Good morning. My name is Barbara, and I’ll be your conference operator today. At this time, I would like welcome everyone to the Kadant Inc. First Quarter Earnings Conference Call. (Operator Instructions) It’s now my pleasure to turn the floor over to your host, Mr. Thomas O’Brien, Chief Financial Officer. Sir, you may begin your conference. Thomas O’Brien: Thank you, Operator, and good morning, everyone, and welcome to Kadant’s First Quarter 2008 Earnings Call. With me on the call today is Bill Rainville, our Chairman and Chief Executive Officer. Before we begin, let me read the Safe Harbor statement. Various remarks that we may make today about Kadant’s future expectations, plans and prospects are forward-looking statements for purposes of the Safe Harbor provisions under the Private Securities Litigation Reform Act of 1995. Our actual results may differ materially from these forward-looking statements as a result of various important factors, including those discussed in our Annual Report on Form 10K for the fiscal year ended December 29th, 2007, which is on file with the SEC and is also available in the Investors section of our website at www.kadant.com under the heading SEC Filings. In addition any forward-looking statements we make on this call represent our views only as of today, but 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 estimates change, and you should not rely on these forward-looking statements as representing our views on any date after today. During this call, 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. A reconciliation of the non-GAAP financial measures to the most directly comparable GAAP measures is contained in our first quarter earnings press release issued yesterday, which is available in the Investors section of our website at www.kadant.com under the heading Recent News. So with that I will turn the call over to Bill Rainville, who will give you an update on Kadant’s business and future prospects. Following Bill’s remarks, I will give an overview of our financial results for the quarter, and we will then have a Q and A session. Bill?

Thank you, Tom. Good morning, everyone, and welcome to our call as we review Kadant’s First Quarter 2008 results and comment on the outlook for the rest of the year. I’ll start with the financial highlights of our continuing operations for our first quarter. Our revenues for Q1 were down 3% to $85.9 million due largely to a 9% decline in overstock preparation business, due to lower revenue in North America and China. On the other hand, our fluid handling business continues to do well, up 12% to $22.5 of revenue with particular strength in Europe, South America and Southeast Asia. Our operating income increased 2% to $7.6 million with a 14% increase in the paper-making system segment. Our EBITDA increased 3% to $9.4 million. Diluted EPS increased 9% to 36 cents. This compares to our guidance of 30 to 32 cents. Our bookings were $90 million for the quarter, an 11% decline from Q1 of last year. The decline is mainly the result of overstock preparation bookings in North American and China where some projects are being delayed by customers. Our backlog, however, remains very healthy with a 40% increase over Q1 last year to our record $119 million. Finally, we had another solid quarter cash flow from operations, which generated $6.3 million in Q1. Our net cash position is now $15.6 million. We also repurchased $12 million of our stock during the quarter. Now looking ahead for the rest of 2008. As we all know, the growth rate of the U.S. economy has slowed considerably, and we may well be in a recession in the U.S. Some economists have also projected reduced growth in Europe. Concerned about the health of the Western economies has also led to some caution on the part of Asian businesses that are dependent…

Thank you. (Operator Instructions) Our first question is coming from Tyler Ols [ph] from J.P. Morgan. Tyler Ols – J.P. Morgan: Morning. This is probably something I should know but what was the asset that you all sold for a [Inaudible] that gain?

That was some land actually in Europe. Tyler Ols – J.P. Morgan: In Europe, okay. And then second could you elaborate a bit more on the demand slowdown you are seeing in Asia and North America? Is it more on the capital side or consumables?

Tyler, in North America for example in the consumables and water management we have actually seen a slight pickup in the business. I think that the big swing you may be referring to is what is going on, for example, in Asia. And as you know I mentioned in my remarks longterm trends in Asia for us is really focused on China at this point and the long-term trends remain very strong. The economy will continue to grow, paper producers in the region have added a lot of capacity and actually stretched somewhat putting it into operation getting the plants up and running. In addition, I think there delaying projects a few months to see what happens in the world economy. I should also point out that we have signed contracts for five projects for 19 million which have not been recorded as bookings and are not in our backlog because we do not yet have the down payment. But, in concerning Europe, our bookings in the European business somewhat offsets the softness in China as we are seeing good activity in Russia, Ukraine, India as well as Western Europe. And I think what really helps us in all of these markets is the focus on reducing energy costs as well. Tyler Ols – J.P. Morgan: And I guess just staying on Asia for a second. Is the slowdown in more of the capital equipment? Is that making it more challenging to grow the parts and consumable business there?

No actually our parts and consumables business went up fairly well in the stock prep and as well we are penetrating the market with accessories and water management so that part of business we are very encouraged on because we are starting to really mine our large install base there. And I think the only impact that we have seen in concerning Asia is some delays in some of the major capital projects. All work for Asia continues to be very strong. Tyler Ols – J.P. Morgan: Great. And then lastly on the share repurchases this play is a little more aggressive than we had in our model. Can you just remind us what is left under that authorization?

There is 8 million left under the authorization Tyler. Tyler Ols – J.P. Morgan: Okay great. And then lastly how are you thinking about uses for cash. You talked a little bit about acquisitions I guess you could go up to a little bit more depth on the M&A environment and then thoughts on a potential dividend?

I will answer your last one first. On the dividend I think that the stock repurchases are very tax efficient. Efficient way to provide a dividend and we continue to view that as an option for our cash and the other one is acquisitions. We find that back a couple of years ago some of the multiple were quite high in companies that we would look at. That environment has certainly has changed and the strength of our balance sheet provides and also the facilities which were put together, a credit facility provides us with the means to really be an inquisitive company. We constantly look at acquisitions both within and outside the paper industry and other industries that we would like to get more of a distribution in. And we do not comment on any of them individually although we are constantly looking in and exploring acquisitions in looking for the right ones which should add a lot of value to our business which would be very complimentary, either within paper industry portfolio or provide us with the means to penetrate markets outside the paper industry. Tyler Ols – J.P. Morgan: Great, thanks very much.

All right. Thank you Tyler.

Thank you. Our next question is coming from Paul Mammola from Sidoti & Company. Paul Mammola – Sidoti & Company: Good morning gentlemen. Given Tom the weak geographic outlook you provided, what gives you confidence that you can increase revenues in the second quarter say by 10 to 11 million?

Well we have a healthy backlog. We have never had a backlog of 119 million and that backlog, again, is primarily on capital equipment because we carry very little backlog on our parts and consumables. And because that is more of a daily business, a slow business. That gives us fair amount of confidence for our guidance we have given on the second quarter. Paul Mammola – Sidoti & Company: Right and you touched on it a couple of times. So you are saying it is a timing issue at this point.

Yes this is why the second half of the year we expect to be better simply because we have a fair amount of visibility now that it is getting clearer for the rest of the year. Paul Mammola – Sidoti & Company: Okay that is fair. And Bill you talked about expanding the parts and consumable business in China. Now, does that have anything to do with expanding the Woushi [ph] facility and if so how is that going?

Yes it does. In fact we have made expansions in that facility and we also did comment that by early next year or the very end of this year we’re going to be acquiring another manufacturing facility right nearby because we are really starting to make some nice end roads. And we are very encouraged by the response that we have had from our customer base within China so we expect that business to have some nice growth opportunity in the future. Paul Mammola – Sidoti & Company: Okay. And we have seen a lot of reports out of China saying that there will be a manufacturing shutdown in the Beijing area for the Olympics. Is that effecting you guys at all, do you see that happening?

No, there is no real modern paper mills around the Beijing area. However, I think that that may benefit us to some degree because they do have some smaller paper mills in that area that are not only going to be shut down for the Olympics but they are going to shut down. And those are the types of mills that do not have western technology, they are old, they are small, they are not economical and whatever production in the area we have would add to the capacity expansion with modern mills somewhere within China. Paul Mammola – Sidoti & Company: Lastly, just going forward would you say that G&A that is just going to be the seasonally high due to compensation expense right here. How should we think about that going forward?

I am not sure it is going to necessarily the low point for the year. I mean, again, when you factor out FX and take out the increment from employee compensation expense it was pretty much flat with last year. I think that SG&A pretty, pretty well under control if you account for those two items. Paul Mammola – Sidoti & Company: Okay, great. Thank you.

It is a percentage of revenues obviously it is going to go down as our revenues increase during the year.

Thank you. Our next question is coming from Bo McKinney [ph] with LeSanc Capital [ph]. Bo McKinney – LeSanc Capital: Hi guys. Congratulations on the good quarter. Couple of questions for you. I think the last time we were up there we were talking a little about the Cadant Lamorgue [ph] facility up in France. With the pickup that you have seen in European business and the restructurings that you undertook in the last couple of years in the business, are you starting to hit the target margins you were looking for out of the business or is there still some more to come?

There is more to come. I mean we are seeing steady progress certainly in France. We are also encouraged by the progress we make actually every quarter. We are also seeing good bookings and good booking prospects for their business. They get involved in projects in India, the Middle East, Eastern Europe as well as into Russia and this year we expect our French operation to achieve operating income somewhere in the middle single digits. And as I said before I expect that progress to continue throughout 2009 and beyond. We are starting to see steady progress out of there. That is very encouraging. Bo McKinney – LeSanc Capital: And that has been what a $50, $60 million a year business for you guys. Is that moving up towards 70?

Actually that is more for two reasons. One is on the euro, the strength of the euro and the other reason is that they are getting very good capital bookings out of places like Russia and out of the Middle East. So that is very encouraging for us. Bo McKinney – LeSanc Capital: Okay. Then secondarily on a different issue, if you were to look at your experience in previous delays and projects and I know there is probably no average that you could look at but generally if there is some hesistency to move forward how long does that hesistency period last before it is resolved one way or the other? Is this something that is a temporary just people getting their confidence back in the general direction and within a quarter or two you start to see changes in sentiment or could it last longer?

Well our experience in the past has been just basically a quarter or two and I think part of it is for two reasons. One is that some of our bigger customers they are in a process of starting up a number of new paper machines and getting that equipment going so perhaps limited on staff and that has been part of the stall. And the other is certainly is taking look at the economy as a whole but the encouraging thing is that we continue to see new prospects and projects continue to surface so I would expect, Bo, that it would probably be a quarter or two at least that is our belief at this point is what we would expect. Bo McKinney – LeSanc Capital: And on that thought how late would be too late for those projects actually being shipped during fiscal 2008 for you guys. If they delayed to the end of the second quarter could you still get the products finished up and done before Q4 or is there some drop dead point before it falls into 2009.

Even if they come within the third quarter we start getting bookings. We recognize revenue and income on percent completion. So we would still get the benefit and on the other hand, the economy besides our 119 million backlog we still have 19 million of capital orders coming out of China which we have not yet recognized in the backlog yet. We are waiting for down payment. So we feel fairly confident about what China may do this year. And the long-term trend is very good. I mean they are going to continue to add on capacity. They are on a path that they have a couple of bumps in the road from time to time but the trend is very clear. Bo McKinney – LeSanc Capital: And finally a separate unrelated question and I apologize if you answered this earlier but I had people trying to ding me while I was listening. On the new credit facilities and given the fact that you have seen devaluations pull back somewhat on some of the things that might be attractive to you guys, how much incremental facilities do you have firmly committed and what has been indicated beyond that given the right type of opportunities should they arise? Thomas O’Brien: In terms of the facilities that we actually have in place, the 75 million committed and then there is another 75 million under our credit facility and accordion feature so we could expand that. That is uncommitted however. So that total facility should be 150 million, 75 million of which is committed. The only thing I was going to also mention was that last quarter we did announce a letter of intent for an additional 100 million, again, uncommitted with Prudential Capital. That has not been finalized but that would also be uncommitted assuming that we were to finalize that. BoMcKinney – LeSanc Capital: Great. All right. Thanks guys.

There appears to be no further questions at this time.

All right. Thank you Barbara. In closing I would like to say we believe Kadant is well-positioned to continue to thrive even during times of economic uncertainty. Importantly we have a record backlog of 119 million. In addition we have a strong parts and consumable business, geographic diversity, as well as an excellent balance sheet and improved access to capital. I look forward to reporting on our progress as the year unfolds. Thank you for joining us today and supporting Kadant.

This concludes today’s Kadant Inc., Corporate conference call. You may now disconnect.