EPS Forecast
Revenue Forecast
EX-99.1
2
kaiform8kexhibit991021.htm
KAI FORM 8-K EXHIBIT 99.1 02-12-2020 EARNINGS RELEASE
Exhibit
Exhibit 99.1
KADANT INC.
One Technology Park Drive
Westford, MA 01886
NEWS
Kadant Reports Fourth Quarter and Fiscal Year 2019 Results
Record Revenue, Bookings and Operating Cash Flows in FY 2019
WESTFORD, Mass. - February 12, 2020 - Kadant Inc. (NYSE: KAI) reported its financial results for the fourth quarter and fiscal year ended December 28, 2019.
Fourth Quarter Financial Highlights
• | Revenue increased 11% to $183 million |
• | GAAP diluted EPS decreased to $0.76 compared to $1.61 in 2018 |
• | Adjusted diluted EPS decreased 20% to $1.32 |
• | Net income decreased to $8.7 million compared to $18.4 million in 2018 |
• | Adjusted EBITDA increased 1% to $32 million |
• | Bookings increased 9% to $160 million |
• | Cash flows from operations were a record $39 million |
Fiscal Year Financial Highlights
• | Revenue increased 11% to $705 million |
• | GAAP diluted EPS decreased 14% to $4.54 |
• | Adjusted diluted EPS was $5.36 |
• | Net income decreased 14% to $52 million |
• | Adjusted EBITDA increased 10% to $127 million |
• | Bookings increased 3% to $688 million |
• | Cash flows from operations increased 55% to a record $97 million |
• | Free cash flow increased 88% to a record $87 million |
Note: Adjusted diluted EPS, adjusted EBITDA, and free cash flow 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." The term “organic” in this press release is a non-GAAP financial measure, which excludes the impact of an acquisition and the effect of foreign currency translation.
Management Commentary
“The fourth quarter was a solid finish to another record-setting year,” said Jeffrey L. Powell, president and chief executive officer. “Kadant’s full-year organic revenue increased for the third consecutive year and contributed to strong performance in a number of key financial metrics, including adjusted diluted EPS and adjusted EBITDA. We were particularly pleased with our record cash flows from operations for the year of $97 million, up 55 percent from 2018, and record free cash flows of $87 million, up 88 percent from 2018.
“A strong backlog entering 2019 and favorable market conditions during the first half of the year coupled with excellent operating execution led to our highest level of revenue and bookings despite the weakness in global demand that emerged in the second half of 2019.
“Parts and consumables revenue increased 18 percent to a record $441 million for the year and represented 63 percent of our total revenue compared to 59 percent in 2018. Parts and consumables demand was strong in the fourth quarter comprising 70 percent of our total fourth quarter bookings. For the full-year, parts and consumables bookings increased 17 percent compared to 2018.”
Fourth Quarter 2019 compared to 2018
Revenue increased 11 percent to $182.7 million compared to $163.9 million in 2018. Organic revenue was down one percent, which excludes a 14 percent increase from an acquisition and a two percent decrease from the unfavorable effect of foreign currency translation. Gross margin was 40.9 percent compared to 43.3 percent in 2018.
GAAP diluted EPS was $0.76 compared to $1.61 in 2018. Adjusted diluted EPS decreased 20 percent to $1.32 compared to $1.66 in 2018. Adjusted diluted EPS in 2019 excludes a $0.55 charge to terminate a defined benefit plan at one of our U.S. operations, a $0.17 impairment and restructuring charge, and a $0.16 discrete tax benefit. Adjusted diluted EPS in 2018 excludes a $0.14 discrete tax benefit, $0.10 of acquisition costs, and a $0.09 charge associated with the termination of defined benefit plans at one of our U.S. operations.
Adjusted EBITDA increased one percent to $32.2 million compared to $32.0 million in 2018. Cash flows from operations increased to a record $39.2 million compared to $10.4 million in 2018.
Bookings increased nine percent to $159.8 million compared to $147.1 million in 2018. Organic bookings were down six percent, which excludes a 16 percent increase from an acquisition and a one percent decrease from the unfavorable effect of foreign currency translation.
Fiscal Year 2019 compared to 2018
Revenue increased 11 percent to $704.6 million compared to $633.8 million in 2018. Organic revenue growth was one percent, which excludes a 13 percent increase from an acquisition and a three percent decrease from the unfavorable effect of foreign currency translation. Gross margin was 41.7 percent compared to 43.9 percent in 2018.
GAAP diluted EPS decreased 14 percent to $4.54 compared to $5.30 in 2018. Adjusted diluted EPS increased to $5.36 compared to $5.34 in 2018. Adjusted diluted EPS in 2019 excludes a $0.55 charge to terminate a defined benefit plan at one of our U.S. operations, $0.38 of acquisition-related costs, a $0.29 discrete tax benefit, and a $0.17 impairment and restructuring charge. Adjusted diluted EPS in 2018 excludes a $0.29 discrete tax benefit, $0.12 of acquisition-related costs, $0.11 of restructuring costs, and a $0.09 charge associated with the termination of defined benefit plans at one of our U.S. operations.
Adjusted EBITDA increased 10 percent to $127.1 million compared to $115.2 million in 2018. Cash flows from operations increased 55 percent to a record $97.4 million in 2019 compared to $63.0 million in 2018.
Bookings increased three percent to $688.3 million compared to $670.4 million in 2018. Organic bookings were down eight percent, which excludes a 13 percent increase from an acquisition and a two percent decrease from the unfavorable effect of foreign currency translation.
Summary and Outlook
“Overall, our healthy balance sheet and strong operating cash flows position us well for what looks to be a somewhat challenging environment for industrial markets in 2020,” Mr. Powell continued. “We expect to report full year GAAP diluted EPS of $4.98 to $5.08 in 2020 on revenue of $690 to $700 million. The 2020 guidance includes pre-tax amortization expense associated with acquired backlog of $0.4 million, or $0.02 per diluted share, and excluding this item, we expect adjusted diluted EPS of $5.00 to $5.10. For the first quarter of 2020, we expect GAAP diluted EPS of $0.80 to $1.08 on revenue of $153 to $163 million. The wide guidance range for the quarter is due to the uncertainty surrounding the impact of the coronavirus in China and the government-mandated business closures, which have impacted employees of our subsidiaries in China. Our subsidiaries received permission to re-open with significant restrictions earlier this week; however, if these restrictions are extended or if there is a broader impact on our customers or suppliers, such impact could affect the timing of shipments and our financial results in the first quarter of 2020.”
Conference Call
Kadant will hold a webcast with a slide presentation for investors on Thursday, February 13, 2020, at 11:00 a.m. eastern time to discuss its fourth quarter and full-year 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 704-385-4884 outside the U.S. and reference participant passcode 7473987. 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. A replay of the webcast will be available on our website through March 13, 2020.
Shortly after the webcast, Kadant will post its updated general investor presentation incorporating the fourth quarter and fiscal year results on our 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 (organic revenue), adjusted operating income, adjusted net income, adjusted diluted earnings per share (EPS), adjusted earnings before interest, taxes, depreciation, and amortization (adjusted EBITDA), adjusted EBITDA margin, and free cash flow.
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.
Revenue included $22.3 million from an acquisition and a $2.4 million unfavorable foreign currency translation effect in the fourth quarter of 2019. Revenue included $83.4 million from an acquisition and an $18.6 million unfavorable foreign currency translation effect in 2019. 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, impairment costs, restructuring costs, and amortization expense related to acquired profit in inventory and backlog. Adjusted net income and adjusted diluted EPS also exclude settlement and curtailment losses and discrete tax items. Free cash flow excludes capital expenditures from cash flow from operations. All 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, expenditures or income, or none at all.
Fourth Quarter
Adjusted operating income, adjusted EBITDA, and adjusted EBITDA margin exclude:
• | Pre-tax impairment and restructuring cost of $2.5 million in 2019. |
• | Pre-tax acquisition costs of $1.3 million in 2018. |
Adjusted net income and adjusted diluted EPS exclude:
• | After-tax settlement loss of $6.4 million ($5.9 million pre-tax and tax expense of $0.5 million) in 2019 and an after-tax curtailment loss of $1.1 million ($1.4 million net of tax of $0.3 million) in 2018 associated with the termination of defined benefits plans at one of our U.S. operations. |
• | After-tax impairment and restructuring cost of $1.9 million ($2.5 million net of tax of $0.6 million) in 2019. |
• | After-tax acquisition costs of $1.1 million ($1.3 million net of tax of $0.2 million) in 2018. |
• | A discrete tax benefit of $1.8 million in 2019 and $1.6 million in 2018. |
Free cash flow excludes:
• | Capital expenditures of $3.7 million in both 2019 and 2018. |
Fiscal Year
Adjusted operating income, adjusted EBITDA, and adjusted EBITDA margin exclude:
• | Pre-tax impairment and restructuring cost of $2.5 million in 2019. |
• | Pre-tax restructuring cost of $1.7 million in 2018. |
• | Pre-tax acquisition costs of $0.8 million in 2019 and $1.3 million in 2018. |
• | Pre-tax expense related to acquired profit in inventory and backlog of $4.9 million in 2019 and $0.3 million in 2018. |
Adjusted net income and adjusted diluted EPS exclude:
• | After-tax settlement loss of $6.4 million ($5.9 million pre-tax and tax expense of $0.5 million) in 2019 and an after-tax curtailment loss of $1.1 million ($1.4 million net of tax of $0.3 million) in 2018 associated with the termination of defined benefits plans at one of our U.S. operations. |
• | After-tax impairment and restructuring costs of $1.9 million ($2.5 million net of tax of $0.6 million) in 2019. |
• | After-tax restructuring cost of $1.3 million ($1.7 million net of tax of $0.4 million) in 2018. |
• | After-tax acquisition costs of $0.7 million ($0.8 million net of tax of $0.1 million) in 2019 and $1.1 million ($1.3 million net of tax of $0.2 million) in 2018. |
• | After-tax expense related to acquired profit in inventory and backlog of $3.7 million ($4.9 million net of tax of $1.2 million) and $0.2 million ($0.3 million net of tax of $0.1 million) in 2018. |
• | A discrete tax benefit of $3.3 million in 2019 and $3.2 million in 2018. |
Free cash flow excludes:
• | Capital expenditures of $10.0 million in 2019 and $16.6 million in 2018. |
Reconciliations of the non-GAAP financial measures to the most directly comparable GAAP financial measures are set forth in this press release.
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Financial Highlights (unaudited) | ||||||||||||||||||
(In thousands, except per share amounts and percentages) | ||||||||||||||||||
Three Months Ended | Twelve Months Ended | |||||||||||||||||
Consolidated Statement of Income | Dec. 28, 2019 | Dec. 29, 2018 | Dec. 28, 2019 | Dec. 29, 2018 | ||||||||||||||
Revenues | $ | 182,659 | $ | 163,935 | $ | 704,644 | $ | 633,786 | ||||||||||
Costs and Operating Expenses: | ||||||||||||||||||
Cost of revenues | 108,032 | 92,990 | 410,884 | 355,505 | ||||||||||||||
Selling, general, and administrative expenses | 47,642 | 43,618 | 192,525 | 177,414 | ||||||||||||||
Research and development expenses | 2,904 | 2,503 | 10,884 | 10,552 | ||||||||||||||
Impairment and restructuring costs (c) | 2,528 | — | 2,528 | 1,717 | ||||||||||||||
161,106 | 139,111 | 616,821 | 545,188 | |||||||||||||||
Operating Income | 21,553 | 24,824 | 87,823 | 88,598 | ||||||||||||||
Interest Income | 55 | 44 | 213 | 379 | ||||||||||||||
Interest Expense | (2,612 | ) | (1,712 | ) | (12,755 | ) | (7,032 | ) | ||||||||||
Other Expense, Net (b) | (6,063 | ) | (1,681 | ) | (6,359 | ) | (2,417 | ) | ||||||||||
Income Before Provision for Income Taxes | 12,933 | 21,475 | 68,922 | 79,528 | ||||||||||||||
Provision for Income Taxes | 4,048 | 2,907 | 16,358 | 18,482 | ||||||||||||||
Net Income | 8,885 | 18,568 | 52,564 | 61,046 | ||||||||||||||
Net Income Attributable to Noncontrolling Interest | (136 | ) | (146 | ) | (496 | ) | (633 | ) | ||||||||||
Net Income Attributable to Kadant | $ | 8,749 | $ | 18,422 | $ | 52,068 | $ | 60,413 | ||||||||||
Earnings per Share Attributable to Kadant: | ||||||||||||||||||
Basic | $ | 0.77 | $ | 1.66 | $ | 4.63 | $ | 5.45 | ||||||||||
Diluted | $ | 0.76 | $ | 1.61 | $ | 4.54 | $ | 5.30 | ||||||||||
Weighted Average Shares: | ||||||||||||||||||
Basic | 11,344 | 11,107 | 11,235 | 11,086 | ||||||||||||||
Diluted | 11,525 | 11,436 | 11,457 | 11,400 | ||||||||||||||
Three Months Ended | Three Months Ended | |||||||||||||||||
Adjusted Net Income and Adjusted Diluted EPS (a) | Dec. 28, 2019 | Dec. 28, 2019 | Dec. 29, 2018 | Dec. 29, 2018 | ||||||||||||||
Net Income and Diluted EPS Attributable to Kadant, as Reported | $ | 8,749 | $ | 0.76 | $ | 18,422 | $ | 1.61 | ||||||||||
Adjustments for the Following: | ||||||||||||||||||
Settlement and Curtailment Losses, Net of Tax (b) | 6,352 | 0.55 | 1,078 | 0.09 | ||||||||||||||
Impairment and Restructuring Costs, Net of Tax (c) | 1,905 | 0.17 | — | — | ||||||||||||||
Acquisition Costs, Net of Tax | — | — | 1,096 | 0.10 | ||||||||||||||
Amortization of Acquired Backlog, Net of Tax (d) | 15 | — | — | — | ||||||||||||||
Discrete Tax Items (e) | (1,839 | ) | (0.16 | ) | (1,577 | ) | (0.14 | ) | ||||||||||
Adjusted Net Income and Adjusted Diluted EPS (a) | $ | 15,182 | $ | 1.32 | $ | 19,019 | $ | 1.66 | ||||||||||
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Twelve Months Ended | Twelve Months Ended | |||||||||||||||||
Dec. 28, 2019 | Dec. 28, 2019 | Dec. 29, 2018 | Dec. 29, 2018 | |||||||||||||||
Net Income and Diluted EPS Attributable to Kadant, as Reported | $ | 52,068 | $ | 4.54 | $ | 60,413 | $ | 5.30 | ||||||||||
Adjustments for the Following: | ||||||||||||||||||
Settlement and Curtailment Losses, Net of Tax (b) | 6,352 | 0.55 | 1,078 | 0.09 | ||||||||||||||
Impairment and Restructuring Costs, Net of Tax (c) | 1,905 | 0.17 | 1,308 | 0.11 | ||||||||||||||
Acquisition Costs, Net of Tax | 699 | 0.06 | 1,096 | 0.10 | ||||||||||||||
Amortization of Acquired Profit in Inventory and Backlog, Net of Tax (d,i) | 3,702 | 0.32 | 189 | 0.02 | ||||||||||||||
Discrete Tax Items (e) | (3,338 | ) | (0.29 | ) | (3,249 | ) | (0.29 | ) | ||||||||||
Adjusted Net Income and Adjusted Diluted EPS (a) | $ | 61,388 | $ | 5.36 | $ | 60,835 | $ | 5.34 | ||||||||||
Increase | ||||||||||||||||||
(Decrease) | ||||||||||||||||||
Excluding | ||||||||||||||||||
Three Months Ended | Increase (Decrease) | Acquisition | ||||||||||||||||
Revenue by Segment | Dec. 28, 2019 | Dec. 29, 2018 | and FX (a,f) | |||||||||||||||
Stock-Preparation | $ | 56,098 | $ | 57,091 | $ | (993 | ) | $ | 9 | |||||||||
Fluid-Handling | 32,300 | 33,330 | (1,030 | ) | (440 | ) | ||||||||||||
Doctoring, Cleaning, & Filtration | 29,247 | 28,667 | 580 | 1,045 | ||||||||||||||
Papermaking Systems | 117,645 | 119,088 | (1,443 | ) | 614 | |||||||||||||
Wood Processing Systems | 38,538 | 42,031 | (3,493 | ) | (3,210 | ) | ||||||||||||
Material Handling Systems | 22,301 | — | 22,301 | — | ||||||||||||||
Fiber-Based Products | 4,175 | 2,816 | 1,359 | 1,359 | ||||||||||||||
$ | 182,659 | $ | 163,935 | $ | 18,724 | $ | (1,237 | ) | ||||||||||
Increase | ||||||||||||||||||
(Decrease) | ||||||||||||||||||
Excluding | ||||||||||||||||||
Twelve Months Ended | Increase (Decrease) | Acquisition | ||||||||||||||||
Dec. 28, 2019 | Dec. 29, 2018 | and FX (a,f) | ||||||||||||||||
Stock-Preparation | $ | 215,091 | $ | 221,933 | $ | (6,842 | ) | $ | 341 | |||||||||
Fluid-Handling | 132,501 | 131,830 | 671 | 4,488 | ||||||||||||||
Doctoring, Cleaning, & Filtration | 117,838 | 116,136 | 1,702 | 4,946 | ||||||||||||||
Papermaking Systems | 465,430 | 469,899 | (4,469 | ) | 9,775 | |||||||||||||
Wood Processing Systems | 143,187 | 151,366 | (8,179 | ) | (3,816 | ) | ||||||||||||
Material Handling Systems | 83,364 | — | 83,364 | — | ||||||||||||||
Fiber-Based Products | 12,663 | 12,521 | 142 | 142 | ||||||||||||||
$ | 704,644 | $ | 633,786 | $ | 70,858 | $ | 6,101 | |||||||||||
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Increase (Decrease) | Increase | |||||||||||||||||
(Decrease) | ||||||||||||||||||
Excluding | ||||||||||||||||||
Three Months Ended | Acquisition | |||||||||||||||||
Revenue by Geography (g) | Dec. 28, 2019 | Dec. 29, 2018 | and FX (a,f) | |||||||||||||||
North America | $ | 95,368 | $ | 78,538 | $ | 16,830 | $ | (2,607 | ) | |||||||||
Europe | 48,944 | 43,244 | 5,700 | 7,041 | ||||||||||||||
Asia | 22,960 | 31,151 | (8,191 | ) | (9,744 | ) | ||||||||||||
Rest of World | 15,387 | 11,002 | 4,385 | 4,073 | ||||||||||||||
$ | 182,659 | $ | 163,935 | $ | 18,724 | $ | (1,237 | ) | ||||||||||
Increase | ||||||||||||||||||
(Decrease) | ||||||||||||||||||
Excluding | ||||||||||||||||||
Twelve Months Ended | Increase (Decrease) | Acquisition | ||||||||||||||||
Dec. 28, 2019 | Dec. 29, 2018 | and FX (a,f) | ||||||||||||||||
North America | $ | 386,952 | $ | 305,618 | $ | 81,334 | $ | 8,086 | ||||||||||
Europe | 180,888 | 174,681 | 6,207 | 15,686 | ||||||||||||||
Asia | 84,705 | 109,688 | (24,983 | ) | (25,414 | ) | ||||||||||||
Rest of World | 52,099 | 43,799 | 8,300 | 7,743 | ||||||||||||||
$ | 704,644 | $ | 633,786 | $ | 70,858 | $ | 6,101 | |||||||||||
Increase | ||||||||||||||||||
(Decrease) | ||||||||||||||||||
Excluding | ||||||||||||||||||
Three Months Ended | Increase (Decrease) | Acquisition | ||||||||||||||||
Bookings by Segment | Dec. 28, 2019 | Dec. 29, 2018 | and FX (f) | |||||||||||||||
Stock-Preparation | $ | 43,934 | $ | 41,371 | $ | 2,563 | $ | 3,172 | ||||||||||
Fluid-Handling | 28,339 | 30,867 | (2,528 | ) | (1,970 | ) | ||||||||||||
Doctoring, Cleaning, & Filtration | 28,635 | 32,938 | (4,303 | ) | (3,926 | ) | ||||||||||||
Papermaking Systems | 100,908 | 105,176 | (4,268 | ) | (2,724 | ) | ||||||||||||
Wood Processing Systems | 30,923 | 38,971 | (8,048 | ) | (7,789 | ) | ||||||||||||
Material Handling Systems | 23,460 | — | 23,460 | — | ||||||||||||||
Fiber-Based Products | 4,492 | 2,940 | 1,552 | 1,552 | ||||||||||||||
$ | 159,783 | $ | 147,087 | $ | 12,696 | $ | (8,961 | ) | ||||||||||
Increase | ||||||||||||||||||
(Decrease) | ||||||||||||||||||
Excluding | ||||||||||||||||||
Twelve Months Ended | Increase (Decrease) | Acquisition | ||||||||||||||||
Dec. 28, 2019 | Dec. 29, 2018 | and FX (f) | ||||||||||||||||
Stock-Preparation | $ | 215,948 | $ | 228,444 | $ | (12,496 | ) | $ | (4,947 | ) | ||||||||
Fluid-Handling | 129,125 | 138,230 | (9,105 | ) | (5,050 | ) | ||||||||||||
Doctoring, Cleaning, & Filtration | 112,095 | 119,541 | (7,446 | ) | (4,432 | ) | ||||||||||||
Papermaking Systems | 457,168 | 486,215 | (29,047 | ) | (14,429 | ) | ||||||||||||
Wood Processing Systems | 129,865 | 172,184 | (42,319 | ) | (37,944 | ) | ||||||||||||
Material Handling Systems | 88,123 | — | 88,123 | — | ||||||||||||||
Fiber-Based Products | 13,129 | 12,028 | 1,101 | 1,101 | ||||||||||||||
$ | 688,285 | $ | 670,427 | $ | 17,858 | $ | (51,272 | ) | ||||||||||
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Three Months Ended | Twelve Months Ended | |||||||||||||||||
Segment Information | Dec. 28, 2019 | Dec. 29, 2018 | Dec. 28, 2019 | Dec. 29, 2018 | ||||||||||||||
Gross Margin: | ||||||||||||||||||
Papermaking Systems | 43.6 | % | 44.1 | % | 44.2 | % | 44.9 | % | ||||||||||
Wood Processing Systems | 37.2 | % | 40.2 | % | 40.7 | % | 40.3 | % | ||||||||||
Material Handling Systems | 30.7 | % | — | % | 28.3 | % | — | % | ||||||||||
Fiber-Based Products | 51.6 | % | 53.1 | % | 49.5 | % | 50.8 | % | ||||||||||
40.9 | % | 43.3 | % | 41.7 | % | 43.9 | % | |||||||||||
Operating Income: | ||||||||||||||||||
Papermaking Systems | $ | 19,864 | $ | 22,052 | $ | 81,232 | $ | 83,454 | ||||||||||
Wood Processing Systems | 5,308 | 9,857 | 28,166 | 31,237 | ||||||||||||||
Material Handling Systems | 2,255 | — | 3,132 | — | ||||||||||||||
Corporate and Other | (5,874 | ) | (7,085 | ) | (24,707 | ) | (26,093 | ) | ||||||||||
$ | 21,553 | $ | 24,824 | $ | 87,823 | $ | 88,598 | |||||||||||
Adjusted Operating Income (a,h): | ||||||||||||||||||
Papermaking Systems | $ | 19,864 | $ | 22,052 | $ | 81,232 | $ | 85,171 | ||||||||||
Wood Processing Systems | 7,836 | 9,857 | 30,694 | 31,489 | ||||||||||||||
Material Handling Systems | 2,275 | — | 8,847 | — | ||||||||||||||
Corporate and Other | (5,874 | ) | (5,764 | ) | (24,707 | ) | (24,772 | ) | ||||||||||
$ | 24,101 | $ | 26,145 | $ | 96,066 | $ | 91,888 | |||||||||||
Capital Expenditures: | ||||||||||||||||||
Papermaking Systems | $ | 2,237 | $ | 2,880 | $ | 6,127 | $ | 12,717 | ||||||||||
Wood Processing Systems | 710 | 686 | 2,133 | 3,272 | ||||||||||||||
Material Handling Systems | 590 | — | 1,195 | — | ||||||||||||||
Corporate and Other | 184 | 176 | 502 | 570 | ||||||||||||||
$ | 3,721 | $ | 3,742 | $ | 9,957 | $ | 16,559 | |||||||||||
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Three Months Ended | Twelve Months Ended | |||||||||||||||||
Cash Flow and Other Data | Dec. 28, 2019 | Dec. 29, 2018 | Dec. 28, 2019 | Dec. 29, 2018 | ||||||||||||||
Cash Provided by Operations | $ | 39,247 | $ | 10,435 | $ | 97,413 | $ | 62,985 | ||||||||||
Less: Capital Expenditures | (3.721 | ) | (3.742 | ) | (9.957 | ) | (16.559 | ) | ||||||||||
Free Cash Flow (a) | $ | 35.526 | $ | 6.693 | $ | 87.456 | $ | 46.426 | ||||||||||
Depreciation and Amortization Expense | $ | 8,086 | $ | 5,829 | $ | 32,390 | $ | 23,568 | ||||||||||
Balance Sheet Data | Dec. 28, 2019 | Dec. 29, 2018 | ||||||||||||||||
Assets | ||||||||||||||||||
Cash, Cash Equivalents, and Restricted Cash | $ | 68,273 | $ | 46,117 | ||||||||||||||
Accounts Receivable, net | 95,740 | 92,624 | ||||||||||||||||
Inventories | 102,715 | 86,373 | ||||||||||||||||
Unbilled Revenues | 13,162 | 15,741 | ||||||||||||||||
Property, Plant, and Equipment, net | 86,032 | 80,157 | ||||||||||||||||
Intangible Assets | 173,896 | 113,347 | ||||||||||||||||
Goodwill | 336,032 | 258,174 | ||||||||||||||||
Other Assets | 63,537 | 33,216 | ||||||||||||||||
$ | 939,387 | $ | 725,749 | |||||||||||||||
Liabilities and Stockholders' Equity | ||||||||||||||||||
Accounts Payable | $ | 45,852 | $ | 35,720 | ||||||||||||||
Debt Obligations | 294,717 | 171,434 | ||||||||||||||||
Other Borrowings | 6,308 | 4,387 | ||||||||||||||||
Other Liabilities | 165,431 | 139,637 | ||||||||||||||||
Total Liabilities | 512,308 | 351,178 | ||||||||||||||||
Stockholders' Equity | 427,079 | 374,571 | ||||||||||||||||
$ | 939,387 | $ | 725,749 | |||||||||||||||
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Three Months Ended | Twelve Months Ended | |||||||||||||||||
Adjusted Operating Income and Adjusted EBITDA Reconciliation (a) | Dec. 28, 2019 | Dec. 29, 2018 | Dec. 28, 2019 | Dec. 29, 2018 | ||||||||||||||
Consolidated | ||||||||||||||||||
Net Income Attributable to Kadant | $ | 8,749 | $ | 18,422 | $ | 52,068 | $ | 60,413 | ||||||||||
Net Income Attributable to Noncontrolling Interest | 136 | 146 | 496 | 633 | ||||||||||||||
Provision for Income Taxes | 4,048 | 2,907 | 16,358 | 18,482 | ||||||||||||||
Interest Expense, Net | 2,557 | 1,668 | 12,542 | 6,653 | ||||||||||||||
Other Expense, Net (b) | 6,063 | 1,681 | 6,359 | 2,417 | ||||||||||||||
Operating Income | 21,553 | 24,824 | 87,823 | 88,598 | ||||||||||||||
Impairment and Restructuring Costs (c) | 2,528 | — | 2,528 | 1,717 | ||||||||||||||
Acquisition Costs | — | 1,321 | 843 | 1,321 | ||||||||||||||
Acquired Backlog Amortization (d) | 20 | — | 1,323 | 252 | ||||||||||||||
Acquired Profit in Inventory (i) | — | — | 3,549 | — | ||||||||||||||
Adjusted Operating Income (a) | 24,101 | 26,145 | 96,066 | 91,888 | ||||||||||||||
Depreciation and Amortization | 8,066 | 5,829 | 31,067 | 23,316 | ||||||||||||||
Adjusted EBITDA (a) | $ | 32,167 | $ | 31,974 | $ | 127,133 | $ | 115,204 | ||||||||||
Adjusted EBITDA Margin (a,j) | 17.6 | % | 19.5 | % | 18.0 | % | 18.2 | % | ||||||||||
Papermaking Systems | ||||||||||||||||||
Operating Income | $ | 19,864 | $ | 22,052 | $ | 81,232 | $ | 83,454 | ||||||||||
Restructuring Costs (c) | — | — | — | 1,717 | ||||||||||||||
Adjusted Operating Income (a) | 19,864 | 22,052 | 81,232 | 85,171 | ||||||||||||||
Depreciation and Amortization | 3,405 | 3,154 | 13,010 | 12,561 | ||||||||||||||
Adjusted EBITDA (a) | $ | 23,269 | $ | 25,206 | $ | 94,242 | $ | 97,732 | ||||||||||
Wood Processing Systems | ||||||||||||||||||
Operating Income | $ | 5,308 | $ | 9,857 | $ | 28,166 | $ | 31,237 | ||||||||||
Impairment and Restructuring Costs (c) | 2,528 | — | 2,528 | — | ||||||||||||||
Acquired Backlog Amortization (d) | — | — | — | 252 | ||||||||||||||
Adjusted Operating Income (a) | 7,836 | 9,857 | 30,694 | 31,489 | ||||||||||||||
Depreciation and Amortization | 2,409 | 2,480 | 9,571 | 10,065 | ||||||||||||||
Adjusted EBITDA (a) | $ | 10,245 | $ | 12,337 | $ | 40,265 | $ | 41,554 | ||||||||||
Material Handling Systems | ||||||||||||||||||
Operating Income | $ | 2,255 | $ | — | $ | 3,132 | $ | — | ||||||||||
Acquisition Costs | — | — | 843 | — | ||||||||||||||
Acquired Backlog Amortization (d) | 20 | — | 1,323 | — | ||||||||||||||
Acquired Profit in Inventory (i) | — | — | 3,549 | — | ||||||||||||||
Adjusted Operating Income (a) | 2,275 | — | 8,847 | — | ||||||||||||||
Depreciation and Amortization | 2,044 | — | 7,695 | — | ||||||||||||||
Adjusted EBITDA (a) | $ | 4,319 | $ | — | $ | 16,542 | $ | — | ||||||||||
Corporate and Other | ||||||||||||||||||
Operating Loss | $ | (5,874 | ) | $ | (7,085 | ) | $ | (24,707 | ) | $ | (26,093 | ) | ||||||
Acquisition Costs | — | 1,321 | — | 1,321 | ||||||||||||||
Adjusted Operating Loss (a) | (5,874 | ) | (5,764 | ) | (24,707 | ) | (24,772 | ) | ||||||||||
Depreciation and Amortization | 208 | 195 | 791 | 690 | ||||||||||||||
Adjusted EBITDA (a) | $ | (5,666 | ) | $ | (5,569 | ) | $ | (23,916 | ) | $ | (24,082 | ) | ||||||
(a) | Represents a non-GAAP financial measure. | |||||||||||||||||
(b) | Represents a settlement loss of $5,887 ($6,352 after tax) in the fourth quarter of 2019 and a curtailment loss of $1,425 ($1,078 after tax) in the fourth quarter of 2018 included in Other Expense, Net associated with the termination of defined benefit plans at one of our U.S. operations. | |||||||||||||||||
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(c) | Represents an intangible asset impairment charge of $2,336 ($1,765 after tax) and a restructuring charge of $192 ($140 after tax) in the fourth quarter of 2019 related to our Wood Processing Systems segment's timber-harvesting product line and a restructuring charge of $1,717 ($1,308 after tax) in 2018 related to our Papermaking Systems segment's stock-preparation product line. | |||||||||||||||||
(d) | Represents intangible amortization expense associated with acquired backlog. | |||||||||||||||||
(e) | The discrete tax benefit of $1,839, or $0.16 per diluted share, in the fourth quarter of 2019 and $3,338, or $0.29 per diluted share, for the full-year 2019 relates to the exercise of employee stock options. The impact of the tax benefit both for the fourth quarter of 2019, as well as the aggregate impact for the full year 2019, is significantly higher than the future tax benefit anticipated for the remaining outstanding stock options. As a result, our adjusted diluted EPS excludes this benefit for all periods in 2019, including recasting our adjusted diluted EPS for the second and third quarters of 2019. Adjusted diluted EPS in 2018 was not recast as the discrete tax benefit was not material. | |||||||||||||||||
In addition for full-year 2019, we recast our adjusted diluted EPS in the second quarter of 2019 to no longer exclude a tax benefit of $1,186, or $0.10 per diluted share, related to the repatriation of foreign earnings due to the recurring nature of this activity in 2019 and expected prospectively. | ||||||||||||||||||
The discrete tax benefit of $1,577, or $0.14 per diluted share, in the fourth quarter of 2018 and $3,249, or $0.29 per diluted share, for the full-year 2018 relates to adjustments to the provisional amounts recognized due to the U.S. tax legislation enacted in December 2017 and for the full-year 2018 also includes the reversal of tax reserves associated with uncertain tax positions. | ||||||||||||||||||
(f) | Represents the increase (decrease) resulting from the exclusion of an acquisition 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. | |||||||||||||||||
(g) | Geographic revenues are attributed to regions based on customer location. | |||||||||||||||||
(h) | Represents expense within cost of revenues associated with acquired profit in inventory. | |||||||||||||||||
(i) | Calculated as adjusted EBITDA divided by revenue in each period. | |||||||||||||||||
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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 2,800 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 our 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 29, 2018 and subsequent filings with the Securities and Exchange Commission. These include risks and uncertainties relating to the impact of the coronavirus on our operating and financial results; 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; international sales and operations; the variability and uncertainties in sales of capital equipment in China; the oriented strand board market and levels of residential construction activity; development and use of digital media; currency fluctuations; cyclical economic conditions affecting the global mining industry and the continued demand for coal; price increases or shortages of raw materials; dependence on certain suppliers; our acquisition strategy; failure of our information systems or breaches of data security and cybertheft; 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 exit from the European Union; our debt obligations; restrictions in our credit agreement and note purchase agreement; loss of key personnel and effective succession planning; protection of intellectual property; fluctuations in our share price; soundness of financial institutions; environmental laws and regulations; climate change; environmental, health and safety laws and regulations; adequacy of our insurance coverage; 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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