Kaman Corporation Reports Second Quarter 2001 Results
BLOOMFIELD, Conn., July 26 /PRNewswire/ -- Kaman Corp. (NASDAQ:KAMNA)
today reported financial results for the second quarter and six months ended June 30, 2001.
In the quarter, the company recorded a sales and pre-tax earnings adjustment of $31.2 million, substantially all of which is associated with a change in estimated costs to complete the SH-2G(A) helicopter program for Australia. The cost growth for that program is related to a contract dispute settlement with Litton Guidance and Control Systems (now part of Northrop Grumman) regarding development of an advanced Integrated Tactical Avionics System (ITAS) that is unique to this particular contract. The company currently is placing with other subcontractors the balance of the ITAS software development, which is a principal element of the cost growth.
As a result of the adjustment, the company reported a net loss for the second quarter 2001 of $12.5 million, or $0.56 loss per share diluted, compared to net earnings of $9.3 million or $0.39 per share diluted in the second quarter of 2000. For the six-month period, the company reported a net loss of $3.8 million or $0.17 loss per share diluted, compared to net earnings of $17.8 million or $0.75 earnings per share diluted for the first six months of 2000. Results for 2001 include gains from the sale of facilities of $2.0 million for the second quarter and $2.7 million for the six-month period. In addition, the company has adjusted its 2001 estimated effective tax rate to 25.0 percent, primarily due to reduced tax considerations on the Australian helicopter program.
Excluding the $31.2 million earnings and tax adjustments, second quarter net earnings were $8.3 million, or $0.36 per share diluted, and for the first six months net earnings were $17.0 million, or $0.74 per share diluted.
Revenues were $194.6 million for the quarter and $439.3 million for the six-month period (both reduced by the $31.2 million adjustment), compared to $259.9 million and $523.4 million for the quarter and six-month periods of 2000.
Paul R. Kuhn, president and CEO, said, "Excluding the adjustment, all of our businesses were profitable despite the economic conditions. Kaman's financial condition continues to be strong, debt is minimal, and our capital structure provides considerable flexibility to take advantage of opportunities to grow our business both internally and through strategic acquisitions."
SEGMENT PERFORMANCE Aerospace
Sales for the second quarter 2001 were $54.6 million (reduced by the $31.2 million adjustment), compared to $98.9 million in the quarter last year. Excluding the adjustment, operating profit was $10.3 million. Including the adjustment, the company recorded an operating loss of $20.9 million. The operating profit in last year's second quarter was $11.4 million.
Sales for the first six months of 2001 were $146.7 million (reduced by the $31.2 million adjustment), compared to $195.4 million the previous year. Excluding the adjustment, the segment had an operating profit of $20.5 million in the first half of 2001. Including the adjustment, Aerospace had an operating loss of $10.7 million. The operating profit for the first half of 2000 was $22.2 million.
Helicopter Programs
SH-2G Super Seasprite business for the international naval helicopter market and the K-MAX medium-to-heavy lift helicopter represented approximately 21 percent (without the adjustment it would be approximately 50 percent) of Aerospace segment sales for the second quarter, compared to approximately 60 percent a year ago. The lower percentage for the second quarter is due to the adjustment along with some anticipated tapering off in revenues from the SH-2G program as the Australia and New Zealand programs mature. Substantially all of the helicopter program sales came from the SH-2G.
The company is continuing work on contracts to supply SH-2G Super Seasprite helicopters to the governments of Australia and New Zealand. The Royal New Zealand Navy has ordered five of the aircraft. Two of the aircraft were shipped to New Zealand in the second quarter and two more are scheduled for shipment in the third quarter. Each of these aircraft is subject to final acceptance by the Royal New Zealand Navy. Delivery of the fifth New Zealand aircraft, representing exercise of an option for additional aircraft, is planned for 2002.
The company delivered one SH-2G(A) aircraft to Australia early this year without the full ITAS software. The company is working with the Royal Australian Navy to develop satisfactory procedures for approval of the new software subcontractor arrangements being made, and thereafter procedures for interim acceptance of the aircraft without the full ITAS and coordination of deliveries of those aircraft. When fully equipped with the advanced ITAS software, the SH-2G(A) will have the most sophisticated integrated cockpit and weapons system available in an intermediate-weight helicopter.
"We continue to believe the international market opportunities for this aircraft are good," Kuhn said. "We are currently in a competition to provide six search and rescue (SAR) helicopters to Egypt. Ten SH-2G helicopters are currently in service in Egypt; therefore we believe Kaman is in a strong position to win this business. The decision on that program is now expected by year's end. Discussions also are continuing with the United States and Polish governments regarding the refurbishment of four SH-2G helicopters for the Polish navy along with future training and support."
Aircraft Structures and Components
Sales in the aircraft structures and components business represented approximately 58 percent of the Aerospace segment's sales for the second quarter. Without the adjustment it would be approximately 37 percent, compared to approximately 27 percent a year ago.
The company is a subcontractor on a number of commercial and defense aviation programs, including production of wing structures and certain components for virtually all Boeing commercial aircraft as well as components for the Boeing C-17 transport and F-22 fighter. Work also is progressing on two multi-year contracts received last year from MD Helicopters, Inc. to supply fuselages for MDHI's entire line of single-engine helicopters, and composite rotor blades for its MD Explorer helicopter. The company expects to deliver 43 fuselages to MDHI this year. Deliveries of main rotor blade assemblies are scheduled to begin in September. These two MDHI contracts have a total potential value of $175 million.
Kamatics reported another good quarter with an increase in operating profits on slightly higher sales compared to last year. Kamatics manufactures self-lubricating bearings for use principally in aircraft flight controls, turbine engines and landing gear, as well as driveline couplings for helicopters.
Advanced Technology Programs
Sales from the company's advanced technology programs accounted for about 21 percent of the segment's sales for the second quarter. Excluding the adjustment it would be approximately 13 percent, the same as last year's percentage.
These products include missile safe, arm and fuzing devices for various missile programs, including the Maverick, AMRAAM and Penguin; precision measuring systems, mass memory systems, electromagnetic motors, microwave cabling and electro-optic systems.
Industrial Distribution
Sales for the quarter for Kaman Industrial Technologies (KIT) were $113.0 million with operating profits of $3.6 million. In the second quarter of 2000, the industrial distribution business generated sales of $133.2 million and operating profits of $6.1 million.
For the six month period, KIT's sales were $236.1 million with operating profits of $8.7 million. In the comparable period last year, sales were $269.5 million and operating profits were $11.6 million.
Commenting on the industrial distribution segment, Kuhn stated, "Sales and earnings at KIT reflect the overall challenging environment in the industrial sector. Reduced plant capacity utilization and temporary plant closures have affected our distribution business, which primarily services our customers' maintenance and repair operations. In anticipation of this downturn, we began implementing programs last year to streamline operations and increase sales and marketing efforts, steps that have helped us to remain competitive and maintain profitability in these difficult times."
Music Distribution
Kaman Music's operating profits increased to $563,000 in the second quarter, compared to $500,000 the previous year. Sales for the quarter were $26.8 million, compared to $27.5 million the prior year.
For the six-month period, Kaman Music had operating profits of $1.9 million, compared to $2.0 million in the first half of 2000. Sales for the six months of 2001 were $56.0 million, compared to $57.9 million in 2000.
Kuhn stated, "Music continues to perform well despite adverse economic conditions. Domestic sales continue to be affected by the economic slowdown and overall softening in the music market. International sales are also soft due in large measure to the economic conditions and currency exchange rate fluctuations in those countries where we do business."
Kuhn added, "Traditionally, the second half of the year is the strongest sales period in this business as music retailers increase their buying in preparation for the holiday season."
Kaman Corp., based here, is a $1 billion company with businesses in aerospace manufacturing, and industrial and music distribution markets.
Forward-Looking Statements
This report contains forward-looking information relating to the corporation's business and prospects, including the SH-2G and K-MAX helicopter programs, aircraft structures and components, the industrial and music distribution businesses, earnings expectations for future periods 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 and thereafter contract negotiations with government authorities, including foreign governments; 2) political developments in countries where the corporation intends to do business; 3) standard government contract provisions permitting renegotiation of terms and termination for the convenience of the government; 4) economic and competitive conditions in markets served by the corporation, including industry consolidation in the United States and global economic conditions; 5) negotiation of subcontracts for, and timing of satisfactory completion of, the Australian SH-2G(A) program; 6) the timing, degree and scope of market acceptance for products such as a repetitive lift helicopter; 7) U.S. industrial production levels; and 8) currency exchange rates, taxes, laws and regulations, inflation rates, general business conditions and other factors. Any forward-looking information should be considered with these factors in mind.
KAMAN CORPORATION AND SUBSIDIARIES
Condensed Consolidated Summaries of Operations
(In thousands except per share amounts)
For the Three Months For the Six Months
Ended June 30, Ended June 30,
2001 2000 2001 2000
Revenues $194,641 $259,852 $439,333 $523,377
Costs and expenses:
Cost of sales 167,865 196,128 350,557 394,880
Selling, general and
administrative
expense 47,272 49,439 96,319 100,834
Interest (income)/
expense, net 18 (564) (8) (914)
Other (income)/
expense, net (2,044) 418 (2,531) 725
213,111 245,421 444,337 495,525
Earnings (loss) before
income taxes (18,470) 14,431 (5,004) 27,852
Income taxes (benefit) (5,975) 5,160 (1,250) 10,025
Net earnings (loss) $(12,495) $9,271 $(3,754) $17,827
Net earnings (loss)
per share:
Basic $(.56) $.40 $(.17) $.77
Diluted* $(.56) $.39 $(.17) $.75
Average shares
outstanding:
Basic 22,377 23,166 22,343 23,146
Diluted 23,710 24,328 23,694 24,342
Dividends declared
per share $.11 $.11 $.22 $.22
*The calculated diluted per share amounts for 2001 are anti-dilutive,
therefore, amounts shown are equal to the basic per share calculation.
KAMAN CORPORATION AND SUBSIDIARIES
Condensed Consolidated Balance Sheets
(In thousands)
June 30, December 31,
2001 2000
Assets
Current assets:
Cash and cash equivalents $39,057 $48,157
Accounts receivable, net 186,331 212,374
Inventories 190,668 196,148
Other current assets 36,525 25,321
Total current assets 452,581 482,000
Property, plant and equipment, net 59,729 63,705
Other assets 8,044 8,125
$520,354 $553,830
Liabilities and shareholders' equity
Current liabilities:
Notes payable $3,892 $3,720
Accounts payable 44,164 58,057
Accrued liabilities 28,520 30,300
Advances on contracts 35,704 41,905
Other current liabilities 35,524 35,244
Income taxes payable -- 4,116
Total current liabilities 147,804 173,342
Deferred credits 24,798 23,556
Long-term debt, excluding current portion 23,226 24,886
Shareholders' equity 324,526 332,046
$520,354 $553,830
KAMAN CORPORATION AND SUBSIDIARIES
Condensed Consolidated Statements of Cash Flows
(In thousands)
For the Six Months
Ended June 30,
2001 2000
Cash flows from operating activities:
Net earnings (loss) $(3,754) $17,827
Depreciation and amortization 5,654 5,777
Net gain on sale of assets (2,640) --
Accounts receivable 26,043 (42,472)
Inventory 5,480 6,809
Accounts payable (13,893) 11,789
Advances on contracts (6,201) (4,697)
Income taxes payable (4,116) (115)
Changes in other current assets
and liabilities (11,614) (2,865)
Other, net 585 1,566
Cash provided by (used in)
operating activities (4,456) (6,381)
Cash flows from investing activities:
Proceeds from sale of assets 4,038 41
Expenditures for property, plant & equipment (2,991) (3,779)
Other, net (44) (262)
Cash provided by (used in)
investing activities 1,003 (4,000)
Cash flows from financing activities:
Additions (reductions) to notes payable 172 (391)
Reductions to long-term debt (1,660) (1,660)
Purchase of treasury stock -- (833)
Dividends paid (4,906) (5,089)
Proceeds from sale of stock 747 769
Cash provided by (used in)
financing activities (5,647) (7,204)
Net increase (decrease) in cash
and cash equivalents (9,100) (17,585)
Cash and cash equivalents
at beginning of period 48,157 76,249
Cash and cash equivalents at end of period $39,057 $58,664
Source: Kaman Corp.
Contact: David M. Long of Kaman Corp., +1-860-243-6319,
dml-corp@kaman.com
Website: http://www.kaman.com/
Company News On-Call: http://www.prnewswire.com/comp/480450.html
