Kaydon Corporation Reports Third Quarter 2005 Results.

Publication: Business Wire

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COPYRIGHT 2005 Business Wire

ANN ARBOR, Mich. -- Kaydon Corporation (NYSE:KDN) today announced financial results for the third quarter ended October 1, 2005. Sales of continuing operations were up 17.6 percent, after tax income from continuing operations increased 38.8 percent and diluted earnings per share from continuing operations were up 35.7 percent, to $.38, versus the comparable period last year.

Brian P. Campbell, Kaydon's President and Chief Executive Officer commented, "Overall, the fundamentals of our business are strong. We are pleased with our order intake during the quarter, and with the quarter-end backlog, reflecting strong demand in key markets. Certain issues that affected first half profitability, namely operating inefficiencies related to new programs for military and wind power applications, shifting product mix and higher material costs, are continuing to be addressed through price increases and capacity initiatives."

Highlights - Continuing Operations - Third Quarter 2005 compared with Third Quarter 2004

--Sales, including recent acquisitions, increased 17.6 percent, to $85.9 million, on strengthened demand across most key product lines.

--After tax income increased 38.8 percent to $11.6 million.

--Diluted earnings per share increased 35.7 percent to $.38.

--Order entry increased 16.9 percent to $87.5 million, reflecting continued strength in the manufacturing economy.

--Quarter-end backlog increased 41.3 percent to $127.2 million.

--EBITDA, a non-GAAP measure, increased 21.1 percent to $21.5 million, equal to 25.0 percent of sales, and covered interest expense by 9.0 times.

--Cash and cash equivalents equaled $321.7 million at the end of the third quarter.

As previously disclosed, on July 26, 2005 Kaydon Corporation sold its Power and Data Transmission Products Group for $72.4 million cash, subject to post-closing purchase price adjustments. The sale resulted in a pre-tax gain of $41.0 million, or $.73 per share on a diluted basis after tax, which is being reported as a component of income from discontinued operations.

In commenting further, Mr. Campbell stated, "We are pleased with our third quarter results and we expect the favorable third quarter order and backlog trends to continue into the fourth quarter. In addition we have a highly liquid balance sheet, which, when combined with other available financial resources, provides us an important resource to drive strategic growth and diversification."

Additional Data on Third Quarter and Year-To-Date Results

Third quarter 2005 sales of continuing operations of $85.9 million increased 17.6 percent compared to sales of continuing operations of $73.0 million in 2004's third quarter. Increased sales across most of the Company's product lines, including specialty bearings, split roller bearings, and linear deceleration and sealing products, along with incremental sales of $5.0 million from recent acquisitions were only partially offset by decreases totaling $1.4 million related to lower demand for specialty metal alloys, a decrease in demand for specialty ball products, and reduced sales of metal forming equipment. Third quarter 2005 sales of continuing operations were 9.1 percent lower than sales generated during this year's second quarter due to seasonal sales patterns.

Gross profit from continuing operations equaled $32.3 million or 37.7 percent of sales during the third quarter of 2005 as compared to $29.5 million or 40.4 percent of sales during the third quarter of 2004. Third quarter 2004 results were favorably impacted by $2.0 million of inventory revaluations, while this year's third quarter was negatively affected by $0.5 million of net inventory adjustments. Similar to this year's first half, the third quarter gross margin continued to be affected by increases in material costs, and a shift in product mix, particularly in the specialty bearings business. Increases in material costs include both higher, but moderating, prices for raw material and increased process outsourcing resulting from higher sales levels from new product programs. However, during the third quarter of 2005 certain selling price...

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