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Kaydon Corporation Reports Second Quarter 2011 Results
Dépèche transmise le 29 juillet 2011 par Business Wire
Kaydon Corporation Reports Second Quarter 2011 Results
ANN ARBOR, Mich.--(BUSINESS WIRE)--Kaydon Corporation (NYSE:KDN) today announced its results for the second fiscal quarter ended July 2, 2011.
“We continue to see strength in our diversified industrial end markets, notably industrial machinery, heavy equipment and medical. In addition, we are extremely pleased with the performance of HAHN, which we acquired in April, and expect considerable further opportunity as it contributes to our Velocity Controls’ product offering.”
Consolidated Results
Sales in the second fiscal quarter of 2011 were $122.0 million, compared to sales of $121.5 million in the second fiscal quarter of 2010. Strong industrial sales, including the results of HAHN-Gasfedern GmbH (“HAHN”) which we acquired on April 8, 2011, offset decreased wind energy sales and the absence of a key military sales program that benefited 2010.
Operating income was $20.4 million in the second quarter of 2011, compared to $26.3 million in the second quarter of 2010. Second quarter of 2011 results included $1.3 million of net costs associated with a previously announced manufacturing consolidation program, due diligence and one time acquisition costs, and a small curtailment gain. Adjusting for these items, operating income was $21.8 million in the second quarter of 2011. The second quarter of 2010 results also included $0.2 million of net costs associated with the manufacturing consolidation program and acquisition due diligence costs, primarily offset by curtailment gains associated with changes to certain postretirement benefit programs.
EBITDA was $27.9 million, or 22.8 percent of sales, during the second quarter of 2011, compared to $33.6 million, or 27.6 percent of sales, during the second quarter of 2010. Adjusting for the items noted above, EBITDA was $29.2 million, or 23.9 percent of sales, in the second quarter of 2011, and $33.8 million, or 27.8 percent of sales in the second quarter of 2010.
Net income for the second quarter of 2011 was $14.2 million, compared to net income of $17.8 million in the second quarter of 2010. Diluted earnings per share was $.43 in the second quarter of 2011 compared to diluted earnings per share of $.53 in the second quarter of 2010. Adjusting for the items noted above, net income for the second quarter 2011 was $15.1 million, or $.46 per share on a diluted basis, and $18.0 million, or $.54 per share on a diluted basis, for the second quarter of 2010.
The effective tax rate for the second quarter of 2011 was 30.8 percent compared to 32.2 percent for the 2010 second quarter. The lower tax rate is principally due to the increasing percentage of earnings from international operations taxed at lower rates than earnings in the U.S. This shift is consistent with Kaydon’s articulated strategy of increasing its international operating presence.
This press release includes certain non-GAAP measures, including EBITDA, free cash flow, and as adjusted operating income, EBITDA, net income, and earnings per share – diluted. 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.
Management Commentary
James O’Leary, Chairman and Chief Executive Officer, commented “Our second quarter of 2011 continued the steady improvement experienced over the past eighteen months. Sales increased over both this year’s first quarter and the prior year’s second quarter as strength in our industrial businesses offset the expected declines in our renewable energy and military businesses. We expect continued improvement through the second half of 2011 as comparisons against 2010’s strong wind and military performances ease and the contribution from our industrial businesses increases.
“We continue to see strength in our diversified industrial end markets, notably industrial machinery, heavy equipment and medical. In addition, we are extremely pleased with the performance of HAHN, which we acquired in April, and expect considerable further opportunity as it contributes to our Velocity Controls’ product offering.
“While there remains a need for a clear, consistent national energy policy to support long term growth in renewable energy, we continue to see indications that the market has bottomed. Increased prequalification activity, notably quotations and prototypes, in addition to the continuing shift in global sentiment towards safer, renewable energy sources, such as that recently experienced in Germany, suggests that better times may be ahead.”
Segment Results and Review
Friction Control Products sales in the second quarter of 2011 were $65.8 million, compared to $79.7 million in the 2010 second quarter. The expected decline was attributable to decreased wind energy and military sales, as wind energy sales declined approximately $12 million compared to the second quarter of 2010. Management continues to expect annual wind energy sales of $60 to $65 million for 2011. Second quarter 2011 sales to industrial markets increased almost 15 percent compared to the second quarter of 2010.
Second quarter 2011 Friction Control Products operating income totaled $11.5 million, compared to $20.3 million in the prior second quarter. Costs related to the manufacturing consolidation program were $0.5 million in the second quarter of 2011 and $0.7 million in last year’s second quarter. Adjusting for these costs, operating income for Friction Control Products segment was $12.1 million, compared to $21.0 million in last year’s second quarter. This decline was attributable to the decreased wind energy and military sales as compared to strong results in the second quarter 2010.
Velocity Control Products sales in the second quarter of 2011 were $25.3 million, compared to $15.1 million in the second quarter of 2010. Operating income for this segment totaled $5.9 million in the second quarter of 2011, compared to $4.0 million earned in the 2010 second quarter, due to improved sales and the addition of HAHN. The second quarter of 2011 includes one time acquisition transaction and purchase accounting costs of $0.5 million. Adjusting for these costs, operating income for Velocity Control Products was $6.4 million in the second quarter of 2011 compared to $4.0 million in the second quarter of 2010. The 2011 quarter also included an investment in sales and marketing of $0.8 million to increase our global sales team and enhance our advertising plan to take advantage of the momentum this segment is currently experiencing, particularly with the addition of HAHN.
Other Industrial Products sales in the second quarter of 2011 were $30.9 million, compared to $26.7 million in the 2010 second quarter. Operating income equaled $4.4 million in the second quarter of 2011, compared to operating income of $2.8 million in the second quarter of 2010, due to improved sales across most of these businesses.
Order Activity
Orders were $111.5 million in the second quarter of 2011, compared to $108.2 million in the second quarter of 2010. Non-wind orders exceeded shipments by approximately 4 percent while wind orders were negligible. The Company expects more significant wind orders in the second half of the year as is historically the case. Backlog at July 2, 2011 was $196.4 million compared to $186.5 million at July 3, 2010 and $203.0 million at April 2, 2011, the end of first quarter 2011.
Financial Position and Free Cash Flow
Free cash flow, a non-GAAP measure defined by the Company, was $10.1 million in the second quarter of 2011, compared to $17.0 million in the second quarter of 2010.
On April 4, 2011, the Company paid common stock dividends of $.19 per share or an aggregate of $6.2 million. During the second quarter of 2011 the Company repurchased 385,000 shares of common stock for $14.2 million. Year-to-date share repurchases totaled 742,091 for $28.2 million. For the third quarter of 2011, the Company declared a dividend of $.20 per share, payable on October 3, 2011. This represents the fifth consecutive annual increase in quarterly dividends.
As of July 2, 2011, the Company had unrestricted cash totaling $223.3 million. The Company has a $250 million senior revolving credit facility with a syndicate of banks which provides for borrowings by the Company for working capital and other general corporate purposes, including acquisitions. The Company had no outstanding borrowings under this facility and no other debt outstanding as of July 2, 2011.
About Kaydon
Kaydon Corporation is a leading designer and manufacturer of custom engineered, performance-critical products, supplying a broad and diverse group of alternative energy, military, industrial, aerospace, medical and electronic equipment, and aftermarket customers.
Conference call information: At 11:00 a.m. Eastern time today, Kaydon will host a second quarter 2011 earnings conference call. The conference call can be accessed telephonically in a listen-only mode by dialing 1-888-811-5455 and providing the following passcode number: 800500. Listeners 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=334105&s=1&k=0F130415BF31942848A043A5452871B0
or by logging on to the Kaydon Corporation website at: http://www.kaydon.com and accessing the conference call at the “Second Quarter 2011 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 Thursday, August 4, 2011 at 2:00 p.m. Eastern time. The replay is accessible by dialing 1-888-203-1112 and providing the following passcode number: 4880327.
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 CONDENSED STATEMENTS OF OPERATIONS | |||||||||||||||||||
| Second Quarter Ended | First Half Ended | ||||||||||||||||||
| July 2, | July 3, | July 2, | July 3, | ||||||||||||||||
| 2011 | 2010 | 2011 | 2010 | ||||||||||||||||
| Net sales | $ | 122,029,000 | $ | 121,500,000 | $ | 230,370,000 | $ | 240,745,000 | |||||||||||
| Cost of sales | 78,045,000 | 75,563,000 | 147,564,000 | 153,039,000 | |||||||||||||||
| Gross profit | 43,984,000 | 45,937,000 | 82,806,000 | 87,706,000 | |||||||||||||||
| Selling, general and administrative expenses | 23,537,000 | 19,679,000 | 44,860,000 | 41,766,000 | |||||||||||||||
| Operating income | 20,447,000 | 26,258,000 | 37,946,000 | 45,940,000 | |||||||||||||||
| Interest expense | (98,000 | ) | (62,000 | ) | (195,000 | ) | (124,000 | ) | |||||||||||
| Interest income | 110,000 | 98,000 | 289,000 | 122,000 | |||||||||||||||
| Income before income taxes | 20,459,000 | 26,294,000 | 38,040,000 | 45,938,000 | |||||||||||||||
| Provision for income taxes | 6,301,000 | 8,478,000 | 11,892,000 | 14,295,000 | |||||||||||||||
| Net income | $ | 14,158,000 | $ | 17,816,000 | $ | 26,148,000 | $ | 31,643,000 | |||||||||||
| Earnings per share: | |||||||||||||||||||
| Basic | $ | 0.44 | $ | 0.53 | $ | 0.80 | $ | 0.94 | |||||||||||
| Diluted | $ | 0.43 | $ | 0.53 | $ | 0.80 | $ | 0.94 | |||||||||||
| Dividends declared per share | $ | 0.19 | $ | 0.18 | $ | 0.38 | $ | 0.36 | |||||||||||
| KAYDON CORPORATION | ||||||||
| CONSOLIDATED CONDENSED BALANCE SHEETS | ||||||||
| July 2, | December 31, | |||||||
| 2011 | 2010 | |||||||
| Assets: | ||||||||
| Cash and cash equivalents | $ | 223,267,000 | $ | 286,648,000 | ||||
| Accounts receivable, net | 87,256,000 | 76,010,000 | ||||||
| Inventories, net | 103,554,000 | 88,253,000 | ||||||
| Other current assets | 15,850,000 | 16,384,000 | ||||||
| Total current assets | 429,927,000 | 467,295,000 | ||||||
| Property, plant and equipment, net | 176,625,000 | 169,597,000 | ||||||
| Goodwill, net | 160,152,000 | 143,428,000 | ||||||
| Other intangible assets, net | 32,793,000 | 18,047,000 | ||||||
| Other assets | 4,557,000 | 2,965,000 | ||||||
| Total assets | $ | 804,054,000 | $ | 801,332,000 | ||||
| Liabilities and Shareholders' Equity: | ||||||||
| Accounts payable | $ | 20,984,000 | $ | 16,944,000 | ||||
| Accrued expenses | 36,188,000 | 36,085,000 | ||||||
| Total current liabilities | 57,172,000 | 53,029,000 | ||||||
| Long-term liabilities | 43,524,000 | 39,165,000 | ||||||
| Shareholders' equity | 703,358,000 | 709,138,000 | ||||||
| Total liabilities and shareholders' equity | $ | 804,054,000 | $ | 801,332,000 | ||||
| KAYDON CORPORATION | |||||||||||||||||||
| CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS | |||||||||||||||||||
| Second Quarter Ended | First Half Ended | ||||||||||||||||||
| July 2, | July 3, | July 2, | July 3, | ||||||||||||||||
| 2011 | 2010 | 2011 | 2010 | ||||||||||||||||
| Cash flows from operating activities: | |||||||||||||||||||
| Net income | $ | 14,158,000 | $ | 17,816,000 | $ | 26,148,000 | $ | 31,643,000 | |||||||||||
| Adjustments to reconcile net income to | |||||||||||||||||||
| net cash from operating activities: | |||||||||||||||||||
| Depreciation | 5,146,000 | 4,992,000 | 9,967,000 | 10,023,000 | |||||||||||||||
| Amortization of intangible assets | 793,000 | 871,000 | 1,458,000 | 1,842,000 | |||||||||||||||
| Amortization of stock awards | 1,117,000 | 1,072,000 | 2,023,000 | 2,144,000 | |||||||||||||||
| Stock option compensation expense | 357,000 | 373,000 | 678,000 | 670,000 | |||||||||||||||
| Excess tax benefits from stock-based compensation | (37,000 | ) | (62,000 | ) | (58,000 | ) | (124,000 | ) | |||||||||||
| Deferred financing fees | 97,000 | 62,000 | 194,000 | 124,000 | |||||||||||||||
| Non-cash postretirement benefits curtailment gain | (142,000 | ) | (3,066,000 | ) | (142,000 | ) | (3,066,000 | ) | |||||||||||
| Net change in receivables, inventories | |||||||||||||||||||
| and trade payables | (6,183,000 | ) | (2,909,000 | ) | (16,642,000 | ) | (6,714,000 | ) | |||||||||||
| Contributions to qualified pension plans | (634,000 | ) | (657,000 | ) | (1,112,000 | ) | (657,000 | ) | |||||||||||
| Net change in other assets and liabilities | (1,130,000 | ) | 3,933,000 | (1,701,000 | ) | 16,167,000 | |||||||||||||
| Net cash from operating activities | 13,542,000 | 22,425,000 | 20,813,000 | 52,052,000 | |||||||||||||||
| Cash flows from investing activities: | |||||||||||||||||||
| Capital expenditures | (3,403,000 | ) | (5,491,000 | ) | (7,731,000 | ) | (7,191,000 | ) | |||||||||||
| Dispositions of property, plant and equipment | 8,000 | 19,000 | 77,000 | 40,000 | |||||||||||||||
| Acquisition of business, net of cash received | (39,047,000 | ) | - | (39,047,000 | ) | - | |||||||||||||
| Net cash used in investing activities | (42,442,000 | ) | (5,472,000 | ) | (46,701,000 | ) | (7,151,000 | ) | |||||||||||
| Cash flows from financing activities: | |||||||||||||||||||
| Cash dividends paid | (6,230,000 | ) | (6,057,000 | ) | (12,509,000 | ) | (12,100,000 | ) | |||||||||||
| Purchase of treasury stock | (14,174,000 | ) | (1,274,000 | ) | (28,150,000 | ) | (8,789,000 | ) | |||||||||||
| Excess tax benefits from stock-based compensation | 37,000 | 62,000 | 58,000 | 124,000 | |||||||||||||||
| Proceeds from exercise of stock options | - | 48,000 | 39,000 | 55,000 | |||||||||||||||
| Net cash used in financing activities | (20,367,000 | ) | (7,221,000 | ) |
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