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 15, 2006
KADANT INC.
(Exact Name of Registrant as Specified in its Charter)
Delaware 1-11406 52-1762325
(State or Other (Commission File Number) (IRS Employer
Jurisdiction Identification No.)
of Incorporation)
One Acton Place
Acton, Massachusetts 01720
(Address of Principal Executive Offices) (Zip Code)
(978) 776-2000
Registrant's telephone number, including area code
Not Applicable
(Former Name or Former Address, if Changed Since Last Report)
Check the appropriate box below if the Form 8-K filing is intended to
simultaneously satisfy the filing obligation of the registrant under any of the
following provisions:
[ ] 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))
KADANT INC.
Item 2.02 Results of Operations and Financial Condition.
On February 15, 2006, Kadant Inc. (the "Company") announced its
financial results for the fiscal quarter and year ended December 31, 2005. The
full text of the press release issued in connection with the announcement is
furnished as Exhibit 99 to this Current Report on Form 8-K.
The information in this Form 8-K (including Exhibit 99) shall not be
deemed "filed" for purposes of Section 18 of the Securities Exchange Act of 1934
(the "Exchange Act") or otherwise subject to the liabilities of that section,
nor shall it be deemed incorporated by reference in any filing under the
Securities Act of 1933 or the Exchange Act, except as expressly set forth by
specific reference in such a filing.
Item 9.01 Financial Statements and Exhibits.
(c) Exhibit
The following exhibit relating to Item 2.02 shall be deemed to be
furnished and not filed.
Exhibit
No. Description of Exhibit
------- ----------------------
99 Press Release issued by the Company on February 15, 2006.
2
>
KADANT INC.
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
KADANT INC.
Date: February 15, 2006 By: /s/ Thomas M. O'Brien
-----------------------------
Thomas M. O'Brien
Executive Vice President and
Chief Financial Officer
3
Exhibit 99
[GRAPHIC OMITTED]
[LOGO]
NEWS
KADANT
AN ACCENT ON INNOVATION
One Acton Place, Suite 202
Acton, MA 01720
Investor contact: Thomas M. O'Brien, 978-776-2000
Media contact: GreatPoint Communications, 978-392-6866
Kadant Reports 2005 Fourth Quarter and Full-Year Results
and Gives Financial Guidance for 2006
ACTON, Mass., February 15, 2006 - Kadant Inc. (NYSE:KAI) reported revenues of
$63.1 million from continuing operations in the fourth quarter of 2005, an
increase of $17.2 million over $45.9 million in the fourth quarter of 2004.
Revenues in the 2005 period included $19.1 million from Kadant Johnson, and
currency translation lowered revenues by $0.5 million. Operating income from
continuing operations in the 2005 quarter was $2.1 million (including $0.6
million from Kadant Johnson), versus an operating loss of $7.5 million in 2004,
due primarily to $9.5 million of restructuring charges in that period. Income
from continuing operations (after-tax) was $1.0 million in the 2005 quarter, or
$.07 of diluted earnings per share (EPS), versus a loss of $4.8 million, or $.34
of diluted EPS, a year ago, which included restructuring charges that lowered
EPS by $.44. Including the discontinued composite building products business,
net income in the 2005 period was $0.4 million, or $.03 per diluted share,
versus a loss of $5.3 million, or $.38 per diluted share, in 2004. The
composites business was sold in October 2005.
For full-year 2005, Kadant reported revenues of $243.7 million from
continuing operations, a $48.7 million increase over $195.0 million for
full-year 2004. The 2005 revenues included $47.9 million from Kadant Johnson and
$2.0 million from the favorable effect of currency translation. Operating income
from continuing operations in 2005 was $14.6 million (including $3.1 million
from Kadant Johnson), versus $6.8 million in 2004. Income from continuing
operations (after-tax) was $9.9 million in 2005, or $.70 of diluted EPS, versus
$5.8 million, or $.40 per diluted share, in 2004. Including the discontinued
composite building products business, net income in 2005 was $6.9 million, or
$.49 per diluted share, versus $0.7 million, or $.05 per diluted share, in 2004.
"Our results for the fourth quarter came in generally as we expected,
that is, weaker than the performance we were able to deliver during the first
three quarters in spite of challenges in some of our geographic markets," said
William A. Rainville, chairman and chief executive officer of Kadant. "Our
quarterly bookings, however, set an all-time record, increasing 60 percent over
last year. Even without Kadant Johnson, bookings in the quarter rose 19 percent,
due primarily to orders for stock-preparation equipment supplied by our
operations in North America and Europe. In addition, high energy costs in the
U.S. are driving demand for Kadant Johnson's efficient dryer and fluid-handling
technologies. Our year-end backlog rose 29 percent over the third quarter of
2005 to $54 million, positioning Kadant for a strong start in 2006.
"For all of 2005, we are pleased to report that we generated $23
million of EBITDA, including $7.2 million from Kadant Johnson. We also generated
more than $19 million in cash flow from operations, for a 47 percent increase
over last year. (EBITDA is a non-GAAP financial measure that excludes certain
items detailed at the end of this press release under the heading "Use of
Non-GAAP Financial Measures.")
-more-
"Our solid balance sheet allowed us to make significant investments in
the company during 2005 that we believe will lead to earnings growth this year,
most notably our acquisition of Kadant Johnson and our restructuring actions in
France and North America. In addition, in January 2006, we signed an agreement
to acquire a Chinese producer of stock-preparation equipment that, if
completed, would expand our product line and add a low-cost manufacturing base.
We also spent $3.7 million in cash during the fourth quarter to repurchase our
stock, for a total investment of $9.1 million in stock buybacks in 2005. Since
May 2004, we have bought more than $19 million of our common stock.
"Based on the actions we took during 2005, and our strong bookings at
the end of the year, for full-year 2006 we expect to achieve GAAP diluted EPS of
$1.15 to $1.25 from continuing operations, on revenues of $290 to $300 million.
For the first quarter of 2006, we expect to report GAAP diluted EPS of $.17 to
$.19, on revenues of $70 to $72 million."
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 earnings before interest, taxes, depreciation and
amortization (EBITDA), adjusted net income, adjusted diluted EPS, and adjusted
operating income, all of which exclude certain non-recurring items. In addition,
we exclude certain acquisition-related charges from EBITDA, such as charges
associated with the sale of inventory that has been revalued for the acquired
profit in inventory at the Kadant Johnson acquisition date. We exclude the above
items because they are outside of our normal operations and/or, are of a
non-recurring nature. We believe that the inclusion of such measures helps
investors to gain a better understanding of our underlying operations and future
prospects, consistent with how management measures and forecasts Kadant's
performance, especially when comparing such results to previous periods or
forecasts. We also believe this information is responsive to investors' requests
and gives them an additional measure of Kadant's performance.
We use these non-GAAP measures, in addition to GAAP financial measures,
as the basis for measuring our underlying operating performance and comparing
such performance to that of prior 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.
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 measure, in that they may be
different from, and therefore not comparable to, similar measures used by other
companies.
Each of these non-GAAP measures included in this press release
excludes:
- Costs and tax effects associated with restructuring
activities, primarily related to reducing headcount in
connection with our Kadant Lamort restructuring in France.
We believe that the costs related to these restructuring
activities are not indicative of our normal operating
costs based on their past pattern of occurrence,
materiality, and unusual nature and complexity.
EBITDA also excludes:
- Certain gains/losses which are either isolated or cannot
be expected to occur again with any regularity or
predictability and that we believe are not indicative of
our normal operating gains and losses.
- Charges related to the sale of inventories revalued at the
Kadant Johnson acquisition date, as we believe these
charges are not indicative of our normal operating costs.
Reconciliations of the non-GAAP financial measures to the most directly
comparable GAAP financial measures are set forth in the accompanying
tables.
-more-
2
>
Financial Highlights (unaudited)
(In thousands, except per share amounts and percentages)
Three Months Ended Twelve Months Ended
----------------------------------- -----------------------------------
Condensed Consolidated Statement of Operations December 31, 2005 January 1, 2005 December 31, 2005 January 1, 2005
- --------------------------------------------------------------------------------------------------------------------------------
Revenues $ 63,084 $ 45,931 $ 243,713 $ 194,966
----------------- --------------- ---------------- ---------------
Costs and Operating Expenses:
Cost of revenues 38,820 29,191 149,744 119,200
Selling, general and administrative expenses 20,959 13,901 74,617 56,334
Research and development expenses 1,277 801 4,887 3,077
Restructuring costs (40) 9,515 (118) 9,515
----------------- --------------- ----------------- ---------------
61,016 53,408 229,130 188,126
----------------- --------------- ---------------- ---------------
Operating Income (Loss) 2,068 (7,477) 14,583 6,840
Interest Income 317 465 1,505 1,468
Interest Expense (813) (9) (2,114) (23)
----------------- --------------- ----------------- ---------------
Income (Loss) from Continuing Operations Before
Income Taxes and Minority Interest 1,572 (7,021) 13,974 8,285
Income Tax Provision (Benefit) 549 (2,252) 3,925 2,524
Minority Interest Expense 26 - 184 8
----------------- --------------- ---------------- ---------------
Income (Loss) from Continuing Operations 997 (4,769) 9,865 5,753
Loss from Discontinued Operation, Net of Tax (a) (580) (555) (2,988) (5,099)
----------------- --------------- ---------------- ---------------
Net Income (Loss) $ 417 $ (5,324) $ 6,877 $ 654
================= =============== ================ ===============
Earnings (Loss) per Share
Basic
Income (Loss) from Continuing Operations $ .07 $ (.34) $ .71 $ .41
Loss from Discontinued Operation (.04) (.04) (.21) (.36)
----------------- --------------- ---------------- ---------------
Net Income (Loss) $ .03 $ (.38) $ .50 $ .05
================= =============== ================ ===============
Diluted
Income (Loss) from Continuing Operations $ .07 $ (.34) $ .70 $ .40
Loss from Discontinued Operation (.04) (.04) (.21) (.35)
----------------- --------------- ---------------- ---------------
Net Income (Loss) $ .03 $ (.38) $ .49 $ .05
================= =============== ================ ===============
Weighted Average Shares
Basic 13,638 13,868 13,829 14,071
================= =============== ================= ===============
Diluted 13,857 13,868 14,104 14,398
================= =============== ================= ===============
Three Months Ended Twelve Months Ended
----------------------------------- -----------------------------------
Adjusted Net Income and Diluted EPS December 31, 2005 January 1, 2005 December 31, 2005 January 1, 2005
- --------------------------------------------------------------------------------------------------------------------------------
Net Income (Loss) $ 417 $ (5,324) $ 6,877 $ 654
Loss from Discontinued Operation, Net of Tax 580 555 2,988 5,099
Restructuring Costs, Net of Tax (b) - 6,090 - 6,090
----------------- --------------- ---------------- ---------------
Adjusted Net Income (c) $ 997 $ 1,321 $ 9,865 $ 11,843
================= =============== ================ ===============
Diluted Earnings (Loss) per Share $ .03 $ (.38) $ .49 $ .05
Loss from Discontinued Operation .04 .04 .21 .35
Restructuring Costs (b) - .44 - .42
----------------- --------------- ---------------- ---------------
Adjusted Diluted Earnings per Share (c) $ .07 $ .10 $ .70 $ .82
================= =============== ================ ===============
-more-
3
>
Three Months Ended Twelve Months Ended
----------------------------------- -----------------------------------
Business Segment Information (d) December 31, 2005 January 1, 2005 December 31, 2005 January 1, 2005
- --------------------------------------------------------------------------------------------------------------------------------
Revenues:
Pulp and Papermaking Systems $ 59,637 $ 44,154 $ 232,615 $ 188,320
Other 3,447 1,777 11,098 6,646
----------------- --------------- ---------------- ---------------
$ 63,084 $ 45,931 $ 243,713 $ 194,966
================= =============== ================ ===============
Gross Profit Margin:
Pulp and Papermaking Systems 40% 37% 39% 39%
Other 20% 33% 28% 36%
----------------- --------------- ---------------- ---------------
38% 36% 39% 39%
================= =============== ================= ===============
Operating Income (Loss):
Pulp and Papermaking Systems $ 3,209 $ (6,309) $ 18,685 $ 11,781
Corporate and Other (1,141) (1,168) (4,102) (4,941)
----------------- ---------------- ---------------- ---------------
$ 2,068 $ (7,477) $ 14,583 $ 6,840
================= =============== ================ ===============
Adjusted Operating Income:
Pulp and Papermaking Systems (b) $ 3,209 $ 3,206 $ 18,685 $ 21,296
Corporate and Other (1,141) (1,168) (4,102) (4,941)
----------------- --------------- ---------------- ---------------
$ 2,068 $ 2,038 $ 14,583 $ 16,355
================= =============== ================ ===============
Three Months Ended Twelve Months Ended
----------------------------------- -----------------------------------
Business Segment Information (d) (continued) December 31, 2005 January 1, 2005 December 31, 2005 January 1, 2005
- --------------------------------------------------------------------------------------------------------------------------------
Bookings from Continuing Operations:
Pulp and Papermaking Systems $ 71,358 $ 45,438 $ 240,900 $ 185,870
Other 4,701 2,031 12,230 6,786
----------------- --------------- ---------------- ---------------
$ 76,059 $ 47,469 253,130 $ 192,656
================= =============== ================ ===============
Capital Expenditures from Continuing Operations:
Pulp and Papermaking Systems $ 1,190 $ 842 $ 2,683 $ 1,968
Corporate and Other 136 18 562 221
----------------- --------------- ---------------- ---------------
$ 1,326 $ 860 $ 3,245 $ 2,189
================= =============== ================ ===============
Three Months Ended Twelve Months Ended
----------------------------------- ------------------------------------
Cash Flow and Other Data from Continuing Operations December 31, 2005 January 1, 2005 December 31, 2005 January 1, 2005
- --------------------------------------------------------------------------------------------------------------------------------
Cash Provided by Operations $ 7,913 $ 6,630 $ 19,063 $ 12,933
Depreciation and Amortization Expense 2,064 870 6,931 3,604
Balance Sheet Data December 31, 2005 January 1, 2005
- --------------------------------------------------------------------------------------------------------------------------------
Cash and Cash Equivalents $ 40,822 $ 82,089
Short- and Long-term Debt 55,500 -
Shareholders' Investment 207,625 212,461
-more-
4
>
Three Months Ended Twelve Months Ended
------------------------------------ -----------------------------------
EBITDA Data December 31, 2005 January 1, 2005 December 31, 2005 January 1, 2005
- --------------------------------------------------------------------------------------------------------------------------------
Consolidated
Operating Income (Loss) $ 2,068 $ (7,477) $ 14,583 $ 6,840
Depreciation and Amortization 2,064 870 6,931 3,604
Restructuring Costs (b) - 9,515 - 9,515
Acquired Profit in Inventory (e) 455 - 1,081 -
Royalty Gain - - - (970)
Gain on Sale of Subsidiary - - - (149)
----------------- --------------- ---------------- ---------------
EBITDA $ 4,587 $ 2,908 $ 22,595 $ 18,840
================= =============== ================ ===============
Pulp and Papermaking Systems
Operating Income (Loss) $ 3,209 $ (6,309) $ 18,685 $ 11,781
Depreciation and Amortization 1,841 766 6,227 3,136
Restructuring Costs (b) - 9,515 - 9,515
Acquired Profit in Inventory (e) 455 - 1,081 -
Royalty Gain - - - (970)
Gain on Sale of Subsidiary - - - (149)
----------------- --------------- ---------------- ---------------
EBITDA $ 5,505 $ 3,972 $ 25,993 $ 23,313
================= ================ ================ ===============
Corporate and Other
Operating Loss $ (1,141) $ (1,168) $ (4,102) $ (4,941)
Depreciation and Amortization 223 104 704 468
----------------- --------------- ---------------- ---------------
EBITDA $ (918) $ (1,064) $ (3,398) $ (4,473)
================= =============== ================ ===============
(a) Includes warranty provisions of $918 and $789 in the three-month periods and $5,525 and $6,696 in the twelve-month
periods ended December 31, 2005 and January 1, 2005, respectively.
(b) Represents pre-tax restructuring costs of $9,515 in the three- and twelve-month periods ended January 1, 2005, or
$.44 and $.42 per diluted share (after-tax), respectively, which have been excluded to derive adjusted net income,
adjusted diluted earnings per share, adjusted operating income, and earnings before interest, taxes, depreciation
and amortization (EBITDA).
(c) Adjusted Net Income and Adjusted Diluted Earnings per Share include:
Twelve-month period ended December 31, 2005:
- a tax benefit of $965, or $.07 per diluted share, including $882 received from our former parent company under
a tax agreement and $83 in reductions of tax reserves.
Twelve-month period ended January 1, 2005:
- a pre-tax gain of $970, or $.04 per diluted share (after-tax), which resulted from renegotiating a series of
agreements with one of our licensees.
- reductions of tax reserves of $581, or $.04 per diluted share, and
- a pre-tax gain on the sale of subsidiary of $149, or $.01 per diluted share (after-tax).
(d) "Other" includes the results from the Fiber-based Products business and Kadant Johnson's Casting Products business.
(e) Acquired profit in inventory relates to the charge associated with the sale of inventory that was revalued at the
Kadant Johnson acquisition date.
Conference Call
Kadant will hold its earnings conference call on Thursday, February 16, 2006,
at 11 a.m. Eastern time. To listen, call 800-709-2159 within the U.S., or
973-582-2810 outside the U.S. You can also listen to the call live on the Web by
visiting www.kadant.com and clicking on "Investors." An audio archive of the
call will be available on our Web site until March 17, 2006.
-more-
5
>
About Kadant
Kadant Inc. is a leading supplier to the global pulp and paper industry, with a
range of products and services for improving efficiency and quality in pulp and
paper production, including paper machine accessories, and systems for stock
preparation, fluid handling, and water management. Our fluid-handling products
are also used to optimize production in the steel, rubber, plastics, food, and
textile industries. In addition, we produce granules from papermaking byproducts
for agricultural and lawn and garden applications. Kadant is based in Acton,
Massachusetts, with approximately $244 million in revenues and 1,400 employees
in 16 countries worldwide. For more information, visit www.kadant.com.
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 expected future business and
financial performance, demand for our products, consequences of actions taken to
position the company for future growth, and the potential acquisition and
benefits of acquiring a Chinese manufacturer of stock-preparation equipment,
including our ability to complete this acquisition. Important factors that could
cause actual results to differ materially from those indicated by such
statements are set forth under the heading "Risk Factors" in Kadant's quarterly
report on Form 10-Q for the period ended October 1, 2005. These include risks
and uncertainties relating to our dependence on the pulp and paper industry;
international sales and operations; competition; increases in our debt;
restrictions in our credit agreement; our ability to successfully integrate
Kadant Johnson; our acquisition strategy; our ability to complete the
restructuring of our French subsidiary; retention of liabilities and warranty
claims associated with composite building products manufactured prior to the
sale of the business; availability of raw materials and exposure to commodity
price fluctuations related to the manufacture of fiber-based products;
protection of patents and proprietary rights; fluctuations in quarterly
operating results; and anti-takeover provisions. We undertake no obligation to
publicly update any forward-looking statement, whether as a result of new
information, future events, or otherwise.
###
6