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Kaydon Corporation Reports Fourth Quarter and Full Year 2012 Results



  Kaydon Corporation Reports Fourth Quarter and Full Year 2012 Results

Business Wire

ANN ARBOR, Mich. -- February 21, 2013

Kaydon Corporation (NYSE:KDN) today announced its results for the fourth
fiscal quarter and full year ended December 31, 2012.

Consolidated Results

Fourth quarter sales increased 2.2 percent to $110.5 million, compared to
sales of $108.1 million in the fourth quarter of 2011.

Diluted earnings per share in the fourth quarter of 2012 equaled $0.25,
compared to diluted earnings per share of $0.27 in the fourth quarter of 2011.
Adjusted earnings per share, as defined below, was $0.36 in the fourth quarter
of 2012, compared to $0.41 in the fourth quarter of 2011.

Adjusted EBITDA, as defined below, was $22.4 million during the fourth quarter
of 2012, compared to $25.5 million, during the fourth quarter of 2011. Free
cash flow, as defined below, for the fourth quarter of 2012 was $33.4 million
compared to $16.6 million in the fourth quarter of 2011, as a $26 million net
reduction in receivables, inventory and payables resulted in the strongest
quarterly free cash flow achieved in over three years.

Adjusted gross margin increased to 36.8 percent in the fourth quarter of 2012,
compared to 34.9 percent in the third quarter of 2012, as reduced shipments of
wind energy bearings benefited product mix. Adjusted gross margin decreased to
36.8 percent from 37.1 percent in the fourth quarter of 2011 as successful
efforts to reduce inventories resulted in lower manufacturing activity,
negatively impacting gross margins relative to the prior year. As general
economic activity improves later in the year, which would result in increased
manufacturing activity, and the Company benefits from the actions it took to
reduce manufacturing capacity in 2012, gross margins would be expected to
continue to improve.

Full year 2012 sales totaled $475.2 million compared to $460.1 million for
full year 2011. Full year 2012 diluted earnings per share, prior to adjustment
for the largely non-cash items noted below and in prior quarters, including
certain impairment charges and costs associated with a recently concluded
arbitration, equaled $0.02 per share compared to $1.52 per share in full year
2011. Adjusting for the full year effect of the items noted below and in prior
quarters, full year 2012 adjusted diluted earnings per share totaled $1.67 per
share and full year 2012 adjusted EBITDA totaled $103.7 million.

This press release includes certain non-GAAP measures, including adjusted net
income, 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 fourth quarter of
2012, Kaydon incurred $0.6 million of costs associated with restructuring,
recapitalization and due diligence activities, and $1.3 million of non-cash
amortization of previously incurred net actuarial losses related to
postretirement benefit plans. During the third quarter, the Company offered
certain former non-retiree employees with vested pension benefits the option
of receiving a lump sum payment or an immediate annuity in settlement of all
future pension obligations. This de-risking of our pension obligations reduced
future pension liabilities by $9.2 million. As a result, the Company incurred
a fourth quarter 2012 non-cash settlement charge of $2.9 million resulting
from the acceleration of associated unrecognized actuarial losses previously
being amortized. This discrete, nonrecurring item is included in the fourth
quarter of 2012 selling, general and administrative expense. There was no
impact on the Company’s cash position as the distributions totaling $7.3
million were funded using the assets of the pension plan.

Order Activity

Orders were $102.6 million in the fourth quarter of 2012, compared to $84.6
million in the fourth quarter of 2011, reflecting improved conditions in
industrial and military markets and the contribution of Fabreeka’s operations.
New orders through mid-February are in excess of 20 percent above prior year’s
levels.

Backlog at December 31, 2012 was $143.5 million, compared to $151.3 million at
September 29, 2012, and $181.6 million at December 31, 2011. Excluding wind
orders, backlog increased $11 million in fiscal 2012, reflecting a
book-to-bill ratio of 101 percent in core non-wind operations over the last
twelve months.

Management Commentary

James O’Leary, Chairman and Chief Executive Officer commented, “Fiscal 2012
was an important transition year for Kaydon during which we proactively and
aggressively managed our business in response to evolving business conditions
in many of our key end markets, generating significant free cash flow in the
process. After a period of exceptional growth in our military and wind energy
businesses that spanned much of the decade preceding the global recession and
financial crisis of 2009, recent years saw declines in both of these markets
as the aftershocks have created new market realities, notably fiscal austerity
in most developed nations. In September, we initiated a comprehensive
restructuring of our bearings business to align capacity with current market
needs while maintaining our leadership positions in these markets. By
rightsizing to reflect current market realities, we have adjusted
manufacturing capacity and lowered fixed operating costs to provide enhanced
operating leverage and position us for margin expansion when business
conditions return to more consistently robust levels.

“With much of the revenue decline related to wind energy markets already
replaced by acquisitions made over the past two years in our Velocity Controls
segment, we look forward to accelerating profitable growth across our product
portfolio now that the restructuring process is close to complete. Within our
Friction Controls segment, we remain focused on developing profitable
expansion opportunities in underserved international markets and in our
traditional distribution channels, particularly within our historically
critical industrial end markets. With improved operating leverage, investments
already made in operational initiatives and sales and marketing resources
throughout the Company will make a more pronounced impact as we also benefit
from the eventual improvement in the global economy.

“As well publicized in recent months, the fourth quarter saw relatively high
levels of uncertainty both in the United States, with election and fiscal
cliff concerns prevalent, and in Europe, where relative economic stability has
yet to translate into meaningfully improved industrial activity. While there
continues to be notable uncertainty in many of our markets, incoming orders
during the quarter, and thus far in 2013, were healthy as many of our
traditional markets served, notably general industrial, experienced gains
relative to the prior year. While the first half of 2013 will be impacted by
still challenging comparisons of wind performance against fiscal 2012 and some
inventory reduction across our industrial customer base, we expect favorable
results in comparison to prior periods in the second half as the economy
continues to improve, tougher wind comparisons dissipate, and actions taken in
late 2012 to restore operating leverage to our critical, core industrial
businesses take full effect.

“While we wait for a more balanced and sustained improvement in business
conditions, a reprioritized focus on our powerful industrial brands and the
critical industries they serve, coupled with the enhanced operating leverage
expected post-restructuring, should serve us well. With manufacturing capacity
and working capital levels better reflective of the current environment, we
are well positioned for the gradual economic improvements expected as the year
progresses.

“Although we remain patient while the economic improvements widely anticipated
in 2013 take hold, patience should not be confused with complacence. In 2012,
in addition to initiating the necessary restructuring already discussed and
completing one acquisition in Velocity Controls while integrating another, we
provided ample evidence of our ability to generate strong levels of free cash
flow, particularly in our fourth quarter, while providing meaningful returns
to our shareholders in a yield starved environment, as demonstrated by our
special dividend earlier in March and our commitment to our current regular
dividend. Our ability to consistently generate strong levels of free cash flow
while providing meaningful cash returns to our shareholders in a still
volatile investing environment remains a hallmark of Kaydon as we have managed
both cyclical and secular challenges within our businesses since 2009. This
solid cash flow performance and ability to provide cash returns to our
shareholders regardless of the economic environment will stand us well while
we anticipate a resumption in more consistently strong and stable economic
conditions.”

Segment Results and Review

Friction Control Products sales in the fourth quarter of 2012 were $53.9
million, compared to $58.5 million in the 2011 fourth quarter. Operating
income totaled $7.1 million, compared to $4.9 million in the prior fourth
quarter. Wind revenues were $1.9 million, compared to $9.6 million in the
fourth quarter of 2011, reflecting the long expected decline in this market.
Excluding wind, Friction Control Products sales were 6.5 percent higher
compared to the prior year. The increase in operating income was attributable
to the absence of $5.2 million of arbitration related costs that impacted the
fourth quarter of 2011 offset in part by the effect of the decline in wind
energy sales and inefficiencies and lower cost absorption associated with the
continued ramp down of wind bearing production and reduction of inventory.

Velocity Control Products sales in the fourth quarter of 2012 were $27.9
million, compared to $20.4 million in the fourth quarter of 2011. Operating
income for this segment totaled $4.5 million, compared to $3.4 million in the
prior fourth quarter. This segment benefited from the results of Fabreeka,
which was acquired in the second quarter of 2012.

Other Industrial Products sales in the fourth quarter of 2012 were $28.7
million, compared to $29.2 million in the 2011 fourth quarter. Operating
income equaled $4.1 million in the fourth quarter of 2012, compared to
operating income of $3.8 million in the fourth quarter of 2011.

Financial Position and Free Cash Flow

Free cash flow was $33.4 million in the fourth quarter of 2012, compared to
$16.6 million in the fourth quarter of 2011, primarily driven by a $26 million
current quarter reduction in net receivables, inventory and trade payables.
During the quarter, the Company repaid $19.9 million of debt while paying
dividends of $12.6 million, including the payment in 2012 of dividends
declared in both the third and fourth quarter.

As of December 31, 2012, the Company had cash and cash equivalents totaling
$53.6 million. Kaydon had borrowings outstanding in the principal amount of
$32.0 million under the revolving credit facility and $144.4 million under the
term loan facility as of December 31, 2012.

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 fourth quarter and full year 2012 earnings conference call. The
conference call can be accessed telephonically in a listen-only mode by
dialing 1-888-455-2296 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=569257&s=1&k=6C877B44CFF820370E1083F7DEC7E8EB

or by logging on to the Kaydon Corporation website at: http://www.kaydon.com
and accessing the conference call at the “Fourth Quarter and Full Year 2012
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, February 27, 2013 at 2:00 p.m.
Eastern time. The replay is accessible by dialing 1-888-203-1112 and providing
the following passcode number: 4328596.

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            Twelve Months Ended
                                                                   
                     December 31,   December 31,   December 31,   December 31,
                     2012           2011           2012           2011
Net sales            $  110,516     $  108,113     $  475,204     $  460,120
                                                                   
Cost of sales           70,878         72,684         316,477        299,043  
                                                                   
Gross profit            39,638         35,429         158,727        161,077
                                                                   
Selling, general
and administrative      27,840         23,483         100,662        90,841
expenses
                                                                   
Impairment charge       -              -              42,953         -        
                                                                   
Operating income        11,798         11,946         15,112         70,236
                                                                   
Interest expense        (997    )      (95     )      (3,135  )      (388    )
                                                                   
Interest income         89             114            327            491      
                                                                   
Income before           10,890         11,965         12,304         70,339
taxes
                                                                   
Provision for           2,852          3,285          11,754         21,007   
income taxes
                                                                   
Net income           $  8,038       $  8,680       $  550         $  49,332   
                                                                   
                                                                   
                                                                   
Earnings per
share:
Basic                $  0.25        $  0.27        $  0.02        $  1.52     
Diluted              $  0.25        $  0.27        $  0.02        $  1.52     
                                                                   
                                                                   
Dividends declared   $  0.20        $  0.20        $  11.30       $  0.78     
per share
                                                                   
                                                                   
Weighted average
common shares
outstanding:
Basic                   31,757         31,763         31,750         32,113   
Diluted                 31,776         31,776         31,772         32,135   

                                                           
KAYDON CORPORATION
CONSOLIDATED BALANCE SHEETS
(In thousands)
                                                             
                                                             
                                             December 31,   December 31,
                                             2012           2011
Assets:
Cash and cash equivalents                    $   53,556     $   225,214
Accounts receivable, net                         71,410         78,441
Inventories, net                                 97,933         110,206
Other current assets                             20,354         16,701
                                                             
Total current assets                             243,253        430,562
                                                             
Property, plant and equipment, net               121,233        168,946
                                                             
Assets held for sale                             6,530          -
Goodwill, net                                    190,323        157,087
Other intangible assets, net                     49,177         31,140
Other assets                                     4,646          3,962
                                                             
Total assets                                 $   615,162    $   791,697
                                                             
                                                             
Liabilities and Shareholders' Equity:
                                                             
Accounts payable                             $   15,555     $   19,699
Accrued expenses                                 21,539         29,766
Current portion long-term debt                   10,313         -
Total current liabilities                        47,407         49,465
                                                             
Long-term debt                                   166,062        -
Other long-term liabilities                      70,917         57,594
Total long-term liabilities                      236,979        57,594
                                                             
Shareholders' equity                             330,776        684,638
                                                             
Total liabilities and shareholders' equity   $   615,162    $   791,697

 
KAYDON CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
                                                                 
                     Three Months Ended            Twelve Months Ended
                                                                   
                     December 31,   December 31,   December 31,   December 31,
                     2012           2011           2012           2011
Cash Flows from
Operating
Activities:
  Net income         $  8,038       $  8,680       $ 550          $  49,332
  Adjustments to
  reconcile net
  income to net
  cash from
  operating
  activities:
  Depreciation          3,818          5,124         19,147          20,219
  Amortization of
  intangible            1,014          802           3,599           3,076
  assets
  Amortization of       779            1,079         3,146           4,204
  stock awards
  Stock option
  compensation          145            317           1,670           1,312
  expense
  Excess tax
  benefits from         86             (309    )     (568     )      (404    )
  stock-based
  compensation
  Non-cash
  postretirement        -              (133    )     -               (275    )
  benefits
  curtailment gain
  Non-cash
  impairment            -              -             42,953          -
  charge
  Pension
  settlement            2,914          -             2,914           -
  charge
  Deferred              124            97            717             388
  financing fees
  Contributions to
  qualified             (176    )      (634    )     (8,135   )      (2,586  )
  pension plans
  Net change in
  receivables,          25,716         8,054         23,094          (17,412 )
  inventories and
  trade payables
  Net change in
  other assets and      (4,729  )      (3,465  )     (2,205   )      (2,968  )
  liabilities
                                                                   
  Net cash from
  operating             37,729         19,612        86,882          54,886
  activities
                                                                   
Cash Flows from
Investing
Activities:
  Capital               (4,438  )      (3,053  )     (17,414  )      (14,918 )
  expenditures
  Dispositions of
  property, plant       146            -             2,158           210
  and equipment
  Acquisition of
  business, net of      300            -             (51,267  )      (39,610 )
  cash acquired
                                                                   
  Net cash used in
  investing             (3,992  )      (3,053  )     (66,523  )      (54,318 )
  activities
                                                                   
Cash Flows from
Financing
Activities:
  Proceeds from
  long-term             2,000          -             202,000         -
  borrowings
  Repayments of
  long-term             (21,874 )      -             (25,623  )      -
  borrowings
  Debt issuance         -              -             (1,357   )      -
  costs
  Cash dividends        (12,554 )      (6,430  )     (367,851 )      (25,082 )
  paid
  Purchase of           -              (3,965  )     (1,199   )      (38,684 )
  treasury stock
  Excess tax
  benefits from         (86     )      309           568             404
  stock-based
  compensation
  Proceeds from
  exercise of           -              -             134             39       
  stock options
                                                                   
  Net cash used in
  financing             (32,514 )      (10,086 )     (193,328 )      (63,323 )
  activities
                                                                   
                                                                   
 
Effect of exchange
rate changes on         324            (347    )     1,311           1,321    
cash and cash
equivalents
                                                                   
Net increase
(decrease) in cash      1,547          6,126         (171,658 )      (61,434 )
and cash
equivalents
                                                                   
Cash and cash
equivalents -           52,009         219,088       225,214         286,648  
Beginning of
period
                                                                   
Cash and cash
equivalents - End    $  53,556      $  225,214     $ 53,556       $  225,214  
of period

                                                                  
KAYDON CORPORATION
REPORTABLE SEGMENT INFORMATION
(In thousands)
                                                                    
                 Three Months Ended                  Twelve Months Ended
                                                                    
                 December 31,      December 31,      December      December
                                                     31,           31,
Net sales        2012              2011              2012          2011
                                                                    
Friction
Control          $  53,918         $  58,495         $ 257,955     $ 255,025
Products
Velocity
Control             27,852            20,436           106,504       89,766
Products
Other
Industrial          28,746            29,182           110,745       115,329  
Products
                                                                    
Total
consolidated     $  110,516        $  108,113        $ 475,204     $ 460,120  
net sales
                                                                    
                                                                    
                 Three Months Ended                  Twelve Months Ended
                                                                    
                 December 31,      December 31,      December      December
                                                     31,           31,
Operating        2012              2011              2012          2011
income
                                                                    
Friction
Control          $  7,056          $  4,902          $ (11,485 )   $ 37,382
Products
Velocity
Control             4,502             3,439            22,683        21,199
Products
Other
Industrial          4,090             3,839            11,706        13,708   
Products
Total segment
operating           15,648            12,180           22,904        72,289
income
Items not
allocated to
segment             (3,850   )        (234     )       (7,792  )     (2,053  )
operating
income
Interest            (997     )        (95      )       (3,135  )     (388    )
expense
Interest            89                114              327           491      
income
                                                                    
Income before    $  10,890         $  11,965         $ 12,304      $ 70,339   
taxes
                                                                    
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."

                                                                  
Kaydon Corporation
Reconciliation of Non-GAAP Measures
(In thousands)
 
                                                                    
                          Three Months Ended         Twelve Months Ended
                                                                    
                          December      December     December      December
                          31,           31,          31,           31,
      Free cash
      flow, as            2012          2011         2012          2011
      defined
      (non-GAAP)
Net cash from
operating                 $  37,729     $ 19,612     $ 86,882      $ 54,886
activities (GAAP)
Capital
expenditures, net            (4,292 )     (3,053 )     (15,256 )     (14,708 )
of dispositions
Free cash flow, as        $  33,437     $ 16,559     $ 71,626      $ 40,178   
defined (non-GAAP)
                                                                    
Kaydon's management believes free cash flow, as defined above and 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 comparable GAAP measure.
                                                                    
                          Three Months Ended         Twelve Months Ended
                                                                    
                          December      December     December      December
                          31,           31,          31,           31,
                          2012          2011         2012          2011
      Adjusted
      EBITDA, as
      defined
      (non-GAAP)
Net income (GAAP)         $  8,038      $ 8,680      $ 550         $ 49,332
Net interest                 908          (19    )     2,808         (103    )
(income)/expense
Provision for                2,852        3,285        11,754        21,007
income taxes
Depreciation and
amortization of              4,832        5,926        22,746        23,295
intangible assets
Stock-based
compensation                 924          1,396        4,816         5,516    
expense (1)
EBITDA, as defined           17,554       19,268       42,674        99,047
(non-GAAP)
                                                                    
Arbitration costs            -            5,177        4,132         6,217
Impairment and
restructuring                294          280          46,588        2,773
related costs (2)
Due diligence and
purchase accounting          87           198          2,040         1,771
costs
Recapitalization             266          -            533           -
costs
Curtailment gains            -            (133   )     -             (275    )
Amortization of net          1,262        702          4,778         2,800
actuarial loss
Pension settlement           2,914        -            2,914         -        
Adjusted EBITDA, as       $  22,377     $ 25,492     $ 103,659     $ 112,333  
defined (non-GAAP)
                                                                    
      (1) Includes non-cash stock amortization expense and non-cash stock
      option expense.
      (2) Includes wind restructuring related impairments and other costs
      including fixed asset impairments of $43.0 million, inventory impairment
      of $1.1 million, accounts receivable reserves of $1.3 million, severance
      costs of $0.4 million, and asset retirement obligations of $0.2 million
      for the twelve months ended December 31, 2012.
                                                                    
Kaydon's management believes EBITDA, as defined above and Adjusted EBITDA, as
defined, both non-GAAP measures, are determinants of the Company's capacity to
incur additional senior capital to enhance future profit growth and cash flow
growth. 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. Also, EBITDA is a metric used to determine
payments under the Company's annual incentive compensation program for senior
managers. However, EBITDA, as defined, and Adjusted EBITDA, as defined should
be viewed as supplemental data, rather than as substitutes or alternatives to
the comparable GAAP measure.

                                                                                                                                       
Kaydon Corporation
Reconciliation of Non-GAAP Measures (continued)
(In thousands, except per share data)
                                                                                                                                         
             Three months ended December 31, 2012
                                                                                                                                         
                           Non-operating items, as defined by the Company
                           Wind                                           Due
                                                                          Diligence/
                           restructuring                 Restructuring/   Purchase                        Settlement /
                           and                           Severance        Accounting   Recapitalization   Curtailment    Amortization   Adjusted
                           impairment                                                                                    of
             GAAP          charge          Arbitration   Costs            Costs        Costs              Gains/Losses   Actuarial      (Non-GAAP)
                                           Costs                                                                         Loss
                                                                                                                                         
Net Sales    $ 110,516     $   -           $  -          $   -            $  -         $    -             $   -          $  -           $ 110,516
                                                                                                                                         
Gross          39,638          172            -              -               -              -                 -             831           40,641
profit
                                                                                                                                         
Gross          35.9    %       0.2    %       0.0    %       0.0    %        0.0   %        0.0     %         0.0    %      0.8    %      36.8    %
margin
                                                                                                                                         
S, G & A       27,840          97             -              25              87             266               2,914         431           24,020
expenses
                                                                                                                                         
Impairment     -               -              -              -               -              -                 -             -             -        
charge
                                                                                                                                         
Operating      11,798          269            -              25              87             266               2,914         1,262         16,621
income
                                                                                                                                         
Interest,      (908    )       -              -              -               -              -                 -             -             (908    )
net
                                                                                                                                         
Income
before         10,890          269            -              25              87             266               2,914         1,262         15,713
taxes
                                                                                                                                         
Tax
provision      2,852           89             -              7               23             70                763           330           4,134    
*
                                                                                                                                         
Net income     8,038           180            -              18              64             196               2,151         932           11,579   
                                                                                                                                         
Diluted      $ 0.25        $   0.01        $  -          $   0.00         $  0.00      $    0.01          $   0.07       $  0.03        $ 0.36
EPS
                                                                                                                                         
             Three months ended December 31, 2011
                                                                                                                                         
                           Non-operating items, as defined by the Company
                           Wind                                           Due
                                                                          Diligence/
                           restructuring                 Restructuring/   Purchase                        Settlement /
                           and                           Severance        Accounting   Recapitalization   Curtailment    Amortization   Adjusted
                           impairment                                                                                    of
             GAAP          charge          Arbitration   Costs            Costs        Costs              Gains/Losses   Actuarial      (Non-GAAP)
                                           Costs                                                                         Loss
                                                        
Net Sales    $ 108,113     $   -           $  -          $   -            $  -         $    -             $   -          $  -           $ 108,113
                                                                                                                                         
Gross          35,429          -              4,102          -               -              -                 -             550           40,081
profit
                                                                                                                                         
Gross          32.8    %       0.0    %       3.8    %       0.0    %        0.0   %        0.0     %         0.0    %      0.5    %      37.1    %
margin
                                                                                                                                         
S, G & A       23,483          -              1,075          280             198            -                 (133   )      152           21,911
                                                                                                                                         
Impairment     -               -              -              -               -              -                 -             -             -        
charge
                                                                                                                                         
Operating      11,946          -              5,177          280             198            -                 (133   )      702           18,170
income
                                                                                                                                         
Interest,      19              -              -              -               -              -                 -             -             19       
net
                                                                                                                                         
Income
before         11,965          -              5,177          280             198            -                 (133   )      702           18,189
taxes
                                                                                                                                         
Tax
provision      3,285           -              1,421          77              54             -                 (36    )      193           4,994    
*
                                                                                                                                         
Net income   $ 8,680       $   -           $  3,756      $   203          $  144       $    -             $   (97    )   $  509         $ 13,195   
                                                                                                                                         
Diluted      $ 0.27        $   -           $  0.12       $   0.01         $  0.00      $    -             $   (0.00  )   $  0.02        $ 0.41
EPS
                                                                                                                                         
Kaydon's management believes that certain non-GAAP measures of Adjusted operating income, Adjusted interest, net, Adjusted net income, and Adjusted
earnings per share - diluted, provide investors with additional information to assess the Company's financial performance. However, these measures
should be viewed as supplemental data, rather than substitutes or alternatives to the comparable GAAP measures.
                                                                                                                                         
                                                                                                                                         
* Taxed at effective tax rate for each quarter, except for wind restructuring and impairment charge and arbitration costs.

                                                                                                                                       
Kaydon Corporation
Reconciliation of Non-GAAP Measures (continued)
(In thousands, except per share data)
                                                                                                                                         
             Twelve months ended December 31, 2012
                                                                                                                                         
                           Non-operating items, as defined by the Company
                           Wind                                           Due
                                                                          Diligence/
                           restructuring                 Restructuring/   Purchase                        Settlement /
                           and                           Severance        Accounting   Recapitalization   Curtailment    Amortization   Adjusted
                           impairment                                                                                    of
             GAAP          charge          Arbitration   Costs            Costs        Costs              Gains/Losses   Actuarial      (Non-GAAP)
                                           Costs                                                                         Loss
                                                                                                                                         
Net Sales    $ 475,204     $  -            $  -          $   -            $  -         $    -             $   -          $  -           $ 475,204
                                                                                                                                         
Gross          158,727        1,507           4,394          -               355            -                 -             3,325         168,308
profit
                                                                                                                                         
Gross          33.4    %      0.3     %       0.9    %       0.0     %       0.1   %        0.0     %         0.0    %      0.7    %      35.4    %
margin
                                                                                                                                         
S, G & A       100,662        1,859           (262   )       269             1,685          1,324             2,914         1,453         91,420
expenses
                                                                                                                                         
Impairment     42,953         42,953          -              -               -              -                 -             -             -        
charge
                                                                                                                                         
Operating      15,112         46,319          4,132          269             2,040          1,324             2,914         4,778         76,888
income
                                                                                                                                         
Interest,      (2,808  )      -               -              -               -              247               -             -             (2,561  )
net
                                                                                                                                         
Income
before         12,304         46,319          4,132          269             2,040          1,571             2,914         4,778         74,327
taxes
                                                                                                                                         
Tax
provision      11,754         4,428           1,497          78              597            448               763           1,333         20,898   
*
                                                                                                                                         
Net income   $ 550         $  41,891       $  2,635      $   191          $  1,443     $    1,123         $   2,151      $  3,445       $ 53,429   
                                                                                                                                         
Diluted      $ 0.02        $  1.31         $  0.08       $   0.01         $  0.04      $    0.03          $   0.07       $  0.11        $ 1.67
EPS
                                                                                                                                         
             Twelve months ended December 31, 2011
                                                                                                                                         
                           Non-operating items, as defined by the Company
                           Wind                                           Due
                                                                          Diligence/
                           restructuring                 Restructuring/   Purchase                        Settlement /
                           and                           Severance        Accounting   Recapitalization   Curtailment    Amortization   Adjusted
                           impairment                                                                                    of
             GAAP          charge          Arbitration   Costs            Costs        Costs              Gains/Losses   Actuarial      (Non-GAAP)
                                           Costs                                                                         Loss
                                                        
Net Sales    $ 460,120     $  -            $  -          $   -            $  -         $    -             $   -          $  -           $ 460,120
                                                                                                                                         
Gross          161,077        -               4,102          1,787           252            -                 -             2,205         169,423
profit
                                                                                                                                         
Gross          35.0    %      0.0     %       0.9    %       0.4     %       0.1   %        0.0     %         0.0    %      0.5    %      36.8    %
margin
                                                                                                                                         
S, G & A       90,841         -               2,115          986             1,519          -                 (275   )      595           85,901
                                                                                                                                         
Wind           -              -               -              -               -              -                 -             -             -        
impairment
                                                                                                                                         
Operating      70,236         -               6,217          2,773           1,771          -                 (275   )      2,800         83,522
income
                                                                                                                                         
Interest,      103            -               -              -               -              -                 -             -             103      
net
                                                                                                                                         
Income
before         70,339         -               6,217          2,773           1,771          -                 (275   )      2,800         83,625
taxes
                                                                                                                                         
Tax
provision      21,007         -               1,735          839             540            -                 (80    )      832           24,873   
*
                                                                                                                                         
Net income   $ 49,332      $  -            $  4,482      $   1,934        $  1,231     $    -             $   (195   )   $  1,968       $ 58,752   
                                                                                                                                         
Diluted      $ 1.52        $  0.00         $  0.14       $   0.06         $  0.04      $    0.00              ($0.01 )   $  0.06        $ 1.81
EPS
                                                                                                                                         
Kaydon's management believes that certain non-GAAP measures of Adjusted operating income, Adjusted interest, net, Adjusted net income, and Adjusted
earnings per share - diluted, provide investors with additional information to assess the Company's financial performance. However, these measures
should be viewed as supplemental data, rather than substitutes or alternatives to the comparable GAAP measures.
                                                                                                                                         
                                                                                                                                         
* Taxed at effective tax rate for each quarter, except for wind restructuring and impairment charge and arbitration costs.

Contact:

Kaydon Corporation
Timothy J. Heasley
Senior Vice President & Chief Financial Officer
(734) 680-2018
READ IT ON THE WEB
http://www.kaydon.com
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