Kaydon Corporation Reports 67.7 Percent Growth in Diluted Earnings Per Share for 2006 First Quarter; Sales Increased 20.0 Percent and Operating Income Grew 56.2 Percent; Operating Margins of 23.3 Percent Improved 540 Basis Points in the Quarter

Business Wire, April 28, 2006

ANN ARBOR, Mich. -- Kaydon Corporation (NYSE:KDN) today announced its financial results for the first quarter ended April 1, 2006. Sales of continuing operations were up 20.0 percent, after tax income from continuing operations increased 80.2 percent and diluted earnings per share from continuing operations of $.52 were up 67.7 percent, compared with the first quarter of last year.

Highlights - Continuing Operations - First Quarter 2006

--The Company achieved record first quarter sales of $101.5 million, versus $84.6 million during last year's first quarter.

--Operating income equaled $23.6 million, or 23.3 percent of sales, compared to $15.1 million, or 17.9 percent of sales, last year.

--After tax income equaled $16.6 million, or 16.3 percent of sales, compared to $9.2 million, or 10.9 percent of sales, last year.

--Diluted earnings per share were $.52, versus $.31 last year.

--Order entry during the quarter equaled $95.9 million, resulting in a quarter-end backlog of $144.6 million versus $127.0 million last year.

--EBITDA, a non-GAAP measure, was $28.0 million, equal to 27.6 percent of sales, and covered interest expense by 11.6 times. EBITDA for the last twelve months ended April 1, 2006 totaled $95.7 million, equal to 25.8 percent of sales, and covered interest expense by 10.0 times.

--Cash and cash equivalents equaled $327.6 million at the end of the first quarter.

Brian P. Campbell, President and Chief Executive Officer commented, "Our excellent first quarter performance reflects not only strong demand from our key markets, but also validates our disciplined operating and profit growth strategies. Operating and cash flow performance for the first quarter, together with our improved cost basis and productivity and lean manufacturing initiatives, provide us with further opportunities to enhance both internal and external growth."

In commenting further, Mr. Campbell said, "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. Based upon our current results and positive order trends, we are looking forward to another successful year of increased operating performance in 2006."

Additional Data on First Quarter 2006 Results

Sales of continuing operations during the first quarter of 2006 equaled a record $101.5 million, a 20.0 percent increase compared to $84.6 million during the first quarter of 2005. Increased sales across many of the Company's product lines, including specialty bearings, sealing products, air filtration products, and metal forming equipment were only partially offset by decreases totaling $0.6 million related to linear deceleration products, liquid filtration products, specialty metal alloys, and specialty ball products.

Gross profit from continuing operations equaled $41.5 million or 40.9 percent of sales for the first quarter of 2006 as compared to $33.4 million or 39.5 percent of sales for the first quarter of 2005. First quarter 2006 gross profit was positively affected by higher sales volume, and by the absence of several items that negatively affected last year's first quarter gross profit, including higher material costs that were not offset by selling price increases and ramp up costs of new programs in the specialty bearings business.

Selling, general, and administrative expenses of continuing operations, equaled $17.9 million or 17.6 percent of sales during the first quarter of 2006 as compared to $18.3 million or 21.6 percent of sales during the first quarter of 2005.

Operating income from continuing operations increased 56.2 percent, to $23.6 million, in the first quarter of 2006, equal to 23.3 percent of sales, compared to $15.1 million, or 17.9 percent of sales, in the first quarter of 2005.

Interest income increased to $3.4 million during the first quarter of 2006, compared with $1.5 million during the first quarter of 2005.

The effective tax rate for continuing operations for the first quarter of 2006 was 32.6 percent, reflecting a $0.9 million reduction to the tax provision resulting from the Company's most current evaluation of contingency reserves related to deductions previously not recognized for financial reporting purposes, after a recent examination by a taxing authority. The effective tax rate during the first quarter of 2005 was 35.2 percent. We expect the effective tax rate for the remainder of 2006 will be approximately 36.0 percent.

Income from continuing operations for the first quarter of 2006 was $16.6 million or $.52 per share on a diluted basis, based on 34.8 million common shares outstanding. During the first quarter of 2005 Kaydon generated income from continuing operations of $9.2 million or $.31 per share on a diluted basis, also based on 34.8 million common shares outstanding.

Income from discontinued operations for the first quarter 2005 equaled $0.7 million. Diluted earnings per share from discontinued operations for the first quarter 2005 were $.02, based on 34.8 million common shares outstanding.