Kaydon Corporation Reports 48.6 Percent Growth in Diluted Earnings Per Share for 2006 Second Quarter; Operating Margins of 25.5 Percent Improved 630 Basis Points in the Quarter

Business Wire, July 28, 2006

ANN ARBOR, Mich. -- New Orders Booked During the Second Quarter Equaled a Record $119.6 Million

Kaydon Corporation (NYSE:KDN) today announced its financial results for the second quarter ended July 1, 2006. Sales of continuing operations increased 8.7 percent to $102.7 million. Operating income from continuing operations of $26.2 million equaled 25.5 percent of sales. After tax income from continuing operations increased 57.0 percent, and diluted earnings per share of $.55 were up 48.6 percent, compared with the second quarter of last year. Order entry during the quarter, and quarter-end backlog both set new record highs.

Highlights - Continuing Operations - Second Quarter 2006

--The Company achieved second quarter sales of $102.7 million, versus $94.5 million during last year's second quarter.

--Operating income was $26.2 million, equal to 25.5 percent of sales, an increase of 44.5 percent compared to $18.1 million, or 19.2 percent of sales, last year.

--After tax income equaled $17.7 million, or 17.2 percent of sales, compared to $11.3 million, or 11.9 percent of sales, last year.

--Diluted earnings per share increased 48.6 percent to $.55, versus $.37 last year.

--Order entry during the quarter equaled a record $119.6 million, resulting in a record quarter-end backlog of $161.5 million versus $125.6 million last year.

--EBITDA was $30.6 million, equal to 29.8 percent of sales, and covered interest expense by 12.8 times. EBITDA for the last twelve months ended July 1, 2006 totaled $103.8 million.

--Cash and cash equivalents equaled $343.3 million at the end of the second quarter.

--The Company embarked on a major expansion program to serve the rapidly-growing wind energy market.

Brian P. Campbell, President and Chief Executive Officer commented, "The excellent financial results and positive order trends we experienced during the second quarter reflect not only continued strong demand from many key markets we serve, but also the success of our efforts to drive growth through new product development, our continued success in providing performance critical products to meet demanding customer needs, and our operational excellence initiatives."

In commenting further, Mr. Campbell said, "Kaydon's strong engineering and lean manufacturing capabilities, our proprietary product positions, and our excellent financial resources will provide us with further opportunities to enhance both internal and external growth. Based upon our excellent first-half results and our current order backlog and incoming order flow, we are looking forward to another successful year of increased operating performance in 2006."

Additional Data on Second Quarter 2006 Results

Sales of continuing operations during the second quarter of 2006 equaled $102.7 million, an 8.7 percent increase compared to $94.5 million during the second quarter of 2005. Increased sales across many of the Company's product lines, including specialty bearings, sealing products, air and liquid filtration products, and specialty metal alloys were only partially offset by decreases totaling $3.0 million primarily related to metal forming equipment, and to a lesser extent linear deceleration products and specialty ball products.

Gross profit from continuing operations equaled $43.6 million or 42.5 percent of sales for the second quarter of 2006 as compared to $36.1 million or 38.2 percent of sales for the second quarter of 2005. Second quarter 2006 gross profit was positively affected by higher sales volume, and by selling price increases and operating efficiency initiatives implemented in the second half of last year.

Selling, general, and administrative expenses of continuing operations, equaled $17.4 million or 17.0 percent of sales during the second quarter of 2006 as compared to $18.0 million or 19.1 percent of sales during the second quarter of 2005.

Operating income from continuing operations increased 44.5 percent, to $26.2 million, in the second quarter of 2006, equal to 25.5 percent of sales, compared to $18.1 million, or 19.2 percent of sales, in the second quarter of 2005.

Interest income increased to $3.9 million during the second quarter of 2006, compared with $1.7 million during the second quarter of 2005.

Income from continuing operations for the second quarter of 2006 was $17.7 million or $.55 per share on a diluted basis, based on 34.8 million common shares outstanding. During the second quarter of 2005 Kaydon generated income from continuing operations of $11.3 million or $.37 per share on a diluted basis, based on 34.7 million common shares outstanding.

Income from discontinued operations for the second quarter 2005 equaled $1.1 million. Diluted earnings per share from discontinued operations for the second quarter 2005 were $.03, based on 34.7 million common shares outstanding.

Reflecting continued strength in the manufacturing economy, and large orders related to the wind energy market, order entry during the second quarter of 2006 equaled a record $119.6 million. Backlog equaled a record $161.5 million at the end of the second quarter 2006, a 28.6 percent increase compared to a backlog of continuing operations of $125.6 million at the end of the second quarter 2005.