UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

______________________________________________________________

FORM 8-K

CURRENT REPORT

Pursuant to Section 13 or 15(d) of the

Securities Exchange Act of 1934

Date of report (Date of earliest event reported): November 4, 2013

KADANT INC.

(Exact Name of Registrant as Specified in its Charter)

(978) 776-2000

Registrant's telephone number, including area code

Not Applicable

 (Former Name or Former Address, if Changed Since Last Report)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

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KADANT INC.

 

Item 2.02  Results of Operations and Financial Condition.

On November 4, 2013, Kadant Inc. (the "Company") announced its financial results for the fiscal quarter ended September 28, 2013. The full text of the press release issued in connection with the announcement is furnished as Exhibit 99 to this Current Report on Form 8-K.

The information in this Form 8-K (including Exhibit 99) shall not be deemed "filed" for purposes of Section 18 of the Securities Exchange Act of 1934 (the "Exchange Act") or otherwise subject to the liabilities of that section, nor shall it be deemed incorporated by reference in any filing under the Securities Act of 1933 or the Exchange Act, except as expressly set forth by specific reference in such a filing.

Item 9.01  Financial Statements and Exhibits.

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KADANT INC.

 

SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

 

Kadant Reports 2013 Third Quarter Results

Lowers Revenue Guidance for 2013

 

WESTFORD, Mass., November 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."

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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

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.

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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												of Currency
Revenues by Product Line		Sept. 28, 2013				Sept. 29, 2012				Increase (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												of Currency
		Sept. 28, 2013				Sept. 29, 2012				Increase (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												of Currency
Sequential Revenues by Product Line		Sept. 28, 2013				June 29, 2013				Increase (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												of Currency
Revenues by Geography (e)		Sept. 28, 2013				Sept. 29, 2012				Increase (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												of Currency
		Sept. 28, 2013				Sept. 29, 2012				Increase (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												of Currency
Sequential Revenues by Geography		Sept. 28, 2013				June 29, 2013				Increase (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

 

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			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
			Three Months Ended								Nine Months Ended
Adjusted Operating Income and Adjusted EBITDA 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."

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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.

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