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Kaman Reports 2012 First Quarter Results

Dépèche transmise le 30 avril 2012 par Business Wire

BLOOMFIELD, Conn.--(BUSINESS WIRE)--Kaman Corp. (NYSE:KAMN) today reported financial results for the first quarter ended March 30, 2012.

“Net sales from the Industrial Distribution segment”

 

           

Table 1. Summary of Financial Results

In thousands except per share amounts

For the three months ended

March 30,

April 1,

 

2012

2011

$ Change

Net sales:
Industrial Distribution $ 257,638 $ 238,870 $ 18,768
Aerospace 131,084   138,953   (7,869 )
Net sales $ 388,722   $ 377,823   $ 10,899  
 
Operating income:
Industrial Distribution $ 12,780 $ 12,114 $ 666
Aerospace 15,901 21,419 (5,518 )
Net gain (loss) on sale of assets 24 (2 ) 26
Corporate expense (11,525 ) (8,972 ) (2,553 )
Operating income $ 17,180   $ 24,559   $ (7,379 )
 
 
Diluted earnings per share $ 0.36 $ 0.54 $ (0.18 )
Adjustments*   (0.07 ) 0.07  
Adjusted diluted earnings per share* $ 0.36   $ 0.47   $ (0.11 )
 

Neal Keating, President and Chief Executive Officer stated, “While below last year, our first quarter results were in line with our expectations and provide us confidence to reaffirm our outlook for the full year. This performance was led by another solid quarter for our Industrial Distribution business, which achieved record quarterly sales and operating profit. Our Aerospace results were lower than the prior year; however, we continue to experience strong order in-take, particularly for our bearing products.

Industrial Distribution sales rose 7.9% versus prior year and 9.6% when measured on a sales per sales day basis. Growth from our acquisitions outpaced organic growth which grew 3.3% on sales per sales day basis. We continue to focus on key initiatives aimed at increasing gross margin rates for this business, which resulted in record gross margin for the quarter, and our seventh consecutive quarter of year over year improvement.

Aerospace sales declined 5.7% primarily due to lower customer requirements on our BLACK HAWK programs, the lower volume of work under our Unmanned K-MAX® Program and the timing and mix of various other programs across the segment. During the quarter we encountered JPF test failures that required us to suspend lot acceptance testing and fuze deliveries. Although this resulted in fewer than expected JPF shipments, we delivered more fuzes to the U.S. Government in this quarter than we did in the first quarter of the prior year. As we have indicated in the past, we anticipate JPF production interruptions will occur from time to time due to the difficulties associated with the extreme parameters of the acceptance tests and the sensitive nature of the production materials. We are working closely with our customer to review our findings and anticipate that we will receive approval to return to lot acceptance testing, on this important sole source program in early May. Despite these failures, we have been able continue production of fuze subassemblies, which will allow us to implement any required changes and return to acceptance testing quickly. In addition, we have more than adequate production and test capacity over the next several quarters to meet our plan for the year.

The performance of the two K-MAX aircraft deployed in Afghanistan has been outstanding. We are proud of the performance of the aircraft, which have maintained 95% flight availability and have now delivered over one million pounds of supplies to forward operating bases and combat outposts.

As we look ahead, we remain focused on a variety of growth opportunities and expect our performance to improve significantly through the balance of the year. We believe that our Industrial Distribution business will be a steady performer throughout the year and that we have built a platform for long-term growth. In our Aerospace business, start-up costs on our new programs will continue to provide some downside pressure on our near-term margins; however, we are confident that these new programs will provide significant contributions in the future. This year, we expect an acceleration of JPF shipments as we fulfill a strong backlog of orders, while continuing to benefit from increasing build rates for commercial aircraft and our participation on key military retrofit programs. Longer-term, we have opportunities to benefit from sales of SH-2G and K-MAX helicopters.”

Segment reports follow:

Industrial Distribution segment

Sales increased 7.9% in the 2012 first quarter to $257.6 million compared to $238.9 million a year ago. Acquisitions contributed $14.6 million in sales in the quarter (sales from acquisitions are classified as organic beginning with the thirteenth month following the acquisition). On a sales per sales day* basis, sales increased 9.6% over last year's first quarter, with organic sales representing 3.3% of the increase. (See Table 3 for additional details regarding the Segment's sales per sales day performance.) Sales growth was driven by increases in machinery manufacturing, durable goods, mining, and primary metal manufacturing, offset by declines in sales volume in the food, beverage and paper manufacturing industries.

Segment operating income for the first quarter of 2012 was $12.8 million compared to operating income of $12.1 million in the first quarter of 2011. The operating profit margin for the first quarter of 2012 was 5.0%. In comparison, the operating profit margin was 4.8% in the fourth quarter of 2011 and 5.1% in the first quarter of 2011. Operating profit was higher year over year as a result of higher sales volume and increased gross profit, which reached a record level in the quarter. Operating margin for 2012 was impacted by significantly higher pension and employee medical expenses.

Aerospace segment

Sales were $131.1 million, a decrease of $7.9 million from sales of $139.0 million in the first quarter of 2011. During the first quarter of 2012 the segment experienced lower sales from a variety of programs. These lower sales were a result of expected fluctuations in mix and timing of deliveries. Programs generating lower sales were Unmanned K-MAX, BLACK HAWK fuselage joining and installation, BLACK HAWK cockpit production, C-17, certain missile fuze programs and the direct commercial sales of the Joint Programmable Fuze. These reductions were somewhat offset by strong performance from bearing product lines, increased shipments of the JPF to the U.S. Government, the Egyptian SH-2G(E) maintenance and upgrade program, and contributions from the acquisition of Vermont Composites.

Operating income for the first quarter of 2012 was $15.9 million, compared to operating income of $21.4 million in the 2011 first quarter. The operating margin in this year's first quarter was 12.1% as compared to 15.4% in the comparable period in the prior year. The lower sales volume on our Unmanned K-MAX program, the customer-driven volume reductions under our Sikorsky BLACK HAWK programs and the timing of deliveries under our legacy fuze programs accounted for approximately $6.5 million of the operating profit reduction when compared to the first quarter of the prior year. The operating profit margin was also impacted by higher employee medical expenses.

Other

First quarter 2011 results include a non-recurring benefit of $2.4 million or $0.07 per diluted share related to the death of a former executive.

Outlook

The Company's expectations for 2012 are reaffirmed as follows:

  • Aerospace segment sales of $605 million to $625 million, up 11% to 14% over 2011
  • Aerospace segment operating margin of 15.7% to 16.0%
  • Industrial Distribution segment sales of $1,025 million to $1,055 million, up 8% to 11% over 2011
  • Industrial Distribution segment operating margin of 5.4% to 5.6%
  • Interest expense of approximately $13.5 million
  • Corporate expenses of approximately $44 million to $46 million
  • Tax rate of approximately 35%
  • Free cash flow* of $30 million to $35 million

Chief Financial Officer, William C. Denninger, commented, "Overall, our earnings were lower than the first quarter of the prior year due to the sales mix and timing of deliveries within Aerospace and higher employee medical expenses. We experienced solid performance from Industrial Distribution and strong performance from our bearing product lines, which are benefiting from increasing commercial build rates. We received $156 million in new Aerospace orders during the quarter, bringing our backlog to $557 million and providing us confidence in our outlook for the year."

Please see the MD&A section of the Company's SEC Form 10-Q filed concurrent with the issuance of this release for greater detail on our results and various company programs.

A conference call has been scheduled for tomorrow, May 1, 2012 at 8:30 AM EDT. Listeners may access the call live over the Internet through a link on the home page of the Company's website at http://www.kaman.com. In its discussion, management may include certain non-GAAP measures related to company performance. If so, a reconciliation of that information to GAAP, if not provided in this release, will be provided in the exhibits to the conference call and will be available through the Internet link provided above.

Table 2. Summary of Segment

     
Information (in thousands)
For the three months ended
March 30, 2012 April 1, 2011
Net sales:
Industrial Distribution $ 257,638 $ 238,870
Aerospace 131,084   138,953  
Net sales $ 388,722   $ 377,823  
 
Operating income:
Industrial Distribution $ 12,780 $ 12,114
Aerospace 15,901 21,419
Net gain (loss) on sale of assets 24 (2 )
Corporate expense (11,525 ) (8,972 )
Operating income $ 17,180

 

$ 24,559  
 

Non-GAAP Measure Disclosure

Management believes that the non-GAAP (Generally Accepted Accounting Principles) measures indicated by an asterisk (*) used in this release or in other disclosures provide investors with important perspectives into the Company's ongoing business performance. The Company does not intend for the information to be considered in isolation or as a substitute for the related GAAP measures. Other companies may define the measures differently. We define the non-GAAP measures used in this report and other disclosures, as follows:

Organic Sales per Sales Day - Organic sales per sales day is defined as GAAP “Net sales from the Industrial Distribution segment” less sales derived from acquisitions, divided by the number of sales days in a given period. Sales days are essentially business days that the Company's branch locations are open for business and exclude weekends and holidays. Sales days are provided as part of this release. Management believes organic sales per sales day provides investors with an important perspective on how net sales may be impacted by the number of days the segment is open for business.

Management uses organic sales per sales day as a measurement to compare periods in which the number of sales days differ. The following table illustrates the calculation of organic sales per sales day using “Net sales: Industrial Distribution” from the “Segment and Geographic Information” footnote in the “Notes to Condensed Consolidated Financial Statements” from the Company's Form 10-Q filed with the Securities and Exchange Commission on April 30, 2012. Sales from acquisitions are classified as organic beginning with the thirteenth month following the acquisition.

     

Table 3. Industrial Distribution - Organic Sales

Per Sales Day (in thousands, except days)

For the three months ended
March 30, April 1,
2012 2011
Net sales: Industrial Distribution $ 257,638 $ 238,870
Acquisition related sales

 

14,584

 

 

Organic sales $ 243,054 $ 238,870
Sales days

 

64

 

 

65

Organic sales per sales day $ 3,798   $ 3,675
 

Free Cash Flow - Free cash flow is defined as GAAP “Net cash provided by (used in) operating activities” less “Expenditures for property, plant & equipment.” Management believes free cash flow provides investors with an important perspective on the cash available for dividends to shareholders, debt repayment, and acquisitions after making capital investments required to support ongoing business operations and long-term value creation. Free cash flow does not represent the residual cash flow available for discretionary expenditures as it excludes certain mandatory expenditures such as repayment of maturing debt. Management uses free cash flow internally to assess both business performance and overall liquidity. The following table illustrates the calculation of free cash flow using “Net cash provided by (used in) operating activities” and “Expenditures for property, plant & equipment”, GAAP measures from the Condensed Consolidated Statements of Cash Flows included in this release.

Table 4. Free Cash Flow (in thousands)    

For the three
months ended

March 30,
2012
Net cash provided by (used in) operating activities $ (23,771 )
Expenditures for property, plant & equipment

 

(5,290

)
Free Cash Flow $ (29,061 )
 

Debt to Capitalization Ratio - Debt to capitalization ratio is calculated by dividing debt by capitalization. Debt is defined as GAAP “Notes payable” plus “Current portion of long-term debt” plus “Long-term debt, excluding current portion.” Capitalization is defined as Debt plus GAAP “Total shareholders' equity.” Management believes that debt to capitalization is a measurement of financial leverage and provides investors with an insight into the financial structure of the Company and its financial strength. The following table illustrates the calculation of debt to capitalization using GAAP measures from the condensed consolidated balance sheets included in this release.

Table 5. Debt to Capitalization (in thousands)        
March 30, December 31,
2012 2011
Notes payable $ 4,335 $ 1,685
Current portion of long-term debt 5,000 5,000
Long-term debt, excluding current portion 228,098   198,522  
Debt 237,433 205,207
Total shareholders' equity 385,702   373,071  
Capitalization $ 623,135   $ 578,278  
Debt to capitalization 38.1 % 35.5 %
 
Table 6. Reconciliation of Non-GAAP Financial Information        
(In thousands except per share amounts)
For the three months ended
March 30, 2012 April 1, 2011
 
GAAP corporate expense, pre-tax $ (11,525 ) $ (8,972 )
Non-recurring benefit associated with the death of a former executive   (2,368 )
Non-GAAP adjusted corporate expense, pre-tax $ (11,525 ) $ (11,340 )
 

NET EARNINGS:

GAAP net earnings as reported $ 9,403 $ 14,192
Non-recurring benefit associated with the death of a former executive, net of tax   (1,907 )
Non-GAAP adjusted net earnings $ 9,403   $ 12,285  
 
GAAP earnings per common share - diluted $ 0.36 $ 0.54
Non-recurring benefit associated with the death of a former executive, net of tax   (0.07 )
Non-GAAP adjusted net earnings per common share diluted $ 0.36   $ 0.47  
 
Diluted weighted average shares outstanding 26,463   26,355  

About Kaman Corporation

Kaman Corporation, founded in 1945 by aviation pioneer Charles H. Kaman, and headquartered in Bloomfield, Connecticut conducts business in the aerospace and industrial distribution markets. The company produces and/or markets widely used proprietary aircraft bearings and components; complex metallic and composite aerostructures for commercial, military and general aviation fixed and rotary wing aircraft; aerostructure engineering design analysis and FAA certification services; safe and arm solutions for missile and bomb systems for the U.S. and allied militaries; subcontract helicopter work; and support for the company's SH-2G Super Seasprite maritime helicopters and K-MAX medium-to-heavy lift helicopters. The company is a leading distributor of industrial parts, and operates more than 200 customer service centers and five distribution centers across North America. Kaman offers more than four million items including bearings, mechanical power transmission, electrical, material handling, motion control, fluid power, automation and MRO supplies to customers in virtually every industry. Additionally, Kaman provides engineering, design and support for automation, electrical, linear, hydraulic and pneumatic systems as well as belting and rubber fabrication, customized mechanical services, hose assemblies, repair, fluid analysis and motor management.

Forward-Looking Statements

This release contains forward-looking information relating to the Company's business and prospects, including the Aerospace and Industrial Distribution businesses, operating cash flow, and other matters that involve a number of uncertainties that may cause actual results to differ materially from expectations. Those uncertainties include, but are not limited to: 1) the successful conclusion of competitions for government programs and thereafter contract negotiations with government authorities, both foreign and domestic; 2) political conditions in countries where the Company does or intends to do business; 3) standard government contract provisions permitting renegotiation of terms and termination for the convenience of the government; 4) satisfactory conclusion to government inquiries or investigations regarding government programs, including satisfactory resolution of the Wichita subpoena matter; 5) domestic and foreign economic and competitive conditions in markets served by the Company, particularly the defense, commercial aviation and industrial production markets; 6) risks associated with successful implementation and ramp up of significant new programs; 7) potential difficulties associated with variable acceptance test results, given sensitive production materials and extreme test parameters; 8) successful resale of the SH-2G(I) aircraft, equipment and spare parts; 9) receipt and successful execution of production orders for the JPF U.S. government contract, including the exercise of all contract options and receipt of orders from allied militaries, as all have been assumed in connection with goodwill impairment evaluations; 10) continued support of the existing K-MAX® helicopter fleet, including sale of existing K-MAX® spare parts inventory; 11) cost estimates associated with environmental remediation activities at the Bloomfield, Moosup and New Hartford, CT facilities and our U.K. facilities; 12) profitable integration of acquired businesses into the Company's operations; 13) changes in supplier sales or vendor incentive policies; 14) the effects of price increases or decreases; 15) the effects of pension regulations, pension plan assumptions, pension plan asset performance and future contributions; 16) future levels of indebtedness and capital expenditures; 17) future availability of credit; 18) continued availability of raw materials and other commodities in adequate supplies and the effect of increased costs for such items; 19) the effects of currency exchange rates and foreign competition on future operations; 20) changes in laws and regulations, taxes, interest rates, inflation rates and general business conditions; 21) future repurchases and/or issuances of common stock; and 22) other risks and uncertainties set forth in the Company's annual, quarterly and current reports, proxy statements and other filings with the SEC. Any forward-looking information provided in this release should be considered with these factors in mind. The Company assumes no obligation to update any forward-looking statements contained in this release.

 
KAMAN CORPORATION AND SUBSIDIARIES
Condensed Consolidated Statements of Operations

(In thousands except per share amounts)

         

For the three months ended

March 30, April 1,
2012 2011
Net sales $ 388,722 $ 377,823
Cost of sales 282,654   273,194  
Gross profit 106,068 104,629
Selling, general and administrative expenses 88,912 80,068
Net (gain)/loss on sale of assets (24 ) 2  
Operating income 17,180 24,559
Interest expense, net 2,879 3,070
Other (income) expense, net (247 ) (389 )
Earnings before income taxes 14,548 21,878
Income tax expense 5,145   7,686  
Net earnings $ 9,403   $ 14,192  
 
Net earnings per share:
Basic net earnings per share $ 0.36 $ 0.54
Diluted net earnings per share $ 0.36 $ 0.54
Average shares outstanding:
Basic 26,294 26,126
Diluted 26,463   26,355  
Dividends declared per share $ 0.16   $ 0.14  
 
 
KAMAN CORPORATION AND SUBSIDIARIES
Condensed Consolidated Statements of Comprehensive Income

(In thousands)

 

For the three months ended

March 30, April 1,
2012 2011
Net earnings $ 9,403 $ 14,192
Other comprehensive income, net of tax:
Foreign currency translation adjustments 3,697 4,172
Change in unrealized loss on derivative instruments, net of tax expense of $0 and $75, respectively 121
Pension plan adjustments, net of tax expense of $834 and $340, respectively 1,361   554  

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