Slide 1: Second Quarter 2011 Business Review
Second Quarter 2011 Business Review Jonathan W. Painter, President & CEO Thomas M. O’Brien, Executive Vice President & CFO
Slide 2: Forward-Looking Statements
* KAI 2Q11 Business Review-July 28, 2011 © 2011 Kadant Inc. All rights reserved. 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 r
Slide 3: Use of Non-GAAP Financial Measures
* KAI 2Q11 Business Review-July 28, 2011 © 2011 Kadant Inc. All rights reserved. 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 de
Slide 4: Financial Classifications
* KAI 2Q11 Business Review-July 28, 2011 © 2011 Kadant Inc. All rights reserved. Financial Classifications All geographic revenues and bookings data are attributed to regions based on selling locations. For North America and China, this also approximates revenues and bookings based on where the equi
Slide 5: Business Review
* KAI 2Q11 Business Review-July 28, 2011 © 2011 Kadant Inc. All rights reserved. BUSINESS REVIEW Jonathan W. Painter President & CEO
Slide 6: Financial Highlights
* KAI 2Q11 Business Review-July 28, 2011 © 2011 Kadant Inc. All rights reserved. Q2 2011 Q2 2010 Revenues $82.5 million $69.1 million Gross Margins 45.7% 45.1% Diluted EPS $0.59 $0.42 Adjusted EBITDA* $12.5 million $9.0 million Adjusted EBITDA/Sales 15% 13% Financial Highlights * Adjusted EBITDA (ea
Slide 7: Q2 Revenue Performance
* KAI 2Q11 Business Review-July 28, 2011 © 2011 Kadant Inc. All rights reserved. ($ Millions) Q2 2011 Q2 2010 % CHANGE EXCL. FX Stock-Preparation $ 32.3 $ 25.0 29.3% 22.5% Fluid-Handling 24.5 20.1 21.9% 13.1% Doctoring 13.7 12.7 7.7% 2.1% Water-Management 8.5 8.5 (0.6%) (5.1%) Fiber-based Products 2
Slide 8: Q2 Booking Performance
* KAI 2Q11 Business Review-July 28, 2011 © 2011 Kadant Inc. All rights reserved. ($ Millions) Q2 2011 Q2 2010 % CHANGE EXCL. FX Stock-Preparation $ 30.8 $ 31.9 (3.3%) (9.2%) Fluid-Handling 28.4 20.1 41.4% 29.2% Doctoring 14.5 12.8 13.5% 6.8% Water-Management 11.1 7.6 46.4% 39.6% Fiber-based Products
Slide 9: Bookings and Revenues Trends
* KAI 2Q11 Business Review-July 28, 2011 © 2011 Kadant Inc. All rights reserved. Bookings and Revenues Trends
Slide 10: Parts and Consumables Bookings and Revenues
* KAI 2Q11 Business Review-July 28, 2011 © 2011 Kadant Inc. All rights reserved. Parts and Consumables Bookings and Revenues
Slide 11: Record Backlog in Q2 2011
* KAI 2Q11 Business Review-July 28, 2011 © 2011 Kadant Inc. All rights reserved. Record Backlog in Q2 2011
Slide 12: Market Review
* KAI 2Q11 Business Review-July 28, 2011 © 2011 Kadant Inc. All rights reserved. MARKET REVIEW
Slide 13: North America Paper Industry Trends
* KAI 2Q11 Business Review-July 28, 2011 © 2011 Kadant Inc. All rights reserved. North America Paper Industry Trends • Paper and board production in 2011 down 1% through May • Q2 Containerboard operating rates remain strong; inventory continues to be lean • Balance sheets, cash flows remain healthy
Slide 14: Input Costs Continue to Escalate
* KAI 2Q11 Business Review-July 28, 2011 © 2011 Kadant Inc. All rights reserved. Input Costs Continue to Escalate Source: RISI, Inc. Examples of raw material fiber cost escalation in the U.S. spot market
Slide 15: North America Bookings and Revenues
* KAI 2Q11 Business Review-July 28, 2011 © 2011 Kadant Inc. All rights reserved. North America Bookings and Revenues
Slide 16: Europe Paper Industry Trends
* KAI 2Q11 Business Review-July 28, 2011 © 2011 Kadant Inc. All rights reserved. Europe Paper Industry Trends • Export demand remains key driver for packaging grades • Prices are stable, balanced supply and demand • Energy focus continues to be high
Slide 17: Europe Bookings and Revenues
* KAI 2Q11 Business Review-July 28, 2011 © 2011 Kadant Inc. All rights reserved. Europe Bookings and Revenues
Slide 18: China Paper Industry Trends
* KAI 2Q11 Business Review-July 28, 2011 © 2011 Kadant Inc. All rights reserved. China Paper Industry Trends • Government mandated closure of 8.2 million tons at 599 mills by the end of 2011 announced this month • Sluggish paper and board demand continued through Q2 • Energy conservation program enc
Slide 19: China Bookings and Revenues
* KAI 2Q11 Business Review-July 28, 2011 © 2011 Kadant Inc. All rights reserved. China Bookings and Revenues
Slide 20: Guidance for Continuing Operations
* KAI 2Q11 Business Review-July 28, 2011 © 2011 Kadant Inc. All rights reserved. Guidance for Continuing Operations • FY 2011 revenues of $325 to $335 million • FY 2011 GAAP diluted EPS of $2.15 to $2.25 • Q3 2011 revenues of $80 to $82 million • Q3 2011 GAAP diluted EPS of $0.40 to $0.42
Slide 21: Financial Review
* KAI 2Q11 Business Review-July 28, 2011 © 2011 Kadant Inc. All rights reserved. FINANCIAL REVIEW Thomas M. O’Brien Executive Vice President & Chief Financial Officer
Slide 22: Gross Margins
* KAI 2Q11 Business Review-July 28, 2011 © 2011 Kadant Inc. All rights reserved. 2Q11 1Q11 2Q10 Sequential ∆ Y-O-Y ∆ Papermaking Systems Segment 45.3% 47.4% 44.9% -210 b.p. +40 b.p. Fiber-based Products 56.6% 50.8% 50.8% +580 b.p. +580 b.p. TOTAL 45.7% 47.6% 45.1% -190 b.p. +60 b.p. Gross Margins
Slide 23: SG&A
* KAI 2Q11 Business Review-July 28, 2011 © 2011 Kadant Inc. All rights reserved. ($ Millions) 2Q11 1Q11 2Q10 Sequential ∆ Y-O-Y ∆ SG&A $25.8 $24.5 $22.7 $1.3 $3.1 % Revenues 31.3% 34.1% 32.8% -280 b.p. -150 b.p. SG&A
Slide 24: 2Q11 to 2Q10 Diluted EPS
* KAI 2Q11 Business Review-July 28, 2011 © 2011 Kadant Inc. All rights reserved. 2Q11 to 2Q10 Diluted EPS
Slide 25: Cash Flow
* KAI 2Q11 Business Review-July 28, 2011 © 2011 Kadant Inc. All rights reserved. ($ Millions) 2Q11 2Q10 Income from Continuing Operations 7.4 5.3 Depreciation and Amortization 2.0 1.7 Stock-Based Compensation 1.1 0.8 Other Items - (0.3) Change in Current Assets & Liabilities (excluding acquisitions)
Slide 26: Key Working Capital Metrics
* KAI 2Q11 Business Review-July 28, 2011 © 2011 Kadant Inc. All rights reserved. 2Q11 1Q11 2Q10 Days in Receivables 63 68 57 Days in Payables 54 62 52 Days in Inventory 113 112 96 Working Capital % LTM Revenues* 13.4% 12.0% 12.3% Key Working Capital Metrics
Slide 27: Cash and Debt
* KAI 2Q11 Business Review-July 28, 2011 © 2011 Kadant Inc. All rights reserved. ($ Millions) 2Q11 1Q11 2Q10 Cash, cash equivalents, restricted cash 46.1 57.6 47.2 Debt (17.5) (17.6) (23.0) NET CASH $ 28.6 $ 40.0 $ 24.2 Cash and Debt
Slide 28: Leverage Ratio
* KAI 2Q11 Business Review-July 28, 2011 © 2011 Kadant Inc. All rights reserved. Leverage Ratio * Calculated by adding or subtracting certain items, as required by our Credit Facility, from Adjusted EBITDA.
Slide 29: Questions & Answers
* KAI 2Q11 Business Review-July 28, 2011 © 2011 Kadant Inc. All rights reserved. Questions & Answers To ask a question, please call 866-804-6926 within the U.S. or +1-857-350-1672 outside the U.S. and reference 83375884. Please mute the audio on your computer.
Slide 30: Second Quarter 2011 Business Review
Second Quarter 2011 Business Review Jonathan W. Painter, President & CEO Thomas M. O’Brien, Executive Vice President & CFO