News Release

Lowers Revenue Guidance for 2013

WESTFORD, Mass.--(BUSINESS WIRE)--Nov. 4, 2013-- Kadant Inc. (NYSE:KAI) reported its financial results for the third quarter ended September 28, 2013.

Third Quarter 2013 Highlights

• GAAP diluted earnings per share (EPS) from continuing operations was $0.57 in the third quarter of 2013 compared to $0.66 in the third quarter of 2012. Guidance was $0.47 to $0.49, which included $0.01 of restructuring costs. A higher effective tax rate reduced diluted EPS by $0.10 in the third quarter of 2013 compared to the third quarter of 2012.
• Revenues were $91 million in the third quarter of 2013, including $7 million from acquisitions, compared to $87 million in the third quarter of 2012. Guidance was $88 to $90 million, including revenues from acquisitions.
• Operating income was $10 million in both the third quarters of 2013 and 2012.
• Bookings were $82 million in the third quarter of 2013, including $5 million from acquisitions, compared to $69 million in the third quarter of 2012. Bookings in the first nine months of 2013 were $259 million, increasing 15% compared to the first nine months of 2012, including 6% from acquisitions.
• Cash flows from continuing operations were $13 million in both the third quarters of 2013 and 2012, and were $31 million in the first nine months of 2013 compared to $18 million in the first nine months of 2012.
• Net cash was $59 million at the end of the third quarter and increased $10 million compared to the second quarter of 2013.

Management Commentary

"We had another solid quarter with strong cash flows and better than expected EPS performance," said Jonathan W. Painter, president and chief executive officer of Kadant. "GAAP diluted EPS from continuing operations was $0.57 and well above our guidance of $0.47 to $0.49 partly due to higher revenues. Our diluted EPS for the third quarter of 2013 included $0.05 from acquisition expenses.

"Revenues of $91 million in the third quarter of 2013 increased five percent compared to the third quarter of 2012, including increases of eight percent from acquisitions and two percent from foreign currency translation. Operating cash flows from continuing operations were $13 million in the third quarter of 2013 and we ended the quarter with net cash (cash less debt) of $59 million.

"Bookings increased to $82 million in the third quarter of 2013 compared to $69 million in the third quarter of 2012, including $5 million from acquisitions. Parts and consumables bookings increased 21 percent to $54 million in the third quarter of 2013 compared to the third quarter of 2012, including a seven percent increase from acquisitions."

Third Quarter 2013

Kadant reported revenues of $91.3 million in the third quarter of 2013, an increase of $4.7 million, or five percent, compared with $86.6 million in the third quarter of 2012. Revenues in the third quarter of 2013 included $7.0 million from acquisitions and a $1.5 million increase from foreign currency translation compared to the third quarter of 2012. Operating income from continuing operations was $9.9 million in both the third quarters of 2013 and 2012. Net income from continuing operations was $6.5 million in the third quarter of 2013, or $0.57 per diluted share, compared to $7.6 million, or $0.66 per diluted share, in the third quarter of 2012.

Guidance

"Our solid diluted EPS performance during the first three quarters of 2013 has positioned us to finish 2013 as expected," Mr. Painter continued. "Looking forward, we expect to achieve GAAP diluted EPS from continuing operations of $0.47 to $0.49 in the fourth quarter of 2013 on revenues of $86 to $88 million. Our fourth quarter guidance includes estimated restructuring costs of $0.01. For the full year, we expect revenues of $336 to $338 million, revised from our previous estimate of $340 to $345 million. We expect to achieve GAAP diluted EPS from continuing operations of $2.02 to $2.04, which includes a gain of $0.12 on the sale of assets and restructuring costs of $0.13. This guidance does not include any results from the pending acquisition of Carmanah Design and Manufacturing Inc."

Conference Call

Kadant will hold a webcast with a slide presentation for investors on Tuesday, November 5, 2013, at 11 a.m. eastern time to discuss its third quarter performance, as well as future expectations. To access the webcast, including the slideshow and accompanying audio, go to www.kadant.com and click on the "Investors" tab. To listen to the webcast via teleconference, call 877-703-6107 within the U.S., or +1-857-244-7306 outside the U.S. and reference participant passcode 83375884. 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. An archive of the webcast presentation will be available on our Web site until December 6, 2013.

Shortly after the webcast, Kadant will post its updated general investor presentation incorporating the third quarter results on its Web site at www.kadant.com under the "Investors" tab.

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 acquisitions and foreign currency translation, adjusted operating income, earnings before interest, taxes, depreciation, and amortization (EBITDA), and adjusted EBITDA.

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.

We present increases or decreases in revenues excluding the effect of acquisitions and foreign currency translation to provide investors insight into underlying revenue trends.

Adjusted operating income and adjusted EBITDA exclude pre-tax restructuring costs of $2.0 million and a pre-tax gain on the sale of assets of $1.7 million in the nine-month period ended September 28, 2013. These items are excluded as they are not indicative of our core operating results and not comparable to other periods, which have differing levels of incremental costs or other income or none at all.

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.

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

Financial Highlights (unaudited)
(In thousands, except per share amounts and percentages)
						Three Months Ended											Nine Months Ended
Consolidated Statement of Income						Sept. 28, 2013					Sept. 29, 2012						Sept. 28, 2013					Sept. 29, 2012
Revenues						$	91,315				$	86,601					$	249,684				$	253,696
Costs and Operating Expenses:
	Cost of revenues						51,194					49,005						133,597					141,430
	Selling, general, and administrative expenses						28,606					26,171						85,001					77,804
	Research and development expenses						1,558					1,511						5,114					4,436
	Restructuring costs and other (income) expense, net (a)						45					-						263					307
							81,403					76,687						223,975					223,977
Operating Income							9,912					9,914						25,709					29,719
Interest Income							155					63						406					231
Interest Expense							(239	)				(219	)					(635	)				(624	)
Income from Continuing Operations before Provision
	for Income Taxes						9,828					9,758						25,480					29,326
Provision for Income Taxes							3,327					2,055						7,786					7,898
Income from Continuing Operations							6,501					7,703						17,694					21,428
(Loss) Income from Discontinued Operation, Net of Tax (b)							(14	)				844						(55	)				780
Net Income							6,487					8,547						17,639					22,208
Net Income Attributable to Noncontrolling Interest							(40	)				(86	)					(148	)				(151	)
Net Income Attributable to Kadant						$	6,447				$	8,461					$	17,491				$	22,057
Amounts Attributable to Kadant:
		Income from Continuing Operations				$	6,461				$	7,617					$	17,546				$	21,277
		(Loss) Income from Discontinued Operation, Net of Tax					(14	)				844						(55	)				780
		Net Income Attributable to Kadant				$	6,447				$	8,461					$	17,491				$	22,057
Earnings per Share from Continuing Operations
	Attributable to Kadant:
		Basic				$	0.58				$	0.67					$	1.57				$	1.85
		Diluted				$	0.57				$	0.66					$	1.55				$	1.83
Earnings per Share Attributable to Kadant:
		Basic				$	0.58				$	0.75					$	1.57				$	1.91
		Diluted				$	0.57				$	0.74					$	1.55				$	1.90
Weighted Average Shares:
		Basic					11,153					11,341						11,165					11,523
		Diluted					11,365					11,491						11,321					11,633
																						Increase
																						(Decrease)
																						Excluding Effect
						Three Months Ended											Increase					of Currency
Revenues by Product Line						Sept. 28, 2013					Sept. 29, 2012						(Decrease)					Translation (c,d)
Stock-Preparation						$	38,827				$	34,492					$	4,335				$	3,255
Doctoring, Cleaning, & Filtration							28,801					27,095						1,706					1,463
Fluid-Handling							21,837					23,624						(1,787	)				(1,992	)
	Papermaking Systems Segment						89,465					85,211						4,254					2,726
Fiber-based Products							1,850					1,390						460					460
						$	91,315				$	86,601					$	4,714				$	3,186
																						Increase
																						(Decrease)
																						Excluding Effect
						Nine Months Ended											Increase					of Currency
						Sept. 28, 2013					Sept. 29, 2012						(Decrease)					Translation (c,d)
Stock-Preparation						$	90,322				$	95,883					$	(5,561	)			$	(7,012	)
Doctoring, Cleaning, & Filtration							82,329					79,706						2,623					1,847
Fluid-Handling							68,464					69,733						(1,269	)				(1,461	)
	Papermaking Systems Segment						241,115					245,322						(4,207	)				(6,626	)
Fiber-based Products							8,569					8,374						195					195
						$	249,684				$	253,696					$	(4,012	)			$	(6,431	)
																						Increase
																						(Decrease)
																						Excluding Effect
						Three Months Ended											Increase					of Currency
Sequential Revenues by Product Line						Sept. 28, 2013					June 29, 2013						(Decrease)					Translation (c,d)
Stock-Preparation						$	38,827				$	28,493					$	10,334				$	10,097
Doctoring, Cleaning, & Filtration							28,801					27,666						1,135					1,355
Fluid-Handling							21,837					23,094						(1,257	)				(1,082	)
	Papermaking Systems Segment						89,465					79,253						10,212					10,370
Fiber-based Products							1,850					2,912						(1,062	)				(1,062	)
						$	91,315				$	82,165					$	9,150				$	9,308
																						Increase
																						(Decrease)
																						Excluding Effect
						Three Months Ended											Increase					of Currency
Revenues by Geography (e)						Sept. 28, 2013					Sept. 29, 2012						(Decrease)					Translation (c,d)
North America						$	36,987				$	35,248					$	1,739				$	1,701
Europe							25,941					18,113						7,828					6,666
China							14,726					17,677						(2,951	)				(3,347	)
South America							8,032					5,873						2,159					2,231
Other							5,629					9,690						(4,061	)				(4,065	)
						$	91,315				$	86,601					$	4,714				$	3,186
																						Increase
																						(Decrease)
																						Excluding Effect
						Nine Months Ended											Increase					of Currency
						Sept. 28, 2013					Sept. 29, 2012						(Decrease)					Translation (c,d)
North America						$	116,215				$	115,677					$	538				$	251
Europe							60,108					56,014						4,094					2,521
China							38,307					40,721						(2,414	)				(3,229	)
South America							20,024					17,381						2,643					2,904
Other							15,030					23,903						(8,873	)				(8,878	)
						$	249,684				$	253,696					$	(4,012	)			$	(6,431	)
																						Increase
																						(Decrease)
																						Excluding Effect
						Three Months Ended											Increase					of Currency
Sequential Revenues by Geography						Sept. 28, 2013					June 29, 2013						(Decrease)					Translation (c,d)
North America						$	36,987				$	40,350					$	(3,363	)			$	(3,243	)
Europe							25,941					16,594						9,347					9,029
China							14,726					12,353						2,373					2,275
South America							8,032					7,801						231					663
Other							5,629					5,067						562					584
						$	91,315				$	82,165					$	9,150				$	9,308
						Three Months Ended											Nine Months Ended
Business Segment Information						Sept. 28, 2013					Sept. 29, 2012						Sept. 28, 2013					Sept. 29, 2012
Gross Profit Margin:
		Papermaking Systems					44.3	%				43.6	%					46.5	%				44.0	%
		Fiber-based Products					26.7	%				30.4	%					46.1	%				50.7	%
							43.9	%				43.4	%					46.5	%				44.3	%
Operating Income:
		Papermaking Systems				$	14,210				$	14,385					$	35,975				$	38,261
		Corporate and Fiber-based Products					(4,298	)				(4,471	)					(10,266	)				(8,542	)
						$	9,912				$	9,914					$	25,709				$	29,719
Adjusted Operating Income (d,f):
		Papermaking Systems				$	14,255				$	14,385					$	36,238				$	38,261
		Corporate and Fiber-based Products					(4,298	)				(4,471	)					(10,266	)				(8,542	)
						$	9,957				$	9,914					$	25,972				$	29,719
Bookings from Continuing Operations:
		Papermaking Systems				$	79,792				$	68,230					$	250,277				$	217,242
		Fiber-based Products					1,844					1,113						8,769					7,106
						$	81,636				$	69,343					$	259,046				$	224,348
Capital Expenditures from Continuing Operations:
		Papermaking Systems				$	1,427				$	578					$	3,825				$	1,339
		Corporate and Fiber-based Products					150					95						324					175
						$	1,577				$	673					$	4,149				$	1,514
						Three Months Ended											Nine Months Ended
Cash Flow and Other Data from Continuing Operations						Sept. 28, 2013					Sept. 29, 2012						Sept. 28, 2013					Sept. 29, 2012
Cash Provided by Operations						$	12,625				$	13,205					$	30,697				$	17,737
Depreciation and Amortization Expense							2,302					2,147						6,730					6,419
Balance Sheet Data																	Sept. 28, 2013					Dec. 29, 2012
Assets
Cash, Cash Equivalents, and Restricted Cash																	$	73,167				$	54,553
Accounts Receivable, net																		61,312					59,359
Inventories																		50,925					42,077
Unbilled Contract Costs and Fees																		3,608					2,800
Other Current Assets																		21,460					16,804
Property, Plant and Equipment, net																		42,105					39,168
Intangible Assets																		25,005					26,095
Goodwill																		110,337					107,947
Other Assets																		10,815					10,145
																	$	398,734				$	358,948
Liabilities and Stockholders' Equity
Accounts Payable																	$	26,169				$	23,124
Short- and Long-term Debt																		14,500					6,875
Other Liabilities																		93,465					78,982
	Total Liabilities																	134,134					108,981
	Stockholders' Equity																	264,600					249,967
																	$	398,734				$	358,948
Adjusted Operating Income and Adjusted EBITDA						Three Months Ended											Nine Months Ended
Reconciliation						Sept. 28, 2013					Sept. 29, 2012						Sept. 28, 2013					Sept. 29, 2012
Consolidated
		Net Income Attributable to Kadant				$	6,447				$	8,461					$	17,491				$	22,057
		Net Income Attributable to Noncontrolling Interest					40					86						148					151
		Loss (Income) from Discontinued Operation, Net of Tax					14					(844	)					55					(780	)
		Provision for Income Taxes					3,327					2,055						7,786					7,898
		Interest Expense, net					84					156						229					393
		Operating Income					9,912					9,914						25,709					29,719
		Restructuring costs and other income, net (a)					45					-						263					-
		Adjusted Operating Income (d)					9,957					9,914						25,972					29,719
		Depreciation and Amortization					2,302					2,147						6,730					6,419
		Adjusted EBITDA (d)				$	12,259				$	12,061					$	32,702				$	36,138
Papermaking Systems
		Operating Income				$	14,210				$	14,385					$	35,975				$	38,261
		Restructuring costs and other income, net (a)					45					-						263					-
		Adjusted Operating Income (d)					14,255					14,385						36,238					38,261
		Depreciation and Amortization					2,180					2,030						6,371					6,063
		Adjusted EBITDA (d)				$	16,435				$	16,415					$	42,609				$	44,324
Corporate and Fiber-based Products
		Operating Loss				$	(4,298	)			$	(4,471	)				$	(10,266	)			$	(8,542	)
		Depreciation and Amortization					122					117						359					356
		EBITDA (d)				$	(4,176	)			$	(4,354	)				$	(9,907	)			$	(8,186	)

(a) Includes restructuring costs of $45 in the three-month period ended September 28, 2013 and restructuring costs of $2,003, net of a gain of $1,740 on the sale of assets, in the nine-month period ended September 28, 2013.

(b) Income from discontinued operation in the three- and nine-month periods ended September 29, 2012 was due to the reduction in the reserve for the payment of claims related to the Composites LLC class action settlement.

(c) 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.

(d) Represents a non-GAAP financial measure.

(e) Geographic revenues are attributed to regions based on customer location.

(f) See reconciliation to the most directly comparable GAAP financial measure under "Adjusted Operating Income and Adjusted EBITDA Reconciliation."

About Kadant

Kadant Inc. is a leading supplier to the global pulp and paper industry. Our stock-preparation; fluid-handling; and doctoring, cleaning, and filtration products are designed to increase efficiency and improve quality in pulp and paper production. Many of our products, particularly in our Fluid-Handling product line, are also used to optimize production in other process 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 $332 million in 2012 and 1,600 employees in 17 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, economic and industry outlook, and pending acquisition of Carmanah Design and Manufacturing Inc. Our actual results may differ materially from these forward-looking statements as a result of various important factors, including those set forth under the heading "Risk Factors" in Kadant's quarterly report on Form 10-Q for the period ended June 29, 2013. 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; commodity and component price increases or shortages; international sales and operations; our acquisition strategy; our ability to consummate the pending acquisition, to successfully integrate the acquired business, and realize anticipated benefits of the acquisition; the future performance of the oriented strand board industry and housing markets; general economic conditions; our internal growth strategy; fluctuations in currency exchange rates; competition; soundness of suppliers and customers; our effective tax rate; future restructurings; soundness of financial institutions; our debt obligations; restrictions in our credit agreement; protection of patents and proprietary rights; failure of our information systems or breaches of data security; fluctuations in our share price; and anti-takeover provisions. We undertake no obligation to publicly update any forward-looking statement, whether as a result of new information, future events, or otherwise.

Source: Kadant Inc.

Kadant Inc.
Investor contact:
Thomas M. O'Brien, 978-776-2000
or
Media contact:
Wes Martz, 269-278-1715