Lydall Inc. (LDL) filed Quarterly Report for the period ended 2009-09-30.
Lydall Inc. and its subsidiaries are manufacturers of engineered products for demanding specialty applications. They develop and manufacture engineered specialty papers in both roll and sheet form; fabricated automotive heat shields and acoustical barriers; and certain medical filtration and bioprocessing components. Their specialty papers are supplied to other manufacturers for conversion or incorporation into finished products. Their fabricated products are sold to original equipment manufacturers and tier-one suppliers. Lydall Inc. has a market cap of $83.5 million; its shares were traded at around $4.96 with and P/S ratio of 0.3. Lydall Inc. had an annual average earning growth of 51% over the past 5 years.
Highlight of Business Operations:
Lydall’s financial results for the third quarter of 2009 were adversely impacted by ongoing global economic conditions. Net sales in the third quarter of 2009 were $66.1 million, a reduction of $3.9 million, excluding the impact of foreign currency translation, compared to the third quarter of 2008. Net sales in the current quarter were lower in the Performance Materials and Thermal Acoustical segments, as well as in Other Products and Services (OPS), as compared to the third quarter of 2008. The Company reported an operating loss from continuing operations of $0.3 million in the third quarter of 2009, compared to operating income from continuing operations of $3.0 million in the comparable quarter of 2008. Loss from continuing operations for the third quarter of 2009 was ($0.3) million, or ($.02) per diluted share, compared to income from continuing operations of $1.7 million, or $.10 per diluted share, in the third quarter of 2008.
The Company’s vital fluids business, which serves the life science industry, reported net sales of $3.9 million and operating income of $0.3 million in the third quarter of 2009, compared to $4.1 million of net sales and $0.5 million of operating income in the comparable period of 2008. The Company is taking steps to increase its market share in the bioprocessing market. In support of this, the Company is investing approximately $3.2 million to increase clean room space capacity and acquire new biodisposable bag manufacturing equipment.
Market conditions in the semiconductor industry continued to negatively impact capital equipment spending by that industry. As a result, the Company’s Affinity® temperature control equipment business (Affinity), which primarily serves the semiconductor industry, reported net sales of $2.3 million and an operating loss of $0.8 million in the third quarter of 2009. The operating loss at Affinity in the third quarter of 2009 included a write-down of inventory of $0.4 million to net realizable value. Affinity reported net sales of $3.4 million and an operating loss of $0.5 million in the third quarter of 2008. The Company expects the depressed capital equipment spending to continue to negatively impact the Company’s Affinity business during the remainder of 2009.
Excluding the impact of foreign currency translation, net sales for the current quarter decreased by $3.9 million, or 5.5%, compared to the third quarter of 2008. Excluding the impact of foreign currency translation, Performance Materials segment net sales decreased by $2.4 million, or 8.5%, in the third quarter of 2009, compared to the third quarter of 2008, as filtration and industrial thermal insulation product net sales decreased by $0.9 million and $1.5 million, respectively. In the Thermal/Acoustical segment, net sales decreased by $0.4 million, or 1.2%, excluding the impact of foreign currency translation, as automotive parts net sales decreased by $4.0 million and tooling net sales increased by $3.6 million. Net sales of Other Products and Services (OPS) in the third quarter of 2009 decreased by $1.3 million, or 17.3%, as compared to the third quarter of 2008. The Affinity® temperature control equipment business posted decreased net sales of $1.1 million and net sales from the Company’s vital fluids business were lower by $0.2 million compared to the third quarter of 2008.
Excluding the impact of foreign currency translation, net sales for the nine months ended September 30, 2009 decreased by $60.9 million, or 24.9%, compared to the first nine months of 2008. Excluding the impact of foreign currency translation, Performance Materials segment net sales decreased by $15.7 million, or 17.6%, in the first nine months of 2009, compared to the same period of 2008, as filtration and industrial thermal insulation product net sales decreased by $7.1 million and $8.6 million, respectively. In the Thermal/Acoustical segment, net sales decreased by $37.8 million, or 28.6%, excluding the impact of foreign currency translation, as automotive parts net sales decreased by $37.7 million and tooling net sales decreased by $0.1 million. Year-to-date net sales of OPS decreased by $7.9 million, or 32.0%, compared to the first nine months of 2008. Net sales from the Company’s vital fluids business decreased by $1.7 million and net sales from the Company’s Affinity® temperature control equipment business decreased by $6.2 million in the first nine months of 2009 compared to the first nine months of 2008.
Selling, product development and administrative expenses decreased by $4.8 million, or $3.8 million when excluding the impact of foreign currency translation, in the first nine months of 2009 as compared to the same period in 2008. The inclusion of expenses from the Company’s Solutech business, which was acquired in December 2008, resulted in selling, product development and administrative expenses increasing by approximately $1.9 million in the first nine months of 2009 compared to the same period a year ago. Including the impact of the Solutech results in 2009, the overall reduction in selling, product development and administrative expenses was primarily due to decreases in salaries and benefits expense of $1.4 million, incentive compensation expense of $1.2 million, sales commission expenses of $0.8 million, and travel expenses of $0.6 million as well as reductions in other discretionary spending. Partially offsetting these decreases was higher professional services expenses of $0.4 million in the first nine months of 2009 compared to the same period of 2008. Lower salaries and benefits expense was due to reductions in workforce that occurred since September 30, 2008, as well as the Company’s suspension of its matching contribution to its sponsored 401(k) plan, beginning with the first payroll of May 2009, for all non-union domestic employees. Lower incentive compensation expense was due to the Company not recording any incentive compensation expense in the first nine months of 2009, because no bonuses were earned under the Company’s bonus program based on year-to-date results. Lower sales commission expenses were due to lower net sales in the first nine months of 2009 as compared to the comparable period of 2008.
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