Kadant Inc. (NYSE:KAI) Q3 2020 Earnings Conference Call - Final Transcript

Oct 28, 2020 • 11:00 am ET

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Kadant Inc. (NYSE:KAI) Q3 2020 Earnings Conference Call - Final Transcript

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Q & A
Operator
Operator

Thank you [Operator Instructions] And we have our first question comes from the line of Chris Howe from Barrington Research.

Analyst
Chris Howe

Good Morning Jeff and Mike.

Executive
Jeffrey L. Powell

Hi, Chris

Executive
Michael J. McKenney

Good morning, Chris.

Analyst
Chris Howe

Hi.First off, I wanted to follow-up on some previous comments that you've made surrounding the material handling segments. Given all the politics that are in the environment now, can you talk about what type of benefit, whether it be qualitative or quantitative, you might see from infrastructure spending to this segment?

Executive
Jeffrey L. Powell

Yes, it would have to be obviously qualitative at this point. But that business, obviously, is very sensitive to kind of infrastructure development and infrastructure spending. And then in prior periods when there has been a federal sponsored infrastructure spending bill, that particular business has benefited greatly from that. It's interesting during the pandemic, many of our customers in that market were not deemed essential, and so they were shut down.

And so one of the reasons why I think we've seen a more moderate booking level in that business this year is because a lot of our customers have just started back up are trying to kind of repair their balance sheet because they were forced to be shut down for an extended period of time. But going forward, once the pandemic is behind us, any increased spending in infrastructure will -- we would expect to see benefit them in a meaningful way.

Analyst
Chris Howe

Great. That's helpful. And following up on that question with leverage at 1.9 turns. Understanding a lot is in flux as we step outside our door here in this environment, but is it possible that opportunities could become available to allocate your capital towards acquisitions in this segment of the tuck-in variety as we look into the fourth quarter or next calendar year.

Executive
Jeffrey L. Powell

Yes. I think I might have mentioned this a little bit on the last call. But clearly, during the deeper part of this pandemic, there just wasn't a lot of activity, a lot of discussions. You couldn't travel, you couldn't meet with people. So there clearly is, I would say, pent-up opportunities from sellers that had planned to sell their business this year and we're not able to, from private equity funds that had planned to sell some of their portfolio companies we're not able to.

And then there's also, I think, some questions around what the capital gains tax rate may look like in the future, depending on our election outcomes. So we -- I would say we are seeing our business development group has seen quite a bit more activity level going on right now as we get towards the end of the year. And so as we've said, we didn't really slow down. We continue to pursue strategic opportunities. There just weren't a lot of them this year because of the pandemic, but we -- I think everybody in the investment banking community would confirm that the activity levels picked up quite a bit here in the last couple of