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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): October 30, 2017

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))
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter). Emerging growth company ¨
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨




KADANT INC.

Item 2.02 Results of Operations and Financial Condition.

On October 30, 2017, Kadant Inc. (the “Company”) announced its financial results for the fiscal quarter ended September 30, 2017. 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.

 
(d) Exhibit


 
The following exhibit relating to Item 2.02 shall be deemed to be furnished and not filed.
 
 
 
 
Exhibit
    No.

Description of Exhibit
 
 
 
 
99
 
 
 

2



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: October 30, 2017
By
/s/ Michael J. McKenney
 
 
Michael J. McKenney
Senior Vice President and
   Chief Financial Officer

3


Exhibit
Exhibit 99
https://cdn.kscope.io/fe190d48de902bf54413ca1b208031be-kadantlogoa11.jpg

KADANT INC.
One Technology Park Drive
Westford, MA 01886

NEWS
Kadant Reports 2017 Third Quarter Results
Raises Revenue and EPS Guidance for 2017

WESTFORD, Mass. - October 30, 2017 - Kadant Inc. (NYSE: KAI) reported its financial results for the third quarter ended September 30, 2017.

Third Quarter 2017 Highlights
•
Acquired the businesses of NII FPG Company and Unaflex, LLC
•
Revenue increased 45% to a record $153 million
•
Gross margin was 42.3%
•
GAAP diluted EPS increased 43% to a record $1.17
•
Adjusted diluted EPS increased 84% to a record $1.49
•
Net income increased 45% to a record $13 million
•
Adjusted EBITDA increased 85% to a record $30 million and represented 20% of revenue
•
Bookings increased 43% to a record $135 million

Note: Adjusted diluted EPS, adjusted EBITDA, adjusted EBITDA margin, and revenues excluding acquisitions and the effect of foreign currency translation are non-GAAP financial measures that exclude certain items as detailed later in this press release.

Management Commentary
“Following our strong first half of 2017, we had another outstanding quarter with a number of record-setting performances across a broad range of metrics contributing to a strong EPS and revenue beat,” said Jonathan Painter, president and chief executive officer of Kadant. “Our third quarter financial results were driven by a combination of better than expected performance from our Wood Processing acquisition and significant internal growth, particularly in China.

“Our record bookings of $135 million in the third quarter extended our strong bookings performance beyond the previous three quarters and was led by our Wood-Processing product line. Also contributing to the record performance were our Stock-Preparation and Fluid-Handling product lines, each of which achieved over 25 percent growth in bookings compared to the same period last year. From a geographic perspective, bookings in China were exceptionally strong in the third quarter, while North America saw the largest impact from our two acquisitions completed during the quarter.”

Third Quarter 2017 Results
Revenue increased 45 percent to $152.8 million compared to the third quarter of 2016, including $29.2 million from acquisitions and a $2.6 million increase from the favorable effect of foreign currency translation. Excluding the impact of acquisitions and foreign currency translation, revenue was up 15 percent compared to the third quarter of 2016. Gross margin was 42.3 percent, including a negative 220 basis point impact from the amortization of acquired profit in inventory. Net income was $13.3 million, or $1.17 per diluted share, compared to $9.2 million, or $0.82 per diluted share, in the third quarter of 2016. Adjusted diluted EPS increased 84 percent to $1.49 in the third quarter of 2017, compared to $0.81 in the third quarter of 2016. Adjusted diluted EPS in the third quarter of 2017 excludes $0.28 of amortization from acquired profit in inventory and backlog and $0.04 of acquisition costs. Adjusted diluted EPS in the third quarter of 2016 excludes a $0.02 benefit from discrete tax items and $0.01 of acquisition costs.



Adjusted EBITDA increased 85 percent to $29.9 million compared to $16.2 million in the third quarter of 2016. Adjusted EBITDA excludes $4.3 million of amortization from acquired profit in inventory and backlog in the third quarter of 2017 and $0.6 million and $0.2 million of acquisition costs in the third quarters of 2017 and 2016, respectively. Cash flows from operations were $7.0 million in the third quarter of 2017 and were impacted by the high level of shipments, which increased accounts receivable and the payment of acquisition-related expenses. Bookings increased 43 percent to $135.5 million compared to $94.8 million in the third quarter of 2016 and includes $20.5 million from acquisitions and a $2.3 million increase from the favorable effect of foreign currency translation. Excluding the impact of acquisitions and foreign currency translation, bookings increased 19 percent compared to the third quarter of 2016.

Guidance
“While we began the year with a fairly optimistic outlook, steadily improving global market conditions combined with contributions from our acquisitions and excellent execution by our operations teams have further raised our expectations for 2017,” Mr. Painter continued. “We now expect to report full year revenue of $509 to $512 million, revised from our previous guidance of $488 to $494 million. We expect to achieve GAAP diluted EPS of $3.56 to $3.60 in 2017, revised from our previous guidance of $3.18 to $3.26. The revised 2017 guidance includes pre-tax acquisition costs of $5.0 million, or $0.38 per diluted share, and pre-tax amortization expense associated with acquired profit in inventory and backlog of $6.6 million, or $0.43 per diluted share. Excluding these acquisition-related expenses, we expect adjusted diluted EPS of $4.37 to $4.41 for 2017. For the fourth quarter of 2017, we expect GAAP diluted EPS of $0.87 to $0.91 on revenue of $143 to $146 million, including $0.15 of amortization expense associated with acquired profit in inventory and backlog. Excluding the amortization expense, we expect adjusted diluted EPS of $1.02 to $1.06 for the fourth quarter of 2017.”

Conference Call
Kadant will hold a webcast with a slide presentation for investors on Tuesday, October 31, 2017, at 11:00 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 “Investors”. To listen to the webcast via teleconference, call 888-326-8410 within the U.S., or +1-704-385-4884 outside the U.S. and reference participant passcode 90222803. 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 website until December 1, 2017.

Shortly after the webcast, Kadant will post its updated general investor presentation incorporating the third quarter results on its website at www.kadant.com under the “Investors” section.

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 revenue excluding the effect of acquisitions and foreign currency translation, adjusted operating income, adjusted net income, adjusted diluted earnings per share (EPS), adjusted earnings before interest, taxes, depreciation, and amortization (adjusted EBITDA), and adjusted EBITDA margin.

We believe 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 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.
    


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.

Revenue in the third quarter and first nine months of 2017 included $29.2 million from acquisitions completed in 2017. Revenue in the first nine months of 2017 also included $13.3 million from an acquisition completed in April 2016. Revenue included a $2.6 million favorable and a $1.1 million unfavorable foreign currency translation effect in the third quarter and first nine months of 2017, respectively, compared to the same periods in 2016. We present increases or decreases in revenue excluding the effect of acquisitions and foreign currency translation to provide investors insight into underlying revenue trends.
        
Adjusted operating income, adjusted EBITDA, adjusted EBITDA margin, adjusted net income, and adjusted diluted EPS exclude acquisition costs, amortization of acquired profit in inventory and backlog, and other income. These items are excluded as they are not indicative of our core operating results and may not be comparable to other periods, which have differing levels of incremental costs or income or none at all.

Adjusted operating income, adjusted EBITDA, and adjusted EBITDA margin exclude:
•
Pre-tax acquisition costs of $0.6 million in the third quarter and $5.0 million in the first nine months of 2017. Pre-tax acquisition costs of $0.2 million in the third quarter and $1.8 million in the first nine months of 2016.

•
Pre-tax expense related to acquired profit in inventory and backlog of $4.3 million in the third quarter and first nine months of 2017. Pre-tax expense related to acquired profit in inventory and backlog of $1.9 million in the first nine months of 2016.

•
Pre-tax gain on the sale of assets of $0.3 million in the first nine months of 2016.

Adjusted net income and adjusted diluted EPS exclude:
•
After-tax acquisition costs of $0.4 million ($0.6 million net of tax of $0.2 million) in the third quarter of 2017 and $4.3 million ($5.0 million net of tax of $0.7 million) in the first nine months of 2017. After-tax acquisition costs of $0.1 million ($0.2 million net of tax of $0.1 million) in the third quarter of 2016 and $1.6 million ($1.8 million net of tax of $0.2 million) in the first nine months of 2016.

•
After-tax expense related to acquired profit in inventory and backlog of $3.2 million ($4.3 million net of tax of $1.1 million) in the third quarter and first nine months of 2017. After-tax expense related to acquired profit in inventory and backlog of $1.4 million ($1.9 million net of tax of $0.5 million) in the first nine months of 2016.

•
After-tax gain on the sale of assets of $0.2 million ($0.3 million net of tax of $0.1 million) in the first nine months of 2016.

•
Benefit from discrete tax items of $0.3 million in the third quarter and first nine months of 2016. The benefit from discrete tax items was primarily due to the reversal of valuation allowances on certain deferred tax assets in the U.S.

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

-more-






Financial Highlights (unaudited)
 
 
 
 
 
 
 
 
(In thousands, except per share amounts and percentages)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Three Months Ended
 
Nine Months Ended
Consolidated Statement of Income
 
Sept. 30, 2017
 
Oct. 1, 2016
 
Sept. 30, 2017
 
Oct. 1, 2016
 
 
 
 
 
 
 
 
 
 
 
Revenues
 
$
152,794

 
$
105,519

 
$
365,893

 
$
313,885

Costs and Operating Expenses:
 
 
 
 
 
 
 
 
 
Cost of revenues
88,166

 
57,440

 
199,449

 
171,569

 
Selling, general, and administrative expenses
42,535

 
33,527

 
116,493

 
102,095

 
Research and development expenses
2,635

 
1,991

 
7,004

 
5,640

 
Other income
—

 
—

 
—

 
(317
)
 
 
 
133,336

 
92,958

 
322,946

 
278,987

Operating Income
 
19,458

 
12,561

 
42,947

 
34,898

Interest Income
 
94

 
54

 
300

 
175

Interest Expense
 
(1,282
)
 
(305
)
 
(2,022
)
 
(914
)
 
 
 
 
 
 
 
 
 
Income from Continuing Operations Before Provision for income Taxes
 
18,270

 
12,310

 
41,225

 
34,159

Provision for Income Taxes
 
4,860

 
3,081

 
10,550

 
9,500

Income from Continuing Operations
 
13,410

 
9,229

 
30,675

 
24,659

Income from Discontinued Operation, Net of Tax
 
—

 
3

 
—

 
3

Net Income
 
13,410

 
9,232

 
30,675

 
24,662

Net Income Attributable to Noncontrolling Interest
 
(125
)
 
(75
)
 
(343
)
 
(318
)
Net Income Attributable to Kadant
 
$
13,285

 
$
9,157

 
$
30,332

 
$
24,344

 
 
 
 
 
 
 
 
 
 
 
Earnings per Share Attributable to Kadant:
 
 
 
 
 
 
 
 
 
 
Basic
 
$
1.21

 
$
0.84

 
$
2.76

 
$
2.24

 
 
Diluted
 
$
1.17

 
$
0.82

 
$
2.69

 
$
2.19

 
 
 
 
 
 
 
 
 
 
 
Weighted Average Shares:
 
 
 
 
 
 
 
 
 
 
Basic
 
11,004

 
10,901

 
10,986

 
10,854

 
 
Diluted
 
11,344

 
11,189

 
11,282

 
11,120

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Three Months Ended
 
Three Months Ended
Adjusted Net Income and Adjusted Diluted EPS (b)
 
Sept. 30, 2017
 
Sept. 30, 2017
 
Oct. 1, 2016
 
Oct. 1, 2016
 
 
 
 
 
 
 
 
 
 
 
Net Income and Diluted EPS Attributable to Kadant, as Reported
 
$
13,285

 
$
1.17

 
$
9,157

 
$
0.82

Net Income and Diluted EPS from Discontinued Operation
 
—

 
—

 
(3
)
 
—

Net Income and Diluted EPS from Continuing Operations
 
13,285

 
1.17

 
9,154

 
0.82

Adjustments for the Following:
 
 
 
 
 
 
 
 
 
Acquisition Costs, Net of Tax
 
441

 
0.04

 
115

 
0.01

 
Amortization of Acquired Profit in Inventory and Backlog, Net of Tax
 
3,191

 
0.28

 
—

 
—

 
Benefit from Discrete Tax Items
 
—

 
—

 
(261
)
 
(0.02
)
Adjusted Net Income and Adjusted Diluted EPS
 
$
16.917

 
$
1.49

 
$
9,008

 
$
0.81

 
 
 
 
 
 
 
 
 
 
 

-more-

 
 
 
 
Nine Months Ended
 
Nine Months Ended
 
 
 
 
Sept. 30, 2017
 
Sept. 30, 2017
 
Oct. 1, 2016
 
Oct. 1, 2016
 
 
 
 
 
 
 
 
 
 
 
Net Income and Diluted EPS Attributable to Kadant, as Reported
 
$
30,332

 
$
2.69

 
$
24,344

 
$
2.19

Net Income and Diluted EPS from Discontinued Operation
 
—

 
—

 
(3
)
 
—

Net Income and Diluted EPS from Continuing Operations
 
30,332

 
2.69

 
24,341

 
2.19

Adjustments for the Following:
 
 
 
 
 
 
 
 
 
Acquisition Costs, Net of Tax
 
4,274

 
0.38

 
1,625

 
0.15

 
Amortization of Acquired Profit in Inventory and Backlog, Net of Tax
 
3,191

 
0.28

 
1,359

 
0.12

 
Benefit from Discrete Tax Items
 
—

 
—

 
(261
)
 
(0.02
)
 
Other Income, Net of Tax
 
—

 
—

 
(247
)
 
(0.02
)
Adjusted Net Income and Adjusted Diluted EPS
 
$
37,797

 
$
3.35

 
$
26,817

 
$
2.41

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Increase
 
 
 
 
 
 
 
 
 
 
Excluding
 
 
 
 
Three Months Ended
 
 
 
Acquisitions
Revenues by Product Line
 
Sept. 30, 2017
 
Oct. 1, 2016
 
Increase
 
and FX (a,b)
Stock-Preparation
 
$
52,065

 
$
44,099

 
$
7,966

 
$
6,905

Doctoring, Cleaning, & Filtration
 
30,538

 
28,955

 
1,583

 
1,129

Fluid-Handling
 
28,532

 
23,024

 
5,508

 
2,370

 
Papermaking Systems
 
111,135

 
96,078

 
15,057

 
10,404

 
Wood Processing Systems
 
39,714

 
7,962

 
31,752

 
4,574

 
Fiber-Based Products
 
1,945

 
1,479

 
466

 
466

 
 
 
 
$
152,794

 
$
105,519

 
$
47,275

 
$
15,444

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Increase
 
 
 
 
 
 
 
 
 
 
(Decrease)
 
 
 
 
 
 
 
 
 
 
Excluding
 
 
 
 
Nine Months Ended
 
Increase
 
Acquisitions
 
 
Sept. 30, 2017
 
Oct. 1, 2016
 
 
and FX (a,b)
Stock-Preparation
 
$
139,396

 
$
132,158

 
$
7,238

 
$
(5,398
)
Doctoring, Cleaning, & Filtration
 
82,921

 
80,374

 
2,547

 
3,296

Fluid-Handling
 
73,099

 
67,904

 
5,195

 
2,727

 
Papermaking Systems
 
295,416

 
280,436

 
14,980

 
625

 
Wood Processing Systems
 
61,050

 
25,437

 
35,613

 
8,587

 
Fiber-Based Products
 
9,427

 
8,012

 
1,415

 
1,415

 
 
 
 
$
365,893

 
$
313,885

 
$
52,008

 
$
10.627

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Increase
 
 
 
 
 
 
 
 
 
 
(Decrease)
 
 
 
 
 
 
 
 
 
 
Excluding
 
 
 
 
Three Months Ended
 
 
 
Acquisitions
Revenues by Geography (c)
 
Sept. 30, 2017
 
Oct. 1, 2016
 
Increase
 
and FX (a,b)
North America
 
$
68,369

 
$
46,994

 
$
21,375

 
$
3,902

Europe
 
46,475

 
31,686

 
14,789

 
5,540

Asia
 
25,215

 
18,466

 
6,749

 
6,623

Rest of World
 
12,735

 
8,373

 
4,362

 
(621
)
 
 
 
 
$
152,794

 
$
105,519

 
$
47,275

 
$
15,444

 
 
 
 
 
 
 
 
 
 
 

-more-

 
 
 
 
 
 
 
 
 
 
Increase
 
 
 
 
 
 
 
 
 
 
(Decrease)
 
 
 
 
 
 
 
 
 
 
Excluding
 
 
 
 
Nine Months Ended
 
Increase
 
Acquisitions
 
 
Sept. 30, 2017
 
Oct. 1, 2016
 
 
and FX (a,b)
North America
 
$
170,092

 
$
155,633

 
$
14,459

 
$
(3,324
)
Europe
 
113,178

 
85,611

 
27,567

 
8,733

Asia
 
53,658

 
45,456

 
8,202

 
9,699

Rest of World
 
28,965

 
27,185

 
1,780

 
(4,481
)
 
 
 
 
$
365,893

 
$
313,885

 
$
52,008

 
$
10,627

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Increase
 
 
 
 
 
 
 
 
 
 
(Decrease)
 
 
 
 
 
 
 
 
 
 
Excluding
 
 
 
 
Three Months Ended
 
 
 
Acquisitions
Bookings by Product Line
 
Sept. 30, 2017
 
Oct. 1, 2016
 
Increase
 
and FX (a)
Stock-Preparation
 
$
50,797

 
$
37,039

 
$
13,758

 
$
12,737

Doctoring, Cleaning, & Filtration
 
27,656

 
27,272

 
384

 
22

Fluid-Handling
 
28,426

 
20,450

 
7,976

 
4,568

 
Papermaking Systems
 
106,879

 
84,761

 
22,118

 
17,327

 
Wood Processing Systems
 
26,548

 
8,623

 
17,925

 
(73
)
 
Fiber-Based Products
 
2,030

 
1,435

 
595

 
595

 
 
 
 
$
135,457

 
$
94,819

 
$
40,638

 
$
17,849

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Increase
 
 
 
 
 
 
 
 
 
 
Excluding
 
 
 
 
Nine Months Ended
 
Increase
 
Acquisitions
 
 
Sept. 30, 2017
 
Oct. 1, 2016
 
 
and FX (a)
Stock-Preparation
 
$
149,285

 
$
103,228

 
$
46,057

 
$
34,777

Doctoring, Cleaning, & Filtration
 
86,354

 
86,141

 
213

 
1,391

Fluid-Handling
 
79,752

 
66,336

 
13,416

 
11,032

 
Papermaking Systems
 
315,391

 
255,705

 
59,686

 
47,200

 
Wood Processing Systems
 
50,172

 
26,981

 
23,191

 
5,198

 
Fiber-Based Products
 
8,999

 
7,164

 
1,835

 
1,835

 
 
 
 
$
374,562

 
$
289,850

 
$
84,712

 
$
54,233

 
 
 
 
 
 
 
 
 
 
 

-more-

 
 
 
 
Three Months Ended
 
Nine Months Ended
Business Segment Information
 
Sept. 30, 2017
 
Oct. 1, 2016
 
Sept. 30, 2017
 
Oct. 1, 2016
Gross Margin:
 
 
 
 
 
 
 
 
 
 
Papermaking Systems
 
45.5
%
 
46.0
%
 
47.1
%
 
45.7
%
 
 
Wood Processing Systems
 
33.5
%
 
45.9
%
 
37.1
%
 
41.7
%
 
 
Fiber-Based Products
 
35.7
%
 
15.0
%
 
50.1
%
 
45.7
%
 
 
 
 
42.3
%
 
45.6
%
 
45.5
%
 
45.3
%
 
 
 
 
 
 
 
 
 
 
 
Operating Income:
 
 
 
 
 
 
 
 
 
 
Papermaking Systems
 
$
21,544

 
$
16,915

 
$
52,932

 
$
44,747

 
 
Wood Processing Systems
 
4,418

 
2,150

 
6,196

 
5,406

 
 
Corporate and Other
 
(6,504
)
 
(6,504
)
 
(16,181
)
 
(15,255
)
 
 
 
 
$
19,458

 
$
12,561

 
$
42,947

 
$
34,898

 
 
 
 
 
 
 
 
 
 
 
Adjusted Operating Income (b, g):
 
 
 
 
 
 
 
 
 
 
Papermaking Systems
 
$
21,822

 
$
17,029

 
$
53,525

 
$
47,921

 
 
Wood Processing Systems
 
9,043

 
2,150

 
14,923

 
5,406

 
 
Corporate and Other
 
(6,504
)
 
(6,451
)
 
(16,181
)
 
(14,988
)
 
 
 
 
$
24,361

 
$
12,728

 
$
52,267

 
$
38,339

 
 
 
 
 
 
 
 
 
 
 
Capital Expenditures:
 
 
 
 
 
 
 
 
 
 
Papermaking Systems
 
$
3,790

 
$
1,632

 
$
6,567

 
$
3,341

 
 
Corporate and Other
 
1,493

 
211

 
2,151

 
238

 
 
 
 
$
5,283

 
$
1,843

 
$
8,718

 
$
3,579

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Three Months Ended
 
Nine Months Ended
Cash Flow and Other Data
 
Sept. 30, 2017
 
Oct. 1, 2016
 
Sept. 30, 2017
 
Oct. 1, 2016
Cash Provided by Continuing Operations
 
$
6,952

 
$
15,530

 
$
32,328

 
$
34,739

Depreciation and Amortization Expense
 
6,525

 
3,457

 
13,056

 
10,934

 
 
 
 
 
 
 
 
 
 
 
Balance Sheet Data
 
 
 
 
 
Sept. 30, 2017
 
Dec. 31, 2016
Assets
 
 
 
 
 
 
 
 
Cash, Cash Equivalents, and Restricted Cash
 
 
 
 
 
$
91,388

 
$
73,569

Accounts Receivable, net
 
 
 
 
 
94,664

 
65,963

Inventories
 
 
 
 
 
90,450

 
54,951

Unbilled Contract Costs and Fees
 
 
 
 
 
6,256

 
3,068

Other Current Assets
 
 
 
 
 
20,911

 
9,799

Property, Plant and Equipment, net
 
 
 
 
 
70,373

 
47,704

Intangible Assets
 
 
 
 
 
135,231

 
52,730

Goodwill
 
 
 
 
 
264,840

 
151,455

Other Assets
 
 
 
 
 
13,546

 
11,452

 
 
 
 
 
 
 
 
$
787,659

 
$
470,691

Liabilities and Stockholders' Equity
 
 
 
 
 
 
 
 
Accounts Payable
 
 
 
 
 
$
35,136

 
$
23,929

Long-term Debt
 
 
 
 
 
273,671

 
61,494

Capital Lease Obligations
 
 
 
 
 
5,127

 
4,917

Other Liabilities
 
 
 
 
 
142,838

 
96,072

 
Total Liabilities
 
 
 
 
 
456,772

 
186,412

 
Stockholders' Equity
 
 
 
 
 
330,887

 
284,279

 
 
 
 
 
 
 
 
$
787,659

 
$
470,691

 
 
 
 
 
 
 
 
 
 
 

-more-

Adjusted Operating Income and Adjusted EBITDA
 
Three Months Ended
 
Nine Months Ended
Reconciliation
 
Sept. 30, 2017
 
Oct. 1, 2016
 
Sept. 30, 2017
 
Oct. 1, 2016
Consolidated
 
 
 
 
 
 
 
 
 
 
Net Income Attributable to Kadant
 
$
13,285

 
$
9,157

 
$
30,332

 
$
24,344

 
 
Net Income Attributable to Noncontrolling Interest
 
125

 
75

 
343

 
318

 
 
Income from Discontinued Operation, Net of Tax
 
—

 
(3
)
 
—

 
(3
)
 
 
Provision for Income Taxes
 
4,860

 
3,081

 
10,550

 
9,500

 
 
Interest Expense, net
 
1,188

 
251

 
1,722

 
739

 
 
Operating Income
 
19,458

 
12,561

 
42,947

 
34,898

 
 
Other Income
 
—

 
—

 
—

 
(317
)
 
 
Acquisition Costs (d)
 
585

 
167

 
5,002

 
1,832

 
 
Acquired Backlog Amortization (e)
 
958

 
—

 
958

 
1,468

 
 
Acquired Profit in Inventory (f)
 
3,360

 
—

 
3,360

 
458

 
 
Adjusted Operating Income (b)
 
24,361

 
12,728

 
52,267

 
38,339

 
 
Depreciation and Amortization
 
5,567

 
3,457

 
12,098

 
9,466

 
 
Adjusted EBITDA (b)
 
$
29,928

 
$
16,185

 
$
64,365

 
$
47,805

 
 
 
 
 
 
 
 
 
 
 
 
 
Adjusted EBITDA Margin (b, h)
 
19.6
%
 
15.3
%
 
17.6
%
 
15.2
%
 
 
 
 
 
 
 
 
 
 
 
Papermaking Systems
 
 
 
 
 
 
 
 
 
 
Operating Income
 
$
21,544

 
$
16,915

 
$
52,932

 
$
44,747

 
 
Other Income
 
—

 
—

 
—

 
(317
)
 
 
Acquisition Costs (d)
 
172

 
114

 
487

 
1,565

 
 
Acquired Backlog Amortization (e)
 
—

 
—

 
—

 
1,468

 
 
Acquired Profit in Inventory (f)
 
106

 
—

 
106

 
458

 
 
Adjusted Operating Income (b)
 
21,822

 
17,029

 
53,525

 
47,921

 
 
Depreciation and Amortization
 
2,894

 
2,746

 
8,105

 
7,359

 
 
Adjusted EBITDA (b)
 
$
24,716

 
$
19,775

 
$
61,630

 
$
55,280

 
 
 
 
 
 
 
 
 
Wood Processing Systems
 
 
 
 
 
 
 
 
 
 
Operating Income
 
$
4,418

 
$
2,150

 
$
6,196

 
$
5,406

 
 
Acquisition Costs (d)
 
413

 
—

 
4,515

 
—

 
 
Acquired Backlog Amortization (e)
 
958

 
—

 
958

 
—

 
 
Acquired Profit in Inventory (f)
 
3,254

 
—

 
3,254

 
—

 
 
Adjusted Operating Income (b)
 
9,043

 
2,150

 
14,923

 
5,406

 
 
Depreciation and Amortization
 
2,527

 
559

 
3,547

 
1,644

 
 
Adjusted EBITDA (b)
 
$
11,570

 
$
2,709

 
$
18,470

 
$
7,050

 
 
 
 
 
 
 
 
 
 
 
Corporate and Other
 
 
 
 
 
 
 
 
 
 
Operating Loss
 
$
(6,504
)
 
$
(6,504
)
 
$
(16,181
)
 
$
(15,255
)
 
 
Acquisition Costs (d)
 
—

 
53

 
—

 
267

 
 
Adjusted Operating Loss (b)
 
(6,504
)
 
(6,451
)
 
(16,181
)
 
(14,988
)
 
 
Depreciation and Amortization
 
146

 
152

 
446

 
463

 
 
Adjusted EBITDA (b)
 
$
(6,358
)
 
$
(6,299
)
 
$
(15,735
)
 
$
(14,525
)
 
 
 
 
 
 
 
 
 
 

-more-

 
 
 
 
 
 
 
 
 
 
(a)
Represents the increase (decrease) resulting from the exclusion of acquisitions and 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.
 
 
 
(b)
Represents a non-GAAP financial measure.
 
 
 
 
 
 
 
 
 
 
 
(c)
Geographic revenues are attributed to regions based on customer location.
 
 
 
 
 
 
 
 
 
 
 
(d)
Represents transaction costs associated with our acquisitions.
 
 
(e)
Represents intangible amortization expense associated with acquired backlog.
 
 
(f)
Represents expense within cost of revenues associated with acquired profit in inventory.
 
 
(g)
See reconciliation to the most directly comparable GAAP financial measure under "Adjusted Operating Income and Adjusted EBITDA Reconciliation."
 
 
(h)
Calculated as adjusted EBITDA divided by revenue in each period.

-more-

About Kadant
Kadant Inc. is a global supplier of high-value, critical components and engineered systems used in process industries worldwide. The Company’s products, technologies, and services play an integral role in enhancing process efficiency, optimizing energy utilization, and maximizing productivity in resource-intensive industries. Kadant is based in Westford, Massachusetts, with approximately 2,400 employees in 20 countries worldwide. For more information, visit www.kadant.com.

Safe Harbor Statement
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 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 December 31, 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; currency fluctuations; our customers’ ability to obtain financing for capital equipment projects; changes in government regulations and policies; the 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; economic conditions and regulatory changes caused by the United Kingdom’s likely exit from the European Union; 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.

Contacts
Investor Contact Information:
Michael McKenney, 978-776-2000
mike.mckenney@kadant.com
or
Media Contact Information:
Wes Martz, 269-278-1715
wes.martz@kadant.com




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