Kadant Reports Second Quarter Results and Reaffirms Guidance
"Our second quarter financial performance reflects the steady progress we are making across the company," said William A. Rainville, chairman and chief executive officer of Kadant. "Our earnings were better than expected - the result of higher gross margins, improved operating results in our Composite and Fiber-based Products segment, and cost-cutting actions we initiated in late 2001 in our Papermaking Equipment segment.
"We have focused on lowering costs in our papermaking equipment business as growth continues to be hampered by fluctuating demand in the pulp and paper industry. While we see signs of modest improvement in the industry, with pulp prices firming and operating rates for some paper grades on the rise, the pace is slow and there is still market uncertainty. In our business, sales of papermaking accessories were soft, while sales of water-management and stock-preparation systems were up slightly from the first quarter.
"In our Composite and Fiber-based Products segment, I'm pleased to report that revenues more than doubled from last year, resulting from strong sales of fiber-based granules and a record $2.2 million in sales of our composite decking and roofing materials. Our efforts to market our composite building products and establish distribution have led to growing acceptance by building suppliers, contractors, and homeowners alike - underscored by second quarter bookings of $4.1 million.
"We are maintaining our guidance for the year which, adjusted for the additional shares issued in our June stock offering, would result in earnings of $.66 to $.76 per diluted share, excluding restructuring and unusual costs. Our revenue guidance for the year also remains unchanged at $185 to $195 million. For the third quarter of 2002, we expect to earn from $.19 to $.21 per diluted share on revenues of $47 to $49 million."
Mr. Rainville concluded, "The June public offering fulfilled an important corporate obligation by satisfying an IRS requirement related to our spinoff, and yielded net proceeds of $17.6 million. We now have nearly $119 million in cash and short-term investments, which is $29 million more than our debt. Through effective management of our working capital, we would have ended the quarter net cash positive even without the offering proceeds. Our strong balance sheet continues to improve, and remains a valuable asset that allows us to invest in Kadant's long-term growth."
Financial Highlights (Unaudited)
(In thousands except per share amounts)
Consolidated Statement of Income
Three Months Ended Six Months Ended
June 29, June 30, June 29, June 30,
2002 2001 2002 2001
Revenues $46,378 $56,732 $89,718 $115,632
Costs and Operating
Expenses:
Cost of revenues 28,378 36,084 55,565 72,280
Selling, general,
and administrative
expenses 12,576 14,585 25,267 30,441
Research and
development expenses 1,152 1,871 2,440 3,663
Restructuring and
unusual costs -- -- 3,637 --
42,106 52,540 86,909 106,384
Operating Income 4,272 4,192 2,809 9,248
Interest Income 623 1,812 1,278 3,953
Interest Expense (1,207) (1,871) (2,636) (3,744)
Income Before
Provision for Income
Taxes, Minority Interest,
and Extraordinary Item 3,688 4,133 1,451 9,457
Provision for Income Taxes 1,395 1,736 545 3,955
Minority Interest
(Income) Expense 1 (50) 2 (74)
Income Before
Extraordinary Item 2,292 2,447 904 5,576
Extraordinary Item
(net of income
taxes of $157 and $175) 257 -- 286 --
Net Income $2,549 $2,447 $1,190 $5,576
Basic and Diluted
Earnings per
Share Before
Extraordinary Item $.18 $.20 $.07 $.45
Basic and Diluted
Earnings per Share $.20 $.20 $.10 $.45
Weighted Average Shares
Basic 12,446 12,277 12,343 12,277
Diluted 12,661 12,294 12,508 12,292
Business Segment Information
Three Months Ended Six Months Ended
June 29, June 30, June 29, June 30,
2002 2001 2002 2001
Revenues:
Pulp and Papermaking
Equipment and Systems $41,923 $54,686 $82,500 $110,673
Composite and Fiber-based
Products 4,455 2,046 7,218 4,959
$46,378 $56,732 $89,718 $115,632
Operating Income (a):
Pulp and Papermaking
Equipment and Systems (b) $5,024 $6,404 $6,907 $13,383
Composite and Fiber-based
Products (c)(d) 98 (1,253) (2,375) (2,236)
Corporate (e) (850) (959) (1,723) (1,899)
$4,272 $4,192 $2,809 $9,248
Capital Expenditures:
Pulp and Papermaking
Equipment and Systems $419 $348 $631 $732
Composite and Fiber-based
Products 327 864 590 1,658
Corporate 7 -- 127 --
$753 $1,212 $1,348 $2,390
Balance Sheet Data
June 29, Dec. 29,
2002 2001
Cash and Short-term Investments $ 118,570 $ 119,432
Short- and Long-term Debt 89,441 119,840
Net Cash (Debt) 29,129 (408)
Shareholders' Investment 206,441 183,557
(a) Excluding restructuring and unusual costs of $3,637,
consolidated operating income was $6,446 in the six-month period ended
June 29, 2002. Includes consolidated goodwill amortization of $862 and
$1,726 in the three- and six-month periods ended June 30, 2001,
respectively.
(b) Excluding restructuring and unusual costs of $1,998, operating
income was $8,905 in the six-month period ended June 29, 2002.
Includes goodwill amortization of $803 and $1,609 in the three- and
six-month periods ended June 30, 2001, respectively.
(c) Excluding restructuring and unusual costs of $1,639, operating
loss was $736 in the six-month period ended June 29, 2002. Includes
goodwill amortization of $59 and $117 in the three- and six-month
periods ended June 30, 2001, respectively.
(d) Includes operating losses from our composite building products
business of $677 and $1,054 in the three-month periods ended June 29,
2002 and June 30, 2001, respectively, and $1,731 and $1,638, excluding
restructuring and unusual charges, in the six-month periods ended June
29, 2002 and June 30, 2001, respectively.
(e) Primarily general and administrative expenses.
Kadant will hold its earnings conference call on Thursday, July 25, 2002, at 11 a.m. EDT. To listen, call 877-692-2595 within the U.S., or 973-633-1010 outside the U.S. You can also listen to the conference call live on the Web by visiting www.kadant.com and clicking on "Investors." An audio archive of the call will be available on the Website until August 1, 2002.
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. The company also develops and manufactures composite building materials produced from natural fiber and recycled plastic. Kadant, based in Acton, Massachusetts, reported $221 million in revenues in 2001 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. Important factors that could cause actual results to differ materially from those indicated by such statements are set forth under the heading "Forward-looking Statements" in Exhibit 13 to the company's annual report on Form 10-K for the fiscal year ended December 29, 2001, as amended. These include risks and uncertainties relating to the company's: dependence on the paper industry, international operations, competition, ability to manufacture and distribute composite building products and the long-term performance of such products, acquisition strategy, dependence on patents and proprietary rights, fluctuations in quarterly operating results, and financial covenants and other obligations arising from the spinoff of the company 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:
Kadant
Investor contact:
Thomas M. O'Brien, 978/776-2000
or
Media contact:
GreatPoint Communications, 978/392-6866