|
|
Delaware
|
06-0865505
|
(State or Other Jurisdiction of Incorporation or Organization)
|
(I.R.S. Employer Identification No.)
|
|
|
One Colonial Road, Manchester, Connecticut
|
06042
|
(Address of principal executive offices)
|
(zip code)
|
Total Shares outstanding April 16 , 2018
|
17,374,320
|
|
|
|
|
Page
Number
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Cautionary Note Concerning Forward – Looking Statements
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Part I.
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Financial Information
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Item 1.
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Item 2.
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Item 3.
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Item 4.
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Part II.
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Other Information
|
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Item 1.
|
||
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Item 1A.
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||
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Item 2.
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Item 5.
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Item 6.
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Signature
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•
|
Overall economic and business conditions and the effects on the Company’s markets;
|
•
|
Outlook for the second quarter and 2018, including expected impact of manufacturing inefficiencies and the Company's ability to improve operational effectiveness in the Thermal Acoustical Solutions segment;
|
•
|
Expected vehicle production in the North American, European or Asian markets;
|
•
|
Growth opportunities in markets served by the Company;
|
•
|
Expected costs and future savings associated with restructuring programs;
|
•
|
Expected gross margin, operating margin and working capital improvements from the application of Lean Six Sigma;
|
•
|
Product development and new business opportunities;
|
•
|
Future strategic transactions, including but not limited to: acquisitions, joint ventures, alliances, licensing agreements and divestitures;
|
•
|
Pension plan funding;
|
•
|
Future cash flow and uses of cash;
|
•
|
Future amounts of stock-based compensation expense;
|
•
|
Future earnings and other measurements of financial performance;
|
•
|
Ability to meet cash operating requirements;
|
•
|
Future levels of indebtedness and capital spending;
|
•
|
Ability to meet financial covenants in the Company's amended revolving credit facility;
|
•
|
Future impact of the variability of interest rates and foreign currency exchange rates;
|
•
|
Expected future impact of recently issued accounting pronouncements upon adoption;
|
•
|
Future effective income tax rates, including the impact of the U.S. Tax Cuts and Jobs Act, and realization of deferred tax assets;
|
•
|
Estimates of fair values of reporting units and long-lived assets used in assessing goodwill and long-lived assets for possible impairment; and
|
•
|
The expected outcomes of legal proceedings and other contingencies, including environmental matters.
|
|
Quarter Ended
March 31, |
||||||
|
2018
|
|
2017
|
||||
|
(Unaudited)
|
||||||
Net sales
|
$
|
191,660
|
|
|
$
|
165,487
|
|
Cost of sales
|
152,153
|
|
|
124,989
|
|
||
Gross profit
|
39,507
|
|
|
40,498
|
|
||
Selling, product development and administrative expenses
|
25,471
|
|
|
25,350
|
|
||
Operating income
|
14,036
|
|
|
15,148
|
|
||
Interest expense
|
540
|
|
|
606
|
|
||
Other expense, net
|
315
|
|
|
333
|
|
||
Income before income taxes
|
13,181
|
|
|
14,209
|
|
||
Income tax expense
|
2,123
|
|
|
2,494
|
|
||
Loss from equity method investment
|
4
|
|
|
46
|
|
||
Net income
|
$
|
11,054
|
|
|
$
|
11,669
|
|
Earnings per share:
|
|
|
|
||||
Basic
|
$
|
0.64
|
|
|
$
|
0.69
|
|
Diluted
|
$
|
0.64
|
|
|
$
|
0.68
|
|
Weighted average number of common shares outstanding:
|
|
|
|
||||
Basic
|
17,164
|
|
|
16,983
|
|
||
Diluted
|
17,339
|
|
|
17,284
|
|
|
Quarter Ended
March 31, |
||||||
|
2018
|
|
2017
|
||||
|
(Unaudited)
|
||||||
Net income
|
$
|
11,054
|
|
|
$
|
11,669
|
|
Other comprehensive income:
|
|
|
|
||||
Foreign currency translation adjustments
|
2,545
|
|
|
2,729
|
|
||
Pension liability adjustment, net of tax
|
198
|
|
|
172
|
|
||
Unrealized gain on hedging activities, net of tax
|
102
|
|
|
—
|
|
||
Comprehensive income
|
$
|
13,899
|
|
|
$
|
14,570
|
|
|
March 31,
2018 |
|
December 31,
2017 |
||||
|
(Unaudited)
|
||||||
ASSETS
|
|
|
|
|
|
||
Current assets:
|
|
|
|
|
|
||
Cash and cash equivalents
|
$
|
49,103
|
|
|
$
|
59,875
|
|
Accounts receivable, less allowances (2018 - $1,463; 2017 - $1,507)
|
136,078
|
|
|
116,712
|
|
||
Contract assets
|
25,005
|
|
|
—
|
|
||
Inventories
|
74,263
|
|
|
80,339
|
|
||
Taxes receivable
|
5,263
|
|
|
5,525
|
|
||
Prepaid expenses
|
4,016
|
|
|
4,858
|
|
||
Other current assets
|
6,765
|
|
|
6,186
|
|
||
Total current assets
|
300,493
|
|
|
273,495
|
|
||
Property, plant and equipment, at cost
|
405,428
|
|
|
397,152
|
|
||
Accumulated depreciation
|
(234,699
|
)
|
|
(226,820
|
)
|
||
Net, property, plant and equipment
|
170,729
|
|
|
170,332
|
|
||
Goodwill
|
68,958
|
|
|
68,969
|
|
||
Other intangible assets, net
|
39,031
|
|
|
40,543
|
|
||
Other assets, net
|
7,131
|
|
|
7,532
|
|
||
Total assets
|
$
|
586,342
|
|
|
$
|
560,871
|
|
LIABILITIES AND STOCKHOLDERS’ EQUITY
|
|
|
|
||||
Current liabilities:
|
|
|
|
||||
Current portion of long-term debt
|
$
|
283
|
|
|
$
|
277
|
|
Accounts payable
|
80,405
|
|
|
71,931
|
|
||
Accrued payroll and other compensation
|
13,678
|
|
|
15,978
|
|
||
Accrued taxes
|
3,162
|
|
|
2,230
|
|
||
Other accrued liabilities
|
14,470
|
|
|
11,690
|
|
||
Total current liabilities
|
111,998
|
|
|
102,106
|
|
||
Long-term debt
|
76,862
|
|
|
76,913
|
|
||
Deferred tax liabilities
|
15,542
|
|
|
14,714
|
|
||
Benefit plan liabilities
|
8,489
|
|
|
9,743
|
|
||
Other long-term liabilities
|
3,618
|
|
|
3,999
|
|
||
|
|
|
|
||||
Commitments and Contingencies (Note 14)
|
|
|
|
||||
Stockholders’ equity:
|
|
|
|
||||
Preferred stock
|
—
|
|
|
—
|
|
||
Common stock
|
251
|
|
|
250
|
|
||
Capital in excess of par value
|
89,768
|
|
|
88,006
|
|
||
Retained earnings
|
387,435
|
|
|
374,783
|
|
||
Accumulated other comprehensive loss
|
(17,303
|
)
|
|
(20,148
|
)
|
||
Treasury stock, at cost
|
(90,318
|
)
|
|
(89,495
|
)
|
||
Total stockholders’ equity
|
369,833
|
|
|
353,396
|
|
||
Total liabilities and stockholders’ equity
|
$
|
586,342
|
|
|
$
|
560,871
|
|
|
Three Months Ended
March 31, |
||||||
|
2018
|
|
2017
|
||||
|
(Unaudited)
|
||||||
Cash flows from operating activities:
|
|
|
|
|
|
||
Net income
|
$
|
11,054
|
|
|
$
|
11,669
|
|
Adjustments to reconcile net income to net cash (used for) provided by operating activities:
|
|
|
|
||||
Depreciation and amortization
|
7,220
|
|
|
6,517
|
|
||
Long-lived asset impairment charge
|
—
|
|
|
772
|
|
||
Inventory step-up amortization
|
—
|
|
|
481
|
|
||
Deferred income taxes
|
601
|
|
|
185
|
|
||
Stock-based compensation
|
1,201
|
|
|
1,231
|
|
||
Loss from equity method investment
|
4
|
|
|
46
|
|
||
Changes in operating assets and liabilities:
|
|
|
|
||||
Accounts receivable
|
(18,626
|
)
|
|
(7,780
|
)
|
||
Contract assets
|
(5,745
|
)
|
|
—
|
|
||
Inventories
|
(8,796
|
)
|
|
(12,015
|
)
|
||
Accounts payable
|
9,471
|
|
|
13,686
|
|
||
Accrued payroll and other compensation
|
(2,432
|
)
|
|
(1,154
|
)
|
||
Accrued taxes
|
877
|
|
|
574
|
|
||
Other, net
|
1,209
|
|
|
(1,854
|
)
|
||
Net cash (used for) provided by operating activities
|
(3,962
|
)
|
|
12,358
|
|
||
Cash flows from investing activities:
|
|
|
|
||||
Capital expenditures
|
(7,676
|
)
|
|
(9,560
|
)
|
||
Net cash used for investing activities
|
(7,676
|
)
|
|
(9,560
|
)
|
||
Cash flows from financing activities:
|
|
|
|
||||
Debt repayments
|
(57
|
)
|
|
(10,467
|
)
|
||
Common stock issued
|
666
|
|
|
155
|
|
||
Common stock repurchased
|
(823
|
)
|
|
(2,497
|
)
|
||
Net cash used for financing activities
|
(214
|
)
|
|
(12,809
|
)
|
||
Effect of exchange rate changes on cash
|
1,080
|
|
|
616
|
|
||
Decrease in cash and cash equivalents
|
(10,772
|
)
|
|
(9,395
|
)
|
||
Cash and cash equivalents at beginning of period
|
59,875
|
|
|
71,934
|
|
||
Cash and cash equivalents at end of period
|
$
|
49,103
|
|
|
$
|
62,539
|
|
In thousands of dollars and shares
|
Common Stock Shares
|
|
Common Stock Amount
|
|
Capital in Excess of Par Value
|
|
Retained Earnings
|
|
Accumulated Other Comprehensive Loss
|
|
Treasury Stock
|
|
Total Stockholders' Equity
|
|||||||||||||
Balance at December 31, 2017
|
25,018
|
|
|
$
|
250
|
|
|
$
|
88,006
|
|
|
$
|
374,783
|
|
|
$
|
(20,148
|
)
|
|
$
|
(89,495
|
)
|
|
$
|
353,396
|
|
Net Income
|
|
|
|
|
|
|
11,054
|
|
|
|
|
|
|
11,054
|
|
|||||||||||
Other comprehensive income, net of tax
|
|
|
|
|
|
|
|
|
2,845
|
|
|
|
|
2,845
|
|
|||||||||||
Stock repurchased
|
|
|
|
|
|
|
|
|
|
|
(823
|
)
|
|
(823
|
)
|
|||||||||||
Stock issued under employee plans
|
50
|
|
|
1
|
|
|
666
|
|
|
|
|
|
|
|
|
667
|
|
|||||||||
Stock-based compensation expense
|
|
|
|
|
1,096
|
|
|
|
|
|
|
|
|
1,096
|
|
|||||||||||
Adoption of ASC 606
|
|
|
|
|
|
|
1,598
|
|
|
|
|
|
|
1,598
|
|
|||||||||||
Balance at March 31, 2018
|
25,068
|
|
|
251
|
|
|
89,768
|
|
|
387,435
|
|
|
(17,303
|
)
|
|
(90,318
|
)
|
|
369,833
|
|
|
March 31, 2018
|
|
January 1, 2018
|
|
Dollar Change
|
||||||
Contract assets
|
$
|
25,005
|
|
|
$
|
19,125
|
|
|
$
|
5,880
|
|
Contract liabilities
|
$
|
3,198
|
|
|
$
|
2,820
|
|
|
$
|
378
|
|
In thousands
|
|
December 31, 2017
|
|
Adjustments for Adoption of ASC606
|
|
January 1, 2018
|
||||||
|
|
|
|
|
||||||||
Assets:
|
|
|
|
|
|
|
||||||
Contract assets
|
|
$
|
—
|
|
|
$
|
19,125
|
|
|
$
|
19,125
|
|
Inventories
|
|
$
|
80,339
|
|
|
$
|
(15,184
|
)
|
|
$
|
65,155
|
|
|
|
|
|
|
|
|
||||||
Liabilities:
|
|
|
|
|
|
|
||||||
Accounts payable
|
|
$
|
71,931
|
|
|
$
|
663
|
|
|
$
|
72,594
|
|
Other accrued liabilities
|
|
$
|
11,690
|
|
|
$
|
1,209
|
|
|
$
|
12,899
|
|
Deferred tax liabilities
|
|
$
|
14,714
|
|
|
$
|
471
|
|
|
$
|
15,185
|
|
|
|
|
|
|
|
|
||||||
Stockholders' equity:
|
|
|
|
|
|
|
||||||
Retained earnings
|
|
$
|
374,783
|
|
|
$
|
1,598
|
|
|
$
|
376,381
|
|
|
|
March 31, 2018
|
||||||||||
In thousands
|
|
Balances Without Adoption of ASC 606
|
|
ASC 606 Adjustments
|
|
As Reported
|
||||||
|
|
|
|
|
||||||||
Assets:
|
|
|
|
|
|
|
||||||
Contract assets
|
|
$
|
—
|
|
|
$
|
25,005
|
|
|
$
|
25,005
|
|
Inventories
|
|
$
|
94,176
|
|
|
$
|
(19,913
|
)
|
|
$
|
74,263
|
|
|
|
|
|
|
|
|
||||||
Liabilities:
|
|
|
|
|
|
|
||||||
Accounts payable
|
|
$
|
76,742
|
|
|
$
|
3,663
|
|
|
$
|
80,405
|
|
Other accrued liabilities
|
|
$
|
15,402
|
|
|
$
|
(932
|
)
|
|
$
|
14,470
|
|
Deferred tax liabilities
|
|
$
|
15,015
|
|
|
$
|
527
|
|
|
$
|
15,542
|
|
|
|
|
|
|
|
|
||||||
Stockholders' equity:
|
|
|
|
|
|
|
||||||
Retained earnings
|
|
$
|
385,601
|
|
|
$
|
1,834
|
|
|
$
|
387,435
|
|
|
|
Quarter Ended March 31, 2018
|
||||||||||
In thousands
|
|
Results Without Adoption of ASC606
|
|
Effect of Change
Higher (Lower) |
|
As Reported
|
||||||
|
|
|
|
|
||||||||
Net sales
|
|
$
|
185,406
|
|
|
$
|
6,254
|
|
|
$
|
191,660
|
|
Cost of sales
|
|
146,191
|
|
|
5,962
|
|
|
152,153
|
|
|||
Gross profit
|
|
39,215
|
|
|
292
|
|
|
39,507
|
|
|||
Selling, product development and administrative expenses
|
|
25,471
|
|
|
—
|
|
|
25,471
|
|
|||
Operating income
|
|
13,744
|
|
|
292
|
|
|
14,036
|
|
|||
Interest expense
|
|
540
|
|
|
—
|
|
|
540
|
|
|||
Other expense, net
|
|
315
|
|
|
—
|
|
|
315
|
|
|||
Income before income taxes
|
|
12,889
|
|
|
292
|
|
|
13,181
|
|
|||
Income tax expense
|
|
2,067
|
|
|
56
|
|
|
2,123
|
|
|||
Loss from equity method investment
|
|
4
|
|
|
—
|
|
|
4
|
|
|||
Net income
|
|
$
|
10,818
|
|
|
$
|
236
|
|
|
$
|
11,054
|
|
Earnings per share:
|
|
|
|
|
|
|
||||||
Basic
|
|
$
|
0.63
|
|
|
$
|
0.01
|
|
|
$
|
0.64
|
|
Diluted
|
|
$
|
0.62
|
|
|
$
|
0.02
|
|
|
$
|
0.64
|
|
Weighted average number of common shares outstanding:
|
|
|
|
|
|
|
||||||
Basic
|
|
17,164
|
|
|
—
|
|
|
17,164
|
|
|||
Diluted
|
|
17,339
|
|
|
—
|
|
|
17,339
|
|
|
|
Quarter Ended March 31, 2018
|
||||||||||||||||||
In thousands
|
|
Performance Materials
|
|
Technical Nonwovens
|
|
Thermal Acoustical Solutions
|
|
Eliminations and Other
|
|
Consolidated Net Sales
|
||||||||||
|
|
|
|
|
|
|
|
|
|
|
||||||||||
North America
|
|
$
|
19,161
|
|
|
$
|
39,133
|
|
|
$
|
69,979
|
|
|
$
|
(7,826
|
)
|
|
$
|
120,447
|
|
Europe
|
|
11,532
|
|
|
19,386
|
|
|
28,055
|
|
|
(185
|
)
|
|
58,788
|
|
|||||
Asia
|
|
—
|
|
|
9,022
|
|
|
3,403
|
|
|
—
|
|
|
12,425
|
|
|||||
Total Net Sales
|
|
$
|
30,693
|
|
|
$
|
67,541
|
|
|
$
|
101,437
|
|
|
$
|
(8,011
|
)
|
|
$
|
191,660
|
|
In thousands
|
|
March 31,
2018 |
|
December 31,
2017 |
||||
Raw materials
|
|
$
|
34,023
|
|
|
$
|
28,672
|
|
Work in process
|
|
16,013
|
|
|
29,427
|
|
||
Finished goods
|
|
24,227
|
|
|
23,901
|
|
||
|
|
74,263
|
|
|
82,000
|
|
||
Less: Progress billings
|
|
—
|
|
|
(1,661
|
)
|
||
Total inventories
|
|
$
|
74,263
|
|
|
$
|
80,339
|
|
|
|
December 31,
2017 |
|
Currency
translation adjustments
|
|
Additions
|
|
March 31, 2018
|
||||||||
In thousands
|
|
|
|
|
||||||||||||
Performance Materials
|
|
$
|
13,307
|
|
|
$
|
115
|
|
|
$
|
—
|
|
|
$
|
13,422
|
|
Technical Nonwovens
|
|
55,662
|
|
|
(126
|
)
|
|
—
|
|
|
55,536
|
|
||||
Total goodwill
|
|
$
|
68,969
|
|
|
$
|
(11
|
)
|
|
$
|
—
|
|
|
$
|
68,958
|
|
|
|
March 31, 2018
|
|
December 31, 2017
|
||||||||||||
In thousands
|
|
Gross Carrying Amount
|
|
Accumulated Amortization
|
|
Gross Carrying Amount
|
|
Accumulated Amortization
|
||||||||
Amortized intangible assets
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Customer Relationships
|
|
$
|
39,399
|
|
|
$
|
(5,606
|
)
|
|
$
|
39,474
|
|
|
$
|
(4,460
|
)
|
Patents
|
|
4,607
|
|
|
(3,942
|
)
|
|
4,504
|
|
|
(3,821
|
)
|
||||
Technology
|
|
2,500
|
|
|
(685
|
)
|
|
2,500
|
|
|
(644
|
)
|
||||
Trade Names
|
|
4,285
|
|
|
(1,689
|
)
|
|
4,288
|
|
|
(1,461
|
)
|
||||
License Agreements
|
|
652
|
|
|
(652
|
)
|
|
640
|
|
|
(640
|
)
|
||||
Other
|
|
601
|
|
|
(439
|
)
|
|
586
|
|
|
(423
|
)
|
||||
Total amortized intangible assets
|
|
$
|
52,044
|
|
|
$
|
(13,013
|
)
|
|
$
|
51,992
|
|
|
$
|
(11,449
|
)
|
|
|
|
|
|
|
March 31,
|
|
December 31,
|
|||||
In thousands
|
|
Effective Rate
|
|
Maturity
|
|
2018
|
|
2017
|
|||||
Revolver Loan, due July 7, 2021
|
|
2.88
|
%
|
|
2021
|
|
$
|
76,600
|
|
|
$
|
76,600
|
|
Capital Leases
|
|
1.65% - 2.09%
|
|
|
2019 - 2020
|
|
545
|
|
|
590
|
|
||
|
|
|
|
|
|
|
77,145
|
|
|
77,190
|
|
||
Less portion due within one year
|
|
|
|
|
|
|
(283
|
)
|
|
(277
|
)
|
||
Total long-term debt
|
|
|
|
|
|
|
$
|
76,862
|
|
|
$
|
76,913
|
|
|
March 31, 2018
|
|
December 31, 2017
|
||||||||||||
In thousands
|
Asset Derivatives
|
|
Liability Derivatives
|
|
Asset Derivatives
|
|
Liability Derivatives
|
||||||||
Derivatives designated as hedging instruments:
|
|
|
|
|
|
|
|
||||||||
Interest rate contract
|
$
|
289
|
|
|
$
|
—
|
|
|
$
|
157
|
|
|
$
|
—
|
|
Total derivatives
|
$
|
289
|
|
|
$
|
—
|
|
|
$
|
157
|
|
|
$
|
—
|
|
|
Quarter Ended
March 31, |
||||||
|
2018
|
|
2017
|
||||
Cash flow hedges:
|
|
|
|
||||
Interest rate contract
|
$
|
102
|
|
|
$
|
—
|
|
|
$
|
102
|
|
|
—
|
|
In thousands except per share
amounts
|
|
Shares
|
|
Weighted-
Average
Exercise Price
|
|
Aggregate
Intrinsic Value
|
|||||
Outstanding at March 31, 2018
|
|
417
|
|
|
$
|
34.36
|
|
|
$
|
6,732
|
|
Exercisable at March 31, 2018
|
|
207
|
|
|
$
|
21.90
|
|
|
$
|
5,611
|
|
Unvested at March 31, 2018
|
|
210
|
|
|
$
|
46.64
|
|
|
$
|
1,121
|
|
In thousands
|
Severance and Related Expenses
|
Contract Termination Expenses
|
Facility Exit, Move and Set-up Expenses
|
Total
|
||||||||
Total estimated expenses
|
1,200
|
|
300
|
|
3,500
|
|
5,000
|
|
||||
Expenses incurred through December 31, 2017
|
181
|
|
154
|
|
327
|
|
662
|
|
||||
Estimated remaining expense at December 31, 2017
|
1,019
|
|
146
|
|
3,173
|
|
4,338
|
|
||||
Expense incurred during quarter ended:
|
|
|
|
|
||||||||
March 31, 2018
|
$
|
315
|
|
$
|
—
|
|
$
|
219
|
|
$
|
534
|
|
Total pre-tax expense incurred
|
$
|
496
|
|
$
|
154
|
|
$
|
546
|
|
$
|
1,196
|
|
Estimated remaining expense at March 31, 2018
|
704
|
|
146
|
|
2,954
|
|
3,804
|
|
In thousands
|
Total
|
||
Balance as of December 31, 2017
|
$
|
333
|
|
Pre-tax restructuring expenses, excluding depreciation
|
469
|
|
|
Cash paid
|
(320
|
)
|
|
Balance as of March 31, 2018
|
$
|
482
|
|
|
|
Quarter Ended
March 31, |
||||||
In thousands
|
|
2018
|
|
2017
|
||||
Components of net periodic benefit cost
|
|
|
|
|
|
|
||
Interest cost
|
|
$
|
470
|
|
|
$
|
514
|
|
Expected return on assets
|
|
(650
|
)
|
|
(594
|
)
|
||
Amortization of actuarial loss
|
|
256
|
|
|
273
|
|
||
Net periodic benefit cost
|
|
$
|
76
|
|
|
$
|
193
|
|
|
|
Quarter Ended
March 31, |
||||
In thousands
|
|
2018
|
|
2017
|
||
Basic average common shares outstanding
|
|
17,164
|
|
|
16,983
|
|
Effect of dilutive options and restricted stock awards
|
|
175
|
|
|
301
|
|
Diluted average common shares outstanding
|
|
17,339
|
|
|
17,284
|
|
|
|
Quarter Ended
March 31, |
||||||
In thousands
|
|
2018
|
|
2017
|
||||
Performance Materials Segment:
|
|
|
|
|
|
|
||
Filtration
|
|
$
|
20,690
|
|
|
$
|
18,846
|
|
Thermal Insulation
|
|
7,507
|
|
|
7,425
|
|
||
Life Sciences Filtration
|
|
2,496
|
|
|
2,480
|
|
||
Performance Materials Segment net sales
|
|
30,693
|
|
|
28,751
|
|
||
|
|
|
|
|
||||
Technical Nonwovens Segment:
|
|
|
|
|
||||
Industrial Filtration
|
|
40,231
|
|
|
34,214
|
|
||
Advanced Materials
(1)
|
|
27,310
|
|
|
24,704
|
|
||
Technical Nonwovens net sales
|
|
67,541
|
|
|
58,918
|
|
||
|
|
|
|
|
||||
Thermal Acoustical Solutions Segment:
|
|
|
|
|
||||
Parts
|
|
88,122
|
|
|
81,814
|
|
||
Tooling
|
|
13,315
|
|
|
2,971
|
|
||
Thermal Acoustical Solutions Segment net sales
|
|
101,437
|
|
|
84,785
|
|
||
Eliminations and Other
(1)
|
|
(8,011
|
)
|
|
(6,967
|
)
|
||
Consolidated Net Sales
|
|
$
|
191,660
|
|
|
$
|
165,487
|
|
|
|
Quarter Ended
March 31, |
||||||
In thousands
|
|
2018
|
|
2017
(2)
|
||||
Performance Materials
|
|
$
|
2,641
|
|
|
$
|
1,658
|
|
Technical Nonwovens
|
|
5,006
|
|
|
4,668
|
|
||
Thermal Acoustical Solutions
|
|
12,614
|
|
|
14,796
|
|
||
Corporate Office Expenses
|
|
(6,225
|
)
|
|
(5,974
|
)
|
||
Consolidated Operating Income
|
|
$
|
14,036
|
|
|
$
|
15,148
|
|
(1)
|
Included in the Technical Nonwovens segment and Eliminations and Other is
$7.1 million
and
$6.3 million
in intercompany sales to the Thermal Acoustical Solutions segment for the quarters ended
March 31, 2018
and
2017
, respectively.
|
(2)
|
First quarter 2017 segment operating income amounts of
$0.2 million
have been reclassified to other expense, net, to give effect to the adoption of ASU No. 2017-07, "Compensation - Retirement Benefits (Topic 715): Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost".
|
In thousands
|
|
Foreign Currency
Translation
Adjustment
|
|
Defined Benefit
Pension
Adjustment
|
|
Gains and Losses
on Cash Flow Hedges
|
|
Total
Accumulated
Other
Comprehensive
(Loss) Income
|
||||||||||
Balance at December 31, 2016
|
|
$
|
(27,885
|
)
|
|
$
|
(20,065
|
)
|
|
|
$
|
—
|
|
|
|
$
|
(47,950
|
)
|
Other Comprehensive Income
|
|
2,729
|
|
|
—
|
|
|
|
—
|
|
|
|
2,729
|
|
||||
Amounts reclassified from accumulated other comprehensive loss
|
|
—
|
|
|
172
|
|
(a)
|
|
—
|
|
|
|
172
|
|
||||
Balance at March 31, 2017
|
|
(25,156
|
)
|
|
(19,893
|
)
|
|
|
—
|
|
|
|
(45,049
|
)
|
||||
Balance at December 31, 2017
|
|
(2,221
|
)
|
|
(18,049
|
)
|
|
|
122
|
|
|
|
(20,148
|
)
|
||||
Other Comprehensive Income
|
|
2,545
|
|
|
—
|
|
|
|
102
|
|
(b)
|
|
2,647
|
|
||||
Amounts reclassified from accumulated other comprehensive loss
|
|
—
|
|
|
198
|
|
(a)
|
|
—
|
|
|
|
198
|
|
||||
Balance at March 31, 2018
|
|
$
|
324
|
|
|
$
|
(17,851
|
)
|
|
|
$
|
224
|
|
|
|
$
|
(17,303
|
)
|
(a)
|
Amount represents amortization of actuarial losses, a component of net periodic benefit cost. This amount was
$0.2 million
, net of
$0.1 million
tax benefit for the quarters ended
March 31, 2018
and
2017
.
|
(b)
|
Amount represents unrealized gains on the fair value of hedging activities, net of taxes, for the quarter ended
March 31, 2018
.
|
Item 2.
|
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
|
•
|
Net sales were
$191.7 million
in
Q1 2018
, compared to
$165.5 million
in
Q1 2017
, an increase of
$26.2 million
, or
15.8%
. The change in consolidated net sales is summarized in the following table:
|
Components
(in thousands)
|
|
Change in Net Sales
|
|
Percent Change
|
|||
Parts volume and pricing change
|
|
6,924
|
|
|
4.2
|
%
|
|
Change in tooling sales
|
|
9,542
|
|
|
5.8
|
%
|
|
Foreign currency translation
|
|
9,707
|
|
|
5.8
|
%
|
|
Total
|
|
$
|
26,173
|
|
|
15.8
|
%
|
•
|
On January 1, 2018 the Company adopted Accounting Standards Update No. 2014-09, “Revenue from Contracts with Customers” (“ASC 606”). The impact of adopting ASC 606 resulted in an increase to net sales of $6.3 million, of which $6.2 million related to tooling sales, and an increase to net income of $0.2 million for the quarter ended March 31, 2018.
|
•
|
Gross margin decreased 390 basis points to 20.6% in the first quarter of 2018, primarily driven by the Thermal Acoustical Solutions segment, and to a lesser extent the Technical Nonwovens and Performance Materials segments. The Thermal Acoustical Solutions segment negatively impacted consolidated gross margin by approximately 290 basis points due to a sharp increase in demand on key platforms in North America, and coupled with equipment downtime and other inefficiencies, resulted in excessive manufacturing and freight costs to meet customer delivery schedules. Also, increased aluminum costs and reduced customer pricing for certain parts contributed to lower gross margin.
|
•
|
Operating income was $
14.0 million
, or
7.3%
, of net sales in
Q1 2018
, compared to $
15.1 million
, or
9.2%
of net sales, in
Q1 2017
. Operating margin declined due to the negative impact of lower gross margin of 390 basis points. Decreased gross margin was partially offset by a 200 basis point reduction in selling, product development and administrative expenses as a percentage of net sales compared to the first quarter of 2017 primarily due to managed spending coupled
|
|
|
Q1 2018
|
|
Q1 2017
|
||||||||||
Components
(in thousands except per share amounts)
|
|
Operating income effect
|
|
EPS impact
|
|
Operating income effect
|
|
EPS impact
|
||||||
TNW restructuring expenses
|
|
(534
|
)
|
|
$
|
(0.03
|
)
|
|
—
|
|
|
$
|
—
|
|
Strategic initiatives expenses
|
|
(122
|
)
|
|
$
|
(0.01
|
)
|
|
(160
|
)
|
|
$
|
(0.01
|
)
|
Severance expenses
|
|
—
|
|
|
$
|
—
|
|
|
(988
|
)
|
|
$
|
(0.03
|
)
|
Inventory step-up purchase accounting adjustments
|
|
—
|
|
|
$
|
—
|
|
|
(481
|
)
|
|
$
|
(0.02
|
)
|
Impairment charge
|
|
—
|
|
|
$
|
—
|
|
|
(772
|
)
|
|
$
|
(0.03
|
)
|
•
|
The Company's effective tax rate for Q1 2018 was 16.1% compared to 17.6% in Q1 2017. The effective tax rate in the first quarter of 2018 was impacted by the reduction of the U.S. corporate tax rate from 35% to 21% under the U.S. Tax Cuts and Jobs Act, while the first quarter of 2017 was impacted by 11.4% due to tax benefits from stock vesting.
|
•
|
Net income was
$11.1 million
, or
$0.64
per diluted share, in Q1 2018 and
$11.7 million
, or
$0.68
per diluted share, in Q1 2017.
|
|
|
Quarter Ended
|
|||||||||
In thousands
|
|
Q1-18
|
|
Q1-17
|
|
Percent
Change
|
|||||
Net sales
|
|
$
|
191,660
|
|
|
$
|
165,487
|
|
|
15.8
|
%
|
|
|
Quarter Ended
|
|||||||||
In thousands of dollars
|
|
Q1-18
|
|
Q1-17
|
|
Percent Change
|
|||||
Cost of sales
|
|
$
|
152,153
|
|
|
$
|
124,989
|
|
|
21.7
|
%
|
|
|
Quarter Ended
|
|||||||||
In thousands
|
|
Q1-18
|
|
Q1-17
|
|
Percent
Change |
|||||
Gross profit
|
|
$
|
39,507
|
|
|
$
|
40,498
|
|
|
(2.4
|
)%
|
Gross margin
|
|
20.6
|
%
|
|
24.5
|
%
|
|
|
|
|
Quarter Ended
|
|||||||||
In thousands
|
|
Q1-18
|
|
Q1-17
|
|
Percent
Change |
|||||
Selling, product development and administrative expenses
|
|
$
|
25,471
|
|
|
$
|
25,350
|
|
|
0.5
|
%
|
Percentage of sales
|
|
13.3
|
%
|
|
15.3
|
%
|
|
|
|
|
Quarter Ended
|
|||||||||
In thousands
|
|
Q1-18
|
|
Q1-17
|
|
Percent
Change |
|||||
Interest expense
|
|
$
|
540
|
|
|
$
|
606
|
|
|
(10.9
|
)%
|
Weighted average interest rate
|
|
2.6
|
%
|
|
1.8
|
%
|
|
|
|
|
Quarter Ended
|
||||||||||
In thousands
|
|
Q1-18
|
|
Q1-17
|
|
Dollar Change
|
||||||
Other expense, net
|
|
$
|
315
|
|
|
$
|
333
|
|
|
$
|
(18
|
)
|
|
|
Quarter Ended
|
||||||||||
In thousands
|
|
Q1-18
|
|
Q1-17
|
|
Dollar Change
|
||||||
Performance Materials Segment:
|
|
|
|
|
|
|
||||||
Filtration
|
|
$
|
20,690
|
|
|
$
|
18,846
|
|
|
$
|
1,844
|
|
Thermal Insulation
|
|
7,507
|
|
|
7,425
|
|
|
82
|
|
|||
Life Sciences Filtration
|
|
2,496
|
|
|
2,480
|
|
|
16
|
|
|||
Performance Materials Segment net sales
|
|
30,693
|
|
|
28,751
|
|
|
1,942
|
|
|||
|
|
|
|
|
|
|
||||||
Technical Nonwovens Segment:
|
|
|
|
|
|
|
||||||
Industrial Filtration
|
|
40,231
|
|
|
34,214
|
|
|
6,017
|
|
|||
Advanced Materials
(1)
|
|
27,310
|
|
|
24,704
|
|
|
2,606
|
|
|||
Technical Nonwovens net sales
|
|
67,541
|
|
|
58,918
|
|
|
8,623
|
|
|||
|
|
|
|
|
|
|
||||||
Thermal Acoustical Solutions Segment:
|
|
|
|
|
|
|
||||||
Parts
|
|
88,122
|
|
|
81,814
|
|
|
6,308
|
|
|||
Tooling
|
|
13,315
|
|
|
2,971
|
|
|
10,344
|
|
|||
Thermal Acoustical Solutions Segment net sales
|
|
101,437
|
|
|
84,785
|
|
|
16,652
|
|
|||
Eliminations and Other
(1)
|
|
(8,011
|
)
|
|
(6,967
|
)
|
|
(1,044
|
)
|
|||
Consolidated Net Sales
|
|
$
|
191,660
|
|
|
$
|
165,487
|
|
|
$
|
26,173
|
|
|
|
|
|
|
|
|
|
|
Quarter Ended
|
||||||||||||||
|
|
Q1-18
|
|
Q1-17
|
|
|
||||||||||
In thousands
|
|
Operating Income
|
|
Operating Margin %
|
|
Operating Income
|
|
Operating Margin %
|
|
Dollar Change
|
||||||
Performance Materials
|
|
$
|
2,641
|
|
|
8.6%
|
|
$
|
1,658
|
|
|
5.8%
|
|
$
|
983
|
|
Technical Nonwovens
|
|
5,006
|
|
|
7.4%
|
|
4,668
|
|
|
7.9%
|
|
338
|
|
|||
Thermal Acoustical Solutions
|
|
12,614
|
|
|
12.4%
|
|
14,796
|
|
|
17.5%
|
|
(2,182
|
)
|
|||
Corporate Office Expenses
|
|
(6,225
|
)
|
|
|
|
(5,974
|
)
|
|
|
|
(251
|
)
|
|||
Consolidated Operating Income
|
|
$
|
14,036
|
|
|
7.3%
|
|
$
|
15,148
|
|
|
9.2%
|
|
$
|
(1,112
|
)
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
Included in the Technical Nonwovens segment and Eliminations and Other is
$7.1 million
and
$6.3 million
in intercompany sales to the Thermal Acoustical Solutions segment for the quarters ended
March 31, 2018
and
2017
, respectively.
|
Item 3.
|
Quantitative and Qualitative Disclosures about Market Risk
|
Item 4.
|
Controls and Procedures
|
Item 1.
|
Legal Proceedings
|
Item 1A.
|
Risk Factors
|
Item 2.
|
Unregistered Sales of Equity Securities and Use of Proceeds
|
Period
|
|
Total Number
of Shares
Purchased
|
|
Average Price
Paid per Share
|
|
Total Number
of Shares
Purchased as
Part of
Publicly
Announced
Program
|
|
Maximum
Number of
Shares That
May Yet Be
Purchased
Under the
Program
|
|||||
January 1, 2018 - January 31, 2018
|
|
—
|
|
|
$
|
—
|
|
|
—
|
|
|
—
|
|
February 1, 2018 - February 28, 2018
|
|
18,561
|
|
|
$
|
44.35
|
|
|
—
|
|
|
—
|
|
March 1, 2018 - March 31, 2018
|
|
—
|
|
|
$
|
—
|
|
|
—
|
|
|
—
|
|
|
|
18,561
|
|
|
$
|
44.35
|
|
|
—
|
|
|
—
|
|
Item 5.
|
Other Information
|
Director
|
|
For
|
|
Withheld
|
|
Broker Non-Votes
|
|||
Dale G. Barnhart
|
|
14,852,898
|
|
|
120,527
|
|
|
737,095
|
|
David G. Bills
|
|
14,928,627
|
|
|
44,798
|
|
|
737,095
|
|
Kathleen Burdett
|
|
14,739,011
|
|
|
234,414
|
|
|
737,095
|
|
James J. Cannon
|
|
14,881,131
|
|
|
92,294
|
|
|
737,095
|
|
Matthew T. Farrell
|
|
14,515,244
|
|
|
458,181
|
|
|
737,095
|
|
Marc T. Giles
|
|
14,662,100
|
|
|
311,325
|
|
|
737,095
|
|
William D. Gurley
|
|
14,573,647
|
|
|
399,778
|
|
|
737,095
|
|
Suzanne Hammett
|
|
14,674,042
|
|
|
299,383
|
|
|
737,095
|
|
S. Carl Soderstorm, Jr.
|
|
14,461,593
|
|
|
511,832
|
|
|
737,095
|
|
For
|
14,721,050
|
|
Against
|
241,576
|
|
Abstain
|
10,799
|
|
Broker Non-Votes
|
737,095
|
|
For
|
15,225,354
|
|
Against
|
484,930
|
|
Abstain
|
236
|
|
Item 6.
|
Exhibits
|
Exhibit
Number
|
|
Description
|
|
|
|
|
|
10.1
|
|
|
|
|
|
|
|
10.2
|
|
|
|
|
|
|
|
31.1
|
|
|
|
|
|
|
|
31.2
|
|
|
|
|
|
|
|
32.1
|
|
|
|
|
|
|
|
101.INS
|
|
|
XBRL Instance Document
|
|
|
|
|
101.SCH
|
|
|
XBRL Taxonomy Extension Schema Document
|
|
|
|
|
101.CAL
|
|
|
XBRL Taxonomy Extension Calculation Linkbase Document
|
|
|
|
|
101.DEF
|
|
|
XBRL Taxonomy Extension Definition Linkbase Document
|
|
|
|
|
101.LAB
|
|
|
XBRL Taxonomy Extension Label Linkbase Document
|
|
LYDALL, INC.
|
|
|
|
|
May 1, 2018
|
By:
|
/s/ Randall B. Gonzales
|
|
|
Randall B. Gonzales
Executive Vice President and Chief Financial Officer (On behalf of the Registrant and as Principal Financial Officer) |
2.
|
Termination of Employment by the Employee
.
|
To the Company:
|
Lydall, Inc.
P.O. Box 151 One Colonial Road Manchester, CT 06045-0151 Attn: Chief Executive Officer |
By:
|
/S/ Dale G. Barnhart
March 12, 2018
Dale G. Barnhart Date President and Chief Executive Officer |
1.
|
DEFINITIONS
|
2.
|
INVENTIONS
|
3.
|
CONFIDENTIAL INFORMATION
|
4.
|
NON-COMPETITION
|
(i)
|
participate in the ownership, management, operation or control of, or work for (as an employee, consultant or independent contractor) or have any material financial interest in, any business competitive with the Company in (a) any market in which the company for which I have worked in the two (2) preceding years has sold or attempted to sell any of its product in the two (2) years preceding my termination or (b) if the Company has assigned me to duties in a geographic area, within two hundred fifty (250) miles of any such geographic area in which I have worked in the two (2) years preceding my termination,
|
(ii)
|
induce or encourage any employee of the Company to terminate his or her employment with the Company, or
|
(iii)
|
solicit, induce or encourage any person, business or entity which is a supplier of, a purchaser from, or a contracting party with, the Company to terminate any written or oral agreement, order or understanding with the Company or to conduct business in a way that results in an adverse impact to the Company.
|
5.
|
GENERAL TERMS
|
Employee Name:
|
/S/ Randall B. Gonzales
|
By:
|
/S/ Dale G. Barnhart
|
Name Printed
|
Randall B. Gonzales
|
Name/Title:
|
Dale G. Barnhart, President and CEO
|
Date:
|
March 8, 2018
|
Date:
|
March 12, 2018
|
Lydall, Inc
|
Telephone 860-646-1233
|
One Colonial Road
|
Facsimile 860-646-4917
|
P.O. Box 151
|
Facsimile 860-646-8847
|
Manchester, CT 06045-0151
|
www.lydall.com
|
•
|
Executive Life Program
– In place of the Basic Life insurance described in the Summary of Benefits provided to all employees, you will participate in an executive life program that provides three times your annual base salary under an individually-owned universal life policy. The premiums for this benefit will be taxable to you as ordinary income. The other life programs (AD&D, Business Travel, and Supplemental) in the Summary of Benefits will apply to you as described.
|
•
|
Executive Long-Term Disability (LTD) Program
– You are provided an executive LTD policy that is in addition to the group LTD program. The group program provides 60% replacement income to a monthly maximum of $10,000. The executive program is designed to obtain replacement income to bring an executive up to 100% of base salary; however, it is limited to the supplemental insurance that can be obtained from the carrier based upon each individual executive’s circumstances and underwriting limitations.
|
1.
|
I have reviewed this quarterly report on Form 10-Q of Lydall, Inc.;
|
2.
|
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
|
3.
|
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
|
4.
|
The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
|
(a)
|
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
|
(b)
|
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
|
(c)
|
Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
|
(d)
|
Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
|
5.
|
The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting ,to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
|
(a)
|
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
|
(b)
|
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
|
May 1, 2018
|
|
/s/ Dale G. Barnhart
|
|
|
Dale G. Barnhart
President and Chief Executive Officer
|
1.
|
I have reviewed this quarterly report on Form 10-Q of Lydall, Inc.;
|
2.
|
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
|
3.
|
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
|
4.
|
The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
|
(a)
|
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
|
(b)
|
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
|
(c)
|
Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
|
(d)
|
Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
|
5.
|
The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
|
(a)
|
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
|
(b)
|
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
|
May 1, 2018
|
|
/s/ Randall B. Gonzales
|
|
|
Randall B. Gonzales
Executive Vice President and Chief Financial Officer (On behalf of the Registrant and as Principal Financial Officer) |
1.
|
The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
|
2.
|
The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
|
May 1, 2018
|
|
/s/ Dale G. Barnhart
|
|
|
Dale G. Barnhart
President and Chief Executive Officer
|
|
|
|
May 1, 2018
|
|
/s/ Randall B. Gonzales
|
|
|
Randall B. Gonzales
Executive Vice President and Chief Financial Officer (On behalf of the Registrant and as Principal Financial Officer) |