Kadant Reports Results for Second Quarter 2008 and Lowers Full Year 2008 Guidance

WESTFORD, Mass.--(Business Wire)--
Kadant Inc. (NYSE:KAI) reported revenues from continuing
operations of $92.4 million in the second quarter of 2008, an increase
of $3.3 million, or 4 percent, compared to $89.1 million in the second
quarter of 2007. The 2008 period included a $6.1 million, or 7
percent, increase from foreign currency translation and the 2007
period included $0.3 million in revenues from the Casting Products
business that was sold in April 2007. Excluding these items, revenues
decreased $2.5 million, or 3 percent, in the second quarter of 2008
compared to the 2007 period. Operating income from continuing
operations in the 2008 quarter increased 11 percent to $10.1 million
versus $9.2 million in the second quarter of 2007. Income from
continuing operations (after-tax) was $6.9 million in the second
quarter of 2008, or $.50 of diluted earnings per share (EPS), versus
income of $5.9 million, or $.42 of diluted EPS, a year ago. Including
the discontinued operation, net income in the second quarter of 2008
was $6.9 million, or $.50 per diluted share, versus $4.9 million, or
$.35 per diluted share, in the 2007 quarter.

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*T
Three Months Ended
-------------------------------
($ in millions) June June
28, 30,
2008 2007 Change % Change
----------------------------------------------------------------------
Revenues, as reported $92.4 $89.1 $ 3.3 4%
Adjustments to revenues for the
following:
Favorable foreign currency effect (6.1) - (6.1) (7)
Sale of Casting Products business - (.3) .3 -
------ ------ ------ ----------
Revenues, as adjusted $86.3 $88.8 $(2.5) (3)%
====== ====== ====== ==========
*T

"We had a number of notable achievements in the second quarter,"
said William A. Rainville, chairman and chief executive officer of
Kadant. "Diluted EPS from our continuing operations was $.50, which
exceeded the top end of our guidance by $.07. Operating income in our
Papermaking Systems segment set a quarterly record of $14.7 million
and represented 16.3 percent of revenues. Within this segment, our
fluid-handling product line set another quarterly record, contributing
revenues of $28 million, a 31 percent increase over the second quarter
of 2007. In addition, cash flows from continuing operations were $4.6
million in the second quarter of 2008, or $7.3 million higher than the
second quarter of 2007.

"Nevertheless, the current economic climate leads us to believe
that the remainder of 2008 will be more challenging than we previously
envisioned, particularly in the market for large stock preparation
systems in China and Southeast Asia. Several large projects for stock
preparation equipment, on which we had expected to recognize revenue
in 2008, have been delayed into 2009, and a few prospective projects
have been cancelled, although none were in our backlog. Despite these
challenges, we are seeing encouraging developments in Europe and Latin
America. For example, we recently received notification that we had
been awarded a contract for over $5 million to deliver a system that
will produce tissue from recycled fiber in South America.

"With the slowdown of capital equipment business in China, we now
expect to report, for the full year, GAAP diluted EPS of $1.65 to
$1.70 from continuing operations, revised from our previous estimate
of $1.85 to $1.90, on revenues of $365 to $370 million, revised from
our previous estimate of $385 to $395 million. For the third quarter
of 2008, we expect to report GAAP diluted EPS of $.36 to $.38 from
continuing operations on revenues of $86 to $88 million. The third
quarter EPS includes a net gain of approximately $.04 primarily from
the sale of real estate."

Use of Non-GAAP Financial Measures

In addition to the financial measures prepared in accordance with
U.S. generally accepted accounting principles (GAAP), we use certain
non-GAAP financial measures, including earnings before interest,
taxes, depreciation, and amortization (EBITDA) and revenues adjusted
to exclude both the results from the sale of our Casting Products
business and the effects of foreign currency translation. We believe
that the inclusion of such measures helps investors to gain a better
understanding of our underlying operations and future prospects,
consistent with how management measures and forecasts our performance,
especially when comparing such results to previous periods or
forecasts. We also believe this information is responsive to
investors' requests and gives them an additional measure of our
performance.

We use non-GAAP financial measures, in addition to GAAP financial
measures, as the basis for measuring our underlying operating
performance and comparing such performance to that of prior periods or
forecasts and to the performance of our competitors. Such measures are
also used by us in our financial and operating decision-making and for
compensation purposes.

The non-GAAP financial measures included in this press release are
not meant to be considered superior to or a substitute for the results
of operations prepared in accordance with GAAP. In addition, the
non-GAAP financial measures included in this press release have
limitations associated with their use as compared to the most directly
comparable GAAP measures, in that they may be different from, and
therefore not comparable to, similar measures used by other companies.

Reconciliations of the non-GAAP financial measures to the most
directly comparable GAAP financial measures are set forth in this
press release and in the accompanying tables.

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*T
Financial Highlights (unaudited)
(In thousands, except per share amounts and percentages)

Three Months Ended Six Months Ended
--------------------------- -----------------------
Consolidated June 28, 2008 June 30, 2007 June 28, 2008 June 30,
Statement of 2007
Income
----------------------------------------------------------------------

Revenues $92,406 $89,107 $178,270 $177,348
------------- ------------- ------------- ---------

Costs and
Operating
Expenses:
Cost of
revenues 53,843 54,964 105,647 110,658
Selling,
general, and
administrative
expenses 26,924 23,087 52,293 46,583
Research and
development
expenses 1,497 1,493 3,105 3,160
Loss on sale of
subsidiary (a) - 388 - 388
Restructuring
costs and
other expense
(income), net
(b) - - (473) -
------------- ------------- ------------- ---------
82,264 79,932 160,572 160,789
------------- ------------- ------------- ---------

Operating Income 10,142 9,175 17,698 16,559
Interest Income 511 342 1,052 693
Interest Expense (640) (789) (1,235) (1,595)
------------- ------------- ------------- ---------

Income from
Continuing
Operations Before
Provision for
Income Taxes
and Minority
Interest
Expense 10,013 8,728 17,515 15,657
Provision for
Income Taxes 2,977 2,705 5,265 4,895
Minority Interest
Expense 143 87 240 135
------------- ------------- ------------- ---------

Income from
Continuing
Operations 6,893 5,936 12,010 10,627

Loss from
Discontinued
Operation, Net of
Tax (5) (1,022) (9) (1,414)
------------- ------------- ------------- ---------

Net Income $ 6,888 $ 4,914 $ 12,001 $ 9,213
============= ============= ============= =========

Basic Earnings per
Share
Income from
Continuing
Operations $ .50 $ .42 $ .86 $ .76
Loss from
Discontinued
Operation - (.07) - (.10)
------------- ------------- ------------- ---------
Net Income $ .50 $ .35 $ .86 $ .66
============= ============= ============= =========

Diluted Earnings
per Share
Income from
Continuing
Operations $ .50 $ .42 $ .85 $ .75
Loss from
Discontinued
Operation - (.07) - (.10)
------------- ------------- ------------- ---------
Net Income $ .50 $ .35 $ .85 $ .65
============= ============= ============= =========

Weighted Average
Shares
Basic 13,703 14,012 13,935 14,010
============= ============= ============= =========

Diluted 13,822 14,202 14,048 14,208
============= ============= ============= =========

Three Months Ended Six Months Ended
--------------------------- -----------------------
Business Segment June 28, 2008 June 30, 2007 June 28, 2008 June 30,
Information (c) 2007
----------------------------------------------------------------------

Revenues:
Pulp and
Papermaking
Systems $90,453 $86,609 $173,711 $170,643
Other 1,953 2,498 4,559 6,705
------------- ------------- ------------- ---------

$92,406 $89,107 $178,270 $177,348
============= ============= ============= =========

Gross Profit
Margin:
Pulp and
Papermaking
Systems 42% 38% 41% 38%
Other 29% 34% 35% 34%
------------- ------------- ------------- ---------

42% 38% 41% 38%
============= ============= ============= =========

Operating Income:
Pulp and
Papermaking
Systems $14,740 $12,238 $ 25,618 $ 21,808
Corporate and
Other (4,598) (3,063) (7,920) (5,249)
------------- ------------- ------------- ---------

$10,142 $ 9,175 $ 17,698 $ 16,559
============= ============= ============= =========

Bookings from
Continuing
Operations:
Pulp and
Papermaking
Systems $82,041 $89,310 $169,373 $185,517
Other 1,647 2,343 3,999 6,360
------------- ------------- ------------- ---------

$83,688 $91,653 $173,372 $191,877
============= ============= ============= =========

Capital
Expenditures from
Continuing
Operations:
Pulp and
Papermaking
Systems $ 1,282 $ 846 $ 2,707 $ 1,621
Corporate and
Other 257 40 442 103
------------- ------------- ------------- ---------

$ 1,539 $ 886 $ 3,149 $ 1,724
============= ============= ============= =========

Three Months Ended Six Months Ended
--------------------------- -----------------------
Cash Flow and
Other Data from
Continuing June 30,
Operations June 28, 2008 June 30, 2007 June 28, 2008 2007
----------------------------------------------------------------------

Cash Provided by
(Used in)
Operations $ 4,615 $(2,684) $ 10,943 $ 3,768
Depreciation and
Amortization
Expense 1,918 1,891 3,776 3,648

Balance Sheet Data June 28, 2008 Dec. 29,
2007
----------------------------------------------------------------------

Cash and Cash
Equivalents $ 53,888 $ 61,553
Short- and Long-
term Debt 42,961 40,700
Shareholders'
Investment 282,836 278,751

Three Months Ended Six Months Ended
--------------------------- -----------------------
EBITDA Data June 28, 2008 June 30, 2007 June 28, 2008 June 30,
2007
----------------------------------------------------------------------

Consolidated
GAAP Operating
Income $10,142 $ 9,175 $ 17,698 $ 16,559
Depreciation
and
Amortization 1,918 1,891 3,776 3,648
Loss on sale of
subsidiary (a) - 388 - 388
------------- ------------- ------------- ---------

EBITDA (b) $12,060 $11,454 $ 21,474 $ 20,595
============= ============= ============= =========

Pulp and
Papermaking
Systems
GAAP Operating
Income $14,740 $12,238 $ 25,618 $ 21,808
Depreciation
and
Amortization 1,786 1,762 3,516 3,386
------------- ------------- ------------- ---------

EBITDA (b) $16,526 $14,000 $ 29,134 $ 25,194
============= ============= ============= =========

Corporate and
Other (c)
GAAP Operating
Loss $(4,598) $(3,063) $ (7,920) $ (5,249)
Depreciation
and
Amortization 132 129 260 262
Loss on sale of
subsidiary (a) - 388 - 388
------------- ------------- ------------- ---------

EBITDA $(4,466) $(2,546) $ (7,660) $ (4,599)
============= ============= ============= =========

(a) Reflects a pre-tax loss on the sale of the Casting Products
business on April 30, 2007 in the three- and six-month periods
ended June 30, 2007.

(b) Includes net restructuring costs and other income of $473 in the
six-month period ended June 28, 2008 related to restructuring
costs of $121 and a gain from the sale of assets of $594.

(c) "Other" includes the results from the Fiber-based Products
business in all periods and the Casting Products business in the
2007 periods through its sale on April 30, 2007.
*T

Conference Call

Kadant will hold its earnings conference call on Thursday, July
24, 2008, at 11 a.m. Eastern time. To listen, call 800-709-2159 within
the U.S., or 973-582-2810 outside the U.S. Please reference Event ID
number 42165462. You can also listen to the call live on the Web by
visiting www.kadant.com and clicking on "Investors." An audio archive
of the call will be available on our Web site until August 22, 2008.

About Kadant

Kadant Inc. is a leading supplier to the global pulp and paper
industry, with a range of products and services for improving
efficiency and quality in pulp and paper production, including paper
machine accessories and systems for stock preparation, fluid handling,
and water management. Our fluid-handling products are also used to
optimize production in the steel, rubber, plastics, food, and textile
industries. In addition, we produce granules from papermaking
byproducts for agricultural and lawn and garden applications. Kadant
is based in Westford, Massachusetts, with revenues of $366 million in
2007 and 2,000 employees in 16 countries worldwide. For more
information, visit www.kadant.com.

The following constitutes a "Safe Harbor" statement under the
Private Securities Litigation Reform Act of 1995: This press release
contains forward-looking statements that involve a number of risks and
uncertainties, including forward-looking statements about our expected
future financial and operating performance, the effect of economic
conditions on our business, demand for our products, and pending and
potential future orders. Important factors that could cause actual
results to differ materially from those indicated by such statements
are set forth under the heading "Risk Factors" in Kadant's quarterly
report on Form 10-Q for the period ended March 29, 2008. These include
risks and uncertainties relating to our dependence on the pulp and
paper industry; significance of sales and operation of manufacturing
facilities in China; international sales and operations; competition;
our debt obligations; restrictions in our credit agreement; litigation
and warranty costs related to our discontinued operation; our
acquisition strategy; future restructurings; factors influencing our
fiber-based products business; protection of patents and proprietary
rights; fluctuations in quarterly operating results; and anti-takeover
provisions. We undertake no obligation to publicly update any
forward-looking statement, whether as a result of new information,
future events, or otherwise.

Kadant Inc.
Investor contact:
Thomas M. O'Brien, 978-776-2000
or
Media contact:
Wes Martz, 269-278-1715

Copyright Business Wire 2008