8-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 8-K

CURRENT REPORT

PURSUANT TO SECTION 13 OR 15 (d) OF

THE SECURITIES EXCHANGE ACT OF 1934

Date of Report (Date of earliest event reported): May 1, 2006

LYDALL, INC.

(Exact name of registrant as specified in its charter)

Commission file number: 1-7665

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)

Registrant’s telephone number, including area code: (860) 646-1233

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

¨ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

¨ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

¨ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

¨ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Section 2 – Financial Information

Item 2.02. Results of Operations and Financial Condition

On May 1, 2006, Lydall, Inc. (the “Company”) issued a press release setting forth the Company’s financial results for the first quarter ended March 31, 2006. A copy of the Company’s press release is attached hereto as Exhibit 99.1 and is hereby incorporated by reference.

Item 8.01. Other Events

On April 27, 2006, the Board of Directors of the Company approved the redesign of its retirement program for all U.S. employees not covered by a collective bargaining agreement. Two defined benefit plans, Lydall Pension Plan No. 1A and Lydall Pension Plan No. 1B (“plans”), will be amended, effective June 30, 2006, to freeze the plans with respect to all participants as of that date, so that no further benefits will accrue for participants after that date. All participants will be vested in their accrued benefit as of June 30, 2006, as long as such participants remain actively employed through that date.

Concurrently, the Board of Directors approved amendments to the Lydall 401(k) plan, effective July 1, 2006, to: (i) increase the Company matching contribution to 100 percent of employee pretax contributions up to six percent of compensation; (ii) discontinue the Company stock matching contribution; and (iii) provide for automatic enrollment of eligible non-union employees who were hired before April 1, 2006 and who are not participating in the Lydall 401(k) plan.

On May 1, 2006, the Company issued a press release announcing these changes to its retirement program. A copy of the Company’s press release is attached hereto as Exhibit 99.2 and is hereby incorporated by reference.

Section 9 - Financial Statements and Exhibits

Item 9.01. Financial Statements and Exhibits

(c) Exhibits

The following exhibits are furnished/filed with this report, as set forth below:

Exhibit Number	Exhibit Description
99.1	Press release, dated May 1, 2006, titled “Lydall Announces Financial Results for the First Quarter Ended March 31, 2006,” furnished herewith.
99.2	Press release, dated May 1, 2006, titled “Lydall Announces Redesign of its Retirement Program,” filed herewith.

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SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

	LYDALL, INC.
May 1, 2006	By:	/s/ Thomas P. Smith
		Thomas P. Smith Vice President, Chief Financial Officer and Treasurer

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EXHIBIT INDEX

Exhibit Number	Exhibit Description
99.1	Press Release dated May 1, 2006, titled “Lydall Announces Financial Results for the First Quarter Ended March 31, 2006,” furnished herewith.
99.2	Press Release dated May 1, 2006, titled “Lydall Announces Redesign of its Retirement Program,” filed herewith.

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EX-99.1

Exhibit 99.1

LYDALL ANNOUNCES FIRST QUARTER

ENDED MARCH 31, 2006 FINANCIAL RESULTS

MANCHESTER, CT – May 1, 2006 — LYDALL, INC. (NYSE: LDL) today announced financial results for the first quarter ended March 31, 2006.

Net sales for the first quarter were $82.2 million compared with $72.5 million for the same period in 2005. Net income for the current quarter was $1.9 million, or $.12 per diluted share, compared with $0.6 million, or $.04 per diluted share, for the first quarter of 2005.

Gross margin on net sales was slightly lower in the first quarter of 2006 dropping to 21.8 percent from 22.2 percent in the first quarter of 2005. This decrease was primarily attributable to reduced gross margins in the Filtration/Separation segment.

Selling, product development and administrative expenses decreased by $0.2 million in the current quarter compared with 2005, and as a percentage of net sales, decreased to 17.7 percent from 20.3 percent. The impact in the first quarter of 2006 from the recognition of compensation expense related to the Company’s adoption of Statement of Financial Accounting Standards No. 123 (revised 2004); “Share-Based Payment” was less than $0.1 million.

Net cash provided by operating activities was $5.2 million for the first quarter of 2006 compared with $0.7 million in the first quarter of 2005.

David Freeman, President and Chief Executive Officer, commented, “Overall I am encouraged by the improved operating performance at our domestic automotive operations. The strengthened management team and operational improvements have begun to show tangible results. We saw continuing improved operational performance at our European automotive business as well. However, our air filtration business continues to face a price competitive market as well as higher manufacturing costs resulting in reduced performance year over year. The Vital Fluids business showed improvement, but its results are still not satisfactory.”

Segment Information

Thermal/Acoustical – For the first quarter of 2006, Thermal/Acoustical segment net sales were $56.4 million compared with $47.8 million for the first quarter of 2005. Excluding the unfavorable impact of foreign currency translation, segment net sales increased by $10.0 million for the quarter. Automotive sales, which represented approximately 77 percent of total segment sales, increased by 15.4 percent. The majority of this increase was attributable to growth achieved by the North American operations. Operating income increased by $2.4 million in the current quarter compared to the same quarter of 2005 principally due to improved gross margin percentages and higher sales volume.

Filtration/Separation – Filtration/Separation segment net sales were $18.4 million in the current quarter compared with $17.5 million in the same period last year. Excluding the unfavorable impact of foreign currency translation, segment net sales increased by $1.4 million for the quarter due to increases in sales of Vital Fluids’ products, partially offset by lower sales of air filtration products. Operating income was $1.0 million for the first quarter of 2006 compared with $1.9 million for the comparable quarter of 2005. The decrease in operating income was primarily due to lower sales of air filtration products and the resultant higher per-unit manufacturing costs.

Conference Call

Lydall will host a conference call today at 10:00 a.m. EDT to discuss its first quarter ended March 31, 2006 results as well as general matters related to its businesses and markets. The call may be accessed in a listen-only mode at (800) 946-0705 and will be webcast live on the Company’s web site www.lydall.com under the Investor Relations’ section.

Lydall, Inc. is a New York Stock Exchange listed company, headquartered in Manchester, Connecticut. The Company, with operations in the U.S., France, and Germany and sales offices in the U.S., Europe, and Asia, focuses on specialty engineered products for the thermal/acoustical and filtration/separation markets.

Cautionary Note Concerning Factors That May Affect Future Results

Stockholders are referred to Lydall’s 2005 Annual Report on Form 10-K, “Management’s Discussion and Analysis of Financial Condition and Results of Operations – Cautionary Note Concerning Factors That May Affect Future Results,” and “Risk Factors” which outline certain risks regarding the Company’s forward-looking statements. Such risks include, among others: a major downturn of the automotive market, which accounted for approximately 52 percent of Lydall’s first quarter 2006 sales, dependence on large customers, pricing for automotive products, unforeseen changes in raw material pricing and supply, specifically, aluminum and other metals used in most of the Company’s heat-shield products and various fibers used in thermal/acoustical and filtration/separation products. In addition, increases in energy pricing, inherent risks at international operations, the timing and performance of new-product introductions, and compliance with environmental laws and regulations can impact Lydall’s projected results. For further details on these risks and other pertinent information on Lydall, copies of the Company’s Forms 10-K, 10-Q and 8-K are available on Lydall’s web site, www.lydall.com. Information may also be obtained from the Company Contact: Thomas P. Smith, Vice President, Chief Financial Officer and Treasurer, at One Colonial Road, Manchester, CT 06042; Telephone: 860-646-1233, email: investor@lydall.com

Lydall News Release

Summary of Operations

In thousands except per share data

(Unaudited)

	Quarter Ended March 31,
	2006			2005
Net sales	$	82,188		$	72,521
Cost of sales		64,256			56,441
Gross margin		17,932			16,080
Selling, product development and administrative expenses		14,510			14,703
Operating income		3,422			1,377
Interest expense		455			330
Other (income) expense, net		(63	)		50
Income before income taxes		3,030			997
Income tax expense		1,118			354
Net income	$	1,912		$	643
Basic earnings per common share	$	0.12		$	0.04
Diluted earnings per common share	$	0.12		$	0.04
Weighted average common shares outstanding		16,137			16,061
Weighted average common shares and equivalents outstanding		16,197			16,183

Summary of Segment Information

In thousands

(Unaudited)

	Quarter Ended March 31,
	2006			2005
Net Sales
Thermal/Acoustical	$	56,357		$	47,799
Filtration/Separation		18,377			17,496
Other Products and Services		8,068			7,759
Reconciling Items		(614	)		(533	)
Consolidated Totals	$	82,188		$	72,521
Operating Income
Thermal/Acoustical	$	6,247		$	3,867
Filtration/Separation		958			1,907
Other Products and Services		563			590
Corporate office expenses		(4,346	)		(4,987	)
Consolidated Totals	$	3,422		$	1,377

Financial Position

In thousands except ratio data

	March 31, 2006		December 31, 2005
	(Unaudited)
Cash and cash equivalents	$	2,206	$	2,162
Working capital	$	61,250	$	57,705
Total debt	$	30,494	$	33,441
Stockholders’ equity	$	146,456	$	143,229
Total capitalization	$	176,950	$	176,670
Current ratio		2.51		2.42
Total debt to total capitalization		0.17		0.19

Cash Flows

In thousands

	Quarter Ended March 31,
	2006			2005
	(Unaudited)			(Unaudited)
Net cash provided by operating activities	$	5,161		$	665
Net cash used for investing activities	$	(1,959	)	$	(5,416	)
Net cash (used in) provided by financing activities	$	(3,224	)	$	4,755
Depreciation and amortization	$	3,927		$	3,696
Capital expenditures	$	1,959		$	5,416

Common Stock Data

Quarter Ended March 31,

	2006		2005
High	$	10.02	$	11.90
Low	$	8.15	$	10.40
Close	$	9.65	$	11.10

During the first quarter of 2006, 1,034,400 shares of Lydall common stock (LDL) were traded on the New York Stock Exchange.

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EX-99.2

Exhibit 99.2

LYDALL ANNOUNCES REDESIGN OF ITS

RETIREMENT PROGRAM

MANCHESTER, CT – May 1, 2006 – Lydall, Inc. (NYSE: LDL) today announced that it is redesigning its retirement program and will move away from its traditional defined benefit pension plans while concurrently enhancing its 401(k) plan.

Effective June 30, 2006, Lydall will freeze the accrued pension benefits for all U.S. employees currently under its defined benefit plans who are not covered under a collective bargaining agreement. The Company had previously closed these pension plans to employees hired after December 31, 2005.

The Company will increase its 401(k) match to a cash contribution equal to 100 percent of employee pretax contributions up to 6 percent of compensation. The current match formula is a cash match equal to 100 percent of the first 3 percent of compensation contributed by an employee plus a Company stock match equal to 50 percent of the next 2 percent of compensation contributed by an employee. The enhanced Lydall 401(k) plan will also feature automatic enrollment of employees not currently in the plan.

David Freeman, President and Chief Executive Officer of Lydall, said in a letter to employees, “The redesign of our retirement program reflects the trend of moving away from defined benefit pension plans and the increasingly competitive environments we are facing in all our businesses. The costs and complexities of providing defined benefit pension plans directly affect our ability to compete globally with other companies that do not have similar pension obligations. These obligations, which are a major issue even for large companies, are considerable for a company our size facing the business challenges that we have in recent years.”

As a result of these actions, the Company expects a reduction in its retirement-related expense of approximately $1.5 to $2.0 million on an annual basis, based on year-end 2005 pension assumptions.

The Company does not anticipate that the curtailment expense to be recorded in the second quarter of 2006, as a result of the amendment to the defined benefit pension plans, will be significant.

Lydall, Inc. is a New York Stock Exchange listed company, headquartered in Manchester, Connecticut. The Company, with operations in the U.S., France, and Germany and sales offices in the U.S., Europe, and Asia, focuses on specialty engineered products for the thermal/acoustical and filtration/separation markets.

Cautionary Note Concerning Factors That May Affect Future Results

In the interest of more meaningful disclosure, Lydall and its management make statements regarding the future outlook of the Company, which constitute “forward-looking statements” under the securities laws. These forward-looking statements are intended to provide management’s current expectations for the future operating and financial performance of the Company, based on assumptions and estimates currently believed to be valid. Forward-looking statements included within this document are generally identified through the use of language such as “believe,” “expect,” “may,” “plan,” “project,” “estimate,” “anticipate” and other words of similar meaning in connection with the discussion of future operating or financial performance. All forward-looking statements involve risks and uncertainties that could cause actual results to differ materially from those expressed or implied in the forward-looking statements. Some of the factors that might cause such a difference include risks and uncertainties which are detailed in the “Management’s Discussion and Analysis of Financial Condition and Results of Operations-Cautionary Note Concerning Factors That May Affect Future Results” and “Risk Factors” sections of the Company’s Annual Report on Form 10-K for the year ended December 31, 2005. Lydall does not undertake to update any forward-looking statement made in this report or that may from time to time be made by or on behalf of the Company.

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