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The eBearing News
November 3, 2004
Kaydon Reports
Third Quarter 2004 Results
copyright © 2004 eBearing Inc.
Kaydon Corporation (USA) announced third quarter 2004 financial results, ahead of expectations and
reflecting continued strength in the North American industrial economy.
Sales were up 22.6%, to $83.4 million in 2004, from $67.9 million in third quarter 2003.
Gross margins reached 38.9% in the quarter, and operating margin hit 19.4%. Operating income
was $16.2 million, up 26.3% over third quarter 2003's $12.8 million.
Net income was $9.5 million, from $7.2 million in 2003.
Kaydon said its orders were up almost 20% in the quarter, and its overall order backlog reached $106.1 million,
up more than 12% over 2003.
The company currently sits on $269.3 million in cash.
President and CEO, Brian Campbell, said increased revenue, the effects of high operating leverage, favorable
product mix and six-sigma savings were the key drivers of the quarter's increased margin. The six-sigma
quality program, initiated in April, has returned approximately $3 million in savings already.
Kaydon has faced raw material cost increases, as has every manufacturing company. So far, it has been
able to pass on approximately $2 million to $2.5 million of the $4 million cost increases incurred so
far in 2004, and expects to be able to negotiate further down that road.
Founded in 1941, Kaydon now manufactures standard and custom-engineered bearings, hydraulic cylinders,
slip rings and filters, supplying a broad and diverse group of industrial, aerospace, medical and electronic
equipment, and aftermarket customers. In the bearing industry, Kaydon is a key manufacturer of slip-ring and
specialty bearing products sold to security, military and industrial markets for industrial and aerospace
applications. The company also includes Cooper Roller Bearing (UK), a leading manufacturer of split roller
bearings, thrust bearings and other custom bearings. Finally, Industrial Tectonics Inc. (ITI) is a Kaydon division
manufacturing precision balls from a wide variety of materials.
Kaydon's Friction and Motion Control 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, and Other.
Friction and Motion Control division sales are by far the largest within Kaydon, and the
division's sales to external customers were up almost 9% over 2003, to $40.8 million. The division's
operating income was $10.2 million, more than half the company's total operating income.
Kaydon said the division was, "positively affected by increased demand for specialty bearings utilized
in specialty electronics, machinery, and heavy equipment markets." Specifically, the company singled out
specialty bearings, split roller bearings, linear deceleration products and split-ring products.
Several high-profile applications have also helped the company showcase its products. Kaydon slewing-ring
bearings are used on the telescope at Arizona's Mt. Graham Observatory. And the unexpectedly long-lived NASA
Mars Rovers are both equipped with Kaydon's Reali-slim™ bearings in the camera pan and tilt mechanisms.
Mr. Campbell said, "The fundamentals of our business are strong. Our strong order intake
during the first three quarters of this year and the resultant increased current backlog level, trends which are
continuing into the fourth quarter, are strong indicators of the positive momentum from the continued
strengthening of the manufacturing economy."
In the earnings call, Mr. Campbell addressed rumors circulating in the bearing industry and elsewhere that Kaydon
is actively seeking to use its cash position to make acquisitions. Mr. Campbell acknowledged Kaydon
spent approximately $800,000 in acquisition due diligence and, "looked at about a dozen acquisition targets," with
widely varying sales, and continues to seek acquisitions and, "pursue attractive business partners."
Acquisitions, noted Mr. Campbell, would be metalworking product companies in industrial markets, where Kaydon
would, "stick to our manufacturing expertise." Acquisitions would not take Kaydon into any new
direction but be, "more of the same." A key consideration, he noted, is the competitive environment of any
acquisition candidate. Kaydon avoids commodity markets as much as possible, and stays in performance-critical
products and applications.
2005, said Mr. Campbell, will be, "a very good year for us on acquisitions."
In terms of the business environment in 2005, Mr. Campbell said it is shaping up to be a good year, with the
only lingering questions being oil pricing and geopolitical issues, both outside the company's control.
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- by Bruce A. Carr
from individual research,
tips and commercial sources.
Unauthorized reproduction is prohibited.
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eBearing.com ... for everything that moves™
Entire contents Copyright 1999-2008, eBearing Inc. All rights reserved.
eBearing.com and "... for everything that moves" are registered
trademarks of eBearing Inc.
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eBearing.com ... for everything that moves™
Entire contents Copyright © 1999-2008, eBearing Inc. All rights reserved.
eBearing.com and "... for everything that moves" are registered trademarks of eBearing Inc.
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