UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
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FORM 10-K
(mark one)
[X] Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act
of 1934 for the fiscal year ended December 28, 2002
[ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934
Commission file number 1-11406
KADANT INC.
(Exact name of Registrant as specified in its charter)
Delaware 52-1762325
(State or other jurisdiction (I.R.S. Employer Identification No.)
of incorporation or organization)
One Acton Place, Suite 202
Acton, Massachusetts 01720
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (978) 776-2000
Securities registered pursuant to Section 12(b) of the Act:
Title of each class Name of each exchange on which registered
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Common Stock, $.01 par value American Stock Exchange
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months, and (2) has been subject to the filing requirements for
at least the past 90 days. Yes [X] No [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of the Registrant's knowledge, in definitive proxy or information
statements incorporated by reference into Part III of this Form 10-K or any
amendment to this Form 10-K. [ ]
Indicate by check mark whether the Registrant is an accelerated filer (as
defined in Exchange Act Rule 12b-2). Yes [X] No [ ]
The aggregate market value of the voting and non-voting common equity held by
nonaffiliates of the Registrant as of June 28, 2002, was approximately
$222,491,000.
As of January 31, 2003, the Registrant had 13,550,285 shares of Common Stock
outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Registrant's Annual Report to Shareholders for the year ended
December 28, 2002, are incorporated by reference into Parts I and II of Form
10-K, and portions of the Registrant's definitive Proxy Statement for the Annual
Meeting of Shareholders to be held on May 15, 2003, are incorporated by
reference into Part III of Form 10-K. Copies of these documents can be obtained
at no cost by calling the Company at (978) 776-2000.
PART I
Item 1. Business
(a) General Development of Business
Kadant Inc. (also referred to in this document as "we," "us," "our,"
"Registrant," or "Company") operates in two segments: the Pulp and Papermaking
Equipment and Systems segment and the Composite and Fiber-based Products
segment.
Through our Pulp and Papermaking Equipment and Systems segment, we
develop, manufacture, and market a range of equipment and products for the
domestic and international papermaking and paper recycling industries. Our
principal products include:
. Stock-preparation systems and equipment: custom-engineered
systems and equipment for de-inking, screening, cleaning, and
refining waste fiber to prepare it for entry into the paper
machine during production of recycled paper;
. Papermaking machine accessory equipment: doctoring systems and
related consumables that clean papermaking rolls to keep paper
machines running efficiently, and profiling systems that control
moisture, web curl, and gloss during paper production; and
. Water-management systems: equipment that is essential for the
continuous cleaning of paper machine fabrics and the draining,
purifying, and recycling of process water for paper sheet and
web formation.
Our Company is well established and has a long history in the
papermaking equipment industry. Certain of our subsidiaries, or their
predecessor companies, have been in operation for nearly 100 years or more. We
have a large, stable customer base that includes most of the world's major paper
manufacturers and our products and systems can be found in most of the world's
pulp and paper mills. We also have one of the largest installed bases of
equipment in the pulp and paper industry, which provides us with a high-margin
spare parts and consumables business that we believe is less susceptible than
our capital equipment business to the cyclical trends of the paper industry. We
currently manufacture our products for the pulp and paper industry in six
countries in Europe and North America, and license certain of our products for
manufacture in South America and the Pacific Rim.
Through our Composite and Fiber-based Products segment, we develop,
manufacture, and market composite building materials produced from recycled
fiber, plastic, and other materials, and manufacture and sell granules derived
from pulp fiber that are used primarily as agricultural carriers and for home
lawn and garden applications. Our principal products include:
. Composite building products: decking and railing systems and
roof tiles that we develop and produce from a combination of
recycled fiber, plastic, and other materials, and market
primarily to the building industry; and
. Fiber-based granular products: biodegradable, absorbing granules
that we produce from papermaking byproducts for use primarily as
agricultural carriers and for home lawn and garden applications.
We were incorporated in November 1991 as a wholly owned subsidiary of
Thermo Electron Corporation as the successor-in-interest to several of its
subsidiaries. In November 1992, we conducted an initial public offering of our
common stock and became a majority-owned public subsidiary of Thermo Electron.
On August 8, 2001, Thermo Electron spun off its equity interest in us as a
dividend to its shareholders and ceased to hold any shares of our common stock.
Thermo Electron received a favorable private letter ruling from the Internal
Revenue Service that the distribution would generally qualify as a tax-free
distribution. The favorable tax treatment was subject to our compliance with
various facts and representations, including a representation that we would
conduct a public offering of 10 to 20 percent of our outstanding common stock
within one year of the distribution. In June 2002, we sold 1.3 million shares,
or approximately 10 percent, of our common stock in a public offering at $14.62
per share, for net proceeds of $17.7 million. The offering supported our
business plan, which includes repayment of debt, acquisitions, creation of
strategic partnerships, and investments in our core papermaking equipment and
composite building products businesses.
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From January through September 2002, we repurchased $32.0 million
principal amount of our 4 1/2 % subordinated convertible debentures, due July
15, 2004, for $31.3 million in cash, plus accrued interest, resulting in an
extraordinary gain of $0.3 million, net of deferred debt charges, and net of
income tax provision of $0.2 million. In December 2002, we redeemed the
remaining $86.2 million outstanding principal amount of the debentures for 100%
par value, plus accrued interest, resulting in an extraordinary loss of $0.3
million from the writeoff of the remaining deferred debt, net of income tax
benefit of $0.2 million.
During 2002, in accordance with the adoption of Statement of Financial
Accounting Standards No. 142, "Goodwill and Other Intangible Assets," we
recorded an after-tax goodwill impairment charge accounted for as a cumulative
effect of change in accounting principle of $32.8 million, consisting of $29.9
million at the Papermaking Equipment segment and $2.9 million at the Composite
and Fiber-based Products segment (see Notes 1 and 17 to Consolidated Financial
Statements in our 2002* Annual Report to Shareholders).
FORWARD-LOOKING STATEMENTS
This Annual Report on Form 10-K and the documents that we incorporate by
reference in this Annual Report on Form 10-K include statements that are subject
to risks and uncertainties and are based on the beliefs and assumptions of our
management, based on information currently available to our management. When we
use words such as "believes," "expects," "anticipates," "intends," "plans,"
"estimates," "should," "likely," "will," or similar expressions, we are making
forward-looking statements. Forward-looking statements include the information
concerning possible or assumed future results of our operations set forth under
the heading "Management's Discussion and Analysis of Financial Condition and
Results of Operations" contained in our 2002 Annual Report to Shareholders.
Forward-looking statements are not guarantees of performance. They
involve risks, uncertainties, and assumptions. Our future results of operations
may differ materially from those expressed in the forward-looking statements.
Many of the important factors that will determine these results and values are
beyond our ability to control or predict. You should not put undue reliance on
any forward-looking statements. We undertake no obligation to publicly update
any forward-looking statement, whether as a result of new information, future
events, or otherwise. For a discussion of important factors that may cause our
actual results to differ materially from those suggested by the forward-looking
statements, you should read carefully the section of our 2002 Annual Report to
Shareholders captioned "Risk Factors," which is incorporated in this document by
reference.
(b) Financial Information About Segments
Financial information concerning our segments is summarized in Note 14
to Consolidated Financial Statements in our 2002 Annual Report to Shareholders,
and is incorporated in this document by reference.
(c) Description of Business
(i) Principal Products and Services
We operate in two segments: (1) Pulp and Papermaking Equipment and
Systems and (2) Composite and Fiber-based Products. We aggregate into segments
our businesses with similar economic characteristics, products and services,
production processes, customers, and methods of distribution.
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* References to 2002, 2001, and 2000 in this document are for the fiscal
years ended December 28, 2002, December 29, 2001, and December 30, 2000,
respectively.
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PULP AND PAPERMAKING EQUIPMENT AND SYSTEMS
Our pulp and papermaking equipment and systems business consists of the
following product lines: stock-preparation systems and equipment, papermaking
machine accessory equipment, and water-management systems.
Stock-Preparation Systems and Equipment
We develop, manufacture, and sell complete custom-engineered systems, as
well as standard individual components, for the preparation of recycled and
virgin fibers for entry into the paper machine during production of recycled
paper. We offer many products relating to all aspects of the stock-preparation
process. Our principal stock-preparation products include:
Screening Systems. We offer a full range of screening systems, including
coarse screens that remove metals and sand from the pulp mixture, and fine
screens that remove microscopic particles such as glue and plastic. In late
2000, we introduced a patented screening technology that, in certain
applications, can produce up to 40% cleaner pulp without decreasing capacity. As
a result, we believe our screening systems are the most technologically advanced
currently on the market. We also offer screen baskets, which are essentially the
consumable portion of the screen.
De-Inking Systems. We offer de-inking systems that remove ink by
injecting small air bubbles into the bottom of the pulp mixture. The ink in the
pulp mixture bonds to the air bubbles and rises to the surface where the inky
film is removed. We believe that our de-inking systems remove ink more
effectively with less fiber loss than those systems offered by our competitors.
Pulpers. We offer both high- and low-consistency pulpers that blend
wastepaper with water and chemicals to form pulp mixtures without contaminant
breakdown, thus allowing easier contaminant removal in later stages of the
papermaking process. Our high-consistency pulpers generate pulp mixtures
comprised of approximately 85% water and 15% fiber, and our low-consistency
pulpers generate pulp mixtures comprised of approximately 94% water and 6%
fiber.
Cleaning Systems. We offer both forward and reverse cleaners. Forward
cleaners remove heavy contaminants such as metal and sand from the pulp mixture,
and reverse cleaners remove light contaminants such as glue and plastic.
Washing Systems. We offer counter-current washing systems that remove
ink and ash from the pulp mixture by injecting water counter-current to the flow
and drawing contaminants out with the water.
Trash Removal Systems. We offer trash removal systems that remove large
debris and impurities by screening them from the pulp mixture.
Thickeners. We offer four principal types of thickeners that remove
water from the pulp mixture, thereby increasing the consistency of the mixture.
Thicker pulp mixtures are necessary to break up ink particles in the dispersers.
Dispersers. We offer mechanical dispersers that break down ink particles
that were not removed in the de-inking system into microscopic particles, or
combine them to form sizes that can be removed in subsequent processing.
In addition, we develop, manufacture, and sell products for the virgin
pulping process, including:
Washers. We also offer horizontal counter-current belt washers that are
used to remove lignin and process chemicals.
4
Evaporators, Recausticizing, and Condensate Treatment Systems. We offer
evaporators, recausticizing, and condensate treatment systems that are used to
concentrate and recycle process chemicals and to remove condensate gases.
Bleaching Systems. We offer oxygen-bleaching systems that increase the
brightness of the pulp without using chlorine bleach or moving parts.
Revenues from our stock-preparation systems and equipment product line
were $82.0 million, $111.1 million, and $113.0 million in 2002, 2001, and 2000,
respectively.
Papermaking Machine Accessory Equipment
We develop, manufacture, and sell a wide range of accessories that
continuously clean the rolls of a papermaking machine, remove the paper from the
machine rolls during sheet breaks, automatically cut the paper sheets and webs
at sheet breaks, and eliminate curl from the paper sheets and webs. These
functions are critical for paper manufacturers because they reduce machine
breakdowns and downtime, extend the life of consumable fabrics, and improve
paper quality. Our principal accessories include:
Doctor Systems. A doctor system cleans a paper machine roll by placing a
blade at an angle against the tangent of the roll. The system is typically
comprised of a doctor (a structure supporting the blade and holder), a blade
holder, and a doctor blade. A large paper machine may have as many as 100 doctor
systems.
Doctor Holders. A doctor holder is the part of a doctor system that
holds the doctor blade to ensure constant and uniform pressure against the
tangent of the roll. It is critical that the entire length of the roll is
doctored consistently, and the holder is designed to ensure that the force of
the blade is evenly applied.
Doctor Blades. We offer doctor blades made of metal, bi-metal, or
synthetic materials, customized to individual applications. Our blades typically
perform one of four functions on a paper machine: cleaning, creping, web
removal, or the application of coatings. We offer doctor blades that keep the
rolls of a papermaking machine clean by removing stock accumulations, water
rings, fuzz, pitch, and filler buildup. We also offer doctor blades that are
specially designed to remove the paper sheet or web from the roll during sheet
breaks and startups. In addition, we offer creping doctor blades, which are
instrumental in the production of tissue and toweling, and coater blades, which
evenly apply coatings that add gloss to the paper sheet. A typical doctor blade
has a life ranging from eight hours to two months, depending on the application.
Revenues from our papermaking machine accessory equipment product line
were $58.8 million, $63.4 million, and $70.3 million in 2002, 2001, and 2000,
respectively.
Water-Management Systems
We develop, manufacture, and sell water-management systems used to clean
papermaking machine fabrics, drain water from pulp mixtures, form the sheet or
web, and filter the process water for reuse. Our principal water-management
systems include:
Shower and Fabric-Conditioning Systems. Paper machine fabrics convey the
paper web through the forming, pressing, and drying sections of the paper
machine. The average paper machine has between 3 and 12 fabrics. These fabrics
can easily become contaminated with fiber, fillers, pitch, and dirt that can
have a detrimental effect on paper machine performance and paper quality. Our
shower and fabric-conditioning systems assist in the removal of these
contaminants. We design and build shower systems that clean the fabrics with
oscillating showers using both high-pressure and low-pressure water together
with chemical additives. We design our showers to clean the fabrics using a
5
minimum amount of water, thereby reducing fresh water usage. There are generally
between 10 and 30 showers used on a paper machine. We also design and
manufacture vacuum-augmented dewatering boxes for removing shower water and
contaminants from paper machine fabrics.
Formation Systems. On many paper machines, the sheet of paper is formed
on a fourdrinier-type former. We supply all the structures located in the
fourdrinier section under the forming fabric that remove water from the pulp
mixture. These structures consist of the forming board, gravity foils, low- and
high-vacuum structures, and vacuum control systems. Our patented VID formation
system creates improved sheet or web formation by allowing the papermaker to
increase speed, reduce fiber cost, improve formation and sheet properties, and
reduce chemical usage.
Water-Filtration Systems. The paper industry is one of the largest
industrial users of fresh water. We offer water-filtration systems consisting of
single in-line pressure filters, multiple-barrel pressure filters, whitewater
gravity strainers, vacuum-augmented fiber recovery strainers, and side-hill
screens that remove contaminants from the process water before reuse and recover
reusable fiber for recycling back into the pulp mixture. Our filtration systems
also allow our customers to reuse their process water within the paper mill,
thereby reducing freshwater usage. Our fine-filtration system can remove
particles as small as 1 to 20 microns in size.
Revenues from our water-management systems product line were $28.9
million, $37.8 million, and $42.4 million in 2002, 2001, and 2000, respectively.
COMPOSITE AND FIBER-BASED PRODUCTS
Our Composite and Fiber-based Products segment consists of two product
lines: composite building products and fiber-based granular products.
Composite Building Products
We develop, manufacture, and market composite building products made
from recycled fiber, plastic, and other materials. As an alternative to
traditional products such as pressure-treated lumber, and cedar, slate, and clay
roof tiles, composite building products have numerous applications, such as
decking and roofing.
We currently offer the following composite building products:
Decking and Railing Systems. Our decking products are marketed under the
name GeoDeck(TM). Our decking system includes deck boards as well as railings.
These materials, which are available in several different fade-resistant colors,
feature a brushed appearance that we believe offers a more attractive
alternative to the homeowner than other composite decking products.
Roof Tiles. Our composite roof tiles are made to resemble traditional
slate and clay tiles. Traditional clay and slate tiles are heavy, brittle, and
susceptible to breakage, as well as expensive and difficult to install. Our
composite tile products are also lighter and less susceptible to breakage than
traditional clay and slate tiles, which we believe provides significant savings
in labor and other costs. Our composite roof tile products have a Class A
fire-resistance rating when used in conjunction with certain underlayments.
Our composite building products are sold to distributors who have
numerous distribution centers throughout the U.S.
Revenues from our composite building products business were $8.6
million, $1.9 million, and $0.2 million in 2002, 2001, and 2000, respectively.
6
Fiber-Based Granular Products
We also produce biodegradable absorbing granules from papermaking
byproducts. These granules are used primarily as carriers that deliver
agricultural chemicals for professional turf, home lawn and garden, agricultural
row-crop, and mosquito-control applications. In addition, our granules are used
in our composite building products.
Revenues from our fiber-based granular products business were $6.0
million, $5.8 million, and $6.6 million in 2002, 2001, and 2000, respectively.
(ii) and (xi) New Products; Research and Development
We seek to develop a broad range of equipment for all facets of the
markets we serve. Over the next several years, we expect to focus our research
and development efforts on the development of fiber-based composite building
products and the technological advancement of our stock-preparation, accessory,
and water-management equipment.
Our research and development expenses were $4.8 million, $6.6 million,
and $7.7 million in 2002, 2001, and 2000, respectively.
PULP AND PAPERMAKING EQUIPMENT AND SYSTEMS
An important element of our growth strategy for this segment is the
development or licensing of new complementary products. We have state-of-the-art
research facilities and collaborative relationships with several of our pulp and
paper industry customers.
For recycling equipment, we maintain a stock-preparation pilot
laboratory adjacent to our manufacturing facility in France, which contains all
the equipment necessary to replicate a commercial stock-preparation system. In
this laboratory, a customer's wastepaper can be tested to determine the exact
system configuration that would be recommended for its future facility. In 2002,
we closed a similar, redundant pilot laboratory in Middletown, Ohio. The testing
laboratory is also used to evaluate prototype equipment, enabling research teams
to quickly and thoroughly evaluate new designs. In addition, we work closely
with our customers in the development of products, typically field-testing new
products on our customers' papermaking machines using pilot systems. For our
other product lines, we have a facility that houses an operation for continued
development of accessory equipment, while another is devoted to the development
of new water-management systems.
COMPOSITE AND FIBER-BASED PRODUCTS
We are developing fiber-based composite products for the building
industry, primarily for decking and roofing applications. We have a research and
development facility in Bedford, Massachusetts, that is focused on developing
new composite formulations and enhancing the composition, color, and other
attributes of our composite building products.
We continue research and development efforts to develop high-value
products using materials recovered from the papermaking process, including a
low-bulk density product for home lawn and garden applications. We operate a
manufacturing plant in Green Bay, Wisconsin, which processes papermaking
byproducts provided by a nearby paper recycling mill into cellulose-based
granules.
7
(iii) Raw Materials
PULP AND PAPERMAKING EQUIPMENT AND SYSTEMS
Raw materials, components, and supplies for all of our significant
products are available either from a number of different suppliers or from
alternative sources that could be developed without a material adverse effect on
our business.
COMPOSITE AND FIBER-BASED PRODUCTS
Raw materials, components, and supplies for our composite building
products are available either from a number of different suppliers or from
alternative sources that could be developed without a material adverse effect on
our business. The raw material used in the manufacture of our fiber-based
granules is obtained from a single paper recycling mill. The mill has the
exclusive right to supply papermaking byproducts to our existing granulation
plant in Green Bay, Wisconsin, under a contract that expires in December 2003,
subject to successive mutual two-year extensions. Although we believe that our
relationship with the mill is good, the mill may not agree to renew the contract
upon its expiration. To date, we have experienced no difficulties in obtaining
these materials.
(iv) Patents, Licenses, and Trademarks
We protect our intellectual property rights by applying for and
obtaining patents when appropriate. We also rely on technical know-how, trade
secrets, and trademarks to maintain our competitive position.
PULP AND PAPERMAKING EQUIPMENT AND SYSTEMS
We have numerous U.S. and foreign patents, including foreign
counterparts to our U.S. patents, expiring on various dates ranging from 2003 to
2018. Third parties have certain rights governing two of our patents that we
jointly developed. We currently hold an exclusive long-term, worldwide license
for a patent on technology that another third party developed. We have joint
ownership with that third party of a second patent on technology that was
jointly developed.
We maintain a worldwide network of licensees and cross-licensees of
products with other companies serving the pulp, papermaking, converting, and
paper recycling industries. We hold an exclusive worldwide license for certain
de-inking cells under an agreement that extends until 2007. We also have license
arrangements with several companies with regard to accessory equipment.
COMPOSITE AND FIBER-BASED PRODUCTS
We have filed several U.S. patent applications for various products and
processes relating to papermaking byproducts and composite building products,
and expect to file additional patent applications in the future.
We currently hold several U.S. patents, expiring at various dates
ranging from 2004 to 2016, relating to various aspects of the processing of
fiber-based granular materials and the use of these materials in the
agricultural, professional turf, home lawn and garden, general absorption, oil
and grease absorption, and catbox filler markets. Our patent relating to the use
of fiber-based granules in the agricultural, professional turf, and home lawn
and garden markets expires in 2004. We also have foreign counterparts to these
U.S. patents in Canada and in various European countries, and have additional
patents pending in Canada and certain European countries. In addition, we have
granted third-party nonexclusive licenses under two of our patents to sell
fiber-based granules produced at an existing site for sale in the oil and grease
absorption and catbox filler markets.
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(v) Seasonal Influences
PULP AND PAPERMAKING EQUIPMENT AND SYSTEMS
There are no material seasonal influences on this segment's sales of
products and services.
COMPOSITE AND FIBER-BASED PRODUCTS
Our composite building products are used or installed in outdoor
construction applications. This business experiences seasonal fluctuations in
sales, particularly in the fourth and first quarters, when holidays and adverse
weather conditions in some regions usually reduce the level of home improvement
and new construction activity. Operating results will tend to be lower in
quarters with lower sales, which are not entirely offset by a corresponding
reduction in operating costs. In addition, we may also experience lower gross
profit margins in the fourth and first quarters due to seasonal incentive
discounts offered to our distributors.
Our fiber-based granular product business also experiences fluctuations
in sales, particularly in the third quarter, when sales decline due to the
seasonality of the agricultural and home lawn and garden markets.
(vi) Working Capital Requirements
There are no special inventory requirements or credit terms extended to
customers that would have a material adverse effect on our working capital.
(vii) Dependency on a Single Customer
A large portion of revenues from our Composite and Fiber-based Products
segment depends on a few customers. The loss of revenues from any of these
customers could have a material adverse effect on this segment. No single
customer accounted for more than 10% of the Company's consolidated revenues in
any of the past three years.
(viii) Backlog
Our backlog of firm orders for the Pulp and Papermaking Equipment and
Systems segment was $28.4 million and $30.9 million at year-end 2002 and 2001,
respectively. The backlog of firm orders for the Composite and Fiber-based
Products segment was $4.5 million and $0.3 million at year-end 2002 and 2001,
respectively. We anticipate that substantially all of the backlog at December
28, 2002, will be shipped or completed during the next 12 months. Certain of
these orders may be canceled by the customer upon payment of a cancellation fee.
(ix) Government Contracts
Not applicable.
(x) Competition
We face significant competition in each of our principal markets. We
compete primarily on the basis of quality, price, service, technical expertise,
and product innovation. We believe the reputation that we and our predecessor
companies have established for quality products and in-depth process knowledge
provides us with a competitive advantage. In addition, a significant portion of
our business is generated from our existing worldwide customer base. To maintain
this base, we have emphasized technology, service, and a problem-solving
relationship with our customers.
9
PULP AND PAPERMAKING EQUIPMENT AND SYSTEMS
We are a leading supplier of stock-preparation equipment used for the
preparation of recycled and virgin fibers in the production of recycled paper.
Several major competitors supply various pieces of equipment for this process.
Our principal competitors in this market are Voith Paper GmbH, Groupe Laperriere
& Verrault Inc., Metso Corporation, and Maschinenfabrik Andritz AG. We compete
in this market primarily on the basis of technical expertise, product
innovation, and price. Other competitors specialize in segments within the
white- and brown-paper markets.
We are a leading supplier of specialty accessory equipment for
papermaking machines. Our principal competitors in this market on a worldwide
basis are ESSCO, Inc. and Metso Corporation. Because of the high capital costs
of papermaking machines and the role of our accessories in maintaining the
efficiency of these machines, we generally compete in this market on the basis
of service, technical expertise, performance, and price.
Various competitors exist in the formation, shower and
fabric-conditioning systems, and filtration systems markets. Asten/Johnson Foils
is a major supplier of formation tables, while a variety of smaller companies
compete within the shower and fabric-conditioning systems and filtration systems
markets. In each of these markets, we generally compete on the basis of process
knowledge, application experience, product quality, service, and price.
COMPOSITE AND FIBER-BASED PRODUCTS
Our principal competitors for composite building products are producers
of traditional products such as pressure-treated lumber, and clay, slate, and
cedar shake roof tiles. Many of the suppliers of traditional products have
well-established ties in the building and construction industry. In addition,
several suppliers have entered the composite building products market, and
competition has become intense. The leading providers of composite decking
products include Trex Company, Inc.; Louisiana-Pacific Corporation; Fiber
Composites LLC; and Advanced Environmental Recycling Technologies Inc. The
leading composite roof tile supplier is Royal Group Technologies Limited. We
compete in this market on the basis of product performance, brand awareness, and
price.
We believe that we are currently the only producer of fiber-based
agricultural carriers. In this market, our principal competitors in the U.S. are
producers of clay-based agricultural carriers for row crops and professional
turf protection, and producers of corncob-based granules traditionally used in
the home lawn and garden and professional turf markets. Our patent relating to
fiber-based granular products expires in 2004. After that date, we expect to be
subject to additional competition in this market. The principal competitive
advantages our agricultural carrier products offer are that they are virtually
dust-free and more uniform in absorption and particle-size distribution than
clay- and corncob-based carriers. In addition, our granules are chemically
neutral, requiring little or no chemical deactivation. We compete in this market
on the basis of product quality and price.
(xii) Environmental Protection Regulations
We believe that our compliance with federal, state, and local
environmental protection regulations will not have a material adverse effect on
our capital expenditures, earnings, or competitive position.
(xiii) Number of Employees
As of December 28, 2002, we employed approximately 1,060 people.
Approximately 22 employees at our facility in Pointe Claire, Quebec, Canada, are
represented by a labor union under a collective bargaining agreement expiring
August 31, 2003. Approximately 27 employees at our facility in Guadalajara,
Mexico, are represented by a labor union under an annual collective bargaining
agreement. In addition, certain employees of our subsidiaries in France and
England are represented by trade unions. We consider our relations with
employees and unions to be good.
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(d) Financial Information About Geographic Areas
Financial information about exports by domestic operations and about
foreign operations is summarized in Note 14 to Consolidated Financial Statements
in our 2002 Annual Report to Shareholders, and is incorporated in this document
by reference.
(e) Available Information
We file annual, quarterly, and current reports, proxy statements, and
other documents with the Securities and Exchange Commission (SEC) under the
Exchange Act. The public may read and copy any materials that we file with the
SEC at the SEC's Public Reference Room at 450 Fifth Street, NW, Washington, D.C.
20549. The public may obtain information on the operation of the Public
Reference Room by calling the SEC at 1-800-SEC-0330. Also, the SEC maintains a
Web site that contains reports, proxy and information statements, and other
information regarding issuers, including Kadant, that file electronically with
the SEC. The public can obtain any documents that we file with the SEC at
www.sec.gov. We maintain a Web site with the address www.kadant.com. We are not
including the information contained in our Web site as part of, or incorporating
it by reference into, this Annual Report on Form 10-K. We also make available
free of charge through our Web site our Annual Reports on Form 10-K, Quarterly
Reports on Form 10-Q, and Current Reports on Form 8-K, and amendments to these
reports filed with or furnished pursuant to Section 13(a) of the Exchange Act,
as soon as reasonably practicable after we electronically file these materials
with, or otherwise furnish them to, the SEC.
(f) Executive Officers of the Registrant
Name Age Present Title (Fiscal Year First Became Executive Officer)
----------------------------------------------------------------------------------------------------
William A. Rainville 61 Chairman of the Board, President, and Chief Executive Officer (1991)
Thomas M. O'Brien 51 Executive Vice President, Chief Financial Officer, and Treasurer (1994)
Jonathan W. Painter 44 Executive Vice President (1997)
Edward J. Sindoni 58 Senior Vice President (1994)
Edwin D. Healy 65 Vice President (2002)
Sandra L. Lambert 48 Vice President, General Counsel, and Secretary (2001)
Michael J. McKenney 41 Vice President, Finance (Chief Accounting Officer) (2002)
Mr. Rainville has been our president and chief executive officer since
our incorporation in 1991, a member of our board of directors since 1992, and
chairman of our board since 2001. Prior to our spinoff in 2001, Mr. Rainville
also held various managerial positions with Thermo Electron, most recently
serving as chief operating officer, recycling and resource recovery, a position
he held since 1998, and for more than five years prior to that, as a senior vice
president. Prior to joining Thermo Electron, Mr. Rainville held positions at
Drott Manufacturing, Paper Industry Engineering, and Sterling Pulp and Paper.
Mr. O'Brien has been an executive vice president since 1998 and our
chief financial officer and treasurer since 2001. He also served as vice
president, finance, from 1991 to 1998. Prior to joining us, Mr. O'Brien held
various finance positions at Racal Interlan, Inc.; Prime Computer; Compugraphic
Corporation; and the General Electric Company.
Mr. Painter has been an executive vice president since 1997 and the
president of our composite building products business since 2001. He served as
our treasurer and treasurer of Thermo Electron from 1994 until 1997. Prior to
1994, Mr. Painter also held various managerial positions at Kadant and Thermo
Electron.
Mr. Sindoni has been a senior vice president since 2001 and, prior to
that, served as a vice president since 1992. Prior to joining us in 1987, he had
a 21-year career with the General Electric Company.
11
Mr. Healy has been a vice president since October 2002 and the president
of our Kadant Black Clawson Inc. subsidiary since 2000. He held various
managerial positions at Kadant Black Clawson since its acquisition in 1997 and
before that, served as the president of our Fiberprep Inc. subsidiary from 1988
to 1997. Prior to joining us, Mr. Healy had a 29-year career with Bird, Escher,
Wyss and its predecessor, Bird Machinery.
Ms. Lambert has been a vice president and general counsel since 2001,
and our secretary since our incorporation in 1991. Prior to joining us, she was
a vice president and the secretary of Thermo Electron from 1999 and 1990,
respectively, and before that was a member of Thermo Electron's legal
department.
Mr. McKenney has been our vice president, finance, and chief accounting
officer since January 2002, and had been corporate controller since 1997. Mr.
McKenney was controller of Kadant AES, our division acquired from Albany
International Inc., from 1993 to 1997. Prior to 1993, Mr. McKenney held various
financial positions at Albany International.
Item 2. Properties
We believe that our facilities are in good condition and are suitable
and adequate for our present operations and that, with respect to leases
expiring in the near future, suitable space is readily available if any leases
are not extended. The location and general character of our principal properties
by segment as of December 28, 2002, are as follows:
PULP AND PAPERMAKING EQUIPMENT AND SYSTEMS
We own approximately 1,056,000 square feet and lease approximately
100,000 square feet, under leases expiring at various dates ranging from 2003 to
2008, of manufacturing, engineering, and office space. Our principal engineering
and manufacturing space is located in Vitry-le-Francois, France; Auburn,
Massachusetts; Rayville, Louisiana; Queensbury, New York; Mason, Ohio;
Guadalajara, Mexico; Pointe Claire, Quebec, Canada; Bury, England; and Hindas,
Sweden. We are currently planning to establish an assembly facility in China to
support our stock-preparation equipment business.
COMPOSITE AND FIBER-BASED PRODUCTS
We own approximately 26,000 square feet and lease approximately 146,000
square feet, under leases expiring at various dates ranging from 2003 to 2006,
of manufacturing, engineering, and office space located principally in Green
Bay, Wisconsin; and Bedford, Massachusetts. The Green Bay facility's operating
lease may be extended through 2014, at our option. We are currently exploring
our options regarding significant capacity expansion at the existing facility in
Green Bay, or at a new location.
Item 3. Legal Proceedings
Not applicable.
Item 4. Submission of Matters to a Vote of Security Holders
Not applicable.
12
PART II
Item 5. Market for Registrant's Common Equity and Related Stockholder
Matters
Information concerning the market and market price for our common stock,
$.01 par value per share, and our dividend policy is included under the headings
"Common Stock Market Information" and "Dividend Policy" in our 2002 Annual
Report to Shareholders, and is incorporated in this document by reference.
Item 6. Selected Financial Data
This information is included under the heading "Selected Financial
Information" in our 2002 Annual Report to Shareholders, and is incorporated in
this document by reference.
Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations
This information is included under the heading "Management's Discussion
and Analysis of Financial Condition and Results of Operations" in our 2002
Annual Report to Shareholders, and is incorporated in this document by
reference.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk
These disclosures are included under the heading "Management's
Discussion and Analysis of Financial Condition and Results of Operations" in our
2002 Annual Report to Shareholders, and are incorporated in this document by
reference.
Item 8. Financial Statements and Supplementary Data
Our Consolidated Financial Statements as of December 28, 2002, and
Supplementary Data, are included in our 2002 Annual Report to Shareholders and
are incorporated in this document by reference. See Item 15 "Exhibits, Financial
Statement Schedules, and Reports on Form 8-K."
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure
In June 2002, we changed our independent accountants as reported in our
Current Report on Form 8-K dated June 19, 2002.
Our consolidated financial statements for each of the two fiscal years
ended December 29, 2001, and December 30, 2000, were audited by Arthur Andersen
LLP, independent accountants. On August 31, 2002, Arthur Andersen ceased
practicing before the SEC. Therefore, Arthur Andersen did not participate in the
preparation of this Form 10-K, did not reissue its audit report with respect to
the financial statements included in this Form 10-K, and did not consent to the
inclusion of its audit report in this Form 10-K. As a result, holders of our
securities may have no effective remedy against Arthur Andersen in connection
with any material misstatement or omission in the financial statements to which
its audit report relates. In addition, even if such holders were able to assert
such a claim, because it has ceased operations, Arthur Andersen may fail or
otherwise have insufficient assets to satisfy claims made by holders of our
securities that might arise under federal securities laws or otherwise with
respect to Arthur Andersen's audit report.
13
PART III
Item 10. Directors and Executive Officers of the Registrant
The information concerning directors is included under the heading
"Election of Directors" in our definitive proxy statement to be filed with the
SEC, not later than 120 days after the close of the fiscal year. This
information is incorporated in this document by reference. The information
concerning executive officers is included under the heading "Executive Officers
of the Registrant" in Part I of this Annual Report on Form 10-K.
We are also required under Item 405 of Regulation S-K to provide
information concerning delinquent filers of reports under Section 16 of the
Securities and Exchange Act of 1934, as amended. This information is included
under the heading "Section 16(a) Beneficial Ownership Reporting Compliance" in
our definitive proxy statement to be filed with the SEC, not later than 120 days
after the close of the fiscal year. This information is incorporated in this
document by reference.
Item 11. Executive Compensation
This information is included under the heading "Executive Compensation"
in our definitive proxy statement to be filed with the SEC, not later than 120
days after the close of the fiscal year. This information is incorporated in
this document by reference.
Item 12. Security Ownership of Certain Beneficial Owners and Management
and Related Stockholder Matters
The information concerning security ownership is included under the
heading "Stock Ownership" in our definitive proxy statement to be filed with the
SEC, not later than 120 days after the close of the fiscal year. This
information is incorporated in this document by reference.
The following table provides information about the securities authorized
for issuance under our equity compensation plans as of December 28, 2002:
Equity Compensation Plan Information
(c)
Number of Securities
(a) Remaining Available for
Number of Securities (b) Future Issuance Under
to be Issued upon Weighted-Average Equity Compensation
Exercise of Exercise Price of Plans (Excluding
Outstanding Options, Outstanding Options, Securities Reflected in
Plan Category Warrants, and Rights Warrants, and Rights Column (a))
- ----------------------------------------------------------------------------------------------------------------------
Equity compensation plans approved
by security holders 2,133,252(1) $ 17.14(1) 507,010(2)
Equity compensation plans not
approved by security holders 603,167 $ 13.16 5,500
-------------------- -------------------- -----------------------
Total 2,736,419(1) $ 16.26(1) 512,510(2)
==================== ==================== =======================
(1) Excludes an aggregate of 334,062 shares of common stock issuable under
our employees stock purchase plan in connection with current and future
offering periods under the plan. Excludes 6,557 shares reserved for
issuance pursuant to our deferred compensation plan for directors.
(2) Includes 334,062 shares of common stock issuable under our employees
stock purchase plan in connection with current and future offering
periods under the plan, including 20,006 shares issued on December 31,
2002 upon the completion of the 2002 offering period.
14
Item 13. Certain Relationships and Related Transactions
This information is included under the heading "Certain Relationships
and Related Transactions" in our definitive proxy statement to be filed with the
SEC, not later than 120 days after the close of the fiscal year. This
information is incorporated in this document by reference.
Item 14. Controls and Procedures
Our management, including our chief executive officer (CEO) and chief
financial officer (CFO), performed an evaluation of the effectiveness of the
design and operation of our disclosure controls and procedures within 90 days
prior to the filing of this report pursuant to Exchange Act Rule 13a-14. Based
on that evaluation, our CEO and CFO concluded that our disclosure controls and
procedures are designed to ensure that information required to be disclosed by
us in the reports that we file or submit under the Exchange Act is recorded,
processed, summarized, and reported within the time periods specified in the
Securities and Exchange Commission's rules and forms and are operating in an
effective manner. There have been no significant changes in our internal
controls or in other factors that could significantly affect these internal
controls subsequent to the date of the most recent evaluation by our CEO and
CFO.
15
PART IV
Item 15. Exhibits, Financial Statement Schedules, and Reports on Form 8-K
(a,d) Financial Statements and Schedules
(1) The consolidated financial statements set forth in the list
below are filed as part of this Report.
Information incorporated by reference from Exhibit 13 filed
herewith:
Consolidated Statement of Operations
Consolidated Balance Sheet
Consolidated Statement of Cash Flows
Consolidated Statement of Comprehensive Income (Loss)
and Shareholders' Investment
Notes to Consolidated Financial Statements
Report of Independent Auditor
Report of Independent Public Accountants
(2) The consolidated financial statement schedule set forth in the
list below is filed as part of this Report.
Financial Statement Schedule filed herewith:
Schedule II: Valuation and Qualifying Accounts
All other schedules are omitted because they are not applicable
or not required, or because the required information is shown
either in the financial statements or in the notes thereto.
(3) Exhibits filed herewith or incorporated in this document by
reference are set forth in Item 15(c) below.
(b) Reports on Form 8-K
None.
(c) Exhibits
See Exhibit Index on the page immediately preceding exhibits.
16
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
Date: March 24, 2003 KADANT INC.
By: /s/ William A. Rainville
-----------------------------------
William A. Rainville
President, Chief Executive Officer,
and Chairman of the Board
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
Registrant and in the capacities indicated, as of March 24, 2003.
Signature Title
- --------- -----
By: /s/ William A. Rainville President, Chief Executive Officer, and
----------------------------- Chairman of the Board
William A. Rainville
By: /s/ Thomas M. O'Brien Executive Vice President, Chief Financial Officer,
----------------------------- and Treasurer
Thomas M. O'Brien
By: /s/ Michael J. McKenney Vice President, Finance (Chief Accounting Officer)
-----------------------------
Michael J. McKenney
By: /s/ John M. Albertine Director
-----------------------------
John M. Albertine
By /s/ John K. Allen Director
-----------------------------
John K. Allen
By: /s/ Francis L. McKone Director
-----------------------------
Francis L. McKone
17
CERTIFICATIONS
I, William A. Rainville, certify that:
1. I have reviewed this annual report on Form 10-K of Kadant Inc.;
2. Based on my knowledge, this annual report does not contain any
untrue statement of a material fact or omit to state a material
fact necessary to make the statements made, in light of the
circumstances under which such statements were made, not
misleading with respect to the period covered by this annual
report;
3. Based on my knowledge, the financial statements, and other
financial information included in this annual report, fairly
present in all material respects the financial condition,
results of operations and cash flows of the registrant as of,
and for, the periods presented in this annual report;
4. The registrant's other certifying officer and I are responsible
for establishing and maintaining disclosure controls and
procedures (as defined in Exchange Act Rules 13a-14 and 15d-14)
for the registrant and have:
a) Designed such disclosure controls and procedures to
ensure that material information relating to the
registrant, including its consolidated subsidiaries, is
made known to us by others within those entities,
particularly during the period in which this annual
report is being prepared;
b) Evaluated the effectiveness of the registrant's
disclosure controls and procedures as of a date within
90 days prior to the filing date of this annual report
(the "Evaluation Date"); and
c) Presented in this annual report our conclusions about
the effectiveness of the disclosure controls and
procedures based on our evaluation as of the Evaluation
Date;
5. The registrant's other certifying officer and I have disclosed,
based on our most recent evaluation, to the registrant's
auditors and the audit committee of registrant's board of
directors (or persons performing the equivalent functions):
a) All significant deficiencies in the design or operation
of internal controls which could adversely affect the
registrant's ability to record, process, summarize and
report financial data and have identified for the
registrant's auditors any material weaknesses in
internal controls; and
b) Any fraud, whether or not material, that involves
management or other employees who have a significant
role in the registrant's internal controls; and
6. The registrant's other certifying officer and I have indicated
in this annual report whether there were significant changes in
internal controls or in other factors that could significantly
affect internal controls subsequent to the date of our most
recent evaluation, including any corrective actions with regard
to significant deficiencies and material weaknesses.
Date: March 24, 2003 /s/ William A. Rainville
-------------------------------------
William A. Rainville
Chief Executive Officer
18
CERTIFICATIONS
I, Thomas M. O'Brien, certify that:
1. I have reviewed this annual report on Form 10-K of Kadant Inc.;
2. Based on my knowledge, this annual report does not contain any
untrue statement of a material fact or omit to state a material
fact necessary to make the statements made, in light of the
circumstances under which such statements were made, not
misleading with respect to the period covered by this annual
report;
3. Based on my knowledge, the financial statements, and other
financial information included in this annual report, fairly
present in all material respects the financial condition,
results of operations and cash flows of the registrant as of,
and for, the periods presented in this annual report;
4. The registrant's other certifying officer and I are responsible
for establishing and maintaining disclosure controls and
procedures (as defined in Exchange Act Rules 13a-14 and 15d-14)
for the registrant and have:
a) Designed such disclosure controls and procedures to
ensure that material information relating to the
registrant, including its consolidated subsidiaries, is
made known to us by others within those entities,
particularly during the period in which this annual
report is being prepared;
b) Evaluated the effectiveness of the registrant's
disclosure controls and procedures as of a date within
90 days prior to the filing date of this annual report
(the "Evaluation Date"); and
c) Presented in this annual report our conclusions about
the effectiveness of the disclosure controls and
procedures based on our evaluation as of the Evaluation
Date;
5. The registrant's other certifying officer and I have disclosed,
based on our most recent evaluation, to the registrant's
auditors and the audit committee of registrant's board of
directors (or persons performing the equivalent function):
a) All significant deficiencies in the design or operation
of internal controls which could adversely affect the
registrant's ability to record, process, summarize and
report financial data and have identified for the
registrant's auditors any material weaknesses in
internal controls; and
b) Any fraud, whether or not material, that involves
management or other employees who have a significant
role in the registrant's internal controls; and
6. The registrant's other certifying officer and I have indicated
in this annual report whether there were significant changes in
internal controls or in other factors that could significantly
affect internal controls subsequent to the date of our most
recent evaluation, including any corrective actions with regard
to significant deficiencies and material weaknesses.
Date: March 24, 2003 /s/ Thomas M. O'Brien
-------------------------------------
Thomas M. O'Brien
Executive Vice President and Chief
Financial Officer
19
Report of Independent Auditor
To the Board of Directors and Shareholders of Kadant Inc.:
We have audited the consolidated financial statements of Kadant Inc. as
of December 28, 2002, and for the year then ended, and have issued our report
thereon dated February 7, 2003 (included elsewhere in this Form 10-K). Our audit
also included Schedule II - Valuation and Qualifying Accounts as of December 28,
2002, and for the year then ended, included in this Annual Report on Form 10-K.
This schedule is the responsibility of the Company's management. Our
responsibility is to express an opinion based on our audit. The financial
statement schedule of Kadant Inc. as of December 29, 2001 and December 30, 2000,
and for the years then ended, was subjected to the auditing procedures applied
by other auditors, who have ceased operation, in connection with their audit of
the consolidated financial statements for those two years and whose report dated
February 8, 2002, indicated that such financial statement schedule fairly stated
in all material respects the financial data required to be set forth therein in
relation to the basic financial statements taken as a whole.
In our opinion, the financial statement schedule as of December 28,
2002, and for the year then ended, when considered in relation to the basic
financial statements taken as a whole, presents fairly in all material respects
the information set forth therein.
/s/ Ernst & Young LLP
Boston, Massachusetts
February 7, 2003
20
Report of Independent Public Accountants
THE FOLLOWING REPORT IS A COPY OF A REPORT PREVIOUSLY ISSUED BY ARTHUR ANDERSEN
LLP AND HAS NOT BEEN REISSUED BY ARTHUR ANDERSEN LLP. THIS REPORT APPLIES TO
SUPPLEMENTAL SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS FOR THE YEARS ENDED
DECEMBER 29, 2001, AND DECEMBER 30, 2000.
To the Shareholders and Board of Directors of Kadant Inc.:
We have audited, in accordance with auditing standards generally
accepted in the United States, the consolidated financial statements included in
Kadant Inc.'s (formerly named Thermo Fibertek Inc.) Annual Report to
Shareholders incorporated by reference in this Form 10-K, and have issued our
report thereon dated February 8, 2002. Our audits were made for the purpose of
forming an opinion on those basic statements taken as a whole. The schedule
listed in Item 14 on page 14* is the responsibility of the Company's management
and is presented for purposes of complying with the Securities and Exchange
Commission's rules and is not part of the basic consolidated financial
statements. This schedule has been subjected to the auditing procedures applied
in the audits of the basic consolidated financial statements and, in our
opinion, fairly states in all material respects the consolidated financial data
required to be set forth therein in relation to the basic consolidated financial
statements taken as a whole.
Arthur Andersen LLP
Boston, Massachusetts
February 8, 2002
* The schedule is now listed in Item 15 on page 16.
21
SCHEDULE II
KADANT INC.
VALUATION AND QUALIFYING ACCOUNTS
(In thousands)
Balance at Provision Accounts Balance
Beginning Charged to Accounts Written at End
Description of Year Expense Recovered Off Other(a) of Year
- -------------------------------------------------------------------------------------------------------------------
ALLOWANCE FOR DOUBTFUL ACCOUNTS
Year Ended December 28, 2002 $ 2,515 $ 818 $ 121 $ (808) $ (12) $ 2,634
Year Ended December 29, 2001 $ 2,182 $ 1,146 $ 31 $ (876) $ 32 $ 2,515
Year Ended December 30, 2000 $ 1,659 $ 1,197 $ 7 $ (616) $ (65) $ 2,182
Provision
Charged to
Balance at Expense Activity Balance
Beginning (Reversed to Charged to Currency at End
Description of Year Income) Reserve Translation of Year
- -------------------------------------------------------------------------------------------------------------------------
ACCRUED RESTRUCTURING COSTS (b)
Year Ended December 28, 2002 $ 56 $ 1,129 $ (1,163) $ 6 $ 28
Year Ended December 29, 2001 $ 32 $ 673 $ (648) $ (1) $ 56
Year Ended December 30, 2000 $ 669 $ (506) $ (33) $ (98) $ 32
(a) Includes allowances of businesses acquired and sold during the year, as
described in Note 4 to Consolidated Financial Statements in our 2002 Annual
Report to Shareholders, and the effect of foreign currency translation.
(b) The nature of activity in this account is described in Note 12 to
Consolidated Financial Statements in our 2002 Annual Report to Shareholders.
22
EXHIBIT INDEX
Exhibit
Number Description of Exhibit
- --------------------------------------------------------------------------------
3.1 Restated Certificate of Incorporation of the Registrant (filed
as Exhibit 3.1 to the Registrant's Quarterly Report on Form 10-Q
for the quarter ended June 30, 2001 [File No. 1-11406] and
incorporated in this document by reference).
3.2 By-Laws of the Registrant, as amended and restated (filed as
Exhibit 3.2 to the Registrant's Quarterly Report on Form 10-Q
for the quarter ended June 30, 2001 [File No. 1-11406] and
incorporated in this document by reference).
4.1 Rights Agreement, dated as of July 16, 2001, between the
Registrant and American Stock Transfer & Trust Company, which
includes as Exhibit A the Form of Certificate of Designations,
as Exhibit B the Form of Rights Certificate, and as Exhibit C
the Summary of Rights to Purchase Preferred Stock (filed as
Exhibit 4.1 to the Registrant's Current Report on Form 8-K [File
No. 1-11406], filed with the Commission on July 17, 2001, and
incorporated in this document by reference).
4.2 Fiscal Agency Agreement dated as of July 16, 1997, among the
Registrant, Thermo Electron Corporation, and Bankers Trust
Company as fiscal agent, relating to $153 million principal
amount of 4 1/2% Convertible Subordinated Debentures due 2004
(filed as Exhibit 4 to the Registrant's Quarterly Report on Form
10-Q for the quarter ended June 28, 1997 [File No. 1-11406] and
incorporated in this document by reference).
10.1* Form of Indemnification Agreement between the Registrant and its
directors and officers (filed as Exhibit 10.1 to the
Registrant's Quarterly Report on Form 10-Q for the quarter ended
June 30, 2001 [File No. 1-11406] and incorporated in this
document by reference).
10.2* Form of Executive Retention Agreement between the Registrant and
its executive officers - each executive officer has a two-year
agreement, except Mr. William A. Rainville, who has a three-year
agreement, and Mr. Michael J. McKenney, who has a one-year
agreement (filed as Exhibit 10.2 to the Registrant's Quarterly
Report on Form 10-Q for the quarter ended June 30, 2001 [File
No. 1-11406] and incorporated in this document by reference).
10.3 Plan and Agreement of Distribution, dated as of August 3, 2001,
between the Registrant and Thermo Electron Corporation (filed as
Exhibit 99.3 to the Registrant's Current Report on Form 8-K
[File No. 1-11406] filed with the Commission on August 6, 2001,
and incorporated in this document by reference).
10.4 First Amendment to Plan and Agreement of Distribution, dated as
of December 27, 2001, between the Registrant and Thermo Electron
Corporation (filed as Exhibit 10.4 to the Registrant's Annual
Report on Form 10-K for the year ended December 29, 2001 [File
No. 1-11406] and incorporated in this document by reference).
10.5 Tax Matters Agreement, dated as of August 8, 2001, between the
Registrant and Thermo Electron Corporation (filed as Exhibit
99.4 to the Registrant's Current Report on Form 8-K [File No.
1-11406] filed with the Commission on August 6, 2001, and
incorporated in this document by reference).
10.6* Amended and Restated Nonqualified Stock Option Plan of the
Registrant.
23
EXHIBIT INDEX
Exhibit
Number Description of Exhibit
- --------------------------------------------------------------------------------
10.7* Amended and Restated Equity Incentive Plan of the Registrant.
10.8* Amended and Restated Deferred Compensation Plan for Directors of
the Registrant (filed as Exhibit 10.5 to the Registrant's
Quarterly Report on Form 10-Q for the quarter ended July 3, 1999
[File No. 1-11406] and incorporated in this document by
reference).
10.9* Amended and Restated Directors' Stock Option Plan of the
Registrant (filed as Exhibit 10.6 to the Registrant's Quarterly
Report on Form 10-Q for the quarter ended July 3, 1999 [File No.
1-11406] and incorporated in this document by reference).
10.10* Directors Restricted Stock Plan (filed as Exhibit 10 to the
Registrant's Quarterly Report on Form 10-Q for the quarter ended
March 30, 2002 [File No 1-11406] and incorporated in this
document by reference).
10.11* 2001 Employee Equity Incentive Plan of the Registrant.
16.1 Letter from Arthur Andersen LLP to the Securities and Exchange
Commission, dated June 20, 2002 (filed as Exhibit 16.1 to the
Registrant's Current Report on Form 8-K dated June 19, 2002
[File No 1-11406] and incorporated in this document by
reference).
13 Annual Report to Shareholders for the year ended December 28,
2002 (only those portions incorporated in this document by
reference).
21 Subsidiaries of the Registrant.
23.1 Consent of Ernst & Young LLP.
23.2 Information Regarding Consent of Arthur Andersen LLP.
99.1 Certification of the Chief Executive Officer of the Registrant
pursuant to 18 U.S.C. Section 1350, as adopted pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002.
99.2 Certification of the Chief Financial Officer of the Registrant
pursuant to 18 U.S.C. Section 1350, as adopted pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002.
*Management contract or compensatory plan or arrangement filed as an exhibit to
this Form 10-K pursuant to Item 15(c) of this Form 10-K.
24