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.

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…

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…

Thank you. (Operator Instructions) Your first question is coming Mark McGrath with Kenmare. Please go ahead.

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.

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.

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.

Okay. And then could you just a last question, could you give us an update on where Kadant Lamort is in terms of margins?

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.

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.

Okay. Thank you.

Thank you, Mark.

Thank you. Your next question is coming from Claudia Hueston. Please go ahead.

Hi, thanks very much. Good morning.

Good morning, Claudia.

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?

You are talking about operating margins, Claudia?

Yeah, EBIT margins.

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.

Okay, so that 11% is still sort of the broader goal we should be thinking about for '08?

I think internally we are also driving for that and that would be our internal goal, right.

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?

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?

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.

Okay. Perfect, got you, thanks guys.

Thank you.

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?

The referring rate will be 30%. Paul Pamela - Sidoti & Company: Okay, you did say. Alright, thank you very much.

Thanks.

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.