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Kadant Inc  (NYSE:KAI)
Q1 2019 Earnings Call
April 30, 2019, 11:00 a.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:

Operator

Good day, ladies and gentlemen, and welcome to the Q1 2019 Kadant Inc. Earnings Conference Call. At this time, all participants are in a listen-only mode. Following management's prepared remarks, we will host a question-and-answer session and our instructions will be given at that time. (Operator Instructions) As a reminder, this conference call may be recorded for replay purposes.

It is now my pleasure to hand the conference over to Michael McKenney, Chief Financial Officer. Sir, you may begin.

Michael J. McKenney -- Executive Vice President and Chief Financial Officer

Thank you, Brian. Good morning everyone and welcome to Kadant's first quarter 2019 earnings call. With me on the call today is Jon Painter, our Chief Executive Officer. Before we begin, let me read our Safe Harbor statement. Various remarks that we may make today about Kadant's future plans and expectations, financial and operating results and prospects are forward-looking statements for purposes of the Safe Harbor provisions under the Private Securities Litigation Reform Act of 1995. These forward-looking statements are subject to known and unknown risks and uncertainties that may cause our actual results to differ materially from these forward-looking statements as a result of various important factors including those outlined at the beginning of our slide presentation and those discussed under the heading Risk Factors in our Annual Report on Form 10-K for the fiscal year-ended December 29, 2018 and subsequent filings with the Securities and Exchange Commission.

In addition, any forward-looking statements we make during this webcast represent our views and estimates only as of today. While we may elect to update forward-looking statements at some point in the future, we specifically disclaim any obligation to do so even if our views or estimates change. During this webcast, we will refer to some non-GAAP financial measures. These non-GAAP measures are not prepared in accordance with Generally Accepted Accounting Principles. A reconciliation of the non-GAAP financial measures to the most directly comparable GAAP measures is contained in our first quarter earnings press release and slides presented on the webcast and discussed in the conference call which are available on the Investor section of our web site at www.kadant.com under the heading investor news.

With that, I'll turn the call over to Jon Painter who will give you an update on Kadant's business and future prospects. Following Jon's remarks, I'll give an overview of our financial results for the quarter and we will then have a Q&A session. Jon?

Jonathan W. Painter -- President and Chief Executive Officer

Thanks Mike. And thank you all for joining us this morning to review our first quarter results and to update you on our business outlook for 2019. Overall, we had a good start to the year with excellent operating performance leading to a solid earnings per share beat as well as record revenue and bookings.

Let me start with the Q1 financial highlights. We had record first quarter bookings of $184 million, up 1% from the record performance last year. We also had record revenue which was up 15% to $171 million. Gross margin decreased to 41.2% due to purchase accounting and the inclusion of lower margin revenues from our recent acquisition.

Adjusted EBITDA was up 27% to $30 million or 17.5% of revenue. We generated $0.96 of GAAP diluted earnings per share and our adjusted earnings per share was up 16% to $1.24. FX negatively impacted our earnings per share by $0.08. Cash flow in Q1 which is historically a weaker quarter increased 37% compared to the same period last year to $10 million. And finally, we finished the quarter with net debt of $304 million and the leverage ratio of 2.33.

If you take a look at Slide 6, you can see FX had a meaningful negative impact on our Q1 results while the acquisition of Syntron had a positive impact. Our internal revenue growth which excludes FX and acquisitions was up a healthy 6% on internal revenue growth in bookings decreased 8% compared to the record first quarter of 2018.

As you may recall, we had an extraordinary level of bookings in the first half of 2018 so we expected difficult comparisons the first half of this year. That said I'm very pleased with the level of bookings in the first quarter. Our parts and consumables internal growth in Q1 was also excellent with revenue up 4.5% and bookings up 3.6%.

Moving on to our bookings and revenue performance generally. Slide 7 shows a positive uptick in bookings in Q1 compared to the previous three quarters to a record $184 million. Thanks to contributions from our recent acquisition. I should also note that we ended the quarter with a record backlog of $200 million. Q1 revenue increased 15% to a record $171 million due largely to the contributions of our acquisition but also strong performance for our stock prep-product line in Europe and North America. And our Doctoring, Cleaning, & Filtration product line in North America.

Another high point of the quarter was our parts and consumables business which saw significant increases in both bookings and revenue. Parts consumables bookings increased 17% to a record $120 million. Thanks largely to contributions from our recent acquisition. Revenue from parts and consumables in the first quarter was also outstanding up 18% to a record $113 million and represents 66% of our total Q1 revenue.

At 66% of revenue, parts and consumables continues to make up a significant portion of our total revenue. I want to note that after analyzing Syntron business we determine it's best to categorize its aftermarket replacements and upgrade business as parts and consumables. Using this classification Syntron had parts and consumables revenue making up 82% of its total revenue in Q1.

Next, let me review our performance in the major geographic regions where we operate and I'll start with North America. The packaging market in North America started the first quarter of 2019 in an environment of weaker demand and new capacity additions. This lead to containerboard operating rates at 91% in the first quarter down from 95% in the prior year quarter. The underlying strength of the US economy is a tailwind but there is still enough uncertainty and overall demand that packaging buyers are being cautious in building up too much inventory.

A big question in the North American market is what role China will play in importing North American liner to offset the fiber shortage they're experiencing in China. On the housing front, US housing starts were down around 10% in the first quarter compared to a strong Q1 of 2018. March's annualized rate of 1.1 million housing starts however is still fairly healthy.

The market does appear to be firming up as interest rates have come down making new homes somewhat more affordable. That said we are seeing reduced capital project activity in our Wood Processing segment compared to the high levels we saw last year as many producers rushed to increase capacity and modernize their facilities.

This combination suggests that the outlook for capital projects will be weaker than last year but still at a reasonable level. The picture is brighter in the mining and aggregates market which are primarily served by our new material handling system segment. We're seeing a strong level of project activity for our conveying products at our mining customers based on healthy industrial activity in North America.

We're also seeing good activity in the aggregate space such as sand, gravel and crushed stone, for our vibratory feeding and conveying products.

As you can see on Slide 9. Revenue increased to a record $110 million up 30% compared to the first quarter of 2018. While our recent acquisition was the major reason for the revenue increase. Our internal revenue growth and revenue which excludes FX and acquisitions was a very healthy 7% making North America the strongest region in the world for us.

Bookings in North America were up 13% to a record 105 million. An increase in bookings in our Doctoring, Cleaning, & Filtration product line partially offset declines in our wood processing and stock product lines.

That said the largest contributor to our bookings increase was our recent acquisition excluding the impact of FX and acquisitions. Our bookings in North America were down 9% from an extremely strong Q1 of 2018. Before leaving North America, I want to report on how our material handling acquisition performed in its first quarter as part of Kadant.

Overall the business did quite well and executed according to plan. The business had revenue of $21 million bookings of $24 million and was $0.07 created to our adjusted earnings per share in the first quarter.

The management team attended our global management meeting in March and came away with several synergies to pursue. Looking ahead we expect a solid year in 2019.

On Slide 10, we show our revenue and bookings performance in Europe. Market conditions in Europe are about the same as they've been for the last few years. The region seems to be dragged down by slowing export activity as its most important trading partner China is working through its own economic headwinds. Weak manufacturing industrial sectors compounded by the ongoing trade disputes between the US and China and ongoing Brexit uncertainty continues to contribute to a fairly lackluster economic environment.

First quarter revenue was down 6%, year-over-year as a result of FX. Despite solid growth in our stock prep and wood processing product lines. Excluding the impact of FX and acquisition revenue was up 2%. Bookings in Europe were down 9%, but only down 2% when excluding FX and acquisitions. All of our product lines were down in Q1 except wood processing where bookings increased 25% compared to Q1 of 2018.

In particular, we booked capital orders for five machines in Eastern Europe for our rotary debarking equipment used in the wood processing mills with the combined value of approximately $2.6 million. Overall, the market in Europe is stable and we expect market conditions to remain somewhat soft due largely to the high level of political uncertainty and relatively weak demand.

Turning now to Asia, we see the impact of the proposed wastepaper ban and the slowing economy in China. Q1 revenue was down 15% compared to Q1 of 2018. Bookings decreased 4% compared to Q1 of 2018, but increased 56% sequentially. As we talked about on prior calls, the containerboard producers in China are facing fiber shortages resulting from the government's decision to dramatically reduce imports of waste paper into China. The build-out of fiber processing capacity in Southeast Asia by Chinese producers in 2018 in response to the wastepaper ban is continuing and there is now more project activity by Chinese producers outside China then within China.

Malaysia has recently emerged as the hotspot for investment with two of China's larger containerboard producers recently announcing plans to add nearly 3 million tonnes of new capacity over the next few years. Containerboard producers inside China on the other hand are taking extended downtime due to a lack of fiber and slowing demand. Consequently, we expect reduced demand for both capital and parts from our paper industry customers in China this year.

Despite the challenging market conditions we didn't have a number of capital projects booked in the quarter in China particularly in our stock prep product line were we booked three OCC system orders with a combined value of approximately $9 million as mentioned in our last call.

In addition, there continues to be, OSB projects in the pipeline which have secured should help to offset expected softer bookings for capital sold into the paper industry. Finally, a few comments on the rest of the world results. The market conditions in South America particularly Brazil are still restrained but stable. Revenue in the rest of the world was $14 million in Q1 up 45% compared to the same period last year and 31% on a sequential basis.

Bookings were down 33% compared to a relatively strong Q1 of 2018. However, we're up 18% sequentially. I want to conclude my remarks with a few comments on our guidance for Q2 and the full year of 2019. Despite some volatility in China and weaker demand for housing in North America we're encouraged by our solid start to 2019. Based on our Q1 results and our outlook for the remainder of the year, we are reaffirming our full year revenue and adjusted diluted earnings per share guidance and raising our GAAP diluted earnings per share guidance.

For 2019, we now expect to achieve gap diluted earnings per share a $4.84 to $4.99 on revenue of $700 million to $710 million. We expect our adjusted earnings per share to between $5.20 and $5.35. Mike, will give you more details on our guidance in his remarks.

In the second quarter of 2019, we expect to achieve GAAP diluted earnings per share of $0.99 to $1.5 on revenues of $165 million to $170 million and adjusted diluted earnings per share of a $1.07 to $1.13.

I'll pass the call over to Mike for additional details on our financial performance. Mike?

Michael J. McKenney -- Executive Vice President and Chief Financial Officer

Thank you John. I'll start with our gross margin performance. Consolidated gross margins were 41.2% in the first quarter of 2019, down 310 basis points compared to 44.3% in the first quarter 2018. The consolidated gross margin in the first quarter of 2019 were negatively affected by the amortization of acquired profit and inventory related to our recent acquisition, which lowered consolidated gross margins by 130 basis points.

Excluding the impact of the amortization of profit and inventory. Consolidated gross margins in the first quarter of 2019, were 42.5%, down 180 basis points compared to last year's first quarter due primarily to the inclusion of the lower gross margin profile of our recent acquisition. Our parts and consumable revenue represented 66% of total revenue in the first quarter of 2019 compared to 64% in the first quarter of 2018.

As John noted, we've categorized Syntron's aftermarket replacements and upgrades as parts and consumables. Excluding the Syntron revenue from parts and consumables would have been 64% in the quarter. Looking ahead in the second quarter of 2019, we expect approximately 60 basis point reduction in gross margins due to the amortization of acquired profit in inventory.

Now, let's turn to Slide 16, in our quarterly SG&A expenses. SG&A expenses were $49.3 million in the first quarter of 2019, up 3.5 million from the first quarter of 2018. This included an increase of $5.7 million from our acquisitions and a decrease of 1.8 million from a favorable foreign currency translation effect. $5.7 million of acquisition related SG&A expenses included a $0.7 million increase in amortization expense related to acquired backlog and a $0.8 million of the acquisition costs.

SG&A expense as a percentage of revenue decreased to 28.8% in the first quarter of 2019 compared to 30.7% in the first quarter of 2018. We expect continued improvement in this metric in the second half of 2019 as our revenue increases.

Let me turn next to our EPS results for the quarter. In the first quarter of 2019 GAAP deluded EPS was $0.96 and our adjusted deluded EPS was a $1.24. The $0.28 difference relates to $0.22 of amortization expense associated with acquired profit and inventory and backlog and $0.06 of acquisition costs.

In the first quarter of 2018, GAAP diluted EPS was $0.96 and our adjusted deluded EPS $1.07. The $0.11 difference relates to $0.05 of restructuring costs , $0.04 of discrete tax items and $0.02 of amortization expense associated with acquired backlog. The increase of $0.17 in adjusted deluded EPS in the first quarter 2019 compared to the first quarter of 2018 consists of the following. $0.16 due to lower operating costs $0.07 from the operating results of our acquisition. Net of interest expense attributed to the acquisition and $0.04 due to higher revenue. These increases were partially offset by $0.06 due to lower gross margin percentages and $0.04 from a higher effective tax rate.

Collectively included in all the categories I just mentioned was an unfavorable foreign currency translation effect of $0.08 in the first quarter of 2019 compared to the first quarter of last year due to the strengthening of the US dollar. Let me also take a moment to compare our adjusted diluted EPS results in the first quarter to the guidance we issued during our February 2019 earnings call. Our adjusted diluted EPS guidance for the first quarter 2019 was a $1.11 to $1.17. We reported adjusted diluted EPS, of $1.24 in the first quarter of '19. The $0.07 increase over the high end of our guidance range was principally the result of better than expected revenue primarily from our stock preparation product line.

Slide 18, presents our quarterly adjusted EBITDA performance. Quarterly adjusted EBITDA was $30 million or 17.5% of revenue compared to $23.5 million or 15.8% of revenue in the first quarter of 2018, up $6.5 million. Now, let's turn to our cash flows and working capital metrics starting on Slide 19.

Cash flow from operations was $9.9 million in the first quarter of 2019 compared to $7.2 million in the first quarter of 2018. As you can see on the chart we had an $11.4 million use of cash related to working capital primarily due to cash outflows related to performance incentive compensation and inventory which was offset in part by cash received from customer deposits.

Free cash flow increased to $7.7 million in the first quarter of 2019 compared to $2.1 million in the first half of 2018 in part due to lower capital expenditures. As we have noted in the past. Historically, the first quarter has been a weak quarter for operating cash flows partly due to the payment on performance incentive compensation.

We had several notable non-operating uses of cash in the first quarter of 2019. We paid $175.3 million net of cash required for our material handling acquisition. $2.6 million for tax withholding payments related to the investing in stock awards. A 2.4 million dividend on our common stock and 2.2 million for capital expenditures. I'd also add that in the second quarter of 2019 we made a final payment of $1.6 million for the material handling acquisition related to working capital acquired.

Let's now look at our key working capital metrics on Slide 20. On a sequential basis our days and receivables inventory and payables have remained fairly consistent. Looking at our overall working capital position. Our cash conversion days measure calculate by taking days and receivables plus days in inventory and subtracting days and accounts payable was 110 at the end of the first quarter of 2019. Working capital as a percentage of revenue was 14.9% in the first quarter of 2019 compared to 12.5% in the fourth quarter of 2018 and 13% in the first quarter of 2018. The sequential and year-over-year increase was due to our recent acquisition which is only contributing three-months of revenue to a metric that uses the last 12 months revenue. Net debt that is debt less cash at the end of the first quarter of 2019 was $303.7 million up from net debt of $129.7 million at the end of the fourth quarter of 2018.

We had net borrowings of $182.6 million in the first quarter of 2019 which were primarily used to finance our material handling acquisition.

As you can see on slide 23, our leverage ratio calculated in accordance with our credit facility increased to $1.19 -- from $1.19 at the end of 2018 to $2.33 at the end of the first quarter of 2019 as a result of the increase in debt related to the acquisition. Under our credit facility, this ratio must be less than 4.0 during the next three quarters and then steps down to less than 3.75. We anticipate free cash flows will improve as we progress through 2019 and we will continue our strategy of paying down debt.

A few comments on our guidance. As was the case in 2017 and 2018, we anticipate the second half of 2019 revenue and EPS performance will be substantially better than the first half of the year with the fourth quarter being the strongest quarter of the year. I would also like to mention that in our February call I noted our tax rate for the first quarter 2019 would likely be lower in the remaining quarters of 2019 due to anticipated tax benefit associated with the vesting of equity awards in March.

The tax rate for the first quarter of 2019 was 26.4% and as anticipated in our guidance, first quarter 2019 GAAP diluted EPS included a tax benefit of $0.03 related to the vesting of equity awards. While we will continue our strategy of paying down debt, the increase in our leverage ratio from 1.19 to 2.33 puts us one level higher in our credit facility pricing grid and will increase our borrowings margin by 25 basis points beginning in the second quarter of 2019. As a result we would expect our quarterly interest expense for the remainder 2019, to be higher than in the first quarter of 2019. These increase was included in the 2019 guidance that we gave during our February earnings call. Finally both GAAP and adjusted EPS guidance included our initial estimates of purchase accounting adjustments which are subject to change as we review and finalize the valuation work for the acquisition.

We anticipate this review will largely be completed by the end of the second quarter of 2019. As a final note, I would just like to add that this is officially Jon's last earnings call. I'm sure he'll comment on that in his wrap up comments. Jon, it's been a pleasure working with you. Although, you'll still be working together. You're off the hook for future earnings calls. I know you're going to miss my reading.

Jonathan W. Painter -- President and Chief Executive Officer

I'll call it a day.

Michael J. McKenney -- Executive Vice President and Chief Financial Officer

That concludes my review of the financials and I'll now turn the call back over to the operator for our Q&A session. Operator?

Questions and Answers:

Operator

Thank you sir. (Operator Instructions) And our first question will come from the line Chris Howe with Barrington Research. Your line is now open.

Christopher Howe -- Barrington Research Associates, Inc. -- Analyst

Good morning, gentlemen.

Michael J. McKenney -- Executive Vice President and Chief Financial Officer

Hey Chris.

Jonathan W. Painter -- President and Chief Executive Officer

Good morning, Chris.

Christopher Howe -- Barrington Research Associates, Inc. -- Analyst

Hi. Well, I suppose I should throw these questions to Jon, since this will be the last call. I'm surprised Mike didn't say now give all the hard questions. right. And I would say save him for Jeff because he's much smarter. First off in regard to China the uncertainty on waste imports, and you mentioned some of the weakness you're seeing in the wood processing capital business and operating rates in North America at 91% as far as operating rates getting these higher and seeing the weaker demand inflect positive. Is that dependent upon the fiber shortage in China. So if the fiber shortage gets under way and lighter board starts to export to China we should see operating rates increase and in turn North American packaging should see some improvement.

Jonathan W. Painter -- President and Chief Executive Officer

Yeah. So that's definitely a scenario, that you know it's the lower operating rates in North America causes that the you know as you are aware of the sort of end-to-end of last year the early part of this quarter you know the economy seemed a little bit softer and I listened to IP's earnings call and they were talking about the kind of the flooding impacting some of the fruit harvest and stuff like that which reduced demand. So you had somewhat softer demand situation and then some capacity coming online. So that's kind of where, where we are now. I think with the, this print of 3.2% GDP and stuff like that. Maybe things are a little rosier for the North American economy generally going forward we'll see. But then getting to the harder question then the question is if there is some excess capacity in North America and more capacity is expected to come on line in the next -- this year and next year. If China turns to buying liner from North America. How much of that will end up going to China and kind of bring those operating rates back up? I definitely think that's a scenario that's very likely to play out. The capacity that they're adding in Southeast Asia really won't be there in time if in fact China goes through and has a full band by 2020. So they will need to import liner from North America and Europe. Now who knows they may defer that, they may give them a break till 2021 but if they do what they say, I would say that there should be some increased exports to China.

Christopher Howe -- Barrington Research Associates, Inc. -- Analyst

That's helpful. And as far as capital equipment demand outside of China. How is that progressing is that kind of at a steady state awaiting what goes on in China?

Jonathan W. Painter -- President and Chief Executive Officer

So, you know, as I said it kind of in my remarks that there's pretty decent capital project activity in Southeast Asia but not so much in China proper. Then if I look at you know just sort of general demand in North America it's pretty, OK. I would say pretty not a rocket ship, but pretty stable. And of course you know I did comment that I think we don't expect as much for capital bookings on our wood products business in North America. And that really has as much to do with the fact that they sort of bought it all last year. You know they were they really pulled a lot of stuff forward and their desire to increase capacity last year so I can kind of see that pausing a little bit.

Christopher Howe -- Barrington Research Associates, Inc. -- Analyst

Okay. And then have one more question, just in regard to Syntro. Many synergies denotes in the quarter. You mentioned strong backlog driven by Syntro. Is this from their existing customer base that they brought onboard or were you able to how much new business were you able to extract from Syntro?

Jonathan W. Painter -- President and Chief Executive Officer

So, it is definitely tied to their existing business they bought onboard. We are pursuing some synergies but these year from long gestation period -- I wouldn't except to see any revenue synergies these year from Syntro. You know these take a quite a while. The -- if usually the timing typically is you know of course we get their financial stuff integrated and then we introduce some sort of best practices that kind of thing. And that and I would say you've got manufacturing synergies, you know, sourcing in other places and then really last and longest to get there is revenue synergies.

Christopher Howe -- Barrington Research Associates, Inc. -- Analyst

Okay. Then as we look further out any debt targets for the end of this year we're at 2.33 now. Where should we see that by the end of this year?

Jonathan W. Painter -- President and Chief Executive Officer

Well, Chris we're going to be -- of course, we'll be actively paying down our debt hopefully in the ensuing quarter. So I'm hoping we can get that down to you know 2.1 something, something like that. I don't think we'll I don't think we'll get below two this year, but we'll be working hard to get there.

Christopher Howe -- Barrington Research Associates, Inc. -- Analyst

All right. Thanks so much John and Mike.

Jonathan W. Painter -- President and Chief Executive Officer

Okay. Thanks Chris.

Operator

Thank you. And our next question will come from the line of Walter Liptak with Seaport Global. Your line is now open.

Walter Liptak -- Seaport Global Securities -- Analyst

Hey, thanks. Good morning guys.

Jonathan W. Painter -- President and Chief Executive Officer

Hey, Wal.

Michael J. McKenney -- Executive Vice President and Chief Financial Officer

Good morning, Wal.

Walter Liptak -- Seaport Global Securities -- Analyst

I want to ask a couple about Syntron. You mentioned the 21 million in sales in the quarter. Can you talk about how that business is doing. Did it grow during the quarter. No, we didn't have that in the numbers last year?

Michael J. McKenney -- Executive Vice President and Chief Financial Officer

So they you know they booked $24 million. So you know as you may remember when we were introducing it was we kind of said there there are sort of 12-months is $89 million you know. So frankly, the $21 million is a little below their run rate, but the $24 million of bookings is a little above. I mean, I'm actually pretty happy with their profitability at the $21 million and their contribution to us incidentally at the $21 million. So I'm pretty encouraged about Syntron, you know for the year. And I would say, look their environment is good in terms of activity.

Walter Liptak -- Seaport Global Securities -- Analyst

Okay. So, with that 24 in bookings you think 89 million is still on track for the year.

Jonathan W. Painter -- President and Chief Executive Officer

Yeah. We didn't give. I don't think we have a projection, but certainly the 24, you know, could pretty much most of that should turn to revenue this year.

Walter Liptak -- Seaport Global Securities -- Analyst

Okay. And with Syntron, Mike you may have mentioned this -- but how much was the purchase accounting in the quarter and how much do you expect for next quarter?

Michael J. McKenney -- Executive Vice President and Chief Financial Officer

So, it was $0.22 related to the backlog and inventory and $0.06 for the acquisition costs. And I think we're done with the acquisition costs and next quarter we're looking at approximately $0.08 and that would be predominantly for the inventory component.

Jonathan W. Painter -- President and Chief Executive Officer

And then largely done.

Michael J. McKenney -- Executive Vice President and Chief Financial Officer

And then we're -- and we're pretty much done.

Walter Liptak -- Seaport Global Securities -- Analyst

Okay. All right. And I want to ask about the parts that looks like they grew nicely. We had said in start prep, where -- were parts represent early you count that in doctoring because doctoring had some nice growth too?

Jonathan W. Painter -- President and Chief Executive Officer

You know it was pretty, it was pretty broad based. I would say, hang on there, Wal.

Walter Liptak -- Seaport Global Securities -- Analyst

Okay. Yeah, I guess the question Jon is, you know the -- you're on a pretty tough comp I think with especially with doctoring, with the first quarter last year. And I wonder if -- like if something has changed with the way the customers order maybe they put in blanket orders for parts early in the year and then those shipped through the rest of the year or is this because of some internal effort to try and grow that parts business?

Jonathan W. Painter -- President and Chief Executive Officer

I would say the parts business is sort of operating as it has. We typically managed to grow, excluding FX and acquisitions in that. Low single digit rate and maybe a couple of -- for a few years will be growing generally higher was slightly higher but this to me is par for the course. I would say that the in terms of where it's coming from it's also pretty broad-based even the wood processing business which is down in capital is the spares are holding up quite nicely. So it's as stable as you would expect for that.

Walter Liptak -- Seaport Global Securities -- Analyst

That was great. That's great. Okay, and maybe a last one for me. You guys a couple of years ago have talked about 80:20 and how you've been testing that out. And I wonder if there's any update on that. If you are reupping on that or is that something that goes on the back burner?

Jonathan W. Painter -- President and Chief Executive Officer

So, we had a, as you know we're doing it with two, two of our divisions. And I would say they are showing good results and we are going to move forward and do that with some other ones. But it's worked out you know and we're happy.

Walter Liptak -- Seaport Global Securities -- Analyst

Okay. Great. Great. Okay, thank you.

Jonathan W. Painter -- President and Chief Executive Officer

Yeah. Thanks, Wal.

Operator

Thank you. (Operator Instruction) Our next question will come from the line of Dan Jacome with Sidoti. Your line is now open.

Daniel Jacome -- Sidoti & Company -- Analyst

Hi, good morning.

Michael J. McKenney -- Executive Vice President and Chief Financial Officer

Good morning, Dan.

Jonathan W. Painter -- President and Chief Executive Officer

Hi Dan.

Daniel Jacome -- Sidoti & Company -- Analyst

You talked a little bit about the Syntron bookings at $24 million encouraging versus $21 million revenue. So, you have the book to bill is above 1. Can you talk a little bit more about maybe some of the markets that Syntron is into. I think he talked a little bit about the cement and the infrastructure, so what about like the food packaging. Did you see anything positive there. Has there been maybe some markets that thus far in 2019 maybe surprise you versus what you -- the book you were looking at last year when you close the transaction? Thanks.

Michael J. McKenney -- Executive Vice President and Chief Financial Officer

So, I would say, the -- one of the stronger areas is really the mining segment. And that's, Trona used in production of glass, potash and actually coal's been pretty good. Even though for thermal coal its being used less and less in power plants, so it is still export and so that's been relatively stable I would say. The other I would say the next strongest areas probably you know the aggregates as I talked about that's tied both building and also infrastructure. And the food has been, I would say going along as normal. That's kind of the packaging more than food processing.

Daniel Jacome -- Sidoti & Company -- Analyst

Okay. No, that helps. Thanks.

Michael J. McKenney -- Executive Vice President and Chief Financial Officer

Okay.

Operator

Thank you. And I'm showing no further questions at this time. So, now it is my pleasure to hand the conference back over Mr. Jonathan Painter, Chief Executive Officer for any closing comments or remarks.

Michael J. McKenney -- Executive Vice President and Chief Financial Officer

Thanks Bryan. Before I let everyone go I want to summarize what I think of the three takeaways from the quarter. First, another strong quarter with record bookings and revenue. Second, the Syntron acquisition is performing well according to plant and according to plan. Third, we're maintaining our full year revenue guidance with the expectation of achieving record revenue and adjusted EBITDA in 2019.

Jonathan W. Painter -- President and Chief Executive Officer

And before I end it, as Mike noted, after 37 quarters this is my last earnings call. I'll be more of a -- of a listener going forward. I want to take the opportunity really to thank the investment community for the support they've given me. I feel very lucky and I think all of us that came that we have investors who really think in the long term. I mean people say sometimes the Wall Street pushes companies to be too short term, but I can say in my almost 10 years talking to investors I've never had a conversation like that. And frankly, if I -- if you did push me we wouldn't have listened. But it's nice not to be put in that position. I also want a lengthy employees who have made this Company, the Company that is today. I think we're as strong as we've ever been and I'm -- and I think we're very well positioned to hit new heights with Jeff and his team going forward. So, I look forward to working with Jeff in his new role and I'm very excited for the Company. So, with that thank you very much. Jeff, will update you on future calls. Thanks again.

Operator

Ladies and gentlemen, thank you for your participation in today's conference. This does conclude our program, and we may all disconnect. Everybody have a wonderful day.

Duration: 40 minutes

Call participants:

Michael J. McKenney -- Executive Vice President and Chief Financial Officer

Jonathan W. Painter -- President and Chief Executive Officer

Christopher Howe -- Barrington Research Associates, Inc. -- Analyst

Walter Liptak -- Seaport Global Securities -- Analyst

Daniel Jacome -- Sidoti & Company -- Analyst

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