Inc. (NYSE: KAI) reported its financial results for the fourth quarter and fiscal year ended December 30, 2017.
Fourth Quarter Financial Highlights
•
Revenue increased 49% to $149 million
•
Gross margin was 43.3% 
•
GAAP diluted EPS decreased to $0.07 compared to $0.69 in 2016
•
Adjusted diluted EPS increased 65% to $1.14
•
Net income decreased to $0.8 million compared to $8 million in 2016
•
Adjusted EBITDA increased 88% to $26 million
•
Bookings increased 29% to a record $147 million
•
Cash flows from operations increased 102% to a record $33 million

Fiscal Year Financial Highlights
•
Revenue increased 24% to a record $515 million
•
Gross margin was 44.9%
•
GAAP diluted EPS decreased 5% to $2.75
•
Adjusted diluted EPS increased 45% to a record $4.49
•
Net income decreased 3% to $31 million
•
Adjusted EBITDA increased 47% to a record $91 million
•
Bookings increased 29% to a record $521 million
•
Cash flows from operations increased 28% to a record $65 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
“The momentum that began in the first half of 2017 continued through the fourth quarter and led to record performance for the year in revenue, cash flows from operations, adjusted EBITDA, and adjusted diluted EPS,” said Jonathan W. Painter, president and chief executive officer. “We had excellent performance by our newly acquired businesses, as well as strong internal growth from our existing businesses.

“Favorable market conditions in all our major geographic regions contributed to record bookings in the fourth quarter. In particular, our Fluid-Handling product line had strong double-digit bookings growth in most geographic regions, and bookings for our parts and consumables increased over 30% to a record $90 million.

“While our GAAP diluted EPS was negatively impacted by the recent tax reform legislation enacted in the U.S. requiring a one-time tax charge primarily associated with the deemed repatriation of our unremitted foreign earnings, our fourth quarter adjusted diluted EPS was up 65 percent. This strong finish to the year helped make 2017 the best year in our history.”
 


Fourth Quarter 2017 Financials
Revenue increased 49 percent to $149.1 million compared to the fourth quarter of 2016, including $26.9 million from acquisitions and a $5.0 million increase from the favorable effect of foreign currency translation. Excluding the impact of acquisitions and foreign currency translation, revenue was up 17 percent compared to the fourth quarter of 2016. Gross margin was 43.3 percent, including a negative 120 basis point impact from the amortization of acquired profit in inventory. Net income was $0.8 million, or $0.07 per diluted share, compared to $7.7 million, or $0.69 per diluted share, in the fourth quarter of 2016. Adjusted diluted EPS increased 65 percent to $1.14 in the fourth quarter of 2017, compared to $0.69 in the fourth quarter of 2016. Adjusted diluted EPS in the fourth quarter of 2017 excludes $0.90 of discrete tax expense, $0.15 of amortization from acquired profit in inventory and backlog, $0.02 of acquisition costs, and $0.01 of restructuring costs. The discrete tax expense relates to the impact of the U.S. tax reform legislation enacted in December 2017. The largest component relates to tax expense for the deemed repatriation of unremitted foreign earnings. This was partially offset by a tax benefit related to adjusting U.S. deferred taxes to the lower enacted tax rate.

Adjusted EBITDA increased 88 percent to $26.5 million compared to $14.1 million in the fourth quarter of 2016. Adjusted EBITDA excludes $2.3 million of amortization from acquired profit in inventory and backlog, $0.4 million of acquisition costs, and $0.2 million of restructuring costs in the fourth quarter of 2017. Cash flows from operations increased to $32.8 million compared to $16.3 million in the fourth quarter of 2016. Bookings increased 29 percent to $146.6 million compared to $113.6 million in the fourth quarter of 2016 and includes $29.6 million from acquisitions and a $4.8 million increase from the favorable effect of foreign currency translation. Excluding the impact of acquisitions and foreign currency translation, bookings decreased one percent compared to the fourth quarter of 2016.

Fiscal Year 2017 Financials 
Revenue increased 24 percent to a record $515.0 million compared to 2016, including $69.4 million from acquisitions and a $3.8 million increase from the favorable effect of foreign currency translation. Excluding the impact of acquisitions and foreign currency translation, revenue was up 7 percent compared to 2016. Gross margin was 44.9 percent, including a negative 100 basis point impact from the amortization of acquired profit in inventory. Net income was $31.1 million, or $2.75 per diluted share, compared to $32.1 million, or $2.88 per diluted share, in 2016. Adjusted diluted EPS increased 45 percent to $4.49 in 2017, compared to $3.10 in 2016. Adjusted diluted EPS in 2017 excludes $0.90 of discrete tax expense, $0.43 of amortization from acquired profit in inventory and backlog, $0.39 of acquisition costs, and $0.01 of restructuring costs. Adjusted diluted EPS in 2016 excludes $0.15 of acquisition costs, $0.12 of amortization from acquired profit in inventory and backlog, a $0.02 gain on the sale of assets, and a $0.02 benefit from discrete tax items.

Adjusted EBITDA increased 47 percent to $90.8 million compared to $61.9 million in 2016. Adjusted EBITDA excludes $6.6 million of amortization from acquired profit in inventory and backlog, $5.4 million of acquisition costs, and $0.2 million of restructuring costs in 2017. Adjusted EBITDA excludes $1.9 million of amortization from acquired profit in inventory and backlog, $1.8 million of acquisition costs, and other income of $0.3 million in 2016. Cash flows from operations increased 28 percent to $65.2 million in 2017 compared to $51.0 million in 2016. Bookings increased 29 percent to a record $521.2 million compared to $403.5 million in 2016 and includes $62.7 million from acquisitions and a $2.2 million increase from the favorable effect of foreign currency translation. Excluding the impact of acquisitions and foreign currency translation, bookings increased 13 percent compared to 2016.



Summary and Outlook
“The favorable economic conditions in most parts of the world and our solid bookings trend puts us in a strong position for 2018,” Mr. Painter continued. “Our integration activities with our recent acquisitions are progressing well, and we are encouraged by the potential for a positive capital investment environment in the U.S. created by the enactment of the Tax Cuts and Jobs Act.

“We expect 2018 to be a record year for both revenue and diluted EPS driven by solid internal growth, as well as contributions from our recent acquisitions. Based on our current visibility, we expect to report full year GAAP diluted EPS of $4.74 to $4.84 on revenue of $605 million to $615 million. The 2018 guidance includes pre-tax restructuring costs of $1.7 million, or $0.11 per diluted share, discrete tax expense of $0.9 million, or $0.08 per diluted share, and pre-tax amortization expense associated with acquired backlog of $0.2 million, or $0.02 per diluted share. Excluding these expenses, we expect adjusted diluted EPS of $4.95 to $5.05 for 2018. For the first quarter of 2018, we expect GAAP diluted EPS of $0.77 to $0.81 on revenue of $143 million to $146 million. The first quarter of 2018 guidance includes pre-tax restructuring costs of $1.1 million, or $0.07 per diluted share, discrete tax expense of $0.9 million, or $0.08 per diluted share, and pre-tax amortization expense associated with acquired backlog of $0.2 million, or $0.02 per diluted share. Excluding these expenses, we expect adjusted diluted EPS of $0.94 to $0.98 for the first quarter of 2018.”

Conference Call
Kadant will hold a webcast with a slide presentation for investors on Friday, February 16, 2018, at 11:00 a.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 3567656. 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 16, 2018.

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), and adjusted EBITDA margin.

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 $26.9 million and $69.4 million from acquisitions in the fourth quarter and fiscal year 2017, respectively. Revenue also included $5.0 million and $3.8 million favorable foreign currency translation effects in the fourth quarter and fiscal year 2017, 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. Adjusted net income and adjusted diluted EPS also exclude discrete tax items. All 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.

Fourth Quarter
Adjusted operating income, adjusted EBITDA, and adjusted EBITDA margin in the fourth quarter of 2017 exclude:
•
Pre-tax expense related to acquired profit in inventory and backlog of $2.3 million.
•
Pre-tax acquisition costs of $0.4 million.
•
Pre-tax restructuring costs of $0.2 million.

Adjusted net income and adjusted diluted EPS in the fourth quarter of 2017 exclude:
•
After-tax restructuring costs of $0.2 million.
•
After-tax acquisition costs of $0.2 million ($0.4 million net of tax of $0.2 million).
•
After-tax expense related to acquired profit in inventory and backlog of $1.7 million ($2.3 million net of tax of $0.6 million).
•
Discrete tax expense of $10.2 million related to U.S. tax legislation enacted in December 2017. The largest component is tax expense for the deemed repatriation of unremitted foreign earnings. This was partially offset by a tax benefit related to adjusting U.S. deferred taxes to the lower enacted tax rate.

Full Year
Adjusted operating income, adjusted EBITDA, and adjusted EBITDA margin exclude:
•
Pre-tax restructuring costs of $0.2 million in 2017 and a gain on the sale of assets of $0.3 million in 2016.
•
Pre-tax acquisition costs of $5.4 million and $1.8 million in 2017 and 2016, respectively.
•
Pre-tax expense related to acquired profit in inventory and backlog of $6.6 million and $1.9 million in 2017 and 2016, respectively.

Adjusted net income and adjusted diluted EPS exclude:
•
After-tax restructuring costs of $0.2 million in 2017 and after-tax gain on the sale of assets of $0.2 million ($0.3 million net of tax of $0.1 million) in 2016.
•
After-tax acquisition costs of $4.5 million ($5.4 million net of tax of $0.9 million) in 2017 and $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 $4.9 million ($6.6 million net of tax of $1.7 million) in 2017 and $1.4 million ($1.9 million net of tax of $0.5 million) in 2016.
•
Discrete tax expense of $10.2 million in 2017 and a discrete tax benefit of $0.3 million in 2016. The benefit from discrete tax items in 2016 was primarily due to the reversal of valuation allowances on certain deferred tax assets in the U.S.

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
 
Twelve Months Ended
Consolidated Statement of Income
 
Dec. 30, 2017
 
Dec. 31, 2016
 
Dec. 30, 2017
 
Dec. 31, 2016
 
 
 
 
 
 
 
 
 
 
 
Revenues
 
$
149,140

 
$
100,241

 
$
515,033

 
$
414,126

Costs and Operating Expenses:
 
 
 
 
 
 
 
 
 
Cost of revenues
 
84,550

 
54,168

 
283,999

 
225,737

 
Selling, general, and administrative expenses
 
44,022

 
33,658

 
160,515

 
135,753

 
Research and development expenses
 
2,559

 
1,740

 
9,563

 
7,380

 
Restructuring costs and other income
 
203

 
—

 
203

 
(317
)
 
 
 
131,334

 
89,566

 
454,280

 
368,553

Operating Income
 
17,806

 
10,675

 
60,753

 
45,573

Interest Income
 
147

 
94

 
447

 
269

Interest Expense
 
(1,525
)
 
(379
)
 
(3,547
)
 
(1,293
)
Income from Continuing Operations Before Provision
 
 
 
 
 
 
 
 
 
for Income Taxes
 
16,428

 
10,390

 
57,653

 
44,549

Provision for Income Taxes
 
15,520

 
2,583

 
26,070

 
12,083

Income from Continuing Operations
 
908

 
7,807

 
31,583

 
32,466

Income from Discontinued Operation, Net of Tax
 
—

 
—

 
—

 
3

Net Income
 
908

 
7,807

 
31,583

 
32,469

Net Income Attributable to Noncontrolling Interest
 
(148
)
 
(74
)
 
(491
)
 
(392
)
Net Income Attributable to Kadant
 
$
760

 
$
7,733

 
$
31,092

 
$
32,077

 
 
 
 
 
 
 
 
 
 
 
Earnings per Share Attributable to Kadant:
 
 
 
 
 
 
 
 
 
 
Basic
 
$
0.07

 
$
0.71

 
$
2.83

 
$
2.95

 
 
Diluted
 
$
0.07

 
$
0.69

 
$
2.75

 
$
2.88

 
 
 
 
 
 
 
 
 
 
 
Weighted Average Shares:
 
 
 
 
 
 
 
 
 
 
Basic
 
11,007

 
10,915

 
10,991

 
10,869

 
 
Diluted
 
11,402

 
11,236

 
11,312

 
11,149

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Three Months Ended
 
Three Months Ended
Adjusted Net Income and Adjusted Diluted EPS (a)
 
Dec. 30, 2017
 
Dec. 30, 2017
 
Dec. 31, 2016
 
Dec. 31, 2016
 
 
 
 
 
 
 
 
 
 
 
Net Income and Diluted EPS Attributable to Kadant, as Reported
 
$
760

 
$
0.07

 
$
7,733

 
$
0.69

Adjustments for the Following:
 
 
 
 
 
 
 
 
 
Restructuring Costs, Net of Tax
 
154

 
0.01

 
—

 
—

 
Acquisition Costs, Net of Tax
 
184

 
0.02

 
—

 
—

 
Amortization of Acquired Profit in Inventory and Backlog, Net of Tax
 
1,667

 
0.15

 
—

 
—

 
Discrete Tax Items (b)
 
10,205

 
0.90

 
—

 
—

Adjusted Net Income and Adjusted Diluted EPS
 
$
12,970

 
$
1.14

 
$
7,733

 
$
0.69

 
 
 
 
 
 
 
 
 
 
 

-more-

 
 
 
 
Twelve Months Ended
 
Twelve Months Ended
 
 
 
 
Dec. 30, 2017
 
Dec. 30, 2017
 
Dec. 31, 2016
 
Dec. 31, 2016
 
 
 
 
 
 
 
 
 
 
 
Net Income and Diluted EPS Attributable to Kadant, as Reported
 
$
31,092

 
$
2.75

 
$
32,077

 
$
2.88

Net Income and Diluted EPS from Discontinued Operation
 
—

 
—

 
(3
)
 
—

Net Income and Diluted EPS from Continuing Operations
 
31,092

 
2.75

 
32,074

 
2.88

Adjustments for the Following:
 
 
 
 
 
 
 
 
 
Restructuring Costs and Other Income, Net of Tax
 
154

 
0.01

 
(247
)
 
(0.02
)
 
Acquisition Costs, Net of Tax
 
4,458

 
0.39

 
1,625

 
0.15

 
Amortization of Acquired Profit in Inventory and Backlog, Net of Tax
 
4,858

 
0.43

 
1,359

 
0.12

 
Discrete Tax Items (b)
 
10,205

 
0.90

 
(261
)
 
(0.02
)
Adjusted Net Income and Adjusted Diluted EPS
 
$
50,767

 
$
4.49

 
$
34,550

 
$
3.10

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Increase
 
 
 
 
 
 
 
 
 
 
Excluding
 
 
 
 
Three Months Ended
 
Increase
 
Acquisitions
Revenues by Product Line
 
Dec. 30, 2017
 
Dec. 31, 2016
 
 
and FX (a,c)
Stock-Preparation
 
$
54,442

 
$
39,220

 
$
15,222

 
$
12,718

Doctoring, Cleaning, & Filtration
 
26,710

 
25,564

 
1,146

 
377

Fluid-Handling
 
31,037

 
21,241

 
9,796

 
3,489

 
Papermaking Systems
 
112,189

 
86,025

 
26,164

 
16,584

 
Wood Processing Systems
 
34,003

 
11,413

 
22,590

 
299

 
Fiber-Based Products
 
2,948

 
2,803

 
145

 
145

 
 
 
 
$
149,140

 
$
100,241

 
$
48,899

 
$
17,028

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Increase
 
 
 
 
 
 
 
 
 
 
Excluding
 
 
 
 
Twelve Months Ended
 
Increase
 
Acquisitions
 
 
Dec. 30, 2017
 
Dec. 31, 2016
 
 
and FX (a,c)
Stock-Preparation
 
$
193,838

 
$
171,378

 
$
22,460

 
$
7,320

Doctoring, Cleaning, & Filtration
 
109,631

 
105,938

 
3,693

 
3,673

Fluid-Handling
 
104,136

 
89,145

 
14,991

 
6,216

 
Papermaking Systems
 
407,605

 
366,461

 
41,144

 
17,209

 
Wood Processing Systems
 
95,053

 
36,850

 
58,203

 
8,886

 
Fiber-Based Products
 
12,375

 
10,815

 
1,560

 
1,560

 
 
 
 
$
515,033

 
$
414,126

 
$
100,907

 
$
27,655

 
 
 
 
 
 
 
 
 
 
 

-more-

 
 
 
 
 
 
 
 
 
 
Increase
 
 
 
 
 
 
 
 
 
 
Excluding
 
 
 
 
Three Months Ended
 
Increase
 
Acquisitions
Revenues by Geography (d)
 
Dec. 30, 2017
 
Dec. 31, 2016
 
 
and FX (a,c)
North America
 
$
68,391

 
$
47,430

 
$
20,961

 
$
2,133

Europe
 
44,816

 
29,622

 
15,194

 
5,438

Asia
 
24,785

 
17,247

 
7,538

 
6,479

Rest of World
 
11,148

 
5,942

 
5,206

 
2,978

 
 
 
 
$
149,140

 
$
100,241

 
$
48,899

 
$
17,028

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Increase
 
 
 
 
 
 
 
 
 
 
(Decrease)
 
 
 
 
 
 
 
 
 
 
Excluding
 
 
 
 
Twelve Months Ended
 
Increase
 
Acquisitions
 
 
Dec. 30, 2017
 
Dec. 31, 2016
 
 
and FX (a,c)
North America
 
$
238,483

 
$
203,063

 
$
35,420

 
$
(1,191
)
Europe
 
157,994

 
115,233

 
42,761

 
14,171

Asia
 
78,443

 
62,703

 
15,740

 
16,178

Rest of World
 
40,113

 
33,127

 
6,986

 
(1,503
)
 
 
 
 
$
515,033

 
$
414,126

 
$
100,907

 
$
27,655

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Increase
 
 
 
 
 
 
 
 
 
 
(Decrease)
 
 
 
 
 
 
 
 
 
 
Excluding
 
 
 
 
Three Months Ended
 
Increase (Decrease)
 
Acquisitions
Bookings by Product Line
 
Dec. 30, 2017
 
Dec. 31, 2016
 
 
and FX (c)
Stock-Preparation
 
$
50,435

 
$
55,648

 
$
(5,213
)
 
$
(7,658
)
Doctoring, Cleaning, & Filtration
 
26,715

 
23,923

 
2,792

 
1,962

Fluid-Handling
 
30,689

 
19,360

 
11,329

 
5,265

 
Papermaking Systems
 
107,839

 
98,931

 
8,908

 
(431
)
 
Wood Processing Systems
 
35,076

 
11,202

 
23,874

 
(1,224
)
 
Fiber-Based Products
 
3,704

 
3,477

 
227

 
227

 
 
 
 
$
146,619

 
$
113,610

 
$
33,009

 
$
(1,428
)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Increase
 
 
 
 
 
 
 
 
 
 
Excluding
 
 
 
 
Twelve Months Ended
 
Increase
 
Acquisitions
 
 
Dec. 30, 2017
 
Dec. 31, 2016
 
 
and FX (c)
Stock-Preparation
 
$
199,720

 
$
158,876

 
$
40,844

 
$
27,119

Doctoring, Cleaning, & Filtration
 
113,069

 
110,064

 
3,005

 
3,353

Fluid-Handling
 
110,441

 
85,696

 
24,745

 
16,297

 
Papermaking Systems
 
423,230

 
354,636

 
68,594

 
46,769

 
Wood Processing Systems
 
85,248

 
38,183

 
47,065

 
3,974

 
Fiber-Based Products
 
12,703

 
10,641

 
2,062

 
2,062

 
 
 
 
$
521,181

 
$
403,460

 
$
117,721

 
$
52,805

 
 
 
 
 
 
 
 
 
 
 

-more-

 
 
 
 
Three Months Ended
 
Twelve Months Ended
Business Segment Information
 
Dec. 30, 2017
 
Dec. 31, 2016
 
Dec. 30, 2017
 
Dec. 31, 2016
Gross Margin:
 
 
 
 
 
 
 
 
 
 
Papermaking Systems
 
45.6
%
 
46.7
%
 
46.7
%
 
45.9
%
 
 
Wood Processing Systems
 
34.8
%
 
39.4
%
 
36.3
%
 
41.0
%
 
 
Fiber-Based Products
 
54.5
%
 
48.5
%
 
51.2
%
 
46.4
%
 
 
 
 
43.3
%
 
46.0
%
 
44.9
%
 
45.5
%
 
 
 
 
 
 
 
 
 
 
 
Operating Income:
 
 
 
 
 
 
 
 
 
 
Papermaking Systems
 
$
19,668

 
$
12,680

 
$
72,600

 
$
57,427

 
 
Wood Processing Systems
 
3,494

 
2,921

 
9,690

 
8,327

 
 
Corporate and Other
 
(5,356
)
 
(4,926
)
 
(21,537
)
 
(20,181
)
 
 
 
 
$
17,806

 
$
10,675

 
$
60,753

 
$
45,573

 
 
 
 
 
 
 
 
 
 
 
Adjusted Operating Income (a, e):
 
 
 
 
 
 
 
 
 
 
Papermaking Systems
 
$
20,065

 
$
12,680

 
$
73,590

 
$
60,601

 
 
Wood Processing Systems
 
5,930

 
2,921

 
20,853

 
8,327

 
 
Corporate and Other
 
(5,356
)
 
(4,926
)
 
(21,537
)
 
(19,914
)
 
 
 
 
$
20,639

 
$
10,675

 
$
72,906

 
$
49,014

 
 
 
 
 
 
 
 
 
 
 
Capital Expenditures:
 
 
 
 
 
 
 
 
 
 
Papermaking Systems
 
$
7,792

 
$
2,163

 
$
14,359

 
$
5,504

 
 
Corporate and Other
 
771

 
62

 
2,922

 
300

 
 
 
 
$
8,563

 
$
2,225

 
$
17,281

 
$
5,804

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Three Months Ended
 
Twelve Months Ended
Cash Flow and Other Data
 
Dec. 30, 2017
 
Dec. 31, 2016
 
Dec. 30, 2017
 
Dec. 31, 2016
Cash Provided by Continuing Operations
 
$
32,836

 
$
16,261

 
$
65,164

 
$
51,000

Depreciation and Amortization Expense
 
6,319

 
3,392

 
19,375

 
14,326

 
 
 
 
 
 
 
 
 
 
 
Balance Sheet Data
 
 
 
 
 
Dec. 30, 2017
 
Dec. 31, 2016
Assets
 
 
 
 
 
 
 
 
Cash, Cash Equivalents, and Restricted Cash
 
 
 
 
 
$
76,846

 
$
73,569

Accounts Receivable, net
 
 
 
 
 
89,624

 
65,963

Inventories
 
 
 
 
 
84,933

 
54,951

Unbilled Contract Costs and Fees
 
 
 
 
 
2,374

 
3,068

Other Current Assets
 
 
 
 
 
12,246

 
9,799

Property, Plant and Equipment, net
 
 
 
 
 
79,723

 
47,704

Intangible Assets
 
 
 
 
 
133,036

 
52,730

Goodwill
 
 
 
 
 
268,001

 
151,455

Other Assets
 
 
 
 
 
14,311

 
11,452

 
 
 
 
 
 
 
 
$
761,094

 
$
470,691

Liabilities and Stockholders' Equity
 
 
 
 
 
 
 
 
Accounts Payable
 
 
 
 
 
$
35,461

 
$
23,929

Long-term Debt
 
 
 
 
 
237,011

 
61,494

Capital Lease Obligations
 
 
 
 
 
5,069

 
4,917

Other Liabilities
 
 
 
 
 
151,049

 
96,072

 
Total Liabilities
 
 
 
 
 
428,590

 
186,412

 
Stockholders' Equity
 
 
 
 
 
332,504

 
284,279

 
 
 
 
 
 
 
 
$
761,094

 
$
470,691

 
 
 
 
 
 
 
 
 
 
 

-more-

Adjusted Operating Income and Adjusted EBITDA
 
Three Months Ended
 
Twelve Months Ended
Reconciliation
 
Dec. 30, 2017
 
Dec. 31, 2016
 
Dec. 30, 2017
 
Dec. 31, 2016
Consolidated
 
 
 
 
 
 
 
 
 
 
Net Income Attributable to Kadant
 
$
760

 
$
7,733

 
$
31,092

 
$
32,077

 
 
Net Income Attributable to Noncontrolling Interest
 
148

 
74

 
491

 
392

 
 
Income from Discontinued Operation, Net of Tax
 
—

 
—

 
—

 
(3
)
 
 
Provision for Income Taxes
 
15,520

 
2,583

 
26,070

 
12,083

 
 
Interest Expense, net
 
1,378

 
285

 
3,100

 
1,024

 
 
Operating Income
 
17,806

 
10,675

 
60,753

 
45,573

 
 
Restructuring Costs and Other Income
 
203

 
—

 
203

 
(317
)
 
 
Acquisition Costs (f)
 
373

 
—

 
5,375

 
1,832

 
 
Acquired Backlog Amortization (g)
 
480

 
—

 
1,438

 
1,468

 
 
Acquired Profit in Inventory (h)
 
1,777

 
—

 
5,137

 
458

 
 
Adjusted Operating Income (a)
 
20,639

 
10,675

 
72,906

 
49,014

 
 
Depreciation and Amortization
 
5,839

 
3,392

 
17,937

 
12,858

 
 
Adjusted EBITDA (a)
 
$
26,478

 
$
14,067

 
$
90,843

 
$
61,872

 
 
 
 
 
 
 
 
 
 
 
 
 
Adjusted EBITDA Margin (a, i)
 
17.8
%
 
14.0
%
 
17.6
%
 
14.9
%
 
 
 
 
 
 
 
 
 
 
 
Papermaking Systems
 
 
 
 
 
 
 
 
 
 
Operating Income
 
$
19,668

 
$
12,680

 
$
72,600

 
$
57,427

 
 
Restructuring costs and other income
 
203

 
—

 
203

 
(317
)
 
 
Acquisition Costs (f)
 
124

 
—

 
611

 
1,565

 
 
Acquired Backlog Amortization (g)
 
—

 
—

 
—

 
1,468

 
 
Acquired Profit in Inventory (h)
 
70

 
—

 
176

 
458

 
 
Adjusted Operating Income (a)
 
20,065

 
12,680

 
73,590

 
60,601

 
 
Depreciation and Amortization
 
3,134

 
2,686

 
11,239

 
10,045

 
 
Adjusted EBITDA (a)
 
$
23,199

 
$
15,366

 
$
84,829

 
$
70,646

 
 
 
 
 
 
 
 
 
Wood Processing Systems
 
 
 
 
 
 
 
 
 
 
Operating Income
 
$
3,494

 
$
2,921

 
$
9,690

 
$
8,327

 
 
Acquisition Costs (f)
 
249

 
—

 
4,764

 
—

 
 
Acquired Backlog Amortization (g)
 
480

 
—

 
1,438

 
—

 
 
Acquired Profit in Inventory (h)
 
1,707

 
—

 
4,961

 
—

 
 
Adjusted Operating Income (a)
 
5,930

 
2,921

 
20,853

 
8,327

 
 
Depreciation and Amortization
 
2,530

 
544

 
6,077

 
2,188

 
 
Adjusted EBITDA (a)
 
$
8,460

 
$
3,465

 
$
26,930

 
$
10,515

 
 
 
 
 
 
 
 
 
 
 
Corporate and Other
 
 
 
 
 
 
 
 
 
 
Operating Loss
 
$
(5,356
)
 
$
(4,926
)
 
$
(21,537
)
 
$
(20,181
)
 
 
Acquisition Costs (f)
 
—

 
—

 
—

 
267

 
 
Adjusted Operating Loss (a)
 
(5,356
)
 
(4,926
)
 
(21,537
)
 
(19,914
)
 
 
Depreciation and Amortization
 
175

 
162

 
621

 
625

 
 
Adjusted EBITDA (a)
 
$
(5,181
)
 
$
(4,764
)
 
$
(20,916
)
 
$
(19,289
)
 
 
(a)
Represents a non-GAAP financial measure.
 
 
 
 
 
 
 
 
 
 
 
(b)
Discrete tax items in 2017 relate to U.S. tax legislation enacted in December 2017 and discrete tax items in 2016 primarily relate to the reversal of valuation allowances on certain deferred tax assets in the U.S.
 
 
 
(c)
Represents the increase (decrease) resulting from the exclusion of acquisitions and 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)
Geographic revenues are attributed to regions based on customer location.
 
 
 
 
 
 
 
 
 
 
(e)
See reconciliation to the most directly comparable GAAP financial measure under "Adjusted Operating Income and Adjusted EBITDA Reconciliation."
 
 

-more-

(f)
Represents transaction costs associated with our acquisitions.
 
 
 
 
 
 
 
 
 
 
(g)
Represents intangible amortization expense associated with acquired backlog.
 
 
 
 
 
 
 
 
 
 
(h)
Represents expense within cost of revenues associated with acquired profit in inventory.
 
 
(i)
Calculated as adjusted EBITDA divided by revenue in each period.

-more-

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 2,400 employees in 20 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. These forward-looking statements represent Kadant’s expectations as of the date of this press release. We undertake no obligation to publicly update any forward-looking statement, whether as a result of new information, future events, or otherwise. These forward-looking statements are subject to known and unknown risks and uncertainties that may cause our actual results to 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 December 31, 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.

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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