Kadant Reports 2003 Second Quarter Results
ACTON, Mass.--(BUSINESS WIRE)--July 23, 2003--For the second quarter of 2003, Kadant Inc. (NYSE:KAI) reported GAAP net income of $3.9 million, or $.28 per diluted share, versus $2.5 million, or $.20 per diluted share, in the 2002 period. Earnings per diluted share in 2003 included a net gain of $.01 due to restructuring and unusual items and, in 2002, a gain of $.02 from the repurchase of debt. Revenues in the second quarter of 2003 increased 20 percent to $55.8 million (including $3.3 million from the favorable effect of currency translation), compared with $46.4 million a year ago.
"We are pleased to report another solid quarter, especially at a time when we see little relief from economic and industry pressures in North America and Europe," said William A. Rainville, chairman and chief executive officer of Kadant. "Net income for the quarter rose more than 50 percent over last year on the 20 percent increase in revenues. The driving force behind this performance continues to be strong sales of our stock-preparation systems in China, coupled with tight spending controls and a shift to net interest income.
"China is the fastest-growing market in the world, and one where we have maintained a leading position in our industry. High demand for our systems that recover and process usable fiber from wastepaper has resulted in more than $17 million in orders from China in the first half of 2003. We expect to receive additional orders from China during the balance of the year, although not at this level.
"In our composite building products business, revenues for the quarter grew better than 50 percent to $3.4 million from $2.2 million a year ago, resulting in breakeven operating performance. While decking products have been our primary source of revenues for this business, we expect to begin seeing modest sales of our composite slate roof tiles later in the year."
Mr. Rainville added, "As we stated previously, we anticipated a stronger first half due to the timing of orders from China. Therefore, we are maintaining our earnings guidance of $.84 to $.92 per diluted share (on a GAAP basis) for the full year, and expect to generate revenues of $195 to $200 million. For the third quarter of 2003, we expect to earn from $.17 to $.19 per diluted share (on a GAAP basis), on revenues of $44 to $46 million."
Financial Highlights(unaudited)
(In thousands except per share amounts and percentages)
Three Months Ended Six Months Ended
--------------------- -------------------
Consolidated Statement of June 28, June 29, June 28, June 29,
Operations 2003 2002(a) 2003 2002(a)
----------------------------------------------------------------------
Revenues $55,784 $46,378 $107,159 $89,718
------------ -------- --------- ---------
Costs and Operating Expenses:
Cost of revenues 35,086 28,378 67,294 55,565
Selling, general, and
administrative expenses 13,382 12,576 26,894 25,267
Research and development
expenses 1,310 1,152 2,353 2,440
Restructuring and unusual
items (180) - (180) 3,637
------------ -------- --------- ---------
49,598 42,106 96,361 86,909
------------ -------- --------- ---------
Operating Income 6,186 4,272 10,798 2,809
Interest Income 214 623 450 1,278
Interest Expense (11) (1,207) (28) (2,636)
Other Income - 414 - 461
------------ -------- --------- ---------
Income Before Provision for Income Taxes,
Minority Interest, and
Cumulative Effect of
Change in Accounting
Principle 6,389 4,102 11,220 1,912
Provision for Income Taxes 2,428 1,552 4,264 720
Minority Interest Expense 72 1 72 2
------------ -------- --------- ---------
Income Before Cumulative
Effect of Change in
Accounting Principle 3,889 2,549 6,884 1,190
Cumulative Effect of Change
in Accounting
Principle (net of income
tax benefit of $12,420) - - - (32,756)
------------ -------- --------- ---------
Net Income (Loss) $3,889 $2,549 $6,884 $(31,566)
============ ======== ========= =========
Earnings per Share Before
Cumulative Effect of
Change in Accounting
Principle
Basic $.29 $.20 $.51 $.10
============ ======== ========= =========
Diluted $.28 $.20 $.50 $.10
============ ======== ========= =========
Earnings (Loss) per Share
Basic $.29 $.20 $.51 $(2.56)
============ ======== ========= =========
Diluted $.28 $.20 $.50 $(2.52)
============ ======== ========= =========
Weighted Average Shares
Basic 13,601 12,446 13,588 12,343
============ ======== ========= =========
Diluted 13,908 12,661 13,837 12,508
============ ======== ========= =========
Three Months Ended Six Months Ended
--------------------- -------------------
Adjusted Diluted June 28, June 29, June 28, June 29,
Earnings per Share(b) 2003 2002 2003 2002
----------------------------------------------------------------------
GAAP Diluted Earnings (Loss)
per Share $.28 $.20 $.50 $(2.52)
Restructuring and Unusual
Items (.01) - (.01) .18
Gain on Repurchases of Debt - (.02) - (.02)
Cumulative Effect of Change
in Accounting Principle - - - 2.61
------------ -------- --------- ---------
$.27 $.18 $.49 $.25
============ ======== ========= =========
Three Months Ended Six Months Ended
--------------------- -------------------
Business Segment June 28, June 29, June 28, June 29,
Information 2003 2002 2003 2002
----------------------------------------------------------------------
Revenues:
Pulp and Papermaking
Equipment and Systems $50,674 $41,923 $96,231 $82,500
Composite and Fiber-
based Products 5,110 4,455 10,928 7,218
------------ -------- --------- ---------
$55,784 $46,378 $107,159 $89,718
============ ======== ========= =========
Gross Profit Margin:
Pulp and Papermaking
Equipment and Systems 37% 40% 38% 39%
Composite and Fiber-
based Products 37% 32% 35% 26%
------------ -------- --------- ---------
37% 39% 37% 38%
============ ======== ========= =========
Operating Income:
Pulp and Papermaking
Equipment and Systems $6,691 $5,024 $11,931 $6,907
Composite and Fiber-
based Products (c) 571 98 983 (2,375)
Corporate (1,076) (850) (2,116) (1,723)
------------ -------- --------- ---------
$6,186 $4,272 $10,798 $2,809
============ ======== ========= =========
Adjusted Operating Income (Excludes
Restructuring and Unusual
Items) (b):
Pulp and Papermaking
Equipment and
Systems(d) $6,511 $5,024 $11,751 $8,905
Composite and Fiber-
based Products (e) 571 98 983 (736)
Corporate (1,076) (850) (2,116) (1,723)
------------ -------- --------- ---------
$6,006 $4,272 $10,618 $6,446
============ ======== ========= =========
Three Months Ended Six Months Ended
--------------------- -------------------
Business Segment June 28, June 29, June 28, June 29,
Information (continued) 2003 2002 2003 2002
----------------------------------------------------------------------
Bookings:
Pulp and Papermaking
Equipment and Systems $38,516 $42,548 $96,644 $86,292
Composite and Fiber-
based Products 4,886 6,268 7,825 9,256
------------ -------- --------- ---------
$43,402 $48,816 $104,469 $95,548
============ ======== ========= =========
Capital Expenditures:
Pulp and Papermaking
Equipment and Systems $359 $419 $561 $631
Composite and Fiber-
based Products 228 327 876 590
Corporate 8 7 11 127
------------ -------- --------- ---------
$595 $753 $1,448 $1,348
============ ======== ========= =========
Three Months Ended Six Months Ended
--------------------- -------------------
Cash Flow and Other Data June 28, June 29, June 28, June 29,
2003 2002 2003 2002
----------------------------------------------------------------------
Cash Provided by Operations $4,098 $9,371 $3,058 $12,617
Depreciation and Amortization
Expense 1,322 1,245 2,607 2,587
Balance Sheet Data June 28, Dec. 28,
2003 2002
----------------------------------------------------------------------
Cash and Short-term
Investments $52,482 $44,429
Short- and Long-term Debt 598 1,165
Shareholders' Investment 197,726 181,257
(a) Restated to reflect the reclassification to other income of an
extraordinary item in accordance with the adoption of SFAS No.
145, resulting from repurchases of our subordinated convertible
debentures. In addition, the six-month period ended June 29, 2002
was restated to include a transitional goodwill impairment charge
recorded as a cumulative effect of change in accounting principle
in accordance with the adoption of SFAS No. 142.
(b) In addition to the financial measures prepared in accordance with
generally accepted accounting principles (GAAP), we use the
non-GAAP financial measures of adjusted diluted EPS and adjusted
operating income, which exclude restructuring and other
non-recurring items. We exclude these items because they are
outside our normal operations. We believe that providing such
non-GAAP measures helps investors to gain a better understanding
of our operating results from period to period, and are consistent
with how management measures our performance.
(c) Includes operating income of $26 and $110 in the three- and six-
month periods ended June 28, 2003, respectively, and operating
losses of $677 in the three- month period ended June 29, 2002, and
$2,847 (including restructuring and unusual costs of $1,116) in
the six-month period ended June 29, 2002, from the composite
building products business.
(d) Excludes restructuring and unusual income of $180 in the three-
and six-month periods ended June 28, 2003, and restructuring and
unusual costs of $1,998 in the six-month period ended June 29,
2002.
(e) Excludes restructuring and unusual costs of $1,639 in the
six-month period ended June 29, 2002.
Kadant will hold its earnings conference call on Thursday, July 24, 2003, at 11 a.m. Eastern time. To listen, call 800-709-2159 within the U.S., or 973-582-2810 outside the U.S. 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 21, 2003.
Kadant Inc. is a leading supplier of a range of products for the global papermaking and paper recycling industries, including stock-preparation equipment, water-management systems, and papermaking accessories. We also develop and manufacture composite building materials produced from recycled fiber and plastic. Kadant, based in Acton, Massachusetts, reported $186 million in revenues in 2002 and employs approximately 1,100 people worldwide. For more information, please 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 regarding our future financial and operating performance, our sales prospects and market position in China, and performance of our composite building products business. 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 fiscal quarter ended March 29, 2003. These include risks and uncertainties relating to our dependence on the pulp and paper industry; international sales and operations; competition; ability to manufacture and distribute composite building products, and the seasonality in sales and the long-term performance of such products; availability of raw materials and exposure to commodity price fluctuations related to the manufacture of composite and fiber-based products; acquisition strategy; protection of patents and proprietary rights; fluctuations in quarterly operating results; and obligations or other consequences arising from our spinoff from Thermo Electron Corporation. We undertake no obligation to publicly update any forward-looking statement, whether as a result of new information, future events, or otherwise.
CONTACT: Investor contact:
Kadant
Thomas M. O'Brien, 978-776-2000
Media contact:
GreatPoint Communications
978-392-6866
SOURCE: Kadant Inc.