Kaydon Corporation Reports First Quarter 2013 Results

Kaydon Corporation Reports First Quarter 2013 Results

ANN ARBOR, Mich.--(BUSINESS WIRE)-- Kaydon Corporation (NYS: KDN) today announced its results for the first fiscal quarter ended March 30, 2013.

Consolidated Results


Sales in the first quarter of 2013 were $110.7 million, compared to sales of $116.5 million in the first quarter of 2012. The change relative to the first quarter of 2012 was attributable to a $14.6 million decrease in wind sales, which had been anticipated.

Diluted earnings per share in the first quarter of 2013 equaled $0.33, compared to diluted earnings per share of $0.38 in the first quarter of 2012. Adjusted earnings per share, as defined below, was $0.37 in the first quarter of 2013, compared to $0.44 in the first quarter of 2012.

Adjusted EBITDA, as defined below, was $23.1 million during the first quarter of 2013, compared to $26.8 million, during the first quarter of 2012. Free cash flow, as defined below, for the first quarter of 2013 was $24.3 million compared to $4.4 million in the first quarter of 2012.

Adjusted gross margin improved to 38.6 percent in the first quarter of 2013, compared to 36.8 percent in the fourth quarter of 2012 and 36.4 percent in the first quarter of 2012, as the current period benefitted from increased operating leverage resulting from restructuring activities undertaken in 2012 and favorable product mix during the quarter.

This press release includes certain non-GAAP measures, including adjusted gross margin, adjusted earnings per share, EBITDA, adjusted EBITDA and free cash flow. Readers should refer to the attached Reconciliation of Non-GAAP Measures exhibit for the reconciliations of the applicable GAAP measures to the non-GAAP measures presented.

Adjustments to GAAP results include certain items management considers in evaluating operating performance in each period. During the first quarter of 2013, Kaydon incurred $0.6 million of costs associated with restructuring and due diligence activities, and $1.2 million of non-cash amortization of previously incurred net actuarial losses related to postretirement benefit plans. Adjustments to the results for the first quarter of 2012 include recapitalization, restructuring and arbitration costs of $1.4 million and $1.1 million of non-cash amortization of previously incurred net actuarial losses related to postretirement benefit plans.

Orders and Backlog

Orders improved both sequentially and year-over-year. Orders were $119.4 million in the first quarter of 2013, compared to $109.8 million in the first quarter of 2012, reflecting a book-to-bill ratio of 108 percent in the current quarter. Orders were $102.6 million in the fourth quarter of 2012. Backlog at March 30, 2013 was $152.2 million, compared to $174.9 million at March 31, 2012. Excluding wind, backlog was $136.3 million at March 30, 2013, compared to $124.1 million at March 31, 2012.

Management Commentary

James O'Leary, Chairman and Chief Executive Officer commented, "We were pleased with a solid first quarter of 2013, which saw expanding operating margins, strong free cash flow and improved orders. We clearly experienced the benefits of the actions taken last year to restructure our wind and military businesses and refocus our organization on opportunities outside of those end markets. The progress this quarter reflects those efforts and should continue going forward, particularly in an improving economy.

"Like most in the industrial sector, we expect gradual improvement in business conditions as we enter the second half of 2013. However, we are managing our businesses judiciously in the event the broader, still fragile, economic environment fails to cooperate. We remain focused on managing the things within our control, principally improving margins, driving free cash flow, and accelerating organic growth within our portfolio of leadership companies. This quarter illustrated our success in driving these key areas of focus. As the year develops, any acceleration in business conditions will amplify the impact of the steps already taken."

Financial Position and Free Cash Flow

Free cash flow was $24.3 million in the first quarter of 2013, compared to $4.4 million in the first quarter of 2012. During the quarter, the Company repaid $3.9 million of debt while paying dividends of $6.4 million.

As of March 30, 2013, the Company had cash and cash equivalents totaling $65.6 million. Kaydon had borrowings outstanding in the principal amount of $30.0 million under the revolving credit facility and $142.5 million under the term loan facility as of March 30, 2013.

About Kaydon

Kaydon Corporation is a leading designer and manufacturer of custom engineered, performance-critical products, supplying a broad and diverse group of industrial, military, aerospace, medical, semiconductor and alternative energy equipment, and aftermarket customers.

Conference call information: At 11:00 a.m. Eastern time today, Kaydon will host a first quarter 2013 earnings conference call. The conference call can be accessed telephonically in a listen-only mode by dialing 1-888-428-9490 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 at:

http://w.on24.com/r.htm?e=607791&s=1&k=FF450372E59C97D7667F245101F25C75

or by logging on to the Kaydon Corporation website at: http://www.kaydon.com and accessing the conference call at the "First Quarter 2013 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 2:00 p.m. Eastern time today through Wednesday, May 15, 2013 at 2:00 p.m. Eastern time. The replay is accessible by dialing 1-888-203-1112 and providing the following passcode number: 2107567.

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 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," "should," "could," "potential," "projects," "approximately," and other similar expressions, including statements regarding 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 of and the Company's ability to control contingent liabilities, and anticipated trends in the Company's businesses. These statements are only predictions, based on the Company's current expectations 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 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 except to the extent required by applicable law.

Certain non-GAAP 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 measures.

KAYDON CORPORATION

CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands, except per share data)

Three Months Ended

March 30,

March 31,

2013

2012

Net sales

$

110,673

$

116,466

Cost of sales

69,302

74,867

Gross profit

41,371

41,599

Selling, general and administrative expenses

25,633

24,264

Operating income

15,738

17,335

Interest expense

(896

)

(388

)

Interest income

66

125

Income before taxes

14,908

17,072

Provision for income taxes

4,234

4,951

Net income

$

10,674

$

12,121

Earnings per share:

Basic

$

0.33

$

0.38

Diluted

$

0.33

$

0.38

Dividends declared per share

$

0.20

$

10.70

Weighted average common shares outstanding:

Basic

31,812

31,734

Diluted

31,839

31,757

KAYDON CORPORATION

CONSOLIDATED BALANCE SHEETS

(In thousands)

March 30,

December 31,

2013

2012

Assets:

Cash and cash equivalents

$

65,575

$

53,556

Accounts receivable, net

71,860

71,410

Inventories, net

99,330

97,933

Other current assets

15,448

20,354

Total current assets

252,213

243,253

Property, plant and equipment, net

118,283

121,233

Assets held for sale

6,518

6,530

Goodwill, net

188,922

190,323

Other intangible assets, net

47,884

49,177

Other assets

4,639

4,646

Total assets

$

618,459

$

615,162

Liabilities and Shareholders' Equity:

Accounts payable

$

21,716

$

15,555

Accrued expenses

22,085

21,539

Current portion long-term debt

8,438

10,313

Total current liabilities

52,239

47,407

Long-term debt

164,062

166,062

Other long-term liabilities

71,302

70,917

Total long-term liabilities

235,364

236,979

Shareholders' equity

330,856

330,776

Total liabilities and shareholders' equity

$

618,459

$

615,162

KAYDON CORPORATION

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

Three Months Ended

March 30,

March 31,

2013

2012

Cash Flows from Operating Activities:

Net income

$

10,674

$

12,121

Adjustments to reconcile net income to

net cash from operating activities:

Depreciation

3,850

5,010

Amortization of intangible assets

958

739

Amortization of stock awards

644

891

Stock option compensation expense

160

1,116

Excess tax benefits from stock-based compensation

156

(702

)

Deferred financing fees

123

346

Contributions to qualified pension plans

(180

)

(634

)

Net change in receivables, inventories and trade payables

3,185

(18,216

)

Net change in other assets and liabilities

6,732

5,286

Net cash from operating activities

26,302

5,957

Cash Flows from Investing Activities:

Capital expenditures

(2,012

)

(3,307

)

Dispositions of property, plant and equipment

52

1,793

Net cash used in investing activities

(1,960

)

(1,514

)

Cash Flows from Financing Activities:

Proceeds from long-term borrowings

-

150,000

Repayments of long-term borrowings

(3,875

)

-

Debt issuance costs

-

(1,357

)

Cash dividends paid

(6,420

)

(342,490

)

Purchase of treasury stock

(678

)

(1,199

)

Excess tax benefits from stock-based compensation

(156

)

702

Proceeds from exercise of stock options

-

15

Net cash used in financing activities

(11,129

)

(194,329

)

Effect of exchange rate changes on cash and

cash equivalents

(1,194

)

963

Net increase (decrease) in cash and cash equivalents

12,019

(188,923

)

Cash and cash equivalents - Beginning of period

53,556

225,214

Cash and cash equivalents - End of period

$

65,575

$

36,291

KAYDON CORPORATION

REPORTABLE SEGMENT INFORMATION

(In thousands)

Three Months Ended

March 30,

March 31,

Net sales

2013

2012

Friction Control Products

$

51,674

$

65,803

Velocity Control Products

32,587

24,299

Other Industrial Products

26,412

26,364

Total consolidated net sales

$

110,673

$

116,466

Three Months Ended

March 30,

March 31,

Operating income

2013

2012

Friction Control Products

$

7,293

$

11,819

Velocity Control Products

7,508

5,842

Other Industrial Products

2,072

1,909

Total segment operating income

16,873

19,570

Items not allocated to segment operating income

(1,135

)

(2,235

)

Interest expense

(896

)

(388

)

Interest income

66

125

Income before taxes

$

14,908

$

17,072

The Company has two reporting segments: Friction Control Products and Velocity Control Products. The Company's remaining operating segments are combined and disclosed as "Other Industrial Products."