Slide 1: Fourth Quarter 2010 Business Review
Fourth Quarter 2010 Business Review Jonathan W. Painter, President & CEO Thomas M. O’Brien, Executive Vice President & CFO
Slide 2: Forward-Looking Statements
Forward-Looking Statements The following constitutes a "Safe Harbor" statement under the Private Securities Litigation Reform Act of 1995: This presentation contains forward-looking statements that involve a number of risks and uncertainties, including forward-looking statements about our expected f
Slide 3: Use of Non-GAAP Financial Measures
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, adjuste
Slide 4: Business Review
Business Review Jonathan W. Painter President & CEO
Slide 5: Q4 2010 Financial Highlights: Revenues
Q4 2010 Financial Highlights: Revenues • $73.3 million, up 29% compared to Q4 2009 • All product lines saw solid increases compared to Q4 2009 – Stock-Preparation up 42% – Fluid-Handling up 25% – Water Management up 20% – Accessories up 19% • Q4 2010 revenues were up 10% sequentially
Slide 6: Financial Highlights
Financial Highlights Q4 2010 Q4 2009 Revenues $73.3 million $56.8 million Gross margins 42% 41% Adjusted EBITDA $8.7 million $3.7 million Diluted EPS $0.41 $(0.14) Cash flows $13.8 million $11.4 million
Slide 7: Q4 2010 Financial Highlights: Bookings
Q4 2010 Financial Highlights: Bookings • $99.8 million, up 55% compared to Q4 2009 • Strong Q4 booking performance – Stock-Preparation up 127% – Fluid-Handling up 19% – Accessories up 15% – Water Management flat compared to Q4 2009 • Q4 2010 bookings were up sequentially by 71% • The highest quarter
Slide 8: 2008-2010 Quarterly Bookings
2008-2010 Quarterly Bookings
Slide 9: Capital Bookings
Capital Bookings (Papermaking Systems Segment Only)
Slide 10: Parts & Consumables Bookings
Parts & Consumables Bookings (Papermaking Systems Segment Only)
Slide 11: Market Review
Market Review
Slide 12: North America Paper Industry Trends
North America Paper Industry Trends • U.S. economy stronger in 2010 than most anticipated – 3.2% GDP growth in Q4 2010 • 2010 operating rates were 90% or higher • In 2010, U.S. mills recovered half of the production lost in 2009 • Inventory levels have stabilized across all major grades • Increased
Slide 13: CAGR = 0.2%
CAGR = 0.2% Source: RISI World Pulp & Recovered Paper Forecast, 2011
Slide 14: Highlighted North America Bookings
Highlighted North America Bookings • OCC system for U.S. containerboard producer in the Southwest • Center-press doctor system for Midwest U.S. packaging producer • 1,000 high-precision rotary unions sold to a U.S. machine tool OEM booked in Q1 2011
Slide 15: North America Bookings
North America Bookings $35.7 million, up 8% compared to Q4 2009
Slide 16: Europe Paper Industry Trends
Europe Paper Industry Trends • Containerboard prices remain steady, demand solid through Q4 and into Q1 2011 • Demand for graphic paper grades increased 4.5% in 2010 • Exports may soften if the Euro strengthens • Operating rates in 2010 were highest for containerboard (93%) and lowest for tissue (88
Slide 17: CAGR = 0.8%
CAGR = 0.8% Source: RISI World Pulp & Recovered Paper Forecast, 2011
Slide 18: Highlighted Q4 European Bookings
Highlighted Q4 European Bookings • Deinking line for tissue producer in Russia • Two stock preparation systems for packaging lines from Turkey and Northern Africa • Dryer system surveys and engineering for four customers in India • Two Petax™ fine filtration systems for a Kraft packaging mill in Tha
Slide 19: European Bookings
European Bookings $22.8 million, up 20% compared to Q4 2009
Slide 20: China Paper Industry Trends
China Paper Industry Trends • China expected to add more than 15 million tons from the end of 2010 through 2012 • China closed 3.8 million tons from inefficient mills in 2010 • China’s rapid economic growth expected to continue, but at a slower pace relative to previous five years • Inflation concer
Slide 21: CAGR = 6.1%
CAGR = 6.1% Source: RISI World Pulp & Recovered Paper Forecast, 2011
Slide 22: World Demand for Paper & Paperboard
World Demand for Paper & Paperboard Global Demand: 369 million tons Global Demand: 468 million tons Source: RISI World Pulp & Recovered Paper Forecast, 2011 Asia 35% Asia 49%
Slide 23: CAGR = 3.4%
Source: RISI World Pulp & Recovered Paper Forecast, 2011 CAGR = 3.4%
Slide 24: Highlighted Q4 China Bookings
Highlighted Q4 China Bookings • 14 stock prep systems orders from China with a combined value of $31 million for OCC, approach flow, and deinked systems • Steam and condensate systems and drying equipment for four containerboard machines and four tissue machines in China • Water filtration equipment
Slide 25: China Bookings
China Bookings $35.9 million, up 340% compared to Q4 2009
Slide 26: China Manufacturing Expansion
China Manufacturing Expansion • Significant bookings increase from China for stock preparation systems • Limited outsourcing flexibility in China • Initiatives taken to increase capacity – Expanding workforce – Investing in capital equipment – Increasing support from other Kadant manufacturing sites
Slide 27: Guidance for Continuing Operations
Guidance for Continuing Operations • FY 2011 revenues of $300 to $310 million • FY 2011 GAAP diluted EPS of $1.65 to $1.75 • Q1 2011 revenues of $71 to $73 million • Q1 2011 GAAP diluted EPS of $0.35 to $0.37
Slide 28: Financial Review
Financial Review Thomas M. O’Brien Executive Vice President and Chief Financial Officer
Slide 29: 4Q10 Revenues Summary
4Q10 Revenues Summary • Consolidated Revenues = $73.3 million – 29% increase vs. 4Q09 – Includes 2% unfavorable foreign currency translation • Revenue Guidance = $64 to $66 million – Higher Stock-Preparation – Smaller increases in Fluid-Handling and Accessories
Slide 30: 4Q10 and 4Q09 Revenues by Product Line
% Change Qtr to Excl. ($ Millions) 4Q10 4Q09 Qtr FX * Stock-Preparation $ 28.9 $ 20.4 42% 45% Fluid-Handling 21.6 17.3 25% 26% Accessories 13.8 11.6 19% 21% Water-Management 6.6 5.5 20% 20% Other 0.6 0.5 32% 26% Fiber-Based Products 1.8 1.5 18% 18% Total $ 73.3 $ 56.8 29% 31% 4Q10 and 4Q09 Revenues
Slide 31: 4Q10 and 3Q10 Revenues by Product Line
% Change Qtr to Excl. ($ Millions) 4Q10 3Q10 Qtr FX * Stock-Preparation $ 28.9 $ 23.9 21% 19% Fluid-Handling 21.6 21.6 0% 1% Accessories 13.8 12.3 13% 10% Water-Management 6.6 6.9 -5% -6% Other 0.6 0.6 -4% -7% Fiber-Based Products 1.8 1.2 41% 41% Total $ 73.3 $ 66.5 10% 9% 4Q10 and 3Q10 Revenues by
Slide 32: Revenues by Geography
% Change Excl. FX* North America $ 33.4 $ 30.5 $ 26.9 10% 24% 23% Europe 23.0 21.1 20.1 9% 14% 23% China 12.3 10.9 6.2 13% 98% 93% South America 2.3 2.1 1.7 9% 40% 37% Australia 0.5 0.7 0.4 -32% 17% 8% Total $ 71.5 $ 65.3 $ 55.3 10% 29% 31% Revenues by Geography (Papermaking Systems Segment Only) *
Slide 33: Revenue Detail
% Change ($ Millions) 4Q10 3Q10 4Q09 3Q10 4Q09 Parts & Consumables $ 40.6 $ 38.8 $ 30.6 5% 33% Capital 30.3 25.9 24.2 17% 25% Other 0.6 0.6 0.5 -4% 32% Total $ 71.5 $ 65.3 $ 55.3 10% 29% Revenue Detail (Papermaking Systems Segment Only) 3Q10
Slide 34: Gross Margin Percentages
% Point Change Quarter 4Q10 3Q10 4Q09 3Q10 4Q09 Papermaking Systems Segment 42.4 44.4 41.6 -2.0% 0.8% Other 41.8 28.3 31.4 13.5% 10.4% Total 42.4 44.1 41.3 -1.7% 1.1% Gross Margin Percentages
Slide 35: SG&A
Quarter Change ($ Millions) 4Q10 3Q10 4Q09 3Q10 4Q09 SG&A $ 22.9 $ 22.5 $ 20.2 $ 0.4 $ 2.7 % Revenues 31.3% 33.8% 35.6% -2.5% -4.3% SG&A
Slide 36: , $0.45 $0.12 $0.35 $0.05 ($0.17) $0.44 — $0.11 $0.01 a Lal $0.15 —
, $0.45 $0.12 $0.35 $0.05 ($0.17) $0.44 — $0.11 $0.01 a Lal $0.15 — $0.05 (80.14) (80.05) (80.15)
Slide 37: Cash Flow
($ Millions) 4Q10 4Q09 2010 2009 Income (Loss) from Continuing Operations $ 5.2 $ (1.7) $ 18.7 $ (6.0) Stock-Based Compensation 0.7 0.7 2.8 2.7 Other Items 1.3 0.3 (0.4) (2.6) Liabilities, Excluding Acquisitions 4.7 10.2 0.0 41.6 Cash from Continuing Operations $ 13.8 $ 11.4 $ 28.3 $ 43.1 Cash Flow
Slide 38: Key Working Capital Statistics
($ Millions) 4Q10 3Q10 4Q09 Days in Receivables 62 65 63 Days in Inventory 90 101 103 Working Capital % LTM Revenues * 9.1% 11.5% 10.5% Key Working Capital Statistics * Working Capital is defined as current assets less current liabilities, excluding cash, debt, and the discontinued operation.
Slide 39: Cash and Debt
($ Millions) 4Q10 3Q10 4Q09 Cash and Cash Equivalents $ 61.8 $ 49.5 $ 45.7 Debt (22.7) (22.9) (23.3) Net Cash $ 39.1 $ 26.6 $ 22.4 Cash and Debt
Slide 40: Leverage Ratio
Leverage Ratio * Calculated by adding or subtracting certain items, as defined in our Credit Facility, from Adjusted EBITDA reported externally.
Slide 41: 2011 Guidance
2011 Guidance • Stronger second half • Effective tax rate approximately 28% • CAPEX: $7 to $8 million • Non-cash equity expense: $0.19 per diluted share • Depreciation and amortization expense: $8 million
Slide 42: Questions & Answers
Questions & Answers To ask a question, please call 866-510-0708 within the U.S. or +1-617-597-5377 outside the U.S. and reference 83375884. Please mute the audio on your computer.
Slide 43: Fourth Quarter 2010 Business Review
Fourth Quarter 2010 Business Review Jonathan W. Painter, President & CEO Thomas M. O’Brien, Executive Vice President & CFO
Slide 44: Appendix
APPENDIX Investor Contact: Thomas M. O’Brien, 978-776-2000 Media Contact : Wes Martz, 269-278-1715
Slide 45: Financial Overview
BAppendix Financial Overview ($ Millions, except Diluted EPS) Revenues Gross Margin Operating Income (Loss) Operating Margin Diluted EPS Operating Cash Flows Cash Balance Cash less Debt Bookings Backlog NM — Not Meaningful 4Q10 3Q10 % Change 4Q09 3Q10 4Q09 $ 73.3 $ 66.5 $ 56.8 31.1 29.3 23.4 67 63 (
Slide 46: Revenue
($ Millions) 2010 2009 % Change Parts & Consumables $ 153.9 $ 130.3 18% Capital 104.8 85.5 23% Other 2.5 1.8 40% Total $ 261.2 $ 217.6 20% Appendix Revenue (Papermaking Systems Segment Only)
Slide 47: Gross Margin Percentages - Year
% Point Change Year 2010 2009 2008 2009 2008 Papermaking Systems Segment 43.8 40.4 41.6 3.4% 2.2% Other 45.8 35.0 27.0 10.8% 18.8% Total 43.9 40.3 41.3 3.6% 2.6% Appendix Gross Margin Percentages - Year
Slide 48: SG&A
Year Change ($ Millions) 2010 2009 2008 2009 2008 SG&A $ 89.2 $ 81.2 $ 100.3 $ 8.0 $ (11.1) % Revenues 33.0% 36.0% 30.5% -3.0% 2.5% Appendix SG&A
Slide 49: 2009 to 2010 Diluted EPS
Appendix 2009 to 2010 Diluted EPS