THIRD QUARTER EARNINGS PER SHARE FROM CONTINUING OPERATIONS UP 46.2% OVER
YEAR-AGO QUARTER
BLOOMFIELD, Conn., Nov. 1 /PRNewswire-FirstCall/ -- Kaman Corp.
(Nasdaq: KAMN) today reported financial results for the third quarter and
nine months ended September 28, 2007.
On October 29, 2007, the company announced that it has signed a
definitive agreement to sell 100 percent of the stock of its wholly owned
subsidiary, Kaman Music Corporation, to Fender Musical Instruments
Corporation for approximately $117 million in cash, subject to specified
post closing purchase price adjustments. Closing is targeted to occur prior
to January 1, 2008, subject to the satisfaction of customary closing
conditions, including termination or expiration of the waiting period under
the Hart-Scott-Rodino Antitrust Improvements Act of 1976. Kaman Music
comprises the company's entire Music segment, and the segment has been
reclassified as discontinued operations in all periods in the report that
follows.
Net earnings from continuing operations for the third quarter of 2007
were $9.4 million, or $0.38 per share diluted, an increase of 47.7% for net
earnings and 46.2% for earnings per share diluted over the $6.4 million, or
$0.26 per share diluted, reported for the third quarter of 2006. The third
quarter results for 2007 and 2006 include $0.8 million and $2.5 million,
respectively, in pretax charges for the company's SH-2G(A) helicopter
program for Australia. Including discontinued operations, net earnings for
the third quarter of 2007 were $11.7 million, or $0.47 per share diluted,
increases of 34.3% and 30.6%, respectively over the $8.7 million, or $0.36
per share diluted, reported for the third quarter of 2006. Net sales from
continuing operations for the third quarter of 2007 were $274.9 million, an
increase of 9.0% over the $252.1 million reported for the third quarter of
2006.
For the first nine months of 2007 the company reported net earnings
from continuing operations of $27.5 million, or $1.11 per share diluted,
increases of 53.6% and 50.0%, respectively, compared to net earnings from
continuing operations of $17.9 million, or $0.74 per share diluted, in the
first nine months of 2006. The 2007 and 2006 first nine months results
include $5.6 million and $7.8 million, respectively, in pretax charges for
the Australia program. Including discontinued operations, net earnings were
$31.9 million, or $1.28 per share diluted, increases of 43.9% and 40.7%,
respectively, compared to net earnings of $22.1 million, or $0.91 per share
diluted, in the first nine months of 2006. Net sales from continuing
operations for the first nine months of 2007 were $813.8 million, an
increase of 9.8% over the $741.2 million reported for the first nine months
of 2006.
Paul R. Kuhn, Chairman and Chief Executive Officer, said: "We are
pleased with our performance in the third quarter of 2007, with our
aerospace businesses continuing to drive increases in sales and operating
income. While our Aerostructures segment had a challenging period due to
the ramp-up of certain programs, we benefited from the breadth of our
presence in the aerospace market, as this issue was more than offset by
strong performance within our Specialty Bearings and Helicopter segments.
We also made good progress in the start-up phases of two new national
accounts within our Industrial Distribution segment, and we expect to see
these contribute more meaningfully to our results going forward."
Mr Kuhn concluded, "The third quarter also saw Kaman achieve a number
of significant milestones. We announced Neal J. Keating as my successor.
With his extensive experience in both the aerospace and distribution
industries, Neal is ideally positioned to lead Kaman into the future. In
addition, we increased our quarterly dividend rate by 12 percent, which
reflects on our financial position, commitment to enhancing shareholder
value and our confidence in our future prospects. Finally, we found a new
home for Kaman Music, which will further enhance our financial strength and
allow management to focus on opportunities in our aerospace and industrial
distribution segments. Overall, we believe we are well positioned for
future success in our targeted markets."
Segment reports follow:
Aerostructures segment operating income for the third quarter of 2007
was $1.6 million, compared to $3.5 million for the third quarter of 2006.
Segment sales were $25.7 million in the third quarter of 2007, compared to
$21.5 million for the third quarter of 2006. The sales increase was
primarily due to higher production levels and increased shipments to
Sikorsky for the BLACK HAWK helicopter program and increased shipments to
Boeing for the 777 program. The decrease in operating income for the third
quarter of 2007 was primarily due to certain adverse adjustments relating
to an increase in manpower, production inefficiencies and excess inventory
amounts at the Wichita facility as a result of the ramp up of several new
programs, which is proceeding more slowly than originally anticipated.
Segment operating income for the first nine months of 2007 was $9.9
million, compared to $7.8 million for the first nine months of 2006.
Segment sales were $74.2 million in the first nine months of 2007, compared
to $55.4 million for the first nine months of 2006.
Fuzing segment operating income for the third quarter of 2007 was $2.7
million, compared to $2.5 million in the third quarter of 2006. Segment
sales were $22.1 million for the third quarter of 2007, compared to $22.3
million in the third quarter of 2006. The segment continued to make
progress on production improvements and enhancements of the JPF fuze
system, yet remains subject to periodic production interruptions, including
during the third quarter of 2007. Segment operating income for the first
nine months of 2007 was $9.2 million, compared to $6.9 million for the
first nine months of 2006. Segment sales were $64.6 million in the first
nine months of 2007, compared to $56.0 million in the first nine months of
2006.
Helicopters segment operating income for the third quarter of 2007 was
$2.3 million (including a $768 thousand pretax charge for the Australia
helicopter program), compared to a loss of $1.1 million (including a $2.5
million pretax charge for the Australia program) for the third quarter of
2006. Segment sales were $18.2 million for the third quarter of 2007
compared to $15.4 million for the third quarter of 2006. The higher sales
for the third quarter of 2007 were a result of a greater volume of work on
the depot level maintenance and upgrade program for the Egyptian SH-2G(E)
aircraft and the Sikorsky BLACK HAWK helicopter program involving fuselage
joining and installation tasks and the production of certain mechanical
subassemblies. Segment operating income for the first nine months of 2007
was $1.0 million (including $5.6 million in pretax charges for the
Australia program), compared to a loss of $4.3 million (including $7.8
million in pretax charges for the Australia program) in the first nine
months of 2006. Segment sales were $54.7 million in the first nine months
of 2007, compared to $42.1 million for the first nine months of 2006.
Specialty Bearings segment operating income for the third quarter of
2007 was $10.9 million, compared to $7.0 million in the third quarter of
2006. Segment sales were $30.7 million in the third quarter of 2007,
compared to $26.2 million in the third quarter of 2006. The increase in
sales was primarily attributed to higher shipments of our bearing product
lines, specifically to customers principally in the military and regional
jet markets. Backlogs reached a record level in the quarter. The segment
continues to develop new customers and applications and, with the recent
facilities expansion complete, capacity is in place to meet demand and
ensure that shorter lead times for the customer remain a competitive
advantage. Segment operating income for the first nine months of 2007 was
$31.6 million, compared to $22.1 million for the first nine months of 2006.
Segment sales were $94.2 million for the first nine months of 2007,
compared to $79.8 million for the first nine months of 2006.
Collectively, the four Aerospace Segments generated operating income
for the third quarter of 2007 of $17.5 million, compared to $11.8 million
for the third quarter of 2006; and sales of $96.8 million and $85.3
million, respectively for the same periods. First nine months operating
income for the four Aerospace Segments, collectively, was $51.7 million for
2007, compared to $32.5 million in 2006, while sales were $287.7 million
and $233.4 million, respectively, for the same periods.
Industrial Distribution segment operating income for the third quarter
of 2007 was $9.0 million, compared to $8.6 million in the third quarter of
2006. Segment sales were $178.1 million in the third quarter of 2007,
compared to $166.7 million in the third quarter of 2006. The increase in
net sales in the third quarter of 2007 was primarily driven by greater
sales volume in certain customer industries including mining, oil
exploration and electrical power generation as well as the ramp up of
several new large national accounts, partially offset by a decrease in net
sales specifically related to original equipment manufacturers (OEM) and
the building materials industry. The increase in operating income during
the third quarter of 2007 was due to increased sales volume and enhanced
cost control, partially offset by initial start-up costs to support new
national account contract awards. Segment operating income for the first
nine months of 2007 was $26.0 million, compared to $28.7 million in the
first nine months of 2006. Segment sales were $526.1 million in the first
nine months of 2007, compared to $507.8 million in the first nine months of
2006.
Discontinued Operations: Music segment operating results are reported
as discontinued operations for all periods presented. Operating income was
$3.7 million for the third quarter of 2007, compared to $3.8 million in the
third quarter of 2006, while sales were $57.1 million compared to $55.5
million for the same periods. For the first nine months of 2007 operating
income was $6.9 million, compared to $6.7 million for the first nine months
of 2006, while sales were $155.4 million compared to $156.0 million for the
same periods. A gain associated with the sale of the Music segment will be
recognized when the transaction closes.
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 financial results and various company programs.
A conference call to discuss this report has been scheduled for
tomorrow, November 2, 2007 at 11:00 AM ET. 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 will include
certain non- GAAP measures related to company performance. A reconciliation
of this 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, Industrial
Distribution and Music 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
defense, commercial aviation, industrial production and the consumer market
for music products; 5) risks associated with successful implementation and
ramp up of significant new programs; 6) satisfactory completion of the
Australian SH-2G(A) program, including negotiation of payment and
performance terms for the balance of the program as well as any additional
work scope requested by the Commonwealth; 7) 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 both have been assumed in connection with goodwill
impairment evaluations; 8) the University of Arizona's continued failure to
succeed in its appeals efforts to overturn the jury verdict that rejected
the University's breach of contract claim against the company; 9)
satisfactory resolution of (i) the company's contract dispute with the U.S.
Army procurement agency relating to the FMU-143 program and (ii) the 2005
DCIS investigation of that program; 10) satisfactory results of
negotiations with NAVAIR concerning purchase of the company's leased
facility in Bloomfield, Conn.; 11) continued support of the existing K-MAX
helicopter fleet, including sale of existing K-MAX spare parts inventory;
12) cost growth in connection with environmental remediation activities at
the Moosup facility and such potential activities at the Bloomfield
facility; 13) whether and when Kaman's music business is sold on the terms
set forth in an agreement entered into as of October 27, 2007; 14)
profitable integration of acquired businesses into the company's
operations; 15) changes in supplier sales or vendor incentive policies; 16)
the effect of price increases or decreases; 17) pension plan assumptions
and future contributions; 18) future levels of indebtedness and capital
expenditures; 19) continued availability of raw materials in adequate
supplies; 20) the effects of currency exchange rates and foreign
competition on future operations; 21) changes in laws and regulations,
taxes, interest rates, inflation rates, general business conditions and
other factors; and 22) 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 release.
A summary of segment information follows:
Summary of Segment Information
(In thousands)
For the Three Months Ended For the Nine Months Ended
September 28, September 29, September 28, September 29,
2007 2006 2007 2006
Net sales:
Aerostructures $25,713 $21,450 $74,214 $55,422
Fuzing 22,104 22,310 64,566 55,986
Helicopters 18,220 15,425 54,703 42,140
Specialty
Bearings 30,729 26,158 94,179 79,829
Subtotal
Aerospace
Segments 96,766 85,343 287,662 233,377
Industrial
Distribution 178,090 166,746 526,106 507,799
Net sales from
continuing
operations 274,856 252,089 813,768 741,176
Discontinued
operations 57,066 55,521 155,425 156,038
Total net sales $331,922 $307,610 $969,193 $897,214
Operating income
(loss):
Aerostructures $1,631 $3,457 $9,862 $7,821
Fuzing 2,687 2,450 9,232 6,877
Helicopters 2,283 (1,073) 1,014 (4,299)
Specialty
Bearings 10,859 6,975 31,622 22,074
Subtotal
Aerospace
Segments 17,460 11,809 51,730 32,473
Industrial
Distribution 9,045 8,590 26,043 28,663
Net gain (loss)
on sale of assets 1 (92) 15 (40)
Corporate
expense (1) (9,498) (7,868) (28,997) (25,917)
Operating income
from continuing
operations 17,008 12,439 48,791 35,179
Discontinued
operations 3,694 3,781 6,918 6,684
Total operating
income 20,702 16,220 55,709 41,863
Interest expense,
net (1,638) (1,648) (4,782) (4,536)
Other income
(expense), net (82) (164) (299) (723)
Earnings before
income taxes $18,982 $14,408 $50,628 $36,604
(1) "Corporate expense" increased for the quarter and nine months ended
September 28, 2007 compared to the same periods of 2006, as shown
below:
For the Three Months Ended For the Nine Months Ended
September 28, September 29, September 28, September 29,
2007 2006 2007 2006
(In thousands)
Corporate expenses
before breakout
items $(6,736) $(5,558) $(19,496) $(18,598)
Breakout items:
Stock
appreciation
rights (252) 10 (1,237) (485)
Stock option
expense (754) (283) (1,297) (860)
Pension expense (96) (869) (289) (2,608)
Supplemental
employees'
retirement plan (1,504) (1,349) (4,511) (4,049)
Group insurance (156) 181 (2,167) 232
Legal -
recapitalization - - - 451
Corporate expense
- total $(9,498) $(7,868) $(28,997) $(25,917)
KAMAN CORPORATION AND SUBSIDIARIES
Condensed Consolidated Statements of Operations
(In thousands except per share amounts)
For the Three Months Ended For the Nine Months Ended
September 28, September 29, September 28, September 29,
2007 2006 2007 2006
Net sales $274,856 $252,089 $813,768 $741,176
Cost of sales 198,399 183,568 587,566 538,496
Selling, general
and administrative
expense 59,450 55,990 177,426 167,461
Net (gain)/loss on
sale of assets (1) 92 (15) 40
257,848 239,650 764,977 705,997
Operating income
from continuing
operations 17,008 12,439 48,791 35,179
Interest expense,
net 1,672 1,665 4,872 4,582
Other expense, net 75 164 291 724
Earnings from
continuing
operations before
income taxes 15,261 10,610 43,628 29,873
Income tax expense (5,824) (4,219) (16,111) (11,963)
Net earnings from
continuing
operations 9,437 6,391 27,517 17,910
Earnings from
discontinued
operations before
income taxes 3,721 3,798 7,000 6,731
Income tax expense (1,421) (1,451) (2,646) (2,497)
Net earnings from
discontinued
operations 2,300 2,347 4,354 4,234
Net earnings $11,737 $8,738 $31,871 $22,144
Net earnings per
share:
Basic net earnings
per share from
continuing
operations 0.39 0.26 1.13 0.74
Basic net earnings
per share from
discontinued
operations 0.09 0.10 0.18 0.18
Basic net earnings
per share $0.48 $0.36 $1.31 $0.92
Diluted net
earnings per share
from continuing
operations 0.38 0.26 1.11 0.74
Diluted net
earnings per share
from discontinued
operations 0.09 0.10 0.17 0.17
Diluted net
earnings per
share $0.47 $0.36 $1.28 $0.91
Average shares
outstanding:
Basic 24,438 24,067 24,288 24,012
Diluted 25,336 24,794 25,217 24,854
Dividends declared
per share $0.140 $0.125 $0.39 $0.375
KAMAN CORPORATION AND SUBSIDIARIES
Condensed Consolidated Balance Sheets
(In thousands)
September 28, 2007 December 31, 2006
Assets:
Current assets:
Cash and cash equivalents $14,484 $12,720
Accounts receivable, net 179,891 163,163
Inventories 203,206 188,869
Deferred income taxes 28,297 24,687
Other current assets 19,025 16,385
Assets held for sale 114,792 107,407
Total current assets 559,695 513,231
Net property, plant & equipment 52,112 49,954
Goodwill 44,082 42,211
Other intangible assets, net 309 285
Deferred income taxes 17,097 16,797
Other assets, net 9,621 7,935
$682,916 $630,413
Liabilities and Shareholders' Equity:
Current liabilities:
Notes payable $1,997 $-
Current portion of long-term debt - 1,551
Accounts payable - trade 79,682 77,263
Accrued salaries and wages 20,857 23,955
Accrued pension costs 14,012 2,862
Accrued contract losses 9,928 11,542
Advances on contracts 9,612 10,215
Other accruals and payables 37,364 39,649
Income taxes payable - 8,787
Liabilities held for sale 23,317 23,302
Total current liabilities 196,769 199,126
Long-term debt, excl. current portion 97,943 72,872
Other long-term liabilities 56,144 61,854
Shareholders' equity 332,060 296,561
$682,916 $630,413
SOURCE Kaman Corporation
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Related links:
http://www.kaman.com/
http://www.prnewswire.com/comp/480450.html/
CONTACT:
Russell H. Jones, SVP, Chief Investment
Officer & Treasurer of Kaman Corporation, +1-860-243-6307,
Russell.Jones@kaman.com
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