Kaydon Corporation Reports Second Quarter 2013 Results

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Kaydon Corporation Reports Second Quarter 2013 Results

ANN ARBOR, Mich.--(BUSINESS WIRE)-- Kaydon Corporation (NYS: KDN) today announced its results for the second fiscal quarter ended June 29, 2013.

Consolidated Results


Sales in the second quarter of 2013 were $117.3 million, compared to sales of $124.4 million in the second quarter of 2012.

Diluted earnings per share on a GAAP basis in the second quarter of each of 2013 and 2012 equaled $0.36. Adjusted earnings per share, as defined below, was $0.42 in both the second quarter of 2013 and the second quarter of 2012.

Adjusted EBITDA, as defined below, was $25.6 million during the second quarter of 2013, compared to $27.3 million, during the second quarter of 2012. Free cash flow, as defined below, for the second quarter of 2013 was $18.7 million compared to $13.3 million in the second quarter of 2012.

Adjusted gross margin was 38.6 percent in the second quarter of 2013, compared to 33.7 percent in the second quarter of 2012, as the Company continues to benefit from the increased operating leverage that has resulted from the restructuring activities undertaken in late 2012 and from ongoing operational improvements.

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 second quarter of 2013, Kaydon incurred $1.2 million of costs associated with due diligence and restructuring activities, and $1.2 million of non-cash amortization of previously incurred net actuarial losses related to postretirement benefit plans. During the current quarter the Company reviewed, and continues to review, several potential acquisitions. During the second quarter of 2012, adjustments included $1.6 million of acquisition-related costs primarily related to the Fabreeka acquisition and $1.1 million of non-cash amortization of previously incurred net actuarial losses related to postretirement benefit plans.

Orders and Backlog

Orders were $123.2 million in the second quarter of 2013, compared to $112.8 million in the second quarter of 2012 and $119.4 million in the first quarter of 2013. Backlog at June 29, 2013 was $158.1 million, compared to $169.5 million at June 30, 2012.

Financial Position and Free Cash Flow

Free cash flow was $18.7 million in the second quarter of 2013, compared to $13.3 million in the second quarter of 2012. During the quarter, the Company repaid $7.8 million of debt while paying dividends of $6.4 million.

As of June 29, 2013, the Company had cash and cash equivalents totaling $69.9 million and total borrowings outstanding of $164.7 million, resulting in net debt of $94.8 million.

Management Commentary

James O'Leary, Chairman and Chief Executive Officer commented, "The second quarter of 2013 was solid as we continue to successfully manage the variables within our control. Relative to the comparable quarter of 2012, we saw improved margins, free cash flow and orders despite a still challenging economic environment. In aggregate, bookings for our industrial businesses were solid with trends consistent with this year's first quarter. As expected, military bookings were lower due to anticipated reductions in military activity and timing. However, this was more than offset by strong wind energy bookings in the quarter, supporting our view that the wind energy business has bottomed and will continue to show signs of improvement as we look a few quarters forward.

"Like most in the industrial space, we anticipate gradual improvement in the latter half of the year. While we wait for clearer signs of this pickup in economic activity, our principal focus remains managing the things within our control while we explore growth opportunities on the acquisition front. Our operational focus will translate in continued strength in both free cash flow and margins, as demonstrated so far this year, and further improvement when economic growth picks up in a more pronounced and sustained fashion."

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 second quarter 2013 earnings conference call. The conference call can be accessed telephonically in a listen-only mode by dialing 1-888-471-3843 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=654132&s=1&k=047D773357A6F973268DACF57BCDC690

or by logging on to the Kaydon Corporation website at: http://www.kaydon.com and accessing the conference call at the "Second 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, July 31, 2013 at 2:00 p.m. Eastern time. The replay is accessible by dialing 1-888-203-1112 and providing the following passcode number: 3897290.

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 EndedSix Months Ended
 
June 29,June 30,June 29,June 30,
2013201220132012
Net sales$117,343$124,373$228,016$240,839
 
Cost of sales 73,751  83,371  143,053  158,238 
 
Gross profit43,59241,00284,96382,601
 
Selling, general and administrative expenses 26,379  23,532  52,012  47,796 
 
Operating income17,21317,47032,95134,805
 
Interest expense(896)(795)(1,792)(1,183)
 
Interest income 74  54  140  179 
 
Income before taxes16,39116,72931,29933,801
 
Provision for income taxes 4,704  5,035  8,938  9,986 
 
Net income$11,687 $11,694 $22,361 $23,815 
 
 
 
Earnings per share:
Basic$0.36 $0.37 $0.70 $0.74 
Diluted$0.36 $0.36 $0.70 $0.74 
 
 
Dividends declared per share$0.20 $0.20 $0.40 $10.90 
 
 
Weighted average common shares outstanding:
Basic 31,818  31,755  31,815  31,744 
Diluted 31,847  31,776  31,843  31,769 
 
 
KAYDON CORPORATION
CONSOLIDATED BALANCE SHEETS
(In thousands)
       
 
June 29,December 31,
20132012
Assets:
Cash and cash equivalents$69,937$53,556
Accounts receivable, net74,58071,410
Inventories, net97,34597,933
Other current assets 17,189 20,354
 
Total current assets259,051243,253
 
Property, plant and equipment, net115,595121,233
 
Assets held for sale7,8506,530
Goodwill, net189,196190,323
Other intangible assets, net47,20149,177
Other assets 4,558 4,646
 
Total assets$623,451$615,162
 
 
Liabilities and Shareholders' Equity:
 
Accounts payable$23,713$15,555
Accrued expenses24,56921,539
Current portion long-term debt 8,438 10,313
Total current liabilities56,72047,407
 
Long-term debt156,250166,062
Other long-term liabilities 71,738 70,917
Total long-term liabilities227,988236,979
 
Shareholders' equity 338,743 330,776
 
Total liabilities and shareholders' equity$623,451$615,162
 
 
KAYDON CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
       
Three Months EndedSix Months Ended
 
June 29,June 30,June 29,June 30,
2013201220132012
Cash Flows from Operating Activities:
Net income$11,687$11,694$22,361$23,815
Adjustments to reconcile net income to
net cash from operating activities:
Depreciation3,8865,1657,73610,175
Amortization of intangible assets9668391,9241,578
Amortization of stock awards9639041,6071,795
Stock option compensation expense2192193791,335
Excess tax benefits from stock-based compensation-29156(673)
Deferred financing fees123124246470
Contributions to qualified pension plans(386)(1,535)(566)(2,169)
Net change in receivables, inventories and trade payables1,5071,8964,692(16,320)
Net change in other assets and liabilities 2,049  (1,346) 8,781  3,940 
 
Net cash from operating activities21,01417,98947,31623,946
 
Cash Flows from Investing Activities:
Capital expenditures(3,011)(4,815)(5,023)(8,122)
Dispositions of property, plant and equipment6591687111
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