Kaydon Reports Fourth Quarter,Full-Year 2005 Results

Kaydon Corp. (USA; NYSE: KDN) reported financial results covering fourth quarter and full-year fiscal 2005, ending December 31, 2005. On the results, which beat analyst estimates by a wide margin, Kaydon stock has set new 52-week highs and moved closer to all-time highs established in the late 1990's. Sales for the fourth quarter were up 24%, reaching $89.7 million from $72.2 million in 2004. Gross profit reached $37.2 million, or 41.5% of sales, from $29.9 million, or 41.1% of sales, in fourth quarter 2004. Net income for the quarter rose 44%, to $14.4 million, from 2004's $10.0 million. Analysts had estimated net income would be in the neighborhood of $12.5 million. Kaydon said the sales improvement traced back to stronger sales across most of its product lines, including specialty bearings, split roller bearings, sealing products, and metalforming equipment. Other operations reported a net decline of approximately $1.1 million -- filtration products, specialty metal alloys, and specialty ball products. Higher profits in the fourth quarter were the result of third quarter actions to increase selling prices across most strategic product lines, offsetting raw material price increases. Fourth quarter's momentum is expected to continue on into 2006, as the company reported increased orders across many specialty products into various key markets. With the quarter's order entry running $112.7 million, it was Kaydon's strongest quarter in 2005. Kaydon's Friction and Motion Control Products division is home to the bearing operations. Seals and slip rings are also carried by the company's three other divisions, Velocity Control Products, Sealing Products, Power and Data Transmission Products (since divested to Moog, Inc.), and Other. In the fourth quarter, Friction and Motion Control reported sales up 23%, reaching $51 million. Operating income rose 26.4%, to $14.6 million. Kaydon said segment sales benefited from increased demand for specialty bearings utilized in defense, heavy equipment, wind power, and various industrial markets. Profitability was strained by higher but moderating raw material costs, more than offset by selling price increases launched in third quarter, and capacity increases. The company ended 2005 with an order backlog of $150.2 million, up almost 50% from the December 31, 2004 backlog of $101.6 million. For the full year 2005, sales were $354.6 million, up 19.5% over 2004's $296.7 million. Specifically, Kaydon said the increase is the result of increased sales of custom-engineered bearings to various defense-related markets of $17.1 million, the wind power market of $6.9 million, the heavy equipment market of $6.0 million, and the medical equipment market of $3.8 million. Also, industrial sales of split roller bearings were up $4.4 million. Those increases were partially offset by reduced sales of custom-engineered bearings to the specialty electronics manufacturing equipment market of $5 million and the machinery market of $1 million, and by reduced sales to specialty ball markets of $1 million. Gross profit for the year hit $139.0 million, 39.2% of sales, from $121.2 million, or 40.8% of sales in 2004. Kaydon said gross was impacted by operating inefficiencies curing the first half of the year related to new programs for military and wind power applications and by higher material costs that were not offset by selling price increases until late third and into the fourth quarter. Including discontinued operations, Net income for 2005 was $73.9 million, from $38.4 million in 2004. Friction and Motion Control Products division sales for 2005 were $195.0 million, up more than $31 million from 2004. Similarly, operating income for the division was up 21%, to $49.5 million in 2005, from $40.9 million in 2004. Kaydon President and CEO, Brian Campbell, said: "We are pleased with our fourth quarter and full year results, both of which improved nicely over 2004's comparable periods. Our strong order intake during the year and resultant year-end backlog, reflect the strength in our key markets during the year. Our performance also reflects the success of our efforts to drive growth through new product development and application engineering, our continued success in providing performance critical products to meet demanding customer needs, and our operational excellence initiatives."