MANCHESTER, CT, October 25, 2001 -- LYDALL, INC. (NYSE: LDL) today announced financial results for the third quarter and nine months ended September 30, 2001.
For the third quarter ended September 30, 2001, income from continuing operations was $2.4 million, or $.15 per diluted share, including the effect of a lower tax rate resulting from the settlement of certain tax audits in the period. Comparable earnings for the third quarter of 2000, excluding the loss associated with the disposition of two non-core German operations, were $3.2 million, or $.20 per diluted share.
Net sales for the third quarter of 2001 were $53.5 million compared with $66.0 million for the same period last year, which included approximately $11.0 million related to previously divested businesses. Gross margin was $14.5 million, or 27.1 percent of sales, compared with $17.3 million, or 26.2 percent of sales, for the same quarter of 2000.
Third quarter and year-to-date 2000 operating results have been restated to exclude the results of discontinued segments.
For the nine months ended September 30, 2001, income from continuing operations was $5.2 million, or $.32 per diluted share, compared with a loss of $6.6 million, or $.42 per diluted share, for the first nine months of 2000. Year-to-date net sales were $170.7 million compared with $204.0 million for the same period in 2000. Gross margin for the first nine months of 2001 was $47.9 million, or 28.0 percent of sales, compared with $52.5 million, or 25.7 percent of sales, in 2000.
In addition to the sale of the German operations, year-to-date 2000 operating results reflect the sale of another non-core business in the first quarter of 2000 for a pretax gain of $6.1 million, or approximately $.24 per share after tax.
The following nonrecurring charges and gains impacted reported results for the periods presented. At September 30, 2001, cash and cash equivalents were $4.7 million compared with $2.2 million at December 31, 2000, and working capital was $42.2 million compared with $54.6 million at the end of last year. Total debt to total capitalization ratio was .12 at September 30, 2001 compared with .22 at December 31, 2000.
Christopher R. Skomorowski, President and Chief Executive Officer, commented, "Like many companies, Lydall had a difficult third quarter, exacerbated by the events of September 11. Although we mitigated somewhat the effects of a slowing economy, extended shutdowns at automotive OEMs, and generally lower demand in our key markets with new-product growth, market share gains, and tight controls on spending, we estimate that the aftermath of the terrorist attacks negatively impacted earnings by $.03 to $.05 per share. While we are expecting less of an impact in the fourth quarter, the repercussions of September 11, added to an already uncertain economy, have made the forecasting process very difficult. We believe that earnings for the year at the lower end of our previously forecasted range of $.62 to $.72 a share may still be achievable. However, given the circumstances, it is tough for us to project results for the fourth quarter with a high degree of accuracy."
Sales of the Filtration/Separation Segment were $15.9 million compared with $16.7 million in the third quarter of 2000. Operating income was $2.1 million in the third quarter of 2001 compared with $2.6 million in the same quarter last year. Lydall countered overall slowing high-efficiency air filtration media markets during the period with new-product sales and market-share gains. Demand for air filtration products in the Far East declined sharply in the quarter due to a depressed Asian microelectronics market. Sales of air filtration media for commercial and industrial applications remained solid, showing particular strength in Europe. Lydall continued its focus on high-technology media and applications employing its strategy to expand its technology base and range of products.
The vital fluid management business, which includes bio-processing products, reported increased sales and operating income compared with the same quarter in 2000 and the second quarter of this year. Manufacturing cost overruns associated with the moving and set-up of a new line in North Carolina earlier in the year have been resolved, and the introduction of Lydall's Bio-PakÔ bio-processing products continued to be well received by the market.
Results of the Thermal/Acoustical Segment were impacted by extended shutdowns at automotive manufacturers and general economic conditions, compounded by the events of September 11. Sales declined by $11.3 million, approximately $10.2 million of which related to non-core businesses divested at the end of the third quarter last year. After adjustment for divestments, sales declined by slightly less than 4 percent in the third quarter of 2001 compared with the same period in 2000. Operating income decreased by 14 percent to $3.9 million compared with $4.5 million in the third quarter of 2000. The majority of the Thermal/Acoustical Segment consists of Lydall's automotive heat shield and acoustical barrier business with the remainder comprised of high-temperature insulating products, specialty building materials, and cryogenic insulation. These latter markets slowed significantly in conjunction with the general economy. Lydall's automotive business, which recorded significant growth year to date, was relatively flat quarter to quarter. The group benefited from sales of new products introduced during the year despite lower overall demand, extended OEM plant shutdowns, and a general malaise by consumers following the terrorist attacks.
Other Products and Services
Sales of other products and services were 10 percent lower compared with the same quarter of 2000, primarily related to the absence of the Covington Operation, which was closed in April of 2001. Operating income was flat quarter to quarter.
On October 9, 2001, Lydall Transport, in partnership with the Virginia Port Authority and its operating company, Virginia International Terminals, Inc., announced the opening of a world-class paper distribution facility at The Port of Virginia's Newport News Marine Terminal.
The new facility will be operated as the Lydall Paper Distribution Center under the management of Lydall and will offer Port customers the advantages of a fully dedicated, on-terminal paper distribution warehouse operation. Lydall Transport specializes in time-sensitive shipments and has an in-depth understanding of the special nature and requirements of the paper and printing industries. The new, 100,000-square-foot facility is expected to be fully operational by December 2001.
On October 22, 2001, Lydall announced the purchase of substantially all of the assets and the assumption of certain limited liabilities of Affinity Industries Inc., a privately held company, for $21.7 million in cash, a portion of which is contingent on the occurrence of certain events. Affinity, located in Ossipee, New Hampshire, is a premier designer and manufacturer of high-precision specialty temperature-control equipment for industrial processes for demanding semiconductor, pharmaceutical, medical, laser, industrial and telecommunication applications and complements Lydall's existing industrial thermal businesses. Results of the Ossipee Operation will be reported as part of the Thermal/Acoustical Segment.
The acquisition of Affinity represents the first step in Lydall's strategy to broaden its industrial thermal focus in value segments of high growth markets. The Affinity product line extends Lydall's technology base while establishing a key position in some very dynamic and developing markets. Affinity, which employs approximately 100 people, has grown sales over the past four years at a compound average annual rate close to 26 percent and has been consistently profitable. Sales of approximately $18 million are forecast for 2002 and Lydall looks forward to it being accretive to 2002 earnings beginning in the first quarter.
During the second quarter of 2001, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 142, "Goodwill and Other Intangible Assets," ("FAS 142"). FAS 142 requires that goodwill recorded in connection with business combinations completed on or before June 30, 2001 shall no longer be amortized after December 31, 2001. In addition, goodwill recorded as a result of a business combination completed after June 30, 2001 will not be amortized.
In accordance with this new standard, goodwill recorded in connection with the acquisition of Affinity Industries Inc. will not be amortized. In addition, amortization of approximately $1.25 million or, $.05 per diluted share, related to goodwill from previous acquisitions will no longer be recorded beginning in fiscal year 2002.
As previously announced, Lydall will hold a conference call today at 2:00 p.m. EDT to discuss its third quarter and nine months year-to-date results as well as the acquisition of Affinity and other general matters related to its businesses and markets. The call may be accessed in a listen-only mode at 800-811-7286 and will be web-cast live on the Company's web site www.lydall.com under the investor relation's section.
Lydall, Inc. is a New York Stock Exchange listed company (NYSE: LDL -news) headquartered in Manchester, Connecticut. The Company, with 11 operations in the U.S., one in France, and one in Germany, with sales offices in Japan and Singapore, focuses on specialty engineered products for the thermal/acoustical and filtration/separation markets.
Stockholders are referred to Lydall's Annual Report and Form 10-K, "Management's Discussion and Analysis of Financial Condition and Results of Operations - Forward-Looking Information," which outlines certain risks regarding the Company's forward-looking statements. Such risks include: a major downturn of the automotive market which accounted for approximately 48 percent of Lydall's total third quarter 2001 sales and significant, unforeseen changes in raw material pricing, specifically, aluminum used in most of the Company's heat-shield products. Also, the timing and degree of success of new-product programs impact Lydall's projected results. For further details on these risks and other pertinent information on Lydall, copies of the Company's Forms 10-K, 10-Q and 8-K are available on Lydall's web site (www.lydall.com ). Information may also be obtained from Lydall's toll-free investor information service at 877-LDL-NYSE (535-6973). Company Contact: Carole F. Butenas, Vice President - Investor Relations, at One Colonial Road, Manchester, CT 06040; Tel. 860-646-1233, e-mail:firstname.lastname@example.org.