Presentation Transcript

1. Q2 2011 Earnings Conference Call Quarter ended June 30, 2011 DRAFT Any information discussed in this presentation which may be forward looking in nature is made available pursuant to the Safe Harbor Provision for forward-looking statements as defined in the securities laws. Lydall’s businesses are subject to a number of risk factors which may cause actual results to differ materially from those anticipated in the forward-looking statements. For information identifying some of these important risk factors, refer to Lydall’s Annual Report on Form 10-K and Forms 10-Q in the MD & A section under Cautionary Note Concerning Factors That May Affect Future Results and also Risk Factors.
2. Forward-looking Statements Any information discussed in this presentation which may be forward looking in nature is made available pursuant to the Safe Harbor Provision for forward-looking statements as defined in the securities laws. Lydall’s businesses are subject to a number of risk factors which may cause actual results to differ materially from those anticipated in the forward-looking statements. For information identifying some of these important risk factors, refer to Lydall’s Annual Report on Form 10-K and Forms 10-Q in the MD & A section under Cautionary Note Concerning Factors That May Affect Future Results and also Risk Factors.
3. Q2 2011 Highlights Affinity business sold for $14M cash Gain on sale (gross) of $6.1M, includes $1.2M working capital adjustment Deemed non-core to Lydall Net sales of $98.8M are 28% higher than Q2 2010 Entered into new $35M credit facility with improved terms EPS (diluted) from Continuing Operations $0.19 vs. $0.10 in Q2 2010
4. Q2 2011 vs Q2 2010 Summary Statements of Operations COMMENTS Strong demand continues in both Thermal / Acoustical and Performance Materials Segments FX translation had a $4.4M, or 5.6%, favorable impact in the current quarter compared to Q2 2010 Gross Margin % negatively impacted by an unfavorable sales mix between the Thermal/Acoustical and Performance Materials segments, and lower OPS gross margin percentage SG&A expenses are flat with Q2 2010 Gain on sale of product line, net of $0.4M compared to $1.7M in Q2 2010 Interest in Q2 2011 includes $0.3M write-off of capitalized loan origination costs relating to the prior domestic credit facility Net income from discontinued operations includes $3.9M gain, net of tax, or $0.23 per diluted share, on sale of the Affinity business in June 2011
5. Q2 Summary Segment Information & Other Products and Services Operating income includes $0.4 million in Q2 2011 from ongoing services provided to the buyer of electrical papers product line, compared to a net gain of $1.7 million in Q2 2010 when the product line was sold Operating income improved in Q2 2011, including an estimated break-even gross profit on net sales of $20.0 million of fiber-based products, compared to negative gross profit on net sales of $12.7 million in Q2 2010. Volume and mix negatively impacted gross profit in Q2 2011
6. Summary Balance Sheets Receivable Days = 3-month avg receivable balance / 3-month rolling revenues * 91 Inventory Days = 3-month avg inventory balance / 3-month rolling cost of sales * 91 Affinity results are excluded from the calculations of days
7. Summary Statements of Cash Flows
8. Q2 2011 – Additional Comments Remediated material weakness identified from Q3 2010 – management deems the improved controls to be sustainable Cash and Restricted Cash balance of $41.6 million at June 30, 2011 Cash restriction temporary due to timing of the change in credit facility Cash and new bank facility allows management to grow the Company in a manner consistent with its strategic vision
9. Performance Materials appLY® Mat Highdensity fiberglass insulation LyPore® Defender Sales grew 14.4% in Q2 2011 compared to Q2 2010. Excluding the favorable impact of foreign currency translation, sales grew by $3.2 million, or 10.2%, compared to Q2 2010 Sales of Industrial Thermal Insulation products increased due to increased capital project investments by customers in the cryogenic and insulation markets. Sales of Life Sciences Filtration products increased due primarily to increased volumes in water filtration and life protection applications Excluding the impact of the sale of electrical papers product line, operating income was $5.7 million, or 15.8% of net sales, in Q2 2011 compared to $4.2 million, or 13.5% of net sales, in Q2 2010 Operating improvement driven by improved absorption of fixed costs from higher volumes of net sales of Industrial Thermal Insulation products and Life Sciences Filtration products High dirt holding capacity filtration media LydAir® SC Synthetic composite, uniform and durable
10. Thermal/Acoustical Metal Shield Excluding the impact of foreign exchange translation, part sales grew 36.0% in Q2 2011 compared to Q2 2010 with fiber products growing at 58.0% Sales growth was driven by increased production of automobiles on existing platforms and market share gains on new platforms Segment net sales were 60.7% of consolidated net sales in Q2 2011, compared to 54.8% in Q2 2010 Automotive industry reported that production of cars and light trucks in North America and Europe in Q2 2011 was essentially flat compared to Q2 2010 High raw material costs in both aluminum and fiber, as well as aluminum conversion costs, continued to have a negative impact on gross profit Increase in operating income in Q2 2011 compared to Q2 2010 was driven by increased revenues and improved estimated gross profit performance of fiber parts at the NA Auto facility FlexShield® Wheel Well Wheel Well Molded Fiber Composite
11. Other Products and Services Sales declined 11.1% due primarily to lower sales of blood transfusion and therapy products Gaining ground in qualifying at bio customers, but customer ramp up slower than expected GM% negatively impacted by mix, scrap and absorption Small Volume Bag Bio-Pak® 3D Gusset bag
12. Conclusions Markets continue to be robust with share gains in a number of our products in both segments Performance Materials Another outstanding quarter reflecting the rise in revenues and implementation of solid lean six sigma programs throughout the businesses Plan to continue to build the business through organic growth and acquisitions Thermal/Acoustical Making progress improving the fiber-based product line performance Rising raw material costs continue to challenge the business Sale of Affinity follows divestitures of the Company’s transport business and electrical papers product line and acquisition of Solutech Will continue to focus on core competencies and strategic acquisitions to transform the Company and to maximize shareholder value QUESTIONS