Kadant: Q2 results, 2012 guidance
WESTFORD, Mass.- Kadant Inc. reported its financial results for the second quarter ended June 30, 2012.
Second Quarter 2012 Financial Highlights
GAAP diluted earnings per share (EPS) from continuing operations was $0.56 in the second quarter of 2012 compared to $0.59 in the second quarter of 2011. Guidance was $0.50 to $0.52.
Revenues were $83.0 million in the quarter compared to $82.5 million in the second quarter of 2011. Guidance was $83 to $85 million.
Net income was $6.5 million in the quarter compared to $7.3 million in the second quarter of 2011.
EBITDA was $11.4 million in the quarter, down 8% from the second quarter of 2011, and was 13.8% of revenues compared to 15.1% in last year's second quarter.
Cash flows from continuing operations were $8.6 million in the quarter, up 25% from the second quarter of 2011.
Repurchases of common stock were $7.3 million in the second quarter of 2012.
Note: EBITDA is a non-GAAP measure that excludes certain items as detailed later in this press release under the heading "Use of Non-GAAP Financial Measures" and in the reconciliation tables below.
"We were very pleased with our results in the second quarter of 2012," said Jonathan W. Painter, president and chief executive officer of Kadant. "Diluted EPS from continuing operations was $0.56, one of the best performances in our twenty-year history as a public company, and exceeded our guidance, which was $0.50 to $0.52.
"Revenues of $83.0 million were at the low end of our guidance, which was $83 to $85 million, and included an unfavorable foreign exchange translation effect of $3.5 million. Revenues also included a $2.4 million increase from Kadant M-Clean, which was acquired late in the second quarter of 2011 and included only one month's results in that period. We were encouraged that our product gross margins were a solid 43.7 percent, although down from the near record level of 45.7 percent in the second quarter of 2011. Our EBITDA was $11.4 million in the second quarter of 2012, down from $12.5 million in the second quarter of 2011, and represented 13.8 percent of revenues. Operating cash flows from continuing operations were $8.6 million, up from $6.8 million in last year's second quarter, and we repurchased $7.3 million of our common stock in the quarter. Cash less debt was $30.1 million at the end of the quarter.
"The global economic uncertainty, particularly in Europe and China, continued to impact our booking results in the second quarter of 2012. Consolidated bookings were $77.4 million in the second quarter of 2012, down 11 percent from last year's second quarter, and included decreases of 30 percent and 19 percent in Europe and China, respectively. Consolidated bookings were flat on a sequential basis."
Second Quarter 2012
Kadant reported revenues from continuing operations of $83.0 million in the second quarter of 2012, an increase of $0.5 million compared with $82.5 million in the second quarter of 2011. Revenues for the second quarter of 2012 included a $3.5 million decrease from foreign currency translation and a $2.4 million increase from Kadant M-Clean compared to the second quarter of 2011. Operating income from continuing operations was $9.4 million in the second quarter of 2012 compared to $10.5 million in the second quarter of 2011. Net income was $6.5 million in the second quarter of 2012, or $0.56 per diluted share, compared to $7.3 million, or $0.59 per diluted share, in the second quarter of 2011.
"Looking forward, the continuing weak economic conditions in Europe and China, coupled with our recent bookings results and the adverse translation effect associated with the strengthening U.S. dollar, have led us to reduce guidance for the second half of the year," Jonathan W. Painter continued. "We expect to achieve diluted EPS of $0.49 to $0.51 in the third quarter of 2012 on revenues of $80 to $82 million. For the full year, we expect to achieve diluted EPS of $2.05 to $2.10 on revenues of $325 to $330 million, revised from our previous guidance of $2.10 to $2.20 on revenues of $335 to $345 million. I should note that if we achieve the revised EPS guidance for the full year, it will be the second highest result we have ever attained."
Kadant will hold a webcast with a slide presentation for investors on Tuesday, July 31, 2012, at 11 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 http://www.kadant.com and click on the "Investors" tab. To listen to the webcast via teleconference, call 866-804-6926 within the U.S., or +1-857-350-1672 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 http://www.sec.gov. An archive of the webcast presentation will be available on our Web site until August 30, 2012.
Shortly after the webcast, Kadant will post its updated general investor presentation incorporating the second quarter results on its Web site at http://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, earnings before interest, taxes, depreciation, and amortization (EBITDA), and adjusted EBITDA.
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 a better 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.
We present increases or decreases in revenues excluding the effect of foreign currency translation to provide investors insight into underlying revenue trends.
Adjusted EBITDA excludes pre-tax gains of $2.3 million, net of restructuring costs of $0.4 million in the twelve-month period ended June 30, 2012. These items are excluded as they are not indicative of our core operating results and not comparable to other periods, which have differing levels of incremental costs or other income, or none at all.
Reconciliations of the non-GAAP financial measures to the most directly comparable GAAP financial measures are set forth in this release.
Kadant Inc. is a leading supplier to the global pulp and paper industry. Our stock-preparation, fluid-handling, doctoring, and water-management equipment and systems are designed to increase efficiency and improve quality in pulp and paper production. Many of our products, particularly in our fluid-handling product line, are also used to optimize production in other process industries. In addition, we produce granules from papermaking byproducts for agricultural and lawn and garden applications. Kadant is based in Westford, Massachusetts, with revenues of $335 million in 2011 and 1,700 employees in 17 countries worldwide. For more information, visit http://www.kadant.com.
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 expected 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 quarterly report on Form 10-Q for the quarter ended March 31, 2012. These include risks and uncertainties relating to our dependence on the pulp and paper industry; significance of sales and operation of manufacturing facilities in China; our ability to adjust operating costs and manufacturing sufficiently in China to meet demand; commodity and component price increases or shortages; international sales and operations; competition; soundness of suppliers and customers; our effective tax rate; future restructurings; soundness of financial institutions; our debt obligations; restrictions in our credit agreement; litigation costs related to our discontinued operation; our acquisition strategy; 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.
Source: Kadant Inc.
Thomas M. O'Brien, 978-776-2000