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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): April 29, 2019

KADANT INC.
(Exact Name of Registrant as Specified in its Charter)

Delaware
001-11406
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 April 29, 2019, Kadant Inc. (the “Company”) announced its financial results for the fiscal quarter ended March 30, 2019. The full text of the press release issued in connection with the announcement is furnished as Exhibit 99.1 to this Current Report on Form 8-K.

Item 7.01 Regulation FD Disclosure.

On April 30, 2019, the Company will hold a webcast and conference call to discuss its financial results for the fiscal quarter ended March 30, 2019. A copy of the slides that will be presented on the webcast and discussed in the conference call is furnished as Exhibit 99.2 to this Current Report on Form 8-K.

The information in Item 2.02 and Item 7.01 of this Form 8-K (including Exhibits 99.1 and 99.2) shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (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) Exhibits


 
The following exhibits relating to Item 2.02 and Item 7.01 shall be deemed to be furnished and not filed.
 
 
 
 
Exhibit
    No.

Description of Exhibits
 
 
 
 
99.1
 
 
 
 
99.2

2



KADANT INC.

SIGNATURE

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

 
 
KADANT INC.

 
 
 
Date: April 29, 2019
By
/s/ Michael J. McKenney
 
 
Michael J. McKenney
Executive Vice President and Chief Financial Officer

3


Exhibit
Exhibit 99.1
https://cdn.kscope.io/e46641c5a750987a6d97ee211c00e4f7-kadantlogoa28.jpg

KADANT INC.
One Technology Park Drive
Westford, MA 01886

NEWS
Kadant Reports 2019 First Quarter Results
Reports Record Revenue and Bookings

WESTFORD, Mass., April 29, 2019 – Kadant Inc. (NYSE: KAI) reported its financial results for the first quarter ended March 30, 2019.

First Quarter 2019 Highlights
•
Revenue increased 15% to a record $171 million
•
GAAP diluted EPS was unchanged at $0.96
•
Adjusted diluted EPS increased 16% to $1.24
•
Net income was unchanged at $11 million
•
Adjusted EBITDA increased 27% to $30 million and represented 17.5% of revenue
•
Gross margin was 41.2%
•
Bookings increased 1% to a record $184 million
•
Revenue and bookings for parts and consumables were a record at $113 million and $120 million, respectively
•
Backlog increased 16% sequentially to a record $200 million
•
Cash flow from operations increased 37% to $10 million

Note: Adjusted diluted EPS, adjusted EBITDA, and adjusted EBITDA margin are non-GAAP financial measures that exclude certain items as detailed later in this press release under the heading “Use of Non-GAAP Financial Measures.”

Management Commentary
“We had a great start to 2019 with record bookings and revenue and a nice EPS beat in the first quarter,” said Jonathan Painter, chief executive officer. “Solid performance by our recent acquisition, Syntron Material Handling Group, contributed to our record-setting quarter and helped drive our backlog to a record $200 million, a 16 percent sequential increase.

“Strong operating performance across our businesses led to our adjusted EBITDA increasing 27 percent and cash flow from operations increasing 37 percent compared to the first quarter of 2018. We continued to see healthy market conditions in North America, while China experienced slower activity due to restrictions on wastepaper imports and weaker demand. We are seeing strong project activity in Southeast Asia as producers seek to build capacity outside of China.

“Our parts and consumables revenue and bookings in the first quarter were also outstanding, up 18 percent and 17 percent, respectively, compared to the first quarter of 2018. This continues to be a strategic focus of ours and I am pleased to see these positive results.”

First Quarter 2019 Results
Revenue increased 15 percent to $171.3 million compared to the first quarter of 2018, including $20.6 million from an acquisition and a $7.0 million decrease from the unfavorable effect of foreign currency translation. Excluding the impact of an acquisition and foreign currency translation, revenue increased six percent compared to the first quarter of 2018. Gross margin was 41.2 percent, including a 1.3 percent negative impact from the amortization of acquired profit in inventory. Net income was $10.9 million, or $0.96 per diluted share, in both the first quarters of 2019 and 2018. Adjusted diluted EPS increased 16 percent to $1.24 compared to $1.07 in the first quarter of 2018. Adjusted diluted EPS in the first quarter of 2019 excludes $0.22 of amortization from acquired profit in inventory and backlog and $0.06 of acquisition costs. Adjusted diluted EPS in the first quarter of 2018 excludes $0.05 of restructuring costs, $0.04 of discrete tax expense, and $0.02 of amortization from acquired backlog.



Adjusted EBITDA increased 27 percent to $30.0 million compared to $23.5 million in the first quarter of 2018. Adjusted EBITDA excludes $3.3 million of amortization from acquired profit in inventory and backlog and $0.8 million of acquisition costs in the first quarter of 2019 and $0.8 million of restructuring costs and $0.3 million of amortization from acquired backlog in the first quarter of 2018. Cash flows from operations increased 37 percent to $9.9 million compared to $7.2 million in the first quarter of 2018. Bookings increased to a record $183.6 million compared to $181.9 million in the first quarter of 2018, including $24.5 million from an acquisition and a $7.7 million decrease from the unfavorable effect of foreign currency translation. Excluding the impact of an acquisition and foreign currency translation, bookings decreased eight percent compared to the first quarter of 2018.

Summary and Outlook
“Despite the policy uncertainty on wastepaper imports in China and some weakness in our Wood Processing capital business in North America, we are encouraged by our solid start to 2019,” Mr. Painter continued. “For 2019, we are reaffirming our adjusted diluted EPS and revenue guidance and raising our GAAP diluted EPS guidance from our previous guidance of $4.75 to $4.90. We now expect to achieve GAAP diluted EPS of $4.84 to $4.99 on revenue of $700 to $710 million. The 2019 guidance includes pre-tax amortization expense associated with acquired profit in inventory and backlog of $4.6 million, or $0.30 per diluted share, and pre-tax acquisition costs of $0.8 million, or $0.06 per diluted share. Excluding these expenses, we expect adjusted diluted EPS of $5.20 to $5.35 for 2019.

“For the second quarter of 2019, we expect GAAP diluted EPS of $0.99 to $1.05 on revenue of $165 to $170 million. The second quarter of 2019 guidance includes pre-tax amortization expense associated with acquired profit in inventory and backlog of $1.1 million, or $0.08 per diluted share. Excluding this expense, we expect adjusted diluted EPS of $1.07 to $1.13 for the second quarter of 2019.”

Conference Call
Kadant will hold a webcast with a slide presentation for investors on Tuesday, April 30, 2019, at 11:00 a.m. eastern time to discuss its first 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 8759439. 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 May 31, 2019.

Shortly after the webcast, Kadant will post its updated general investor presentation incorporating the first 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), earnings before interest, taxes, depreciation, and amortization (EBITDA), 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 first quarter of 2019 included $20.6 million from an acquisition and a $7.0 million unfavorable foreign currency translation effect. We present increases or decreases in revenue excluding the effect of acquisitions and foreign currency translation to provide investors insight into underlying revenue trends.
        
Our non-GAAP financial measures exclude restructuring costs, acquisition costs, amortization expense related to acquired profit in inventory and backlog, and discrete tax expense. These items are excluded as they are not indicative of our core operating results and are not 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 $0.8 million in the first quarter of 2019.
•
Pre-tax expense related to amortization of acquired profit in inventory and backlog of $3.3 million in the first quarter of 2019.
•
Pre-tax restructuring costs of $0.8 million in the first quarter of 2018.
•
Pre-tax expense related to amortization of acquired backlog of $0.3 million in the first quarter of 2018.

Adjusted net income and adjusted diluted EPS exclude:
•
After-tax acquisition costs of $0.7 million ($0.8 million net of tax of $0.1 million) in the first quarter of 2019.
•
After-tax expense related to amortization of acquired profit in inventory and backlog of $2.5 million ($3.3 million net of tax of $0.8 million) in the first quarter of 2019.
•
After-tax restructuring costs of $0.6 million ($0.8 million net of tax of $0.2 million) in the first quarter of 2018.
•
After-tax expense related to amortization of acquired backlog of $0.2 million ($0.3 million net of tax of $0.1 million) in the first quarter of 2018.
•
Discrete tax expense of $0.4 million in the first quarter of 2018.

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
Consolidated Statement of Income
 
 
 
 
 
March 30, 2019
 
March 31, 2018
 
 
 
 
 
 
 
 
 
 
 
Revenues
 
 
 
 
 
$
171,316

 
$
149,193

Costs and Operating Expenses:
 
 
 
 
 
 
 
 
 
Cost of revenues
 
 
 
 
100,801

 
83,114

 
Selling, general, and administrative expenses
 
 
 
 
49,319

 
45,776

 
Research and development expenses
 
 
 
 
2,621

 
2,869

 
Restructuring costs
 
 
 
 
—

 
770

 
 
 
 
 
 
 
152,741

 
132,529

Operating Income
 
 
 
 
 
18,575

 
16,664

Interest Income
 
 
 
 
 
56

 
183

Interest Expense
 
 
 
 
 
(3,504
)
 
(1,732
)
Other Expense, Net
 
 
 
 
 
(99
)
 
(246
)
 
 
 
 
 
 
 
 
 
Income Before Provision for Income Taxes
 
 
 
 
15,028

 
14,869

Provision for Income Taxes
 
 
 
 
 
3,963

 
3,861

Net Income
 
 
 
 
 
11,065

 
11,008

Net Income Attributable to Noncontrolling Interest
 
 
 
 
 
(165
)
 
(150
)
Net Income Attributable to Kadant
 
 
 
 
 
$
10,900

 
$
10,858

 
 
 
 
 
 
 
 
 
 
 
Earnings per Share Attributable to Kadant:
 
 
 
 
 
 
 
 
 
 
Basic
 
 
 
 
 
$
0.98

 
$
0.98

 
 
Diluted
 
 
 
 
 
$
0.96

 
$
0.96

 
 
 
 
 
 
 
 
 
 
 
Weighted Average Shares:
 
 
 
 
 
 
 
 
 
 
Basic
 
 
 
 
 
11,133

 
11,042

 
 
Diluted
 
 
 
 
 
11,385

 
11,342

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Three Months Ended
 
Three Months Ended
Adjusted Net Income and Adjusted Diluted EPS (a)
 
March 30, 2019
 
March 30, 2019
 
March 31, 2018
 
March 31, 2018
 
 
 
 
 
 
 
 
 
 
 
Net Income and Diluted EPS Attributable to Kadant, as Reported
 
$
10,900

 
$
0.96

 
$
10,858

 
$
0.96

Adjustments for the Following:
 
 
 
 
 
 
 
 
 
Restructuring Costs, Net of Tax
 
—

 
—

 
589

 
0.05

 
Acquisition Costs, Net of Tax
 
699

 
0.06

 
—

 
—

 
Amortization of Acquired Profit in Inventory and Backlog, Net of Tax (e,f)
 
2,513

 
0.22

 
189

 
0.02

 
Discrete Tax Items
 
—

 
—

 
444

 
0.04

Adjusted Net Income and Adjusted Diluted EPS (a)
$
14,112

 
$
1.24

 
$
12,080

 
$
1.07

 
 
 
 
 
 
 
 
 
 
 

-more-

 
 
 
 
 
 
 
 
 
 
Increase
 
 
 
 
 
 
 
 
 
 
(Decrease)
 
 
 
 
 
 
 
 
 
 
Excluding
 
 
 
 
Three Months Ended
 
 
 
Acquisition
Revenues by Product Line
 
March 30, 2019
 
March 31, 2018
 
Increase (Decrease)
 
and FX (a,b)
Stock-Preparation
 
$
52,048

 
$
45,483

 
$
6,565

 
$
9,129

Fluid-Handling
 
32,754

 
32,886

 
(132
)
 
1,207

Doctoring, Cleaning, & Filtration
 
28,390

 
27,222

 
1,168

 
2,298

 
Papermaking Systems
 
113,192

 
105,591

 
7,601

 
12,634

 
Wood Processing Systems
 
34,049

 
39,141

 
(5,092
)
 
(3,117
)
 
Material Handling Systems
 
20,584

 
—

 
20,584

 
—

 
Fiber-Based Products
 
3,491

 
4,461

 
(970
)
 
(970
)
 
 
 
 
$
171,316

 
$
149,193

 
$
22,123

 
$
8,547

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Increase
 
 
 
 
 
 
 
 
 
 
(Decrease)
 
 
 
 
 
 
 
 
 
 
Excluding
 
 
 
 
Three Months Ended
 
 
 
Acquisition
Revenues by Geography (c)
 
March 30, 2019
 
March 31, 2018
 
Increase (Decrease)
 
and FX (a,b)
North America
 
$
100,876

 
$
77,616

 
$
23,260

 
$
5,803

Europe
 
38,985

 
41,493

 
(2,508
)
 
739

Asia
 
17,078

 
20,148

 
(3,070
)
 
(2,643
)
Rest of World
 
14,377

 
9,936

 
4,441

 
4,648

 
 
 
 
$
171,316

 
$
149,193

 
$
22,123

 
$
8,547

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Increase
 
 
 
 
 
 
 
 
 
 
(Decrease)
 
 
 
 
 
 
 
 
 
 
Excluding
 
 
 
 
Three Months Ended
 
 
 
Acquisition
Bookings by Product Line
 
March 30, 2019
 
March 31, 2018
 
Increase (Decrease)
 
and FX (b)
Stock-Preparation
 
$
55,828

 
$
56,515

 
$
(687
)
 
$
2,130

Fluid-Handling
 
37,039

 
39,770

 
(2,731
)
 
(1,084
)
Doctoring, Cleaning, & Filtration
 
27,696

 
28,331

 
(635
)
 
433

 
Papermaking Systems
 
120,563

 
124,616

 
(4,053
)
 
1,479

 
Wood Processing Systems
 
34,882

 
52,729

 
(17,847
)
 
(15,642
)
 
Material Handling Systems
 
24,475

 
—

 
24,475

 
—

 
Fiber-Based Products
 
3,692

 
4,575

 
(883
)
 
(883
)
 
 
 
 
$
183,612

 
$
181,920

 
$
1,692

 
$
(15,046
)
 
 
 
 
 
 
 
 
 
 
 

-more-

 
 
 
 
 
 
Three Months Ended
Business Segment Information
 
 
 
 
 
March 30, 2019
 
March 31, 2018
Gross Margin:
 
 
 
 
 
 
 
 
 
 
Papermaking Systems
 
 
 
 
 
44.2
%
 
45.6
%
 
 
Wood Processing Systems
 
 
 
 
 
41.4
%
 
39.5
%
 
 
Material Handling Systems
 
 
 
 
 
22.5
%
 
—
%
 
 
Fiber-Based Products
 
 
 
 
 
50.3
%
 
56.0
%
 
 
 
 
 
 
 
 
41.2
%
 
44.3
%
 
 
 
 
 
 
 
 
 
 
 
Operating Income:
 
 
 
 
 
 
 
 
 
 
Papermaking Systems
 
 
 
 
 
$
18,509

 
$
14,584

 
 
Wood Processing Systems
 
 
 
 
 
7,270

 
7,363

 
 
Material Handling Systems
 
 
 
 
 
(1,353
)
 
—

 
 
Corporate and Other
 
 
 
 
 
(5,851
)
 
(5,283
)
 
 
 
 
 
 
 
 
$
18,575

 
$
16,664

 
 
 
 
 
 
 
 
 
 
 
Adjusted Operating Income (a,d):
 
 
 
 
 
 
 
 
 
 
Papermaking Systems
 
 
 
 
 
$
18,509

 
$
15,354

 
 
Wood Processing Systems
 
 
 
 
 
7,270

 
7,615

 
 
Material Handling Systems
 
 
 
 
 
2,798

 
—

 
 
Corporate and Other
 
 
 
 
 
(5,851
)
 
(5,283
)
 
 
 
 
 
 
 
 
$
22,726

 
$
17,686

 
 
 
 
 
 
 
 
 
 
 
Capital Expenditures:
 
 
 
 
 
 
 
 
 
 
Papermaking Systems
 
 
 
 
 
$
1,357

 
$
4,649

 
 
Wood Processing Systems
 
 
 
 
 
551

 
376

 
 
Material Handling Systems
 
 
 
 
 
38

 
—

 
 
Corporate and Other
 
 
 
 
 
222

 
126

 
 
 
 
 
 
 
 
$
2,168

 
$
5,151

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Three Months Ended
Cash Flow and Other Data
 
 
 
 
 
March 30, 2019
 
March 31, 2018
Cash Provided by Operations
 
 
 
 
 
$
9,876

 
$
7,216

Depreciation and Amortization Expense
 
 
 
 
 
8,231

 
6,099

 
 
 
 
 
 
 
 
 
 
 
Balance Sheet Data
 
 
 
 
 
March 30, 2019
 
Dec. 29, 2018
Assets
 
 
 
 
 
 
 
 
Cash, Cash Equivalents, and Restricted Cash
 
 
 
 
 
$
57,175

 
$
46,117

Accounts Receivable, net
 
 
 
 
 
104,120

 
92,624

Inventories
 
 
 
 
 
103,029

 
86,373

Unbilled Revenues
 
 
 
 
 
16,996

 
15,741

Property, Plant and Equipment, net
 
 
 
 
 
87,732

 
80,157

Intangible Assets
 
 
 
 
 
184,596

 
113,347

Goodwill
 
 
 
 
 
343,768

 
258,174

Other Assets
 
 
 
 
 
60,824

 
33,216

 
 
 
 
 
 
 
 
$
958,240

 
$
725,749

Liabilities and Stockholders' Equity
 
 
 
 
 
 
 
 
Accounts Payable
 
 
 
 
 
$
43,571

 
$
35,720

Debt Obligations
 
 
 
 
 
354,790

 
171,434

Other Borrowings
 
 
 
 
 
6,127

 
4,387

Other Liabilities
 
 
 
 
 
171,756

 
139,637

 
Total Liabilities
 
 
 
 
 
576,244

 
351,178

 
Stockholders' Equity
 
 
 
 
 
381,996

 
374,571

 
 
 
 
 
 
 
 
$
958,240

 
$
725,749

 
 
 
 
 
 
 
 
 
 
 

-more-

 
 
Three Months Ended
 Adjusted Operating Income and Adjusted EBITDA Reconciliation
 
 
 
 
 
March 30, 2019
 
March 31, 2018
Consolidated
 
 
 
 
 
 
 
 
 
 
Net Income Attributable to Kadant
 
 
 
 
 
$
10,900

 
$
10,858

 
 
Net Income Attributable to Noncontrolling Interest
 
 
 
165

 
150

 
 
Provision for Income Taxes
 
 
 
 
 
3,963

 
3,861

 
 
Interest Expense, Net
 
 
 
 
 
3,448

 
1,549

 
 
Other Expense, Net
 
 
 
 
 
99

 
246

 
 
Operating Income
 
 
 
 
 
18,575

 
16,664

 
 
Restructuring Costs
 
 
 
 
 
—

 
770

 
 
Acquisition Costs
 
 
 
 
 
843

 
—

 
 
Acquired Backlog Amortization (e)
 
 
 
 
 
998

 
252

 
 
Acquired Profit in Inventory (f)
 
 
 
 
 
2,310

 
—

 
 
Adjusted Operating Income (a)
 
 
 
 
 
22,726

 
17,686

 
 
Depreciation and Amortization
 
 
 
 
 
7,233

 
5,847

 
 
Adjusted EBITDA (a)
 
 
 
 
 
$
29,959

 
$
23,533

 
 
 
 
 
 
 
 
 
 
 
 
 
Adjusted EBITDA Margin (a,g)
 
 
 
 
 
17.5
%
 
15.8
%
 
 
 
 
 
 
 
 
 
 
 
Papermaking Systems
 
 
 
 
 
 
 
 
 
 
Operating Income
 
 
 
 
 
$
18,509

 
$
14,584

 
 
Restructuring costs
 
 
 
 
 
—

 
770

 
 
Adjusted Operating Income (a)
 
 
 
 
 
18,509

 
15,354

 
 
Depreciation and Amortization
 
 
 
 
 
3,188

 
3,136

 
 
Adjusted EBITDA (a)
 
 
 
 
 
$
21,697

 
$
18,490

 
 
 
 
 
 
 
 
 
Wood Processing Systems
 
 
 
 
 
 
 
 
 
 
Operating Income
 
 
 
 
 
$
7,270

 
$
7,363

 
 
Acquired Backlog Amortization (e)
 
 
 
 
 
—

 
252

 
 
Adjusted Operating Income (a)
 
 
 
 
 
7,270

 
7,615

 
 
Depreciation and Amortization
 
 
 
 
 
2,387

 
2,544

 
 
Adjusted EBITDA (a)
 
 
 
 
 
$
9,657

 
$
10,159

 
 
 
 
 
 
 
 
 
 
 
Material Handling Systems
 
 
 
 
 
 
 
 
 
 
Operating Loss
 
 
 
 
 
$
(1,353
)
 
$
—

 
 
Acquisition Costs
 
 
 
 
 
843

 
—

 
 
Acquired Backlog Amortization (e)
 
 
 
 
 
998

 
—

 
 
Acquired Profit in Inventory (f)
 
 
 
 
 
2,310

 
—

 
 
Adjusted Operating Income (a)
 
 
 
 
 
2,798

 
—

 
 
Depreciation and Amortization
 
 
 
 
 
1,466

 
—

 
 
Adjusted EBITDA (a)
 
 
 
 
 
$
4,264

 
$
—

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Corporate and Other
 
 
 
 
 
 
 
 
 
 
Operating Loss
 
 
 
 
 
$
(5,851
)
 
$
(5,283
)
 
 
Depreciation and Amortization
 
 
 
 
 
192

 
167

 
 
EBITDA (a)
 
 
 
 
 
$
(5,659
)
 
$
(5,116
)
 
 
 
 
 
 
 
 
 
 

-more-

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

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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 2,800 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. These forward-looking statements represent our expectations as of the date of this press release. We undertake no obligation to publicly update any forward-looking statement, whether as a result of new information, future events, or otherwise. These forward-looking statements are subject to known and unknown risks and uncertainties that may cause our actual results to 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 29, 2018 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; our customers’ ability to obtain financing for capital equipment projects; international sales and operations; the variability and uncertainties in sales of capital equipment in China; the oriented strand board market and levels of residential construction activity; development and use of digital media; currency fluctuations; cyclical economic conditions affecting the global mining industry and the continued demand for coal; price increases or shortages of raw materials; dependence on certain suppliers; our acquisition strategy; failure of our information systems or breaches of data security and cybertheft; changes in government regulations and policies and compliance with laws; our internal growth strategy; competition; soundness of suppliers and customers; changes in our tax provision or exposure to additional tax liabilities; our ability to successfully manage our manufacturing operations; disruption in production; future restructurings; economic conditions and regulatory changes caused by the United Kingdom’s exit from the European Union; our debt obligations; restrictions in our credit agreement and note purchase agreement; loss of key personnel and effective succession planning; protection of intellectual property; fluctuations in our share price; soundness of financial institutions; environmental laws and regulations; climate change; environmental, health and safety laws and regulations; adequacy of our insurance coverage; anti-takeover provisions; and reliance on third-party research.


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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Exhibit 99.2 First Quarter 2019 Business Review April 30, 2019

 
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 future financial and operating performance, demand for our products, and economic and industry outlook. These forward-looking statements represent Kadant’s expectations as of the date of this presentation. We undertake no obligation to publicly update any forward-looking statement, whether as a result of new information, future events, or otherwise. These forward-looking statements are subject to known and unknown risks and uncertainties that may cause our actual results to 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 29, 2018 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; our customers’ ability to obtain financing for capital equipment projects; international sales and operations; the variability and uncertainties in sales of capital equipment in China; the oriented strand board market and levels of residential construction activity; development and use of digital media; currency fluctuations; cyclical economic conditions affecting the global mining industry and the continued demand for coal; price increases or shortages of raw materials; dependence on certain suppliers; our acquisition strategy; failure of our information systems or breaches of data security and cybertheft; changes in government regulations and policies and compliance with laws; our internal growth strategy; competition; soundness of suppliers and customers; changes in our tax provision or exposure to additional tax liabilities; our ability to successfully manage our manufacturing operations; disruption in production; future restructurings; economic conditions and regulatory changes caused by the United Kingdom’s exit from the European Union; our debt obligations; restrictions in our credit agreement and note purchase agreement; loss of key personnel and effective succession planning; protection of intellectual property; fluctuations in our share price; soundness of financial institutions; environmental laws and regulations; climate change; environmental, health and safety laws and regulations; adequacy of our insurance coverage; anti-takeover provisions; and reliance on third-party research. KAI Q119 Business Review–April 30, 2019 | © 2019 Kadant Inc. All rights reserved. 2

 
Use of Non-GAAP Financial Measures In addition to the financial measures prepared in accordance with U.S. 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), adjusted EBITDA margin, and free cash flow. A reconciliation of those numbers to the most directly comparable GAAP financial measures is shown in our 2019 first quarter earnings press release issued April 29, 2019, which is available in the Investors section of our website at investor.kadant.com under the heading News Releases. 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 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 presentation 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 presentation 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. KAI Q119 Business Review–April 30, 2019 | © 2019 Kadant Inc. All rights reserved. 3

 
BUSINESS REVIEW Jonathan W. Painter | Chief Executive Officer KAI Q119 Business Review–April 30, 2019 | © 2019 Kadant Inc. All rights reserved. 4

 
Q1 2019 Financial Highlights ($ Millions, except per share amounts) Q1 2019 Q1 2018 % Change2 Bookings $183.6 $181.9 0.9% Revenue $171.3 $149.2 14.8% Gross Margin 41.2% 44.3% n.m. Net Income $10.9 $10.9 n.m. Adjusted EBITDA1 $30.0 $23.5 27.3% Adjusted EBITDA Margin1 17.5% 15.8% n.m. Diluted EPS $0.96 $0.96 n.m. Adjusted Diluted EPS1 $1.24 $1.07 15.9% Cash Flow from Operations $9.9 $7.2 36.8% Net Debt $303.7 $167.2 81.7% 1 Adjusted EBITDA, adjusted EBITDA/revenue (margin), and adjusted diluted EPS are non-GAAP financial measures that exclude certain items as detailed in our press release dated April 29, 2019. 2 Percent change calculated using actual numbers reported in our press release dated April 29, 2019. KAI Q119 Business Review–April 30, 2019 | © 2019 Kadant Inc. All rights reserved. 5

 
FX Translation and Acquisition Impact Q1 2019 ($ in millions) Revenue Bookings Parts & Consumables Revenue Parts & Consumables Bookings As Reported $171.3 $183.6 $112.9 $120.2 Growth1 14.8% 0.9% 17.6% 16.8% Growth excluding FX2 19.5% 5.2% 22.1% 21.3% Growth excluding FX and Acquisitions3 5.7% -8.3% 4.5% 3.6% 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 as Acquisitions for the first four quarters after acquisition. KAI Q119 Business Review–April 30, 2019 | © 2019 Kadant Inc. All rights reserved. 6

 
Bookings and Revenue US$ (millions) BOOKINGS REVENUE $200 $160 $120 $80 $40 $0 KAI Q119 Business Review–April 30, 2019 | © 2019 Kadant Inc. All rights reserved. 7

 
Parts and Consumables Bookings and Revenue US$ (millions) BOOKINGS REVENUE $140 $120 $100 $80 $60 $40 $20 $0 KAI Q119 Business Review–April 30, 2019 | © 2019 Kadant Inc. All rights reserved. 8

 
North America Bookings and Revenue US$ (millions) BOOKINGS REVENUE $120 $100 $80 $60 $40 $20 $0 KAI Q119 Business Review–April 30, 2019 | © 2019 Kadant Inc. All rights reserved. 9

 
Europe Bookings and Revenue US$ (millions) BOOKINGS REVENUE $60 $50 $40 $30 $20 $10 $0 KAI Q119 Business Review–April 30, 2019 | © 2019 Kadant Inc. All rights reserved. 10

 
Asia Bookings and Revenue US$ (millions) BOOKINGS REVENUE $40 $30 $20 $10 $0 KAI Q119 Business Review–April 30, 2019 | © 2019 Kadant Inc. All rights reserved. 11

 
Rest-of-World Bookings and Revenue US$ (millions) BOOKINGS REVENUE $20 $15 $10 $5 $0 KAI Q119 Business Review–April 30, 2019 | © 2019 Kadant Inc. All rights reserved. 12

 
Guidance • FY 2019 GAAP diluted EPS of $4.84 to $4.99 • FY 2019 adjusted diluted EPS* of $5.20 to $5.35 • FY 2019 revenue of $700 to $710 million • Q2 2019 GAAP diluted EPS of $0.99 to $1.05 • Q2 2019 adjusted diluted EPS* of $1.07 to $1.13 • Q2 2019 revenue of $165 to $170 million * Adjusted diluted EPS is a non-GAAP financial measure that excludes certain items as detailed in our press release dated April 29, 2019. KAI Q119 Business Review–April 30, 2019 | © 2019 Kadant Inc. All rights reserved. 13

 
FINANCIAL REVIEW Michael J. McKenney | Executive Vice President & CFO KAI Q119 Business Review–April 30, 2019 | © 2019 Kadant Inc. All rights reserved. 14

 
Gross Margin 50% 47.7% 47.9% 45.6% 45.6% 46.0% 44.9% 45% 44.3% 44.0% 44.1% 43.3% 43.3% 42.3% 41.2% 40% 35% 30% All data for 2017, 2018, and 2019 is presented in conformity with the Financial Accounting Standards Board’s Accounting Standards Update No. 2017-07. Prior period amounts have not been restated. KAI Q119 Business Review–April 30, 2019 | © 2019 Kadant Inc. All rights reserved. 15

 
SG&A US$ (millions) SG&A SG&A as a % of Revenues $50 45% $40 40% $30 35% $20 30% $10 25% $0 20% All data for 2017, 2018, and 2019 is presented in conformity with the Financial Accounting Standards Board’s Accounting Standards Update No. 2017-07. Prior period amounts have not been restated. KAI Q119 Business Review–April 30, 2019 | © 2019 Kadant Inc. All rights reserved. 16

 
1Q18 to 1Q19 Adjusted Diluted EPS* $2.00 $1.50 ($0.06) $0.07 $0.04 $0.16 ($0.04) $1.24 $1.07 $1.00 $0.50 $0.00 * Adjusted diluted EPS is a non-GAAP financial measure that excludes certain items as detailed in our press release dated April 29, 2019. KAI Q119 Business Review–April 30, 2019 | © 2019 Kadant Inc. All rights reserved. 17

 
Adjusted EBITDA* Adjusted EBITDA* Adjusted EBITDA / Revenue* 25% $35 $30 20% $25 15% $20 % of of Revenue % $15 EBITDA Adjusted 10% $10 5% $5 0% $0 * Adjusted EBITDA and adjusted EBITDA/revenue (margin) are non-GAAP financial measures that exclude certain items as detailed in our press release dated April 29, 2019. KAI Q119 Business Review–April 30, 2019 | © 2019 Kadant Inc. All rights reserved. 18

 
Cash Flow US$ (millions) Q1 2019 Q1 2018 Net Income $11.1 $11.0 Depreciation and Amortization 8.2 6.1 Stock-Based Compensation 1.6 1.5 ROU Asset Amortization 1.1 – Other Items (0.7) (0.1) Change in Current Assets & Liabilities (excl. acquisitions) (11.4) (11.3) Cash Provided by Operating Activities $9.9 $7.2 Purchases of Property, Plant, and Equipment (2.2) (5.1) Free Cash Flow* $7.7 $2.1 * Free cash flow, a non-GAAP financial measure, is defined as cash flows from continuing operations less capital expenditures, as calculated above. KAI Q119 Business Review–April 30, 2019 | © 2019 Kadant Inc. All rights reserved. 19

 
Key Working Capital Metrics Q1 2019 Q4 2018 Q1 2018 Days in Receivables 64 59 57 Days in Inventory 85 86 98 Days in Payables 39 35 40 Days in Receivables Days in Inventory Days in Payables 140 120 98 100 86 85 80 Days 57 59 60 64 40 35 40 39 20 KAI Q119 Business Review–April 30, 2019 | © 2019 Kadant Inc. All rights reserved. 20

 
Working Capital and Cash Conversion Days Q1 2019 Q4 2018 Q1 2018 Working Capital % LTM Revenues* 14.9% 12.5% 13.0% Cash Conversion Days** 110 days 110 days 115 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. Cash Conversion Days ** Working Capital % LTM Revenues * 20% 200 15% 150 10% 100 Days % of Revenue of % 5% 50 0% 0 KAI Q119 Business Review–April 30, 2019 | © 2019 Kadant Inc. All rights reserved. 21

 
Cash and Debt US$ (millions) Q1 2019 Q4 2018 Q1 2018 Cash, cash equivalents, and restricted cash $57.2 $46.1 $73.7 Debt (354.8) (171.4) (235.8) Other borrowings (6.1) (4.4) (5.1) Net debt $(303.7) $(129.7) $(167.2) $75 $33.9 $22.2 $25 $7.2 $2.5 ($25) $(14.7) $(3.3) ($75) ($125) $(135.6) $(129.7) ($175) $(145.7) $(165.2) US$ (millions) US$ $(167.2) ($225) $(187.4) ($275) ($325) $(303.7) KAI Q119 Business Review–April 30, 2019 | © 2019 Kadant Inc. All rights reserved. 22

 
Leverage Ratio Debt/EBITDA * 4.00 3.50 3.00 2.33 2.50 2.00 1.50 1.00 0.50 0.00 *Calculated by adding or subtracting certain items from Adjusted EBITDA, as required by our Credit Facility. Our amended and restated Credit Facility defines total debt as debt less worldwide cash of up to $30 million. KAI Q119 Business Review–April 30, 2019 | © 2019 Kadant Inc. All rights reserved. 23

 
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 875 9439. Please mute the audio on your computer. KAI Q119 Business Review–April 30, 2019 | © 2019 Kadant Inc. All rights reserved. 24

 
Key Take-Aways • Record Q1 revenue and bookings • Syntron acquisition performing well, integration going according to plan​ • Expecting record revenue and adjusted EBITDA in 2019 KAI Q119 Business Review–April 30, 2019 | © 2019 Kadant Inc. All rights reserved. 25