Kaydon Corporation Reports 67.7 Percent Growth in Diluted Earnings Per Share for 2006 First Quarter; Sales Increased 20.0 Percent and Operating Income Grew 56.2 Percent; Operating Margins of 23.3 Percent Improved 540 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 first quarter ended April 1, 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 were up 20.0 percent, after tax income from continuing operations increased 80.2 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 from continuing operations of $.52 were up 67.7 percent, compared with the first quarter of last year. Highlights - Continuing Operations - First Quarter 2006 --The Company achieved record first quarter sales of $101.5 million, versus $84.6 million during last year's first quarter. --Operating income equaled $23.6 million, or 23.3 percent of sales, compared to $15.1 million, or 17.9 percent of sales, last year. --After tax income equaled $16.6 million, or 16.3 percent of sales, compared to $9.2 million, or 10.9 percent of sales, last year. --Diluted earnings per share were $.52, versus $.31 last year. --Order entry during the quarter equaled $95.9 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 $144.6 million versus $127.0 million last year. --EBITDA, a non-GAAP measure, was $28.0 million, equal to 27.6 percent of sales, and covered interest expense by 11.6 times. 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 for the last twelve months ended April 1, 2006 totaled $95.7 million, equal to 25.8 percent of sales, and covered interest expense by 10.0 times. --Cash and cash equivalents equaled $327.6 million at the end of the first 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, "Our excellent first quarter performance reflects not only strong demand from our key markets, but also validates our disciplined operating and profit growth strategies. Operating and cash flow performance for the first quarter, together with our improved cost basis and productivity and lean manufacturing Lean manufacturing is the production of goods using less of everything compared to mass production: less human effort, less manufacturing space, less investment in tools, and less engineering time to develop a new product. initiatives, provide us with further opportunities to enhance both internal and external growth." In commenting further, Mr. Campbell said, "Our first quarter performance is indicative indicative: see mood. of the growth of the strong, investment-led economy, as well as Kaydon's strong engineering, manufacturing, and proprietary product competitive positions. Based upon our current results and positive order trends, we are looking forward to another successful year of increased operating performance in 2006." Additional Data on First Quarter 2006 Results Sales of continuing operations during the first quarter of 2006 equaled a record $101.5 million, a 20.0 percent increase compared to $84.6 million during the first quarter of 2005. Increased sales across many of the Company's product lines, including specialty A contract under seal. A specialty is a written document that has been sealed and delivered and is given as security for the payment of a specifically indicated debt. bearings, sealing products, air 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, 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 were only partially offset by decreases totaling $0.6 million related to linear deceleration deceleration /de·cel·er·a·tion/ (de-sel?er-a´shun) decrease in rate or speed. early deceleration products, liquid filtration products, specialty metal alloys This is a list of alloys for which an article exists in Wikipedia (or is proposed but not yet written). They are grouped by base metal, in order of increasing atomic number. Within these headings they are in no particular order. , and specialty ball products. Gross profit from continuing operations equaled $41.5 million or 40.9 percent of sales for the first quarter of 2006 as compared to $33.4 million or 39.5 percent of sales for the first quarter of 2005. First quarter 2006 gross profit was positively affected by higher sales volume, and by the absence of several items that negatively affected last year's first quarter gross profit, including higher material costs that were not offset by selling price increases and ramp up Ramp Up To increase a company's operations in anticipation of increased demand. Notes: A company might 'ramp up' operations if they just signed a contract creating substantially more demand for their product. See also: Demand, Economies of Scale costs of new programs in the specialty bearings business. Selling, general, and administrative expenses of continuing operations, equaled $17.9 million or 17.6 percent of sales during the first quarter of 2006 as compared to $18.3 million or 21.6 percent of sales during the first quarter of 2005. 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 increased 56.2 percent, to $23.6 million, in the first quarter of 2006, equal to 23.3 percent of sales, compared to $15.1 million, or 17.9 percent of sales, in the first quarter of 2005. Interest income increased to $3.4 million during the first quarter of 2006, compared with $1.5 million during the first quarter of 2005. The effective tax rate for continuing operations for the first quarter of 2006 was 32.6 percent, reflecting a $0.9 million reduction to the tax provision resulting from the Company's most current evaluation of contingency contingency n. an event that might not occur. reserves related to deductions previously not recognized for financial reporting purposes, after a recent examination by a taxing authority. The effective tax rate during the first quarter of 2005 was 35.2 percent. We expect the effective tax rate for the remainder of 2006 will be approximately ap·prox·i·mate adj. 1. Almost exact or correct: the approximate time of the accident. 2. 36.0 percent. Income from continuing operations for the first quarter of 2006 was $16.6 million or $.52 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 first quarter of 2005 Kaydon generated income from continuing operations of $9.2 million or $.31 per share on a diluted basis, also based on 34.8 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 first quarter 2005 equaled $0.7 million. Diluted earnings per share from discontinued operations for the first quarter 2005 were $.02, based on 34.8 million common shares outstanding. Reflecting continued strength in the manufacturing economy, order entry during the first quarter of 2006 equaled $95.9 million. Orders booked in last year's first quarter equaled $105.0 million, including a $7.8 million order for specialty bearings from a customer in the wind energy industry for delivery throughout 2005. As a result of increased demand for specialty bearings utilized by the wind energy industry, the same customer accelerated their order for 2006 deliveries into last year's fourth quarter. Therefore, the $7.8 million order made in last year's first quarter did not reoccur during this year's first quarter. Backlog equaled $144.6 million at the end of the first quarter 2006, a 13.9 percent increase compared to a backlog of continuing operations of $127.0 million at the end of the first quarter 2005. Net cash flow from operating activities during the first quarter 2006 improved to $15.1 million, or 14.8 percent of sales, compared to first 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 $5.6 million, or 6.6 percent of sales, primarily as a result of increased net income. During the first quarter 2006, the Company paid common stock dividends of $3.4 million, repurchased a total of 66,355 shares of Company common stock for $2.3 million, and invested $4.1 million in net capital expenditures. The Company's cash and cash equivalents equaled $327.6 million at April 1, 2006. Free cash flow, a non-GAAP measure, defined as net cash flow from operating activities less capital expenditures, equaled $10.9 million, or 10.8 percent of sales, during the first quarter 2006, as compared to $3.2 million, or 3.8 percent of sales, during the first quarter 2005. Free cash flow for the last twelve months ended April 1, 2006 totaled $36.4 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 $4.4 million during the first quarter of 2006, compared to $4.0 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.
Segment Discussion During the first quarter of 2006, sales of the Friction and Motion Control Products segment increased $12.3 million or 27.4 percent, to $57.1 million, when compared with first quarter 2005. Operating income increased 50.1 percent, to $15.9 million. This segment was positively affected by increased demand for specialty bearings utilized in defense, machinery and heavy equipment markets, including the wind power market. First quarter 2006 operating income was favorably fa·vor·a·ble adj. 1. Advantageous; helpful: favorable winds. 2. Encouraging; propitious: a favorable diagnosis. 3. impacted by increased selling prices and improved operating efficiencies related to military and industrial programs. First quarter 2006 sales of the Velocity Control Products segment of $14.5 million decreased slightly from the $14.7 million achieved in the first quarter of 2005, primarily as a result of changes in foreign exchange rates. Operating income of $3.7 million improved slightly compared to the $3.4 million generated in the first quarter of 2005 as a result of improved operating efficiencies and cost reduction programs. Sales of the Sealing Products segment increased 24.7 percent, to $10.8 million, compared with last year's first quarter. First quarter 2005 sales were negatively affected by a work stoppage stoppage - /sto'p*j/ Extreme lossage that renders something (usually something vital) completely unusable. "The recent system stoppage was caused by a fried transformer." at the Baltimore, Maryland "Baltimore" redirects here. For the surrounding county, see Baltimore County, Maryland. For other uses, see Baltimore (disambiguation). Baltimore is an independent city located in the state of Maryland in the United States. facility, which ended on January January: see month. 22, 2005. Operating income declined slightly to $1.0 million as a result of sales mix sales mix See product mix. and higher energy costs. Sales of the Company's remaining businesses equaled $19.1 million during the first quarter of 2006 an increase from first quarter 2005 of $2.7 million or 16.7 percent, as a result of higher sales of metal forming equipment and air filtration products. As a result of higher sales volume, operating income for these businesses improved to $1.9 million in the first quarter of 2006, compared to $1.0 million during the first quarter 2005. As previously disclosed dis·close tr.v. dis·closed, dis·clos·ing, dis·clos·es 1. To expose to view, as by removing a cover; uncover. 2. To make known (something heretofore kept secret). , in July July: see month. 2005, Kaydon Corporation sold its Power and Data Transmission Products Group. The financial results of the Group are reported as discontinued operations, and the Group has been eliminated as a reportable segment. 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 first quarter 2006 earnings conference call. The conference call can be accessed telephonically in a listen-only mode by dialing 1-800-475-3716 and providing the following passcode number: 951753. 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=vlllrsscwzsvdnmll or by logging on to the Kaydon Corporation website at: http://www.kaydon.com and accessing the conference call at the "1Q 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 Friday: see Sabbath; week. Friday young Indian rescued by Crusoe and kept as servant and companion. [Br. Lit.: Robinson Crusoe] See : Servant , May 5, 2006 at 5:00 p.m. Eastern time. The replay is accessible by dialing 1-888-203-1112 and providing the following passcode number: 4443137. Additionally, interested parties can access an archive (1) A file that contains one or more compressed files. Most archive formats are also capable of storing folders in order to reconstruct the file/folder relationship when decompressed. See archive formats. 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 cannot 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 Inferred from circumstances; known indirectly. In its legal application, the term implied is used in contrast with express, where the intention regarding the subject matter is explicitly and directly indicated. 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.
KAYDON CORPORATION
CONSOLIDATED CONDENSED
STATEMENTS OF INCOME
----------------------------------------------------------------------
First Quarter Ended
--------------------------
April 1, April 2,
2006 2005
------------- ------------
Net sales $101,505,000 $84,562,000
Cost of sales 59,962,000 51,167,000
------------- ------------
Gross profit 41,543,000 33,395,000
Selling, general, and administrative
expenses 17,915,000 18,273,000
------------- ------------
Operating income from continuing operations 23,628,000 15,122,000
Interest income 3,396,000 1,527,000
Interest expense (2,411,000) (2,418,000)
------------- ------------
Income from continuing operations before
income taxes 24,613,000 14,231,000
Provision for income taxes 8,024,000 5,027,000
------------- ------------
Income from continuing operations 16,589,000 9,204,000
Income from discontinued operations before
income taxes - 1,015,000
Provision for income taxes - 340,000
------------- ------------
Income from discontinued operations - 675,000
------------- ------------
Net income $16,589,000 $9,879,000
============= ============
Weighted average common
shares outstanding
Basic 27,843,000 27,885,000
Diluted 34,761,000 34,818,000
Earnings per share - continuing operations
Basic $0.60 $0.33
============= ============
Diluted $0.52 $0.31
============= ============
Earnings per share - discontinued
operations
Basic - $0.02
============
Diluted - $0.02
============
Earnings per share
Basic $0.60 $0.35
============= ============
Diluted $0.52 $0.33
============= ============
Dividends declared per share $0.12 $0.12
============= ============
KAYDON CORPORATION
CONSOLIDATED CONDENSED STATEMENTS OF FINANCIAL POSITION
----------------------------------------------------------------------
April 1, December 31,
2006 2005
------------- -------------
Assets:
Cash and cash equivalents $327,582,000 $320,804,000
Accounts receivable, net 61,064,000 50,869,000
Inventories, net 53,081,000 51,783,000
Other current assets 11,464,000 14,671,000
------------- -------------
Total current assets 453,191,000 438,127,000
Plant and equipment, net 80,892,000 79,603,000
Goodwill, net 117,282,000 117,168,000
Other intangible assets, net 23,533,000 24,288,000
Other assets 10,049,000 11,401,000
------------- -------------
Total assets $684,947,000 $670,587,000
============= =============
Liabilities and Shareholders' Equity:
Accounts payable $16,255,000 $18,192,000
Accrued expenses 29,187,000 26,552,000
------------- -------------
Total current liabilities 45,442,000 44,744,000
Long-term debt 200,000,000 200,000,000
Long-term liabilities 66,300,000 66,167,000
------------- -------------
Total long-term liabilities 266,300,000 266,167,000
Shareholders' equity 373,205,000 359,676,000
------------- -------------
Total liabilities and shareholders'
equity $684,947,000 $670,587,000
============= =============
KAYDON CORPORATION
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
----------------------------------------------------------------------
First Quarter Ended
---------------------------
April 1, April 2,
2006 2005
------------- -------------
Cash flows from operating activities:
Net income $16,589,000 $9,879,000
Adjustments to reconcile net income to
net cash from operating activities:
Income from discontinued operations, net
of tax - (675,000)
Depreciation 2,866,000 2,691,000
Amortization of intangible assets 769,000 602,000
Amortization of stock awards 787,000 658,000
Stock option compensation expense 136,000 -
Excess tax benefit from stock-based
compensation (462,000) -
Deferred financing fees 387,000 393,000
Net change in receivables, inventories
and trade payables (13,274,000) (11,601,000)
Net change in other assets and
liabilities 7,254,000 3,616,000
------------- -------------
Net cash from operating activities 15,052,000 5,563,000
Cash flows from investing activities:
Additions to property, plant and
equipment, net (4,106,000) (2,343,000)
Acquisitions of businesses, net of cash
acquired - (42,664,000)
------------- -------------
Net cash used in investing activities (4,106,000) (45,007,000)
Cash flows from financing activities:
Cash dividends paid (3,378,000) (3,384,000)
Payments on debt (16,000) (15,000)
Excess tax benefit from stock-based
compensation 462,000 -
Proceeds from exercise of stock options 802,000 494,000
Purchase of treasury stock (2,327,000) (3,600,000)
------------- -------------
Net cash used in financing activities (4,457,000) (6,505,000)
Effect of exchange rate changes on cash and
cash equivalents 289,000 333,000
Cash from discontinued operations - 1,514,000
------------- -------------
Net increase (decrease) in cash and cash
equivalents 6,778,000 (44,102,000)
Cash and cash equivalents - Beginning of
period 320,804,000 278,586,000
------------- -------------
Cash and cash equivalents - End of period $327,582,000 $234,484,000
============= =============
Reportable Segment Information
(Amounts in thousands)
First Quarter Ended
April 1, 2006 April 2, 2005
-------------- --------------
Net sales
Friction and Motion Control Products
External customers $57,062 $44,670
Intersegment - continuing operations 31 26
Intersegment - discontinued operations - 104
-------------- --------------
57,093 44,800
Velocity Control Products
External customers 14,518 14,738
Sealing Products
External customers 10,835 8,690
Intersegment - continuing operations (23) (19)
-------------- --------------
10,812 8,671
Other
External customers 19,090 16,360
Intersegment - continuing operations (8) (7)
-------------- --------------
19,082 16,353
Total consolidated net sales $101,505 $84,562
============== ==============
First Quarter Ended
Operating income April 1, 2006 April 2, 2005
-------------- --------------
Friction and Motion Control Products $15,919 $10,609
Velocity Control Products 3,692 3,441
Sealing Products 1,000 1,191
Other 1,919 1,038
-------------- --------------
Total segment operating income 22,530 16,279
State income tax provision included in
segment operating income 711 495
Items not allocated to segment operating
income 387 (1,652)
Interest income 3,396 1,527
Interest expense (2,411) (2,418)
-------------- --------------
Income from continuing operations
before income taxes $24,613 $14,231
============== ==============
Kaydon Corporation
Reconciliation of Non-GAAP Measures
(Amounts in Thousands)
Free cash flow (non-GAAP)
from continuing operations First Quarter Ended LTM
------------------- --------
April 1, April 2, April 1,
2006 2005 2006
--------- --------- --------
Net cash from operating activities (GAAP) $15,052 $5,563 $50,713
Capital expenditures (4,106) (2,343) (14,323)
--------- --------- --------
Free cash flow (non-GAAP) $10,946 $3,220 $36,390
========= ========= ========
Kaydon's management believes free cash flow, a non-GAAP measure, is an
important indicator of the Company's ability to generate excess cash
above levels required for capital investment to support future growth.
However, it should be viewed as supplemental data, rather than as a
substitute or alternative to the GAAP performance measure.
Earnings before interest, taxes, depreciation
and amortization- EBITDA (non-GAAP)
from continuing operations First Quarter Ended LTM
------------------- --------
April 1, April 2, April 1,
2006 2005 2006
--------- --------- --------
Income from continuing operations (GAAP) $16,589 $9,204 $53,915
Net interest (income)/expense (985) 891 (1,044)
Income tax expense 8,024 5,027 25,811
Depreciation and amortization 4,422 3,951 16,984
--------- --------- --------
Earnings before interest, taxes,
depreciation
and amortization- EBITDA (non-GAAP) $28,050 $19,073 $95,666
========= ========= ========
Kaydon's management believes EBITDA, or earnings before interest,
taxes, depreciation and amortization, a non-GAAP measure, is a gauge
of financial strength from continuing operations before financing
costs, investment income, taxes on income and non-cash charges. In
addition, EBITDA is widely used by financial analysts and investors,
and is utilized in measuring compliance with financial covenants in
the Company's credit agreement. Accordingly, EBITDA is a determinant
of the Company's capacity to incur additional senior capital to
enhance future profit growth and cash flow growth. However, it should
be viewed as supplemental data, rather than as a substitute or
alternative to the GAAP performance measure.
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