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 7.01 Regulation FD Disclosure.
On October 31, 2017, Kadant Inc. (the “Company”) will hold a webcast and conference call to discuss its financial results for the fiscal quarter ended September 30, 2017. 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 | ||
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
Third Quarter 2017 Business Review
Jonathan W. Painter, President & CEO
Michael J. McKenney, Senior Vice President & CFO
Forward-Looking Statements
The following constitutes a “Safe Harbor” statement under the Private Securities Litigation Reform Act of 1995: This presentation and our accompanying commentary
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 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; 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; 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.
KAI 3Q17 Business Review–October 31, 2017 | © 2017 Kadant Inc. All rights reserved. 2
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 that exclude the effect of acquisitions and foreign currency translation, adjusted operating income, adjusted net income,
adjusted diluted EPS, adjusted earnings before interest, taxes, depreciation, and amortization (adjusted EBITDA) and adjusted EBITDA margin.
A reconciliation of those numbers to the most directly comparable U.S. GAAP financial measures is shown in our 2017 third quarter earnings press release issued
October 30, 2017, which is available in the Investors section of our website at www.kadant.com under the heading Press Releases.
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.
KAI 3Q17 Business Review–October 31, 2017 | © 2017 Kadant Inc. All rights reserved. 3
BUSINESS REVIEW
Jonathan W. Painter
President & CEO
Q3 2017 Financial Highlights
($ Millions, except per share amounts) Q3 2017 Q3 2016 % CHANGE2
Bookings $135.5 $94.8 42.9%
Revenue $152.8 $105.5 44.8%
Gross Margin 42.3% 45.6% n.m.
Operating Income $19.5 $12.6 54.9%
Adjusted Operating Income1 $24.4 $12.7 91.4%
Net Income $13.3 $9.2 45.1%
Adjusted EBITDA1 $29.9 $16.2 84.9%
Adjusted EBITDA/Revenue1 19.6% 15.3% n.m.
Diluted EPS $1.17 $0.82 42.7%
Adjusted Diluted EPS1 $1.49 $0.81 84.0%
Cash flow from operations $7.0 $15.5 -55.2%
1 Adjusted operating income, adjusted EBITDA, adjusted EBITDA margin and adjusted diluted EPS are non-GAAP financial measures that exclude certain items as detailed in our press
release dated October 30, 2017.
2 Percent change calculated using actual numbers reported in our press release dated October 30, 2017.
KAI 3Q17 Business Review–October 31, 2017 | © 2017 Kadant Inc. All rights reserved. 5
FX Translation and Acquisition Impact
Q3 2017, $ in millions except EPS Revenue Adjusted EPS4 Bookings
Parts & Consumables
Revenue
Parts & Consumables
Bookings
As Reported $152.8 $1.49 $135.5 $83.8 $81.1
Growth1 44.8% 84.0% 42.9% 36.4% 27.2%
Growth excluding FX2,4 42.3% 79.0% 40.4% 34.1% 25.3%
Growth excluding FX and Acquisitions3,4 14.6% 35.8% 18.8% 12.9% 3.1%
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 press release dated October 30, 2017.
KAI 3Q17 Business Review–October 31, 2017 | © 2017 Kadant Inc. All rights reserved. 6
$0
$20
$40
$60
$80
$100
$120
$140
$160
Bookings Booking Reversal Revenues
Bookings and Revenues
US$ (millions)
1 Reported Q415 bookings were $76 million, which included new orders of $92 million and a booking reversal of $16 million.
1
KAI 3Q17 Business Review–October 31, 2017 | © 2017 Kadant Inc. All rights reserved. 7
Parts and Consumables Bookings and Revenues
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US$ (millions)
$0
$10
$20
$30
$40
$50
$60
$70
$80
$90
Bookings Revenues
Unaflex Acquisition
• Unaflex is a market leader in the manufacture and
supply of expansion joints and related equipment
• Acquisition price: $31 million*
• Revenue: $18 million (2016)
• High impact product
• History of stable earnings
• Strong aftermarket business
• Integrated with our Fluid-Handling product line
KAI 3Q17 Business Review–October 31, 2017 | © 2017 Kadant Inc. All rights reserved. 9
* Subject to post-closing adjustments.
Q3 2017 Revenue Source by End Market
KAI 3Q17 Business Review–October 31, 2017 | © 2017 Kadant Inc. All rights reserved. 10
Q3 2017 Revenue of $152.8 Million
*Based on Company estimates of revenue by industrial category.
*
North America Bookings and Revenues
US$ (millions)
KAI 3Q17 Business Review–October 31, 2017 | © 2017 Kadant Inc. All rights reserved. 11
$0
$10
$20
$30
$40
$50
$60
$70
$80
Bookings Revenues
Europe Bookings and Revenues
US$ (millions)
KAI 3Q17 Business Review–October 31, 2017 | © 2017 Kadant Inc. All rights reserved. 12
$0
$10
$20
$30
$40
$50
Bookings Revenues
-$10
-$5
$0
$5
$10
$15
$20
$25
$30
$35
$40
Bookings New Orders Revenues
Asia Bookings and Revenues
US$ (millions)
1 Reported Q415 Asia bookings were negative $6 million, which included new orders of $10 million and a booking reversal of $16 million.
1
KAI 3Q17 Business Review–October 31, 2017 | © 2017 Kadant Inc. All rights reserved. 13
Rest-of-World Bookings and Revenues
US$ (millions)
KAI 3Q17 Business Review–October 31, 2017 | © 2017 Kadant Inc. All rights reserved. 14
$0
$2
$4
$6
$8
$10
$12
$14
$16
Bookings Revenues
Guidance
• FY 2017 GAAP diluted EPS of $3.56 to $3.60
• FY 2017 adjusted diluted EPS of $4.37 to $4.41
• FY 2017 revenue of $509 to $512 million
• Q4 2017 GAAP diluted EPS of $0.87 to $0.91
• Q4 2017 adjusted diluted EPS of $1.02 to $1.06
• Q4 2017 revenue of $143 to $146 million
KAI 3Q17 Business Review–October 31, 2017 | © 2017 Kadant Inc. All rights reserved. 15
*Adjusted diluted EPS is a non-GAAP financial measure that excludes certain items as detailed in our press release dated October 30, 2017.
*
*
FINANCIAL REVIEW
Michael J. McKenney
Senior Vice President & Chief Financial Officer
Quarterly Gross Margins
KAI 3Q17 Business Review–October 31, 2017 | © 2017 Kadant Inc. All rights reserved. 17
47.3%
48.6%
43.9% 43.9%
45.2%
43.0%
44.7% 44.7%
48.1%
46.5%
47.5%
43.1%
45.6%
44.9%
45.6% 46.0%
47.6% 47.9%
42.3%
25%
30%
35%
40%
45%
50%
Quarterly SG&A
US$ (millions)
KAI 3Q17 Business Review–October 31, 2017 | © 2017 Kadant Inc. All rights reserved. 18
20%
25%
30%
35%
40%
45%
$0
$5
$10
$15
$20
$25
$30
$35
$40
$45
SG&A SG&A as a % of Revenues
3Q16 to 3Q17 Adjusted Diluted EPS
KAI 3Q17 Business Review–October 31, 2017 | © 2017 Kadant Inc. All rights reserved. 19
$0.81
$0.53
$0.35 $0.01 ($0.12)
($0.06)
($0.02) ($0.01) $1.49
$0.00
$0.50
$1.00
$1.50
$2.00
Cash Flow
US$ (millions) 3Q17 3Q16
Net Income $13.4 $9.2
Depreciation and Amortization 6.5 3.4
Stock-Based Compensation 1.6 1.3
Other Items (3.0) (0.2)
Change in Current Assets & Liabilities (excl. acquisitions) (11.5) 1.8
Cash Provided by Operating Activities $7.0 $15.5
KAI 3Q17 Business Review–October 31, 2017 | © 2017 Kadant Inc. All rights reserved. 20
Key Working Capital Metrics
3Q17 2Q17 3Q16
Days in Receivables 59 62 60
Days in Inventory 79 97 95
Days in Payables 36 45 39
KAI 3Q17 Business Review–October 31, 2017 | © 2017 Kadant Inc. All rights reserved. 21
60 62
59
95 97
79
39 45
36
20
40
60
80
100
120
140
D
ay
s
Days in Receivables Days in Inventory Days in Payables
Working Capital and Cash Conversion Days
3Q17 2Q17 3Q16
Working Capital % LTM Revenues* 18.0% 11.6% 11.6%
Cash Conversion Days** 102 days 113 days 116 days
*Working Capital is defined as current assets less current liabilities, excluding cash and debt.
** Based on days in receivables plus days in inventory less days in accounts payable.
KAI 3Q17 Business Review–October 31, 2017 | © 2017 Kadant Inc. All rights reserved. 22
0
50
100
150
200
0%
5%
10%
15%
20%
D
A
YS
%
OF
REV
EN
U
E
Cash Conversion Days Working Capital % LTM Revenues *
Cash and Debt
US$ (millions) 3Q17 2Q17 3Q16
Cash, cash equivalents, and restricted cash $91.4 $88.0 $65.5
Debt (273.7) (60.7) (63.5)
Capital lease obligations (5.1) (5.1) (5.3)
Net (Debt) Cash $(187.4) $22.2 $(3.3)
KAI 3Q17 Business Review–October 31, 2017 | © 2017 Kadant Inc. All rights reserved. 23
U
S$
(
m
ill
io
n
s)
$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
$(14.7)
$(3.3)
$7.2 $2.5
$22.2
$(187.4) ($200)
($150)
($100)
($50)
$0
$50
$100
Leverage Ratio
KAI 3Q17 Business Review–October 31, 2017 | © 2017 Kadant Inc. All rights reserved. 24
*Calculated by adding or subtracting certain items from Adjusted EBITDA, as required by our Credit Facility. Effective March 2, 2017, our amended and restated Credit Facility
defined total debt as debt less worldwide cash of up to $30 million. For periods 1Q13 to 4Q16, total debt is defined as debt less domestic cash of up to $25 million.
2.45
0.00
0.50
1.00
1.50
2.00
2.50
3.00
3.50
Debt/EBITDA *
2017 Guidance
• FY 2017 GAAP diluted EPS of $3.56 to $3.60
• FY 2017 adjusted diluted EPS of $4.37 to $4.41
• Gross margin approximately 45%
• SG&A approximately 31% of revenue
• Effective tax rate of 26%
• Acquisition costs of $5.0 million or $0.38 per diluted share
• Acquisition-related amortization expense of $6.6 million or $0.43 per diluted share
• Depreciation and amortization expense of $19 million
KAI 3Q17 Business Review–October 31, 2017 | © 2017 Kadant Inc. All rights reserved. 25
* Adjusted diluted EPS is a non-GAAP financial measure that excludes certain items as detailed in our press release dated October 30, 2017.
*
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 902 228 03.
Please mute the audio on your computer.
KAI 3Q17 Business Review–October 31, 2017 | © 2017 Kadant Inc. All rights reserved. 26
Q3 2017 Key Take-Aways
• Record EPS, adjusted EBITDA, and operating income
• Record revenue and bookings
• Completed NII FPG forest products business acquisition on July 5; Unaflex
expansion joint business on August 14
• Raising full-year revenue and EPS guidance
KAI 3Q17 Business Review–October 31, 2017 | © 2017 Kadant Inc. All rights reserved. 27
