Loading ...ANN ARBOR, Mich.–(BUSINESS WIRE)–Kaydon Corporation (NYSE: KDN) today announced its results for the fourth quarter and full year ended December 31, 2009.
Consolidated Results
Sales in the fourth quarter of 2009 were $108.9 million, compared to $132.4 million in the fourth quarter of 2008. Wind energy sales in the fourth quarter of 2009 were $21.3 million, compared to $24.0 million in the fourth quarter of 2008. Full year 2009 wind energy sales of $103.0 million were 28.0 percent higher compared to $80.5 million wind energy sales for the full year 2008.
Operating income was $18.0 million in the fourth quarter of 2009, compared to $22.4 million in the fourth quarter of 2008. EBITDA, a non-GAAP measure and as defined by the Company, was $25.6 million, or 23.5 percent of sales, during the fourth quarter of 2009, compared to $29.6 million, or 22.4 percent of sales, during the fourth quarter of 2008. Readers should refer to the attached Reconciliation of Non-GAAP Measures exhibit for the calculation of EBITDA and the reconciliation of EBITDA to the most comparable GAAP measure. During the fourth quarter of 2009, the Company recognized a $0.9 million net gain on the curtailment of certain postretirement benefits. This gain was fully offset by one-time costs at its split roller bearing facility in England, including employee termination costs associated with a fourth quarter of 2009 downsizing.
Net income was $11.4 million in the fourth quarter of 2009, or $.34 per share on a diluted basis, compared to net income of $13.8 million in the fourth quarter of 2008, or $.40 per share on a diluted basis. Fourth quarter 2008 results have been adjusted to reflect the required retrospective application of new accounting guidance related to earnings per share, effective January 1, 2009. This new guidance required retrospective application to prior periods which reduced previously reported fourth quarter 2008 basic earnings per share and diluted earnings per share by $.01.
Full year 2009 sales totaled $441.1 million compared to $522.4 million for full year 2008. Sales declines in our core industrial businesses associated with adverse macroeconomic conditions more than offset increased sales in our wind energy business during 2009. Full year 2009 diluted earnings per share totaled $1.37 compared to $2.06 per share in full year 2008, as adjusted for the retrospective application of new accounting guidance.
Backlog was $218.5 million at December 31, 2009, compared to $250.1 million at October 3, 2009, and $312.6 million at December 31, 2008. Wind energy backlog was $109.2 million at December 31, 2009, compared to $129.6 million at October 3, 2009, and $160.2 million at December 31, 2008.
Management Commentary
James O’Leary, Chairman and Chief Executive Officer commented, “We are satisfied with the results achieved in a historically challenging economic environment. More importantly, we believe we will exit this recession more competitive than when we entered it due to the actions taken over the past two years. During 2009, the Company focused on managing those things within its control, notably converting backlog, reducing and containing costs, and positioning ourselves for longer term growth opportunities that will arise. These actions were initiated early and aggressively in this downturn and have yielded improved results relative to both the start of this year and the cyclical trough of the previous recession. We are especially pleased with our cash flow performance, which reflected our disciplined approach to managing costs and capital during this challenging period.”
“While we are confident in our strategic positioning in each of our markets, meaningful improvements in 2010 will be dependent on continued improvements in the industrial economy and an actionable renewable energy policy. Overall, our industrial end markets have stabilized at the lower levels noted in past quarters, with non-wind sales increasing sequentially for the second consecutive quarter. Military sales, while below prior year’s level, also improved sequentially, and semiconductor end market sales grew for the third consecutive quarter and exceeded the prior fourth quarter sales. While wind energy sales declined sequentially, this was largely due to the timing of customer releases in the third quarter as we shipped a significant amount of product that had been delayed due to global credit conditions.”
“During the first two months of 2010, non-wind orders have improved both sequentially and relative to the prior year. Cumulative incoming orders on a quarter-to-date basis have exceeded prior years’ levels for the first time since the third quarter of 2008. Looking forward for our core industrial markets, growth in 2010 will largely be dependent on continued improvement in these order rates, which will result from improved capacity utilization and increased capital spending by our customers. Also, improved wind energy orders will need to be driven by increased electricity demand from an improved economy and greater clarity on the public policy front.”
“The Company took difficult but necessary steps to reduce its cost base during the past two years. Having taken these actions, and with its strong debt-free balance sheet, the Company is well positioned for the future. The strength of our balance sheet and the cash generating ability of our businesses will allow us to fund important initiatives and take advantage of opportunities that may arise over time. Our third consecutive year of increasing our dividend, unique in this environment, reflects the confidence of our management team and our Board in the fundamental strengths of our Company.”
Quarterly Segment Results and Review
Friction Control Products sales in the fourth quarter of 2009 were $72.9 million, compared to $85.8 million in the fourth quarter of 2008. The adverse effects of macroeconomic difficulties affected our core industrial businesses, with only the semiconductor business achieving growth in the fourth quarter of 2009 compared to fourth quarter 2008. Notably, sales of heavy equipment turntable bearings and split roller bearings declined due to the much lower level of industrial activity globally. Wind energy sales decreased in the fourth quarter of 2009 compared to the prior fourth quarter and also sequentially compared to the third quarter of 2009 following record wind energy sales in the third quarter.
Fourth quarter 2009 Friction Control Products operating income was $12.7 million, compared to $17.7 million in the fourth quarter of 2008. The decline in operating income was attributable to decreased sales, increased depreciation, increased pension costs, and one-time split roller bearing costs, including employee termination costs.
Velocity Control Products sales in the fourth quarter of 2009 were $11.8 million, compared to $13.8 million in the fourth quarter of 2008, due to reduced demand in both Europe and North America. Fourth quarter 2009 Velocity Control Products operating income was $1.3 million, compared to $1.8 million in the fourth quarter of 2008 due principally to lower sales volume.
Sealing Products sales in the fourth quarter of 2009 were $8.8 million, compared to $11.0 million in the fourth quarter of 2008, due to lower demand stemming from the general economic decline. Fourth quarter 2009 Sealing Products operating income was $1.7 million, compared to $0.9 million in the fourth quarter of 2008 due to reduced costs, including a favorable inventory adjustment, and the absence of an asset impairment charge recorded in the prior fourth quarter, partly offset by the impact of lower sales.
Sales from the Company’s remaining businesses in the fourth quarter of 2009 were $15.3 million, compared to $21.8 million in the fourth quarter of 2008 resulting from lower demand related to the general economic decline. Fourth quarter 2009 other business operating income was $1.4 million, compared to $3.1 million in the fourth quarter of 2008, due principally to lower sales volume.
Financial Position and Free Cash Flow
The Company had unrestricted cash totaling $262.4 million, $300.0 million in committed available credit and no debt outstanding as of December 31, 2009.
Free cash flow, a non-GAAP measure defined by the Company as net cash from operating activities less capital expenditures, net of dispositions, was $19.7 million in the fourth quarter of 2009 compared to a net use of $5.5 million during the fourth quarter of 2008, which included the effects of an $11.9 million contribution to our qualified pension plans and net capital expenditures of $13.7 million. Readers should refer to the attached Reconciliation of Non-GAAP Measures exhibit for the calculation of free cash flow and the reconciliation of free cash flow to the most comparable GAAP measure.
On October 5, 2009, the Company paid a common stock dividend of $.18 per share or an aggregate of $6.0 million. This is the third consecutive year of increasing our dividend, reflecting the fundamental strength of our businesses and our confidence in the long term prospects of the Company.
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, industrial, aerospace, medical and electronic equipment, and aftermarket customers.
