Company Quick10K Filing
Kadant
Price87.39 EPS5
Shares11 P/E16
MCap1,002 P/FCF17
Net Debt267 EBIT85
TEV1,269 TEV/EBIT15
TTM 2019-09-28, in MM, except price, ratios
10-Q 2020-09-26 Filed 2020-11-04
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10-K 2012-12-29 Filed 2013-03-13
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10-K 2011-12-31 Filed 2012-03-14
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8-K 2020-10-27
8-K 2020-07-28
8-K 2020-06-18
8-K 2020-05-12
8-K 2020-04-29
8-K 2020-04-22
8-K 2020-02-12
8-K 2019-10-29
8-K 2019-07-30
8-K 2019-05-17
8-K 2019-04-29
8-K 2019-03-06
8-K 2019-02-13
8-K 2018-12-31
8-K 2018-12-14
8-K 2018-12-09
8-K 2018-12-05
8-K 2018-10-29
8-K 2018-07-30
8-K 2018-07-06
8-K 2018-05-16
8-K 2018-04-30
8-K 2018-04-30
8-K 2018-03-07
8-K 2018-02-15
8-K 2018-02-15

KAI 10Q Quarterly Report

Part 1 - Financial Information
Item 1 - Financial Statements
Item 2 - Management's Discussion and Analysis of Financial Condition and Results of Operations
Item 3 - Quantitative and Qualitative Disclosures About Market Risk
Item 4 - Controls and Procedures
Part II - Other Information
Item 1A - Risk Factors
Item 6 - Exhibits
EX-31.1 kaiform10q3q2020ex311.htm
EX-31.2 kaiform10q3q2020ex312.htm
EX-32 kaiform10q3q2020ex32.htm

Kadant Earnings 2020-09-26

Balance SheetIncome StatementCash Flow
1.00.80.60.40.20.02012201420172020
Assets, Equity
0.20.20.10.10.00.02012201420172020
Rev, G Profit, Net Income
0.30.20.1-0.1-0.2-0.32012201420172020
Ops, Inv, Fin

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Table of Contents

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549


FORM 10-Q
(Mark One)
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 26, 2020
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ________ to _________
Commission file number 001-11406
KADANT INC.
(Exact name of registrant as specified in its charter)
Delaware52-1762325
(State or other jurisdiction of incorporation or organization)(I.R.S. Employer Identification No.)
One Technology Park Drive
Westford, Massachusetts 01886
(Address of principal executive offices, including zip code)
(978) 776-2000
(Registrant's telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Securities Exchange Act of 1934:
Title of each classTrading Symbol(s)Name of each exchange on which registered
Common Stock, $.01 par valueKAINew York Stock Exchange

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 (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.  Yes     No
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).  Yes No
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of "large accelerated filer", "accelerated filer", "smaller reporting company", and "emerging growth company" in Rule 12b-2 of the Exchange Act.
Large accelerated filer
Accelerated filer
Non-accelerated filerSmaller reporting company
Emerging growth company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes   No
As of October 23, 2020, the registrant had 11,509,560 shares of common stock outstanding.


Table of Contents

Kadant Inc.
Quarterly Report on Form 10-Q
for the Period Ended September 26, 2020
Table of Contents
  Page
PART I: Financial Information
   
 
PART II: Other Information
   


Table of Contents

PART 1 – FINANCIAL INFORMATION

Item 1 – Financial Statements

KADANT INC.
Condensed Consolidated Balance Sheet
(Unaudited)
September 26,
2020
December 28,
2019
(In thousands, except share and per share amounts)
Assets
Current Assets:
Cash and cash equivalents$53,554 $66,786 
Restricted cash2,650 1,487 
   Accounts receivable, net of allowances of $3,113 and $2,698
94,145 95,740 
Inventories108,715 102,715 
Unbilled revenue9,095 13,162 
Other current assets15,382 17,686 
Total Current Assets283,541 297,576 
Property, Plant, and Equipment, net of accumulated depreciation of $103,664 and $95,309
82,427 86,032 
Other Assets40,565 45,851 
Intangible Assets, Net (Note 1)164,359 173,896 
Goodwill (Note 1)342,999 336,032 
Total Assets$913,891 $939,387 
Liabilities and Stockholders' Equity
Current Liabilities:
Current maturities of long-term obligations (Note 6)$1,538 $2,851 
Accounts payable32,588 45,852 
Accrued payroll and employee benefits27,946 31,968 
Customer deposits25,834 24,012 
Advanced billings4,520 11,280 
Other current liabilities35,436 30,206 
Total Current Liabilities127,862 146,169 
Long-Term Obligations (Note 6)259,049 298,174 
Other Long-Term Liabilities64,735 67,965 
Commitments and Contingencies (Note 13)
Stockholders' Equity:  
Preferred stock, $.01 par value, 5,000,000 shares authorized; none issued
  
Common stock, $.01 par value, 150,000,000 shares authorized; 14,624,159 shares issued
146 146 
Capital in excess of par value108,384 106,698 
Retained earnings465,963 435,249 
Treasury stock at cost, 3,114,599 and 3,214,888 shares
(76,320)(78,778)
Accumulated other comprehensive items (Note 9)(37,232)(37,620)
Total Kadant Stockholders' Equity460,941 425,695 
Noncontrolling interest1,304 1,384 
Total Stockholders' Equity462,245 427,079 
Total Liabilities and Stockholders' Equity$913,891 $939,387 
The accompanying notes are an integral part of these condensed consolidated financial statements.
3

Table of Contents

KADANT INC.
Condensed Consolidated Statement of Income
(Unaudited)
 Three Months EndedNine Months Ended
September 26,
2020
September 28,
2019
September 26,
2020
September 28,
2019
(In thousands, except per share amounts)
Revenue (Notes 1 and 12)$154,610 $173,504 $466,597 $521,985 
Costs and Operating Expenses:  
Cost of revenue86,294 99,257 263,510 302,852 
Selling, general, and administrative expenses43,853 47,097 134,518 144,883 
Research and development expenses2,658 2,597 8,532 7,980 
Restructuring costs (Note 3)470  926  
 133,275 148,951 407,486 455,715 
Operating Income21,335 24,553 59,111 66,270 
Interest Income52 43 140 158 
Interest Expense(1,670)(3,066)(6,060)(10,143)
Other Expense, Net(32)(98)(95)(296)
Income Before Provision for Income Taxes19,685 21,432 53,096 55,989 
Provision for Income Taxes (Note 5)4,705 5,219 13,738 12,310 
Net Income14,980 16,213 39,358 43,679 
Net Income Attributable to Noncontrolling Interest(129)(98)(369)(360)
Net Income Attributable to Kadant$14,851 $16,115 $38,989 $43,319 
Earnings per Share Attributable to Kadant (Note 4)  
Basic$1.29 $1.43 $3.40 $3.87 
Diluted$1.28 $1.41 $3.38 $3.79 
Weighted Average Shares (Note 4)  
Basic11,504 11,267 11,472 11,198 
Diluted11,589 11,469 11,550 11,434 

The accompanying notes are an integral part of these condensed consolidated financial statements.





4

Table of Contents

KADANT INC.
Condensed Consolidated Statement of Comprehensive Income
(Unaudited)
 Three Months EndedNine Months Ended
September 26,
2020
September 28,
2019
September 26,
2020
September 28,
2019
(In thousands)
Net Income$14,980 $16,213 $39,358 $43,679 
Other Comprehensive Items:    
Foreign currency translation adjustment8,656 (9,091)824 (7,603)
Pension and other post-retirement liability adjustments, net (net of tax (benefit) provision of $(6), $12, $14 and $22)
(14)31 34 59 
Effect of other post-retirement plan settlement  (119) 
Deferred gain (loss) on cash flow hedges (net of tax provision (benefit) of $19, $(47), $(103) and $(190))
51 (123)(275)(524)
Total other comprehensive items8,693 (9,183)464 (8,068)
Comprehensive Income23,673 7,030 39,822 35,611 
Comprehensive Income Attributable to Noncontrolling Interest
(191)(24)(445)(276)
Comprehensive Income Attributable to Kadant$23,482 $7,006 $39,377 $35,335 

The accompanying notes are an integral part of these condensed consolidated financial statements.
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KADANT INC.
Condensed Consolidated Statement of Cash Flows
(Unaudited)
 Nine Months Ended
September 26,
2020
September 28,
2019
(In thousands)
Operating Activities
Net income attributable to Kadant$38,989 $43,319 
Net income attributable to noncontrolling interest369 360 
Net income39,358 43,679 
Adjustments to reconcile net income to net cash provided by operating activities:
  
Depreciation and amortization23,260 24,304 
Stock-based compensation expense5,126 5,125 
Provision for losses on accounts receivable505 170 
Gain on sale of property, plant, and equipment(4)(139)
Other items, net(250)954 
Changes in current assets and liabilities, net of effects of acquisitions:  
Accounts receivable1,306 (1,124)
Unbilled revenue4,332 1,957 
Inventories(6,229)(10,294)
Other current assets2,840 (4,093)
Accounts payable(13,183)2,798 
Other current liabilities(4,460)(5,171)
Net cash provided by operating activities52,601 58,166 
Investing Activities  
Acquisitions, net of cash acquired (Note 2)(7,095)(177,058)
Purchases of property, plant, and equipment(5,419)(6,236)
Proceeds from sale of property, plant, and equipment55 527 
Net cash used in investing activities(12,459)(182,767)
Financing Activities  
Repayment of short- and long-term obligations(69,034)(108,272)
Proceeds from issuance of short- and long-term obligations26,000 247,090 
Dividends paid(8,141)(7,604)
Tax withholding payments related to stock-based compensation(2,596)(2,670)
Proceeds from issuance of Company common stock 1,614 2,006 
Dividend paid to noncontrolling interest(525) 
Other financing activities(189)(52)
Net cash (used in) provided by financing activities(52,871)130,498 
Exchange Rate Effect on Cash, Cash Equivalents, and Restricted Cash660 (2,043)
(Decrease) Increase in Cash, Cash Equivalents, and Restricted Cash(12,069)3,854 
Cash, Cash Equivalents, and Restricted Cash at Beginning of Period68,273 46,117 
Cash, Cash Equivalents, and Restricted Cash at End of Period$56,204 $49,971 

See Note 1, under the heading Supplemental Cash Flow Information for further details.

The accompanying notes are an integral part of these condensed consolidated financial statements.
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KADANT INC.
Condensed Consolidated Statement of Stockholders' Equity
(Unaudited)
Three Months Ended September 26, 2020
(In thousands, except share and per share amounts)Common
Stock
Capital in
Excess of Par Value
Retained EarningsTreasury
Stock
Accumulated
Other
Comprehensive Items
Noncontrolling InterestTotal
Stockholders' Equity
SharesAmountSharesAmount
Balance at June 27, 202014,624,159 $146 $107,202 $453,874 3,127,565 $(76,638)$(45,863)$1,638 $440,359 
  Net income— — — 14,851 — — — 129 14,980 
Dividend declared – Common Stock, $0.24 per share
— — — (2,762)— — — — (2,762)
Dividend paid to noncontrolling interest— — — — — — — (525)(525)
  Activity under stock plans— — 1,182 — (12,966)318 — — 1,500 
  Other comprehensive items— — — — — — 8,631 62 8,693 
Balance at September 26, 202014,624,159 $146 $108,384 $465,963 3,114,599 $(76,320)$(37,232)$1,304 $462,245 
Nine Months Ended September 26, 2020
(In thousands, except share and per share amounts)Common
Stock
Capital in
Excess of Par Value
Retained EarningsTreasury
Stock
Accumulated
Other
Comprehensive Items
Noncontrolling InterestTotal
Stockholders' Equity
SharesAmountSharesAmount
Balance at December 28, 201914,624,159 $146 $106,698 $435,249 3,214,888 $(78,778)$(37,620)$1,384 $427,079 
  Net income— — — 38,989 — — — 369 39,358 
Dividends declared – Common Stock, $0.72 per share
— — — (8,275)— — — — (8,275)
Dividend paid to noncontrolling interest— — — — — — — (525)(525)
Activity under stock plans— — 1,686 — (100,289)2,458 — — 4,144 
  Other comprehensive items— — — — — — 388 76 464 
Balance at September 26, 202014,624,159 $146 $108,384 $465,963 3,114,599 $(76,320)$(37,232)$1,304 $462,245 

Three Months Ended September 28, 2019
(In thousands, except share and per share amounts)Common
Stock
Capital in
Excess of Par Value
Retained EarningsTreasury
Stock
Accumulated
Other
Comprehensive Items
Noncontrolling InterestTotal
Stockholders' Equity
SharesAmountSharesAmount
Balance at June 29, 201914,624,159 $146 $103,767 $415,605 3,369,304 $(82,562)$(38,251)$1,855 $400,560 
  Net income— — — 16,115 — — — 98 16,213 
Dividend declared – Common Stock, $0.23 per share
— — — (2,593)— — — — (2,593)
  Activity under stock plans— — 1,452 — (17,270)424 — — 1,876 
  Other comprehensive items— — — — — — (9,109)(74)(9,183)
Balance at September 28, 201914,624,159 $146 $105,219 $429,127 3,352,034 $(82,138)$(47,360)$1,879 $406,873 
Nine Months Ended September 28, 2019
(In thousands, except share and per share amounts)Common
Stock
Capital in
Excess of Par Value
Retained EarningsTreasury
Stock
Accumulated
Other
Comprehensive Items
Noncontrolling InterestTotal
Stockholders' Equity
SharesAmountSharesAmount
Balance at December 29, 201814,624,159 $146 $104,731 $393,578 3,514,163 $(86,111)$(39,376)$1,603 $374,571 
  Net income— — — 43,319 — — — 360 43,679 
Adoption of ASU No. 2016-02, Leases
— — — (17)— — — — (17)
Dividends declared – Common Stock, $0.69 per share
— — — (7,753)— — — — (7,753)
  Activity under stock plans— — 488 — (162,129)3,973 — — 4,461 
  Other comprehensive items— — — — — — (7,984)(84)(8,068)
Balance at September 28, 201914,624,159 $146 $105,219 $429,127 3,352,034 $(82,138)$(47,360)$1,879 $406,873 

The accompanying notes are an integral part of these condensed consolidated financial statements.
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KADANT INC.
Notes to Condensed Consolidated Financial Statements
(Unaudited)

1.    Nature of Operations and Summary of Significant Accounting Policies

Nature of Operations
Kadant Inc. was incorporated in Delaware in November 1991 and trades on the New York Stock Exchange under the ticker symbol "KAI."
Kadant Inc. (together with its subsidiaries, the Company) is a global supplier of high-value, critical components and engineered systems used in process industries worldwide. Its products, technologies, and services play an integral role in enhancing process efficiency, optimizing energy utilization, and maximizing productivity in resource-intensive industries.
    
COVID-19
On March 11, 2020, the World Health Organization designated the novel coronavirus (COVID-19) a global pandemic, and a national emergency was subsequently declared by the U.S. government. The pandemic has negatively affected the global economy, disrupted global supply chains, and resulted in significant travel and transport restrictions, which have adversely affected the Company’s bookings and financial results. The impact of the COVID-19 pandemic, including the resulting economic impact, continues to evolve and the Company is closely monitoring its impact on all aspects of its business.

Interim Financial Statements
The interim condensed consolidated financial statements and related notes presented have been prepared by the Company, are unaudited, and, in the opinion of management, reflect all adjustments of a normal recurring nature necessary for a fair statement of the Company's financial position at September 26, 2020, its results of operations, comprehensive income, and stockholders' equity for the three- and nine-month periods ended September 26, 2020 and September 28, 2019, and its cash flows for the nine-month periods ended September 26, 2020 and September 28, 2019. Interim results are not necessarily indicative of results for a full year or for any other interim period.
The condensed consolidated balance sheet presented as of December 28, 2019 has been derived from the consolidated financial statements contained in the Company's Annual Report on Form 10-K for the fiscal year ended December 28, 2019. The condensed consolidated financial statements and related notes are presented as permitted by the rules and regulations of the Securities and Exchange Commission (SEC) for Form 10-Q and do not contain certain information included in the annual consolidated financial statements and related notes of the Company. The condensed consolidated financial statements and notes included herein should be read in conjunction with the consolidated financial statements and related notes included in the Company's Annual Report on Form 10-K for the fiscal year ended December 28, 2019, filed with the SEC.

Financial Statement Presentation
In the first quarter of 2020, the Company realigned its business segments into three new reportable operating segments: Flow Control, Industrial Processing, and Material Handling. The Company previously reported its financial results by combining its operating entities into three reportable operating segments: Papermaking Systems, Wood Processing Systems, and Material Handling Systems, and a separate product line, Fiber-based Products. Financial information for 2019 has been recast to conform to the new segment presentation. See Note 12, Business Segment Information, for further detail regarding the Company's segments.

Use of Estimates and Critical Accounting Policies
The preparation of financial statements in conformity with U.S. generally accepted accounting principles (GAAP) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenue and expenses during the reporting period. Although the Company makes every effort to ensure the accuracy of the estimates and assumptions used in the preparation of its condensed consolidated financial statements or in the application of accounting policies, if business conditions were different, or if the Company were to use different estimates and assumptions, it is possible that materially different amounts could be reported in the Company's condensed consolidated financial statements.
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KADANT INC.
Notes to Condensed Consolidated Financial Statements
(Unaudited)

Notes 1 and 3 to the consolidated financial statements in the Company's Annual Report on Form 10-K for the fiscal year ended December 28, 2019 describe the significant accounting estimates and policies used in preparation of the consolidated financial statements. There have been no material changes in the Company’s significant accounting policies during the nine months ended September 26, 2020, except that the Company no longer considers its policy with respect to accounting for pension benefits to be a critical accounting policy due to the settlement of its U.S. pension plan in December 2019.

Supplemental Cash Flow Information
 Nine Months Ended
(In thousands)September 26,
2020
September 28,
2019
Cash Paid for Interest$5,518 $9,711 
Cash Paid for Income Taxes, Net of Refunds$9,953 $18,037 
Non-Cash Investing Activities:
Fair value of assets acquired$9,295 $208,558 
Cash paid for acquired businesses(7,565)(179,489)
Liabilities Assumed of Acquired Businesses$1,730 $29,069 
Non-cash additions to property, plant, and equipment$101 $304 
Non-Cash Financing Activities:  
Issuance of Company common stock upon vesting of restricted stock units$4,557 $3,908 
Dividends declared but unpaid$2,762 $2,593 

Restricted Cash
The Company's restricted cash serves as collateral for certain banker's acceptance drafts issued to vendors and for bank guarantees associated with providing assurance to customers that the Company will fulfill certain customer obligations entered into in the normal course of business. The majority of the bank guarantees will expire over the next twelve months.
The following table provides a reconciliation of cash, cash equivalents, and restricted cash reported within the Company's condensed consolidated balance sheet that are shown in aggregate in the accompanying condensed consolidated statement of cash flows:
(In thousands)September 26,
2020
September 28,
2019
December 28,
2019
December 29,
2018
Cash and cash equivalents$53,554 $48,650 $66,786 $45,830 
Restricted cash2,650 1,321 1,487 287 
Total Cash, Cash Equivalents, and Restricted Cash$56,204 $49,971 $68,273 $46,117 

Inventories
The components of inventories are as follows:
 September 26,
2020
December 28,
2019
(In thousands)
Raw Materials$47,918 $49,332 
Work in Process17,089 15,344 
Finished Goods43,708 38,039 
$108,715 $102,715 
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KADANT INC.
Notes to Condensed Consolidated Financial Statements
(Unaudited)

Intangible Assets, Net
Acquired intangible assets by major asset class are as follows:
(In thousands)GrossAccumulated
Amortization
Currency
Translation
Net
September 26, 2020
Definite-Lived
Customer relationships$174,423 $(62,018)$(3,741)$108,664 
Product technology56,568 (30,674)(1,520)24,374 
Tradenames6,753 (2,811)(362)3,580 
Other18,248 (14,036)(565)3,647 
 255,992 (109,539)(6,188)140,265 
Indefinite-Lived
Tradenames24,100 — (6)24,094 
Acquired Intangible Assets$280,092 $(109,539)$(6,194)$164,359 
December 28, 2019   
Definite-Lived
Customer relationships$171,583 $(51,798)$(4,141)$115,644 
Product technology56,011 (27,819)(1,709)26,483 
Tradenames6,527 (2,421)(427)3,679 
Other17,964 (13,295)(593)4,076 
 252,085 (95,333)(6,870)149,882 
Indefinite-Lived
Tradenames24,100 — (86)24,014 
Acquired Intangible Assets$276,185 $(95,333)$(6,956)$173,896 
    
Gross intangible assets include $3,907,000 for acquired intangible assets from acquisitions that occurred in the second quarter of 2020. See Note 2, Acquisitions, for further details.
Intangible assets are initially recorded at fair value at the date of acquisition. Subsequent impairment charges are reflected as a reduction in the gross balance, as applicable. Definite-lived intangible assets are stated net of accumulated amortization and currency translation in the accompanying condensed consolidated balance sheet. The Company amortizes definite-lived intangible assets over lives that have been determined based on the anticipated cash flow benefits of the intangible asset.

Goodwill
The changes in the carrying amount of goodwill by segment are as follows:
(In thousands)Flow ControlIndustrial ProcessingMaterial HandlingTotal
Balance at December 28, 2019 (a)