Kaydon Corporation (NYSE:KDN) today announced preliminary results for the fourth quarter and full year ended December 31, 2008. While the Company plans to report its complete fourth quarter and fiscal year 2008 results in detail on February 23, it has released its preliminary financial results to accommodate its participation in an upcoming investor conference and related investor meetings. The Company will hold its Fourth Quarter and Full Year 2008 Earnings Conference Call on Monday, February 23, 2009 at 11:00 a.m. Eastern time. That call will follow the Company’s release of fourth quarter and full year 2008 earnings at 7:00 a.m. Eastern time on that same day.

Preliminary Summary Financial Results
Preliminary fourth quarter sales increased to $132.4 million compared to $123.7 million during last year’s fourth quarter. Preliminary full year 2008 sales increased to $522.4 million, representing the highest annual sales in the Company’s history, with significant growth in the wind energy business. Full year 2007 sales were $451.4 million.

Preliminary wind energy sales were $24.0 million for the fourth quarter, compared to $13.4 million in the prior fourth quarter. Preliminary full year 2008 wind energy sales totaled $80.5 million compared to 2007 wind energy sales of $32.9 million. While final shipments in the quarter were less than originally anticipated as customers minimized their inventories at the end of the quarter, the Company saw significant growth in this market as capacity increased during the fourth quarter.

Preliminary earnings before interest, taxes, depreciation and amortization (“EBITDA”), a non-GAAP measure as defined by the Company, was $29.6 million for the fourth quarter of 2008 compared to $37.9 million in the prior fourth quarter. Preliminary EBITDA for the full year was $132.9 million, an all time record, as compared to $132.5 million in 2007.

Certain items in both years affected comparability. EBITDA for the fourth quarter and full year of fiscal 2007 included a $5.0 million gain on the sale of a component of our friction control products reporting segment while the fourth quarter and full year of fiscal 2008 includes $1.3 million, in total, of due diligence costs on unconsummated transactions and asset impairments on property and equipment in facilities that have been downsized. Readers should refer to the attached Reconciliation of Non-GAAP Measure for the calculation of preliminary EBITDA and the reconciliation of preliminary EBITDA to the most comparable preliminary GAAP measure.

Preliminary operating income was $22.4 million for the fourth quarter of 2008, compared to $32.2 million in the prior fourth quarter. Preliminary operating income for the full year was $105.5 million as compared to $111.3 million in 2007. The fourth quarter and full year of 2007 included the $5.0 million gain on the sale of a component of a reporting segment while the fourth quarter and full year of fiscal 2008 includes the $1.3 million of costs discussed above.

Preliminary net income was $13.8 million for the fourth quarter, compared to $22.7 million earned in last year’s fourth quarter. Preliminary net income for fiscal 2008 was $67.1 million compared to 2007 net income of $77.7 million. The fourth quarter and full year of 2007 included a $3.1 million after tax gain on the sale of a component of a reporting segment while the fourth quarter and full year of fiscal 2008 includes $0.8 million, after tax, of due diligence and impairment costs.

Including the aforementioned items impacting comparability, preliminary diluted earnings per share for the fourth quarter is expected to be $.41 compared with $.70 in the prior fourth quarter. Preliminary diluted earnings per share is expected to be $2.09 for fiscal 2008 compared to $2.41 in the prior year. The fourth quarter and full year of 2007 included a $.09 per share after tax gain on the sale of a component of a reporting segment discussed above while the fourth quarter and full year of fiscal 2008 includes $.02 per share for the due diligence and impairment costs discussed above.

Business Commentary
Fiscal 2008 became increasingly challenging as several of the Company’s end markets slowed during the year. While wind energy and defense remained strong relative to last year, their contribution to operating profit was not sufficient to offset the softness in certain higher margin end markets. In particular, the industrial, machinery, and export businesses, in which orders are often booked and shipped within the same quarter, slowed during the second half of the year. Also, within the defense business, the Company saw a continued shift from certain higher margin aerospace business to lower margin vehicle products. Finally, depreciation was meaningfully higher in fiscal 2008 relative to fiscal 2007 as recent capital investments have been put in service.

The Company was negatively impacted by the rapid strengthening of the U.S. dollar against both the euro and the British pound throughout the second half of the year, impacting both exports and our translated overseas results. Likewise, interest income was significantly reduced relative to the prior year due to the global collapse in yields on suitable safe haven investments for corporate cash. In addition, the impact of lower interest rates, coupled with the historic decline in world stock markets, will result in higher pension expense in 2009.


The Company has taken several actions to prepare it to take maximum benefit of the eventual improvement in business conditions. It has frozen executive salaries, eliminated across the board salary increases, closed or eliminated a number of benefit programs, including certain retiree health programs, and significantly curtailed both temporary labor and overtime. It has also implemented targeted staff cuts at most locations.
Order Entry and Backlog.

Preliminary order entry totaled $90.5 million for the fourth quarter of 2008, a decrease of 23.3 percent as compared to the prior fourth quarter. Preliminary quarter-end backlog was $312.6 million compared to $238.9 million at the end of fourth quarter 2007. Order entry declined in the fourth quarter as customers reacted to adverse macroeconomic conditions. December, in particular, was slow as customers pushed out receipts of inventory during the last half of the month. The Company has responded to requests from certain customers with orders in backlog to adjust shipping schedules as their end users have reacted to the global financial crisis. The Company defines backlog as orders shippable in the upcoming 18 months.
Balance Sheet and Liquidity.

During the fourth quarter of 2008, the Company repurchased 483,700 shares of Company common stock for $14.1 million. The Company has no debt outstanding at December 31, 2008, $233.0 million of unrestricted cash, and $295.1 million of available bank capacity.

About Kaydon
Kaydon Corporation is a leading designer and manufacturer of custom-engineered, performance-critical products, supplying a broad and diverse group of alternative-energy, industrial, aerospace, medical and electronic equipment, and aftermarket customers.

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