Exhibit 99
[LOGO]
NEWS
KADANT
AN ACCENT ON INNOVATION
One Acton Place, Suite 202
Acton, MA 01720
Investor contact: Thomas M. O'Brien, 978-776-2000
Media contact: GreatPoint Communications, 978-392-6866
Kadant Reports 2004 Second Quarter Results
ACTON, Mass., July 28, 2004 - For the second quarter of 2004, Kadant Inc.
(NYSE:KAI) reported GAAP diluted earnings per share (EPS) of $.26, compared with
$.28 in the second quarter of 2003. Earnings in the 2004 period included a $.03
benefit from a reduction in tax reserves, and, in 2003, included a net gain of
$.01 due to restructuring and unusual items. GAAP net income in the 2004 period
was $3.7 million, versus $3.9 million a year ago. Second quarter revenues
increased to $57.8 million in 2004 (including $1.7 million from the favorable
effect of currency translation), compared with $55.8 million in 2003.
"We are pleased with our overall performance during the second
quarter," said William A. Rainville, chairman and chief executive officer of
Kadant. "Earnings, excluding the tax benefit, were at the high end of our
guidance, and revenues slightly exceeded our expectations. Sales of our
stock-preparation systems to China remained strong, with a record $10.4 million
in revenues for the quarter. In North America, we booked one of our largest
single orders in the past few years, for a pulping system worth nearly $4
million, and saw increased sales of paper machine accessories. Our composite
building products business reported quarterly revenues of $5.1 million - 52
percent higher than last year - and the $370,000 operating loss for the quarter
was slightly less than we expected.
"That said, we are tempering our outlook for the second half of the
year. Although we believe that China will remain an active and growing market
for us, the timing of orders is always difficult to predict, especially with the
recent slowdown in bank financing approvals there. European markets, on the
other hand, have become weaker than we expected, and this will affect sales in
all our papermaking equipment product lines for the rest of this year. We are
evaluating opportunities to streamline our operations in Europe to improve
operating results in 2005. In the composites business, higher warranty and raw
materials costs continue to hamper profitability in spite of revenue growth.
"Based on these factors, we expect to report GAAP diluted EPS of $.17
to $.20 for the third quarter of 2004, on revenues of $46 to $48 million. For
the full year, we are now forecasting GAAP diluted EPS of $.85 to $.90, down
from our earlier estimate of $.90 to $1.00. We expect to report revenues of $205
to $210 million for all of 2004."
Mr. Rainville added, "On a positive note, we continued to generate
strong cash flow from operations - $7.8 million during the quarter. This leaves
us with a cash balance of $81.6 million at quarter end, even after buying back
more than $6 million worth of our stock in the quarter. With a strong cash
position, and no debt, we have several options for generating shareholder value,
including internal investment, additional stock buybacks, and strategic
acquisitions."
-more-
Financial Highlights (unaudited)
(In thousands, except per share amounts and percentages)
Three Months Ended Six Months Ended
---------------------------- -----------------------------
Consolidated Statement of Income July 3, 2004 June 28, 2003 July 3, 2004 June 28, 2003
- -------------------------------------------------------------------------------------------------------------------------------
Revenues $ 57,782 $ 55,784 $ 109,509 $ 107,159
------------ ------------- ------------ -------------
Costs and Operating Expenses:
Cost of revenues 36,652 35,086 68,617 67,294
Selling, general, and administrative expenses 15,566 13,382 30,434 26,894
Research and development expenses 693 1,310 1,711 2,353
Restructuring and unusual items - (180) - (180)
------------ ------------- ------------ -------------
52,911 49,598 100,762 96,361
------------ ------------- ------------ -------------
Operating Income 4,871 6,186 8,747 10,798
Interest Income 318 214 647 450
Interest Expense (4) (11) (12) (28)
------------ ------------- ------------ -------------
Income Before Provision for Income Taxes and Minority Interest 5,185 6,389 9,382 11,220
Provision for Income Taxes 1,428 2,428 2,897 4,264
Minority Interest Expense 14 72 14 72
------------ ------------- ------------ -------------
Net Income $ 3,743 $ 3,889 $ 6,471 $ 6,884
============ ============= ============ =============
Earnings per Share
Basic $ .26 $ .29 $ .46 $ .51
============ ============= ============ =============
Diluted $ .26 $ .28 $ .44 $ .50
============ ============= ============ =============
Weighted Average Shares
Basic 14,218 13,601 14,220 13,588
============ ============= ============ =============
Diluted 14,555 13,908 14,579 13,837
============ ============= ============ =============
Three Months Ended Six Months Ended
---------------------------- -----------------------------
Adjusted Diluted Earnings per Share (a) July 3, 2004 June 28, 2003 July 3, 2004 June 28, 2003
- -------------------------------------------------------------------------------------------------------------------------------
GAAP Diluted Earnings per Share $ .26 $ .28 $ .44 $ .50
Restructuring and Unusual Items - (.01) - (.01)
Income Taxes (b) (.03) - (.03) -
------------ ------------- ------------ -------------
$ .23 $ .27 $ .41 $ .49
============ ============= ============ =============
Three Months Ended Six Months Ended
---------------------------- -----------------------------
Business Segment Information July 3, 2004 June 28, 2003 July 3, 2004 June 28, 2003
- -------------------------------------------------------------------------------------------------------------------------------
Revenues:
Pulp and Papermaking Equipment and Systems $ 50,933 $ 50,674 $ 96,497 $ 96,231
Composite and Fiber-based Products 6,849 5,110 13,012 10,928
------------ ------------- ------------ -------------
$ 57,782 $ 55,784 $ 109,509 $ 107,159
============ ============= ============ =============
Gross Profit Margin:
Pulp and Papermaking Equipment and Systems 38% 37% 39% 38%
Composite and Fiber-based Products 22% 37% 19% 35%
------------ ------------- ------------ -------------
37% 37% 37% 37%
============ ============= ============ =============
Operating Income:
Pulp and Papermaking Equipment and Systems $ 6,152 $ 6,691 $ 12,495 $ 11,931
Composite and Fiber-based Products (c) 104 571 (532) 983
Corporate (1,385) (1,076) (3,216) (2,116)
------------ ------------- ------------ -------------
$ 4,871 $ 6,186 $ 8,747 $ 10,798
============ ============= ============ =============
Adjusted Operating Income (Excludes Restructuring and
Unusual Items) (a):
Pulp and Papermaking Equipment and Systems (d) $ 6,152 $ 6,511 $ 12,495 $ 11,751
Composite and Fiber-based Products 104 571 (532) 983
Corporate (1,385) (1,076) (3,216) (2,116)
------------ ------------- ------------ -------------
$ 4,871 $ 6,006 $ 8,747 $ 10,618
============ ============= ============ =============
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> Three Months Ended Six Months Ended
---------------------------- -----------------------------
Business Segment Information (continued) July 3, 2004 June 28, 2003 July 3, 2004 June 28, 2003
- -------------------------------------------------------------------------------------------------------------------------------
Bookings:
Pulp and Papermaking Equipment and Systems $ 48,897 $ 38,516 $ 100,040 $ 96,644
Composite and Fiber-based Products 7,057 4,886 12,103 7,825
------------ ------------- ------------ -------------
$ 55,954 $ 43,402 $ 112,143 $ 104,469
============ ============= ============ =============
Capital Expenditures:
Pulp and Papermaking Equipment and Systems $ 505 $ 359 $ 835 $ 561
Composite and Fiber-based Products 190 228 300 876
Corporate 8 8 11 11
------------ ------------- ------------ -------------
$ 703 $ 595 $ 1,146 $ 1,448
============ ============= ============ =============
Three Months Ended Six Months Ended
---------------------------- -----------------------------
Cash Flow and Other Data July 3, 2004 June 28, 2003 July 3, 2004 June 28, 2003
- -------------------------------------------------------------------------------------------------------------------------------
Cash Provided by Operations $ 7,819 $ 4,098 $ 8,877 $ 3,058
Depreciation and Amortization Expense 1,193 1,322 2,419 2,607
Balance Sheet Data July 3, 2004 Jan. 3, 2004
- -------------------------------------------------------------------------------------------------------------------------------
Cash and Short-term Investments $ 81,588 $ 74,451
Short-term Debt - $ 598
Shareholders' Investment $ 217,016 $ 211,758
(a) In addition to the financial measures prepared in accordance with generally accepted accounting principles (GAAP), we use
the non-GAAP financial measures of adjusted diluted EPS and adjusted operating income, which exclude restructuring and other
non-recurring items. We exclude these items because they are outside our normal operations. We believe that providing such
non-GAAP measures helps investors to gain a better understanding of our operating results from period to period, and is
consistent with how we measure our performance.
(b) Represents effect of reduction in tax reserves of $386 in the three- and six-month periods ended July 3, 2004.
(c) Includes operating losses of $370 and $1,302 in the three- and six- month periods ended July 3, 2004, respectively, and
operating income of $26 and $110 in the three- and six- month periods ended June 28, 2003, respectively, from the composite
building products business.
(d) Excludes net restructuring costs and unusual income of $180 in the three- and six-month periods ended June 28, 2003.
Kadant will hold its earnings conference call on Thursday, July 29,
2004, at 11 a.m. Eastern time. To listen, call 800-709-2159 within the U.S., or
973-582-2810 outside the U.S. You can also listen to the call live on the Web by
visiting www.kadant.com and clicking on "Investors." An audio archive of the
call will be available on our Web site until August 26, 2004.
Kadant Inc. is a leading supplier of a range of products for the global
papermaking and paper recycling industries, including stock-preparation
equipment, water-management systems, and paper machine accessories. We also
develop and manufacture composite building materials produced from recycled
fiber and plastic. Kadant, based in Acton, Massachusetts, had approximately $204
million in revenues in 2003 and 1,000 employees worldwide. For more information,
please visit 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 regarding our projected operating results,
the future performance of our businesses, opportunities for shareholder value,
and demand for our products in China. Important factors that could cause actual
results to differ materially from those indicated by such statements are set
forth under the heading "Risk Factors" in Kadant's quarterly report on Form 10-Q
for the period ended April 3, 2004. These include risks and uncertainties
relating to our dependence on the pulp and paper industry; international sales
and operations; competition; ability to manufacture and distribute composite
building products, and the seasonality in sales and the long-term performance of
such products; availability of raw materials and exposure to commodity price
fluctuations related to the manufacture of composite and fiber-based products;
acquisition strategy; protection of patents and proprietary rights; fluctuations
in quarterly operating results; 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.
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