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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
----------------------------------------------------
FORM 10-K
(mark one)
[ X ] Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934 for the fiscal year ended December 29, 2001
[ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
Commission file number 1-11406
KADANT INC.
(Exact name of Registrant as specified in its charter)
Delaware 52-1762325
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
One Acton Place, Suite 202
Acton, Massachusetts 01720
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (978) 776-2000
Securities registered pursuant to Section 12(b) of the Act:
Title of each class Name of each exchange on which registered
---------------------------- -----------------------------------------
Common Stock, $.01 par value American Stock Exchange
Securities registered pursuant to Section 12(g) of the Act:
None
Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months, and (2) has been subject to the filing requirements for
at least the past 90 days. Yes [ X ] No [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of the Registrant's knowledge, in definitive proxy or information
statements incorporated by reference into Part III of this Form 10-K or any
amendment to this Form 10-K. [ ]
The aggregate market value of the voting stock held by nonaffiliates of the
Registrant as of January 31, 2002, was approximately $171,929,000.
As of January 31, 2002, the Registrant had 12,240,019 shares of Common Stock
outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Registrant's Annual Report to Shareholders for the year ended
December 29, 2001, are incorporated by reference into Parts I and II, and
portions of the Registrant's definitive Proxy Statement for the Annual Meeting
of Shareholders to be held on May 16, 2002, are incorporated by reference into
Part III. Copies of these documents can be obtained at no cost by calling the
Company at (978) 776-2000.
PART I
Item 1. Business
(a) General Development of Business
-------------------------------
Kadant Inc. (also referred to in this document as "we", "the Registrant"
or "the Company"), operates in two segments: the Pulp and Papermaking Equipment
and Systems segment and the Composite and Fiber-based Products segment. On July
12, 2001, we changed our name to Kadant Inc. from Thermo Fibertek Inc. and our
common stock now trades under the ticker symbol "KAI" on the American Stock
Exchange.
Through our Pulp and Papermaking Equipment and Systems segment, we
develop, manufacture, and market a range of equipment and products for the
domestic and international papermaking and paper recycling industries. Our
principal products include custom-engineered systems and equipment for the
preparation of wastepaper for conversion into recycled paper; accessory
equipment and related consumables important to the efficient operation of
papermaking machines; and water-management systems essential for draining,
purifying, and recycling process water. Through our Composite and Fiber-based
Products segment, we develop, manufacture, and market fiber-based composite
products for the building industry and manufacture and sell agricultural
carriers derived from cellulose fiber.
We were incorporated in November 1991 as a wholly owned subsidiary of
Thermo Electron Corporation. In November 1992, we conducted an initial public
offering of our common stock and became a majority-owned public subsidiary of
Thermo Electron. As part of its reorganization plan, Thermo Electron spun off
its equity interest in us as a dividend to Thermo Electron shareholders in
August 2001. Thermo Electron received a favorable private letter ruling from the
Internal Revenue Service that the distribution would generally qualify as a
tax-free distribution, with approximately 8% of the shares distributed being
considered "taxable" shares. The favorable tax treatment is subject to our
compliance with various facts and representations, including a representation
that we will conduct a public offering of 10 to 20 percent of our outstanding
common stock within one year of the distribution. The offering will also support
our current business plan, which includes repayments of debt, acquisitions,
creation of strategic partnerships, and investments in our core papermaking
equipment business and composite products business. The dividend was distributed
on August 8, 2001, on the basis of 0.0612 shares of our common stock for each
share of Thermo Electron common stock outstanding. Following the distribution,
Thermo Electron ceased to hold any shares of our common stock. Thermo Electron
continues to guarantee, on a subordinated basis, our 4 1/2% subordinated
convertible debentures due 2004, and we are subject to compliance with certain
financial covenants contained in the amended Plan and Agreement of Distribution
with Thermo Electron (see Note 9 to Consolidated Financial Statements in our
2001* Annual Report to Shareholders).
Our Pulp and Papermaking Equipment and Systems segment designs and
manufactures stock-preparation systems and equipment, papermaking machine
accessories, and water-management systems for the paper and paper recycling
industries. Our principal products for the paper and paper recycling industries
include:
- custom-engineered systems and equipment for the conversion of waste
paper into recycled paper;
- accessory equipment and related consumables necessary for the efficient
operation of papermaking machines; and
- water-management systems for the continuous cleaning of papermaking
machine fabrics and the draining, purifying, and recycling of process
water for paper sheet and web formation.
- --------------------
* References to 2001, 2000, and 1999, in this document are for the fiscal years
ended December 29, 2001, December 30, 2000, and January 1, 2000, respectively.
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We have been in operation for more than 100 years and have a large, stable
customer base that includes most of the world's paper manufacturers. Our
products and systems can be found in most of the world's pulp and paper mills.
We also have one of the largest installed bases of equipment in the pulp and
paper industry, which provides us with a higher margin spare parts and
consumables business, which we believe is less susceptible to the cyclical
trends of the paper industry. We currently manufacture our products for the pulp
and paper industry in six countries in Europe and North America, and license
certain of our products for manufacture in South America and the Pacific Rim.
Our Composite and Fiber-based Products segment manufactures and markets
fiber-based composite products for the building industry, which are derived from
natural fiber and recycled plastic, and manufactures and sells fiber-based
granules used primarily as agricultural carriers. Our composite building
products, such as decking and roof tiles, are sold into the emerging markets for
alternative lumber and roofing products. In January 2001, we acquired the
remaining 49% equity interest that we did not already own in Kadant Composites
Inc. (formerly named NEXT Fiber Products Inc.), which is responsible for our
composite building products business. We established a composite building
products manufacturing facility in Green Bay, Wisconsin, and began production at
the facility in late 2000. We also employ patented technology to produce
biodegradable absorbing granules from papermaking byproducts. These granules are
primarily used as agricultural carriers and, to a lesser extent, as oil and
grease absorbents and catbox filler.
On December 27, 2001, we completed a short-form merger with Thermo
Fibergen, formerly a majority-owned public subsidiary, pursuant to which we
acquired 359,587 shares of Thermo Fibergen's common stock, representing all of
the outstanding shares of Thermo Fibergen's common stock not already owned by us
for $12.75 per share in cash. As a result, Thermo Fibergen's common stock ceased
to be publicly traded. We expended $4,585,000 in cash for the shares (see Note
11 to Consolidated Financial Statements in our 2001 Annual Report to
Shareholders).
Forward-looking Statements
This annual report on Form 10-K and the documents that we incorporate by
reference in this Annual Report on Form 10-K include statements that are subject
to risks and uncertainties and are based on the beliefs and assumptions of our
management, based on information currently available to our management. When we
use words such as "believes," "expects," "anticipates," "intends," "plans,"
"estimates," "should," "likely," "will," or similar expressions, we are making
forward-looking statements. Forward-looking statements include the information
concerning possible or assumed future results of our operations set forth under
the heading "Forward-looking Statements" in our 2001 Annual Report to
Shareholders, which statements are incorporated by reference in this Annual
Report on Form 10-K.
Forward-looking statements are not guarantees of performance. They involve
risks, uncertainties, and assumptions. Our future results of operations may
differ materially from those expressed in the forward-looking statements. Many
of the important factors that will determine these results and values are beyond
our ability to control or predict. You should not put undue reliance on any
forward-looking statements. For a discussion of important factors that may cause
our actual results to differ materially from those suggested by the
forward-looking statements, you should read carefully the section of our 2001
Annual Report to Shareholders captioned "Forward-looking Statements," which
statements are incorporated in this document by reference.
(b) Financial Information About Segments
------------------------------------
Financial information concerning our segments is summarized in Note 14 to
Consolidated Financial Statements in our 2001 Annual Report to Shareholders,
which information is incorporated in this document by reference.
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(c) Description of Business
-----------------------
(i) Principal Products and Services
-------------------------------
We operate in two segments: (1) Pulp and Papermaking Equipment and Systems
and (2) Composite and Fiber-based Products. In classifying operational entities
into a particular segment, we aggregated businesses with similar economic
characteristics, products and services, production processes, customers, and
methods of distribution.
Pulp and Papermaking Equipment and Systems
Our pulp and papermaking equipment and systems business consists of the
following product lines: stock-preparation systems for the manufacture of
recycled paper, accessory systems for continuous cleaning of rolls used in
papermaking machines, and water-management systems for continuous cleaning of
papermaking machine fabrics as well as formation and drainage systems critical
to sheet formation.
Stock-preparation Systems and Equipment
We develop, design, manufacture, and sell complete custom-engineered
systems, as well as standard individual components, for the preparation of
recycled and virgin fibers. We offer over 80 products relating to all aspects of
the stock-preparation process. Our principal stock-preparation products include:
Screening Systems. We offer a full range of screening systems, including
coarse screens that remove metals and sand from the pulp mixture, and fine
screens that remove microscopic particles such as glue and plastic. In late
2000, we introduced a patented new screening technology that, in certain
applications, can produce up to 40% cleaner pulp without decreasing capacity. As
a result, we believe our new screening systems are the most technologically
advanced currently on the market. We also offer screen baskets, which are
essentially the consumable portion of the screen. Screen baskets typically are
replaced every 9 to 12 months.
De-inking Systems. We offer de-inking systems that inject small air
bubbles into the bottom of the pulp mixture. The ink in the pulp mixture bonds
to the air bubbles and rises to the surface where the inky film is removed. We
believe that our de-inking systems remove ink more effectively with less fiber
loss than de-inking systems offered by our competitors.
Pulpers. We offer both high- and low-consistency pulpers that blend waste
paper with water and certain chemicals to form pulp mixtures without contaminant
breakdown, thus allowing easier contaminant removal in later stages of the
process. Our high-consistency pulpers generate pulp mixtures comprised of
approximately 85% water and 15% fiber, and our low-consistency pulpers generate
pulp mixtures comprised of approximately 94% water and 6% fiber.
Cleaning Systems. We offer both forward and reverse cleaners. Forward
cleaners remove heavy contaminants such as metal and sand from the pulp mixture,
and reverse cleaners remove light contaminants such as glue and plastic.
Washing Systems. We offer counter-current washing systems that remove ink
and ash from the pulp mixture by injecting water counter current to the flow and
drawing contaminants out with the water.
Trash Removal Systems. We offer trash removal systems that remove larger
debris and impurities by screening them from the pulp mixture.
Thickeners. We offer four principal types of thickeners that remove water
from the pulp mixture, thereby increasing the consistency of the mixture.
Thicker pulp mixtures are necessary to break up ink particles in the dispersers.
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Dispersers. We offer mechanical dispersers that break down ink particles
that were not removed in the de-inking system into microscopic particles, or
combine them to form sizes that can be removed in subsequent processing.
In addition, we design, develop, manufacture, and sell products for the
virgin pulping process, including:
Chemi-Washers(R). We offer Chemi-Washers, horizontal counter-current belt
washers that are used to remove lignin and process chemicals in the virgin
pulping process.
Evaporators, Recausticizing, and Condensate Treatment Systems. We offer
evaporators, recausticizing, and condensate treatment systems that are used in
the virgin pulping process to concentrate and recycle process chemicals and to
remove condensate gases.
Bleaching Systems. We offer oxygen-bleaching systems that increase the
brightness of the pulp without using chlorine bleach or moving parts.
Revenues from our stock-preparation equipment and systems product line
were $111.1 million, $113.0 million, and $98.9 million in 2001, 2000, and 1999,
respectively.
Accessories
We develop, design, manufacture, and sell a wide range of accessories that
continuously clean the rolls of a papermaking machine, remove the paper sheets
and webs from the rolls, automatically cut the paper sheets and webs at
sheet-breaks, and eliminate curl from the paper sheets and webs. These functions
are critical for paper manufacturers because they reduce machine breakdowns and
downtime, extend the life of consumable fabrics, and improve paper quality. Our
principal accessories include:
Doctor Systems. A doctor system cleans a paper machine roll by placing a
blade at an angle against the tangent of the roll. The system is typically
comprised of a doctor (a structure supporting the blade and holder), a blade
holder, and a doctor blade. A large paper machine may have as many as 100
doctors.
Doctor Holders. A doctor holder is the part of a doctor system that holds
the doctor blade to ensure constant pressure against the roll. It is critical
that the entire length of the roll is doctored consistently, and the holder is
designed to ensure that the force of the blade is evenly applied.
Doctor Blades. We offer doctor blades made of metal, bi-metal, or
synthetic materials, customized to each individual application. We offer doctor
blades that keep the rolls of a papermaking machine clean by removing stock
accumulations, water rings, fuzz, pitch, and filler buildup. We also offer
doctor blades that are specially designed to remove the paper sheet or web from
the roll during sheetbreaks and startups. In addition, we offer creping doctor
blades, which are instrumental in the production of tissue and toweling, and
coater blades, which evenly spread coatings that add gloss to the paper sheet. A
typical doctor blade has a life ranging from eight hours to two months depending
on the application.
Revenues from our accessories product line were $63.4 million, $70.3
million, and $74.8 million in 2001, 2000, and 1999, respectively.
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Water-management Systems
We design, develop, manufacture, and sell water-management systems used to
clean papermaking machine fabrics, drain water from pulp mixtures, form the
sheet or web, and filter the process water for reuse. Our principal
water-management systems include:
Shower and Fabric-conditioning Systems. Paper machine fabrics convey the
paper web through the forming, pressing, and drying sections of the paper
machine. The average paper machine has between 3 and 12 fabrics. These fabrics
can easily become contaminated with fiber, fillers, pitch, and dirt that can
have a detrimental effect on paper machine performance and paper quality. Our
shower and fabric-conditioning systems assist in the removal of these
contaminants. We design and build shower systems that clean the fabrics with
oscillating showers using both high-pressure and low-pressure water, together
with chemical additives. We design our showers to clean the fabrics using a
minimum amount of water, thereby reducing fresh water usage. There are generally
between 10 and 30 showers used on a paper machine. We also design and
manufacture vacuum-augmented dewatering boxes for removing shower water and
contaminants from the fabrics.
Formation Systems. A sheet of paper is formed on the fourdrinier section
of a paper machine. We supply all the structures located under the forming
fabric to remove water from the pulp mixture. These structures consist of the
forming board, gravity foils, low- and high-vacuum structures, and vacuum
control systems. Our patented VID formation system creates improved sheet or web
formation by allowing the papermaker to increase speed, reduce fiber cost,
improve formation and sheet properties, and reduce chemical usage.
Water-filtration Systems. The paper industry is one of the largest
industrial users of fresh water. We offer water-filtration systems consisting of
single in-line pressure filters, multiple-barrel pressure filters, whitewater
gravity strainers, vacuum-augmented fiber recovery strainers, and side-hill
screens that remove contaminants from the process water before reuse and recover
reusable fiber for recycling back into the pulp mixture. Our filtration systems
also allow our customers to reuse their process water within the paper mill,
thereby reducing their fresh water usage. The newest addition to our
water-filtration system product line is the Petax(TM) fine filtration system.
The Petax system can remove particles as small as 1 to 20 microns in size.
Revenues from our water-management product line were $37.8 million, $42.4
million, and $42.6 million in 2001, 2000, and 1999, respectively.
Composite and Fiber-based Products
Our Composite and Fiber-based Products segment consists of two product
lines: composite building products and fiber-based granular products.
We develop, design, and manufacture composite building products made from
papermaking byproducts, reclaimed plastic, and other material. As an alternative
to traditional products such as pressure-treated lumber, cedar, and slate and
clay roof tiles, composite building products have numerous applications such as
decking and roofing.
We currently offer the following composite building products:
Decking. Our decking system includes deck boards as well as railings. Our
decking products feature a brushed appearance, which we believe offers a more
attractive alternative to the homeowner than the leading decking products.
Roof Tiles. Our composite roof tile products are made to resemble
traditional clay tiles. In addition, we have developed a slate roof tile
product. Traditional clay and slate tiles are heavy, brittle, and susceptible to
breakage. Our composite tile products are lighter and less susceptible to
breakage than traditional clay and slate tiles, which provides significant
savings in labor and other costs. Based on internal testing, we believe that our
composite roof tile products will achieve a Class A fire resistance rating when
used in conjunction with certain underlayments.
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Our composite building product line contributed revenues of $2.0 million
in 2001, and $0.2 million in 2000, the first year that we recognized revenues
from this product line.
We also employ patented technology to produce biodegradable absorbing
granules from papermaking byproducts. These granules are used primarily as
agricultural carriers used to deliver agricultural chemicals for professional
turf, home lawn and garden, agricultural row-crop, and mosquito-control
applications. In addition, our granules are used in our composite building
products.
Our fiber-based granular product line contributed revenues of $5.8
million, $6.6 million, and $7.2 million in 2001, 2000, and 1999, respectively.
(ii) and (xi) New Products; Research and Development
--------------------------------------
We seek to develop a broad range of equipment for all facets of the
markets we serve. Over the next several years, we expect to focus our research
and development efforts on the development of fiber-based composite building
products and the technological advancement of our paper recycling, accessories,
and water-management equipment.
Our research and development expenses were $6.6 million, $7.7 million, and
$7.3 million in 2001, 2000, and 1999, respectively.
Pulp and Papermaking Equipment and Systems
An important element of our growth strategy for this segment is the
development or licensing of new complementary products. We have state-of-the-art
research facilities and collaborative relationships with several of our pulp and
paper industry customers.
For recycling equipment, we maintain a stock-preparation pilot laboratory
adjacent to our manufacturing facility in France, which contains all the
equipment necessary to replicate a commercial stock-preparation system. In this
laboratory, a customer's wastepaper can be tested to determine the exact system
configuration that would be recommended for its future facility. In February
2002, we announced that we would be closing a similar, redundant pilot
laboratory in our Ohio facility. The testing laboratories are also used to
evaluate prototype equipment, enabling research teams to quickly and thoroughly
evaluate new designs. In addition, we work closely with our customers in the
development of products, typically field-testing new products on our customers'
papermaking machines using pilot systems. For our other product lines, we have
one facility that houses an operation for continued development of accessory
products, while another is devoted to the development of new water-management
products.
Composite and Fiber-based Products
We are developing fiber-based composite products for the building
industry, for use in applications such as decking and roofing. We have a
research and development facility in Massachusetts that is focused on developing
new composite formulations, and enhancing the composition, color, and other
attributes of our composite building products. In 2001, we introduced two new
fade-resistant colors, cedar and mahogany, as well as an easier-to-install
railing system.
We continue research and development efforts to develop high-value
products using materials recovered from papermaking byproducts, including a
low-bulk density product for home lawn and garden applications. We operate a
manufacturing plant in Green Bay, Wisconsin, which processes papermaking
byproducts provided by a nearby paper recycling mill into cellulose-based
granules.
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(iii) Raw Materials
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Pulp and Papermaking Equipment and Systems
Raw materials, components, and supplies for all of our significant
products are available either from a number of different suppliers or from
alternative sources that could be developed without a material adverse effect on
our business.
Composite and Fiber-based Products
Raw materials, components, and supplies for our composite building
products are available either from a number of different suppliers or from
alternative sources that could be developed without a material adverse effect on
our business. The raw material used in the manufacture of our fiber-based
granules is obtained from a single paper mill. The mill has the exclusive right
to supply papermaking byproducts to our existing granulation plant in Green Bay,
Wisconsin, under a contract that expires in December 2003, subject to successive
mutual two-year extensions. Although we believe that our relationship with the
mill is good, the mill may not agree to renew the contract upon its termination.
To date, we have experienced no difficulties in obtaining these materials.
(iv) Patents, Licenses, and Trademarks
---------------------------------
We protect our intellectual property rights by applying for and obtaining
patents when appropriate. We also rely on technical know-how, trade secrets, and
trademarks to maintain our competitive position.
Pulp and Papermaking Equipment and Systems
We have numerous U.S. and foreign patents, including foreign counterparts
to our U.S. patents, expiring on various dates ranging from 2002 to 2018.
Third-parties have certain rights governing two of our patents that we jointly
developed. We currently hold an exclusive long-term, worldwide license for a
patent on technology that another third-party developed. We have joint ownership
with that third-party of a second patent on technology that was jointly
developed.
We maintain a worldwide network of licensees and cross-licensees of
products with other companies servicing the pulp, papermaking, converting, and
paper recycling industries. We hold an exclusive worldwide license for certain
de-inking cells under an agreement that extends until 2007. We also have license
arrangements with several companies with regard to accessory equipment.
Composite and Fiber-based Products
We have filed several U.S. patent applications for various products and
processes relating to papermaking byproducts and composite building products,
and expect to file additional patent applications in the future.
We have granted a third-party nonexclusive licenses under two of our
patents to sell fiber-based granules produced at an existing site for sale in
the oil and grease absorption and catbox filler markets. In addition, we
currently hold several U.S. patents, expiring at various dates ranging from 2004
to 2016, relating to various aspects of the processing of fiber-based granular
materials and the use of these materials in the agricultural, professional turf,
home lawn and garden, general absorption, oil and grease absorption, and catbox
filler markets. We also have foreign counterparts to these U.S. patents in
Canada and in various European countries, and have additional patents pending in
Canada and certain European countries.
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(v) Seasonal Influences
-------------------
Pulp and Papermaking Equipment and Systems
There are no material seasonal influences on the segment's sales of
products and services.
Composite and Fiber-based Products
There are no material seasonal influences on the segment's sales of
products and services.
(vi) Working Capital Requirements
----------------------------
There are no special inventory requirements or credit terms extended to
customers that would have a material adverse effect on our working capital.
(vii) Dependency on a Single Customer
-------------------------------
No single customer accounted for more than 10% of the Company's revenues
in any of the past three years.
(viii) Backlog
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Our backlog of firm orders for the Pulp and Papermaking Equipment and
Systems segment was $30.9 million and $56.9 million at year-end 2001 and 2000,
respectively. The backlog of firm orders for the Composite and Fiber-based
Products segment was $0.3 million and $0.4 million at year-end 2001 and 2000,
respectively. We anticipate that substantially all of the backlog at December
29, 2001, will be shipped or completed during the next twelve months. Certain of
these orders may be canceled by the customer upon payment of a cancellation fee.
(ix) Government Contracts
--------------------
Not applicable.
(x) Competition
-----------
We face significant competition in each of our principal markets. We
compete primarily on the basis of quality, price, service, technical expertise,
and product innovation. We believe the reputation that we and our predecessors
have established over more than 100 years for quality products and in-depth
process knowledge provides us with a competitive advantage. In addition, a
significant portion of our business is generated from our existing worldwide
customer base. To maintain this base, we have emphasized technology, service,
and a problem-solving relationship with our customers.
Pulp and Papermaking Equipment and Systems
We are a leading supplier of stock-preparation equipment for the
preparation of wastepaper to be used in the production of recycled paper. There
are several major competitors that supply various pieces of equipment for this
process. Our principal competitors in this market are Voith Paper GmbH, Groupe
Laperriere & Verrault Inc., Ahlstrom Machine Company, Kvaerner Pulping
Technologies, Metso Corporation, and Maschinenfabrik Andritz AG. We compete in
this market primarily on the basis of technical expertise, product innovation,
and price. Other competitors specialize in segments within the white- and
brown-paper markets.
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We are a leading supplier of specialty accessory equipment for papermaking
machines. Our principal competitors in this market on a worldwide basis are
ESSCO Inc. and Metso Corporation. Because of the high capital costs of
papermaking machines and the role of our accessories in maintaining the
efficiency of these machines, we generally compete in this market on the basis
of service, technical expertise, performance, and price.
Various competitors exist in the formation, conditioning and cleaning
systems, and filtration systems markets. Asten/Johnson Foils is a major supplier
of formation tables, while a variety of smaller companies compete within the
conditioning and cleaning systems and filtration systems markets. In each of
these markets, we generally compete on the basis of process knowledge,
application experience, product quality, service, and price.
Composite and Fiber-based Products
We encounter intense competition in the sale of our composite building
products. Our principal competitors for composite building products are
producers of traditional products such as pressure-treated lumber, and clay,
slate, and cedar shake roof tiles. Many of the suppliers of traditional products
have well- established ties in the building and construction industry. In
addition, several suppliers have entered the composite building products market
and competition has become intense. The leading providers of composite decking
products include Trex Company, Inc., Louisiana-Pacific Corporation, and Advanced
Environmental Recycling Technologies Inc. The leading composite roof tile
suppliers include Owens Corning and Royal Group Technologies Limited. We compete
in this market on the basis of product performance, brand awareness, and price.
We believe that we are currently the only producer of fiber-based
agricultural carriers. In this market, our principal competitors in the U.S. are
producers of clay-based agricultural carriers for row crops and professional
turf protection, and producers of corncob-based granules traditionally used in
the home lawn and garden and professional turf markets. The principal
competitive advantages of our agricultural carrier product are that it is
virtually dust-free and is more uniform in absorption and particle-size
distribution than clay- and corncob-based carriers. In addition, our granules
are chemically neutral, requiring little or no chemical activation. We compete
in this market on the basis of product quality and price.
(xii) Environmental Protection Regulations
------------------------------------
We believe that our compliance with federal, state, and local
environmental protection regulations will not have a material adverse effect on
our capital expenditures, earnings, or competitive position.
(xiii) Number of Employees
-------------------
As of December 29, 2001, we employed approximately 1,160 people.
Approximately 25 employees at our operation in Pointe Claire, Quebec, Canada,
are represented by a labor union under a collective bargaining agreement
expiring August 31, 2002. Approximately 29 employees at our operation in
Guadalajara, Mexico, are represented by a labor union under an annual collective
bargaining agreement. In addition, certain employees of our subsidiaries in
France and England are represented by trade unions. We consider our relations
with employees and unions to be good.
(d) Financial Information About Geographic Areas
--------------------------------------------
Financial information about exports by domestic operations and about
foreign operations is summarized in Note 14 to Consolidated Financial Statements
in our 2001 Annual Report to Shareholders, which information is incorporated in
this document by reference.
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(e) Executive Officers of the Registrant
------------------------------------
Present Title (Fiscal Year First Became
Name Age Executive Officer)
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William A. Rainville 60 Chairman of the Board, President, and Chief
Executive Officer (1991)
Thomas M. O'Brien 50 Executive Vice President, Chief Financial
Officer, and Treasurer (1994)
Jonathan W. Painter 43 Executive Vice President (1997)
Edward J. Sindoni 57 Senior Vice President (1994)
Sandra L. Lambert 47 Vice President, General Counsel, and
Secretary (2001)
Michael J. McKenney 40 Vice President, Finance (Chief Accounting
Officer) (2002)
Mr. Rainville has been president and chief executive officer since our
incorporation in 1991, a member of our board of directors since 1992, and became
chairman of our board in August 2001. Prior to August 2001, Mr. Rainville also
held various managerial positions with Thermo Electron, most recently serving as
chief operating officer, recycling and resource recovery, a position he held
since 1998, and for five years prior to that, as a senior vice president. Prior
to joining Thermo Electron, Mr. Rainville held positions at Drott Manufacturing,
Paper Industry Engineering, and Sterling Pulp and Paper.
Mr. O'Brien has been our executive vice president since September 1998 and
became chief financial officer and treasurer in August 2001. He also served as
vice president, finance, from 1991 until September 1998. Prior to joining us,
Mr. O'Brien held various finance positions at Racal Interlan, Inc.; Prime
Computer; Compugraphic Corporation; and the General Electric Company.
Mr. Painter has been our executive vice president since September 1997 and
has been chief executive officer of our composite building products business
since May 2001. He served as our treasurer and treasurer of Thermo Electron from
1994 until 1997. Prior to 1994, Mr. Painter also held various managerial
positions at Thermo Electron.
Mr. Sindoni has been our senior vice president since 2001 and, prior to
that, served as a vice president since 1992. Prior to joining us in 1987, he had
a 21-year career with the General Electric Company.
Ms. Lambert has been our vice president and general counsel since August
2001, and secretary since our incorporation in 1991. Prior to joining us, she
was a vice president and the secretary of Thermo Electron from 1999 and 1990,
respectively, and was a member of Thermo Electron's legal department.
Mr. McKenney became our vice president, finance, and chief accounting
officer in January 2002, and has been corporate controller since 1997. Mr.
McKenney was controller of Kadant AES, our division acquired from Albany
International Inc., from 1993 to 1997. Prior to 1993, Mr. McKenney held various
financial positions at Albany International.
Item 2. Properties
----------
We believe that our facilities are in good condition and are suitable and
adequate for our present operations and that, with respect to leases expiring in
the near future, suitable space is readily available if any leases are not
extended. The location and general character of our principal properties by
segment as of December 29, 2001, are as follows:
Pulp and Papermaking Equipment and Systems
We own approximately 1,000,000 square feet and lease approximately 100,000
square feet, under leases expiring at various dates ranging from 2002 to 2008,
of manufacturing, engineering, and office space. Our principal engineering and
manufacturing space is located in Vitry-le-Francois, France; Auburn,
Massachusetts; Rayville, Louisiana; Queensbury, New York; Middletown, Ohio;
Guadalajara, Mexico; Pointe Claire, Quebec, Canada; Bury, England; and Hindas,
Sweden.
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Composite and Fiber-based Products
We own approximately 26,000 square feet and lease approximately 130,000
square feet, under leases expiring at various dates ranging from 2002 to 2004,
of manufacturing, engineering, and office space located principally in Green
Bay, Wisconsin; and Bedford, Massachusetts.
Item 3. Legal Proceedings
-----------------
Not applicable.
Item 4. Submission of Matters to a Vote of Security Holders
---------------------------------------------------
Not applicable.
PART II
Item 5. Market for Registrant's Common Equity and Related Stockholder Matters
---------------------------------------------------------------------
Information concerning the market and market price for the Registrant's
Common Stock, $.01 par value, and dividend policy is included under the sections
labeled "Common Stock Market Information" and "Dividend Policy" in our 2001
Annual Report to Shareholders, which data is incorporated in this document by
reference.
Item 6. Selected Financial Data
-----------------------
This information is included under the sections labeled "Selected
Financial Information" and "Dividend Policy" in our 2001 Annual Report to
Shareholders, which information is incorporated in the document by reference.
Item 7. Management's Discussion and Analysis of Financial Condition and Results
of Operations
-----------------------------------------------------------------------
This information is included under the heading "Management's Discussion
and Analysis of Financial Condition and Results of Operations" in our 2001
Annual Report to Shareholders, which information is incorporated in this
document by reference.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk
----------------------------------------------------------
These disclosures are included under the caption "Management's Discussion
and Analysis of Financial Condition and Results of Operations" in our 2001
Annual Report to Shareholders, which disclosures are incorporated in this
document by reference.
Item 8. Financial Statements and Supplementary Data
-------------------------------------------
Our Consolidated Financial Statements as of December 29, 2001, and
Supplementary Data are included in our 2001 Annual Report to Shareholders and
are incorporated in this document by reference.
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure
----------------------------------------------------------------
Not applicable.
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PART III
Item 10. Directors and Executive Officers of the Registrant
--------------------------------------------------
The information concerning directors is listed under the caption "Election
of Directors" in our definitive proxy statement to be filed with the Securities
and Exchange Commission (SEC), not later than 120 days after the close of the
fiscal year. This information is incorporated in this document by reference.
We are also required under Item 405 of Regulation S-K, to provide
information concerning delinquent filers of reports under Section 16 of the
Securities and Exchange Act of 1934, as amended. This information is listed
under the heading "Section 16(a) Beneficial Ownership Reporting Compliance"
under the caption "Stock Ownership" in our definitive proxy statement to be
filed with the SEC, not later than 120 days after the close of the fiscal year.
Item 11. Executive Compensation
----------------------
This information is listed under the caption "Executive Compensation" in
our definitive proxy statement to be filed with the SEC, not later than 120 days
after the close of the fiscal year. This information is incorporated in this
document by reference.
Item 12. Security Ownership of Certain Beneficial Owners and Management
--------------------------------------------------------------
This information is listed under the caption "Stock Ownership" in our
definitive proxy statement to be filed with the SEC, not later than 120 days
after the close of the fiscal year. This information is incorporated in this
document by reference.
Item 13. Certain Relationships and Related Transactions
----------------------------------------------
This information is listed under the caption "Certain Relationships and
Related Transactions" in our definitive proxy statement to be filed with the
SEC, not later than 120 days after the close of the fiscal year. This
information is incorporated in this document by reference.
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PART IV
Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K
----------------------------------------------------------------
(a,d) Financial Statements and Schedules
----------------------------------
(1) The consolidated financial statements set forth in the list below are
filed as part of this Report.
(2) The consolidated financial statement schedule set forth in the list
below is filed as part of this Report.
(3) Exhibits filed herewith or incorporated in this document by reference
are set forth in Item 14(c) below.
List of Financial Statements and Schedules Referenced in this Item 14
---------------------------------------------------------------------
Information incorporated by reference from Exhibit 13 filed herewith:
Consolidated Statement of Income
Consolidated Balance Sheet
Consolidated Statement of Cash Flows
Consolidated Statement of Comprehensive Income and Shareholders'
Investment
Notes to Consolidated Financial Statements
Report of Independent Public Accountants
Financial Statement Schedules filed herewith:
Schedule II: Valuation and Qualifying Accounts
All other schedules are omitted because they are not applicable or not
required, or because the required information is shown either in the
financial statements or in the notes thereto.
(b) Reports on Form 8-K
-------------------
None.
(c) Exhibits
--------
See Exhibit Index on the page immediately preceding exhibits.
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SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
Date: March 20, 2002 KADANT INC.
By: /s/ William A. Rainville
---------------------------------------
William A. Rainville
President, Chief Executive Officer, and
Chairman of the Board
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
Registrant and in the capacities indicated, as of March 20, 2002.
Signature Title
- --------------------------------------------------------------------------------
By: /s/ William A. Rainville President, Chief Executive Officer, and
------------------------ Chairman of the Board
William A. Rainville
By: /s/ Thomas M. O'Brien Executive Vice President, Chief
----------------------- Financial Officer, and Treasurer
Thomas M. O'Brien
By: /s/ Michael J. McKenney Vice President, Finance (Chief
----------------------- Accounting Officer)
Michael J. McKenney
By: /s/ John M. Albertine Director
-----------------------
John M. Albertine
By: /s/ Francis L. McKone Director
-----------------------
Francis L. McKone
By: /s/ Donald E. Noble Director
-----------------------
Donald E. Noble
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Report of Independent Public Accountants
----------------------------------------
To the Shareholders and Board of Directors of Kadant Inc.:
We have audited, in accordance with auditing standards generally accepted
in the United States, the consolidated financial statements included in Kadant
Inc.'s (formerly named Thermo Fibertek Inc.) Annual Report to Shareholders
incorporated by reference in this Form 10-K, and have issued our report thereon
dated February 8, 2002. Our audits were made for the purpose of forming an
opinion on those basic statements taken as a whole. The schedule listed in Item
14 on page 14 is the responsibility of the Company's management and is presented
for purposes of complying with the Securities and Exchange Commission's rules
and is not part of the basic consolidated financial statements. This schedule
has been subjected to the auditing procedures applied in the audits of the basic
consolidated financial statements and, in our opinion, fairly states in all
material respects the consolidated financial data required to be set forth
therein in relation to the basic consolidated financial statements taken as a
whole.
Arthur Andersen LLP
Boston, Massachusetts
February 8, 2002
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SCHEDULE II
KADANT INC.
Valuation and Qualifying Accounts
(In thousands)
Balance at Provision Accounts Balance
Beginning Charged to Accounts Written at End
Description of Year Expense Recovered Off Other (a) of Year
- ----------------------------------------------------------------------------------------------------------
Allowance for Doubtful Accounts
Year Ended December 29, 2001 $2,182 $1,146 $ 31 $ (876) $ 32 $2,515
Year Ended December 30, 2000 $1,659 $1,197 $ 7 $ (616) $ (65) $2,182
Year Ended January 1, 2000 $2,231 $ 234 $ - $ (586) $ (220) $1,659
Provision
Charged to
Balance at Expense Activity Balance
Beginning (Reversed to Charged to Currency at End
Description of Year Income) Reserve Translation of Year
- ------------------------------------------------------------------------------------------------------------
Accrued Restructuring Costs (b)
Year Ended December 29, 2001 $ 32 $ 673 $ (648) $ (1) $ 56
Year Ended December 30, 2000 $ 669 $ (506) $ (33) $ (98) $ 32
Year Ended January 1, 2000 $ 34 $ 2,257 $(1,356) $ (266) $ 669
(a) Includes allowances of businesses acquired and sold during the year, as described in Note 4 to Consolidated
Financial Statements in our 2001 Annual Report to Shareholders, and the effect of foreign currency translation.
(b) The nature of activity in this account is described in Note 12 to Consolidated Financial Statements in our
2001 Annual Report to Shareholders.
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EXHIBIT INDEX
Exhibit
Number Description of Exhibit
- --------------------------------------------------------------------------------
3.1 Restated Certificate of Incorporation of the Registrant (filed as
Exhibit 3.1 to the Registrant's Quarterly Report on Form 10-Q for
the quarter ended June 30, 2001 [File No. 1-11406] and
incorporated herein by reference).
3.2 By-Laws of the Registrant, as amended and restated (filed as
Exhibit 3.2 to the Registrant's Quarterly Report on Form 10-Q for
the quarter ended June 30, 2001 [File No. 1-11406] and
incorporated herein by reference).
4.1 Rights Agreement, dated as of July 16, 2001, between the
Registrant and American Stock Transfer & Trust Company, which
includes as Exhibit A the Form of Certificate of Designations, as
Exhibit B the Form of Rights Certificate, and as Exhibit C the
Summary of Rights to Purchase Preferred Stock (filed as Exhibit
4.1 to the Registrant's Current Report on Form 8-K [File No.
1-11406], filed with the Commission on July 17, 2001, and
incorporated herein by reference).
4.2 Fiscal Agency Agreement dated as of July 16, 1997, among the
Registrant, Thermo Electron Corporation, and Bankers Trust
Company as fiscal agent, relating to $153 million principal
amount of 4 1/2% Convertible Subordinated Debentures due 2004
(filed as Exhibit 4 to the Registrant's Quarterly Report on Form
10-Q for the quarter ended June 28, 1997 [File No. 1-11406] and
incorporated herein by reference).
10.1 Form of Indemnification Agreement between the Registrant and its
directors and officers (filed as Exhibit 10.1 to the Registrant's
Quarterly Report on Form 10-Q for the quarter ended June 30, 2001
[File No. 1-11406] and incorporated herein by reference).
10.2 Form of Executive Retention Agreement between the Registrant and
its executive officers - each executive officer has a two-year
agreement, except Mr. William A. Rainville, who has a three-year
agreement, and Mr. Michael J. McKenney, who has a one-year
agreement (filed as Exhibit 10.2 to the Registrant's Quarterly
Report on Form 10-Q for the quarter ended June 30, 2001 [File No.
1-11406] and incorporated herein by reference).
10.3 Plan and Agreement of Distribution, dated as of August 3, 2001,
between the Registrant and Thermo Electron Corporation (filed as
Exhibit 99.3 to the Registrant's Current Report on Form 8-K [File
No. 1-11406] filed with the Commission on August 6, 2001, and
incorporated in this document by reference).
10.4 First Amendment to Plan and Agreement of Distribution, dated as
of December 27, 2001, between the Registrant and Thermo Electron
Corporation.
10.5 Tax Matters Agreement, dated as of August 8, 2001, between the
Registrant and Thermo Electron Corporation (filed as Exhibit 99.4
to the Registrant's Current Report on Form 8-K [File No. 1-11406]
filed with the Commission on August 6, 2001, and incorporated
herein by reference).
10.6 Amended and Restated Nonqualified Stock Option Plan of the
Registrant (filed as Exhibit 10.4 to the Registrant's Quarterly
Report on Form 10-Q for the quarter ended July 3, 1999 [File No.
1-11406] and incorporated herein by reference).
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EXHIBIT INDEX
Exhibit
Number Description of Exhibit
- --------------------------------------------------------------------------------
10.7 Amended and Restated Equity Incentive Plan of the Registrant
(filed as Exhibit 10 to the Registrant's Quarterly Report on Form
10-Q for the quarter ended September 30, 2001 [File No. 1-11406]
and incorporated herein by reference).
10.8 Amended and Restated Deferred Compensation Plan for Directors of
the Registrant (filed as Exhibit 10.5 to the Registrant's
Quarterly Report on Form 10-Q for the quarter ended July 3, 1999
[File No. 1-11406] and incorporated herein by reference).
10.9 Amended and Restated Directors' Stock Option Plan of the
Registrant (filed as Exhibit 10.6 to the Registrant's Quarterly
Report on Form 10-Q for the quarter ended July 3, 1999 [File No.
1-11406] and incorporated herein by reference).
13 Annual Report to Shareholders for the year ended December 29,
2001 (only those portions incorporated herein by reference).
21 Subsidiaries of the Registrant.
23 Consent of Arthur Andersen LLP.
99 Temporary Note 3T to Article 3 of Regulation S-X.