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Kadant Reports Record Results for Second Quarter 2021

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WESTFORD, Mass., Aug. 03, 2021 (GLOBE NEWSWIRE) -- Kadant Inc. (NYSE: KAI) reported its financial results for the second quarter ended July 3, 2021.

Second Quarter Financial Highlights with Records Achieved in Each of the Following Metrics

  • Bookings increased 60% to $213 million.

  • Revenue increased 28% to $196 million.

  • Operating cash flow increased 101% to $44 million.

  • Free cash flow increased 100% to $42 million.

  • Net income increased 97% to $23 million.

  • GAAP diluted EPS increased 96% to $1.96.

  • Adjusted diluted EPS increased 90% to $2.01.

  • Adjusted EBITDA increased 56% to $41 million and represented 21.1% of revenue.

  • Backlog was $242 million.

Note: Percent changes above are based on comparison to the prior year period. Free cash flow, adjusted diluted EPS, adjusted EBITDA, adjusted EBITDA margin, and changes in organic revenue 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
“Our global workforce once again executed extremely well in delivering significant value to our customers and record results for our stockholders,” said Jeffrey L. Powell, president and chief executive officer of Kadant Inc. “The broadening economic recovery has provided us with opportunities to grow our business and our results show that our efforts are working. Record revenue and solid operational execution led to strong adjusted EBITDA margin expansion across all our operating segments and we are well positioned for the second half of 2021.

“New order activity was driven by strong demand across all our operating segments and was particularly strong for our Industrial Processing segment. Our end markets continue to show signs of building momentum as we enter the second half of the year. As the economic recovery spreads to Europe and Asia, we are seeing increased customer optimism and believe the second half of 2021 will finish strong despite headwinds from supply chain constraints and inflationary pressure on material costs.”

Second Quarter 2021 compared to 2020
Revenue increased 28 percent to a record $195.8 million compared to $152.9 million in 2020. Organic revenue increased 21 percent, which excludes a seven percent increase from the favorable effect of foreign currency translation. Gross margin was 43.6 percent compared to 43.5 percent in 2020.

GAAP diluted earnings per share (EPS) increased 96 percent to a record $1.96 compared to $1.00 in 2020. Adjusted diluted EPS increased 90 percent to a record $2.01 compared to $1.06 in 2020. Adjusted diluted EPS excludes $0.05 of acquisition costs in 2021 and $0.03 of acquisition costs and $0.03 of restructuring costs in 2020. Net income increased 97 percent to $22.9 million compared to $11.6 million in 2020. Adjusted EBITDA increased 56 percent to a record $41.3 million and a record 21.1 percent of revenue compared to $26.6 million and 17.4 percent of revenue in the prior year quarter. Operating cash flow increased 101 percent to a record $44.4 million compared to $22.0 million in 2020.

Bookings increased 60 percent to a record $213.2 million compared to $133.0 million in 2020. Organic bookings increased 50 percent, which excludes a ten percent increase from the favorable effect of foreign currency translation.

Summary and Outlook
“As the U.S. continues its robust growth and other regions begin to show increasing economic momentum, we are well positioned to capitalize on opportunities wherever they may come next,” Mr. Powell continued. “We remain cautiously optimistic that our end market demand will continue to show strength while recognizing the growing risk the COVID-19 Delta variant and supply chain constraints present to near-term economic growth. Our revenue expectation for the year has increased due to our record bookings and backlog. Our acquisition of the Clouth Group of Companies in the third quarter will further strengthen our revenue performance for the year. Accordingly, we are increasing our revenue expectation to $783 to $793 million for 2021 from our previous range of $710 to $730 million.”

Conference Call
Kadant will hold a webcast with a slide presentation for investors on Wednesday, August 4, 2021, at 11:00 a.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 3083302. 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 3, 2021.

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 (organic revenue), adjusted operating income, adjusted net income, adjusted diluted EPS, earnings before interest, taxes, depreciation, and amortization (EBITDA), adjusted EBITDA, adjusted EBITDA margin, and free cash flow.

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 in the second quarter of 2021 included a $11.6 million favorable foreign currency translation effect. Revenue in the first six months of 2021 included a $17.6 million favorable foreign currency translation effect and $0.5 million from an acquisition. We present increases or decreases in organic revenue, which excludes 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, and amortization expense related to acquired backlog. Free cash flow presents cash flow from operations excluding capital expenditures. 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 none at all.

Second Quarter

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

  • Pre-tax acquisition costs of $0.6 million in 2021 and $0.4 million in 2020.

  • Pre-tax restructuring costs of $0.5 million in 2020.

Adjusted net income and adjusted diluted EPS exclude:

  • After-tax acquisition costs of $0.6 million in 2021 and $0.3 million ($0.4 million net of tax of $0.1 million) in 2020.

  • After-tax restructuring costs of $0.3 million ($0.5 million net of tax of $0.2 million) in 2020.

Free cash flow is calculated as cash flow from operations less:

  • Capital expenditures of $2.1 million in 2021 and $0.9 million in 2020.

First Six Months

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

  • Pre-tax acquisition costs of $1.9 million in 2021 and $0.4 million in 2020.

  • Pre-tax restructuring costs of $0.5 million in 2020.

  • Pre-tax expense related to amortization of acquired backlog of $0.1 million in 2021.

Adjusted net income and adjusted diluted EPS exclude:

  • After-tax acquisition costs of $1.7 million ($1.9 million net of tax of $0.2 million) in 2021 and $0.3 million ($0.4 million net of tax of $0.1 million) in 2020.

  • After-tax restructuring costs of $0.3 million ($0.5 million net of tax of $0.2 million) in 2020.

  • After-tax expense related to amortization of acquired backlog of $0.1 million in 2021.

Free cash flow is calculated as cash flow from operations less:

  • Capital expenditures of $4.3 million in 2021 and $3.6 million in 2020.

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

Six Months Ended

Consolidated Statement of Income

July 3,
2021

June 27,
2020

July 3,
2021

June 27,
2020

Revenue

$

195,811

$

152,860

$

368,274

$

311,987

Costs and Operating Expenses:

Cost of revenue

110,493

86,412

207,241

177,216

Selling, general, and administrative expenses

49,267

45,073

98,698

90,665

Research and development expenses

3,041

2,798

5,898

5,874

Restructuring costs

456

456

162,801

134,739

311,837

274,211

Operating Income

33,010

18,121

56,437

37,776

Interest Income

56

37

121

88

Interest Expense

(1,066

)

(1,931

)

(2,177

)

(4,390

)

Other Expense, Net

(24

)

(31

)

(48

)

(63

)

Income Before Provision for Income Taxes

31,976

16,196

54,333

33,411

Provision for Income Taxes

8,949

4,474

14,510

9,033

Net Income

23,027

11,722

39,823

24,378

Net Income Attributable to Noncontrolling Interest

(163

)

(115

)

(398

)

(240

)

Net Income Attributable to Kadant

$

22,864

$

11,607

$

39,425

$

24,138

Earnings per Share Attributable to Kadant:

Basic

$

1.97

$

1.01

$

3.41

$

2.11

Diluted

$

1.96

$

1.00

$

3.39

$

2.09

Weighted Average Shares:

Basic

11,579

11,482

11,566

11,457

Diluted

11,650

11,552

11,631

11,530


Three Months Ended

Three Months Ended

Adjusted Net Income and Adjusted Diluted EPS (a)

July 3,
2021

July 3,
2021

June 27,
2020

June 27,
2020

Net Income and Diluted EPS Attributable to Kadant, as Reported

$

22,864

$

1.96

$

11,607

$

1.00

Adjustments for the Following:

Restructuring Costs, Net of Tax

332

0.03

Acquisition Costs, Net of Tax (b)

557

0.05

297

0.03

Amortization of Acquired Backlog, Net of Tax (c)

21

20

Adjusted Net Income and Adjusted Diluted EPS (a)

$

23,442

$

2.01

$

12,256

$

1.06


Six Months Ended

Six Months Ended

July 3,
2021

July 3,
2021

June 27,
2020

June 27,
2020

Net Income and Diluted EPS Attributable to Kadant, as Reported

$

39,425

$

3.39

$

24,138

$

2.09

Adjustments for the Following:

Restructuring Costs, Net of Tax

332

0.03

Acquisition Costs, Net of Tax (b)

1,730

0.15

297

0.03

Amortization of Acquired Backlog, Net of Tax (c)

65

0.01

26

Adjusted Net Income and Adjusted Diluted EPS (a)

$

41,220

$

3.54

$

24,793

$

2.15


Three Months Ended

Increase Excluding FX (a,d)

Revenue by Segment

July 3,
2021

June 27,
2020

Increase

Flow Control

$

70,762

$

51,365

$

19,397

$

15,610

Industrial Processing

82,681

65,673

17,008

10,795

Material Handling

42,368

35,822

6,546

4,972

$

195,811

$

152,860

$

42,951

$

31,377

Percentage of Parts and Consumables Revenue

64

%

64

%

Six Months Ended

Increase

Increase Excluding Acquisition and FX (a,d)

July 3,
2021

June 27,
2020

Flow Control

$

134,516

$

108,514

$

26,002

$

20,585

Industrial Processing

151,835

130,382

21,453

11,704

Material Handling

81,923

73,091

8,832

5,903

$

368,274

$

311,987

$

56,287

$

38,192

Percentage of Parts and Consumables Revenue

66

%

65

%

Three Months Ended

Increase

Increase Excluding FX (d)

Bookings by Segment

July 3,
2021

June 27,
2020

Flow Control

$

71,819

$

49,361

$

22,458

$

18,660

Industrial Processing

101,899

53,144

48,755

40,412

Material Handling

39,447

30,471

8,976

7,212

$

213,165

$

132,976

$

80,189

$

66,284

Percentage of Parts and Consumables Bookings

60

%

71

%

Six Months Ended

Increase

Increase Excluding Acquisition and FX (d)

July 3,
2021

June 27,
2020

Flow Control

$

147,818

$

117,105

$

30,713

$

24,733

Industrial Processing

188,505

118,982

69,523

56,664

Material Handling

81,331

72,506

8,825

5,568

$

417,654

$

308,593

$

109,061

$

86,965

Percentage of Parts and Consumables Bookings

62

%

68

%


Three Months Ended

Six Months Ended

Business Segment Information

July 3,
2021

June 27,
2020

July 3,
2021

June 27,
2020

Gross Margin:

Flow Control

52.8

%

53.5

%

53.0

%

53.2

%

Industrial Processing

40.1

%

40.9

%

40.3

%

39.7

%

Material Handling

34.9

%

33.8

%

34.8

%

34.7

%

43.6

%

43.5

%

43.7

%

43.2

%


Operating Income:

Flow Control

$

19,324

$

10,260

$

34,770

$

23,590

Industrial Processing

17,301

10,639

28,434

20,075

Material Handling

5,592

3,593

10,035

7,727

Corporate

(9,207

)

(6,371

)

(16,802

)

(13,616

)

$

33,010

$

18,121

$

56,437

$

37,776

Adjusted Operating Income (a,e):

Flow Control

$

19,563

$

10,716

$

36,006

$

24,046

Industrial Processing

17,301

11,074

28,494

20,510

Material Handling

5,619

3,593

10,062

7,735

Corporate

(8,843

)

(6,371

)

(16,137

)

(13,616

)

$

33,640

$

19,012

$

58,425

$

38,675

Capital Expenditures:

Flow Control

$

368

$

337

$

702

$

1,158

Industrial Processing

1,191

211

2,995

1,675

Material Handling

495

283

616

681

Corporate

5

80

5

83

$

2,059

$

911

$

4,318

$

3,597

Three Months Ended

Six Months Ended

Cash Flow and Other Data

July 3,
2021

June 27,
2020

July 3,
2021

June 27,
2020

Operating Cash Flow

$

44,386

$

22,039

$

63,478

$

28,208

Less: Capital Expenditures

(2,059

)

(911

)

(4,318

)

(3,597

)

Free Cash Flow (a)

$

42,327

$

21,128

$

59,160

$

24,611

Depreciation and Amortization Expense

$

7,716

$

7,576

$

15,402

$

15,174


Balance Sheet Data

July 3,
2021

January 2,
2021

Assets

Cash, Cash Equivalents, and Restricted Cash (f)

$

158,144

$

66,640

Accounts Receivable, net

106,791

91,540

Inventories

114,316

106,814

Unbilled Revenue

6,481

7,576

Property, Plant, and Equipment, net

81,757

84,642

Intangible Assets

151,582

160,965

Goodwill

350,271

351,753

Other Assets

60,134

57,641

$

1,029,476

$

927,571

Liabilities and Stockholders' Equity

Accounts Payable

$

44,087

$

32,264

Debt Obligations

268,722

227,963

Other Borrowings

5,003

5,511

Other Liabilities

180,538

164,928

Total Liabilities

498,350

430,666

Stockholders' Equity

531,126

496,905

$

1,029,476

$

927,571


Three Months Ended

Six Months Ended

Adjusted Operating Income and Adjusted EBITDA Reconciliation (a)

July 3,
2021

June 27,
2020

July 3,
2021

June 27,
2020

Consolidated

Net Income Attributable to Kadant

$

22,864

$

11,607

$

39,425

$

24,138

Net Income Attributable to Noncontrolling Interest

163

115

398

240

Provision for Income Taxes

8,949

4,474

14,510

9,033

Interest Expense, Net

1,010

1,894

2,056

4,302

Other Expense, Net

24

31

48

63

Operating Income

33,010

18,121

56,437

37,776

Restructuring Costs

456

456

Acquisition Costs (b)

603

407

1,901

407

Acquired Backlog Amortization (c)

27

28

87

36

Adjusted Operating Income (a)

33,640

19,012

58,425

38,675

Depreciation and Amortization

7,689

7,548

15,315

15,138

Adjusted EBITDA (a)

$

41,329

$

26,560

$

73,740

$

53,813

Adjusted EBITDA Margin (a,g)

21.1

%

17.4

%

20.0

%

17.2

%

Flow Control

Operating Income

$

19,324

$

10,260

$

34,770

$

23,590

Acquisition Costs (b)

239

1,236

Restructuring Costs

456

456

Adjusted Operating Income (a)

19,563

10,716

36,006

24,046

Depreciation and Amortization

1,568

1,579

3,140

3,165

Adjusted EBITDA (a)

$

21,131

$

12,295

$

39,146

$

27,211

Adjusted EBITDA Margin (a,g)

29.9

%

23.9

%

29.1

%

25.1

%

Industrial Processing

Operating Income

$

17,301

$

10,639

$

28,434

$

20,075

Acquisition Costs (b)

407

407

Acquired Backlog Amortization (c)

28

60

28

Adjusted Operating Income (a)

17,301

11,074

28,494

20,510

Depreciation and Amortization

3,403

3,126

6,741

6,287

Adjusted EBITDA (a)

$

20,704

$

14,200

$

35,235

$

26,797

Adjusted EBITDA Margin (a,g)

25.0

%

21.6

%

23.2

%

20.6

%

Material Handling

Operating Income

$

5,592

$

3,593

$

10,035

$

7,727

Acquired Backlog Amortization (c)

27

27

8

Adjusted Operating Income (a)

5,619

3,593

10,062

7,735

Depreciation and Amortization

2,682

2,795

5,368

5,592

Adjusted EBITDA (a)

$

8,301

$

6,388

$

15,430

$

13,327

Adjusted EBITDA Margin (a,g)

19.6

%

17.8

%

18.8

%

18.2

%

Corporate

Operating Loss

$

(9,207

)

$

(6,371

)

$

(16,802

)

$

(13,616

)

Acquisition Costs (b)

364

665

Adjusted Operating Loss (a)

(8,843

)

(6,371

)

(16,137

)

(13,616

)

Depreciation and Amortization

36

48

66

94

Adjusted EBITDA (a)

$

(8,807

)

$

(6,323

)

$

(16,071

)

$

(13,522

)


(a)

Represents a non-GAAP financial measure.

(b)

Represents transaction costs associated with our acquisitions. The results by segment for the first quarter of 2021 have been recast to reflect acquisition costs incurred.

(c)

Represents intangible amortization expense associated with acquired backlog.

(d)

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.

(e)

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

(f)

Includes restricted cash of $84.2 million at the end of the second quarter of 2021 used to fund our third quarter acquisition of Clouth.

(g)

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 approximately 2,800 employees in 21 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 fiscal year ended January 2, 2021 and subsequent filings with the Securities and Exchange Commission. These include risks and uncertainties relating to the impact of the COVID-19 pandemic 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; health epidemics; our acquisition strategy; levels of residential construction activity; reductions by our wood processing customers of their capital spending or production of oriented strand board; changes to the global timber supply; development and use of digital media; cyclical economic conditions affecting the global mining industry; demand for coal, including economic and environmental risks associated with coal; failure of our information systems or breaches of data security and cybertheft; implementation of our internal growth strategy; price increases or shortages of raw materials; competition; changes in our tax provision or exposure to additional tax liabilities; our ability to successfully manage our manufacturing operations; disruption in production; future restructurings; loss of key personnel and effective succession planning; protection of intellectual property; climate change; adequacy of our insurance coverage; global operations; policies of the Chinese government; the variability and uncertainties in sales of capital equipment in China; currency fluctuations; economic conditions and regulatory changes caused by the United Kingdom’s exit from the European Union; changes to government regulations and policies around the world; compliance with government regulations and policies and compliance with laws; environmental laws and regulations; environmental, health and safety laws and regulations impacting the mining industry; our debt obligations; restrictions in our credit agreement and note purchase agreement; substitution of an alternative index for LIBOR; soundness of financial institutions; fluctuations in our share price; and anti-takeover provisions.

Contacts
Investor Contact Information:
Michael McKenney, 978-776-2000
IR@kadant.com

or

Media Contact Information:
Wes Martz, 269-278-1715
media@kadant.com