Sales Increase 16.1%, Earnings of $0.24 Per Diluted Share Impacted by $7.8
Million Non-Cash Goodwill Impairment Charge
BLOOMFIELD, Conn., July 31 /PRNewswire-FirstCall/ -- Kaman Corp.
(Nasdaq: KAMN) today reported financial results for the second quarter and
six-month period ended June 27, 2008.
For the second quarter of 2008, the company reported net earnings from
continuing operations of $6.1 million, or $0.24 per share diluted, compared
to net earnings from continuing operations of $9.0 million, or $0.36 per
share diluted, in the second quarter of 2007. The company's results for the
second quarter of 2008 include a non-cash charge of $7.8 million related to
goodwill impairment at the company's Aerostructures Wichita facility. The
results for the second quarter of 2007 included pretax charges of $2.4
million related to the company's Australia helicopter program. Net sales
from continuing operations for the second quarter of 2008 were $316.3
million, an increase of 16.1% over $272.4 million in the second quarter of
2007.
For the first half of 2008, net earnings from continuing operations
decreased to $15.0 million, or $0.59 per share diluted, compared to net
earnings from continuing operations of $18.1 million, or $0.73 per share
diluted in the year ago period. First half results include the goodwill
impairment charge of $7.8 million, which is not deductible for tax
purposes. Net sales from continuing operations for the 2008 six-month
period were $602.1 million, an increase of 11.7% over $538.9 million in the
first half of last year. Results for the 2007 first half include pretax
charges of $4.9 million related to the company's Australia helicopter
program.
The company also announced that the Fuzing segment was renamed Kaman
Precision Products to better represent the diversity of its capabilities,
effective on July 8th.
Neal J. Keating, Chairman, President and Chief Executive Officer, said,
"During the second quarter we made significant progress in several areas
including the strengthening of our Senior Management team through the
addition of Greg Steiner as President of our Aerospace Group, completing
sizeable acquisitions in both our Aerospace and Industrial Distribution
businesses, achieving our production goal of 6,000 JPF fuzes in the quarter
and delivering top line growth of over 16%.
Within Aerospace our performance was negatively impacted by weaker
results in our Aerostructures and Precision Products businesses.
Specifically, while our Wichita facility made progress during the quarter,
it did not happen as quickly as we, or our customers, would have liked to
have seen. However, we have now completed rebuilding the local management
team, invested in additional training for our employees, and upgraded
equipment, all of which we believe will result in improving performance in
the second half of 2008.
In addition, we completed the acquisition of Brookhouse Holdings
Limited, a leading U.K. based aerospace company. This brings us important
composites expertise and expands our platform positions in both commercial
and military markets. We were also successful in securing significant new
and follow-on orders during the period. This included signing of a
contract, with a potential value in excess of $100 million, to supply
Boeing Integrated Defense Systems on the A-10 re-wing program, as well as
additional C-17 orders."
Segment reports follow:
The Aerostructures segment operating loss for the 2008 second quarter
was $6.2 million, compared to operating income of $3.7 million in the 2007
second quarter. The loss for the second quarter includes the goodwill
impairment charge at the Wichita facility of $7.8 million. Segment sales
were $30.9 million, an increase of more than 30% over sales of $23.3
million in the second quarter of 2007.
The segment's results for the period primarily reflect the goodwill
impairment charge and cost growth due to operational issues in Wichita.
Sales at the Jacksonville facility increased significantly. In addition,
the operating results of Brookhouse Holdings, Limited are included from
June 12, 2008, the date of acquisition.
For the 2008 six-month period, the Aerostructures segment reported net
sales of $59.7 million, compared to $48.5 million for the first half of
2007. The segment had an operating loss of $7.3 million in the first half
of 2008 (after the $7.8 million goodwill impairment charge), compared to
operating income of $8.2 million in the first half of 2007.
The Company also reported that in mid July 2008, it signed a long-term
requirements contract with Boeing for the production of wing control
surfaces for the U.S. Air Force's A-10 fleet. This work will be performed
at the Aerostructures Jacksonville facility and has a potential contract
value in excess of $100 million. The agreement calls for the segment to
supply inboard and outboard flaps, slats and deceleron assemblies. The
contract will commence in 2008 with initial deliveries to begin in early
2010. Full rate production is expected to begin in 2011 with an average of
approximately 47 shipsets per year through 2015. The annual quantities will
vary and will be dependent upon the orders Boeing receives from the Air
Force.
Precision Products (formerly Fuzing) segment operating income for the
second quarter of 2008 was $0.9 million, compared to $4.0 million in the
year ago period. Segment sales were $27.2 million for the 2008 second
quarter, compared to $24.0 million in the second quarter last year.
Results in the Precision Products segment primarily reflect sales
growth as a result of higher shipments on several legacy missile programs
and higher JPF program shipments to the U.S. Government. While increased
JPF program shipments drove sales growth, the essentially break-even gross
margins of these sales limited profitability during the period. In
addition, the second quarter of 2007 included profit from two programs that
did not recur in the second quarter of 2008. These were the JPF
facilitization program, which is essentially complete; and 40mm sales,
which product line was sold at the end of 2007.
For the first half of 2008, sales in the Precision Products segment
totaled $51.4 million, compared to $42.5 million in the first half of 2007.
Segment operating income totaled $2.7 million in the first half of 2008,
compared to $6.5 million in the first half of 2007.
Helicopters segment operating income for the second quarter of 2008 was
$2.9 million, compared to an operating loss of $0.2 million in the second
quarter of 2007, which included a pretax charge of $2.4 million related to
the company's Australia helicopter program. Segment sales in the second
quarter of 2008 were $18.1 million, compared to $19.0 million in the same
period last year.
The improvement in the Helicopters segment results in the 2008 second
quarter primarily reflect the absence of a charge for the Australian
helicopter program. Sales were lower primarily due to reduced service
center sales from the Australia helicopter program.
Helicopter segment sales for the first half of 2008 totaled $32.7
million, compared to $36.5 million in the first half of 2007. For the first
half of 2008, the segment generated operating income of $3.7 million,
compared to an operating loss of $1.3 million in the year-ago period, which
included $4.9 million in pretax charges for the company's Australia
helicopter program.
Specialty Bearings segment operating income rose 36.6% to $13.9 million
from $10.2 million in the second quarter of last year. Segment sales in the
period were a record $36.7 million, compared to $31.5 million in the second
quarter of 2007, an increase of 16.5%.
Results in the Specialty Bearings segment primarily reflect continued
strong execution, increased demand for the segment's products across all
markets, and higher profit margins as a result of the segment's leverage
from increased sales volume.
Sales in the Specialty Bearings segment rose 14.7% in the first half of
2008 to $72.7 million from $63.5 million in the first half of 2007. Year to
date, the segment has generated operating income of $26.9 million, a 29.6%
increase over operating income of $20.8 million in the first half of 2007.
Collectively, the four Aerospace Segments generated operating income of
$11.4 million in the second quarter of 2008, compared to operating income
of $17.7 million in the second quarter of 2007. Sales for the period rose
to $113.0 million from $97.8 million for the same period a year ago. For
the first half of 2008, sales for the Aerospace Segments totaled $216.6
million, compared to $190.9 million in 2007, and operating income totaled
$26.1 million, compared to $34.3 million in the year ago period. Operating
income for the second quarter of 2008 and the first half of 2008 include
the $7.8 million goodwill impairment charge.
Commenting on the performance of the Aerospace segments, Mr. Keating
said, "Once again, our Aerospace segments were led by the continued
outstanding performance of the Specialty Bearings segment, which turned in
another period of record results. Demand continues to be sound and we were
able to generate strong sales growth while maintaining a solid backlog.
Helicopters experienced a solid quarter with our Sikorsky business up and
the remarketing effort on the Australian helicopters taking shape. We
believe we have also made significant progress towards resolving the
production issues associated with the JPF, as evidenced by our quarterly
production rate reaching 6,000 fuzes during the period. We continue to
pursue sales of the JPF to foreign militaries, and could see progress on
this front in the second half of the year."
Industrial Distribution segment operating income for the second quarter
of 2008 was $9.7 million, an increase of 17.2% over operating income of
$8.3 million in the second quarter of 2007. Segment sales increased 16.5%
in the 2008 second quarter to $203.3 million from $174.6 million a year
ago. Organic sales growth in the quarter was 8.4%, compared with 2.4% in
the prior year period, with the remaining growth coming from the
acquisition of Industrial Supply Corporation (ISC) on March 31, 2008.
The Industrial Distribution segment's results for the 2008 second
quarter primarily reflect the continued success of the company's efforts to
further develop its national accounts business, robust demand within the
energy and power generation, mining and oil exploration markets as well as
the contribution from ISC, which was acquired at the beginning of the 2008
second quarter. Operating profits in the period improved as a result of
higher sales volumes and a continued focus on careful cost management,
which was offset somewhat by cost growth associated with new branch
openings, as the segment continues to expand its operations in order to
support its growing national account business. Overall, the operating
profit margin for the quarter was 4.8%, consistent with the prior year
despite higher energy costs and the integration of ISC, which both had the
effect of dampening Industrial Distribution's overall operating profit
margin slightly for the quarter.
For the 2008 six-month period, net sales in the Industrial Distribution
segment totaled $385.5 million, compared with $348.0 million in the year
ago period. Segment operating income in the first half of 2008 totaled
$18.8 million, compared to $17.0 million in the first half of 2007. Organic
growth for the first half of 2008 was 6.7%, compared with 2.0% in the same
period last year.
Commenting on the performance of the Industrial Distribution segment,
Mr. Keating said, "We are very pleased with the performance of the
Industrial Distribution segment during the second quarter, during which it
gained market share and posted solid organic growth despite a challenging
market environment. The business continued to benefit from strong demand in
end markets such as mining and food processing, as well as the ongoing
successful execution of its national account strategy. The integration of
ISC has progressed well, and the segment also benefitted from solid sales
performance from this business during the period. Looking into the second
half of the year, overall market conditions remain challenging and the
segment faces tougher year-over-year comparisons, but we remain committed
to the continued successful execution of our operating strategy as we focus
on the further build-out of our national account program and maintaining
strict operating expense controls."
Mr. Keating concluded, "Despite the challenges we have faced in the
first half of 2008 I believe we have made substantial progress in growing
our business through a mix of organic growth and strategic acquisitions
that complement our existing businesses. As we move into the second half of
the year, we are focused on resolving the issues in our Aerostructures
segment and continuing to build on the results that our other segments have
achieved. At the same time we continue to operate from a position of
financial strength, providing us the opportunity to continue to invest for
future growth and improved profitability."
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 the
quarter's results and various company programs.
A conference call has been scheduled for tomorrow, August 1, 2008 at
11:00 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
will be provided in the exhibits to the conference call and will be
available through the Internet link provided above.
Forward-Looking Statements
This release may contain 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) domestic and foreign economic and
competitive conditions in markets served by the company, particularly the
defense, commercial aviation and industrial production markets; 5) risks
associated with successful implementation and ramp up of significant new
programs; 6) management's success in resolving operational issues at the
Aerostructures Wichita facility; 7) successful implementation of the Deed
of Settlement agreed upon with the Commonwealth of Australia, which would
conclude the Australia SH-2G (A) program with a mutual release of claims;
8) receipt and successful execution of production orders for the JPF U.S.
government contract, including the exercise of all contract options,
successful negotiation of price increases with the U.S. government, and
receipt of orders from allied militaries, as all have been assumed in
connection with goodwill impairment evaluations; 9) satisfactory resolution
of the company's contract dispute with the U.S. Army procurement agency
relating to the FMU-143 program; 10) continued support of the existing
K-MAX helicopter fleet, including sale of existing K-MAX spare parts
inventory; 11) cost growth in connection with environmental remediation
activities at the Bloomfield, Moosup and New Hartford, CT facilities; 12)
profitable integration of acquired businesses into the company's
operations; 13) changes in supplier sales or vendor incentive policies; 14)
the effect of price increases or decreases; 15) pension plan assumptions
and future contributions; 16) future levels of indebtedness and capital
expenditures; 17) continued availability of raw materials and other
commodities in adequate supplies and the effect of increased costs
therefore; 18) the effects of currency exchange rates and foreign
competition on future operations; 19) changes in laws and regulations,
taxes, interest rates, inflation rates, general business conditions and
other factors; and 20) other risks and uncertainties set forth in the
company's annual, quarterly and current reports, and proxy statements. Any
forward- looking information provided in this report should be considered
with these factors in mind. The company assumes no obligation to update any
forward- looking statements contained in this report.
A summary of segment information follows:
Summary of Segment Information
For the Three Months For the Six Months
Ended Ended
June 27, June 29, June 27, June 29,
2008 2007 2008 2007
Net sales:
Aerostructures $30,944 $23,322 $59,737 $48,501
Precision Products 27,236 23,962 51,366 42,462
Helicopters 18,105 19,025 32,719 36,483
Specialty Bearings 36,667 31,471 72,746 63,450
Subtotal Aerospace Segments 112,952 97,780 216,568 190,896
Industrial Distribution 203,333 174,602 385,498 348,016
Net sales from continuing
operations $316,285 $272,382 $602,066 $538,912
Operating income (loss):
Aerostructures $(6,248) $3,680 $(7,263) $8,231
Precision Products 880 4,015 2,685 6,545
Helicopters 2,866 (244) 3,724 (1,269)
Specialty Bearings 13,941 10,204 26,909 20,763
Subtotal Aerospace Segments 11,439 17,655 26,055 34,270
Industrial Distribution 9,735 8,304 18,808 16,998
Net gain (loss) on sale of
assets (97) 58 (207) 15
Corporate expense (1) (6,486) (10,156) (16,282) (19,499)
Operating income from continuing
operations $14,591 $15,861 $28,374 $31,784
(1) "Corporate expense" decreased for the quarter and six months ended
June 27, 2008 compared to the same periods of 2007, as shown below:
For the Three Months For the Six Months
Ended Ended
June 27, June 29, June 27, June 29,
2008 2007 2008 2007
Corporate expenses before breakout
items $(5,788) $(6,075) $(12,361) $(11,876)
Breakout items:
Incentive compensation 39 (1,035) (1,187) (1,620)
Stock appreciation rights 308 (815) 836 (985)
Supplemental employees'
retirement plan (888) (1,482) (2,870) (3,007)
Group insurance (157) (749) (700) (2,011)
Corporate expense - total $(6,486) $(10,156) $(16,282) $(19,499)
KAMAN CORPORATION AND SUBSIDIARIES
Condensed Consolidated Statements of Operations
(In thousands except per share amounts)
For the Three Months For the Six Months
Ended Ended
June 27, June 29, June 27, June 29,
2008 2007 2008 2007
Net sales $316,285 $272,382 $602,066 $538,912
Cost of sales 230,013 197,798 439,203 389,167
Selling, general and
administrative expense 63,774 58,781 126,472 117,976
Goodwill impairment 7,810 - 7,810 -
Net (gain)/loss on sale of assets 97 (58) 207 (15)
301,694 256,521 573,692 507,128
Operating income from continuing
operations 14,591 15,861 28,374 31,784
Interest expense (income), net 463 1,656 462 3,200
Other expense (income), net 321 258 462 217
Earnings from cont. operations
before income taxes 13,807 13,947 27,450 28,367
Income tax expense (7,717) (4,940) (12,492) (10,287)
Net earnings from continuing
operations 6,090 9,007 14,958 18,080
Earnings from discont. operations
before inc. taxes - 1,655 - 3,279
Gain on disposal of discontinued
operations 506 - 506 -
Income tax expense (183) (603) (183) (1,225)
Net earnings from discontinued
operations 323 1,052 323 2,054
Net earnings $6,413 $10,059 $15,281 $20,134
Net earnings per share:
Basic net EPS from continuing
operations 0.24 0.37 0.60 0.74
Basic net EPS from discontinued
operations - 0.04 - 0.09
Basic net EPS from disposal of
discont. op. 0.01 - 0.01 -
Basic net earnings per share $0.25 $0.41 $0.61 $0.83
Diluted net EPS from continuing
operations 0.24 0.36 0.59 0.73
Diluted net EPS from
discontinued operations - 0.04 - 0.08
Diluted net EPS from disposal of
discont. op. 0.01 - 0.01 -
Diluted net earnings per share $0.25 $0.40 $0.60 $0.81
Average shares outstanding:
Basic 25,232 24,285 25,166 24,213
Diluted 25,497 25,210 25,444 25,157
Dividends declared per share $0.140 $0.125 $0.280 $0.250
KAMAN CORPORATION AND SUBSIDIARIES
Condensed Consolidated Balance Sheets
(In thousands)
June 27, 2008 December 31, 2007
Assets
Current assets:
Cash and cash equivalents $13,570 $73,898
Accounts receivable, net 211,577 158,435
Inventories 239,353 210,341
Deferred income taxes 24,460 28,724
Other current assets 24,703 20,231
Total current assets 513,663 491,629
Property, plant and equipment, net 67,500 53,645
Goodwill and other intangible assets,
net 130,292 46,188
Deferred income taxes 3,507 3,594
Overfunded pension 31,276 30,486
Other assets 11,561 9,321
$757,799 $634,863
Liabilities and shareholders' equity
Current liabilities:
Notes payable $1,896 $1,680
Accounts payable - trade 98,914 74,236
Accrued salaries and wages 22,046 25,328
Accrued pension costs 13,768 14,202
Accrued contract losses 10,780 9,513
Advances on contracts 10,429 9,508
Other accruals and payables 39,360 36,162
Income taxes payable 2,447 12,002
Total current liabilities 199,640 182,631
Long-term debt, excluding current
portion 95,400 11,194
Deferred income taxes, long-term 10,825 199
Other long-term liabilities 42,428 46,313
Shareholders' equity 409,506 394,526
$757,799 $634,863
SOURCE Kaman Corp.
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Related links:
http://www.kaman.com
http://www.prnewswire.com/comp/480450.html/
CONTACT:
Eric Remington, Vice President, Investor
Relations, +1-860-243-6334, Eric.Remington@kaman.com
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