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Kaydon Corporation Reports First Quarter 2013 Results



  Kaydon Corporation Reports First Quarter 2013 Results

Business Wire

ANN ARBOR, Mich. -- May 09, 2013

Kaydon Corporation (NYSE: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                156           (702     )
  compensation
  Deferred financing fees                             123           346
  Contributions to qualified pension plans            (180    )     (634     )
  Net change in receivables, inventories and          3,185         (18,216  )
  trade payables
  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                (156    )     702
  compensation
  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              12,019        (188,923 )
equivalents
                                                                   
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              $     51,674                $    65,803
Products
Velocity Control                    32,587                     24,299
Products
Other Industrial                    26,412                     26,364      
Products
                                                           
Total consolidated net        $     110,673               $    116,466     
sales
                                                           
                                                           
                              Three Months Ended
                                                           
                              March 30,                   March 31,
Operating income              2013                        2012
                                                           
Friction Control              $     7,293                 $    11,819
Products
Velocity Control                    7,508                      5,842
Products
Other Industrial                    2,072                      1,909       
Products
Total segment operating             16,873                     19,570
income
Items not allocated to
segment operating                   (1,135      )              (2,235     )
income
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."

                                                                  
Kaydon Corporation
Reconciliation of Non-GAAP Measures
(In thousands)
                                                                    
                                                                    
                     Three Months Ended              LTM
                                                                    
                     March 30,        March 31,      March 30,     March 31,
Free cash flow,
as defined           2013             2012           2013          2012
(non-GAAP)
Net cash from
operating            $  26,302        $  5,957       $ 107,227     $ 53,572
activities (GAAP)
Capital
expenditures, net       (1,960  )        (1,514  )     (15,702 )     (11,963 )
of dispositions
Free cash flow,
as defined           $  24,342        $  4,443       $ 91,525      $ 41,609   
(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              LTM
                                                                    
                     March 30,        March 31,      March 30,     March 31,
                     2013             2012           2013          2012
Adjusted EBITDA,
as defined
(non-GAAP)
Net income (GAAP)    $  10,674        $  12,121      $ (897    )   $ 49,463
Net interest            830              263           3,375         242
(income)/expense
Provision for           4,234            4,951         11,037        20,367
income taxes
Depreciation and
amortization of         4,808            5,749         21,805        23,558
intangible assets
Stock-based
compensation            804              2,007         3,613         6,296    
expense (1)
EBITDA, as
defined                 21,350           25,091        38,933        99,926
(non-GAAP)
                                                                    
Arbitration costs       -                143           3,989         5,924
Impairment and
restructuring           551              163           46,976        1,808
related costs (2)
Due diligence and
purchase                30               -             2,070         1,302
accounting costs
Recapitalization        -                267           266           267
costs
Curtailment gains       -                -             -             (275    )
Amortization of
net actuarial           1,172            1,126         4,824         3,229
loss
Pension                 -                -             2,914         -        
settlement
Adjusted EBITDA,
as defined           $  23,103        $  26,790      $ 99,972      $ 112,181  
(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, other program costs of $0.8 million, and asset retirement obligations
of $0.2 million for the twelve months ended March 30, 2013.
                                                                    
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 March 30, 2013
                                                                                                                                        
                          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   $ 110,673     $   -           $  -          $   -            $  -         $    -             $   -          $  -           $ 110,673
                                                                                                                                        
Gross         41,371          574            -              -               -              -                 -             759           42,704
profit
                                                                                                                                        
Gross         37.4    %       0.5    %       0.0   %        0.0    %        0.0   %        0.0     %         0.0    %      0.7    %      38.6    %
margin
                                                                                                                                        
S, G & A      25,633          (23    )       -              -               30             -                 -             413           25,213   
expenses
                                                                                                                                        
Operating     15,738          551            -              -               30             -                 -             1,172         17,491
income
                                                                                                                                        
Interest,     (830    )       -              -              -               -              -                 -             -             (830    )
net
                                                                                                                                        
Income
before        14,908          551            -              -               30             -                 -             1,172         16,661
taxes
                                                                                                                                        
Tax
provision     4,234           156            -              -               9              -                 -             333           4,732    
*
                                                                                                                                        
Net         $ 10,674      $   395         $  -          $   -            $  21        $    -             $   -          $  839         $ 11,929   
income
                                                                                                                                        
Diluted     $ 0.33        $   0.01        $  0.00       $   0.00         $  0.00      $    0.00          $   0.00       $  0.03        $ 0.37
EPS
                                                                                                                                        
            Three months ended March 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   $ 116,466     $   -           $  -          $   -            $  -         $    -             $   -          $  -           $ 116,466
                                                                                                                                        
Gross         41,599          -              -              -               -              -                 -             831           42,430
profit
                                                                                                                                        
Gross         35.7    %       0.0    %       0.0   %        0.0    %        0.0   %        0.0     %         0.0    %      0.7    %      36.4    %
margin
                                                                                                                                        
S, G & A      24,264          -              143            163             -              1,058             -             295           22,605   
                                                                                                                                        
Operating     17,335          -              143            163             -              1,058             -             1,126         19,825
income
                                                                                                                                        
Interest,     (263    )       -              -              -               -              247               -             -             (16     )
net
                                                                                                                                        
Income
before        17,072          -              143            163             -              1,305             -             1,126         19,809
taxes
                                                                                                                                        
Tax
provision     4,951           -              41             47              -              378               -             327           5,744    
*
                                                                                                                                        
Net         $ 12,121      $   -           $  102        $   116          $  -         $    927           $   -          $  799         $ 14,065   
income
                                                                                                                                        
Diluted     $ 0.38        $   -           $  -          $   -            $  -         $    0.03          $   -          $  0.03        $ 0.44
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.

 
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
                                                                                                                                        
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         $ 8,038       $   180         $  -          $   18           $  64        $    196           $   2,151      $  932         $ 11,579   
income
                                                                                                                                        
Diluted     $ 0.25        $   0.01        $  0.00       $   0.00         $  0.00      $    0.01          $   0.07       $  0.03        $ 0.36
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.

Contact:

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