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): August 4, 2016
KADANT INC.
(Exact Name of Registrant as Specified in its Charter)
Delaware | 1-11406 | 52-1762325 |
(State or Other Jurisdiction | (Commission File Number) | (IRS Employer |
of Incorporation) | Identification No.) | |
One Technology Park Drive | ||
Westford, Massachusetts | 01886 | |
(Address of Principal Executive Offices) | (Zip Code) | |
(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:
o | Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) | |
o | Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) | |
o | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) | |
o | Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) | |
KADANT INC.
Item 7.01 Regulation FD Disclosure.
On August 4, 2016, Kadant Inc. (the “Company”) will hold a webcast and conference call to discuss its financial results for the fiscal quarter ended July 2, 2016. A copy of the slides that will be presented on the webcast and discussed in the conference call is being 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.
(d) Exhibit | ||
The following exhibit relating to Item 7.01 shall be deemed to be furnished and not filed. | ||
Exhibit No. | Description of Exhibit | |
99 | Slides to be presented by the Company on August 4, 2016. | |
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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 INC. | ||
Date: August 4, 2016 | By | /s/ Michael J. McKenney |
Michael J. McKenney Senior Vice President and Chief Financial Officer | ||
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Second Quarter 2016 Business Review
Jonathan W. Painter, President & CEO
Michael J. McKenney, Senior Vice President & CFO
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KAI 2Q16 Business Review–August 4, 2016
© 2016 Kadant Inc. All rights reserved.
Forward-Looking Statements
The following constitutes a “Safe Harbor” statement under the Private Securities Litigation Reform Act of 1995: This
presentation 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, and economic and
industry outlook. 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 annual report on Form 10-K for the
year ended January 2, 2016 and subsequent filings with the Securities and Exchange Commission. These include risks and
uncertainties relating to adverse changes in global and local economic conditions; the variability and difficulty in accurately
predicting revenues from large capital equipment and systems projects; the variability and uncertainties in sales of capital
equipment in China; the effect of currency fluctuations on our financial results; our customers’ ability to obtain financing for
capital equipment projects; changes in government regulations and policies; oriented strand board market and levels of
residential construction activity; development and use of digital media; price increases or shortages of raw materials;
dependence on certain suppliers; international sales and operations; disruption in production; our acquisition strategy; our
internal growth strategy; competition; soundness of suppliers and customers; our effective tax rate; future restructurings;
soundness of financial institutions; our debt obligations; restrictions in our credit agreement; loss of key personnel; reliance
on third-party research; 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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KAI 2Q16 Business Review–August 4, 2016
© 2016 Kadant Inc. All rights reserved.
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, adjusted net income, adjusted diluted EPS, and adjusted earnings
before interest, taxes, depreciation, and amortization.
A reconciliation of those numbers to the most directly comparable U.S. GAAP financial measures is shown in our 2016 second
quarter earnings press release issued August 3, 2016, which is available in the Investors section of our website at
www.kadant.com under the heading Recent News.
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.
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KAI 2Q16 Business Review–August 4, 2016
© 2016 Kadant Inc. All rights reserved.
BUSINESS REVIEW
Jonathan W. Painter
President & CEO
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KAI 2Q16 Business Review–August 4, 2016
© 2016 Kadant Inc. All rights reserved.
Q2 2016 Financial Highlights
($ Millions, except per share amounts) Q2 2016 Q2 2015 % CHANGE3 EXCL. FX3
Revenue $111.8 $98.3 13.7% 15.7%
Gross Margin 44.9% 46.5% n.m. n.m.
Net Income1 $8.3 $8.5 -1.8% 3.6%
Adjusted EBITDA1, 2 $17.9 $15.6 14.3% 18.6%
Adjusted EBITDA/Revenue 16.0% 15.9% n.m. n.m.
Diluted EPS1 $0.75 $0.76 -1.3% 3.9%
Adjusted Diluted EPS1, 2 $0.88 $0.78 12.8% 17.9%
Bookings $98.1 $93.7 4.7% 6.8%
Cash Flow1 $13.6 $14.4 -5.1% -5.1%
1 Net income, diluted EPS, adjusted diluted EPS, adjusted EBITDA, and cash flow are from continuing operations.
2 Adjusted EBITDA and adjusted diluted EPS are non-GAAP financial measures that exclude certain items as detailed in our Q2 2016 earnings release dated August 3, 2016.
3 Percent change calculated using actual numbers reported in our Q2 2016 earnings release dated August 3, 2016.
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KAI 2Q16 Business Review–August 4, 2016
© 2016 Kadant Inc. All rights reserved.
FX Translation and Acquisition Impact
Q2 2016, $ in millions except EPS Revenue Adjusted EPS4 Bookings
Parts & Consumables
Revenue
Parts & Consumables
Bookings
As Reported $111.8 $0.88 $98.1 $69.5 $64.6
Growth1 13.7% 12.8% 4.7% 6.4% 3.6%
Growth excluding FX Translation2 15.7% 17.9% 6.8% 8.4% 5.7%
Growth excluding FX Translation
and Acquisitions3
0.3% 3.8% -8.4% 0.9% -1.8%
1 Growth is the year-over-year percent change between the current period and the comparable prior period.
2 Represents the year-over-year percent change excluding the impact of current period versus prior period exchange rates.
3 Represents the year-over-year percent change excluding the impact of acquisitions and current period versus prior period exchange rates. Acquired
businesses are classified above as Acquisitions for the first four quarters after acquisition.
4 Adjusted diluted EPS is a non-GAAP financial measure that excludes certain items as detailed in our Q2 2016 earnings press release issued August 3, 2016.
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KAI 2Q16 Business Review–August 4, 2016
© 2016 Kadant Inc. All rights reserved.
Bookings and Revenues
US$ (millions)
1 Reported Q415 bookings were $76 million, which included new orders of $92 million and a booking reversal of $16 million.
$0
$20
$40
$60
$80
$100
$120
Bookings Booking Reversal Revenues
1
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KAI 2Q16 Business Review–August 4, 2016
© 2016 Kadant Inc. All rights reserved.
Parts and Consumables Bookings and Revenues
US$ (millions)
$0
$10
$20
$30
$40
$50
$60
$70
$80
Bookings Revenues
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© 2016 Kadant Inc. All rights reserved.
REGIONAL PERFORMANCE
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KAI 2Q16 Business Review–August 4, 2016
© 2016 Kadant Inc. All rights reserved.
North America Bookings and Revenues
US$ (millions)
$0
$10
$20
$30
$40
$50
$60
$70
$80
Bookings Revenues
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KAI 2Q16 Business Review–August 4, 2016
© 2016 Kadant Inc. All rights reserved.
Europe Bookings and Revenues
US$ (millions)
$0
$5
$10
$15
$20
$25
$30
$35
Bookings Revenues
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KAI 2Q16 Business Review–August 4, 2016
© 2016 Kadant Inc. All rights reserved.
Asia Bookings and Revenues
US$ (millions)
1 Reported Q415 Asia bookings were negative $6 million, which included new orders of $10 million and a booking reversal of $16 million.
-$10
-$5
$0
$5
$10
$15
$20
$25
$30
$35
$40
Bookings New Orders Revenues
1
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KAI 2Q16 Business Review–August 4, 2016
© 2016 Kadant Inc. All rights reserved.
Rest-of-World Bookings and Revenues
US$ (millions)
$0
$2
$4
$6
$8
$10
$12
$14
$16
Bookings Revenues
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© 2016 Kadant Inc. All rights reserved.
Guidance
• FY 2016 GAAP diluted EPS of $2.75 to $2.81
• FY 2016 adjusted diluted EPS of $2.98 to $3.04
• FY 2016 revenues of $415 to $421 million
• Q3 2016 GAAP diluted EPS of $0.62 to $0.65
• Q3 2016 revenues of $103 to $105 million
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© 2016 Kadant Inc. All rights reserved.
FINANCIAL REVIEW
Michael J. McKenney
Senior Vice President & Chief Financial Officer
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KAI 2Q16 Business Review–August 4, 2016
© 2016 Kadant Inc. All rights reserved.
Quarterly Gross Margins
45.6%
43.7% 43.4% 43.0%
47.3%
48.6%
43.9% 43.9%
45.2%
43.0%
44.7% 44.7%
48.1%
46.5%
47.5%
43.1%
45.6%
44.9%
30%
35%
40%
45%
50%
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KAI 2Q16 Business Review–August 4, 2016
© 2016 Kadant Inc. All rights reserved.
Quarterly SG&A
US$ (millions)
25%
30%
35%
40%
45%
$0
$10
$20
$30
$40
SG&A SG&A as a % of Revenues
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KAI 2Q16 Business Review–August 4, 2016
© 2016 Kadant Inc. All rights reserved.
2Q15 to 2Q16 Adjusted Diluted EPS
$0.78
$0.11
$0.02 $0.01 $0.01 ($0.05) $0.88
$0.00
$0.25
$0.50
$0.75
$1.00
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KAI 2Q16 Business Review–August 4, 2016
© 2016 Kadant Inc. All rights reserved.
Cash Flow
($ Millions) 2Q16 2Q15
Income from Continuing Operations $8.4 $8.5
Depreciation and Amortization 4.9 2.8
Stock-Based Compensation 1.3 1.7
Other Items (0.6) 0.1
Change in Current Assets & Liabilities (excl. acquisition) (0.4) 1.3
Cash Provided by Operating Activities $13.6 $14.4
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KAI 2Q16 Business Review–August 4, 2016
© 2016 Kadant Inc. All rights reserved.
Key Working Capital Metrics
2Q16 1Q16 2Q15
Days in Receivables 58 60 57
Days in Inventory 89 99 107
Days in Payables 45 41 49
57
60
58
107
99
89
49 41
45
20
40
60
80
100
120
140
Days in Receivables Days in Inventory Days in Payables
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© 2016 Kadant Inc. All rights reserved.
Working Capital and Cash Conversion Days
2Q16 1Q16 2Q15
Working Capital % LTM Revenues* 12.7% 15.1% 15.8%
Cash Conversion Days** 102 days 118 days 115 days
*Working Capital is defined as current assets less current liabilities, excluding cash, debt, and the discontinued operation.
** Based on days in receivables plus days in inventory less days in accounts payable.
0
50
100
150
200
0%
5%
10%
15%
20%
DA
YS
%
O
F
R
EV
EN
U
E
Cash Conversion Days Working Capital % LTM Revenues *
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© 2016 Kadant Inc. All rights reserved.
Cash and Debt
($ Millions) 2Q16 1Q16 2Q15
Cash, cash equivalents, and restricted cash $54.9 $106.1 $48.6
Debt (64.3) (72.2) (28.5)
Net (Debt) Cash $(9.4) $33.9 $20.1
$30.9 $30.1
$41.5
$47.7
$51.8
$48.5
$58.7
$11.6
$14.3
$9.5
$18.7 $19.9
$12.5
$20.1
$27.5
$35.7 $33.9
$(9.4)
($20)
$0
$20
$40
$60
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© 2016 Kadant Inc. All rights reserved.
Leverage Ratio
* Calculated by adding or subtracting certain items, as required by our Credit Facility, from Adjusted EBITDA. Under our new Credit Facility entered into on August 3,
2012 total debt is defined as debt less domestic cash of up to $25 million. For periods prior to 3Q12, total debt was not reduced for domestic cash.
0.89
0.00
0.25
0.50
0.75
1.00
1.25
Debt/EBITDA *
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© 2016 Kadant Inc. All rights reserved.
Questions & Answers
To ask a question, please call 888-326-8410 within the U.S. or
+1-704-385-4884 outside the U.S. and reference 46143277.
Please mute the audio on your computer.
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KAI 2Q16 Business Review–August 4, 2016
© 2016 Kadant Inc. All rights reserved.
Q2 2016 Key Take-Aways
• Solid quarter in revenue, EPS, and cash flow
• PAAL integration is going well and we expect this progress to
continue to gain momentum
• We continue to expect 2016 to be a good year despite the
challenging market environment across the globe
Second Quarter 2016 Business Review
Jonathan W. Painter, President & CEO
Michael J. McKenney, Senior Vice President & CFO