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): May 4, 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 May 4, 2021, Kadant Inc. (the “Company”) announced its financial results for the fiscal quarter ended April 3, 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 May 5, 2021, the Company will hold a webcast and conference call to discuss its financial results for the fiscal quarter ended April 3, 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: May 4, 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 First Quarter 2021 Results and Record Bookings
WESTFORD, Mass., May 4, 2021 - Kadant Inc. (NYSE: KAI) reported its financial results for the first quarter ended April 3, 2021.
First Quarter Financial Highlights
•Bookings increased 16% to a record $204 million.
•Operating cash flow increased 209% to $19 million.
•Free cash flow increased 383% to $17 million.
•Revenue increased 8% to $172 million.
•GAAP diluted EPS and adjusted diluted EPS both increased 31% to $1.43.
•Net income increased 32% to $17 million.
•Adjusted EBITDA increased 14% to $31 million and represented 18.0% of revenue.
•Backlog was a record $223 million.
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
“Our global workforce continued its focus on safely meeting our customers’ needs despite challenging circumstances in many areas of the world,” said Jeffrey L. Powell, president and chief executive officer. “New order activity continued the momentum from the second half of 2020 leading to record bookings and backlog in the first quarter of 2021. Strong demand for parts and consumables as well as a high level of capital project activity in our Industrial Processing and Flow Control segments led to our record-setting performance.
"Solid execution across all our operating segments generated strong cash flows and further improved our liquidity position. As market conditions continue to show signs of improvement, we are optimistic for the remainder of the year, particularly as COVID-19 vaccines become more available.”
First Quarter 2021 compared to 2020
Revenue increased eight percent to $172.5 million compared to $159.1 million in 2020. Organic revenue increased four percent, which excludes an acquisition and a four percent increase from the favorable effect of foreign currency translation. Gross margin was 43.9 percent compared to 42.9 percent in 2020.
Both GAAP diluted earnings per share (EPS) and adjusted diluted EPS were $1.43 compared to $1.09 in 2020. Net income was $16.6 million compared to $12.5 million in 2020 and adjusted EBITDA was $31.1 million compared to $27.3 million in the prior year quarter. Cash flow from operations increased to $19.1 million compared to $6.2 million in 2020.
Bookings increased 16 percent to a record $204.5 million compared to $175.6 million in 2020. Organic bookings increased 12 percent, which excludes an acquisition and a four percent increase from the favorable effect of foreign currency translation.
| Kadant Reports 2021 First Quarter Results | | ||||
| May 4, 2021 | |||||
Page 2 | |||||
Summary and Outlook
“We are encouraged by the improving market conditions and demand, and our strong start to the year,” Mr. Powell continued. “However, variability around vaccine availability and infection rates create uncertainty on the global economic front, and the limited ability to engage with our customers also affects our ability to forecast the timing of orders. Despite the challenges, our record backlog at the end of the first quarter positions us well to generate strong financial results for the year. Accordingly, we are increasing our revenue expectation to $710 to $730 million for 2021.”
Conference Call
Kadant will hold a webcast with a slide presentation for investors on Wednesday, May 5, 2021, 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 4189188. 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 June 4, 2021.
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 (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 first quarter of 2021 included a $6.0 million favorable foreign currency translation effect and $0.5 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 acquired backlog amortization. Free cash flow is operating cash flow less capital expenditures of $2.3 million in the first quarter of 2021 and $2.7 million in the first quarter of 2020. These items are excluded as they are not indicative of our core operating results and are not comparable to other periods, which may have differing levels of incremental costs or expenditures, or none at all.
Reconciliations of the non-GAAP financial measures to the most directly comparable GAAP financial measures are set forth in this press release.
| Kadant Reports 2021 First Quarter Results | | ||||
| May 4, 2021 | |||||
Page 3 | |||||
| Financial Highlights (unaudited) | ||||||||||||||||||||
| (In thousands, except per share amounts and percentages) | ||||||||||||||||||||
| Three Months Ended | ||||||||||||||||||||
| Consolidated Statement of Income | April 3, 2021 | March 28, 2020 | ||||||||||||||||||
| Revenue | $ | 172,463 | $ | 159,127 | ||||||||||||||||
| Costs and Operating Expenses: | ||||||||||||||||||||
| Cost of revenue | 96,748 | 90,804 | ||||||||||||||||||
| Selling, general, and administrative expenses | 49,431 | 45,592 | ||||||||||||||||||
| Research and development expenses | 2,857 | 3,076 | ||||||||||||||||||
| 149,036 | 139,472 | |||||||||||||||||||
| Operating Income | 23,427 | 19,655 | ||||||||||||||||||
| Interest Income | 65 | 51 | ||||||||||||||||||
| Interest Expense | (1,111) | (2,459) | ||||||||||||||||||
| Other Expense, Net | (24) | (32) | ||||||||||||||||||
| Income Before Provision for Income Taxes | 22,357 | 17,215 | ||||||||||||||||||
| Provision for Income Taxes | 5,561 | 4,559 | ||||||||||||||||||
| Net Income | 16,796 | 12,656 | ||||||||||||||||||
| Net Income Attributable to Noncontrolling Interest | (235) | (125) | ||||||||||||||||||
| Net Income Attributable to Kadant | $ | 16,561 | $ | 12,531 | ||||||||||||||||
| Earnings per Share Attributable to Kadant: | ||||||||||||||||||||
| Basic | $ | 1.43 | $ | 1.10 | ||||||||||||||||
| Diluted | $ | 1.43 | $ | 1.09 | ||||||||||||||||
| Weighted Average Shares: | ||||||||||||||||||||
| Basic | 11,553 | 11,432 | ||||||||||||||||||
| Diluted | 11,612 | 11,508 | ||||||||||||||||||
| Three Months Ended | Three Months Ended | |||||||||||||||||||||||||||||||
Adjusted Net Income and Adjusted Diluted EPS (a) | April 3, 2021 | April 3, 2021 | March 28, 2020 | March 28, 2020 | ||||||||||||||||||||||||||||
| Net Income and Diluted EPS Attributable to Kadant, as Reported | $ | 16,561 | $ | 1.43 | $ | 12,531 | $ | 1.09 | ||||||||||||||||||||||||
| Adjustment for the Following: | ||||||||||||||||||||||||||||||||
| Amortization of Acquired Backlog, Net of Tax (d) | 44 | — | 6 | — | ||||||||||||||||||||||||||||
| Adjusted Net Income and Adjusted Diluted EPS (a) | $ | 16,605 | $ | 1.43 | $ | 12,537 | $ | 1.09 | ||||||||||||||||||||||||
| Three Months Ended | Increase Excluding Acquisition and FX (a,b) | |||||||||||||||||||||||||||||||
| Revenue by Segment | April 3, 2021 | March 28, 2020 | Increase | |||||||||||||||||||||||||||||
| Flow Control | $ | 63,754 | $ | 57,149 | $ | 6,605 | $ | 4,975 | ||||||||||||||||||||||||
| Industrial Processing | 69,154 | 64,709 | 4,445 | 909 | ||||||||||||||||||||||||||||
| Material Handling | 39,555 | 37,269 | 2,286 | 931 | ||||||||||||||||||||||||||||
| $ | 172,463 | $ | 159,127 | $ | 13,336 | $ | 6,815 | |||||||||||||||||||||||||
| Percentage of Parts and Consumables Revenue | 68% | 66% | ||||||||||||||||||||||||||||||
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| Kadant Reports 2021 First Quarter Results | | ||||
| May 4, 2021 | |||||
Page 4 | |||||
| Three Months Ended | Increase (Decrease) | Increase (Decrease) Excluding Acquisition and FX (b) | ||||||||||||||||||||||||||||||
| Bookings by Segment | April 3, 2021 | March 28, 2020 | ||||||||||||||||||||||||||||||
| Flow Control | $ | 75,999 | $ | 67,744 | $ | 8,255 | $ | 6,073 | ||||||||||||||||||||||||
| Industrial Processing | 86,606 | 65,838 | 20,768 | 16,252 | ||||||||||||||||||||||||||||
| Material Handling | 41,884 | 42,035 | (151) | (1,644) | ||||||||||||||||||||||||||||
| $ | 204,489 | $ | 175,617 | $ | 28,872 | $ | 20,681 | |||||||||||||||||||||||||
| Percentage of Parts and Consumables Bookings | 65% | 66% | ||||||||||||||||||||||||||||||
| Three Months Ended | ||||||||||||||||||||
| Business Segment Information | April 3, 2021 | March 28, 2020 | ||||||||||||||||||
| Gross Margin: | ||||||||||||||||||||
| Flow Control | 53.3% | 52.9% | ||||||||||||||||||
| Industrial Processing | 40.5% | 38.4% | ||||||||||||||||||
| Material Handling | 34.7% | 35.5% | ||||||||||||||||||
| 43.9% | 42.9% | |||||||||||||||||||
| Operating Income: | ||||||||||||||||||||
| Flow Control | $ | 16,443 | $ | 13,330 | ||||||||||||||||
| Industrial Processing | 11,133 | 9,436 | ||||||||||||||||||
| Material Handling | 4,443 | 4,134 | ||||||||||||||||||
| Corporate | (8,592) | (7,245) | ||||||||||||||||||
| $ | 23,427 | $ | 19,655 | |||||||||||||||||
| Adjusted Operating Income (a,c): | ||||||||||||||||||||
| Flow Control | 16,443 | 13,330 | ||||||||||||||||||
| Industrial Processing | 11,193 | 9,436 | ||||||||||||||||||
| Material Handling | 4,443 | 4,142 | ||||||||||||||||||
| Corporate | (8,592) | (7,245) | ||||||||||||||||||
| $ | 23,487 | $ | 19,663 | |||||||||||||||||
| Capital Expenditures: | ||||||||||||||||||||
| Flow Control | $ | 334 | $ | 821 | ||||||||||||||||
| Industrial Processing | 1,804 | 1,464 | ||||||||||||||||||
| Material Handling | 121 | 398 | ||||||||||||||||||
| Corporate | — | 3 | ||||||||||||||||||
| $ | 2,259 | $ | 2,686 | |||||||||||||||||
| Three Months Ended | ||||||||||||||||||||
| Cash Flow and Other Data | April 3, 2021 | March 28, 2020 | ||||||||||||||||||
| Operating Cash Flow | $ | 19,092 | $ | 6,169 | ||||||||||||||||
| Less: Capital Expenditures | (2,259) | (2,686) | ||||||||||||||||||
| Free Cash Flow (a) | $ | 16,833 | $ | 3,483 | ||||||||||||||||
| Depreciation and Amortization Expense | $ | 7,686 | $ | 7,598 | ||||||||||||||||
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| Kadant Reports 2021 First Quarter Results | | ||||
| May 4, 2021 | |||||
Page 5 | |||||
| Balance Sheet Data | April 3, 2021 | January 2, 2021 | ||||||||||||||||||||||||||||||
| Assets | ||||||||||||||||||||||||||||||||
| Cash, Cash Equivalents, and Restricted Cash | $ | 66,708 | $ | 66,640 | ||||||||||||||||||||||||||||
| Accounts Receivable, net | 104,378 | 91,540 | ||||||||||||||||||||||||||||||
| Inventories | 112,590 | 106,814 | ||||||||||||||||||||||||||||||
| Unbilled Revenue | 6,204 | 7,576 | ||||||||||||||||||||||||||||||
| Property, Plant, and Equipment, net | 82,204 | 84,642 | ||||||||||||||||||||||||||||||
| Intangible Assets | 155,534 | 160,965 | ||||||||||||||||||||||||||||||
| Goodwill | 348,504 | 351,753 | ||||||||||||||||||||||||||||||
| Other Assets | 59,543 | 57,641 | ||||||||||||||||||||||||||||||
| $ | 935,665 | $ | 927,571 | |||||||||||||||||||||||||||||
| Liabilities and Stockholders' Equity | ||||||||||||||||||||||||||||||||
| Accounts Payable | $ | 38,988 | $ | 32,264 | ||||||||||||||||||||||||||||
| Debt Obligations | 217,257 | 227,963 | ||||||||||||||||||||||||||||||
| Other Borrowings | 5,227 | 5,511 | ||||||||||||||||||||||||||||||
| Other Liabilities | 169,885 | 164,928 | ||||||||||||||||||||||||||||||
| Total Liabilities | 431,357 | 430,666 | ||||||||||||||||||||||||||||||
| Stockholders' Equity | 504,308 | 496,905 | ||||||||||||||||||||||||||||||
| $ | 935,665 | $ | 927,571 | |||||||||||||||||||||||||||||
| Three Months Ended | ||||||||||||||||||||
Adjusted Operating Income and Adjusted EBITDA Reconciliation (a) | April 3, 2021 | March 28, 2020 | ||||||||||||||||||
| Consolidated | ||||||||||||||||||||
| Net Income Attributable to Kadant | $ | 16,561 | $ | 12,531 | ||||||||||||||||
| Net Income Attributable to Noncontrolling Interest | 235 | 125 | ||||||||||||||||||
| Provision for Income Taxes | 5,561 | 4,559 | ||||||||||||||||||
| Interest Expense, Net | 1,046 | 2,408 | ||||||||||||||||||
| Other Expense, Net | 24 | 32 | ||||||||||||||||||
| Operating Income | 23,427 | 19,655 | ||||||||||||||||||
| Acquired Backlog Amortization (d) | 60 | 8 | ||||||||||||||||||
| Adjusted Operating Income (a) | 23,487 | 19,663 | ||||||||||||||||||
| Depreciation and Amortization | 7,626 | 7,590 | ||||||||||||||||||
| Adjusted EBITDA (a) | $ | 31,113 | $ | 27,253 | ||||||||||||||||
| Adjusted EBITDA Margin (a,e) | 18.0 | % | 17.1 | % | ||||||||||||||||
| Flow Control | ||||||||||||||||||||
| Operating Income | $ | 16,443 | $ | 13,330 | ||||||||||||||||
| Depreciation and Amortization | 1,572 | 1,586 | ||||||||||||||||||
| Adjusted EBITDA (a) | $ | 18,015 | $ | 14,916 | ||||||||||||||||
| Adjusted EBITDA Margin (a,e) | 28.3 | % | 26.1 | % | ||||||||||||||||
| Industrial Processing | ||||||||||||||||||||
| Operating Income | $ | 11,133 | $ | 9,436 | ||||||||||||||||
| Acquired Backlog Amortization (d) | 60 | — | ||||||||||||||||||
| Adjusted Operating Income (a) | 11,193 | 9,436 | ||||||||||||||||||
| Depreciation and Amortization | 3,338 | 3,161 | ||||||||||||||||||
| Adjusted EBITDA (a) | $ | 14,531 | $ | 12,597 | ||||||||||||||||
| Adjusted EBITDA Margin (a,e) | 21.0 | % | 19.5 | % | ||||||||||||||||
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| Kadant Reports 2021 First Quarter Results | | ||||
| May 4, 2021 | |||||
Page 6 | |||||
| Three Months Ended | ||||||||||||||||||||
Adjusted Operating Income and Adjusted EBITDA Reconciliation (continued) (a) | April 3, 2021 | March 28, 2020 | ||||||||||||||||||
| Material Handling | ||||||||||||||||||||
| Operating Income | $ | 4,443 | $ | 4,134 | ||||||||||||||||
| Acquired Backlog Amortization (d) | — | 8 | ||||||||||||||||||
| Adjusted Operating Income (a) | 4,443 | 4,142 | ||||||||||||||||||
| Depreciation and Amortization | 2,686 | 2,797 | ||||||||||||||||||
| Adjusted EBITDA (a) | $ | 7,129 | $ | 6,939 | ||||||||||||||||
| Adjusted EBITDA Margin (a,e) | 18.0 | % | 18.6 | % | ||||||||||||||||
| Corporate | ||||||||||||||||||||
| Operating Loss | $ | (8,592) | $ | (7,245) | ||||||||||||||||
| Depreciation and Amortization | 30 | 46 | ||||||||||||||||||
| EBITDA (a) | $ | (8,562) | $ | (7,199) | ||||||||||||||||
| (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) | See reconciliation to the most directly comparable GAAP financial measure under "Adjusted Operating Income and Adjusted EBITDA Reconciliation." | |||||||||||||||||||
| (d) | Represents intangible amortization expense associated with acquired backlog. | |||||||||||||||||||
| (e) | Calculated as adjusted EBITDA divided by revenue in each period. | |||||||||||||||||||
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 fiscal year ended January 2, 2021 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; health epidemics; our acquisition strategy; 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; development and use of digital media; cyclical economic conditions affecting the global mining industry; demand for coal, including economic and environmental risks associated with coal; failure of our information systems or breaches of data security and cybertheft; implementation of our internal growth strategy; price increases or shortages of raw materials; competition;
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| Kadant Reports 2021 First Quarter Results | | ||||
| May 4, 2021 | |||||
Page 7 | |||||
changes in our tax provision or exposure to additional tax liabilities; our ability to successfully manage our manufacturing operations; disruption in production; future restructurings; loss of key personnel and effective succession planning; protection of intellectual property; climate change; adequacy of our insurance coverage; global operations; policies of the Chinese government; the variability and uncertainties in sales of capital equipment in China; currency fluctuations; economic conditions and regulatory changes caused by the United Kingdom’s exit from the European Union; changes to government regulations and policies around the world; compliance with government regulations and policies and compliance with laws; environmental laws and regulations; environmental, health and safety laws and regulations impacting the mining industry; our debt obligations; restrictions in our credit agreement and note purchase agreement; substitution of an alternative index for LIBOR; soundness of financial institutions; fluctuations in our share price; and anti-takeover provisions.
Contacts
Investor Contact Information:
Michael McKenney, 978-776-2000
IR@kadant.com
or
Media Contact Information:
Wes Martz, 269-278-1715
media@kadant.com
###
First Quarter 2021 Business Review May 5, 2021 Exhibit 99.2
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 May 4, 2021. 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 fiscal year ended January 2, 2021 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; health epidemics; our acquisition strategy; 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; development and use of digital media; cyclical economic conditions affecting the global mining industry; demand for coal, including economic and environmental risks associated with coal; failure of our information systems or breaches of data security and cybertheft; implementation of our internal growth strategy; price increases or shortages of raw materials; competition; changes in our tax provision or exposure to additional tax liabilities; our ability to successfully manage our manufacturing operations; disruption in production; future restructurings; loss of key personnel and effective succession planning; protection of intellectual property; climate change; adequacy of our insurance coverage; global operations; policies of the Chinese government; the variability and uncertainties in sales of capital equipment in China; currency fluctuations; economic conditions and regulatory changes caused by the United Kingdom’s exit from the European Union; changes to government regulations and policies around the world; compliance with government regulations and policies and compliance with laws; environmental laws and regulations; environmental, health and safety laws and regulations impacting the mining industry; our debt obligations; restrictions in our credit agreement and note purchase agreement; substitution of an alternative index for LIBOR; soundness of financial institutions; fluctuations in our share price; and anti-takeover provisions. 2KAI 1Q21 BUSINESS REVIEW–MAY 2021 | © 2021 KADANT INC. ALL RIGHTS RESERVED.
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 (organic revenue), adjusted diluted EPS (earnings per share), adjusted earnings before interest, taxes, depreciation, and amortization (adjusted EBITDA), adjusted EBITDA margin, adjusted operating income, 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 first quarter earnings press release issued May 4, 2021, 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. 3KAI 1Q21 BUSINESS REVIEW–MAY 2021 | © 2021 KADANT INC. ALL RIGHTS RESERVED.
BUSINESS REVIEW Jeffrey L. Powell, President & CEO 4KAI 1Q21 BUSINESS REVIEW–MAY 2021 | © 2021 KADANT INC. ALL RIGHTS RESERVED.
Operational Highlights • Record demand for parts and solid execution by our businesses led to strong margin performance and excellent cash flow in the first quarter • Capital project activity combined with high demand for parts and consumables led to record bookings in the first quarter • Strong cash flow in Q1 was a historical high for a first quarter 5KAI 1Q21 BUSINESS REVIEW–MAY 2021 | © 2021 KADANT INC. ALL RIGHTS RESERVED.
Q1 2021 Performance 6 Q1 21 Q1 20 Change Revenue $172.5 $159.1 +8.4% Net Income $16.6 $12.5 +32.2% Adjusted EBITDA* $31.1 $27.3 +14.2% Adjusted EBITDA Margin* 18.0% 17.1% +90 bps Diluted EPS $1.43 $1.09 +31.2% Operating Cash Flow $19.1 $6.2 +209.5% Free Cash Flow* $16.8 $3.5 +383.3% Bookings $204.5 $175.6 +16.4% HIGHLIGHTS • Record bookings performance led by our Industrial Processing segment • Parts and consumables revenue was up 12% and made up 68% of Q1 revenue • Strong performance across all operating segments contributed to a solid adjusted EBITDA • Free cash flow* was up nearly 4x to $17 million ($ in millions, except per share amounts) KAI 1Q21 BUSINESS REVIEW–MAY 2021 | © 2021 KADANT INC. ALL RIGHTS RESERVED.
$67.7 $49.4 $49.6 $61.9 $76.0 1Q20 2Q20 3Q20 4Q20 1Q21 Flow Control 7 $ in millions Q1 21 Q1 20 Change Revenue $63.8 $57.1 +11.6% Bookings $76.0 $67.7 +12.2% Adjusted EBITDA* $18.0 $14.9 +20.8% Adjusted EBITDA Margin* 28.3% 26.1% +220 bps HIGHLIGHTS • Robust Q1 capital project activity and bookings • Parts and consumables revenue made up 72% of total Q1 revenue • Product mix and operating leverage drove strong adjusted EBITDA margin BOOKINGS ($ in millions) KAI 1Q21 BUSINESS REVIEW–MAY 2021 | © 2021 KADANT INC. ALL RIGHTS RESERVED.
$65.8 $53.1 $59.9 $94.8 $86.6 1Q20 2Q20 3Q20 4Q20 1Q21 Industrial Processing 8 $ in millions Q1 21 Q1 20 Change Revenue $69.2 $64.7 +6.9% Bookings $86.6 $65.8 +31.5% Adjusted EBITDA* $14.5 $12.6 +15.4% Adjusted EBITDA Margin* 21.0% 19.5% +150 bps HIGHLIGHTS • Strong demand for wood products supported by strength in U.S. housing • Consistently high operating rates driving demand for parts • Parts and consumables revenue made up 70% of total Q1 revenue • Product mix and operating leverage drove strong adjusted EBITDA margin BOOKINGS ($ in millions) KAI 1Q21 BUSINESS REVIEW–MAY 2021 | © 2021 KADANT INC. ALL RIGHTS RESERVED.
$42.0 $30.5 $33.8 $39.9 $41.9 1Q20 2Q20 3Q20 4Q20 1Q21 Material Handling 9 $ in millions Q1 21 Q1 20 Change Revenue $39.6 $37.3 +6.1% Bookings $41.9 $42.0 -0.4% Adjusted EBITDA* $7.1 $6.9 +2.7% Adjusted EBITDA Margin* 18.0% 18.6% -60 bps HIGHLIGHTS • Stable demand with revenue increasing 6% compared to prior year • Parts and consumables revenue made up 60% of total Q1 revenue • Improving market conditions in Europe and North America with increasing activity in food and recycling sectors BOOKINGS ($ in millions) KAI 1Q21 BUSINESS REVIEW–MAY 2021 | © 2021 KADANT INC. ALL RIGHTS RESERVED.
Business Outlook • Demand expected to remain strong as industrial activity increases in North America and Europe • Variability around vaccine distribution and infection rates lead to continued uncertainty on the global macroeconomic front • Our solid balance sheet and strong cash flows position us to capitalize on new opportunities 10KAI 1Q21 BUSINESS REVIEW–MAY 2021 | © 2021 KADANT INC. ALL RIGHTS RESERVED.
FINANCIAL REVIEW Michael J. McKenney, EVP & CFO KAI 1Q21 BUSINESS REVIEW–MAY 2021 | © 2021 KADANT INC. ALL RIGHTS RESERVED. 11
Q1 2021 Financial Performance Q1 21 Q1 20 Gross Margin 43.9% 42.9% SG&A % of Revenue 28.7% 28.7% Operating Income $23.4 $19.7 Net Income $16.6 $12.5 Adjusted EBITDA* $31.1 $27.3 Diluted EPS $1.43 $1.09 HIGHLIGHTS • Adjusted EBITDA margin* of 18.0% • Operating cash flow of $19.1 million • Free cash flow* of $16.8 million • Net debt of $156 million; leverage ratio1 of 1.50 ($ in millions, except per share amounts) KAI 1Q21 BUSINESS REVIEW–MAY 2021 | © 2021 KADANT INC. ALL RIGHTS RESERVED. 12
$3.5 $21.1 $22.6 $38.1 $16.8 1Q20 2Q20 3Q20 4Q20 1Q21 FREE CASH FLOW* OPERATING CASH FLOW 17.1% 17.4% 19.4% 19.1% 18.0% 1Q20 2Q20 3Q20 4Q20 1Q21 28.7% 29.5% 28.4% 28.1% 28.7% 1Q20 2Q20 3Q20 4Q20 1Q21 42.9% 43.5% 44.2% 44.1% 43.9% 1Q20 2Q20 3Q20 4Q20 1Q21 Key Consolidated Financial Metrics CASH FLOW $22.0 $24.4 $40.3 GROSS MARGIN $6.2 ($ in millions) SG&A ADJUSTED EBITDA MARGIN* $19.1 (as a % of revenue) KAI 1Q21 BUSINESS REVIEW–MAY 2021 | © 2021 KADANT INC. ALL RIGHTS RESERVED. 13
1Q20 to 1Q21 Adjusted Diluted EPS* KAI 1Q21 BUSINESS REVIEW–MAY 2021 | © 2021 KADANT INC. ALL RIGHTS RESERVED. 14 $1.09 $0.35 $0.09 $0.08 $0.04 $0.03 ($0.23) ($0.01) ($0.01) $1.43 $0.00 $0.50 $1.00 $1.50 $2.00
Key Liquidity Metrics $ in millions Q1 21 Q4 20 Q1 20 Cash, cash equivalents, and restricted cash $66.7 $66.7 $62.1 Debt $217.3 $228.0 $289.5 Lease obligations $5.2 $5.5 $5.9 Net Debt $155.8 $166.8 $233.3 Leverage ratio1 1.50 1.61 2.04 Working capital % LTM revenue2 15.1% 14.2% 14.2% Cash conversion days3 123 125 119 • Net debt decreased 33% from Q1 2020 • Paid down $9 million of debt in the first quarter of 2021 • Our liquidity remains solid with over $450 million in borrowing capacity • Approximately $193 million under our revolving credit facility; an additional uncommitted $150 million • Up to $115 million through our note purchase agreement KAI 1Q21 BUSINESS REVIEW–MAY 2021 | © 2021 KADANT INC. ALL RIGHTS RESERVED. 15
Financial Outlook for 2021 16KAI 1Q21 BUSINESS REVIEW–MAY 2021 | © 2021 KADANT INC. ALL RIGHTS RESERVED. • Revenue of $710 to $730 million, up 12% to 15% over 2020 • Gross margin of 43%
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 418 9188. Please mute the audio on your computer. KAI 1Q21 BUSINESS REVIEW–MAY 2021 | © 2021 KADANT INC. ALL RIGHTS RESERVED. 17
2021 Key Priorities 18 MEET OUR CUSTOMERS’ NEEDS ACCELERATE OUR REVENUE GROWTH MAINTAIN STRONG CASH FLOW CAPITALIZE ON NEW OPPORTUNITIES KAI 1Q21 BUSINESS REVIEW–MAY 2021 | © 2021 KADANT INC. ALL RIGHTS RESERVED.
INVESTOR RELATIONS CONTACT Michael McKenney, 978-776-2000 IR@kadant.com MEDIA RELATIONS CONTACT Wes Martz, 269-278-1715 media@kadant.com May 5, 2021
APPENDIX First Quarter 2021 Business Review
Adjusted Diluted EPS Reconciliation Q1 21 Q1 20 Diluted EPS, as reported $1.43 $1.09 Amortization of Acquired Backlog, Net of Tax - - Adjusted Diluted EPS $1.43 $1.09 Free Cash Flow Reconciliation $ in thousands Q1 21 Q1 20 Operating Cash Flow $19,092 $6,169 Less Capital Expenditures (2,259) (2,686) Free Cash Flow $16,833 $3,483 Adjusted diluted EPS (earnings per share) is a non-GAAP financial measure. Free cash flow is a non-GAAP financial measure.
Adjusted EBITDA Reconciliation 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 Q1 21 Q1 20 Net Income Attributable to Kadant $16,561 $12,531 Net Income Attributable to Noncontrolling Interest 235 125 Provision for Income Taxes 5,561 4,559 Interest Expense, Net 1,046 2,408 Other Expense, Net 24 32 Acquired Backlog Amortization 60 8 Depreciation and Amortization 7,626 7,590 Adjusted EBITDA $31,113 $27,253 Adjusted EBITDA Margin 18.0% 17.1%
Revenue by Customer Location $ in thousands Q1 21 Q1 20 Change Change Excl. Acquisition and FX North America $95,092 $93,823 $1,269 $12 Europe 44,641 36,014 8,627 4,719 Asia 21,813 15,908 5,905 4,347 Rest of World 10,917 13,382 (2,465) (2,263) TOTAL $172,463 $159,127 $13,336 $6,815
Notes PRESENTATION NOTES • All references to EPS (earnings per share) are to our EPS as calculated on a diluted basis. • Percent change in slides 6-9 is calculated using actual numbers reported in our press release dated May 4, 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.