Thomas O'Brien - CFO Bill Rainville - Chairman and CEO

Mark McGrath - Kenmare Claudia Hueston - JPMorgan Paul Pamela - Sidoti & Company

Good afternoon. My name is Assia and I will be your conference operator today. At this time I would like to welcome everyone to the Kadant Incorporated Earnings Call. All lines have been placed on mute to present any background noise. After the speakers remarks there will be a question-and-answer period. (Operator Instructions). Thank you. It is 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 fourth quarter and full year 2007 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 quarterly report on Form 10-Q for the fiscal period ended September 29, 2007, which is on file with the SEC and is also available in the investor 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. 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 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 financial measures to the most directly comparable GAAP measures is contained in our fourth quarter earnings press release issued yesterday, which is available in the investor section of our website at www.kadant.com under the heading News Releases. 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&A session. Bill?

Thanks, Tom. Good morning everyone. Thanking for you joining us today as we review Kadant's record setting 2007 fourth quarter results, summarize the highlights of an outstanding year as we look ahead to 2008 a year which will have many challenges but also many opportunities. I will start with the financial highlights of our continuing operations. I will begin with the fourth quarter. Revenues for Q4 grew 12% to $96.5 million. The principal drivers of our growth were stock preparation business which was up 33% to a record $43.8 million and our food handling business, which was 17% to a record $27.4 million of revenue. Our operating income increased 59% to $10.6 million, which is our best performance since our spin off in 2001. Our EBITDA increased 42% to $12.5 million. Diluted EPS increased 86% to $0.54. This compares to our guidance of $0.42 to $0.45. We enjoyed another healthy bookings quarter with orders totaling $102 million, a 30% increase over the fourth quarter of last year. Our backlog increased 52% over last year to $110 million also a record. Lastly and in view most significantly we generated $26 million of cash flow from operations in Q4, our best performance ever as we improved our working capital position during the quarter. This has moved us to our net cash position of $21 million, the first time we have been net debt free since acquired Kadant Johnson in 2005. Now a review of the past year, 2007 was an outstanding year for Kadant. Here are some of the highlights. In '07 we generated record revenues of $366 million a 7% increase over the prior record, which were set last year. The biggest contributors to this growth where stock preparation and food handling lines, which recorded a 13% and 11% increase in revenue respectively. Our operating income increased 26% to $37 million as we leveraged our SG&A with higher sales. Our diluted EPS for the year was up 37% a $1.78. Finally we generated $34 million of cash flow from operations in '07 an increase of a 172% over '06 and a record for our company. I want to take this opportunity to thank all of our employees for the contributions in making '07 a very successful year. Now let's look ahead to 2008. The last few years have been very good for Kedant, without doubt the global economy is weaker and more uncertain than it was this time last year. Our customers are not immune to the state of the overall economy and needless to say neither are we. That said a strong backlog, excellent balance sheet, improved access to capital, and breath of global sales including strong positions in growth markets like China, Russia and India lead me to believe that '08 will be another good year for Kadant. While we have seen the benefits of some of our actions such as shifting manufacturing to lower cost regions and improved operating results. We continue to have opportunities to improve our margins. We will start with the outlook for China, which continues to be the most important region for paper production in the world. Of our industry forecast to projecting somewhat slower growth rates in China, over the next several years, the production base has grown so much that the increase in absolute terms remains robust. Overall, China continues to be the strongest growth market in the world for our products. While it is difficult to predict performance levels for each year due to variability of large capital orders, the overall trend for China remains very positive. We continue to be encouraged about the opportunities to grow sales for our accessories and water management products in China. As I have said before we have a lot going for us as we seek to increase our market share in this region. We are the world's leaders and most highly respected brand for accessories and water management products. We have the most advance technology in the industry. We have the process expertise that the customer base really needs and we have a strong market presence in the region for our stock prep and food handling product lines, with good opportunities for cross selling. In '07 we trained a local sales force and began manufacturing our accessories and water management products. We know this market provides a significant growth opportunity for our business. In fact, I have just returned from China where I reviewed the growth plans for these businesses and approved an expansion of our manufacturing capabilities in Wuxi. This expansion will enlarge our base for the manufacture and sale of our products into the Asian markets while enabling us to lower our costs for our products around the globe. We expect to have this expansion completed by early 2009. Another opportunity for growth in China is increasing our spare parts business and our stock prep product line. By mining our own install base we will be creating for ourselves a profitable revenue stream and replacement parts and service. We have recently hired a senior executive in China to head our spare parts and service program. In '07 we significantly increased our spare parts bookings to $5 million. Despite this growth our spare parts business in China is still much smaller relative to our installed base than it is in other parts for the world. We believe we have a significant opportunity in this area. We are also making steady progress manufacturing components of our stock prep product line in China. We have done complete manufacturing and assembly of some equipment at our facility in Jining last year. We plan to increase the number of products we can produce in China throughout '08. Manufacturing these products in China will help us serve the growing Asian market and improve our margins throughout the world. We are seeing margin improvement in our stock preparation product line as a result of these actions and we expect this trend to continue. We also continue to expand production at our screen basket facility in China where we combine state-of-the-art technology with low cost manufacturing to supply screen baskets worldwide. We more than doubled the capacity of this facility in '07 and we plan to increase capacity again in '08 as demand for our screen baskets continues to exceed supply. This is a critical consumable business for stock preparation since screen baskets are typically replaced every 9 to 12 months. Most of China's growth in paper capacity has been in liner board for boxes. In the future we expect to see capacity expansion for white grades of papers such as tissue, learning and writing and even newsprint. As one of the leading suppliers of stock prep systems for white grades, we believe we are well positioned to play a key role in this market. Although China is the leader in terms of capacity additions in the paper industry, we also see opportunities in other fast growing economies such as India, Indonesia, Eastern Europe and Russia. All of these regions are experiencing strong growth in paper making capacity as their economies develop. Russia has been a particularly strong market for us with sales of over $7 million in '07. Now let's discuss opportunities for our business in North America and Europe, many of our customers in North America and Europe are seeing reasonable top line growth but are concerned about margins, due to higher fiber and energy cost. Fortunately for us and them we have products and technology that address these concerns. Our fluid-handling, energy-efficient drying systems are instrumental in achieving energy savings in the dryer section, which is the section of the paper machine that consumes the most energy in paper production. We have seen excellent demand for these products in the last few years and we expect this to continue in '08. In addition we have other products from energy-efficient rotors for our pulpers, so low energy usage doctor blades that are more attracted to customers in a high energy cost environment. The $19 million order we've received for an evaporator system from a US customer in the later part of last year is being purchased largely to reduce energy usage at the mill. In addition our stock preparation products help our customers increase the yield from recovered fiber thereby reducing their fiber cost. Fiber is the highest cost item from our customers, and even a 1% increase in yield is significant. Two additional areas of growth potential for Kadant are expansion beyond the paper industry and acquisitions. We believe there are opportunities to apply our technology into non-paper markets such as steel, textiles and food and beverages. Over 35% of our food handling business sales is from outside the paper industry. Our objective continues to be to diversify sales of our other product lines in a similar fashion. Similarly, we continue to look for potential acquisitions both within and outside of paper industry. One potential advantage from the recent turmoil in the equity and credit markets is more reasonable valuations of businesses, we can acquire. It's been very much of a sellers market in M&A for the past few years, and it has affected our ability to find a company that is attractive to us at a reasonable price. As a buyer in the market with a strong balance sheet and access to capital, we welcome some downward pressure and valuations. Those of you, who have been following us for a while, know we are very patient acquirers. It may take sometime for us to find a company that meets our requirements. I can tell you we will not compromise our standards in the qualities of business, products and technology that we would consider acquiring. I am pleased to announce a resource we now have to help us with growth outside of paper as well as potential acquisitions. In January Jeff Powell, joined our company as Vice President of new ventures. Jeff has a wealth of experience building and acquiring business from his time as the CEO of ThermoRetec, which was one of the publicly traded subsidiaries at Thermo Electron. I had the opportunity to work with Jeff during our tenure at Thermo Electron and I am confident, he will be a valuable addition to our management team. Now a little bit about our goals. During our 2006 annual meeting we presented long-term goals for the business that included EPS of $1.20 in '06, $1.50 in '07 and $1.80 in '08. We are happy to report that we exceeded our '06 and '07 goals by a wide margin and with good execution of our plans and no significant deterioration of our markets. We expect to achieve our goals in '08. Now on to our guidance. Let me now review our guidance for '08. We expect to achieve GAAP diluted EPS of $1.85 to $1.90 from continuing operations for the year on revenues of $385 million to $395 million. For the first quarter we expect to report diluted EPS of $0.30 to $0.32 per share on revenues of $88 million to $90 million. Now I will turn the call over to Tom for more detailed revenue of the financials. Tom. Thomas O'Brien: Thank you, Bill. I will begin with our revenue performance. Consolidated revenues were a record $96.5 million in the fourth quarter of 2007, 12% higher than last year, including a 6% favorable effect from foreign currencies. I should note that last year's revenues included $900,000 from the casting products business, which we sold in April of this year as well as $2.8 million associated with changing the fiscal year at our Kadant Lamort subsidiary to conform to Kadant's fiscal year. Excluding the effects of foreign exchange in 2007, as well as the revenues from the casting products business and the additional month from Kadant Lamort in the 2006 period, revenues increased 11% in the fourth quarter of 2007 compared to last year. Looking at our revenues in general we had strong revenue performances in the stock prep and fluid handling product lines, both of which set quarterly records in the fourth quarter of 2007. Partly offsetting these increases were declines in our accessories in water management product lines, which I will address in more detail in a moment. I will look at the revenue performances in each of our major product lines. Stock prep revenues set a record quarterly high for the second consecutive quarter. Fourth quarter 2007 revenues were $43.8 million, 33% higher than last year including a 6% favorable effect from foreign exchange. Encouragingly each of our three major stock prep operations contributed to this solid performance. North America revenues increased 54% over last year, China increased 17% including 3% from currency gains and Europe increased 23% including 16% from currency. The 54% increase in our North American based operations was largely due to revenues recognized under the percentage of completion method related to several large capital projects awarded earlier in the year and to a 27% in the after market revenues. Continuing with stock prep, revenues in China including Kadant Jining were $13.1 million up 17% over last year including a favorable effect of 3% from foreign exchange. We noted in the October 2007 earnings call that we expected to achieve stock prep revenue in excess of $65 million for 2007 and we slightly exceeded that forecast. Stock prep revenues in China were $65.5 million in 2007, reaching a record annual amount and were 4% over last year, including 2% from foreign exchange. This increase over last year is noteworthy given that revenues in 2006 more than doubled from 2005. Finally to finish the stock prep discussion, revenues in Europe were up 23% from the fourth of 2006, including a favorable impact from foreign exchange of 16%, due to higher capital revenues including a large project in Russia. Revenues in our water management product line was $7.6 million in the fourth quarter of 2007, a decrease of 15% compared to the prior year, including a favorable affect of 3% foreign exchange. As was the case last quarter, revenues were lower in both North America and in Europe, primarily in the capital component of the business, which can be quite variable from quarter-to-quarter. Revenues in North America were down 13% including a 1% favorable affect from currency, and revenues were down 23% in Europe including an 8% favorable effect on currency. For the first time in several quarters, revenues in our accessories product line were lower than the previous year's quarter. Revenues here were $15.1 million in the fourth quarter of 2007, down 10% from last year, including a 5% favorable impact from currency. North American revenues were essentially flat with last year, largely due some growth in the US 7%, offset by declines in Canada and Mexico. In Europe, revenues were lower than last year by 27% including an 8% favorable effect from foreign exchange. Although we believe that some of these decreases are attributable to the timing of capital orders. We continue to face challenges in these businesses due to fix machine and mill shutdowns over the past few years. To end my discuss of revenues on an encouraging note, revenues in our fluid handling product line were record $27.4 million in the fourth quarter of 2007, up 17% over last year, including a 9% favorable affect of foreign exchange. Your mixed results amongst the three largest business in this product line in the fourth quarter of 2007. As Europe was up 69% including 16% from foreign currency. China was up 5% including 8% from currency and the US was down 9%. The large increase in Europe resulted from a percentage of completion revenues associated with several large capital projects, including those in Austria, Croatia and Russia as well as higher after-market revenues. The decrease in the US was due to postponements by customers of deliveries to several different paper and non-paper industry projects. Now turning to our product gross margins. Consolidated product gross margins were 38.1% in the fourth quarter of 2007, down 50 basis points from last year. This slight decline occurred in our paper making systems segments where gross margins of 38.2% or 80 basis points lower than last year. Gross margins in our other category were up significantly and had a weighted effect in improving the consolidated margins by 30 basis points. The decline in our paper making system segment was primarily due to a small and favorable mix and affected product mix that is a higher percentage of revenues were derived from the capital portion of the business. Although we have seen the benefits of our efforts to source more products from our subsidiaries in China and Mexico, these benefits have been somewhat offset from a margin percentage standpoint by lower margins from several large projects as well as pricing pressure in certain markets. Now let us look at our SG&A expenses for a moment. SG&A expenses were $25 million in the fourth quarter of 2007 up $900,000 or 4% from last year. This increase includes $1.2 million or 5% from the unfavorable effect of foreign exchange. As a percentage of revenues, reported SG&A was 26% in the fourth quarter of 2007, down 200 basis points from last year, demonstrating the leverage we have in SG&A as we increase revenues with relatively smaller increases in expenses. Our EPS results we reported GAAP diluted earnings per share including the discontinued operation of $0.53 in the fourth quarter of 2007 compared to $0.27 in the fourth quarter of 2006. Discontinued operation reported a loss of $0.01 per diluted share in the fourth quarter of 2007 compared to loss of $0.02 in the 2006 quarter. So excluding the discontinued results income from continuing operations was $0.54 in the fourth of 2007 compared to $0.29 in the fourth quarter of 2006, an improvement of $0.25 per diluted share. This improvement of $0.25 per diluted share includes an increase of $0.06 due to a lower effective tax rate and $0.03 due to the net favorable effects of foreign currency translation. Diluted EPS was lowered in the fourth quarter of 2007 by $0.03 due to an increase in non-cash employee equity compensation expense and by $0.01 due to a higher number of diluted shares outstanding. All these factors together account for a net increase $0.05 and since I am explaining an increase of $0.25 between the two periods. It leaves us with an increase of $0.20 attributable to better operating results in the fourth quarter of 2007 compared to last year. Now turning to the balance sheet and our cash flows from a moment, due to a record performance in operating cash flows we ended the fourth quarter with $61.6 million in cash and $40.7 million in debt leaving us with a net cash position of $20.9 million. This represents approximately $1.45 per diluted share at year end. At the end of 2006, we had net debt that is more debt than cash of $14.3 million and since we now have net cash of $20.9 million. We improved our net position by over $35 million in 2007. Cash flows from continuing operations were a record $25.8 million in the fourth quarter of 2007, tripling from one of our strongest quarters ever last year. We made note in earlier earnings calls of the significant investments in working capital, we had made in 2007, primarily associated with several large system orders in China and elsewhere and we received payments on a number of these orders either in part or in full in the fourth quarter. For the year, cash flows from continuing operations were $33.5 million in 2007, more than doubling over 2006. The reduction in working capital was our major source of cash, generating over $16 million in the quarter. Other major sources of cash were from net income $7.7 million, stock option exercises and their related tax benefits $4.7 million and depreciation and amortization $1.9 million. The two major uses of cash in the quarter were from the repayment of debt, $7.1 million and CapEx $1.9 million. During the quarter, we decided to repay one tranche of our uploading rate debt, so our debt repayments were somewhat higher than we had originally planned. The investment in working capital in our continuing operations, here defined as excluding cash and debt improved significantly in the fourth quarter of 2007. As a percentage of our last 12 months revenues, working capital was 15.6% in the fourth quarter of 2007 down 290 basis points compared to the third quarter of 2007, although a 180 basis points higher than the fourth quarter of 2006. Now I want to take a moment here to briefly recap our new credit facilities, which we announced in our press release yesterday. On February 13th we entered into a new five year credit agreement with a group of banks led by JPMorgan Chase, for a committed unsecured revolving facility of $75 million along with an uncommitted unsecured facility up to an additional $75 million. Also we have recently signed a letter of intangibles with Prudential Capital Group to enter into a three year uncommitted unsecured $100 million facility know as [PruShelf] the under which we could enter in to senior notes with repayment terms up to 12 years. The covenants and restrictions of the [PruShelf] would mirror those of our new bank credit facility. Getting back to that committed facility for a moment. It is a fully revolving credit with the following major features. It increases our allowable leverage from three times EBITDA in our former facility to 3.5 times EBITDA, lowers our minimum fixed charge average to 1.2 from 1.5 and has no restrictions on stock repurchases as long as we are in compliance with the financial covenants. In summary we now have approximately $50 million available under the committed line net of $25 million in estimated borrowings and other uses of the credit line. Along with including the [PruShelf] if it is completed. A $175 million of uncommitted unsecured facilities available to support our long-term growth plans. You should know that we have no immediate plans to make significant borrowings under these arrangements other than the repayment of the debt outstanding under our former credit facility and that any debt we were to incur would be limited to a maximum of 3.5 times our EBITDA. Despite the turmoil of late in the credit markets we believe that this is an excellent time for companies with good credit, excellent track records and outstanding balance sheets to refinance their credit facilities. I should note that this new long-term debt structure will give us the ability to more easily finance our acquisitions outside the US, allow us to utilize non-bank sources of debt capital and importantly give us more flexibility to repurchase that commons stock. Before concluding my remarks, I would like to give you some additional details on our earnings guidance of 2008. Looking at our quarterly EPS performance in 2008 as was the case in 2007 we expect lower results in the first quarter and that we will see sequential improvement in each quarter thereafter. Our quarterly performance can be somewhat variable and challenging the forecast due to the timing of large system orders, particularly those in China and their relative importance to our consolidated results. For our tax rate, last year at this time we targeted a rate of 31% to 32% and we managed to do somewhat better ending the year with a recurring effective tax rate of 30%. Several discrete non-recurring income tax adjustments reduced the reported effective tax to 27.5% in 2007. Although the rate may vary from quarter-to-quarter we expect the recurring effect of tax rate for 2008 to remain approximately 30%, discrete items which lower tax expense in 2007 and which we do not expect to recur in 2008 as the effective decrease in diluted EPS by approximately $0.07 in 2008 when compared to 2007. We anticipate our CapEx spending in 2008 will be approximately $8 million to $9 million, somewhat higher than the levels in the past several years, reflecting the key investments we are making in our accessories, water managements and stock prep businesses in China. We also plan to selectively upgrade our manufacturing capabilities in North America and Europe . Included in our 2008 guidance is approximately $0.18 per diluted share associated with our estimated non-cash employee equity compensation expense compared to approximately $0.07 in 2007. And finally, we expect depreciation and amortization to be approximately $8 million in 2008. With that I will conclude my review of the financials and turn the conference back to the operator for our Q&A session. Operator?

Thank you. (Operator Instructions) Your first question is coming Mark McGrath with Kenmare. Please go ahead. Mark McGrath - Kenmare: Hi there, two quick questions. The screen baskets business, I was wondering if you could give us a sense of the revenue size of the business maybe, the $390 million revenue you expect this year or if you could just give us even a run rate in terms of the size of the business?

Okay. Mark, thank you and good morning. Tom, if you have some numbers on that. Thomas O'Brien: I think we've said in the past Mark, that the size of the market was around $140 million and we were pretty small in that range, maybe like 5% to 8% somewhere in that range. So, we have a lot of opportunity there. I think we are still probably in that range in 2007.

Yeah, we anticipate to have some good growth on that Mark and this is why we have plans to expand our facility in '08. As we are starting to receive some good orders not only out of China, but we are also selling baskets very successfully in to North America and to Europe. Mark McGrath - Kenmare: Okay. So but at this point you are still single digit percent share?

Yes, right. So that we look at as the real growth opportunity, because in our opinion we have a superior basket entering that market and also coupled with low cost manufacturing. Mark McGrath - Kenmare: Okay. And then could you just a last question, could you give us an update on where Kadant Lamort is in terms of margins? Thomas O'Brien: Well, they had a very good performance, and best performance actually Mark in many years. In the fourth quarter they were, the EBITDA, I will give you the EBITDA margins. They were in the 5% to 6% range in the fourth quarter and so we are very pleased with that.

They are not where we really want them to be in the future but they are certainly making good headwinds in to much better performance and they are also going to be assisted by and helped by our components coming in from Asia as well. Mark McGrath - Kenmare: Okay, is this still your belief that you can get EBIT margins in that business to kind of company wide levels?

Yes, that's our whole objective and basically they were in that same neighborhood some year's back. So we have high expectations to get them back there. Mark McGrath - Kenmare: Okay. Thank you.

Thank you, Mark.

Thank you. Your next question is coming from Claudia Hueston. Please go ahead. Claudia Hueston - JPMorgan: Hi, thanks very much. Good morning.

Good morning, Claudia. Claudia Hueston - JPMorgan: H guys, just given the guidance, it looks like margins will come in a little bit in the first quarter. I guess just what's driving that? And then how should we think about margins, to sort of progress through the back half of the year in the second quarter as well? Tom, you can handle that? Thomas O'Brien: You are talking about operating margins, Claudia? Claudia Hueston - JPMorgan: Yeah, EBIT margins. Thomas O'Brien: Yeah, well just to recap a second here. In the fourth quarter of '07 our operating margins were around 11%, which is the best we've done I think since the second quarter of '03. If you look at the last couple of years we've increased our operating margin by over 400 basis points. So we are still on plan internally to try to meet the 11% for the year margins that we establish as our goals. If you remember back in our 2006 shareholder's meeting and certainly Bill, mentioned in his remarks we have done quite well on meeting those goals and the 11% is still an internal target. I think you are right if you look at the guidance it will suggest that we might be a shade under that. I think we are still in that general range and certainly from an EPS standpoint we're doing quite well and in meeting those goals that we set out over two years ago now. Claudia Hueston - JPMorgan: Okay, so that 11% is still sort of the broader goal we should be thinking about for '08? Thomas O'Brien: I think internally we are also driving for that and that would be our internal goal, right. Claudia Hueston - JPMorgan: Okay and I think and then I guess the CapEx is a little bit lower than I expected for 2007. Was there any sort of -- what drove that, I guess, and was there spending that was pushed in to '08. And maybe just a little bit more color on the project you see for 2008 beyond just Wuxi expansion will be helpful as well?

: Claudia Hueston - JPMorgan: Okay. That’s helpful, Tom you mentioned I think or in the press release there was $219,000 in restructuring income, what was that related? Thomas O'Brien: Well actually we spent less in structuring than we had anticipated, for the Lamort structuring actually a couple of years ago. There was really just kind of a clean up of that restructuring. Claudia Hueston - JPMorgan: Okay. Perfect, got you, thanks guys.

Thank you. Thomas O'Brien: Thank you, Claudia.

(Operator Instructions) Your next question is coming from [Paul Pamela with Sidoti & Company]. Please go ahead.

Good morning, Paul. Paul Pamela - Sidoti & Company: Good morning, I was just curious if you could give us color around water management and their performance over the last year and what you expect coming up.

We see some nice growth opportunity in water management Paul, especially in the Asian markets. And we're just beginning to get a foot hold into this last year and also in the water management sometimes the revenues influenced by some of the bigger components like farmers in that business which is their major capital piece of equipment. So, we anticipate some nice growth opportunities and also water has become an item throughout the world that people in all countries right now are taking a look at cleaning up water and there is fair amount of attention given in China as well. And I think that’s a great opportunity for our filtration technology not only within Asia but also upgrading in North America and Europe. Paul Pamela - Sidoti & Company: Okay, great. And Tom, is there an '08 tax rate estimate at this point? Thomas O'Brien: The referring rate will be 30%. Paul Pamela - Sidoti & Company: Okay, you did say. Alright, thank you very much.

Thanks. Thomas O'Brien: Thanks, Paul.

(Operator Instructions) There appear to be no questions at this time. I would now like to turn the floor back to Mr. Bill Rainville for any closing remarks.

Thank you, operator. In closing I would just like to say despite recent uncertainty in the market. We believe Kadant is well positioned for continued growth in '08. We enter '08 with a strong backlog, excellent balance sheet, improved access to capital and a great global reach. I look forward to reporting on our progress as the year unfolds. Thank you for joining us today and for supporting Kadant.

Thank you, this does conclude today's Kadant Incorporated earnings conference call. You may now disconnect your lines. Have a wonderful day.