Kaydon Reports First Quarter 2006 Results

Kaydon Corp. (USA; NYSE: KDN) reported operating results for the first quarter of 2006. Sales in the quarter were USD $101.5 million, up 20% from $84.6 million in 2005. The company credited higher sales across most product lines; specialty bearings, sealing products, air filtration products, and metalforming equipment. The performance in those sectors was partially offset by $600,000 drops in sales of linear deceleration products, liquid filtration products, specialty metal alloys, and specialty ball products. Net income was $16.6 million (16.3% of sales), not including $700,000 from discontinued operations, up more than 80% from $9.2 million (10.9% of sales) in first quarter 2005. Profits were helped by the higher sales volumes, and comparatively to 2005 by the absence of some unique expense items that hit 2005. As with many manufacturers, higher raw material costs experienced early in 2005 were not yet being offset by selling price increases; that effect and ramp-up costs for new programs in the specialty bearings business were depressing results. Kaydon received $96 million in orders during the quarter, pushing its end-of-quarter backlog to $144.6 million, from $127 million a year ago, reflecting continued strength across the entire manufacturing economy. 2005's first quarter included an unusually large $7.8 million order for bearings used in wind power generation equipment. That same customer reportedly accelerated its early 2006 bearing deliveries into late 2005, impacting apparent order backlog in 2006's first quarter. Kaydon's Friction and Motion Control Products division is home to the bearing manufacturing. 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. Friction and Motion Control Products saw sales in the quarter grow by more than 27%, to $57.1 million. The segment's operating income was also up strongly, by 50%, to $15.9 million. The higher segment sales were driven primarily by demand for specialty bearings used in the defense, machinery and heavy equipment markets, including the above-mentioned wind power market. Profitability in the quarter was helped by higher selling prices which recovered higher raw material costs, and by improved operating efficiencies in the military and industrial programs. Brian Campbell, President and CEO, said: "Our excellent first quarter performance reflects not only strong demand from our key markets, but also validates our disciplined operating and profit growth strategies." He went on to say: "Our first quarter performance is indicative of the growth of the strong, investment-led economy, as well as Kaydon's strong engineering, manufacturing, and proprietary product competitive positions. Base on our current results and positive order trends, we are looking forward to another successful year of increased operating performance in 2006."