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): February 17, 2021
(Exact name of registrant as specified in its charter)
Commission file number 001-11406
| (State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) | ||||||||||
(Address of principal executive offices, including zip code)
(978 ) 776-2000
(Registrant's telephone number, including area code)
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:
| Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) | ||||||||
| Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) | ||||||||
| Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) | ||||||||
| Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) | ||||||||
Securities registered pursuant to Section 12(b) of the Securities Exchange Act of 1934:
| Title of each class | Trading Symbol(s) | Name of each exchange on which registered | ||||||||||||
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 February 17, 2021, Kadant Inc. (the “Company”) announced its financial results for the fiscal quarter and year ended January 2, 2021. 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 February 18, 2021, the Company will hold a webcast and conference call to discuss its financial results for the fiscal quarter and year ended January 2, 2021. 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 | ||||||||
| 104 | Cover Page Interactive Data File (embedded within the Inline XBRL document). | |||||||
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: February 17, 2021 | By | /s/ Michael J. McKenney | ||||||
| Michael J. McKenney Executive Vice President and Chief Financial Officer | ||||||||
3
Exhibit 99.1
 | PRESS RELEASE | |||||||
KADANT INC. | ||||||||
One Technology Park Drive | ||||||||
Westford, MA 01886 USA | ||||||||
Tel: +1 978-776-2000 | ||||||||
www.kadant.com | ||||||||
Kadant Reports Fourth Quarter and Fiscal Year 2020 Results
Record Bookings, Operating Cash Flow, and Free Cash Flow in Q4 2020
WESTFORD, Mass., February 17, 2021 - Kadant Inc. (NYSE: KAI) reported its financial results for the fourth quarter and fiscal year ended January 2, 2021.
Fourth Quarter Financial Highlights
•Operating cash flow increased 3% to a record $40 million.
•Free cash flow increased 7% to a record $38 million.
•Bookings increased 23% to a record $197 million.
•Revenue decreased 8% to $168 million.
•GAAP diluted EPS increased 84% to $1.40.
•Adjusted diluted EPS increased 17% to $1.54.
•Net income increased 85% to $16 million.
•Adjusted EBITDA was $32 million and represented 19.1% of revenue.
Fiscal Year Financial Highlights
•Operating cash flow was $93 million and free cash flow was $85 million.
•Bookings decreased 6% to $648 million.
•Revenue decreased 10% to $635 million.
•GAAP diluted EPS increased 5% to $4.77.
•Adjusted diluted EPS decreased 7% to $5.00.
•Net income increased 6% to $55 million.
•Adjusted EBITDA decreased 9% to $116 million and represented 18.3% of revenue.
Note: Percent changes above are based on comparison to the prior year period. Free cash flow, adjusted diluted EPS, adjusted EBITDA, adjusted EBITDA margin, and changes in organic revenue 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
“While the past year has been dominated by the global pandemic that impacted communities around the world, I am proud of the pivotal role Kadant has played in helping essential industries continue to operate,” said Jeffrey L. Powell, president and chief executive officer. “Our leadership teams across the globe continue to work tirelessly to safeguard our employees while meeting the needs of our customers. New order activity and revenue continued their upward trajectory in the fourth quarter of 2020 led by robust capital project activity in our Industrial Processing segment and strong demand for our parts and consumables across all our operating segments.
“Overall, the quarter was better than expected with solid execution from our businesses enabling us to deliver strong margins and earnings in the fourth quarter. This led to record cash flow from operations and record free cash flow in the quarter which, combined with our debt repayments, helped reduce our leverage ratio to 1.61. As our end-market conditions improve and the broader macroeconomic outlook becomes increasingly positive, we are well-positioned to capitalize on new opportunities and accelerate revenue growth.”
| Kadant Reports Fourth Quarter and Fiscal 2020 Results | | ||||
| February 17, 2021 | |||||
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Fourth Quarter 2020 compared to 2019
Revenue decreased eight percent to $168.4 million compared to $182.7 million in 2019. Organic revenue was down 10 percent, which excludes an acquisition and a two percent increase from the favorable effect of foreign currency translation. Gross margin was 44.1 percent compared to 40.9 percent in 2019.
GAAP diluted earnings per share (EPS) was $1.40 compared to $0.76 in 2019. Adjusted diluted EPS increased 17 percent to $1.54 compared to $1.32 in 2019. Adjusted diluted EPS in 2020 excludes $0.13 of impairment and restructuring costs and $0.01 of acquired backlog amortization. Adjusted diluted EPS in 2019 excludes a $0.55 settlement loss, $0.17 of impairment and restructuring costs, and a $0.16 discrete tax benefit. Net income was $16.2 million compared to $8.7 million in 2019 and adjusted EBITDA was $32.1 million compared to $32.2 million in the prior year quarter. Cash flow from operations increased three percent to a record $40.3 million compared to $39.2 million in 2019.
Bookings increased 23 percent to a record $196.5 million compared to $159.8 million in 2019. Organic bookings increased 20 percent, which excludes an acquisition and a three percent increase from the favorable effect of foreign currency translation.
Fiscal Year 2020 compared to 2019
Revenue decreased 10 percent to $635.0 million compared to $704.6 million in 2019. Organic revenue was down 10 percent, which excludes an acquisition and the unfavorable effect of foreign currency translation. Gross margin was 43.7 percent compared to 41.7 percent in 2019.
GAAP diluted EPS increased five percent to $4.77 compared to $4.54 in 2019. Adjusted diluted EPS decreased seven percent to $5.00 compared to $5.36 in 2019. Adjusted diluted EPS in 2020 excludes $0.19 of impairment and restructuring costs, $0.04 of acquired backlog amortization, $0.03 of acquisition costs, and a $0.03 discrete tax benefit. Adjusted diluted EPS in 2019 excludes a $0.55 settlement loss, $0.32 of acquired profit in inventory and backlog amortization, a $0.29 discrete tax benefit, $0.17 of impairment and restructuring costs, and $0.06 of acquisition costs. Net income was $55.2 million compared to $52.1 million in 2019. Adjusted EBITDA decreased nine percent to $115.9 million compared to $127.1 million in 2019. Cash flow from operations decreased five percent to $92.9 million compared to $97.4 million in 2019.
Bookings decreased six percent to $648.5 million compared to $688.3 million in 2019. Organic bookings were down six percent, which excludes an acquisition and the unfavorable effect of foreign currency translation.
Summary and Outlook
“Our record bookings in the fourth quarter were led by strong capital project activity and solid contributions from our parts and consumables," Mr. Powell continued. "As we start 2021, we expect demand to improve as industrial production continues to strengthen. Our global footprint and the diversity of our product offerings have provided stability as the timing of the market recovery has varied by region and industry. While we have seen a recent strengthening in demand, there is uncertainty in how global markets may respond to the pandemic as the vaccine distribution has proven to be uneven around the world. As a result, we will not be providing guidance at this time.”
Conference Call
Kadant will hold a webcast with a slide presentation for investors on Thursday, February 18, 2021, at 11:00 a.m. eastern time to discuss its fourth quarter and full-year 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 2636925. 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 March 19, 2021.
| Kadant Reports Fourth Quarter and Fiscal 2020 Results | | ||||
| February 17, 2021 | |||||
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Shortly after the webcast, Kadant will post its updated general investor presentation incorporating the fourth quarter and fiscal year 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 (organic revenue), adjusted operating income, adjusted net income, adjusted diluted EPS, earnings before interest, taxes, depreciation, and amortization (EBITDA), adjusted EBITDA, adjusted EBITDA margin, and free cash flow.
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 fourth quarter of 2020 included a $3.6 million favorable foreign currency translation effect and $0.7 million from an acquisition. Revenue in 2020 included a $2.2 million unfavorable foreign currency translation effect and $1.6 million from an acquisition. We present increases or decreases in organic revenue, which excludes the effect of acquisitions and foreign currency translation, to provide investors insight into underlying revenue trends.
Our non-GAAP financial measures exclude benefit plan settlement losses, impairment and restructuring costs, acquisition costs, amortization expense related to acquired profit in inventory and backlog, and discrete tax items. Free cash flow excludes capital expenditures from cash flow from operations. 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, expenditures or income, or none at all.
Fourth Quarter
Adjusted operating income, adjusted EBITDA, and adjusted EBITDA margin exclude:
•Pre-tax impairment and restructuring costs of $2.1 million in 2020 and $2.5 million in 2019.
•Pre-tax expense related to acquired backlog amortization of $0.2 million in 2020.
Adjusted net income and adjusted diluted EPS exclude:
•After-tax settlement loss of $6.4 million ($5.9 million pre-tax and tax expense of $0.5 million) in 2019.
•After-tax impairment and restructuring costs of $1.5 million ($2.1 million net of tax of $0.6 million) in 2020 and $1.9 million ($2.5 million net of tax of $0.6 million) in 2019.
•After-tax expense related to acquired backlog amortization of $0.1 million ($0.2 million net of tax of $0.1 million) in 2020.
•A discrete tax benefit of $1.8 million in 2019.
Free cash flow is calculated as cash flow from operations less:
•Capital expenditures of $2.2 million in 2020 and $3.7 million in 2019.
| Kadant Reports Fourth Quarter and Fiscal 2020 Results | | ||||
| February 17, 2021 | |||||
Page 4 | |||||
Fiscal Year
Adjusted operating income, adjusted EBITDA, and adjusted EBITDA margin exclude:
•Pre-tax impairment and restructuring costs of $3.0 million in 2020 and $2.5 million in 2019.
•Pre-tax acquisition costs of $0.5 million in 2020 and $0.8 million in 2019.
•Pre-tax expense related to acquired backlog amortization of $0.5 million in 2020 and $1.3 million in 2019.
•Pre-tax expense related to amortization of acquired profit in inventory of $3.5 million in 2019.
Adjusted net income and adjusted diluted EPS exclude:
•After-tax settlement loss of $6.4 million ($5.9 million pre-tax and tax expense of $0.5 million).
•After-tax impairment and restructuring costs of $2.2 million ($3.0 million net of tax of $0.8 million) in 2020 and $1.9 million ($2.5 million net of tax of $0.6 million) in 2019.
•After-tax acquisition costs of $0.4 million ($0.5 million net of tax of $0.1 million) in 2020 and $0.7 million ($0.8 million net of tax of $0.1 million) in 2019.
•After-tax expense related to acquired backlog amortization of $0.4 million ($0.5 million net of tax of $0.1 million) in 2020 and $1.0 million ($1.3 million net of tax of $0.3 million) in 2019.
•After-tax expense related to amortization of acquired profit in inventory of $2.7 million ($3.5 million net of tax of $0.8 million) in 2019.
•A discrete tax benefit of $0.3 million in 2020 and $3.3 million in 2019.
Free cash flow is calculated as cash flow from operations less:
•Capital expenditures of $7.6 million in 2020 and $10.0 million in 2019.
Reconciliations of the non-GAAP financial measures to the most directly comparable GAAP financial measures are set forth in this press release.
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| Kadant Reports Fourth Quarter and Fiscal 2020 Results | | ||||
| February 17, 2021 | |||||
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| Financial Highlights (unaudited) | ||||||||||||||||||||||||||||||||
| (In thousands, except per share amounts and percentages) | ||||||||||||||||||||||||||||||||
| Three Months Ended | Twelve Months Ended | |||||||||||||||||||||||||||||||
| Consolidated Statement of Income | Jan. 2, 2021 | Dec. 28, 2019 | Jan. 2, 2021 | Dec. 28, 2019 | ||||||||||||||||||||||||||||
| Revenue | $ | 168,431 | $ | 182,659 | $ | 635,028 | $ | 704,644 | ||||||||||||||||||||||||
| Costs and Operating Expenses: | ||||||||||||||||||||||||||||||||
| Cost of revenue | 94,212 | 108,032 | 357,722 | 410,884 | ||||||||||||||||||||||||||||
| Selling, general, and administrative expenses | 47,387 | 47,642 | 181,905 | 192,525 | ||||||||||||||||||||||||||||
| Research and development expenses | 2,766 | 2,904 | 11,298 | 10,884 | ||||||||||||||||||||||||||||
| Impairment and restructuring costs (b) | 2,053 | 2,528 | 2,979 | 2,528 | ||||||||||||||||||||||||||||
| 146,418 | 161,106 | 553,904 | 616,821 | |||||||||||||||||||||||||||||
| Operating Income | 22,013 | 21,553 | 81,124 | 87,823 | ||||||||||||||||||||||||||||
| Interest Income | 41 | 55 | 181 | 213 | ||||||||||||||||||||||||||||
| Interest Expense | (1,363) | (2,612) | (7,423) | (12,755) | ||||||||||||||||||||||||||||
| Other Expense, Net (c) | (100) | (6,063) | (195) | (6,359) | ||||||||||||||||||||||||||||
Income Before Provision for Income Taxes | 20,591 | 12,933 | 73,687 | 68,922 | ||||||||||||||||||||||||||||
| Provision for Income Taxes | 4,210 | 4,048 | 17,948 | 16,358 | ||||||||||||||||||||||||||||
| Net Income | 16,381 | 8,885 | 55,739 | 52,564 | ||||||||||||||||||||||||||||
| Net Income Attributable to Noncontrolling Interest | (174) | (136) | (543) | (496) | ||||||||||||||||||||||||||||
| Net Income Attributable to Kadant | $ | 16,207 | $ | 8,749 | $ | 55,196 | $ | 52,068 | ||||||||||||||||||||||||
| Earnings per Share Attributable to Kadant: | ||||||||||||||||||||||||||||||||
| Basic | $ | 1.41 | $ | 0.77 | $ | 4.81 | $ | 4.63 | ||||||||||||||||||||||||
| Diluted | $ | 1.40 | $ | 0.76 | $ | 4.77 | $ | 4.54 | ||||||||||||||||||||||||
| Weighted Average Shares: | ||||||||||||||||||||||||||||||||
| Basic | 11,513 | 11,344 | 11,482 | 11,235 | ||||||||||||||||||||||||||||
| Diluted | 11,608 | 11,525 | 11,564 | 11,457 | ||||||||||||||||||||||||||||
| Three Months Ended | Three Months Ended | |||||||||||||||||||||||||||||||
| Adjusted Net Income and Adjusted Diluted EPS (a) | Jan. 2, 2021 | Jan. 2, 2021 | Dec. 28, 2019 | Dec. 28, 2019 | ||||||||||||||||||||||||||||
| Net Income and Diluted EPS Attributable to Kadant, as Reported | $ | 16,207 | $ | 1.40 | $ | 8,749 | $ | 0.76 | ||||||||||||||||||||||||
| Adjustments for the Following: | ||||||||||||||||||||||||||||||||
| Settlement Loss, Net of Tax (c) | — | — | 6,352 | 0.55 | ||||||||||||||||||||||||||||
| Impairment and Restructuring Costs, Net of Tax (b) | 1,543 | 0.13 | 1,905 | 0.17 | ||||||||||||||||||||||||||||
| Amortization of Acquired Backlog, Net of Tax (g) | 132 | 0.01 | 15 | — | ||||||||||||||||||||||||||||
| Discrete Tax Items (i) | — | — | (1,839) | (0.16) | ||||||||||||||||||||||||||||
| Adjusted Net Income and Adjusted Diluted EPS (a) | $ | 17,882 | $ | 1.54 | $ | 15,182 | $ | 1.32 | ||||||||||||||||||||||||
| Twelve Months Ended | Twelve Months Ended | |||||||||||||||||||||||||||||||
| Adjusted Net Income and Adjusted Diluted EPS (a) | Jan. 2, 2021 | Jan. 2, 2021 | Dec. 28, 2019 | Dec. 28, 2019 | ||||||||||||||||||||||||||||
| Net Income and Diluted EPS Attributable to Kadant, as Reported | $ | 55,196 | $ | 4.77 | $ | 52,068 | $ | 4.54 | ||||||||||||||||||||||||
| Adjustments for the Following: | ||||||||||||||||||||||||||||||||
| Settlement Loss, Net of Tax (c) | — | — | 6,352 | 0.55 | ||||||||||||||||||||||||||||
| Impairment and Restructuring Costs, Net of Tax (b) | 2,210 | 0.19 | 1,905 | 0.17 | ||||||||||||||||||||||||||||
| Acquisition Costs, Net of Tax | 355 | 0.03 | 699 | 0.06 | ||||||||||||||||||||||||||||
| Amortization of Acquired Profit in Inventory and Backlog, Net of Tax (g,h) | 407 | 0.04 | 3,702 | 0.32 | ||||||||||||||||||||||||||||
| Discrete Tax Items (i) | (338) | (0.03) | (3,338) | (0.29) | ||||||||||||||||||||||||||||
| Adjusted Net Income and Adjusted Diluted EPS (a) | $ | 57,830 | $ | 5.00 | $ | 61,388 | $ | 5.36 | ||||||||||||||||||||||||
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| Three Months Ended | Decrease Excluding Acquisition and FX (a,e) | |||||||||||||||||||||||||||||||
| Revenue by Segment (d) | Jan. 2, 2021 | Dec. 28, 2019 | Decrease | |||||||||||||||||||||||||||||
| Flow Control | $ | 60,115 | $ | 61,547 | $ | (1,432) | $ | (2,304) | ||||||||||||||||||||||||
| Industrial Processing | 69,109 | 79,049 | (9,940) | (12,283) | ||||||||||||||||||||||||||||
| Material Handling | 39,207 | 42,063 | (2,856) | (3,951) | ||||||||||||||||||||||||||||
| $ | 168,431 | $ | 182,659 | $ | (14,228) | $ | (18,538) | |||||||||||||||||||||||||
| Percentage of Parts and Consumables Revenue | 67 | % | 60 | % | ||||||||||||||||||||||||||||
| Twelve Months Ended | Decrease | Decrease Excluding Acquisition and FX (a,e) | ||||||||||||||||||||||||||||||
| Jan. 2, 2021 | Dec. 28, 2019 | |||||||||||||||||||||||||||||||
| Flow Control | $ | 225,444 | $ | 250,339 | $ | (24,895) | $ | (22,073) | ||||||||||||||||||||||||
| Industrial Processing | 261,577 | 301,948 | (40,371) | (41,658) | ||||||||||||||||||||||||||||
| Material Handling | 148,007 | 152,357 | (4,350) | (5,267) | ||||||||||||||||||||||||||||
| $ | 635,028 | $ | 704,644 | $ | (69,616) | $ | (68,998) | |||||||||||||||||||||||||
| Percentage of Parts and Consumables Revenue | 66 | % | 63 | % | ||||||||||||||||||||||||||||
| Three Months Ended | Increase (Decrease) | Increase (Decrease) Excluding Acquisition and FX (e) | ||||||||||||||||||||||||||||||
| Bookings by Segment (d) | Jan. 2, 2021 | Dec. 28, 2019 | ||||||||||||||||||||||||||||||
| Flow Control | $ | 61,878 | $ | 56,974 | $ | 4,904 | $ | 4,171 | ||||||||||||||||||||||||
| Industrial Processing | 94,759 | 61,874 | 32,885 | 29,972 | ||||||||||||||||||||||||||||
| Material Handling | 39,898 | 40,935 | (1,037) | (2,196) | ||||||||||||||||||||||||||||
| $ | 196,535 | $ | 159,783 | $ | 36,752 | $ | 31,947 | |||||||||||||||||||||||||
| Percentage of Parts and Consumables Bookings | 61 | % | 70 | % | ||||||||||||||||||||||||||||
| Twelve Months Ended | Decrease | Decrease Excluding Acquisition and FX (e) | ||||||||||||||||||||||||||||||
| Jan. 2, 2021 | Dec. 28, 2019 | |||||||||||||||||||||||||||||||
| Flow Control | $ | 228,591 | $ | 241,220 | $ | (12,629) | $ | (9,345) | ||||||||||||||||||||||||
| Industrial Processing | 273,644 | 290,881 | (17,237) | (18,818) | ||||||||||||||||||||||||||||
| Material Handling | 146,242 | 156,184 | (9,942) | (11,201) | ||||||||||||||||||||||||||||
| $ | 648,477 | $ | 688,285 | $ | (39,808) | $ | (39,364) | |||||||||||||||||||||||||
| Percentage of Parts and Consumables Bookings | 65 | % | 64 | % | ||||||||||||||||||||||||||||
| Three Months Ended | Twelve Months Ended | |||||||||||||||||||||||||||||||
| Business Segment Information (d) | Jan. 2, 2021 | Dec. 28, 2019 | Jan. 2, 2021 | Dec. 28, 2019 | ||||||||||||||||||||||||||||
| Gross Margin: | ||||||||||||||||||||||||||||||||
| Flow Control | 52.5 | % | 50.5 | % | 52.9 | % | 51.4 | % | ||||||||||||||||||||||||
| Industrial Processing | 42.3 | % | 36.2 | % | 41.3 | % | 38.3 | % | ||||||||||||||||||||||||
| Material Handling | 34.3 | % | 35.6 | % | 33.7 | % | 32.5 | % | ||||||||||||||||||||||||
| 44.1 | % | 40.9 | % | 43.7 | % | 41.7 | % | |||||||||||||||||||||||||
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| Three Months Ended | Twelve Months Ended | |||||||||||||||||||||||||||||||
| Business Segment Information (d) (continued) | Jan. 2, 2021 | Dec. 28, 2019 | Jan. 2, 2021 | Dec. 28, 2019 | ||||||||||||||||||||||||||||
| Operating Income: | ||||||||||||||||||||||||||||||||
| Flow Control | $ | 14,170 | $ | 12,123 | $ | 51,530 | $ | 55,343 | ||||||||||||||||||||||||
| Industrial Processing | 10,824 | 10,769 | 42,971 | 49,599 | ||||||||||||||||||||||||||||
| Material Handling | 4,034 | 6,085 | 14,375 | 11,600 | ||||||||||||||||||||||||||||
| Corporate | (7,015) | (7,424) | (27,752) | (28,719) | ||||||||||||||||||||||||||||
| $ | 22,013 | $ | 21,553 | $ | 81,124 | $ | 87,823 | |||||||||||||||||||||||||
| Adjusted Operating Income (a,f): | ||||||||||||||||||||||||||||||||
| Flow Control | $ | 14,108 | $ | 12,123 | $ | 52,189 | $ | 55,343 | ||||||||||||||||||||||||
| Industrial Processing | 12,840 | 13,297 | 45,788 | 52,127 | ||||||||||||||||||||||||||||
| Material Handling | 4,310 | 6,105 | 14,907 | 17,315 | ||||||||||||||||||||||||||||
| Corporate | (7,015) | (7,424) | (27,752) | (28,719) | ||||||||||||||||||||||||||||
| $ | 24,243 | $ | 24,101 | $ | 85,132 | $ | 96,066 | |||||||||||||||||||||||||
| Capital Expenditures: | ||||||||||||||||||||||||||||||||
| Flow Control | $ | 1,141 | $ | 825 | $ | 2,808 | $ | 2,639 | ||||||||||||||||||||||||
| Industrial Processing | 663 | 1,890 | 3,123 | 5,113 | ||||||||||||||||||||||||||||
| Material Handling | 372 | 999 | 1,539 | 2,144 | ||||||||||||||||||||||||||||
| Corporate | — | 7 | 125 | 61 | ||||||||||||||||||||||||||||
| $ | 2,176 | $ | 3,721 | $ | 7,595 | $ | 9,957 | |||||||||||||||||||||||||
| Three Months Ended | Twelve Months Ended | |||||||||||||||||||||||||||||||
| Cash Flow and Other Data | Jan. 2, 2021 | Dec. 28, 2019 | Jan. 2, 2021 | Dec. 28, 2019 | ||||||||||||||||||||||||||||
| Cash Provided by Operations | $ | 40,283 | $ | 39,247 | $ | 92,884 | $ | 97,413 | ||||||||||||||||||||||||
| Less: Capital Expenditures | (2,176) | (3,721) | (7,595) | (9,957) | ||||||||||||||||||||||||||||
| Free Cash Flow (a) | $ | 38,107 | $ | 35,526 | $ | 85,289 | $ | 87,456 | ||||||||||||||||||||||||
| Depreciation and Amortization Expense | $ | 8,074 | $ | 8,086 | $ | 31,334 | $ | 32,390 | ||||||||||||||||||||||||
| Balance Sheet Data | Jan. 2, 2021 | Dec. 28, 2019 | ||||||||||||||||||||||||||||||
| Assets | ||||||||||||||||||||||||||||||||
| Cash, Cash Equivalents, and Restricted Cash | $ | 66,640 | $ | 68,273 | ||||||||||||||||||||||||||||
| Accounts Receivable, net | 91,540 | 95,740 | ||||||||||||||||||||||||||||||
| Inventories | 106,814 | 102,715 | ||||||||||||||||||||||||||||||
| Unbilled Revenue | 7,576 | 13,162 | ||||||||||||||||||||||||||||||
| Property, Plant, and Equipment, net | 84,642 | 86,032 | ||||||||||||||||||||||||||||||
| Intangible Assets | 160,965 | 173,896 | ||||||||||||||||||||||||||||||
| Goodwill | 351,753 | 336,032 | ||||||||||||||||||||||||||||||
| Other Assets | 57,641 | 63,537 | ||||||||||||||||||||||||||||||
| $ | 927,571 | $ | 939,387 | |||||||||||||||||||||||||||||
| Liabilities and Stockholders' Equity | ||||||||||||||||||||||||||||||||
| Accounts Payable | $ | 32,264 | $ | 45,852 | ||||||||||||||||||||||||||||
| Debt Obligations | 227,963 | 294,717 | ||||||||||||||||||||||||||||||
| Other Borrowings | 5,511 | 6,308 | ||||||||||||||||||||||||||||||
| Other Liabilities | 164,928 | 165,431 | ||||||||||||||||||||||||||||||
| Total Liabilities | 430,666 | 512,308 | ||||||||||||||||||||||||||||||
| Stockholders' Equity | 496,905 | 427,079 | ||||||||||||||||||||||||||||||
| $ | 927,571 | $ | 939,387 | |||||||||||||||||||||||||||||
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| Kadant Reports Fourth Quarter and Fiscal 2020 Results | | ||||
| February 17, 2021 | |||||
Page 8 | |||||
| Three Months Ended | Twelve Months Ended | |||||||||||||||||||||||||||||||
| Adjusted Operating Income and Adjusted EBITDA Reconciliation (a,d) | Jan. 2, 2021 | Dec. 28, 2019 | Jan. 2, 2021 | Dec. 28, 2019 | ||||||||||||||||||||||||||||
| Consolidated | ||||||||||||||||||||||||||||||||
| Net Income Attributable to Kadant | $ | 16,207 | $ | 8,749 | $ | 55,196 | $ | 52,068 | ||||||||||||||||||||||||
| Net Income Attributable to Noncontrolling Interest | 174 | 136 | 543 | 496 | ||||||||||||||||||||||||||||
| Provision for Income Taxes | 4,210 | 4,048 | 17,948 | 16,358 | ||||||||||||||||||||||||||||
| Interest Expense, Net | 1,322 | 2,557 | 7,242 | 12,542 | ||||||||||||||||||||||||||||
| Other Expense, Net (c) | 100 | 6,063 | 195 | 6,359 | ||||||||||||||||||||||||||||
| Operating Income | 22,013 | 21,553 | 81,124 | 87,823 | ||||||||||||||||||||||||||||
| Impairment and Restructuring Costs (b) | 2,053 | 2,528 | 2,979 | 2,528 | ||||||||||||||||||||||||||||
| Acquisition Costs | — | — | 485 | 843 | ||||||||||||||||||||||||||||
| Acquired Backlog Amortization (g) | 177 | 20 | 544 | 1,323 | ||||||||||||||||||||||||||||
| Acquired Profit in Inventory (h) | — | — | — | 3,549 | ||||||||||||||||||||||||||||
| Adjusted Operating Income (a) | 24,243 | 24,101 | 85,132 | 96,066 | ||||||||||||||||||||||||||||
| Depreciation and Amortization | 7,897 | 8,066 | 30,790 | 31,067 | ||||||||||||||||||||||||||||
| Adjusted EBITDA (a) | $ | 32,140 | $ | 32,167 | $ | 115,922 | $ | 127,133 | ||||||||||||||||||||||||
| Adjusted EBITDA Margin (a,j) | 19.1 | % | 17.6 | % | 18.3 | % | 18.0 | % | ||||||||||||||||||||||||
| Flow Control | ||||||||||||||||||||||||||||||||
| Operating Income | $ | 14,170 | $ | 12,123 | $ | 51,530 | $ | 55,343 | ||||||||||||||||||||||||
| Restructuring (Income) Costs | (62) | — | 659 | — | ||||||||||||||||||||||||||||
| Adjusted Operating Income (a) | 14,108 | 12,123 | 52,189 | 55,343 | ||||||||||||||||||||||||||||
| Depreciation and Amortization | 1,604 | 1,780 | 6,333 | 6,603 | ||||||||||||||||||||||||||||
| Adjusted EBITDA (a) | $ | 15,712 | $ | 13,903 | $ | 58,522 | $ | 61,946 | ||||||||||||||||||||||||
| Adjusted EBITDA Margin (a,j) | 26.1 | % | 22.6 | % | 26.0 | % | 24.7 | % | ||||||||||||||||||||||||
| Industrial Processing | ||||||||||||||||||||||||||||||||
| Operating Income | $ | 10,824 | $ | 10,769 | $ | 42,971 | $ | 49,599 | ||||||||||||||||||||||||
| Impairment and Restructuring Costs | 1,933 | 2,528 | 2,138 | 2,528 | ||||||||||||||||||||||||||||
| Acquisition Costs | — | — | 485 | — | ||||||||||||||||||||||||||||
| Acquired Backlog Amortization (g) | 83 | — | 194 | — | ||||||||||||||||||||||||||||
| Adjusted Operating Income (a) | 12,840 | 13,297 | 45,788 | 52,127 | ||||||||||||||||||||||||||||
| Depreciation and Amortization | 3,371 | 3,281 | 12,969 | 13,012 | ||||||||||||||||||||||||||||
| Adjusted EBITDA (a) | $ | 16,211 | $ | 16,578 | $ | 58,757 | $ | 65,139 | ||||||||||||||||||||||||
| Adjusted EBITDA Margin (a,j) | 23.5 | % | 21.0 | % | 22.5 | % | 21.6 | % | ||||||||||||||||||||||||
| Material Handling | ||||||||||||||||||||||||||||||||
| Operating Income | $ | 4,034 | $ | 6,085 | $ | 14,375 | $ | 11,600 | ||||||||||||||||||||||||
| Restructuring Costs | 182 | — | 182 | — | ||||||||||||||||||||||||||||
| Acquisition Costs | — | — | — | 843 | ||||||||||||||||||||||||||||
| Acquired Backlog Amortization (g) | 94 | 20 | 350 | 1,323 | ||||||||||||||||||||||||||||
| Acquired Profit in Inventory (h) | — | — | — | 3,549 | ||||||||||||||||||||||||||||
| Adjusted Operating Income (a) | 4,310 | 6,105 | 14,907 | 17,315 | ||||||||||||||||||||||||||||
| Depreciation and Amortization | 2,862 | 2,946 | 11,278 | 11,205 | ||||||||||||||||||||||||||||
| Adjusted EBITDA (a) | $ | 7,172 | $ | 9,051 | $ | 26,185 | $ | 28,520 | ||||||||||||||||||||||||
| Adjusted EBITDA Margin (a,j) | 18.3 | % | 21.5 | % | 17.7 | % | 18.7 | % | ||||||||||||||||||||||||
| Corporate | ||||||||||||||||||||||||||||||||
| Operating Loss | $ | (7,015) | $ | (7,424) | $ | (27,752) | $ | (28,719) | ||||||||||||||||||||||||
| Depreciation and Amortization | 60 | 59 | 210 | 247 | ||||||||||||||||||||||||||||
| EBITDA (a) | $ | (6,955) | $ | (7,365) | $ | (27,542) | $ | (28,472) | ||||||||||||||||||||||||
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| Kadant Reports Fourth Quarter and Fiscal 2020 Results | | ||||
| February 17, 2021 | |||||
Page 9 | |||||
| (a) | Represents a non-GAAP financial measure. | |||||||||||||||||||||||||||||||
| (b) | The fourth quarter of 2020 includes an intangible asset impairment charge of $1,861 ($1,389 after tax) related to our Industrial Processing segment's timber-harvesting product line and consolidated restructuring costs of $192 ($154 after tax), and the full-year 2020 includes an intangible asset impairment charge of $1,861 ($1,389 after tax) and restructuring costs of $1,118 ($821 after tax). The fourth quarter and full-year of 2019 includes an intangible asset impairment charge of $2,336 ($1,765 after tax) and restructuring costs of $192 ($140 after tax) related to our Industrial Processing segment's timber-harvesting product line. | |||||||||||||||||||||||||||||||
| (c) | Includes a settlement loss of $5,887 ($6,352 after tax) in the three- and twelve-month periods ended December 28, 2019 associated with the termination of defined benefit plans at one of our U.S. operations. | |||||||||||||||||||||||||||||||
| (d) | Reflects our new reportable operating segments announced on April 22, 2020. Prior period information has been recast to conform to the current period presentation. | |||||||||||||||||||||||||||||||
| (e) | 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. | |||||||||||||||||||||||||||||||
| (f) | See reconciliation to the most directly comparable GAAP financial measure under "Adjusted Operating Income and Adjusted EBITDA Reconciliation." | |||||||||||||||||||||||||||||||
| (g) | Represents intangible amortization expense associated with acquired backlog. | |||||||||||||||||||||||||||||||
| (h) | Represents expense within cost of revenues associated with amortization of acquired profit in inventory. | |||||||||||||||||||||||||||||||
| (i) | The discrete tax benefit of $1,839, or $0.16 per diluted share, in the fourth quarter of 2019 and $3,338, or $0.29 per diluted share, for the full-year 2019 relates to the exercise of employee stock options, which were significantly higher in these periods than in other comparable reporting periods. | |||||||||||||||||||||||||||||||
| (j) | Calculated as adjusted EBITDA divided by revenue in each period. | |||||||||||||||||||||||||||||||
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| Kadant Reports 2020 Fourth Quarter Results | | ||||
| February 17, 2021 | |||||
Page 10 | |||||
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 2,600 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 28, 2019 and subsequent filings with the Securities and Exchange Commission. These include risks and uncertainties relating to the impact of the COVID-19 pandemic on our operating and financial results; 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; health epidemics; changes to government regulations and policies around the world; policies of the Chinese government; the variability and uncertainties in sales of capital equipment in China; levels of residential construction activity; reductions by our wood processing customers of their capital spending or production of oriented strand board; changes to the global timber supply; cyclical economic conditions affecting the global mining industry; development and use of digital media; currency fluctuations; demand for coal, including economic and environmental risks associated with 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; compliance with government regulations and policies and compliance with laws; implementation of 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; substitution of an alternative index for LIBOR; 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
IR@kadant.com
or
Media Contact Information:
Wes Martz, 269-278-1715
media@kadant.com
###
Fourth Quarter and Fiscal Year 2020 Business Review FEBRUARY 18, 2021 Exhibit 99.2
Forward-Looking Statements 2KAI Q420 Business Review–February 18, 2021 | © 2021 Kadant Inc. All rights reserved. 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 28, 2019 and subsequent filings with the Securities and Exchange Commission. These include risks and uncertainties relating to the impact of the COVID-19 pandemic on our operating and financial results; 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; health epidemics; changes to government regulations and policies around the world; policies of the Chinese government; the variability and uncertainties in sales of capital equipment in China; levels of residential construction activity; reductions by our wood processing customers of their capital spending or production of oriented strand board; changes to the global timber supply; cyclical economic conditions affecting the global mining industry; development and use of digital media; currency fluctuations; demand for coal, including economic and environmental risks associated with 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; compliance with government regulations and policies and compliance with laws; implementation of 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; substitution of an alternative index for LIBOR; 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.
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 revenue excluding the effect of acquisitions and foreign currency translation, adjusted diluted EPS (earnings per share), adjusted earnings before interest, taxes, depreciation, and amortization (adjusted EBITDA), adjusted EBITDA margin, and free cash flow. Specific non-GAAP financial measures have been marked with an * (asterisk) within this presentation. A reconciliation of those numbers to the most directly comparable GAAP financial measures is shown in the Appendix and in our fourth quarter and fiscal year 2020 earnings press release issued February 17, 2021 and our fourth quarter and fiscal year 2019 earnings press release issued February 12, 2020 , 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 Q420 Business Review–February 18, 2021 | © 2021 Kadant Inc. All rights reserved. 3
BUSINESS REVIEW Jeffrey L. Powell | President & CEO 4 KAI Q420 Business Review–February 18, 2021 | © 2021 Kadant Inc. All rights reserved.
Operational Highlights • Solid execution by our businesses led to strong margin performance and record cash flow from operations in the fourth quarter • Capital project activity and increased demand for parts and consumables led to record bookings in the fourth quarter • Our balance sheet remains healthy and our liquidity position has improved 5KAI Q420 Business Review–February 18, 2021 | © 2021 Kadant Inc. All rights reserved.
Q4 2020 Performance 6 Q4 20 Q4 19 Change Revenue $168.4 $182.7 -7.8% Net Income $16.2 $8.7 +85.2% Adjusted EBITDA* $32.1 $32.2 -0.1% Adjusted EBITDA Margin* 19.1% 17.6% +150 bps Diluted EPS $1.40 $0.76 +84.2% Adjusted Diluted EPS* $1.54 $1.32 +16.7% Operating Cash Flow $40.3 $39.2 +2.6% Free Cash Flow* $38.1 $35.5 +7.3% Bookings $196.5 $159.8 +23.0% HIGHLIGHTS • Excellent bookings performance across all operating segments • Parts and consumables revenue was up 9% sequentially and made up 67% of Q4 revenue • Strong performance in our Flow Control and Industrial Processing segments contributed to a solid adjusted EBITDA margin • Free cash flow* was a record $38 million ($ in millions, except per share amounts) KAI Q420 Business Review–February 18, 2021 | © 2021 Kadant Inc. All rights reserved.
FY 2020 Performance 7 FY 20 FY 19 Change Revenue $635.0 $704.6 -9.9% Net Income $55.2 $52.1 +6.0% Adjusted EBITDA* $115.9 $127.1 -8.8% Adjusted EBITDA Margin* 18.3% 18.0% +30 bps Diluted EPS $4.77 $4.54 +5.1% Adjusted Diluted EPS* $5.00 $5.36 -6.7% Operating Cash Flow $92.9 $97.4 -4.6% Free Cash Flow* $85.3 $87.5 -2.5% Bookings $648.5 $688.3 -5.8% HIGHLIGHTS • Cash flow from operations was exceptionally strong • Increasing order activity and solid execution in the second half of 2020 led to near-record free cash flow • Adjusted diluted EPS declined 7% compared to our record performance in 2019 • Record Q4 2020 bookings created positive momentum heading into 2021 ($ in millions, except per share amounts) KAI Q420 Business Review–February 18, 2021 | © 2021 Kadant Inc. All rights reserved.
Flow Control 8 $ in millions Q4 20 Q4 19 Change Revenue $60.1 $61.5 -2.3% Bookings $61.9 $57.0 +8.6% Adjusted EBITDA* $15.7 $13.9 +13.0% Adjusted EBITDA Margin* 26.1% 22.6% +350 bps HIGHLIGHTS • Solid rebound in Q4 capital project activity in all regions • Parts and consumables revenue made up 68% of total Q4 revenue • Product mix and operating leverage drove strong adjusted EBITDA margin • Capital project activity continued at a robust pace early in Q1 2021 KAI Q420 Business Review–February 18, 2021 | © 2021 Kadant Inc. All rights reserved. Custom-engineered products, systems, and technologies that control the flow of fluids ($ in millions) $57.0 $67.7 $49.4 $49.6 $61.9 4Q19 1Q20 2Q20 3Q20 4Q20 BOOKINGS
Industrial Processing 9 $ in millions Q4 20 Q4 19 Change Revenue $69.1 $79.0 -12.6% Bookings $94.8 $61.9 +53.1% Adjusted EBITDA* $16.2 $16.6 -2.2% Adjusted EBITDA Margin* 23.5% 21.0% +250 bps HIGHLIGHTS • Strong demand for wood products continued in Q4 as U.S. housing starts remained near all-time highs • Capital bookings more than doubled sequentially and over Q419 • Parts and consumables revenue made up 70% of total Q4 revenue KAI Q420 Business Review–February 18, 2021 | © 2021 Kadant Inc. All rights reserved. Products used to recycle paper and paperboard and to process timber ($ in millions) $61.9 $65.8 $53.1 $59.9 $94.8 4Q19 1Q20 2Q20 3Q20 4Q20 BOOKINGS
Material Handling 10 $ in millions Q4 20 Q4 19 Change Revenue $39.2 $42.1 -6.8% Bookings $39.9 $40.9 -2.5% Adjusted EBITDA* $7.2 $9.1 -20.8% Adjusted EBITDA Margin* 18.3% 21.5% -320 bps HIGHLIGHTS • Stable demand and business activity throughout Q4 • Capital orders up 23% from Q419 and 18% sequentially • Parts and consumables revenue made up 58% of total Q4 revenue KAI Q420 Business Review–February 18, 2021 | © 2021 Kadant Inc. All rights reserved. Products used to handle bulk and discrete materials for secondary processing. ($ in millions) $40.9 $42.0 $30.5 $33.8 $39.9 4Q19 1Q20 2Q20 3Q20 4Q20 BOOKINGS
Business Outlook • Demand expected to improve as industrial activity strengthens • Uncertainty as to how markets will respond to the pandemic given the variability around vaccine distribution • Our strong cash flow position enables us to capitalize on new opportunities 11KAI Q420 Business Review–February 18, 2021 | © 2021 Kadant Inc. All rights reserved.
FINANCIAL REVIEW Michael J. McKenney | EVP & CFO 12 KAI Q420 Business Review–February 18, 2021 | © 2021 Kadant Inc. All rights reserved.
Q4 2020 Financial Performance 13 Q4 20 Q4 19 Gross Margin 44.1% 40.9% SG&A % of Revenue 28.1% 26.1% Operating Income $22.0 $21.6 Net Income $16.2 $8.7 Adjusted EBITDA* $32.1 $32.2 Diluted EPS $1.40 $0.76 Adjusted Diluted EPS* $1.54 $1.32 HIGHLIGHTS • Adjusted EBITDA margin* of 19.1% • Operating cash flow of $40.3 million • Free cash flow* of $38.1 million • Net debt of $166.8 million; leverage ratio1 of 1.61 ($ in millions, except per share amounts) KAI Q420 Business Review–February 18, 2021 | © 2021 Kadant Inc. All rights reserved.
FY 2020 Financial Performance 14 FY 20 FY 19 Gross Margin 43.7% 41.7% SG&A % of Revenue 28.6% 27.3% Operating Income $81.1 $87.8 Net Income $55.2 $52.1 Adjusted EBITDA* $115.9 $127.1 Diluted EPS $4.77 $4.54 Adjusted Diluted EPS* $5.00 $5.36 HIGHLIGHTS • Adjusted EBITDA margin* of 18.3% • Operating cash flow of $92.9 million • Free cash flow* of $85.3 million ($ in millions, except per share amounts) KAI Q420 Business Review–February 18, 2021 | © 2021 Kadant Inc. All rights reserved.
15KAI Q420 Business Review–February 18, 2021 | © 2021 Kadant Inc. All rights reserved. 17.6% 17.1% 17.4% 19.4% 19.1% 4Q19 1Q20 2Q20 3Q20 4Q20 ADJUSTED EBITDA MARGIN* $35.5 $3.5 $21.1 $22.6 $38.1 4Q19 1Q20 2Q20 3Q20 4Q20 FREE CASH FLOW* OPERATING CASH FLOW CASH FLOW $39.2 $22.0 $6.2 $24.4 $40.3 $61.9 $91.7 $115.2 $127.1 $115.9 0.0% 5.0% 10.0% 15.0% 20.0% 25.0% 30.0% $0 $50 $100 $150 2016 2017 2018 2019 2020 ADJUSTED EBITDA* ADJ. EBITDA* MARGIN FY ADJUSTED EBITDA* $45.2 $47.9 $46.4 $87.5 $85.3 2016 2017 2018 2019 2020 FREE CASH FLOW* OPERATING CASH FLOW FY CASH FLOW $92.9$97.4 $63.0$65.2 $51.0 Adjusted EBITDA and Cash Flow Metrics
4Q19 to 4Q20 Adjusted Diluted EPS* KAI Q420 Business Review–February 18, 2021 | © 2021 Kadant Inc. All rights reserved. 16 $1.32 $0.21 $0.15 $0.07 $0.06 $0.02 $0.01 ($0.29) ($0.01) $1.54 $0.00 $0.50 $1.00 $1.50 $2.00
2019 to 2020 Adjusted Diluted EPS* KAI Q420 Business Review–February 18, 2021 | © 2021 Kadant Inc. All rights reserved. 17 $5.36 $0.45 $0.39 $0.35 $0.33 $0.03 $0.01 ($1.87) ($0.05) $5.00 $0.00 $2.00 $4.00 $6.00 $8.00
Key Liquidity Metrics 18KAI Q420 Business Review–February 18, 2021 | © 2021 Kadant Inc. All rights reserved. $ in millions Q4 20 Q3 20 Q4 19 Cash, cash equivalents, and restricted cash $66.7 $56.2 $68.2 Debt (228.0) (255.0) (294.8) Lease obligations (5.5) (5.6) (6.2) Net Debt $166.8 $204.4 $232.8 Leverage ratio1 1.61 1.88 2.03 Working capital % LTM revenue2 14.2% 15.6% 12.2% Cash conversion days3 125 140 104 • Net debt decreased 28.3% from Q4 2019 • Paid down $30 million of debt in the fourth quarter of 2020 • Our liquidity remains solid with $400 million in borrowing capacity • Approximately $182 million under our revolving credit facility; an additional uncommitted $150 million • Up to $115 million through our note purchase agreement
Financial Outlook for 2021 • Revenue increasing 9% to 12% over 2020 • Gross margins close to 2020, excluding government assistance programs • SG&A approximately 27% to 28% of revenue • Recurring tax rate of 27% to 28% • Capex spending approximately 2% of revenue • Depreciation & amortization expense of $30 to $31 million 19KAI Q420 Business Review–February 18, 2021 | © 2021 Kadant Inc. All rights reserved.
To ask a question, please call 888-326-8410 within the U.S. or +1 704-385-4884 outside the U.S. and reference 2636925. Please mute the audio on your device. KAI Q420 Business Review–February 18, 2021 | © 2021 Kadant Inc. All rights reserved. 20
2021 Key Priorities 21KAI Q420 Business Review–February 18, 2021 | © 2021 Kadant Inc. All rights reserved. MEET OUR CUSTOMERS’ NEEDS ACCELERATE OUR REVENUE GROWTH MAINTAIN STRONG CASH FLOW CAPITALIZE ON NEW OPPORTUNITIES
Thank You INVESTOR RELATIONS CONTACT Michael McKenney, 978-776-2000 IR@kadant.com MEDIA RELATIONS CONTACT Wes Martz, 269-278-1715 media@kadant.com FEBRUARY 18, 2021
APPENDIX 23 Fourth Quarter and Fiscal Year 2020 Business Review KAI Q420 Business Review–February 18, 2021 | © 2021 Kadant Inc. All rights reserved.
Strategic Operating Segments 24KAI Q420 Business Review–February 18, 2021 | © 2021 Kadant Inc. All rights reserved. • Fluid Handling and Doctoring, Cleaning, & Filtration product lines • Custom-engineered products, systems and technologies that control the flow of fluids • Key industries include packaging, tissue, food, and metals • $225 million revenue (2020) • Stock Preparation and Wood Processing product lines • Products used to recycle paper and paperboard and process timber • Key industries include packaging, tissue, wood products, and alternative fuels • $262 million revenue (2020) • Conveyors, Vibratory Feeders, Balers, and Fiber-based Products • Products used to handle bulk and discrete materials for secondary processing • Key industries include aggregates, mining, food, and waste management • $148 million revenue (2020) FLOW CONTROL MATERIAL HANDLINGINDUSTRIAL PROCESSING
Revenue by Customer Location 25KAI Q420 Business Review–February 18, 2021 | © 2021 Kadant Inc. All rights reserved. $ in thousands Q4 20 Q4 19 Change Change Excl. Acquisition and FX* North America $90,154 $95,368 $(5,214) $(5,703) Europe 48,646 48,944 (298) (3,784) Asia 21,276 22,960 (1,684) (2,810) Rest of World 8,355 15,387 (7,032) (6,241) TOTAL $168,431 $182,659 $(14,228) $(18,538) $ in thousands FY 20 FY 19 Change Change Excl. Acquisition and FX* North America $360,061 $386,952 $(26,891) $(26,476) Europe 161,527 180,888 (19,361) (22,752) Asia 72,268 84,705 (12,437) (12,767) Rest of World 41,172 52,099 (10,927) (7,003) TOTAL $635,028 $704,644 $(69,616) $ (68,998)
26.1% 28.7% 29.5% 28.4% 28.1% 4Q19 1Q20 2Q20 3Q20 4Q20 Quarterly Gross Margin and SG&A 26KAI Q420 Business Review–February 18, 2021 | © 2021 Kadant Inc. All rights reserved. SG&A 40.9% 42.9% 43.5% 44.2% 44.1% 4Q19 1Q20 2Q20 3Q20 4Q20 (as a % of revenue) GROSS MARGIN
Adjusted Diluted EPS Reconciliation 27KAI Q420 Business Review–February 18, 2021 | © 2021 Kadant Inc. All rights reserved. Q4 20 Q4 19 FY 20 FY 19 Diluted EPS, as reported $1.40 $0.76 $4.77 $4.54 Settlement Loss, Net of Tax - 0.55 - 0.55 Impairment and Restructuring Costs, Net of Tax 0.13 0.17 0.19 0.17 Acquisition Costs, Net of Tax - - 0.03 0.06 Amortization of Acquired Profit in Inventory and Backlog, Net of Tax 0.01 - 0.04 0.32 Discrete Tax Items - (0.16) (0.03) (0.29) Adjusted Diluted EPS $1.54 $1.32 $5.00 $5.36 Free Cash Flow Reconciliation $ in thousands Q4 20 Q4 19 Cash Provided by Operations $40,283 $39,247 Capital Expenditures (2,176) (3,721) Free Cash Flow $38,107 $35,526 Adjusted diluted EPS is a non-GAAP financial measure. Free cash flow is a non-GAAP financial measure.
Free Cash Flow Reconciliation 28 ($ in millions) 2013 2014 2015 2016 2017 2018 2019 2020 Cash Provided by Continuing Operations, as reported $ 39.9 $ 51.1 $ 40.4 $ 51.0 $ 65.2 $ 63.0 $ 97.4 $ 92.9 Capital Expenditures $ (6.2) $ (6.7) $ (5.5) $ (5.8) $ (17.3) $ (16.6) $ (9.9) $ (7.6) Free Cash Flow $ 33.7 $ 44.4 $ 34.9 $ 45.2 $ 47.9 $ 46.4 $ 87.5 $ 85.3 KAI Q419 Business Review–February 13, 2020 | © 2020 Kadant Inc. All rights reserved. Free cash flow is a non-GAAP financial measure.
Adjusted EBITDA Reconciliation 29KAI Q420 Business Review–February 18, 2021 | © 2021 Kadant Inc. All rights reserved. Adjusted EBITDA and adjusted EBITDA margin are non-GAAP financial measures. Adjusted EBITDA margin is calculated by dividing adjusted EBITDA in a given period by revenue in the same period. $ in thousands Q4 20 Q4 19 FY 20 FY 19 Net Income Attributable to Kadant $16,207 $8,749 $55,196 $52,068 Net Income Attributable to Noncontrolling Interest 174 136 543 496 Provision for Income Taxes 4,210 4,048 17,948 16,358 Interest Expense, Net 1,322 2,557 7,242 12,542 Other Expense, Net 100 6,063 195 6,359 Impairment and Restructuring Costs 2,053 2,528 2,979 2,528 Acquisition Costs - - 485 843 Acquired Backlog Amortization 177 20 544 1,323 Acquired Profit in Inventory - - - 3,549 Depreciation and Amortization 7,897 8,066 30,790 31,067 Adjusted EBITDA $32,140 $32,167 $115,922 $127,133 Adjusted EBITDA Margin 19.1% 17.6% 18.3% 18.0%
Notes PRESENTATION NOTES • This presentation reflects our new reportable operating segments, as announced on the Form 8-K we filed with the U.S. Securities and Exchange Commission on April 22, 2020. Prior periods have been recast to conform to this presentation. • All references to EPS are to our EPS as calculated on a diluted basis. • Percent change in slides 6-10 is calculated using actual numbers reported in our press release dated February 17, 2021. FOOTNOTES 1) Leverage ratio is calculated by dividing total debt by EBITDA. For purposes of this calculation, EBITDA is calculated by adding or subtracting certain items from Adjusted EBITDA, as required by our amended and restated credit facility (“Credit Facility”). Our Credit Facility defines total debt as debt less worldwide cash of up to $30 million. 2) Working capital is defined as current assets less current liabilities, excluding cash and debt. LTM is defined as last 12 months. 3) Cash conversion days is based on days in receivables plus days in inventory less days in accounts payable. 30KAI Q420 Business Review–February 18, 2021 | © 2021 Kadant Inc. All rights reserved.