Lydall, Inc. announced financial results for the fourth quarter and year ended December 31, 2012.
Fourth Quarter 2012 (“Q4 2012”) compared to Fourth Quarter 2011 (“Q4 2011”)
Net sales were $90.5 million, including unfavorable foreign currency translation of $1.3 million, or 1.4%, compared to $89.3 million
Operating income of $2.0 million, or 2.2%, compared to $4.4 million, or 4.9%
− Q4 2012 operating income included an asset impairment charge of $1.8 million
− Q4 2011 operating income included income of $0.8 million from a completed pricing negotiation and $0.4 million of income from a license agreement
Net income of $2.4 million, or $0.14 per share, compared to $2.7 million, or $0.16 per share
− Income tax benefit of $0.5 million included a reversal of valuation allowance on a foreign tax credit carryover of $1.3 million, or $0.08 per share
2012 Year Highlights
Net sales were $378.9 million, including unfavorable foreign currency translation impact of $10.6 million, or 2.8%, compared to $383.6 million in 2011
Gross margin of 20.5%, an improvement of 290 basis points from 2011, primarily from operational efficiency improvements in the Thermal/Acoustical Fibers segment
Operating income of $21.4 million, or 5.6%, compared to $16.2 million, or 4.2% in 2011
− 2012 operating income included the asset impairment charge of $1.8 million and $0.8 million of income from a license agreement
− 2011 operating income included $1.6 million of income from a license agreement
• Effective tax rate for 2012 of 19.9%, primarily as a result of reversal of valuation allowance on a foreign tax credit carryover of $3.9 million, or $0.23 per share, compared to an effective tax rate of 41.3% in 2011
• Income from continuing operations in 2012 was $16.8 million, or $0.99 per share, compared to $9.1 million, or $0.54 per share in 2011
• Net income of $16.8 million, or $0.99 per share, compared to net income in 2011 of $13.8 million, or $0.82 per share
Liquidity
• Cash provided by operations of $15.2 million in Q4 2012 ($34.4 million in full year 2012) compared to cash provided by operations of $12.6 million in Q4 2011 ($14.7 million in full year 2011)
• Cash and short-term investments of $63.6 million at December 31, 2012 compared to $42.9 million at December 31, 2011
Net sales of $90.5 million in Q4 2012 were $1.1 million greater than Q4 2011. Increased sales volume from the Thermal/Acoustical Fibers (“T/A Fibers”) segment of $3.3 million and the Life Sciences Vital Fluids business (“VF business”) of $0.8 million, included in Other Products and Services, were partially offset by lower net sales from the Performance Materials (“PM”) and Thermal/Acoustical Metals (“T/A Metals”) segments of $2.1 million and $0.7 million, respectively.
Higher consumer demand in North America for vehicles on Lydall’s existing platforms and new platform awards contributed to the increased net sales for the T/A Fibers segment. Lower net sales for the Performance Materials segment were primarily due to decreased volumes of Industrial Thermal Insulation products of $1.4 million, specifically with lower sales of electrical papers products, as the product line was sold to a customer in a prior year.
The Company reported operating income of $2.0 million, or 2.2% of net sales, in the fourth quarter of 2012 compared to $4.4 million, or 4.9% of net sales, in the fourth quarter of 2011. The T/A Fibers segment reported operating income of $3.8 million in Q4 2012, an improvement of $3.1 million compared to Q4 2011, due to improved gross profit as a result of increased net sales, improved manufacturing processes and a lower cost structure.
The VF business reported operating income of $0.3 million in Q4 2012, an improvement of $0.6 million compared to Q4 2011, primarily due to increased net sales in blood filtration and bioprocessing products and a lower cost structure. The PM segment broke even during the fourth quarter of 2012, a decrease in operating income of $3.0 million compared to Q4 2011, primarily due to lower gross profit in Q4 2012.
Lower net sales of $2.1 million in Q4 2012, unfavorable mix of product sales and under-absorption of fixed overhead costs contributed to lower gross profit in the PM segment. Also, Q4 2012 included an asset impairment charge of $0.3 million, while Q4 2011 included $0.4 million of gain from services provided under a licensing agreement.
T/A Metals operating income in the current quarter was lower by $1.7 million compared to Q4 2011, primarily due to lower gross profit as a result of unfavorable mix in sales between parts and tooling. Also, the fourth quarter of 2011 included $0.8 million of gross profit associated with a completed pricing negotiation with a customer that was related to shipments during the first nine months of 2011.
The Company previously announced a change to its information technology software and systems strategy from a project involving an ERP reimplementation to a project involving an ERP upgrade and some additional applications software. As a result of this change in IT strategy, the Company recorded a non-cash $1.8 million asset impairment charge in the quarter ended December 31, 2012 ($1.5 million in corporate office expenses and $0.3 million in the Performance Materials segment).
Income tax benefit of $0.5 million in Q4 2012 included a reversal of valuation allowance against foreign tax credit carryovers of $1.3 million, or $0.08 per share, as these credits will be used to offset 2012 or future U.S. taxable income.
