KADANT INC - FORM 8-K - EX-99 - KAI FORM 8-K EXHIBIT 99 08-01-2017

Attached files

file	filename
8-K - KAI FORM 8-K 08-01-2017 - KADANT INC	kaiform8k08012017er.htm

Exhibit 99

KADANT INC.

One Technology Park Drive

Westford, MA 01886

NEWS

Kadant Reports 2017 Second Quarter Results

Raises Revenue and EPS Guidance for the Second Half of 2017

WESTFORD, Mass. - August 1, 2017 - Kadant Inc. (NYSE: KAI) reported its financial results for the second quarter ended July 1, 2017.

Second Quarter 2017 Highlights


•	GAAP diluted EPS decreased 4% to $0.72


•	Adjusted diluted EPS increased 18% to a record $1.04


•	Net income decreased 3% to $8 million


•	Adjusted EBITDA increased 5% to a record $19 million and represented 17% of revenue


•	Revenue decreased 1% to $110 million


•	Gross margin was 47.9%


•	Bookings increased 23% to a record $120 million


•	Cash flows from operations increased 73% to $24 million

Note: Adjusted diluted EPS, adjusted EBITDA, and adjusted EBITDA margin are non-GAAP financial measures that exclude certain items as detailed later in this press release.

Management Commentary

“Following our strong first quarter of 2017, we had another outstanding quarter with record bookings, adjusted diluted EPS, and adjusted EBITDA,” said Jonathan Painter, president and chief executive officer of Kadant. “Our adjusted diluted EPS performance achieved a new milestone and was driven by a strong gross margin, which benefited from near-record parts and consumables revenue. Our adjusted diluted EPS excludes the costs related to our acquisition of the forest products business of NII FPG Company (NII), which we completed in early July. We are working hard on the integration of this business, which is proceeding quite well. The more we learn about NII and its management team the more optimistic we are about our future together.

“Our record bookings of $120 million in the second quarter extended our strong bookings performance beyond the previous two quarters and was led by our Stock-Preparation and Wood-Processing product lines, each of which achieved over 30 percent growth in bookings compared to the same period last year. From a geographic perspective, bookings in China and Europe were strong in the second quarter for both capital and parts and consumables products. Another highlight of the quarter was our cash flows from operations of $24 million, which were the second highest in our history.”

Second Quarter 2017 Results

Revenue decreased one percent compared to the second quarter of 2016 to $110.2 million, including a $2.7 million decrease from the unfavorable effect of foreign currency translation. Excluding the impact of foreign currency translation, revenue was up one percent compared to the second quarter of 2016. Gross margin was 47.9 percent. Net income was $8.1 million, or $0.72 per diluted share, compared to $8.3 million, or $0.75 per diluted share, in the second quarter of 2016, and included an $0.8 million, or $0.07 per diluted share, decrease from the unfavorable effects of foreign currency translation. Adjusted diluted EPS increased 18 percent to $1.04 in the second quarter of 2017, compared to $0.88 in the second quarter of 2016. Adjusted diluted EPS in the second quarter of 2017 excludes $0.32 of acquisition costs. Adjusted diluted EPS in the second quarter of 2016 excludes $0.12 of amortization from acquired profit in inventory and backlog and $0.01 of acquisition costs. Adjusted EBITDA increased five percent to $18.8 million compared to $17.9 million in the second quarter of 2016. Adjusted EBITDA excludes $4.1 million of acquisition costs in the second quarter of 2017 and $0.3 million of acquisition costs and $1.9 million from

the amortization of acquired profit in inventory and backlog in the second quarter of 2016. Bookings increased 23 percent to a record $120.3 million compared to $98.1 million in the second quarter of 2016, including a $3.5 million decrease from the unfavorable effect of foreign currency translation.

Guidance

“We are increasing our guidance for the second half of 2017 due to both the improved outlook for our existing business, as well as the acquisition of NII,” Mr. Painter continued. “We expect to report full year revenue of $488 to $494 million, revised from our previous guidance of $427 to $437 million. We expect to achieve GAAP diluted EPS of $3.18 to $3.26 in 2017, revised from our previous guidance of $3.27 to $3.37. The revised 2017 guidance includes acquisition costs of $4.8 million, or $0.36 per diluted share, and amortization expense associated with acquired profit in inventory and backlog of $7.0 million, or $0.45 per diluted share. Excluding these acquisition-related expenses, we expect adjusted diluted EPS of $3.99 to $4.07 for 2017. For the third quarter of 2017, we expect GAAP diluted EPS of $0.83 to $0.87 on revenue of $139 to $142 million, including $0.02 of acquisition costs and $0.27 of amortization expense associated with acquired inventory and backlog. Excluding these acquisition-related expenses, we expect adjusted diluted EPS of $1.12 to $1.16 for the third quarter of 2017.”

Conference Call

Kadant will hold a webcast with a slide presentation for investors on Tuesday, August 1, 2017, at 4:30 p.m. eastern time to discuss its second 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 58886672. 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 September 1, 2017.

Shortly after the webcast, Kadant will post its updated general investor presentation incorporating the second 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, adjusted operating income, adjusted net income, adjusted diluted earnings per share (EPS), adjusted earnings before interest, taxes, depreciation, and amortization (adjusted EBITDA), and adjusted EBITDA margin.

We believe these non-GAAP financial measures, when taken together with the corresponding GAAP financial measures, provide meaningful supplemental information regarding our performance by excluding certain items that may not be indicative of our core business, operating results, or future outlook. We believe that the inclusion of such measures helps investors gain an understanding of our underlying operating performance and future prospects, consistent with how management measures and forecasts our performance, especially when comparing such results to previous periods or forecasts and to the performance of our competitors. Such measures are also used by us in our financial and operating decision-making and for compensation purposes. We also believe this information is responsive to investors' requests and gives them an additional measure of our performance.

The non-GAAP financial measures included in this press release are not meant to be considered superior to or a substitute for the results of operations prepared in accordance with GAAP. In addition, the non-GAAP financial measures included in this press release have limitations associated with their use as compared to the most directly comparable GAAP measures, in that they may be different from, and therefore not comparable to, similar measures used by other companies.

Revenue included a $2.7 million and a $3.8 million unfavorable foreign currency translation effect in the second quarter and first six months of 2017, respectively, compared to the same periods in 2016. Revenue in the first six months of 2017 also included $13.3 million from an acquisition completed in 2016. We present increases or decreases in revenue excluding the effect of acquisitions and foreign currency translation to provide investors insight into underlying revenue trends.

Adjusted operating income, adjusted EBITDA, adjusted EBITDA margin, adjusted net income, and adjusted diluted EPS exclude acquisition costs, amortization of acquired profit in inventory and backlog, and other income. 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 or income or none at all.

Adjusted operating income, adjusted EBITDA, and adjusted EBITDA margin exclude:


•	A pre-tax gain on the sale of assets of $0.3 million in the first six months of 2016.


•	Pre-tax acquisition costs of $4.1 million in the second quarter and $4.4 million in the first six months of 2017. Pre-tax acquisition costs of $0.3 million in the second quarter and $1.7 million in the first six months of 2016.


•	Pre-tax expense related to acquired profit in inventory and backlog of $1.9 million in the second quarter and first six months of 2016.

Adjusted net income and adjusted diluted EPS exclude:


•	An after-tax gain on the sale of assets of $0.2 million ($0.3 million net of tax of $0.1 million) in the first six months of 2016.

•

After-tax acquisition costs of $3.6 million ($4.1 million net of tax of $0.5 million) in the second quarter of 2017 and $3.8 million ($4.4 million net of tax of $0.6 million) in the first six months of 2017. After-tax acquisition costs of $0.2 million ($0.3 million net of tax of $0.1 million) in the second quarter of 2016 and $1.5 million ($1.7 million net of tax of $0.2 million) in the first six months of 2016.


•	After-tax expense related to acquired profit in inventory and backlog of $1.4 million ($1.9 million net of tax of $0.5 million) in the second quarter and first six months of 2016.

Reconciliations of the non-GAAP financial measures to the most directly comparable GAAP financial measures are set forth in this press release.

-more-



Financial Highlights (unaudited)
(In thousands, except per share amounts and percentages)

			Three Months Ended						Six Months Ended
Consolidated Statement of Income			July 1, 2017			July 2, 2016			July 1, 2017			July 2, 2016

Revenues			$	110,242		$	111,828		$	213,099		$	208,366
Costs and Operating Expenses:
	Cost of revenues		57,418			61,567			111,283			114,129
	Selling, general, and administrative expenses		39,159			36,072			73,958			68,568
	Research and development expenses		2,222			1,945			4,369			3,649
	Other income		—			—			—			(317		)
			98,799			99,584			189,610			186,029
Operating Income			11,443			12,244			23,489			22,337
Interest Income			102			66			206			121
Interest Expense			(392		)	(340		)	(740		)	(609		)

Income Before Provision for Income Taxes			11,153			11,970			22,955			21,849
Provision for Income Taxes			2,955			3,531			5,690			6,419
Net Income			8,198			8,439			17,265			15,430
Net Income Attributable to Noncontrolling Interest			(102		)	(128		)	(218		)	(243		)
Net Income Attributable to Kadant			$	8,096		$	8,311		$	17,047		$	15,187

Earnings per Share Attributable to Kadant:
		Basic	$	0.74		$	0.76		$	1.55		$	1.40
		Diluted	$	0.72		$	0.75		$	1.52		$	1.37

Weighted Average Shares:
		Basic	11,001			10,870			10,976			10,831
		Diluted	11,296			11,152			11,250			11,085

			Three Months Ended						Three Months Ended
Adjusted Net Income and Adjusted Diluted EPS (b)			July 1, 2017			July 1, 2017			July 2, 2016			July 2, 2016

Net Income and Diluted EPS Attributable to Kadant, as Reported			$	8,096		$	0.72		$	8,311		$	0.75
Adjustments for the Following:
	Acquisition Costs, Net of Tax		3,627			0.32			168			0.01
	Amortization of Acquired Profit in Inventory and Backlog, Net of Tax		—			—			1,358			0.12
Adjusted Net Income and Adjusted Diluted EPS			$	11.723		$	1.04		$	9,837		$	0.88

-more-



		Six Months Ended				Six Months Ended
		July 1, 2017		July 1, 2017		July 2, 2016			July 2, 2016

Net Income and Diluted EPS Attributable to Kadant, as Reported		$	17,047	$	1.52	$	15,187		$	1.37
Adjustments for the Following:
	Acquisition Costs, Net of Tax	3,833		0.34		1,510			0.14
	Amortization of Acquired Profit in Inventory and Backlog, Net of Tax	—		—		1,358			0.12
	Other Income, Net of Tax	—		—		(247		)	(0.02		)
Adjusted Net Income and Adjusted Diluted EPS		$	20,880	$	1.86	$	17,808		$	1.61

									Increase
									(Decrease)
									Excluding Effect
		Three Months Ended							of Currency
Revenues by Product Line		July 1, 2017		July 2, 2016		Increase (Decrease)			Translation (a,b)
Stock-Preparation		$	46,178	$	49,641	$	(3,463	)	$	(2,253	)
Doctoring, Cleaning, & Filtration		27,033		27,580		(547		)	54
Fluid-Handling		22,520		23,110		(590		)	(155		)
	Papermaking Systems	95,731		100,331		(4,600		)	(2,354		)
	Wood Processing Systems	11,393		8,768		2,625			3,125
	Fiber-Based Products	3,118		2,729		389			389
		$	110,242	$	111,828	$	(1,586	)	$	1,160


									Increase
									Excluding Effect
		Six Months Ended				Increase (Decrease)			of Currency
		July 1, 2017		July 2, 2016		Increase (Decrease)			Translation (a,b)
Stock-Preparation		$	87,331	$	88,059	$	(728	)	$	1,008
Doctoring, Cleaning, & Filtration		52,383		51,419		964			2,167
Fluid-Handling		44,567		44,880		(313		)	357
	Papermaking Systems	184,281		184,358		(77		)	3,532
	Wood Processing Systems	21,336		17,475		3,861			4,013
	Fiber-Based Products	7,482		6,533		949			949
		$	213,099	$	208,366	$	4,733		$	8.494

-more-



									Increase
									(Decrease)
									Excluding Effect
		Three Months Ended							of Currency
Sequential Revenues by Product Line		July 1, 2017		April 1, 2017		Increase (Decrease)			Translation (a,b)
Stock-Preparation		$	46,178	$	41,153	$	5,025		$	4,341
Doctoring, Cleaning, & Filtration		27,033		25,350		1,683			1,370
Fluid-Handling		22,520		22,047		473			196
	Papermaking Systems	95,731		88,550		7,181			5,907
	Wood Processing Systems	11,393		9,943		1,450			1,635
	Fiber-Based Products	3,118		4,364		(1,246		)	(1,246		)
		$	110,242	$	102,857	$	7,385		$	6,296

									Increase
									(Decrease)
									Excluding Effect
		Three Months Ended							of Currency
Revenues by Geography (c)		July 1, 2017		July 2, 2016		Increase (Decrease)			Translation (a,b)
North America		$	51,557	$	53,830	$	(2,273	)	$	(1,736	)
Europe		33,952		32,960		992			2,400
Asia		16,545		13,985		2,560			3,465
Rest of World		8,188		11,053		(2,865		)	(2,969		)
		$	110,242	$	111,828	$	(1,586	)	$	1,160

									Increase
									(Decrease)
									Excluding Effect
		Six Months Ended				Increase (Decrease)			of Currency
		July 1, 2017		July 2, 2016		Increase (Decrease)			Translation (a,b)
North America		$	101,723	$	108,639	$	(6,916	)	$	(6,539	)
Europe		66,703		53,925		12,778			15,031
Asia		28,443		26,990		1,453			3,077
Rest of World		16,230		18,812		(2,582		)	(3,075		)
		$	213,099	$	208,366	$	4,733		$	8,494


									Increase
									Excluding Effect
		Three Months Ended							of Currency
Sequential Revenues by Geography (c)		July 1, 2017		April 1, 2017		Increase			Translation (a,b)
North America		$	51,557	$	50,166	$	1,391		$	1,407
Europe		33,952		32,751		1,201			277
Asia		16,545		11,898		4,647			4,507
Rest of World		8,188		8,042		146			105
		$	110,242	$	102,857	$	7,385		$	6,296

-more-




												Increase
												Excluding Effect
			Three Months Ended									of Currency
Bookings by Product Line			July 1, 2017			July 2, 2016			Increase			Translation (a)
Stock-Preparation			$	50,166		$	37,152		$	13,014		$	14,526
Doctoring, Cleaning, & Filtration			32,145			27,868			4,277			5,227
Fluid-Handling			25,207			23,391			1,816			2,368
	Papermaking Systems		107,518			88,411			19,107			22,121
	Wood Processing Systems		10,543			7,977			2,566			3,028
	Fiber-Based Products		2,194			1,739			455			455
			$	120,255		$	98,127		$	22,128		$	25,604


												Increase
												Excluding Effect
			Six Months Ended						Increase (Decrease)			of Currency
			July 1, 2017			July 2, 2016			Increase (Decrease)			Translation (a)
Stock-Preparation			$	98,488		$	66,189		$	32,299		$	34,654
Doctoring, Cleaning, & Filtration			58,698			58,869			(171		)	1,369
Fluid-Handling			51,326			45,886			5,440			6,464
	Papermaking Systems		208,512			170,944			37,568			42,487
	Wood Processing Systems		23,624			18,358			5,266			5,271
	Fiber-Based Products		6,969			5,729			1,240			1,240
			$	239,105		$	195,031		$	44,074		$	48,998

			Three Months Ended						Six Months Ended
Business Segment Information			July 1, 2017			July 2, 2016			July 1, 2017			July 2, 2016
Gross Margin:
		Papermaking Systems	48.1		%	44.6		%	48.0		%	45.5		%
		Other	46.5		%	48.4		%	46.3		%	43.3		%
			47.9		%	44.9		%	47.8		%	45.2		%

Operating Income:
		Papermaking Systems	$	17,445		$	14,335		$	31,703		$	27,832
		Corporate and Other	(6,002		)	(2,091		)	(8,214		)	(5,495		)
			$	11,443		$	12,244		$	23,489		$	22,337

Adjusted Operating Income (b, g):
		Papermaking Systems	$	17,445		$	16,307		$	31,703		$	30,892
		Corporate and Other	(1,904		)	(1,877		)	(3,797		)	(5,281		)
			$	15,541		$	14,430		$	27,906		$	25,611

Capital Expenditures:
		Papermaking Systems	$	1,293		$	1,140		$	2,777		$	1,658
		Corporate and Other	420			72			658			78
			$	1,713		$	1,212		$	3,435		$	1,736

			Three Months Ended						Six Months Ended
Cash Flow and Other Data			July 1, 2017			July 2, 2016			July 1, 2017			July 2, 2016
Cash Provided by Operations			$	23,693		$	13,691		$	25,376		$	19,209
Depreciation and Amortization Expense			3,275			4,913			6,531			7,477

-more-



Balance Sheet Data									July 1, 2017			Dec. 31, 2016
Assets
Cash, Cash Equivalents, and Restricted Cash									$	87,981		$	73,569
Accounts Receivable, net									68,994			65,963
Inventories									63,390			54,951
Unbilled Contract Costs and Fees									6,421			3,068
Other Current Assets									14,377			9,799
Property, Plant and Equipment, net									49,983			47,704
Intangible Assets									51,659			52,730
Goodwill									158,827			151,455
Other Assets									13,182			11,452
									$	514,814		$	470,691
Liabilities and Stockholders' Equity
Accounts Payable									$	28,875		$	23,929
Long-term Debt									60,673			61,494
Capital Lease Obligations									5,094			4,917
Other Liabilities									108,835			96,072
	Total Liabilities								203,477			186,412
	Stockholders' Equity								311,337			284,279
									$	514,814		$	470,691

Adjusted Operating Income and Adjusted EBITDA			Three Months Ended						Six Months Ended
Reconciliation			July 1, 2017			July 2, 2016			July 1, 2017			July 2, 2016
Consolidated
		Net Income Attributable to Kadant	$	8,096		$	8,311		$	17,047		$	15,187
		Net Income Attributable to Noncontrolling Interest	102			128			218			243
		Provision for Income Taxes	2,955			3,531			5,690			6,419
		Interest Expense, net	290			274			534			488
		Operating Income	11,443			12,244			23,489			22,337
		Other Income	—			—			—			(317		)
		Acquisition Costs (d)	4,098			260			4,417			1,665
		Acquired Backlog Amortization (e)	—			1,468			—			1,468
		Acquired Profit in Inventory (f)	—			458			—			458
		Adjusted Operating Income (b)	15,541			14,430			27,906			25,611
		Depreciation and Amortization	3,275			3,445			6,531			6,009
		Adjusted EBITDA (b)	$	18,816		$	17,875		$	34,437		$	31,620

		Adjusted EBITDA Margin (b, h)	17.1		%	16.0		%	16.2		%	15.2		%

Papermaking Systems
		Operating Income	$	17,445		$	14,335		$	31,703		$	27,832
		Other Income	—			—			—			(317		)
		Acquisition Costs (d)	—			46			—			1,451
		Acquired Backlog Amortization (e)	—			1,468			—			1,468
		Acquired Profit in Inventory (f)	—			458			—			458
		Adjusted Operating Income (b)	17,445			16,307			31,703			30,892
		Depreciation and Amortization	2,618			2,737			5,211			4,613
		Adjusted EBITDA (b)	$	20,063		$	19,044		$	36,914		$	35,505

Corporate and Other
		Operating Loss	$	(6,002	)	$	(2,091	)	$	(8,214	)	$	(5,495	)
		Acquisition Costs (d)	4,098			214			4,417			214
		Adjusted Operating Income (b)	(1,904		)	(1,877		)	(3,797		)	(5,281		)
		Depreciation and Amortization	657			708			1,320			1,396
		Adjusted EBITDA (b)	$	(1,247	)	$	(1,169	)	$	(2,477	)	$	(3,885	)

-more-

(a)

Represents the increase (decrease) resulting 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.

(b)

Represents a non-GAAP financial measure.

(c)

Geographic revenues are attributed to regions based on customer location.

(d)

Represents transaction costs associated with our acquisitions.

(e)

Represents intangible amortization expense associated with acquired backlog.

(f)

Represents expense within cost of revenues associated with acquired profit in inventory.

(g)

See reconciliation to the most directly comparable GAAP financial measure under "Adjusted Operating Income and Adjusted EBITDA Reconciliation."

(h)

Calculated as adjusted EBITDA divided by revenue in each period.

-more-

About Kadant

Kadant Inc. is a global supplier of high-value, critical components and engineered systems used in process industries worldwide. The Company’s products, technologies, and services play an integral role in enhancing process efficiency, optimizing energy utilization, and maximizing productivity in resource-intensive industries. Kadant is based in Westford, Massachusetts, with approximately 2,300 employees in 20 countries worldwide. For more information, visit www.kadant.com.

Safe Harbor Statement

The following constitutes a “Safe Harbor” statement under the Private Securities Litigation Reform Act of 1995: This press release contains forward-looking statements that involve a number of risks and uncertainties, including forward-looking statements about our future financial and operating performance, demand for our products, and economic and industry outlook. Our actual results may differ materially from these forward-looking statements as a result of various important factors, including those set forth under the heading "Risk Factors" in Kadant’s annual report on Form 10-K for the year ended December 31, 2016 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; the variability and uncertainties in sales of capital equipment in China; currency fluctuations; our customers’ ability to obtain financing for capital equipment projects; changes in government regulations and policies; the oriented strand board market and levels of residential construction activity; development and use of digital media; price increases or shortages of raw materials; dependence on certain suppliers; international sales and operations; economic conditions and regulatory changes caused by the United Kingdom’s likely exit from the European Union; disruption in production; our acquisition strategy; our internal growth strategy; competition; soundness of suppliers and customers; our effective tax rate; future restructurings; soundness of financial institutions; our debt obligations; restrictions in our credit agreement; loss of key personnel; reliance on third-party research; protection of patents and proprietary rights; failure of our information systems or breaches of data security; fluctuations in our share price; 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.

Contacts

Investor Contact Information:

Michael McKenney, 978-776-2000

mike.mckenney@kadant.com

Media Contact Information:

Wes Martz, 269-278-1715

wes.martz@kadant.com

###

Attached files

Stock widget

Investing forum

KADANT INC Reports