Kadant Reports 2013 First Quarter Results

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Kadant Reports 2013 First Quarter Results

Achieves Quarterly Bookings of $90 Million and Raises Guidance for 2013

WESTFORD, Mass.--(BUSINESS WIRE)-- Kadant Inc. (NYS: KAI) reported its financial results for the first quarter ended March 30, 2013.


First Quarter 2013 Financial Highlights

  • GAAP diluted earnings per share (EPS) from continuing operations was $0.47 in the first quarter of 2013, compared to $0.61 in the first quarter of 2012. Guidance was $0.32 to $0.34.
  • Bookings were $90 million in the first quarter of 2013, increasing 19% sequentially and 16% compared to the first quarter of 2012. The book-to-bill ratio was 1.18.
  • Revenues were $76 million in the quarter, compared to $84 million in the first quarter of 2012. Guidance was $71 to $73 million.
  • Gross profit margins were the second highest ever achieved at 47.3% in the first quarter of 2013, compared to 45.6% in the first quarter of 2012.
  • Cash flows from continuing operations were $7 million in the first quarter of 2013, increasing significantly from negative cash flows of $4 million in the first quarter of 2012.
  • Repurchases of common stock were $1.3 million in the first quarter of 2013.
  • First quarterly dividend of $0.125 per share declared in February 2013 to be paid in May 2013.

Management Commentary

"We are off to a better start in 2013 than we had expected," said Jonathan W. Painter, president and chief executive officer of Kadant. "Diluted EPS from continuing operations was $0.47 in the first quarter of 2013, including $0.03 of acquisition costs, and exceeded our guidance of $0.32 to $0.34. This strong performance was driven by a number of factors, including higher revenues in our Fluid-Handling and our Doctoring, Cleaning, & Filtration product lines, as well as excellent gross profit margins.

"Operating income was $7.4 million, or 9.7 percent of revenues, compared to $10.4 million, or 12.4 percent of revenues, in the first quarter of 2012. We were pleased to see operating cash flows from continuing operations of $7.0 million in the first quarter, which is often a weak quarter for cash flows. We ended the quarter in a net cash position, cash less debt, of $51.8 million, up $4.1 million from the end of 2012. We also purchased 50,000 shares of our common stock for $1.3 million in the quarter.

"Bookings were strong in the first quarter of 2013 at $90.3 million, up 16 percent from the first quarter of 2012 and 19 percent sequentially. This increase was due to an excellent performance in our Stock-Preparation product line, particularly in Europe. Our parts and consumables bookings of $55 million in the first quarter of 2013 were the highest level achieved since the first quarter of 2008, increasing 10 percent from the first quarter of 2012 and 17 percent sequentially.

"We have also been working on two small but strategic acquisitions during the quarter. As we announced earlier this month, we completed the acquisition of Companhia Brasileira de Tecnologia Industrial (CBTI), our licensee in Brazil, in April. The addition of CBTI enhances our strategy of expanding our presence in the important South American market. After quarter-end, we also signed an asset purchase agreement with the Noss Group, a leading Sweden-based developer and supplier of high-efficiency cleaners and approach flow systems used in stock preparation in the pulp and paper industry. The Noss products will expand the product offerings of our Stock-Preparation product line, particularly for virgin pulping applications. In addition, the Noss product line will make a significant contribution to our parts and consumables business. We expect to close this acquisition in the second quarter."

First Quarter 2013

Kadant reported revenues of $76.2 million in the first quarter of 2013, a decrease of $7.9 million, or nine percent, compared with $84.1 million in the first quarter of 2012. Revenues for the first quarter of 2013 included a $0.3 million increase from foreign currency translation compared to the first quarter of 2012. Operating income from continuing operations was $7.4 million in the first quarter of 2013 compared to $10.4 million in the first quarter of 2012. Net income from continuing operations was $5.3 million in the first quarter of 2013, or $0.47 per diluted share, compared to $7.1 million, or $0.61 per diluted share, in the first quarter of 2012.

Guidance

"During the second quarter, we expect to realize a gain of approximately $0.10 per diluted share from the sale of a building in China," Mr. Painter continued. "Also for the second quarter and full year, we expect a modest amount of accretion from the operating results of CBTI. Including these items, we expect to achieve GAAP diluted EPS from continuing operations of $0.53 to $0.55 in the second quarter of 2013 on revenues of $79 to $82 million. For the full year, we are increasing our guidance and now expect to achieve GAAP diluted EPS from continuing operations of $2.00 to $2.10 on revenues of $336 to $343 million, revised from our previous guidance of $1.80 to $1.90 on revenues of $320 to $330 million. This guidance does not include any potential restructuring costs from the recent acquisition or the results of the pending Noss acquisition."

Conference Call

Kadant will hold a webcast with a slide presentation for investors on Tuesday, April 30, 2013, at 11 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 the "Investors" tab. To listen to the webcast via teleconference, call 877-703-6107 within the U.S., or +1-857-244-7306 outside the U.S. and reference participant passcode 83375884. 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 Web site until May 31, 2013.

Shortly after the webcast, Kadant will post its updated general investor presentation incorporating the first quarter results on its Web site at www.kadant.com under the "Investors" tab.

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 revenues excluding the effect of foreign currency translation and earnings before interest, taxes, depreciation, and amortization (EBITDA).

We present increases or decreases in revenues excluding the effect of foreign currency translation to provide investors insight into underlying revenue trends.

We believe that 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 to 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.

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  March 30, 2013  March 31, 2012
 
Revenues$76,204 $84,113 
 
Costs and Operating Expenses:
Cost of revenues40,17845,741
Selling, general, and administrative expenses26,95026,143
Research and development expenses1,7041,532
Other expense (a) -  307 
 68,832  73,723 
 
Operating Income7,37210,390
Interest Income10994
Interest Expense (165) (209)
 

Income from Continuing Operations Before Provision for Income Taxes

7,31610,275
Provision for Income Taxes 1,967  3,138 
 
Income from Continuing Operations5,3497,137
 
Loss from Discontinued Operation, Net of Tax (29) (61)
 
Net Income5,3207,076
 
Net Income Attributable to Noncontrolling Interest (36) (23)
 
Net Income Attributable to Kadant$5,284 $7,053 
 
Amounts Attributable to Kadant:
Income from Continuing Operations$5,313$7,114
Loss from Discontinued Operation, Net of Tax (29) (61)
Net Income Attributable to Kadant$5,284 $7,053 
 
Earnings per Share from Continuing Operations
Attributable to Kadant:
Basic$0.48 $0.61 
Diluted$0.47 $0.61 
 
Earnings per Share Attributable to Kadant:
Basic$0.47 $0.61 
Diluted$0.47 $0.60 
 
Weighted Average Shares:
Basic 11,163  11,653 
 
Diluted 11,267  11,729 
Increase
(Decrease)
Excluding Effect
Three Months EndedIncreaseof Currency
Revenues by Product Line  March 30, 2013  March 31, 2012  (Decrease)  Translation (b,c)
 
Doctoring, Cleaning, & Filtration (d)$25,862$25,065$797$548
Fluid-Handling23,53322,3681,1651,246
Stock-Preparation 23,002  32,717  (9,715) (9,814)
 
Papermaking Systems Segment72,39780,150(7,753)(8,020)
Fiber-based Products 3,807  3,963  (156) (156)
 
$76,204 $84,113 $(7,909)$(8,176)
 
Increase
(Decrease)
Excluding Effect
Three Months EndedIncreaseof Currency
Sequential Revenues by Product Line  March 30, 2013  Dec. 29, 2012  (Decrease)  Translation (b,c)
 
Doctoring, Cleaning, & Filtration$25,862$24,787$1,075$1,030
Fluid-Handling23,53322,848685488
Stock-Preparation 23,002  28,069  (5,067) (5,235)
 
Papermaking Systems Segment72,39775,704(3,307)(3,717)
Fiber-based Products 3,807  2,351  1,456  1,456 
 
$76,204 $78,055 $(1,851)$(2,261)
 
Decrease
Excluding Effect
Three Months Endedof Currency
Revenues by Geography (e)  March 30, 2013  March 31, 2012  Decrease  Translation (b,c)
 
North America$38,878$39,699$(821)$(870)
Europe17,57319,040(1,467)(1,672)
China11,22811,893(665)(823)
South America4,1915,794(1,603)(1,458)
Other 4,334  7,687  (3,353) (3,353)
 
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