Lydall, Inc. Announces Financial Results That are In-line With Forecasts for the Second Quarter and Six Months Ended June 30, 1999.MANCHESTER, Conn.--(BUSINESS WIRE)--July 22, 1999-- LYDALL, INC inc - /ink/ increment, i.e. increase by one. Especially used by assembly programmers, as many assembly languages have an "inc" mnemonic. Antonym: dec. . (NYSE NYSE See: New York Stock Exchange : LDL LDL - ["LDL: A Logic-Based Data-Language", S. Tsur et al, Proc VLDB 1986, Kyoto Japan, Aug 1986, pp.33-41]. ) today announced financial results for the second quarter ended June 30, 1999. Aided by a $21.4 million contribution to sales from the Gerhardi acquisition of December 30, 1998, net sales Net Sales The amount a seller receives from the buyer after costs associated with the sale are deducted. Notes: This amount is calculated by subtracting the following items from gross sales: merchandise returned for credit, allowances for damaged or missing goods, freight for the 1999 second quarter were up sharply to $84.0 million compared with $59.2 million for the 1998 second quarter. As anticipated, Lydall Gerhardi had a small operating loss operating loss The excess of operating expenses over revenue. As with operating income, operating losses exclude revenues and expenses from operations that are not considered a regular part of the business. Also called deficit. Compare operating income. in the period and this, combined with severance costs at a domestic operation, held net income to $3.6 million compared to $3.9 million a year earlier. 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 were $.23, off slightly from $.24 in the comparable 1998 period, as Lydall Gerhardi and the domestic restructuring costs penalized pe·nal·ize tr.v. pe·nal·ized, pe·nal·iz·ing, pe·nal·iz·es 1. To subject to a penalty, especially for infringement of a law or official regulation. See Synonyms at punish. 2. current year earnings by approximately $.02 per share. Gross profit improved to $20.3 million from $17.5 million but represented 24.1 percent of sales compared to 29.6 percent of sales for the year earlier period. The net after-tax margin declined to 4.3 percent from last year's 6.5 percent. Net sales for the six months ended June 30, 1999, including $42.4 million from Lydall Gerhardi, were $167.6 million compared with $115.8 million for the same period in 1998. Net income was $7.7 million, or $.49 per diluted share, compared with $7.4 million, or $.45 per share, for the first half of 1998. Gross profit for the first half was $39.3 million, or 23.5 percent of sales, and the net after-tax margin was 4.6 percent compared with $33.6 million of gross profit, or 29 percent of sales, and a net after-tax margin of 6.4 percent during the year earlier period. The Company's operating cash flow Operating cash flow Earnings before depreciation minus taxes. Measures the cash generated from operations, not counting capital spending or working capital requirements. (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 , earnings before interest and taxes In financial and business accounting, earnings before interest and taxes (EBIT) is a measure of a firm's profitability that excludes interest and income tax expenses.[1] EBIT = Operating Revenue – Operating Expenses + Non-operating Income plus depreciation and amortization) increased 6 percent to $9.3 million in the second quarter of 1999 compared with the same quarter last year. The six-month operating cash flow year to date totaled $18.6 million, up 13 percent over the same period in 1998. The Company anticipates its operating cash flow to total between $37 million and $40 million for the full year 1999. Although, significant cost reductions throughout the Company had a positive impact on results in the period, earnings continued to be negatively affected by ongoing operational improvements at Lydall's U.S. automotive heat shield operations. These include consolidation efforts that started at the end of last year and new processes are being put in place in anticipation of strong growth of the automotive heat shield business over the next several years. We are also evaluating the need for added capacity in North Carolina North Carolina, state in the SE United States. It is bordered by the Atlantic Ocean (E), South Carolina and Georgia (S), Tennessee (W), and Virginia (N). Facts and Figures Area, 52,586 sq mi (136,198 sq km). Pop. and Vermont. Commenting on Lydall's results, Christopher R. Skomorowski, President and Chief Executive Officer, stated, "Overall, we are pleased with our results in the second quarter. Sales increased; earnings from operations, excluding Gerhardi, exceeded the comparable quarter last year before one-time expenses; and the integration of Gerhardi progressed on schedule. Gross margin, without Gerhardi, improved over the first quarter from 28.2 percent to 29 percent. Also, we completed the refinancing of our short-term debt Short-term debt Debt obligations, recorded as current liabilities, requiring payment within the year. into a Euro-denominated term loan equivalent to approximately $19 million to finance a large portion of the Gerhardi acquisition plus a $50 million revolving credit Revolving Credit A line of credit where the customer pays a commitment fee and is then allowed to use the funds when they are needed. It is usually used for operating purposes, fluctuating each month depending on the customers current cash flow needs. facility, under which we currently have $20 million outstanding. As a result, working capital was positive $36.3 million at June 30, 1999, compared with a working capital deficit of $9.1 million at the end of 1998. Total debt to total capitalization Total capitalization The total long-term debt and all types of equity of a company that constitutes its capital structure. total capitalization See capitalization. was 29 percent." Lydall's heat-management businesses represented 54 percent of total sales in the quarter. Excluding Gerhardi, sales of heat-management products grew by 13 percent compared with the corresponding quarter of 1998. The Company introduced dBLyte(TM) undercarpet acoustical insulation for the automotive market. A patent has been applied for on this recyclable, lightweight, high quality sound-blocking barrier that is very cost effective in use. Initial approvals for this product include Nissan's Altima and Sentra models. Also, during the quarter, Solvay, a major fuel tank manufacturer, designated Lydall as one of two exclusive suppliers of multi-layer shields for its plastic gas tanks. In addition, the Company was awarded the underbody and engine-mount shields for Diamler Chrysler's new RS minivan. Mr. Skomorowski added, "We will see some incremental sales growth from these programs in 1999, but substantive sales won't begin until 2000 with further growth in 2001 and 2002." The Company reported that sales of non-automotive heat-management products were up slightly in the quarter compared to the same period last year. Most of these products are manufactured at Lydall Manning where excellent gains occurred during the first half of the year. Lydall introduced the first of a series of next-generation insulation products focused on commercial building markets during the quarter. These new products for commercial HVAC (Heating Ventilation Air Conditioning) In the home or small office with a handful of computers, HVAC is more for human comfort than the machines. In large datacenters, a humidity-free room with a steady, cool temperature is essential for the trouble-free applications have excellent thermal and acoustical properties and offer improved manufacturing efficiency for our customers and lower maintenance costs for end-users. Filtration sales, representing 18 percent of total sales, showed modest growth in the quarter. Sales of Lydall's high-efficiency air filtration media are improving in the Far East and Europe, both in volume and dollars; however, sales in the U. S. continue to be sluggish. Sales of medical filtration products showed substantial growth, up approximately 20 percent in the second quarter compared with the same quarter last year. Mr. Skomorowski further commented, "We expect FDA FDA abbr. Food and Drug Administration FDA, n.pr See Food and Drug Administration. FDA, n.pr the abbreviation for the Food and Drug Administration. approval in the third quarter on a unique 40-micron autologous autologous /au·tol·o·gous/ (aw-tol´ah-gus) related to self; belonging to the same organism. au·tol·o·gous adj. 1. blood filtration device. This will be the first device shipped from our North Carolina operation, which received its FDA Registration and ISO (1) See ISO speed. (2) (International Organization for Standardization, Geneva, Switzerland, www.iso.ch) An organization that sets international standards, founded in 1946. The U.S. member body is ANSI. 9000 Certification during the quarter." In closing, Mr. Skomorowski announced the implementation of an Economic Value Added Economic value added (EVA) A method of performance evaluation that adjusts accounting performance for investors' required return on investment. Suppose a division produces a 12% return on capital invested. initiative at Lydall. "I am very pleased and enthusiastic that Lydall has engaged Stern Stewart(R) & Co. to assist us in becoming an EVA Eva to marry winner of singing contest. [Ger. Opera: Wagner, Meistersinger, Westerman, 225–228] See : Prize 1. Eva - A toy ALGOL-like language used in "Formal Specification of Programming Languages: A Panoramic Primer", F.G. Company(R). EVA, or Economic Value Added, is a strategy for creating shareholder wealth that measures our real profitability. It is the framework for a complete financial management and incentive compensation system. We believe strongly in this program and its positive effect on our future performance, its motivational power for employees, and resulting greater returns for our shareholders." Lydall subsidiaries manufacture technologically advanced-engineered products for demanding specialty applications primarily servicing filtration and heat-management applications. Stockholders are referred to Lydall's Annual Report and Form 10-K Form 10-K A report required by the SEC from exchange-listed companies that provides for annual disclosure of certain financial information. Form 10-K See 10-K. , "Management's Discussion and Analysis Management's discussion and analysis (MD&A) A report from management to shareholders that accompanies the firm's financial statements in the annual report. It explains the period's financial results and enables management to discuss topics that may not be apparent in the financial of Financial Condition and Results of Operations - Forward-Looking Information," which outlines certain risks regarding the Company's forward-looking statements. Such risks include: a major downturn of the automotive market which accounted for approximately 47 percent of Lydall's total second-quarter 1999 sales; a meaningful decrease in the number of clean rooms being built worldwide and growth of the commercial heating, ventilating ventilating Natural or mechanically induced movement of fresh air into or through an enclosed space. The hazards of poor ventilation were not clearly understood until the early 20th century. Expired air may be laden with odors, heat, gases, or dust. and air conditioning air conditioning, mechanical process for controlling the humidity, temperature, cleanliness, and circulation of air in buildings and rooms. Indoor air is conditioned and regulated to maintain the temperature-humidity ratio that is most comfortable and healthful. market; and significant, unforeseen changes in raw material pricing, specifically, virgin fiber used in producing the Company's materials handling slipsheets Also, the timing and degree of success of new-product programs impact Lydall's projected results. For further details on these risks and other pertinent information on Lydall, copies of the Company's Forms 10-K, 10-Q and 8-K are available on the World Wide Web at Corporate Financials Online (http://www.cfonews.com/ldl) and Lydall's own web site (www.lydall.com). Copies of these documents can also be obtained from the Company. Write or call: Carole F. Butenas, Vice President - Investor Relations Investor relations The process by which the corporation communicates with its investors. , at One Colonial Road, Manchester, CT 06040; Tel. 860-646-1233, E-Mail: investor@lydall.com. -0-
Summary of Operations
In thousands except per-share data
(Unaudited) Second Quarter Six Months
Ended June 30, Ended June 30,
1999 1998 1999 1998
Net sales $83,998 $59,244 $167,600 $115,786
Cost of sales 63,729 41,696 128,256 82,222
Gross margin 20,269 17,548 39,344 33,564
Selling, product
development, and
administrative
expenses 14,330 11,913 27,667 22,650
Operating income 5,939 5,635 11,677 10,914
Other (income) expense:
Investment income (9) (76) (15) (400)
Interest expense 588 196 1,309 285
Foreign currency transaction
(gain) loss 317 22 (1,010) 36
Other (327) (343) (112) (168)
569 (201) 172 (247)
Income before income
taxes 5,370 5,836 11,505 11,161
Income tax expense 1,765 1,985 3,818 3,761
Net income $ 3,605 $ 3,851 $ 7,687 $ 7,400
Basic earnings
per share $ 0.23 $ 0.24 $ 0.49 $ 0.46
Weighted average shares
outstanding 15,732 15,997 15,724 16,020
Diluted earnings
per share $ 0.23 $ 0.24 $ 0.49 $ 0.45
Weighted average shares
and equivalents
outstanding 15,822 16,363 15,808 16,434
Financial Position As of As of
In thousands except ratio data June 30, December 31,
1999 1998
(Unaudited)
Cash, cash equivalents, and
short-term investments $ 2,498 $ 2,254
Working capital (deficit) 36,260 (9,090)
Total debt 46,400 54,664
Stockholders' equity 112,723 109,225
Total capitalization 159,123 163,889
Current ratio 1.73 0.91
Total debt/total capitalization 0.29 0.33
Common Stock Data
Second quarter ended June 30, 1999 1998
High $ 12.50 $ 18.94
Low $ 8.31 $ 14.44
Last $ 11.50 $ 14.56
2,611,500 shares of Lydall common stock (LDL) were traded on the New
York Stock Exchange during the second quarter 1999.
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