Kadant Corporate

News Release

Kadant Announces Second Quarter Results and Provides Guidance for 2001 and 2002

July 19, 2001 at 12:00 AM EDT

WALTHAM, Mass., July 19 /PRNewswire/ -- Kadant Inc. (Amex: KAI - news), formerly known as Thermo Fibertek Inc., today reported net income of $2.4 million, or $.20 per diluted share, for the quarter ended June 30, 2001, compared with $3.9 million, or $.32 per diluted share, for the same period last year. Results for the second quarter of 2000 include a pretax gain of $1.0 million from the sale of an investment. Excluding this item from the 2000 period, net income would have been $3.3 million, or $.27 per diluted share. Included in the net income results for the 2001 and 2000 periods are $0.6 million and $0.2 million, respectively, of net losses from the company's new composite building products startup.

Revenues for the quarter ended June 30, 2001, were $56.7 million, compared with $60.6 million in the same period last year. Excluding unfavorable currency effects of $1.0 million, revenues decreased 5 percent compared to the second quarter of 2000. Revenues from the composite building products business in the 2001 quarter were approximately $0.4 million.

``The past few months have been both exhilarating and challenging as we prepare to be spun off from Thermo Electron,'' said William A. Rainville, president and chief executive officer of K?dant. ``While we are looking forward to the many advantages of being an independent public company, there is much we need to do to capitalize on the opportunities at hand in both our core pulp and paper systems business and our new composites startup.

``Our customers in the pulp and paper industry continue to respond to weak market and economic conditions by cutting costs and consolidating operations, curbing demand for our products for the balance of 2001 and likely into 2002. We believe, however, that these actions being taken by our customers will create a stronger industry long term that we are ideally positioned to serve through our well-regarded global franchise.

``In our new composites business, we are lowering expectations as we work to expand our distribution network for these fiber-based building materials. Although startups are difficult to forecast, our estimate of revenues from this business for each of the remaining quarters in 2001 is $300,000 to $500,000, and for the year just below $2 million. We have made considerable progress in the technology and production phases of our composite products launch, and now need to build our marketing and distribution channels to take advantage of this growth market.

``In light of these factors, we expect earnings in the third quarter of 2001 for the company overall to be in the range of $.15 to $.20 per share, on revenues of $55 to $60 million. For the year, we expect earnings per share of $.80 to $.90, on revenues of $225 to $230 million.

``Looking ahead to 2002, we estimate earnings for the year to increase to $.90 to $1.05 per share by focusing on a more favorable product mix that includes higher-margin aftermarket sales and reducing operating expenses in our businesses that serve the pulp and paper industry, as well as lowering operating losses in the composites business. Revenues in 2002 are expected to be between $225 and $230 million, including $4 to $6 million from sales of composites.''

Mr. Rainville concluded, ``We finished the second quarter of 2001 with a healthy balance sheet -- $167 million in cash -- which will help us fund our plans for future growth. The spinoff from Thermo Electron marks a new beginning for us. Our long history of leadership in the pulp and paper industry gives us a solid foundation from which to build on K?dant's new position as an independent public company.''

A pre-recorded company update will be available from 5 p.m. EDT today until August 8, 2001. To listen to the recording, call 877-519-4471 within the U.S., or 973-341-3080 outside the U.S., passcode: 2711685. An audio archive will also be available on the Internet until August 8, 2001. Click on ``Audio Archives'' under ``Investors'' at www.thermo.com.

Kadant Inc. is a leading supplier of a range of products for the global papermaking and paper-recycling industries, including de-inking systems, stock-preparation equipment, water-management systems, and papermaking accessories. Through its majority-owned Thermo Fibergen subsidiary, the company also develops and commercializes composite building materials produced from natural fiber and recycled plastic. Kadant is a public subsidiary of Thermo Electron Corporation that will be spun off as a dividend to Thermo Electron shareholders on August 8, 2001.

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. Important factors that could cause actual results to differ materially from those indicated by such forward-looking statements are set forth under the heading ``Risk Factors'' in Exhibit 99.3 to the company's current report on Form 8-K filed with the Securities and Exchange Commission on July 12, 2001. These include risks and uncertainties relating to: the company's dependence on the paper industry and pulp and paper prices, international operations, competition, ability to enter the composite building products market, acquisition strategy, dependence on patents and proprietary rights, fluctuations in quarterly operating results, and the proposed spinoff of the company.

     Financial Highlights (unaudited)
    (In thousands except per share amounts)

    Consolidated Statement of Income
                                        Three Months Ended  Six Months Ended

                                         June 30, July 1,  June 30,  July 1,
                                           2001     2000     2001      2000

    Revenues                             $56,732  $60,565  $115,632  $118,487

    Costs and Operating Expenses:
    Cost of revenues                      36,084   37,930    72,280    72,537
    Selling, general, and administrative
     expenses (a)                         14,585   15,749    30,441    31,580
    Research and development expenses      1,871    1,953     3,663     3,816
    Gain on sale of property                   -     (971)        -      (971)
                                          52,540   54,661   106,384   106,962

    Operating Income (b)                   4,192    5,904     9,248    11,525
    Interest Income                        1,812    2,691     3,953     5,194
    Interest Expense                      (1,871)  (1,865)   (3,744)   (3,755)

    Income Before Provision for Income
     Taxes and Minority Interest           4,133    6,730     9,457    12,964
    Provision for Income Taxes             1,736    2,775     3,955     5,300
    Minority Interest (Income) Expense       (50)      45       (74)      194

    Income Before Cumulative Effect of
     Change in Accounting Principle        2,447    3,910     5,576     7,470
    Cumulative Effect of Change in
     Accounting Principle                      -        -         -      (870)
    Net Income                             2,447    3,910     5,576     6,600

    Basic and Diluted Earnings per Share
     Before Cumulative Effect
      of Change in Accounting Principle     $.20     $.32      $.45      $.61

    Basic and Diluted Earnings per Share    $.20     $.32      $.45      $.54

    Weighted Average Shares:
      Basic                               12,277   12,257    12,277    12,253

      Diluted                             12,294   12,301    12,292    12,310

    Other Financial Data
    Adjusted EBITDA (c)                   $6,531   $7,375   $13,968   $15,396
    Cash Flow from Operations             11,187   10,903    13,298    10,523

    Pro Forma Data (d)
    Net Income                            $2,447   $3,327    $5,576    $6,887
    Diluted Earnings per Share               .20      .27       .45       .56

    Balance Sheet Data                                     As of
                                              June 30, 2001     July 1, 2000
    Cash, Cash Equivalents, Advance to
     Affiliates, and Available-for-Sale
      Investments                                 $166,687          $185,006
    Short- and Long-term Debt                      154,703           155,212
    Shareholders' Investment                       175,762           165,606

    (a) Includes a $0.6 million charge to provide for a customer dispute in
    the 2000 periods.
    (b) Includes operating losses from our startup composite building
    products business of $1,054, $487, $1,638, and $869 in the three months
    ended June 30, 2001, the three months ended July 1, 2000, the six months
    ended June 30, 2001, and the six months ended July 1, 2000, respectively.
    (c) Adjusted EBITDA is calculated as earnings before interest, income
    taxes, depreciation, amortization, and gain on the sale of property.
    (d) Excludes gain on the sale of property in the 2000 periods and the
    cumulative effect of a change in accounting principle in the six months
    ended July 1, 2000.
© Kadant Inc.

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