28.10.14

Kadant: Q3 results

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WESTFORD, Mass. - Kadant Inc. (NYSE:KAI) reported its financial results for the third quarter ended September 27, 2014.

Third Quarter 2014 Financial Highlights

    GAAP diluted earnings per share (EPS) from continuing operations increased 5% to $0.60 in the third quarter of 2014 compared to $0.57 in the third quarter of 2013. Guidance was $0.52 to $0.54. Adjusted diluted EPS increased 11% to $0.63 in the third quarter of 2014 compared to $0.57 in the third quarter of 2013.
    Revenue increased 8% to $99 million in the third quarter of 2014, including $9 million from acquisitions, compared to $91 million in the third quarter of 2013. Guidance was $94 to $96 million.
    Bookings increased 23% to $100 million in the third quarter of 2014, including $9 million from acquisitions, compared to $82 million in the third quarter of 2013. Excluding acquisitions, bookings increased 12% in the third quarter of 2014 compared to the third quarter of 2013 and 13% for the corresponding nine-month periods.
    Parts and consumables revenue increased 21% to a record $63 million in the third quarter of 2014 compared to $52 million in the third quarter of 2013.
    Gross margin was 44.7% in the third quarter of 2014 compared to 43.9% in the third quarter of 2013.
    Net income from continuing operations was $6.7 million in the third quarter of 2014 compared to $6.5 million in the third quarter of 2013.
    Adjusted EBITDA was the second highest in the Company’s history, increasing 9% to $13 million in the third quarter of 2014 compared to $12 million in the third quarter of 2013.
    Backlog increased 30% to $128 million at the end of the third quarter of 2014 compared to $99 million in the third quarter of 2013.
    Cash flows from continuing operations increased 20% to $15 million in the third quarter of 2014 compared to $13 million in the third quarter of 2013.
    Repurchases of common stock were $2 million in the third quarter of 2014.

Note: Adjusted diluted EPS and adjusted EBITDA are non-GAAP measures that exclude certain items as detailed later in this press release under the heading “Use of Non-GAAP Financial Measures” and in the reconciliation tables below.


Management Commentary

“We had a solid third quarter with strong cash flows, gross margin, adjusted EBITDA, and a new record for parts and consumables revenue,” said Jonathan W. Painter, president and chief executive officer of Kadant Inc. “We exceeded our EPS guidance due to strong revenue performance, particularly in our Stock-Preparation and Wood Processing Systems product lines.

“Revenue was $99 million in the third quarter of 2014, increasing 8 percent compared to the third quarter of 2013, including a 47 percent increase in North America. We were pleased with our record parts and consumables revenue, which increased 21 percent to $63 million in the third quarter of 2014 compared to the third quarter of 2013, and reflects the continued focus we have placed on our parts and consumables business over the past several years.

“We are on track to achieve record adjusted EBITDA for the year. Adjusted EBITDA in the third quarter of 2014 was the second highest in our history at $13 million, up 9 percent compared to the third quarter of last year. Cash flows were excellent in the third quarter of 2014 at $15 million, up 20 percent compared to the third quarter of 2013, and we ended the third quarter of 2014 with net cash of $19 million.

“Our bookings of $100 million in the third quarter of 2014, including $9 million from acquisitions, increased 23 percent compared to the third quarter of 2013. Excluding bookings from acquisitions, our bookings in the third quarter of 2014 increased 12 percent compared to the third quarter of 2013 and increased 13 percent for the corresponding nine-month periods. We have put a lot of effort into several strategic initiatives to promote internal growth and it is nice to see these positive results.”

Third Quarter 2014

Kadant reported revenue of $98.7 million in the third quarter of 2014, an increase of $7.4 million, or 8 percent, compared with $91.3 million in the third quarter of 2013. Revenue for the third quarter of 2014 included $8.6 million from acquisitions and a $0.3 million increase from foreign currency translation compared to the third quarter of 2013. Operating income from continuing operations was $10.2 million in the third quarter of 2014, including $0.5 million of restructuring costs, compared to $9.9 million in the third quarter of 2013. Adjusted operating income, a non-GAAP measure, was $10.7 million in the third quarter of 2014 compared to $10.0 million in the third quarter of 2013.

Net income from continuing operations was $6.7 million, or $0.60 per diluted share, in the third quarter of 2014 compared to $6.5 million, or $0.57 per diluted share, in the third quarter of 2013. Adjusted net income from continuing operations, a non-GAAP measure, was $7.0 million, or $0.63 per diluted share, in the third quarter of 2014 compared to $6.5 million, or $0.57 per diluted share, in the third quarter of 2013.

 Guidance

“While we were pleased with our revenue and EPS performance in the third quarter, delays in capital shipments, weakening market conditions in Europe and South America, and an unfavorable effect from foreign currency exchange have adversely affected our outlook for the fourth quarter,” Mr. Painter continued. “We expect to achieve GAAP diluted EPS from continuing operations of $0.72 to $0.74 in the fourth quarter of 2014 on revenue of $104 to $106 million. If achieved, this fourth quarter diluted EPS would be a record on an adjusted basis. In addition, we expect to finish the year with record annual revenues, bookings, adjusted EBITDA, and adjusted EPS. For the full year, we expect revenue of $401 to $403 million, narrowed from our previous guidance of $400 to $410 million. We expect to achieve GAAP diluted EPS from continuing operations of $2.47 to $2.49, revised from our previous guidance of $2.50 to $2.60. We are lowering our full year 2014 EPS guidance due to a $0.03 unfavorable effect from foreign currency exchange and $0.03 of restructuring costs, as well as our reduced expectations for the fourth quarter. Our full year diluted EPS guidance includes $0.17 of expense related to acquired inventory and backlog associated with businesses acquired in 2013 and $0.06 of restructuring costs.”

 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 revenue of $344 million in 2013 and 1,800 employees in 18 countries worldwide. For more information, visit www.kadant.com.
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