KAI
$95.95
Kadant
$1.35
1.43%
Earnings Details
1st Quarter March 2018
Monday, April 30, 2018 4:34:00 PM
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Summary

Kadant Raises Guidance

Kadant (KAI) reported 1st Quarter March 2018 earnings of $1.07 per share on revenue of $149.2 million. The consensus earnings estimate was $0.96 per share on revenue of $145.4 million. Revenue grew 45.0% on a year-over-year basis.

The company said it expects second quarter earnings of $0.95 to $1.00 per share on revenue of $150.0 million to $154.0 million. The current consensus earnings estimate is $1.11 per share on revenue of $148.4 million for the quarter ending June 30, 2018. The company also said it now expects 2018 earnings of $5.15 to $5.25 per share on revenue of $625.0 million to $635.0 million. The company's previous guidance was earnings of $4.95 to $5.05 per share on revenue of $605.0 million to $615.0 million and the current consensus earnings estimate is $5.02 per share on revenue of $615.4 million for the year ending December 31, 2018.

Kadant Inc develops, manufactures, and markets equipment and products for the papermaking, paper recycling and other process industries. It also designs and manufactures stranders and related equipment used in the production of oriented strand board.

Results
Reported Earnings
$1.07
Earnings Whisper
-
Consensus Estimate
$0.96
Reported Revenue
$149.2 Mil
Revenue Estimate
$145.4 Mil
Growth
Earnings Growth
Revenue Growth
Power Rating
Grade
Earnings Release

Kadant Reports 2018 First Quarter Results

Reports Record Bookings of $182 Million
Raises Full-Year Revenue and EPS Guidance

WESTFORD, Mass., April 30, 2018 (GLOBE NEWSWIRE) -- Kadant Inc. (NYSE:KAI) reported its financial results for the first quarter ended March 31, 2018.

First Quarter 2018 Highlights

  • Revenue increased 45% to $149 million
  • GAAP diluted EPS increased 20% to $0.96
  • Adjusted diluted EPS increased 30% to $1.07
  • Net income increased 21% to $11 million
  • Adjusted EBITDA increased 49% to $24 million and represented 16% of revenue
  • Gross margin was 44.3%
  • Bookings increased 53% to a record $182 million
  • Record bookings and revenue for parts and consumables of $103 and $96 million, respectively
  • Backlog increased 24% sequentially to a record $180 million
  • Cash flow from operations was $7 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 under the heading “Use of Non-GAAP Financial Measures.”

Management Commentary
“We had a great start to 2018 with record bookings and solid EPS performance in the first quarter,” said Jonathan Painter, president and chief executive officer. “We saw excellent performance by our newly acquired businesses as well as strong internal growth, which was broad-based both geographically and across our product lines. Our backlog increased 24 percent sequentially to a record $180 million and our bookings were a record $182 million leading us to increase our revenue and EPS guidance for the year.

“Our record bookings performance of $182 million was led by strong capital bookings in North America and Europe and record parts and consumables bookings of $103 million. As a long-standing strategic focus of ours, I am pleased to see these positive results with our parts and consumables business.”

First Quarter 2018 Results
Revenue increased 45 percent to $149.2 million compared to the first quarter of 2017, including $34.8 million from acquisitions and a $6.7 million increase from the favorable effect of foreign currency translation. Excluding the impact of acquisitions and foreign currency translation, revenue increased five percent compared to the first quarter of 2017. Gross margin was 44.3 percent. Net income increased 21 percent to $10.9 million, or $0.96 per diluted share, compared to $9.0 million, or $0.80 per diluted share, in the first quarter of 2017. Adjusted diluted EPS increased 30 percent to $1.07 compared to $0.82 in the first quarter of 2017. Adjusted diluted EPS in the first quarter of 2018 excludes $0.05 of restructuring costs, $0.04 of discrete tax expense, and $0.02 of amortization from acquired backlog. Adjusted diluted EPS in the first quarter of 2017 excludes $0.02 of acquisition costs.

Adjusted EBITDA increased 49 percent to $23.5 million compared to $15.8 million in the first quarter of 2017. Adjusted EBITDA excludes $0.8 million of restructuring costs and $0.3 million of amortization from acquired backlog in the first quarter of 2018 and $0.3 million of acquisition costs in the first quarter of 2017. Cash flows from operations increased to $7.2 million compared to $1.7 million in the first quarter of 2017. Bookings increased 53 percent to a record $181.9 million compared to $118.9 million in the first quarter of 2017 and includes $40.2 million from acquisitions and a $8.2 million increase from the favorable effect of foreign currency translation. Excluding the impact of acquisitions and foreign currency translation, bookings increased 12 percent compared to the first quarter of 2017.

Summary and Outlook
“We are encouraged by our bookings trend and the excellent start to 2018,” Mr. Painter continued. “Based on our record bookings performance in the first quarter, as well as our outlook for the remainder of the year, we are increasing our guidance for 2018. We expect to report full year revenue of $625 to $635 million, increased from our previous guidance of $605 to $615 million. We expect to achieve GAAP diluted EPS of $4.98 to $5.08 in 2018, increased from our previous guidance of $4.74 to $4.84. The 2018 guidance incorporates an increase in our forecasted interest and tax expense. The 2018 guidance includes pre-tax restructuring costs of $1.7 million, or $0.11 per diluted share, discrete tax expense of $0.4 million, or $0.04 per diluted share, and pre-tax amortization expense associated with acquired backlog of $0.2 million, or $0.02 per diluted share. Excluding these expenses, we expect adjusted diluted EPS of $5.15 to $5.25 for 2018. For the second quarter of 2018, we expect GAAP diluted EPS of $0.89 to $0.94 on revenue of $150 to $154 million. The second quarter of 2018 guidance includes pre-tax restructuring costs of $0.8 million, or $0.06 per diluted share. Excluding this expense, we expect adjusted diluted EPS of $0.95 to $1.00 for the second quarter of 2018.”

Conference Call
Kadant will hold a webcast with a slide presentation for investors on Tuesday, May 1, 2018, at 11:00 a.m. eastern time to discuss its first quarter performance, as well as future expectations. To access the webcast, including the slideshow and accompanying audio, go to www.kadant.com and click on “Investors”. To listen to the webcast via teleconference, call 888-326-8410 within the U.S., or +1-704-385-4884 outside the U.S. and reference participant passcode 2990429. Prior to the call, our earnings release and the slides used in the webcast presentation will be filed with the Securities and Exchange Commission and will be available at www.sec.gov. An archive of the webcast presentation will be available on our website until June 1, 2018.

Shortly after the webcast, Kadant will post its updated general investor presentation incorporating the first quarter results on its website at www.kadant.com under the “Investors” section.

Use of Non-GAAP Financial Measures
In addition to the financial measures prepared in accordance with generally accepted accounting principles (GAAP), we use certain non-GAAP financial measures, including increases or decreases in revenue excluding the effect of acquisitions and foreign currency translation, adjusted operating income, adjusted net income, adjusted diluted earnings per share (EPS), earnings before interest, taxes, depreciation, and amortization (EBITDA), 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 $34.8 million from acquisitions and a $6.7 million favorable foreign currency translation effect in the first quarter of 2018. We present increases or decreases in revenue excluding the effect of acquisitions and foreign currency translation to provide investors insight into underlying revenue trends.

Our non-GAAP financial measures exclude restructuring costs, acquisition costs, amortization expense related to acquired backlog and discrete tax expense. 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:

  • Pre-tax restructuring costs of $0.8 million in the first quarter of 2018.
  • Pre-tax expense related to acquired backlog of $0.3 million in the first quarter of 2018.
  • Pre-tax acquisition costs of $0.3 million in the first quarter of 2017.

Adjusted net income and adjusted diluted EPS exclude:

  • After-tax restructuring costs of $0.6 million ($0.8 million net of tax of $0.2 million) in the first quarter of 2018.
  • After-tax expense related to acquired backlog of $0.2 million ($0.3 million net of tax of $0.1 million) in the first quarter of 2018.
  • Discrete tax expense of $0.4 million in the first quarter of 2018.
  • After-tax acquisition costs of $0.2 million ($0.3 million net of tax of $0.1 million) in the first quarter of 2017.

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

          
Financial Highlights (unaudited)       
(In thousands, except per share amounts and percentages)       
          
   Three Months Ended  
Consolidated Statement of Income (a)March 31, 2018 April 1, 2017    
          
Revenues$149,193  $102,857     
          
Costs and Operating Expenses:       
 Cost of revenues 83,114   53,840     
 Selling, general, and administrative expenses 45,776   34,620     
 Research and development expenses 2,869   2,147     
 Restructuring costs 770   -     
   132,529   90,607     
          
Operating Income 16,664   12,250     
Interest Income 183   104     
Interest Expense (1,732)  (348)    
Other Expense, Net (246)  (204)   
          
Income Before Provision for Income Taxes 14,869   11,802     
Provision for Income Taxes 3,861   2,735     
          
Net Income 11,008   9,067     
          
Net Income Attributable to Noncontrolling Interest (150)  (116)    
          
Net Income Attributable to Kadant$10,858  $8,951     
          
Earnings per Share Attributable to Kadant:       
  Basic$0.98  $0.82     
  Diluted$0.96  $0.80     
          
Weighted Average Shares:       
  Basic 11,042   10,952     
  Diluted 11,342   11,205     
          
   Three Months Ended Three Months Ended
Adjusted Net Income and Adjusted Diluted EPS (b)March 31, 2018 March 31, 2018 April 1, 2017 April 1, 2017
          
Net Income and Diluted EPS Attributable to Kadant, as Reported$10,858  $0.96  $8,951  $0.80 
Adjustments for the Following:       
 Restructuring Costs, Net of Tax 589   0.05   -   - 
 Acquisition Costs, Net of Tax -   -   206   0.02 
 Amortization of Acquired Backlog, Net of Tax 189   0.02   -   - 
 Discrete Tax Items (c) 444   0.04   -   - 
          
Adjusted Net Income and Adjusted Diluted EPS (b)$12,080  $1.07  $9,157  $0.82 
          
         Increase
         (Decrease)
         Excluding
   Three Months Ended   Acquisitions
Revenues by Product LineMarch 31, 2018 April 1, 2017 Increase and FX (b,d)
          
Stock-Preparation$45,483  $41,153  $4,330  $874 
Doctoring, Cleaning, & Filtration 27,222   25,350   1,872   671 
Fluid-Handling 32,886   22,047   10,839   3,340 
          
 Papermaking Systems 105,591   88,550   17,041   4,885 
 Wood Processing Systems 39,141   9,943   29,198   (139)
 Fiber-Based Products 4,461   4,364   97   97 
          
   $149,193  $102,857  $46,336  $4,843 
          
         Increase
         (Decrease)
         Excluding
   Three Months Ended   Acquisitions
Revenues by Geography (e)March 31, 2018 April 1, 2017 Increase and FX (b,d)
          
North America$77,616  $50,166  $27,450  $2,117 
Europe 41,493   32,751   8,742   (2,180)
Asia 20,148   11,898   8,250   6,392 
Rest of World 9,936   8,042   1,894   (1,486)
          
   $149,193  $102,857  $46,336  $4,843 
          
         Increase
         (Decrease)
         Excluding
   Three Months Ended Increase Acquisitions
Bookings by Product LineMarch 31, 2018 April 1, 2017 (Decrease) and FX (d)
          
Stock-Preparation$56,515  $48,322  $8,193  $4,038 
Doctoring, Cleaning, & Filtration 28,331   26,553   1,778   483 
Fluid-Handling 39,770   26,119   13,651   4,648 
          
 Papermaking Systems 124,616   100,994   23,622   9,169 
 Wood Processing Systems 52,729   13,081   39,648   5,698 
 Fiber-Based Products 4,575   4,775   (200)  (200)
          
   $181,920  $118,850  $63,070  $14,667 
          
   Three Months Ended  
Business Segment Information (a)March 31, 2018 April 1, 2017    
          
Gross Margin:       
  Papermaking Systems 45.6%  47.9%    
  Wood Processing Systems 39.5%  42.2%    
  Fiber-Based Products 56.0%  55.0%    
          
    44.3%  47.7%    
          
Operating Income:       
  Papermaking Systems$14,584  $14,299     
  Wood Processing Systems 7,363   2,504     
  Corporate and Other (5,283)  (4,553)    
          
   $16,664  $12,250     
          
Adjusted Operating Income (b, f):       
  Papermaking Systems$15,354  $14,299     
  Wood Processing Systems 7,615   2,823     
  Corporate and Other (5,283)  (4,533)    
          
   $17,686  $12,569     
          
Capital Expenditures:       
  Papermaking Systems$4,649  $1,484     
  Corporate and Other 502   238     
          
   $5,151  $1,722     
          
   Three Months Ended  
Cash Flow and Other DataMarch 31, 2018 April 1, 2017    
          
Cash Provided by Operations$7,216  $1,683     
Depreciation and Amortization Expense 6,099   3,256     
          
Balance Sheet DataMarch 31, 2018 Dec. 30, 2017    
          
Assets       
Cash, Cash Equivalents, and Restricted Cash$73,742  $76,846     
Accounts Receivable, net 91,529   89,624     
Inventories 95,840   84,933     
Unbilled Contract Costs and Fees 2,375   2,374     
Property, Plant and Equipment, net 80,672   79,723     
Intangible Assets 129,635   133,036     
Goodwill 269,514   268,001     
Other Assets 28,970   26,557     
          
   $772,277  $761,094     
Liabilities and Stockholders' Equity       
Accounts Payable$37,026  $35,461     
Long-term Debt 235,851   237,011     
Capital Lease Obligations 5,085   5,069     
Other Liabilities 149,088   151,049     
          
 Total Liabilities 427,050   428,590     
 Stockholders' Equity 345,227   332,504     
          
   $772,277  $761,094     
          
Adjusted Operating Income and Adjusted EBITDAThree Months Ended  
Reconciliation (a) (b)March 31, 2018 April 1, 2017    
          
Consolidated       
  Net Income Attributable to Kadant$10,858  $8,951     
  Net Income Attributable to Noncontrolling Interest 150   116     
  Provision for Income Taxes 3,861   2,735     
  Interest Expense, Net 1,549   244     
  Other Expense, Net 246   204     
          
  Operating Income 16,664   12,250     
  Restructuring Costs 770   -     
  Acquisition Costs -   319     
  Acquired Backlog Amortization (g) 252   -     
          
  Adjusted Operating Income (b) 17,686   12,569     
  Depreciation and Amortization 5,847   3,256     
          
  Adjusted EBITDA (b)$23,533  $15,825     
          
  Adjusted EBITDA Margin (b, h) 15.8%  15.4%    
          
Papermaking Systems       
  Operating Income$14,584  $14,299     
  Restructuring costs 770   -     
          
  Adjusted Operating Income (b) 15,354   14,299     
  Depreciation and Amortization 3,136   2,593     
          
  Adjusted EBITDA (b)$18,490  $16,892     
          
Wood Processing Systems       
  Operating Income$7,363  $2,504     
  Acquisition Costs -   319     
  Acquired Backlog Amortization (g) 252   -     
          
  Adjusted Operating Income (b) 7,615   2,823     
  Depreciation and Amortization 2,544   514     
          
  Adjusted EBITDA (b)$10,159  $3,337     
          
Corporate and Other       
  Operating Loss$(5,283) $(4,553)    
  Depreciation and Amortization 167   149     
          
  EBITDA$(5,116) $(4,404)    
          
          
(a)Prior period amounts have been restated to conform to the current period presentation as a result of the adoption of the Financial Accounting Standards Board's Accounting Standards Update No. 2017-07.
          
(b)Represents a non-GAAP financial measure.
          
(c)Discrete tax items in 2018 primarily relate to the impact of new guidance associated with the U.S. tax legislation enacted in December 2017.
          
(d)Represents the increase (decrease) resulting from the exclusion of acquisitions and from the conversion of current period amounts reported in local currencies into U.S. dollars at the exchange rate of the prior period compared to the U.S. dollar amount reported in the prior period.
     
(e)Geographic revenues are attributed to regions based on customer location.
    
(f)See reconciliation to the most directly comparable GAAP financial measure under "Adjusted Operating Income and Adjusted EBITDA Reconciliation."
          
(g)Represents intangible amortization expense associated with acquired backlog.
   
(h)Calculated as adjusted EBITDA divided by revenue in each period.
  

About Kadant
Kadant Inc. is a global supplier of high-value, critical components and engineered systems used in process industries worldwide. The Company’s products, technologies, and services play an integral role in enhancing process efficiency, optimizing energy utilization, and maximizing productivity in resource-intensive industries. Kadant is based in Westford, Massachusetts, with 2,500 employees in 20 countries worldwide. For more information, visit www.kadant.com.

Safe Harbor Statement
The following constitutes a “Safe Harbor” statement under the Private Securities Litigation Reform Act of 1995: This press release contains forward-looking statements that involve a number of risks and uncertainties, including forward-looking statements about our future financial and operating performance, demand for our products, and economic and industry outlook. These forward-looking statements represent Kadant’s expectations as of the date of this press release. We undertake no obligation to publicly update any forward-looking statement, whether as a result of new information, future events, or otherwise. These forward-looking statements are subject to known and unknown risks and uncertainties that may cause our actual results to differ materially from these forward-looking statements as a result of various important factors, including those set forth under the heading "Risk Factors" in Kadant’s annual report on Form 10-K for the year ended December 30, 2017 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; our customers’ ability to obtain financing for capital equipment projects; the variability and uncertainties in sales of capital equipment in China; international sales and operations; the oriented strand board market and levels of residential construction activity; development and use of digital media; currency fluctuations; price increases or shortages of raw materials; dependence on certain suppliers; our acquisition strategy; failure of our information systems or breaches of data security; changes in government regulations and policies and compliance with laws; our internal growth strategy; competition; soundness of suppliers and customers; changes in our tax provision or exposure to additional tax liabilities; our ability to successfully manage our manufacturing operations; disruption in production; future restructurings; economic conditions and regulatory changes caused by the United Kingdom’s likely exit from the European Union; our debt obligations; restrictions in our credit agreement; loss of key personnel; protection of patents and proprietary rights; fluctuations in our share price; soundness of financial institutions; environmental laws and regulations; anti-takeover provisions; and reliance on third-party research.

Contacts
Investor Contact Information:
Michael McKenney, 978-776-2000
mike.mckenney@kadant.com
or
Media Contact Information:
Wes Martz, 269-278-1715
wes.martz@kadant.com

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Source: Kadant Inc