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 3, 2022
(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 3, 2022 , Kadant Inc. (the “Company”) announced its financial results for the fiscal quarter ended April 2, 2022. 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 4, 2022, the Company will hold a webcast and conference call to discuss its financial results for the fiscal quarter ended April 2, 2022. 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: | 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 2022 Results
Raises Full Year 2022 Earnings Guidance
WESTFORD, Mass., May 3, 2022 - Kadant Inc. (NYSE: KAI) reported its financial results for the first quarter ended April 2, 2022.
First Quarter Financial Highlights
•Bookings increased 30% to a record $266 million.
•Revenue increased 31% to a record $226 million.
•Operating cash flow increased 24% to $24 million.
•Free cash flow increased 24% to $21 million.
•Net income was $41 million, including a $15 million after-tax gain on the sale of a facility.
•GAAP diluted EPS increased 147% to $3.53.
•Adjusted diluted EPS increased 49% to $2.28.
•Adjusted EBITDA increased 41% to a record $46 million and represented 20.2% of revenue.
•Backlog was a record $348 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
“We had an excellent start to 2022 with record bookings, revenue, and adjusted EBITDA in the first quarter,” said Jeffrey L. Powell, president and chief executive officer of Kadant. “Strong demand continued across all operating segments with new order activity from both parts and capital contributing to record backlog at the end of the first quarter.
“Solid execution by our operations teams led to improved operating performance and record adjusted EBITDA despite ongoing supply chain constraints and inflationary pressures. Our global workforce once again delivered exceptional value to our customers who rely on our critical technologies and engineered systems to enable Sustainable Industrial Processing.”
First Quarter 2022 compared to 2021
Revenue increased 31 percent to a record $226.5 million compared to $172.5 million in 2021. Organic revenue increased 22 percent, which excludes an 11 percent increase from acquisitions and a two percent decrease from the unfavorable effect of foreign currency translation. Gross margin was 43.4 percent compared to 43.9 percent in 2021.
GAAP diluted earnings per share (EPS) increased 147 percent to $3.53, which included a $1.30 gain on the sale of a facility, compared to $1.43 in 2021. Adjusted diluted EPS increased 49 percent to $2.28 compared to $1.53 in 2021. Adjusted diluted EPS excludes a $1.30 gain on the sale of a facility, $0.04 of acquisition-related costs, and $0.01 of impairment costs in 2022 and $0.10 of acquisition costs in 2021. Net income increased 149 percent to $41.2 million compared to $16.6 million in 2021. Adjusted EBITDA increased 41 percent to a record $45.8 million and represented 20.2 percent of revenue compared to $32.4 million and 18.8 percent of revenue in the prior year quarter. Operating cash flow increased 24 percent to $23.8 million compared to $19.1 million in 2021.
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| May 3, 2022 | |||||
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Bookings increased 30 percent to a record $266.1 million compared to $204.5 million in 2021. Organic bookings increased 22 percent, which excludes an 11 percent increase from acquisitions and a three percent decrease from the unfavorable effect of foreign currency translation.
Summary and Outlook
“We are encouraged by the strong start, and as a result, we are raising our guidance for the year,” Mr. Powell continued. “Our record backlog has us positioned well, and we expect to generate record financial results while continuing to navigate supply chain challenges, economic headwinds, and growing socio-political uncertainties.
"We now expect revenue of $885 to $905 million in 2022, revised from our previous guidance of $870 to $890 million. We now expect to achieve GAAP diluted EPS of $10.05 to $10.25, revised from our previous guidance of $8.50 to $8.70. The revised 2022 guidance includes a $1.30 gain on the sale of a facility, $0.04 of acquisition-related costs, and a $0.01 impairment charge. Excluding these items, we now expect adjusted diluted EPS of $8.80 to $9.00, revised from our previous guidance of $8.55 to $8.75. The 2022 guidance includes a negative effect from foreign currency translation, lowering revenue guidance by $14 million and adjusted diluted EPS guidance by $0.14. For the second quarter of 2022, we expect GAAP diluted EPS of $1.86 to $1.96 on revenue of $215 to $220 million."
Conference Call
Kadant will hold a webcast with a slide presentation for investors on Wednesday, May 4, 2022, 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 8582925. 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 3, 2022.
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 use organic revenue to understand our trends and to forecast and evaluate our financial performance and compare revenue to prior periods. Revenue in the first quarter of 2022 included $20.0 million from acquisitions and a $3.9 million unfavorable foreign currency translation effect. Adjusted operating income, adjusted EBITDA, and adjusted EBITDA margin exclude impairment costs, acquisition costs, amortization expense related to acquired profit in inventory and backlog, and certain gains or losses. Collectively, 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. Additionally, we use free cash flow in order to provide insight on our ability to generate cash for acquisitions and debt repayments, as well as for other investing and financing activities.
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
| Kadant Reports First Quarter 2022 Results | | ||||
| May 3, 2022 | |||||
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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.
First Quarter
Adjusted operating income, adjusted EBITDA, and adjusted EBITDA margin exclude:
•Pre-tax gain on the sale of a facility of $20.2 million in 2022.
•Pre-tax acquisition costs of $0.1 million in 2022 and $1.3 million in 2021.
•Pre-tax indemnification asset reversal of $0.6 million in 2022.
•Pre-tax impairment costs of $0.2 million in 2022.
•Pre-tax expense related to amortization of acquired profit in inventory and backlog of $0.5 million in 2022 and $0.1 million in 2021.
Adjusted net income and adjusted diluted EPS exclude:
•After-tax gain on the sale of a facility of $15.1 million ($20.2 million net of tax of $5.1 million) in 2022.
•After-tax acquisition costs of $0.1 million in 2022 and $1.2 million ($1.3 million net of tax of $0.1 million) in 2021.
•After-tax impairment costs of $0.1 million ($0.2 million net of tax of $0.1 million) in 2022.
•After-tax expense related to amortization of acquired profit in inventory and backlog of $0.4 million ($0.5 million net of tax of $0.1 million) in 2022.
Free cash flow is calculated as operating cash flow less:
•Capital expenditures of $2.9 million in 2022 and $2.3 million in 2021.
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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| May 3, 2022 | |||||
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| Financial Highlights (unaudited) | ||||||||||||||||||||
| (In thousands, except per share amounts and percentages) | ||||||||||||||||||||
| Three Months Ended | ||||||||||||||||||||
| Consolidated Statement of Income | April 2, 2022 | April 3, 2021 | ||||||||||||||||||
| Revenue | $ | 226,480 | $ | 172,463 | ||||||||||||||||
| Costs and Operating Expenses: | ||||||||||||||||||||
| Cost of revenue | 128,269 | 96,748 | ||||||||||||||||||
| Selling, general, and administrative expenses | 59,168 | 49,431 | ||||||||||||||||||
| Research and development expenses | 3,078 | 2,857 | ||||||||||||||||||
| Gain on sale and other expense, net (b) | (20,008) | — | ||||||||||||||||||
| 170,507 | 149,036 | |||||||||||||||||||
| Operating Income | 55,973 | 23,427 | ||||||||||||||||||
| Interest Income | 102 | 65 | ||||||||||||||||||
| Interest Expense | (1,234) | (1,111) | ||||||||||||||||||
| Other Expense, Net | (22) | (24) | ||||||||||||||||||
| Income Before Provision for Income Taxes | 54,819 | 22,357 | ||||||||||||||||||
| Provision for Income Taxes | 13,378 | 5,561 | ||||||||||||||||||
| Net Income | 41,441 | 16,796 | ||||||||||||||||||
| Net Income Attributable to Noncontrolling Interest | (249) | (235) | ||||||||||||||||||
| Net Income Attributable to Kadant | $ | 41,192 | $ | 16,561 | ||||||||||||||||
| Earnings per Share Attributable to Kadant: | ||||||||||||||||||||
| Basic | $ | 3.54 | $ | 1.43 | ||||||||||||||||
| Diluted | $ | 3.53 | $ | 1.43 | ||||||||||||||||
| Weighted Average Shares: | ||||||||||||||||||||
| Basic | 11,630 | 11,553 | ||||||||||||||||||
| Diluted | 11,655 | 11,612 | ||||||||||||||||||
| Three Months Ended | Three Months Ended | |||||||||||||||||||||||||||||||
Adjusted Net Income and Adjusted Diluted EPS (a) | April 2, 2022 | April 2, 2022 | April 3, 2021 | April 3, 2021 | ||||||||||||||||||||||||||||
| Net Income and Diluted EPS Attributable to Kadant, as Reported | $ | 41,192 | $ | 3.53 | $ | 16,561 | $ | 1.43 | ||||||||||||||||||||||||
| Adjustments for the Following, Net of Tax: | ||||||||||||||||||||||||||||||||
| Gain on Sale (b) | (15,143) | (1.30) | — | — | ||||||||||||||||||||||||||||
| Acquisition Costs | 59 | 0.01 | 1,173 | 0.10 | ||||||||||||||||||||||||||||
| Impairment Costs | 135 | 0.01 | — | — | ||||||||||||||||||||||||||||
| Acquired Profit in Inventory and Backlog Amortization (c,d) | 387 | 0.03 | 44 | — | ||||||||||||||||||||||||||||
| Adjusted Net Income and Adjusted Diluted EPS (a) | $ | 26,630 | $ | 2.28 | $ | 17,778 | $ | 1.53 | ||||||||||||||||||||||||
| Three Months Ended | Increase Excluding Acquisitions and FX (a,e) | |||||||||||||||||||||||||||||||
| Revenue by Segment | April 2, 2022 | April 3, 2021 | Increase | |||||||||||||||||||||||||||||
| Flow Control | $ | 85,826 | $ | 63,754 | $ | 22,072 | $ | 11,227 | ||||||||||||||||||||||||
| Industrial Processing | 93,085 | 69,154 | 23,931 | 25,186 | ||||||||||||||||||||||||||||
| Material Handling | 47,569 | 39,555 | 8,014 | 1,484 | ||||||||||||||||||||||||||||
| $ | 226,480 | $ | 172,463 | $ | 54,017 | $ | 37,897 | |||||||||||||||||||||||||
| Percentage of Parts and Consumables Revenue | 65% | 68% | ||||||||||||||||||||||||||||||
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| May 3, 2022 | |||||
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| Three Months Ended | Increase | Increase Excluding Acquisitions and FX (e) | ||||||||||||||||||||||||||||||
| Bookings by Segment | April 2, 2022 | April 3, 2021 | ||||||||||||||||||||||||||||||
| Flow Control | $ | 100,111 | $ | 75,999 | $ | 24,112 | $ | 13,378 | ||||||||||||||||||||||||
| Industrial Processing | 106,344 | 86,606 | 19,738 | 21,149 | ||||||||||||||||||||||||||||
| Material Handling | 59,640 | 41,884 | 17,756 | 9,467 | ||||||||||||||||||||||||||||
| $ | 266,095 | $ | 204,489 | $ | 61,606 | $ | 43,994 | |||||||||||||||||||||||||
| Percentage of Parts and Consumables Bookings | 60% | 65% | ||||||||||||||||||||||||||||||
| Three Months Ended | ||||||||||||||||||||
| Business Segment Information | April 2, 2022 | April 3, 2021 | ||||||||||||||||||
| Gross Margin: | ||||||||||||||||||||
| Flow Control | 52.4% | 53.3% | ||||||||||||||||||
| Industrial Processing | 38.6% | 40.5% | ||||||||||||||||||
| Material Handling | 36.4% | 34.7% | ||||||||||||||||||
| 43.4% | 43.9% | |||||||||||||||||||
| Operating Income: | ||||||||||||||||||||
| Flow Control | $ | 21,725 | $ | 15,446 | ||||||||||||||||
| Industrial Processing | 38,159 | 11,106 | ||||||||||||||||||
| Material Handling | 5,844 | 4,169 | ||||||||||||||||||
| Corporate | (9,755) | (7,294) | ||||||||||||||||||
| $ | 55,973 | $ | 23,427 | |||||||||||||||||
| Adjusted Operating Income (a,f): | ||||||||||||||||||||
| Flow Control | $ | 21,569 | $ | 16,443 | ||||||||||||||||
| Industrial Processing | 18,726 | 11,193 | ||||||||||||||||||
| Material Handling | 6,561 | 4,443 | ||||||||||||||||||
| Corporate | (9,755) | (7,294) | ||||||||||||||||||
| $ | 37,101 | $ | 24,785 | |||||||||||||||||
| Capital Expenditures: | ||||||||||||||||||||
| Flow Control | $ | 525 | $ | 334 | ||||||||||||||||
| Industrial Processing | 1,952 | 1,804 | ||||||||||||||||||
| Material Handling | 384 | 121 | ||||||||||||||||||
| Corporate | 7 | — | ||||||||||||||||||
| $ | 2,868 | $ | 2,259 | |||||||||||||||||
| Three Months Ended | ||||||||||||||||||||
| Cash Flow and Other Data | April 2, 2022 | April 3, 2021 | ||||||||||||||||||
| Operating Cash Flow | $ | 23,768 | $ | 19,092 | ||||||||||||||||
| Less: Capital Expenditures | (2,868) | (2,259) | ||||||||||||||||||
| Free Cash Flow (a) | $ | 20,900 | $ | 16,833 | ||||||||||||||||
| Depreciation and Amortization Expense | $ | 9,445 | $ | 7,686 | ||||||||||||||||
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| Balance Sheet Data | April 2, 2022 | January 1, 2022 | ||||||||||||||||||||||||||||||
| Assets | ||||||||||||||||||||||||||||||||
| Cash, Cash Equivalents, and Restricted Cash | $ | 88,971 | $ | 94,161 | ||||||||||||||||||||||||||||
| Accounts Receivable, net | 125,919 | 117,209 | ||||||||||||||||||||||||||||||
| Inventories | 143,583 | 134,356 | ||||||||||||||||||||||||||||||
| Contract Assets | 8,978 | 8,626 | ||||||||||||||||||||||||||||||
| Property, Plant, and Equipment, net | 105,851 | 107,989 | ||||||||||||||||||||||||||||||
| Intangible Assets | 192,426 | 199,343 | ||||||||||||||||||||||||||||||
| Goodwill | 394,414 | 396,887 | ||||||||||||||||||||||||||||||
| Other Assets | 84,124 | 73,641 | ||||||||||||||||||||||||||||||
| $ | 1,144,266 | $ | 1,132,212 | |||||||||||||||||||||||||||||
| Liabilities and Stockholders' Equity | ||||||||||||||||||||||||||||||||
| Accounts Payable | $ | 67,762 | $ | 59,250 | ||||||||||||||||||||||||||||
| Debt Obligations | 243,377 | 264,597 | ||||||||||||||||||||||||||||||
| Other Borrowings | 4,479 | 4,917 | ||||||||||||||||||||||||||||||
| Other Liabilities | 228,910 | 237,832 | ||||||||||||||||||||||||||||||
| Total Liabilities | 544,528 | 566,596 | ||||||||||||||||||||||||||||||
| Stockholders' Equity | 599,738 | 565,616 | ||||||||||||||||||||||||||||||
| $ | 1,144,266 | $ | 1,132,212 | |||||||||||||||||||||||||||||
| Three Months Ended | ||||||||||||||||||||
Adjusted Operating Income and Adjusted EBITDA Reconciliation (a) | April 2, 2022 | April 3, 2021 | ||||||||||||||||||
| Consolidated | ||||||||||||||||||||
| Net Income Attributable to Kadant | $ | 41,192 | $ | 16,561 | ||||||||||||||||
| Net Income Attributable to Noncontrolling Interest | 249 | 235 | ||||||||||||||||||
| Provision for Income Taxes | 13,378 | 5,561 | ||||||||||||||||||
| Interest Expense, Net | 1,132 | 1,046 | ||||||||||||||||||
| Other Expense, Net | 22 | 24 | ||||||||||||||||||
| Operating Income | 55,973 | 23,427 | ||||||||||||||||||
| Gain on Sale (b) | (20,190) | — | ||||||||||||||||||
| Acquisition Costs | 76 | 1,298 | ||||||||||||||||||
| Indemnification Asset Reversal (g) | 575 | — | ||||||||||||||||||
| Impairment Costs | 182 | — | ||||||||||||||||||
| Acquired Backlog Amortization (c) | 703 | 60 | ||||||||||||||||||
| Acquired Profit in Inventory Amortization (d) | (218) | — | ||||||||||||||||||
| Adjusted Operating Income (a) | 37,101 | 24,785 | ||||||||||||||||||
| Depreciation and Amortization | 8,742 | 7,626 | ||||||||||||||||||
| Adjusted EBITDA (a) | $ | 45,843 | $ | 32,411 | ||||||||||||||||
| Adjusted EBITDA Margin (a,h) | 20.2% | 18.8% | ||||||||||||||||||
| Flow Control | ||||||||||||||||||||
| Operating Income | $ | 21,725 | $ | 15,446 | ||||||||||||||||
| Acquisition Costs | 62 | 997 | ||||||||||||||||||
| Acquired Profit in Inventory Amortization (d) | (218) | — | ||||||||||||||||||
| Adjusted Operating Income (a) | 21,569 | 16,443 | ||||||||||||||||||
| Depreciation and Amortization | 2,347 | 1,572 | ||||||||||||||||||
| Adjusted EBITDA (a) | $ | 23,916 | $ | 18,015 | ||||||||||||||||
| Adjusted EBITDA Margin (a,h) | 27.9% | 28.3% | ||||||||||||||||||
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| May 3, 2022 | |||||
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| Three Months Ended | ||||||||||||||||||||
Adjusted Operating Income and Adjusted EBITDA Reconciliation (continued) (a) | April 2, 2022 | April 3, 2021 | ||||||||||||||||||
| Industrial Processing | ||||||||||||||||||||
| Operating Income | $ | 38,159 | $ | 11,106 | ||||||||||||||||
| Gain on Sale (b) | (20,190) | — | ||||||||||||||||||
| Indemnification Asset Reversal (g) | 575 | — | ||||||||||||||||||
| Impairment Costs | 182 | — | ||||||||||||||||||
| Acquisition Costs | — | 27 | ||||||||||||||||||
| Acquired Backlog Amortization (c) | — | 60 | ||||||||||||||||||
| Adjusted Operating Income (a) | 18,726 | 11,193 | ||||||||||||||||||
| Depreciation and Amortization | 3,274 | 3,338 | ||||||||||||||||||
| Adjusted EBITDA (a) | $ | 22,000 | $ | 14,531 | ||||||||||||||||
| Adjusted EBITDA Margin (a,h) | 23.6% | 21.0% | ||||||||||||||||||
| Material Handling | ||||||||||||||||||||
| Operating Income | $ | 5,844 | $ | 4,169 | ||||||||||||||||
| Acquisition Costs | 14 | 274 | ||||||||||||||||||
| Acquired Backlog Amortization (c) | 703 | — | ||||||||||||||||||
| Adjusted Operating Income (a) | 6,561 | 4,443 | ||||||||||||||||||
| Depreciation and Amortization | 3,096 | 2,686 | ||||||||||||||||||
| Adjusted EBITDA (a) | $ | 9,657 | $ | 7,129 | ||||||||||||||||
| Adjusted EBITDA Margin (a,h) | 20.3% | 18.0% | ||||||||||||||||||
| Corporate | ||||||||||||||||||||
| Operating Loss | $ | (9,755) | $ | (7,294) | ||||||||||||||||
| Depreciation and Amortization | 25 | 30 | ||||||||||||||||||
| EBITDA (a) | $ | (9,730) | $ | (7,264) | ||||||||||||||||
| (a) | Represents a non-GAAP financial measure. | |||||||||||||||||||
| (b) | Includes a $20,190 gain on the sale of a Chinese facility in our Industrial Processing segment pursuant to a relocation plan. | |||||||||||||||||||
| (c) | Represents intangible amortization expense associated with acquired backlog. | |||||||||||||||||||
| (d) | Represents income within the cost of revenue associated with amortization of acquired profit in inventory. | |||||||||||||||||||
| (e) | Represents the increase (decrease) resulting from the exclusion of acquisitions and from the conversion of current period amounts reported in local currencies into U.S. dollars at the exchange rate of the prior period compared to the U.S. dollar amount reported in the prior period. | |||||||||||||||||||
| (f) | See reconciliation to the most directly comparable GAAP financial measure under "Adjusted Operating Income and Adjusted EBITDA Reconciliation." | |||||||||||||||||||
| (g) | Represents an indemnification asset reversal related to the release of tax reserves associated with uncertain tax positions. | |||||||||||||||||||
| (h) | Calculated as adjusted EBITDA divided by revenue in each period. | |||||||||||||||||||
About Kadant
Kadant Inc. is a global supplier of technologies and engineered systems that drive Sustainable Industrial Processing. The Company’s products and services play an integral role in enhancing efficiency, optimizing energy utilization, and maximizing productivity in process industries. Kadant is based in Westford, Massachusetts, with approximately 3,000 employees in 20 countries worldwide. For more information, visit www.kadant.com.
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| Kadant Reports First Quarter 2022 Results | | ||||
| May 3, 2022 | |||||
Page 8 | |||||
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 1, 2022 and subsequent filings with the Securities and Exchange Commission. These include risks and uncertainties relating to adverse changes in global and local economic conditions; the variability and difficulty in accurately predicting revenues from large capital equipment and systems projects; 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; supply chain constraints, inflationary pressure, price increases and shortages in 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.
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 2022 Business Review May 4, 2022 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 our expectations as of May 3, 2022. 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 1, 2022 and subsequent filings with the Securities and Exchange Commission. These include risks and uncertainties relating to adverse changes in global and local economic conditions; the variability and difficulty in accurately predicting revenues from large capital equipment and systems projects; 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; supply chain constraints, inflationary pressure, price increases and shortages in 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 1Q22 BUSINESS REVIEW–MAY 2022 | © 2022 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 2022 earnings press release issued May 3, 2022, 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 1Q22 BUSINESS REVIEW–MAY 2022 | © 2022 KADANT INC. ALL RIGHTS RESERVED.
BUSINESS REVIEW Jeffrey L. Powell, President & CEO 4KAI 1Q22 BUSINESS REVIEW–MAY 2022 | © 2022 KADANT INC. ALL RIGHTS RESERVED.
Operational Highlights • Strong demand continued into the first quarter leading to record bookings and revenue • Solid execution by our businesses led to excellent financial performance and record adjusted EBITDA* • Capital project activity continued its momentum in Q1 despite increasing economic headwinds and socio-political uncertainties • Strong cash flow reached a new historical high for a first quarter 5KAI 1Q22 BUSINESS REVIEW–MAY 2022 | © 2022 KADANT INC. ALL RIGHTS RESERVED.
Q1 2022 Performance 6 Q1 22 Q1 21 Change Revenue $226.5 $172.5 +31.3% Net Income $41.2 $16.6 +148.7% Adjusted EBITDA* $45.8 $32.4 +41.4% Adjusted EBITDA Margin* 20.2% 18.8% +140 bps Diluted EPS $3.53 $1.43 +146.9% Adjusted Diluted EPS* $2.28 $1.53 +49.0% Operating Cash Flow $23.8 $19.1 +24.5% Free Cash Flow* $20.9 $16.8 +24.2% Bookings $266.1 $204.5 +30.1% HIGHLIGHTS • Demand remained strong in the first quarter; bookings up 30% to a record $266 million • Record revenue performance with organic revenue up 22% led by our Industrial Processing segment • Strong operating performance led to record adjusted EBITDA* and excellent cash flow • Aftermarket parts were up 24% and represented 65% of total Q1 revenue ($ in millions, except per share amounts) KAI 1Q22 BUSINESS REVIEW–MAY 2022 | © 2022 KADANT INC. ALL RIGHTS RESERVED.
$76.0 $71.8 $76.7 $83.7 $100.1 1Q21 2Q21 3Q21 4Q21 1Q22 Flow Control 7 $ in millions Q1 22 Q1 21 Change Revenue $85.8 $63.8 +34.6% Bookings $100.1 $76.0 +31.7% Adjusted EBITDA* $23.9 $18.0 +32.8% Adjusted EBITDA Margin* 27.9% 28.3% -40 bps HIGHLIGHTS • Strong aftermarket demand and capital project activity drove record bookings • Improved operating leverage led to strong adjusted EBITDA* performance • Macroeconomic headwinds and supply chain constraints continue to present challenges to manage • Fundamental drivers of our end- markets remain strong ($ in millions) KAI 1Q22 BUSINESS REVIEW–MAY 2022 | © 2022 KADANT INC. ALL RIGHTS RESERVED. BOOKINGS
$86.6 $101.9 $118.9 $94.9 $106.3 1Q21 2Q21 3Q21 4Q21 1Q22 Industrial Processing 8 $ in millions Q1 22 Q1 21 Change Revenue $93.1 $69.2 +34.6% Bookings $106.3 $86.6 +22.8% Adjusted EBITDA* $22.0 $14.5 +51.4% Adjusted EBITDA Margin* 23.6% 21.0% +260 bps HIGHLIGHTS • Strong end-market demand drove bookings for both parts and capital • High operating rates at mills led to solid aftermarket parts business • Excellent adjusted EBITDA margin* driven by improved operating leverage and solid execution in all product lines • Healthy backlog positions us well for strong performance in 2022 BOOKINGS ($ in millions) KAI 1Q22 BUSINESS REVIEW–MAY 2022 | © 2022 KADANT INC. ALL RIGHTS RESERVED.
$41.9 $39.4 $49.1 $52.2 $59.6 1Q21 2Q21 3Q21 4Q21 1Q22 Material Handling 9 $ in millions Q1 22 Q1 21 Change Revenue $47.6 $39.6 +20.3% Bookings $59.6 $41.9 +42.4% Adjusted EBITDA* $9.7 $7.1 +35.5% Adjusted EBITDA Margin* 20.3% 18.0% +230 bps HIGHLIGHTS • Demand was strong for our baling and bulk material handling equipment with record bookings in Q1 • Business activity remains healthy with organic bookings up 23% • Margin performance continues to be solid despite inflationary pressure for raw materials BOOKINGS ($ in millions) KAI 1Q22 BUSINESS REVIEW–MAY 2022 | © 2022 KADANT INC. ALL RIGHTS RESERVED.
Business Outlook • Demand expected to remain solid with some potential for softening in the second half of 2022 • Supply chain constraints and inflationary pressures expected to continue along with macroeconomic headwinds growing • Expecting to generate record earnings in fiscal 2022 10KAI 1Q22 BUSINESS REVIEW–MAY 2022 | © 2022 KADANT INC. ALL RIGHTS RESERVED.
FINANCIAL REVIEW Michael J. McKenney, EVP & CFO KAI 1Q22 BUSINESS REVIEW–MAY 2022 | © 2022 KADANT INC. ALL RIGHTS RESERVED. 11
Q1 2022 Financial Performance Q1 22 Q1 21 Gross Margin 43.4% 43.9% SG&A % of Revenue 26.1% 28.7% Operating Income $56.0 $23.4 Net Income $41.2 $16.6 Adjusted EBITDA* $45.8 $32.4 Diluted EPS $3.53 $1.43 Adjusted Diluted EPS* $2.28 $1.53 HIGHLIGHTS • Adjusted EBITDA margin* of 20.2% • Operating cash flow of $23.8 million • Free cash flow* of $20.9 million • Net debt of $159 million; leverage ratio1 of 1.16 ($ in millions, except per share amounts) KAI 1Q22 BUSINESS REVIEW–MAY 2022 | © 2022 KADANT INC. ALL RIGHTS RESERVED. 12
$16.8 $42.3 $34.6 $55.9 $20.9 1Q21 2Q21 3Q21 4Q21 1Q22 FREE CASH FLOW* OPERATING CASH FLOW 18.8% 21.1% 20.5% 20.5% 20.2% 1Q21 2Q21 3Q21 4Q21 1Q22 28.7% 25.2% 26.2% 26.4% 26.1% 1Q21 2Q21 3Q21 4Q21 1Q22 43.9% 43.6% 41.9% 42.4% 43.4% 1Q21 2Q21 3Q21 4Q21 1Q22 Key Consolidated Financial Metrics CASH FLOW $44.4 $37.9 $61.0 GROSS MARGIN $19.1 ($ in millions) SG&A ADJUSTED EBITDA MARGIN* $23.8 (as a % of revenue) KAI 1Q22 BUSINESS REVIEW–MAY 2022 | © 2022 KADANT INC. ALL RIGHTS RESERVED. 13
$1.53 $0.96 $0.16 $0.02 $0.01 ($0.26) ($0.09) ($0.04) ($0.01) $2.28 1Q21 to 1Q22 Adjusted Diluted EPS* KAI 1Q22 BUSINESS REVIEW–MAY 2022 | © 2022 KADANT INC. ALL RIGHTS RESERVED. 14 1Q21 ADJ EPS* 1Q22 ADJ EPS* REVENUE ACQUISTIONS INTEREST EXPENSE TAX PROVISION OPERATING EXPENSE GOV’T PROGRAMS GROSS MARGIN CHANGE IN SHARES
Key Liquidity Metrics $ in millions Q1 22 Q4 21 Q1 21 Cash, cash equivalents, and restricted cash $89.0 $94.2 $66.7 Debt $243.4 $264.6 $217.3 Lease obligations $4.5 $4.9 $5.2 Net Debt $158.9 $175.4 $155.8 Leverage ratio1 1.16 1.34 1.50 Working capital % LTM revenue2 10.8% 9.4% 15.1% Cash conversion days3 104 106 123 KAI 1Q22 BUSINESS REVIEW–MAY 2022 | © 2022 KADANT INC. ALL RIGHTS RESERVED. 15
Guidance 16KAI 1Q22 BUSINESS REVIEW–MAY 2022 | © 2022 KADANT INC. ALL RIGHTS RESERVED. • FY 2022 GAAP diluted EPS of $10.05 to $10.25 • FY 2022 adjusted diluted EPS* of $8.80 to $9.00 • FY 2022 revenue of $885 to $905 million • Q2 2022 GAAP diluted EPS of $1.86 to $1.96 • Q2 2022 revenue of $215 to $220 million
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 858 2925. Please mute the audio on your computer. KAI 1Q22 BUSINESS REVIEW–MAY 2022 | © 2022 KADANT INC. ALL RIGHTS RESERVED. 17
2022 Key Priorities 18 ACCELERATE SUSTAINABLE INDUSTRIAL PROCESSING DELIVER EXCEPTIONAL STAKEHOLDER VALUE MAINTAIN STRONG CASH FLOW CAPITALIZE ON NEW OPPORTUNITIES KAI 1Q22 BUSINESS REVIEW–MAY 2022 | © 2022 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 4, 2022
APPENDIX First Quarter 2022 Business Review KAI 1Q22 BUSINESS REVIEW–MAY 2022 | © 2022 KADANT INC. ALL RIGHTS RESERVED. 20
Revenue by Customer Location $ in thousands Q1 22 Q1 21 Change Change Excl. Acquisitions and FX* North America $124,336 $95,092 $29,244 $20,423 Europe 58,366 44,641 13,725 10,099 Asia 31,987 21,813 10,174 7,200 Rest of World 11,791 10,917 874 175 TOTAL $226,480 $172,463 $54,017 $37,897 KAI 1Q22 BUSINESS REVIEW–MAY 2022 | © 2022 KADANT INC. ALL RIGHTS RESERVED. 21
Adjusted Diluted EPS Reconciliation Q1 22 Q1 21 Diluted EPS, as reported $3.53 $1.43 Impairment Costs, Net of Tax 0.01 - Gain on Sale, Net of Tax (1.30) - Acquisition Costs, Net of Tax 0.01 0.10 Acquired Profit in Inventory and Backlog Amortization, Net of Tax 0.03 - Adjusted Diluted EPS* $2.28 $1.53 Free Cash Flow Reconciliation $ in thousands Q1 22 Q1 21 Operating Cash Flow $23,768 $19,092 Less Capital Expenditures (2,868) (2,259) Free Cash Flow* $20,900 $16,833 Adjusted diluted EPS (earnings per share) is a non-GAAP financial measure. Free cash flow is a non-GAAP financial measure. KAI 1Q22 BUSINESS REVIEW–MAY 2022 | © 2022 KADANT INC. ALL RIGHTS RESERVED. 22
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 22 Q1 21 Net Income Attributable to Kadant $41,192 $16,561 Net Income Attributable to Noncontrolling Interest 249 235 Provision for Income Taxes 13,378 5,561 Interest Expense, Net 1,132 1,046 Other Expense, Net 22 24 Impairment Costs 182 - Gain on Sale (20,190) - Acquisition Costs 76 1,298 Indemnification Asset Reversal 575 - Acquired Backlog Amortization 703 60 Acquired Profit in Inventory Amortization (218) - Depreciation and Amortization 8,742 7,626 Adjusted EBITDA* $45,843 $32,411 Adjusted EBITDA Margin* 20.2% 18.8% KAI 1Q22 BUSINESS REVIEW–MAY 2022 | © 2022 KADANT INC. ALL RIGHTS RESERVED. 23
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 3, 2022. 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. KAI 1Q22 BUSINESS REVIEW–MAY 2022 | © 2022 KADANT INC. ALL RIGHTS RESERVED. 24