Kaydon Corporation Reports 44.7 Percent Growth in Diluted Earnings Per Share for 2006 Third Quarter; Record Third Quarter Sales Were Up 16.1 Percent Compared to Last Year and Operating Income Grew 42.8 Percent.Operating Margin Operating Margin A ratio used to measure a company's pricing strategy and operating efficiency. Calculated by: of 25.0 Percent Improved 470 Basis Points in the Quarter ANN ARBOR Ann Arbor, city (1990 pop. 109,592), seat of Washtenaw co., S Mich., on the Huron River; inc. 1851. It is a research and educational center, with a large number of government and industrial research and development firms, many in high-technology fields such as , Mich. -- Kaydon Corporation (NYSE NYSE See: New York Stock Exchange :KDN KDN Korea Electric Power Data Network Co, Ltd KDN Kenya Data Networks Limited (Nairobi, Kenya) ) today announced its financial results for the third quarter ended September September: see month. 30, 2006. Sales of continuing operations continuing operations Parts of a business that are expected to be maintained as an ongoing segment of an overall business operation. Income and losses from continuing operations are reported separately if any segments have been discontinued during the increased 16.1 percent to a third quarter record $99.7 million. Operating income Operating Income The profit realized from a business' own operations. Notes: This would not include income from things such as investments in other firms. Also referred to as operating profit or recurring profit. from continuing operations of $24.9 million equaled 25.0 percent of sales. After tax income from continuing operations increased 50.8 percent, and diluted earnings per share diluted earnings per share An earnings measure calculated by dividing net income less preferred stock dividends for a period by the average number of shares of common stock that would be outstanding if all convertible securities were converted into shares of of $.55 were up 44.7 percent, compared with the third quarter of last year. Highlights - Continuing Operations - Third Quarter 2006 * The Company achieved record third quarter sales of $99.7 million, an increase of 16.1 percent compared to $85.9 million during last year's third quarter. * Operating income equaled $24.9 million, or 25.0 percent of sales, an increase of 42.8 percent compared to $17.4 million, or 20.3 percent of sales, last year. * After tax income equaled $17.6 million, or 17.6 percent of sales, compared to $11.6 million, or 13.6 percent of sales, last year. * Diluted earnings per share increased 44.7 percent to $.55, versus $.38 last year. * Order entry during the quarter equaled $93.2 million, resulting in a quarter-end backlog Backlog The total value of sales orders waiting to be fulfilled. Notes: This figure is used mainly in the manufacturing industry. Increases or decreases in a company's backlog indicate the future direction of sales and earnings. of $155.0 million versus $127.2 million at the end of last year's third quarter. * EBITDA (Earnings Before Interest, Taxes, Depreciation and Amortization) A metric used to show a company's profitability, but not its cash flow. EBITDA became popular in the 1980s to show the potential profitability of leveraged buyouts, but has become was $29.1 million, equal to 29.2 percent of sales, and covered interest expense by 12.2 times. EBITDA for the latest twelve months ended September 30, 2006 totaled $111.5 million. * Cash and cash equivalents equaled $349.5 million at the end of the third quarter. Brian The name Brian (sometimes spelled Bryan) comes from an Irish backround. It is of Celtic origin and its meaning may be "hill" or "strong, noble, and high"[1]. P. Campbell Campbell, city, United States Campbell, city (1990 pop. 36,048), Santa Clara co., W Calif., in the fertile Santa Clara valley; founded 1885, inc. 1952. , President and Chief Executive Officer commented, "The excellent sales growth and positive earnings momentum we experienced during the third quarter reflect not only continued strong demand for our performance critical products that meet demanding customer needs, but also the operational execution of the Kaydon Team." In commenting further, Mr. Campbell said, "Kaydon's operational excellence initiatives, our proprietary product positions, and our strong financial resources will provide us with further opportunities to enhance both internal and external growth. Our current order backlog and incoming order flow make us highly confident that we will achieve record annual sales in 2006. Looking beyond the fourth quarter, we are confident that Kaydon will continue its sales and earnings growth in 2007. Company-wide manufacturing efficiency initiatives, together with expanded productive capacity, and new product development and market share programs, will all support our growth and operating performance going forward." Additional Data on Third Quarter 2006 Results Sales of continuing operations during the third quarter of 2006 equaled a record $99.7 million, a 16.1 percent increase compared to $85.9 million during the third quarter of 2005. Increased sales were experienced across most of the Company's product lines, including specialty bearings, linear deceleration deceleration /de·cel·er·a·tion/ (de-sel?er-a´shun) decrease in rate or speed. early deceleration products, sealing products, air and liquid filtration filtration: see sewerage; water supply. Filtration The separation of solid particles from a fluidsolids suspension of which they are a part by passage of most of the fluid through a septum or membrane that retains most of the solids products, specialty ball products, and metal forming Metal forming Manufacturing processes by which parts or components are fabricated from metal stock. In the specific technical sense, metal forming involves changing the shape of a piece of metal. equipment. Gross profit from continuing operations equaled $40.9 million or 41.0 percent of sales for the third quarter of 2006 as compared to $32.3 million or 37.7 percent of sales for the third quarter of 2005. This 26.4 percent increase in third quarter 2006 gross profit was the result of not only increased sales volume and favorable fa·vor·a·ble adj. 1. Advantageous; helpful: favorable winds. 2. Encouraging; propitious: a favorable diagnosis. 3. product mix, but also the leverage achieved due to the effects of the Company's ongoing operating efficiency initiatives. Selling, general, and administrative ("SG&A") expenses of continuing operations, equaled $16.0 million or 16.1 percent of sales during the third quarter of 2006 as compared to $14.9 million or 17.4 percent of sales during the third quarter of 2005. SG&A expenses during this year's third quarter were favorably fa·vor·a·ble adj. 1. Advantageous; helpful: favorable winds. 2. Encouraging; propitious: a favorable diagnosis. 3. impacted by an insurance refund TO REFUND. To pay back by the party who has received it, to the party who has paid it, money which ought not to have been paid. 2. On a deficiency of assets, executors and administrators cum testamento annexo, are entitled to have refunded to them legacies and by a reduction of environmental reserves, totaling approximately $0.8 million. Operating income from continuing operations increased 42.8 percent, to $24.9 million, in the third quarter of 2006, equal to 25.0 percent of sales, compared to $17.4 million, or 20.3 percent of sales, in the third quarter of 2005. Interest income increased to $4.4 million during the third quarter of 2006, compared with $2.4 million during the third quarter of 2005. Primarily as the result of a $0.5 million tax benefit related to the Company's disposition for book value of an idle facility during the quarter, the effective tax rate for the third quarter of 2006 for continuing operations was 34.6 percent. The effective tax rate during the third quarter last year was 33.3 percent, primarily due to the higher U.S. federal tax benefit of the Extraterritorial ex·tra·ter·ri·to·ri·al adj. 1. Located outside territorial boundaries: fishing in extraterritorial waters. 2. Income Exclusion, which has been partially phased out this year. The Company currently expects the effective tax rate for the fourth quarter and full year 2006 to be approximately 35.0 percent. Income from continuing operations for the third quarter of 2006 was $17.6 million or $.55 per share on a diluted di·lute tr.v. di·lut·ed, di·lut·ing, di·lutes 1. To make thinner or less concentrated by adding a liquid such as water. 2. To lessen the force, strength, purity, or brilliance of, especially by admixture. basis, based on 34.8 million common shares outstanding. During the third quarter of 2005 Kaydon generated income from continuing operations of $11.6 million or $.38 per share on a diluted basis, based on 34.7 million common shares outstanding. Income from discontinued operations Discontinued operations Divisions of a business that have been sold or written off and that no longer are maintained by the business. for the third quarter 2005 equaled $25.5 million, including the after tax gain of $25.4 million on the sale of the Power and Data Transmission Products Group. Diluted earnings per share from discontinued operations for the third quarter 2005 were $.74, based on 34.7 million common shares outstanding. Reflecting continued strength in many of the key markets that Kaydon serves, order entry during the third quarter of 2006 equaled $93.2 million, compared to $87.5 million during the third quarter of 2005. Orders are historically lower during the third quarter of each year due to seasonal business patterns. Backlog equaled $155.0 million at the end of the third quarter 2006, a 21.8 percent increase compared to a backlog of continuing operations of $127.2 million at the end of the third quarter 2005. Net cash flow from operating activities during the third quarter 2006 improved to $17.5 million, or 17.5 percent of sales, compared to third quarter 2005 cash flow from operations Cash flow from operations A firm's net cash inflow resulting directly from its regular operations (disregarding extraordinary items such as the sale of fixed assets or transaction costs associated with issuing securities), calculated as the sum of net income plus noncash expenses of $13.0 million, or 15.1 percent of sales, primarily as a result of increased net income from continuing operations. During the third quarter 2006, the Company paid common stock dividends of $3.4 million and invested $7.8 million in net capital expenditures, $5.5 million of which was the Company's initial investment in its major expansion program to increase capacity to serve the rapidly growing wind energy market. As was previously announced, the Company intends to maintain its leadership position in the supply of specialty bearings utilized in this important end-market by investing a total of approximately $30.0 million in this project. Following the investment during the third quarter, the Company will invest a total of approximately $24.5 million more by the end of 2007. The Company's cash and cash equivalents equaled $349.5 million at September 30, 2006. Beginning in this year's fourth quarter and extending into 2009, the Company plans to invest a total of approximately $7.5 million to increase capacity to serve the demanding medical and security equipment markets with performance-critical specialty bearing assemblies. The Company believes that its sales to these fast growing markets will continue to provide additional significant growth opportunities going forward. Primarily as a result of increased capital expenditures associated with the wind energy project, free cash flow, defined as net cash flow from operating activities less capital expenditures, equaled $9.6 million during the third quarter 2006, as compared to $11.3 million during the third quarter 2005. Free cash flow for the last twelve months ended September 30, 2006 totaled $44.3 million. Readers should refer to the attached Reconciliation of Non-GAAP Measures exhibit for the calculation of free cash flow and the reconciliation of free cash flow to the most comparable GAAP GAAP See: Generally Accepted Accounting Principles GAAP See generally accepted accounting principles (GAAP). measure. Depreciation and amortization of continuing operations equaled $4.2 million during the third quarter of 2006, compared to $4.1 million during the comparable period last year. EBITDA from continuing operations, or earnings before interest, taxes, depreciation and amortization Earnings before interest, taxes, depreciation and amortization (EBITDA) is a non-GAAP metric that can be used to evaluate a company's profitability.
Sales from continuing operations during the first three quarters of 2006 increased $38.9 million, or 14.7 percent, to $303.8 million, compared with the comparable period in 2005. Operating income increased $24.0 million, or 47.4 percent, to $74.7 million. Aided by higher interest income, after tax income from continuing operations and diluted earnings per share for the first three quarters of 2006 were up 61.4 percent and 52.8 percent, respectively, compared with the first three quarters of 2005. EBITDA during the first three quarters of 2006 equaled $87.7 million, a 39.4 percent increase compared with the same period in 2005. Order entry during the first three quarters of 2006 equaled $308.6 million, an 8.1 percent increase compared with the comparable period in 2005. About Kaydon Kaydon Corporation is a leading designer and manufacturer of custom-engineered, performance-critical products, supplying a broad and diverse group of industrial, aerospace, medical and electronic equipment, and aftermarket Aftermarket See: Secondary market. aftermarket See secondary market. customers. Conference call information: At 10:30 a.m. Eastern time today, Kaydon will host a third quarter 2006 earnings conference call. The conference call can be accessed telephonically in a listen-only mode by dialing 1-866-564-7431 and providing the following passcode number: 800500. Participants are asked to dial in 10 minutes prior to the scheduled start time of the call. Alternatively, interested parties are invited to listen to the conference call on the Internet Internet Publicly accessible computer network connecting many smaller networks from around the world. It grew out of a U.S. Defense Department program called ARPANET (Advanced Research Projects Agency Network), established in 1969 with connections between computers at the at: https://cis.premconf.com/sc/scw.dll/usr?cid=vlllrznrmsnvrnnzs or by logging on to the Kaydon Corporation website at: http://www.kaydon.com and accessing the conference call at the "3Q 2006 Earnings Conference Call" icon. To accommodate those that are unable to listen at the scheduled start time, a replay of the conference call will be available telephonically beginning at 1:30 p.m. Eastern time today through Friday, November 3, 2006 at 5:00 p.m. Eastern time. The replay is accessible by dialing 1-888-203-1112 and providing the following passcode number: 5462864. Additionally, interested parties can access an archive of the conference call on the Kaydon Corporation website at http://www.kaydon.com. This press release contains forward-looking statements forward-looking statement A projected financial statement based on management expectations. A forward-looking statement involves risks with regard to the accuracy of assumptions underlying the projections. within the meaning of the Securities Exchange Act of 1934 regarding the Company's plans, expectations, estimates and beliefs. Forward-looking statements are typically identified by words such as "believes," "anticipates," "estimates," "expects," "intends," "will," "may," "potential," "projects," "approximately," "looking forward to" and other similar expressions, including statements regarding pending litigation An action brought in court to enforce a particular right. The act or process of bringing a lawsuit in and of itself; a judicial contest; any dispute. When a person begins a civil lawsuit, the person enters into a process called litigation. , general economic conditions, competitive dynamics and the adequacy of capital resources. These forward-looking statements may include, among other things, projections of the Company's financial performance, anticipated growth, characterization A rather long and fancy word for analyzing a system or process and measuring its "characteristics." For example, a Web characterization would yield the number of current sites on the Web, types of sites, annual growth, etc. of and the Company's ability to control contingent liabilities Contingent Liability 1. The possibility of an obligation to pay certain sums dependent on future events. 2. Defined obligations by a company that must be met, but the probability of payment is minimal. Notes: 1. , and anticipated trends in the Company's businesses. These statements are only predictions, based on the Company's current expectation about future events. Although the Company believes the expectations reflected in the forward-looking statements are reasonable, it does not guarantee future results, performance or achievements or that predictions or current expectations will be accurate. These forward-looking statements involve risks and uncertainties that could cause the Company's actual results, performance or achievements to differ materially from those expressed or implied by the forward-looking statements. In addition, the Company or persons acting on its behalf may from time to time publish or communicate other items that could also be construed to be forward-looking statements. Statements of this sort are or will be based on the Company's estimates, assumptions, and projections and are subject to risks and uncertainties that could cause actual results to differ materially from those included in the forward-looking statements. Kaydon does not undertake any responsibility to update its forward-looking statements or risk factors to reflect future events or circumstances CIRCUMSTANCES, evidence. The particulars which accompany a fact. 2. The facts proved are either possible or impossible, ordinary and probable, or extraordinary and improbable, recent or ancient; they may have happened near us, or afar off; they are public or . Certain non-GAAP performance measures are presented in this press release. These measures should be viewed as supplemental data, rather than as substitutes or alternatives to the most comparable GAAP performance measures. [TABLE OMITTED] [TABLE OMITTED] [TABLE OMITTED] [TABLE OMITTED] [TABLE OMITTED] [TABLE OMITTED] |
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