1-Nov-2012 Source: Kaman
Kaman Corp. (NYSE:KAMN) today reported financial results for the third quarter ended September 28, 2012.
Neal J. Keating, Chairman, President and Chief Executive Officer, stated, “During the third quarter we delivered solid performance in both of our businesses. Aerospace delivered 28.9% sales growth driven by deliveries of over 10,000 Joint Programmable Fuzes (“JPF”) during the quarter, which offset lower sales volume on certain other programs. In Distribution, we achieved double digit sales growth and completed two strategic acquisitions that we believe will continue to propel growth in the future.
Industrial Distribution sales growth was 10.1%, driven by our recent acquisitions, while organic sales were flat during the quarter. We were able to achieve a 5.0% operating profit margin for the third quarter by focusing on cost control initiatives, despite flat organic sales and the September acquisition of the assets of Zeller Corporation, which was dilutive to the operating margin percentage for the period. In addition, we incurred higher costs from our investment in our new ERP system and acquisition due diligence and integrations.
Aerospace sales performance was led by the JPF program the strength of which offset lower deliveries on several other programs, most notably the BLACK HAWK and Unmanned K-MAX. As expected, sales of our bearing product lines were solid despite being lower sequentially coming off an extremely strong Q2 performance. The 16.1% operating profit margin in Aerospace benefited from favorable JPF sales volume in the quarter, offset by a less profitable mix of bearing sales and a one time charge for a contract claim settlement.
We are monitoring business conditions, particularly defense spending issues in Aerospace and certain end market weakness within Distribution. Proactive expense reduction actions have been taken where appropriate and contingency plans have been developed in the event conditions warrant more aggressive actions. Overall, we are pleased with our performance in the quarter and believe we continue to make progress with our long term strategy.”
Aerospace segment
Sales were $151.3 million, an increase of $33.9 million from sales of $117.4 million in the third quarter of 2011. This increase was due to deliveries of over 10,000 JPF to the US Government. Additionally, strong performance from bearing product lines; increased deliveries under the A-10 re-wing program; higher volume of sales on our legacy fuze programs; higher sales on our helicopter aftermarket programs, including the Egypt SH-2G(E) upgrade program and K-MAX spares; and contributions from the acquisition of Vermont Composites contributed to the increased sales. The increases were partially offset by lower sales on several programs including the Unmanned K-MAX and BLACK HAWK cockpit production programs and lower engineering design work on certain commercial aircraft programs.
Operating income for the third quarter of 2012 was $24.4 million, compared to operating income of $19.2 million in the third quarter of 2011. The operating margin in this year’s third quarter was 16.1% as compared to 16.3% in the prior year. The increase in operating income resulted from higher deliveries of JPF and higher gross profit resulting from increased sales volume on other legacy fuze programs. Also benefiting margin was the absence of legal fees related to FMU-143 litigation. These increases were offset by a less profitable mix of bearing products, the declines mentioned in the preceding paragraph and the write-off of $0.6 million related to the settlement of a claim for one of our legacy fuze programs.
Outlook
The Company’s updated expectations for 2012 are as follows:
Chief Financial Officer, William C. Denninger, commented, “While significantly stronger than last year our results for the quarter were slightly below expectations, and with additional push outs in Aerospace we are lowering our outlook for the full year. At Aerospace, the ability to increase our JPF deliveries has allowed us to offset some delivery push outs on other programs. This lower volume, although disappointing, has been driven by a shift in near term customer requirements. At Distribution, our strategy of focused growth through acquisition delivered double digit sales growth for the period, while weakness in certain end markets we serve resulted in flat organic sales. We believe organic sales trends will remain weak through the fourth quarter. Corporate expense was higher in the quarter as a result of $1.0 million of acquisition costs incurred and $0.6 million of severance costs. We are managing costs across the company in an effort to ensure we maintain our profit margin and are able to react to changing market conditions. Our free cash flow* generation in the quarter was strong at $34.0 million.”
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, November 1, 2012 at 8:30 AM EDT. Listeners may access the call live by telephone at (800) 884-5695 and from outside the U.S. at (617) 786-2960 (passcode: 54733525); or, over the Internet through a link on the home page of the Company’s website at . 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.
Full results, financials statements etc can be found here
