Kadant Reports Third Quarter 2003 Results
ACTON, Mass.--(BUSINESS WIRE)--Oct. 22, 2003--For the third quarter of 2003, Kadant Inc. (NYSE: KAI - News) reported GAAP diluted earnings per share of $.19, versus $.20 in the 2002 period. Earnings in 2003 included a $.01 charge for restructuring and unusual items. GAAP net income was $2.7 million in both periods. Revenues in the third quarter of 2003 were $45.9 million (including $2.2 million from the favorable effect of currency translation), compared with $50.1 million a year ago.
William A. Rainville, chairman and chief executive officer of Kadant, said, "Our EPS results this quarter were slightly better than we expected despite weak performance from our composite building products business, which reported an operating loss of $771,000. We were pleased to generate a record $17 million of operating cash in the quarter - all from our core papermaking equipment segment. The strong cash flows contributed to a cash balance of $66 million at quarter-end, up more than $21 million since the beginning of the year. These results attest to the strength of our core business in spite of ongoing challenges in some of our markets.
"Another positive was our 15 percent increase in total bookings for the quarter over last year, led by strong orders for stock-preparation systems, particularly in China. Just after quarter-end, we received an order for approximately $3.5 million of these systems, which are used to recover usable fiber from wastepaper in the production of recycled-paper products.
"While the composite building products industry has been experiencing lower-than-expected demand, we continue to believe in the potential opportunities that our business represents. We recently launched an aggressive program to further expand our dealer base, and expect to see the benefit in 2004."
Mr. Rainville added, "With the loss in composites likely to be from $1.0 to $1.3 million in the fourth quarter of 2003, we expect to earn $.15 to $.17 per diluted share (on a GAAP basis) for the quarter, on revenues of $45 to $47 million. For the full year, we expect to earn $.84 to $.86 per diluted share (on a GAAP basis), on revenues of $198 to $200 million."
Financial Highlights (unaudited)
(In thousands except per share amounts and percentages)
Three Months Ended Nine Months Ended
------------------- ---------------------
Consolidated Statement of Operations
------------------------------------
Sept. 27, Sept. 28, Sept. 27, Sept. 28,
2003 2002 (a) 2003 2002 (a)
-------- -------- --------- ---------
Revenues $45,906 $50,084 $153,065 $139,802
-------- -------- --------- ---------
Costs and Operating
Expenses:
Cost of revenues 27,768 31,576 95,062 87,141
Selling, general, and
administrative
expenses 12,775 12,490 39,669 37,757
Research and
development expenses 1,149 1,149 3,502 3,589
Restructuring and
unusual items 157 101 (23) 3,738
-------- -------- --------- ---------
41,849 45,316 138,210 132,225
-------- -------- --------- ---------
Operating Income 4,057 4,768 14,855 7,577
Interest Income 243 676 693 1,954
Interest Expense (11) (1,084) (39) (3,720)
Other Income - 8 - 469
-------- -------- --------- ---------
Income Before Provision for Income
Taxes, Minority Interest, and
Cumulative Effect of
Change in Accounting
Principle 4,289 4,368 15,509 6,280
Provision for Income
Taxes 1,630 1,660 5,894 2,380
Minority Interest Expense
(Income) (4) 1 68 3
-------- -------- --------- ---------
Income Before Cumulative
Effect of Change in
Accounting Principle 2,663 2,707 9,547 3,897
Cumulative Effect of Change in
Accounting Principle (net of
income tax benefit of
$12,420) - - - (32,756)
-------- -------- --------- ---------
Net Income (Loss) $2,663 $2,707 $9,547 $(28,859)
======== ======== ========= =========
Earnings per Share Before
Cumulative Effect of
Change in Accounting
Principle
Basic $.20 $.20 $.70 $.31
======== ======== ========= =========
Diluted $.19 $.20 $.69 $.30
======== ======== ========= =========
Earnings (Loss) per Share
Basic $.20 $.20 $.70 $(2.26)
======== ======== ========= =========
Diluted $.19 $.20 $.69 $(2.24)
======== ======== ========= =========
Weighted Average Shares
Basic 13,632 13,547 13,602 12,744
======== ======== ========= =========
Diluted 14,041 13,716 13,905 12,911
======== ======== ========= =========
Three Months Ended Nine Months Ended
------------------- ---------------------
Adjusted Diluted Earnings per Share (b)
---------------------------------------
Sept. 27, Sept. 28, Sept. 27, Sept. 28,
2003 2002 2003 2002
---------- -------- --------- ---------
GAAP Diluted Earnings
(Loss) per Share $.19 $.20 $.69 $(2.24)
Restructuring and Unusual
Items .01 - - .18
Gain on Repurchases of
Debt - - - (.02)
Cumulative Effect of
Change in Accounting
Principle - - - 2.54
-------- -------- --------- ---------
$.20 $.20 $.69 $.46
======== ======== ========= =========
Three Months Ended Nine Months Ended
------------------- ---------------------
Business Segment Information
----------------------------
Sept. 27, Sept. 28, Sept. 27, Sept. 28,
2003 2002 2003 2002
--------- ---------- --------- ---------
Revenues:
Pulp and
Papermaking
Equipment and
Systems $42,023 $46,322 $138,254 $128,822
Composite and
Fiber-based
Products 3,883 3,762 14,811 10,980
-------- -------- --------- ---------
$45,906 $50,084 $153,065 $139,802
======== ======== ========= =========
Gross Profit Margin:
Pulp and
Papermaking
Equipment and
Systems 42% 38% 39% 39%
Composite and
Fiber-based
Products 11% 27% 28% 26%
-------- -------- --------- ---------
40% 37% 38% 38%
======== ======== ========= =========
Operating Income:
Pulp and
Papermaking
Equipment and
Systems $5,702 $5,839 $17,633 $12,746
Composite and
Fiber-based
Products (c) (669) (272) 314 (2,647)
Corporate (976) (799) (3,092) (2,522)
-------- -------- --------- ---------
$4,057 $4,768 $14,855 $7,577
======== ======== ========= =========
Adjusted Operating Income (Excludes
Restructuring and Unusual Items) (b):
Pulp and
Papermaking
Equipment and
Systems (d) $5,859 $5,940 $17,610 $14,845
Composite and
Fiber-based
Products (e) (669) (272) 314 (1,008)
Corporate (976) (799) (3,092) (2,522)
-------- -------- --------- ---------
$4,214 $4,869 $14,832 $11,315
======== ======== ========= =========
Three Months Ended Nine Months Ended
------------------- ---------------------
Business Segment Information (continued)
---------------------------------------
Sept. 27, Sept. 28, Sept. 27, Sept. 28,
2003 2002 2003 2002
-------- -------- -------- ---------
Bookings:
Pulp and
Papermaking
Equipment and
Systems $44,559 $38,983 $141,203 $125,275
Composite and
Fiber-based
Products 2,638 1,919 10,463 11,175
-------- -------- --------- ---------
$47,197 $40,902 $151,666 $136,450
======== ======== ========= =========
Capital Expenditures:
Pulp and
Papermaking
Equipment and
Systems $537 $266 $1,098 $897
Composite and
Fiber-based
Products 585 583 1,461 1,173
Corporate - 18 11 145
-------- -------- --------- ---------
$1,122 $867 $2,570 $2,215
======== ======== ========= =========
Three Months Ended Nine Months Ended
------------------- ---------------------
Cash Flow and Other Data
-------------------------
Sept. 27, Sept. 28, Sept. 27, Sept. 28,
2003 2002 2003 2002
-------- -------- -------- ---------
Cash Provided by
Operations $16,953 $4,557 $20,011 $17,174
Depreciation and
Amortization Expense 1,248 1,306 3,855 3,893
Balance Sheet Data Sept. 27, Dec. 28,
------------------ 2003 2002
-------- -------
Cash and Short-term
Investments $65,687 $44,429
Short- and Long-term Debt 598 1,165
Shareholders' Investment 197,424 181,257
(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 nine-month period ended September 28,
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 is consistent
with how we measure our performance.
(c) Includes operating loss of $771 and $661 in the three- and nine-
month periods ended September 27, 2003, respectively, and
operating losses of $376 in the three- month period ended
September 28, 2002, and $3,285 (including restructuring and
unusual costs of $1,178) in the nine-month period ended September
28, 2002, from the composite building products business.
(d) Excludes restructuring costs and unusual costs of $157 in the
three-month period ended September 27, 2003, net resturcturing and
unusual income of $23 in the nine-month period ended September 27,
2003, and net restructuring and unusual costs of $101 and $2,099
in the three- and nine-month periods ended September 28, 2002.
(e) Excludes restructuring and unusual costs of $1,639 in the
nine-month period ended September 28, 2002.
Kadant will hold its earnings conference call on Thursday, October 23, 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 Thursday, November 20, 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, had $186 million in revenues in 2002 and approximately 1,100 employees 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 projected operating results and the future performance of our businesses, particularly our composites 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 period ended June 28, 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:Kadant Inc.
Investors:
Thomas M. O'Brien, 978-776-2000
or
Media:
GreatPoint Communications, 978-392-6866