Lydall: 4th Qtr and Year Results For Immediate Release LYDALL, INC. ANNOUNCES RESULTS FOR FOURTH QUARTER AND YEAR ENDED DECEMBER 31, 1996 MANCHESTER, CT, February 19, 1997 -- LYDALL, INC. (NYSE: LDL) today announced financial results for the fourth quarter and year ended December 31, 1996. Net income for the year ended December 31, 1996, was a record $24.7 million, or $1.37 per share, compared with $22.4 million, or $1.23 per share in 1995 -- an 11 percent increase in earnings per share. Sales rose modestly in 1996 to $252.7 million from $252.1 million in 1995. Gross margin was $82.1 million, or 32.5 percent of sales, for 1996, and the after- tax return on sales was 9.8 percent. For 1995, gross margin was $77.7 million, or 30.8 percent of sales, and the after-tax return on sales was 8.9 percent. For the fourth quarter of 1996, net income was $6.1 million compared with $5.8 million in the comparable quarter 1995 -- up 5 percent. On an earnings per-share basis, the Company posted a fourth-quarter record of $.34 compared with $.32 for the same period last year -- a 6 percent increase. Sales were $59.5 million compared with $62.4 million for the 1995 fourth quarter -- a decrease of 5 percent. Gross margin for the 1996 fourth quarter was $20.3 million, a record 34.2 percent of sales, compared with $19.5 million, or 31.3 percent of sales, for the 1995 fourth quarter. After-tax return on sales was 10.3 percent compared with 9.3 percent for the same period last year. Commenting on Lydall's results, Leonard R. Jaskol, Chairman and Chief Executive Officer, stated, "We posted our twelfth year of earnings growth and sixth year of increased sales in 1996. Gross margin reached an all-time high for the fourth quarter and set a record for the year. We made significant gains through our comprehensive quality program, and generated record operating cash flow of $48.2 million. Late in December, Lydall acquired Textile Technologies Industries, Inc., a privately owned company in Pennsylvania which manufactures highly specialized, advanced structural materials sold to the aerospace, marine, medical device, automotive, and sporting goods industries. "Results for the fourth quarter of 1996 mirrored results for the third quarter of the same year. Sales of our material-handling products, which represented 13 percent of Lydall's total sales in 1996, were off from record highs in 1995. The deflationary climate of the linerboard market, the principal raw material, put severe pressure on pricing of this product line. Despite this pressure, unit volume and profitability remained healthy. This market began to stabilize at the end of the year and looks to be sustaining itself thus far in 1997. "Another factor depressing sales growth in the latter half of 1996 was the further decay of the market for cellulose-based battery separator products in Europe. Electrical insulation products, which include battery separator materials, accounted for only 6 percent of total sales in 1996. We purchased the Axohm Division in France in 1991 to establish Lydall as a European manufacturer of filtration and thermal products and to provide us with added capacity. As planned, we have responded to the shift away from cellulose-based separators over the past several years by methodically converting much of the manufacturing capacity in Europe to these filtration and thermal materials. "Air and liquid filtration media sales, which represented 24 percent of 1996 sales, grew by 9 percent in 1996. This was off from the extraordinary pace of growth experienced in 1995 and 1994. Growth of just high-efficiency air filtration media was slightly better. Sold to air filter manufacturers for clean-room applications, air filtration sales accounted for the majority of total filtration sales. Sales of these products slowed in the third quarter of 1996 and remained sluggish through the end of the year mainly because of postponements of planned clean-room construction and inventory reductions by our customers. "Thermal barrier sales were 38 percent of 1996's total sales. Sales of all- metal heat shields and battery insulators were particularly robust growing at a much better rate than thermal products in total, which rose by 6 percent. Thermal products include cryogenic insulation, automotive heat-management products, media for air-bag inflators, and high-temperature industrial insulation." Regarding results for the first quarter of 1997, Mr. Jaskol said, "We think first quarter 1997 results will be similar to the first quarter last year. At this point, we see more of our growth coming in the second half of 1997. I traditionally do an earnings projection at our annual meeting each year, and I plan to continue that practice. "Looking at the year ahead, we have committed to a major strategic investment in our information systems. We focus our capital investment primarily on projects to improve quality, process efficiencies, and productivity. The MIS project, which we are calling Lydall 2000, meets all these criteria. The new system will provide us with increased access to real- time information; quicker integration of acquisitions; and enhancements to our Cost of Quality methods. This will be a significant investment over the next three years, but it promises quality, process, and productivity improvements and an exceptional return on investment." Mr. Jaskol also announced the launch of Lydall's corporate site on the World Wide Web. The new Internet site ( http://lydall.com ) incorporates over 300 on-line pages and provides a comprehensive review of Lydall's products, divisions, and financial position. It is expected to become an integral part of the Company's worldwide product marketing and investor relations efforts. At December 31, 1996, cash, cash equivalents and short-term investments were $43.2 million compared with $28.7 million at year-end 1995. Working capital was $53.4 million compared with $52.7 million at the end of last year. ### Lydall, Inc. is a manufacturer of technologically advanced engineered materials for demanding specialty applications. Stockholders are referred to Lydall's Form 8-K, filed on June 4, 1996, which outlines certain risks regarding the Company's forward-looking statements. Such risks include: a major downturn of the automotive market which accounts for about 30 percent of Lydall's total sales, excluding foreign and after-market sales; a meaningful decrease in the number of clean rooms being built worldwide; and significant, unforeseen changes in raw material pricing, specifically, virgin fiber used in producing the Company's materials handling slipsheets. For further details on these risks and other pertinent information on Lydall, copies of the Company's 10-K, 10-Q’s and 8-K are available on the World Wide Web at Corporate Financials Online (http://www.cfonews.com/ldl) and Lydall's own web site (http://lydall.com). Copies of these documents can also be obtained from the Company. Write or call: Carole F. Butenas, Vice President - Investor Relations, at One Colonial Road, Manchester, CT 06040; Tel. 860-646-1233. Summary of Operations In thousands except per-share data (Unaudited) Fourth Quarter Twelve Months Ended December 31, Ended December 31, 1996 1995 1996 1995 Net sales $59,482 $62,353 $252,652 $252,128 Cost of sales 39,139 42,820 170,597 174,430 Gross margin 20,343 19,533 82,055 77,698 Selling, product development, and administrative expenses 10,814 10,306 42,778 40,668 Operating income 9,529 9,227 39,277 37,030 Other (income) expense: Investment income (410) (395) (1,389) (1,113) Interest expense 61 123 518 778 Other 11 197 294 490 (338) (75) (577) 155 Income before income taxes 9,867 9,302 39,854 36,875 Income tax expense 3,747 3,489 15,118 14,437 Net income $ 6,120 $ 5,813 $ 24,736 $ 22,438 Net income per share $ 0.34 $ 0.32 $ 1.37 $ 1.23 Weighted average shares and equivalents outstanding 17,987 18,399 18,107 18,313 Financial Position As of As of In thousands except ratio data December 31, December 31, 1996 1995 Cash, cash equivalents, and short-term investments $43,167 $28,733 Working capital 53,358 52,730 Long-term debt, net of current maturities 5,050 7,750 Stockholders' equity 117,844 101,811 Total capitalization 135,344 112,432 Current ratio 2.24 2.77 Total debt/total capitalization .13 .09 Common Stock Data Fourth quarter ended December 31, 1996 1995 High $24.500 $28.500 Low 20.250 21.500 Last 22.500 22.750 2,063,000 shares of Lydall common stock (LDL) were traded on the New York Stock Exchange during the fourth quarter 1996. ### Ends.