Lydall Announces Financial Results for the Fourth Quarter and Year Ended December 31, 2014

• Organic sales growth of 5.7% in Q4 2014; 8.3% in FY 2014
• Q4 2014 EPS of $0.34, up 36% over prior year, on sales of $128 million
• FY 2014 adjusted EPS of $1.80, up 76% over prior year adjusted EPS, on sales of $536 million
• Cash generated from 2014 operating activities of $41.6 million

MANCHESTER, Conn., March 3, 2015 (GLOBE NEWSWIRE) -- LYDALL, INC. (NYSE:LDL) today announced financial results for the fourth quarter and year ended December 31, 2014.

Net sales were $127.6 million in the fourth quarter of 2014 compared to $99.9 million in the fourth quarter of 2013. The fourth quarter of 2014 included net sales of $29.9 million from Industrial Filtration which was acquired in February 2014. Net income was $5.7 million, or $0.34 per diluted share, in the fourth quarter of 2014 compared to $4.1 million, or $0.25 per diluted share, in the fourth quarter of 2013.

Net sales were $535.8 million in 2014 compared to $398.0 million in 2013, an increase of 34.6%. Sales growth of $112.2 million, or 28.2%, was driven by the Industrial Filtration segment with the remaining increase primarily due to 8.3% organic sales growth. The Company's operating margin was 6.4% in 2014, negatively impacted by several one-time items, compared to 7.2% in 2013. Adjusted operating margin was 8.7% in 2014 compared to 7.1% in 2013. Improved adjusted operating margin during the year reflected favorable product mix and manufacturing efficiency improvements primarily realized by the Company's Thermal/Acoustical Fibers ("T/A Fibers") and Thermal/Acoustical Metals ("T/A Metals") segments, and improved fixed cost absorption from higher sales achieved across all of the Company's operating segments. Net income in 2014 was $21.8 million, or $1.28 per diluted share, compared to $19.2 million, or $1.14 per diluted share in 2013. Adjusted earnings per share were $1.80 and $1.02 per diluted share in 2014 and 2013, respectively (see attached table for reconciliation).

Below are financial highlights comparing Lydall's quarter ended December 31, 2014 ("Q4 2014") results to its quarter ended December 31, 2013 ("Q4 2013") results:

• Net sales increased by $27.7 million, or 27.7%, with sales growth of 29.9% from the Industrial Filtration acquisition and organic sales growth of 5.7%, offset by a reduction in tooling net sales of 5.2% and unfavorable foreign currency translation of 2.7%;
   
• Gross margin decreased 40 basis points to 20.0%, compared to 20.4% in Q4 2013, due to the mix impact from the Industrial Filtration segment, which was partially offset by improvements in T/A Metals and T/A Fibers segments' gross margin;
   
• Operating income in Q4 2014 was $8.1 million, or 6.3% of net sales, which included operating income for Industrial Filtration of $1.6 million, or 5.3% of segment net sales, compared to total operating income of $5.3 million, or 5.3% of net sales, in Q4 2013; and
   
• Effective tax rate was 31.3% in Q4 2014 compared to 20.4% in Q4 2013. The fourth quarter of 2013 was positively impacted by the reversal of a state tax valuation allowance of $0.9 million.

Cash balance was $62.1 million at December 31, 2014 compared to $75.4 million at December 31, 2013. Cash generated by operating activities in 2014 was $41.6 million compared to $30.3 million in 2013. During the fourth quarter of 2014, Lydall repaid $20.0 million of debt that was borrowed in the first quarter of 2014 to fund the Industrial Filtration acquisition. The Company's consolidated leverage ratio was approximately 0.7 at December 31, 2014.

T/A Fibers segment net sales in the fourth quarter of 2014 increased $1.5 million, with increased parts net sales of $3.7 million, or 14.7%, partially offset by lower tooling net sales of $2.2 million compared to the fourth quarter of 2013. T/A Metals segment net sales decreased $3.0 million, or 7.2% in the fourth quarter of 2014, compared to the fourth quarter of 2013, as a result of lower tooling net sales of $3.4 million, partially offset by increased parts net sales of $0.4 million. Unfavorable foreign currency translation decreased net sales by $2.0 million. Parts net sales increased by $2.0 million, or 6.0%, excluding the $1.7 million impact of foreign currency translation in the fourth quarter of 2014, compared to the same period of 2013.  Operating margins for T/A Fibers and T/A Metals increased by 240 basis points and 170 basis points, respectively, as a result of gross margin improvements from increased parts sales, manufacturing efficiencies and product mix improvements.  

Net sales for the Performance Materials segment decreased by $0.6 million, or 2.0%, due to unfavorable foreign currency translation of $0.7 million. Excluding the impact of foreign currency, higher filtration and life sciences products net sales were nearly offset by lower thermal insulation product net sales primarily due to a decline in sales to a key customer in the HVAC market. Operating margin in the fourth quarter of 2014 decreased by 160 basis points from the fourth quarter of 2013 primarily as a result of a change in mix of sales.

Dale Barnhart, President and Chief Executive Officer, stated, "We executed well in the fourth quarter and are pleased to report a solid finish to 2014.  Our 2014 financial performance was the result of record sales for our Company, driven by strong contribution from the Industrial Filtration acquisition, and 8.3% organic sales growth.  Record sales also translated to record earnings, demonstrating our team's ability to execute on our operational excellence initiatives.

"In January we continued to make progress on our long-term strategy to drive profitable growth for our shareholders and completed the sale of Charter Medical, which was our vital fluids business. This divestiture aligns with our strategy to focus resources on our core business segments and represents an incremental step to achieving our long-term vision. 

"As we look forward into 2015, we are seeing stable demand for our products globally. We anticipate demand to be in line with or exceed industry growth rates by geographic region." 

Use of Non-GAAP Financial Measures

In addition to the financial measures prepared in accordance with generally accepted accounting principles ("GAAP"), the Company uses certain non-GAAP financial measures, including organic sales growth, adjusted operating income, adjusted operating margin and adjusted earnings per share. The attached financial tables address the non-GAAP measures used in this press release and reconcile non-GAAP measures to the most directly comparable GAAP measures. The Company believes that the use of non-GAAP measures helps investors to gain a better understanding of our core operating results and future prospects, consistent with how management measures and forecasts the Company's performance, especially when comparing such results to previous periods or forecasts. Non-GAAP measures should be considered in addition to, and not as a replacement for or superior to, the corresponding GAAP measures, and may not be comparable to similarly titled measures reported by other companies.

Conference Call

Lydall will host a conference call today at 10:00 a.m. Eastern Time to discuss results for its fourth quarter and year ended December 31, 2014 as well as general matters related to its businesses and markets. The call may be accessed at (888) 338-7142, from within the U.S., or (412) 902-4181, internationally. In addition, the audio of the call will be webcast live and will be available for replay on the Company's website at www.lydall.com in the Investor Relations' section. A recording of the call will be available from 12:00 p.m. Eastern Time on March 3, 2015 through 11:59 p.m. Eastern Time, March 11, 2015 at (877) 344-7529, from within the U.S., or (412) 317-0088, internationally, pass code 10061409. Additional information, including a presentation outlining key financial data supporting today's conference call, can be found on the Company's website www.lydall.com under the Investors Relations' Section.

Lydall, Inc. is a New York Stock Exchange listed company, headquartered in Manchester, Connecticut with global manufacturing operations producing specialty engineered products for the thermal/acoustical and filtration/separation markets.  For more information, visit http://www.lydall.com. Lydall^® is a registered trademark of Lydall, Inc. in the U.S. and other countries.

Cautionary Note Concerning Forward-Looking Statements

This press release contains "forward-looking statements" within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended. Any statements contained in this press release that are not statements of historical fact, including statements about the expected impact of the acquisition of the Industrial Filtration businesses on Lydall's future financial performance and the overall outlook for 2015, may be deemed to be forward-looking statements. All such forward-looking statements are intended to provide management's current expectations for the future operating and financial performance of the Company based on current expectations and assumptions relating to the Company's business, the economy and other future conditions. Forward-looking statements generally can be identified through the use of words such as "believes," "anticipates," "may," "should," "will," "plans," "projects," "expects," "estimates," "forecasts," "predicts," "targets," "prospects," "strategy," "signs," and other words of similar meaning in connection with the discussion of future operating or financial performance. Because forward-looking statements relate to the future, they are subject to inherent risks, uncertainties and changes in circumstances that are difficult to predict. Such risks and uncertainties which include, among others, worldwide economic cycles that affect the markets that the Company's businesses serve which could have an effect on demand for the Company's products and impact the Company's profitability, challenges encountered by Lydall in the integration of acquired businesses, disruptions in the global credit and financial markets, including diminished liquidity and credit availability, swings in consumer confidence and spending, unstable economic growth, raw material pricing and supply issues, fluctuations in unemployment rates, increases in fuel prices, and outcomes of legal proceedings, claims and investigations, including with respect to possible violations of German anti-trust laws by employees in our German operation, could have a negative impact on the Company's results of operations and financial condition. Accordingly, the Company's actual results may differ materially from those contemplated by these forward-looking statements. Investors, therefore, are cautioned against relying on any of these forward-looking statements. They are neither statements of historical fact nor guarantees or assurances of future performance. Additional information regarding the factors that may cause actual results to differ materially from these forward-looking statements is available in our filings with the Securities and Exchange Commission, including the risks and uncertainties identified in Part I, Item 1A - Risk Factors of Lydall's Annual Report on Form 10-K for the year ended December 31, 2014.

These forward-looking statements speak only as of the date of this press release, and Lydall does not assume any obligation to update or revise any forward-looking statement made in this press release or that may from time to time be made by or on behalf of the Company. Information may also be obtained from the Company Contact: David D. Glenn, Vice President of Business Development and Investor Relations, One Colonial Road, Manchester, CT 06042; Telephone 860-646-1233, email: investor@lydall.com.