Kaman Reports 18 Percent Increase in Third Quarter Earnings Per Share - Operating Profits Improve at Each Of Company's Three Business Segments -
BLOOMFIELD, Conn., Oct. 19 /PRNewswire/ -- (NASDAQ:KAMNA)
Kaman Corp. today reported financial results for the third quarter and nine months ended September 30, 2000.
Net earnings for the quarter increased 16 percent to $9.5 million from $8.2 million in the same quarter last year. On a per diluted share basis earnings grew 18 percent to $0.40 from the $0.34 reported in the year ago period. Revenues for the third quarter of 2000 were $251.8 million, compared to $242.6 million in 1999.
For the nine month period this year, net earnings increased 17 percent to $27.4 million from $23.5 million in the same period last year. Earnings per diluted share grew 19 percent to $1.15 from the $0.97 reported in the comparable period in 1999. Revenues for the period were $768.1 million compared to $739.1 million last year. Results for the nine months ended September 30, 1999 included a non-recurring gain of approximately $0.06 per share as a result of reversing a $2.5 million reserve. Excluding this gain, year over year earnings per diluted share grew 26 percent.
Paul R. Kuhn, president and chief executive officer, stated, "We are pleased with our solid performance this quarter which reflects favorable results in the Aerospace segment and a continuation of positive trends in the Industrial and Music Distribution segments. Increased operating profit margins reflect improved market conditions and our focus on reducing costs and improving operating efficiencies."
SEGMENT PERFORMANCE Aerospace Segment
Third quarter operating profits for the company's Aerospace segment improved to $10.9 million compared to $10.3 million last year. Sales were $85.6 million compared to $86.5 million a year ago.
Operating profits for the nine months of 2000 were $33.0 million, compared to $33.4 million ($30.9 excluding the 1999 reserve reversal) in the same period last year. Sales for the nine months were $281.0 million, compared to $276.4 million for the period last year.
"This has been a good year for Kaman's Aerospace segment with the company winning important competitions for multi-year aircraft structures and components contracts," Kuhn said. "The outlook continues to be favorable for Kaman in this core competency, and as we work toward the delivery phase on two large helicopter contracts, our goal is to incorporate additional aircraft structures and components business, while continuing to pursue prospects for new helicopter programs."
Helicopter Programs
The company's helicopter programs accounted for approximately 60 percent of the segment's sales with the SH-2G Super Seasprite program being the primary component of those sales.
Testing of the SH-2G(A) flight prototype for the Royal Australian Navy, as well as flight testing of the SH-2G(NZ) for the Royal New Zealand Navy began this summer. Australia has 11 Super Seasprite helicopters on order and New Zealand has five of the helicopters on order. Deliveries to both countries are scheduled to begin early next year. As these deliveries occur, sales from SH-2G helicopter programs will taper off in 2001 while new programs are being actively pursued.
Mr. Kuhn commented, "We believe there are long-term opportunities for the SH-2G. A number of countries have requirements for maritime helicopters like the SH-2G that will fit on the new frigates and offshore patrol vessels they plan to acquire. We are talking with several foreign governments to familiarize them with the SH-2G's multi-mission capabilities. However, international markets take time to develop and certain decisions we expected to have been made by now have been pushed out in time, largely for economic and political reasons."
With regard to the Australian program, one of Kaman's subcontractors, Litton Guidance and Control Systems, has stated that it is incurring additional costs on the program beyond its fixed price contract to provide the Integrated Tactical Avionics System (ITAS) specific to the Australian program. As a result, Litton has requested an adjustment to its contract pricing. Kaman is working with Litton and the Royal Australian Navy, as appropriate, to address Litton's performance and funding issues in an attempt to avoid a disruption to Litton's portion of the program. If such efforts do not result in a mutually satisfactory resolution, Kaman is prepared to take appropriate action to protect its interests in the program.
The company also is pursuing global market opportunities for its K-MAX(R) external lift helicopter. So far this year a total of three K-MAX helicopters have been sold to operators in Europe and the United States. During the past two years, K-MAX sales were affected by market conditions in the logging industry, which had been its primary market, and management expects that successful sales development as well as profitability will take some time to achieve.
"We are continuing to target other applications for K-MAX in industry and government, including oil and gas exploration, power line and other utility construction, fire fighting, law enforcement, and movement of equipment," Kuhn said.
Aircraft Structures and Components
The aircraft structures and components business contributed approximately 30 percent of the Aerospace segment's sales.
The company has received several significant contract awards in recent months. In July, the company received its second multi-year contract of the year from MD Helicopters, Inc. (MDHI) of Mesa, Arizona. This agreement, worth a potential $75 million, calls for Kaman to supply composite rotor blade system sets for the MD Explorer(R) helicopter. Earlier in the year, MDHI selected Kaman as the sole supplier of fuselages for its entire line of MD 500 and MD 600 commercial helicopters, in a multi-year contract worth a potential $100 million.
In August, Kaman extended its relationship with The Boeing Company with a three-year, follow-on contract worth a potential $98 million to supply structural parts for Boeing's line of commercial aircraft. The contract, which also contains an additional three-year option, calls for Kaman to supply fixed trailing edge kits for Boeing 777 and 767 aircraft, and other parts and subassemblies in support of those aircraft as well as 737, 747 and 757 airliners.
The company supplies structural components for the Boeing C-17 military transport under a separate contract. Additionally, the company currently supplies Boeing special, high performance self-lubricating bearings that are used extensively on Boeing airliners, 750 of which are used on the Boeing 777.
"We are encouraged by indications that the commercial aircraft market is strengthening," Kuhn said. "The company is well-positioned to benefit from the move toward greater outsourcing by the OEMs. Kaman has a reputation for being a cost-efficient manufacturer able to deliver high quality components on time. Our lean enterprise initiatives will make us even more competitive as we continue to build this piece of the business."
Advanced Technology Products
The company's advanced technology products account for slightly over 10 percent of the segment's sales.
Sales of these products, which include missile fuzing devices, precision measuring systems, electromagnetic motors and electro-optic devices, were steady for the quarter, as were operating profits. Kaman is part of an industry team, led by Litton Ingalls Shipbuilding, that is involved in a competition to design an electric-drive propulsion system for the U.S. Navy's proposed next-generation DD-21 destroyer. Kaman is responsible for designing the permanent magnet motors that would drive the ship.
Industrial Distribution Segment
Operating profits for the Industrial Distribution segment were $5.2 million for the third quarter, a 29 percent increase over the $4.0 million reported a year ago. Sales were $130.3 million in the third quarter, compared to $123.2 million a year ago.
For the nine months, segment operating profits were 50 percent higher than a year ago, rising to $16.8 million from $11.2 million in 1999. Nine-month sales were $393.6 million for 2000, compared to $377.6 million a year ago.
Kuhn commented, "Our industrial distribution business has benefited from this year's strong economy with solid increases in sales and profitability. Steps taken earlier to improve cost efficiencies through consolidation of branch operations and the implementation of better inventory controls coupled with the healthy economy were the main factors in the segment's solid performance. We are currently implementing programs with two new large national accounts in the food processing and building materials industries. The company also recently went online with its new e-commerce web site that will make it easier and faster for customers to access the company's more than one million industrial products."
Music Distribution Segment
Operating profits for the Music segment were $2.5 million, a 56 percent increase over the $1.6 million reported a year ago. Sales were $35.6 million in the third quarter, compared to $32.4 million a year ago.
For the nine months, segment operating profits were $4.6 million, compared to $3.3 million last year. Nine month sales were $92.7 million for 2000, versus $83.7 million a year ago.
The company's e-commerce web site that went online early in the year is gaining popularity with Music's dealers for its easy, cost-effective way of placing orders. Music also continues to benefit from a state-of-the-art supply chain management software system that enables it to offer its dealers such services as inventory management, just-in-time delivery, Internet access, and electronic data interchange.
Additionally, in July, Music was selected by Fred Gretsch Enterprises to assume global sales and marketing responsibility for Gretsch(R) brand professional quality drum products. Early next year Music will also begin selling Gretsch's lower end line of imported drumsets.
"Kaman Music has always been a major player in the entry level drumset business under our CB name and now Gretsch gives us a top of the line, U.S.-made professional drumset to sell along with our Toca brand of Latin-style drums," Kuhn said. "We are pleased with the improving trend in Music's domestic business that began last year. We also expect international sales to continue to exceed prior year results as our major brands in countries outside of the Unites States continue to perform well."
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, 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) political developments in countries where the corporation intends to do business; 2) standard government contract provisions permitting renegotiation of terms and termination for the convenience of the government; 3) economic and competitive conditions in markets served by the corporation, including industry consolidation in the United States and global economic conditions; 4) timing of satisfactory completion of the Australian SH-2G(A) program; 5) the timing, degree and scope of market acceptance for products such as a repetitive lift helicopter; 6) U.S. industrial production levels; and 7) 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 Nine Months
Ended September 30, Ended September 30,
2000 1999 2000 1999
Revenues $251,776 $242,581 $768,103 $739,097
Costs and expenses:
Cost of sales 187,323 179,082 574,134 546,446
Selling, general and
administrative
expense 49,631 50,601 151,484 154,551
Interest income, net (466) (453) (1,380) (978)
Other expense, net 378 404 1,103 910
236,866 229,634 725,341 700,929
Earnings before
income taxes 14,910 12,947 42,762 38,168
Income taxes 5,375 4,750 15,400 14,667
Net earnings $9,535 $8,197 $27,362 $23,501
Net earnings per share:
Basic $.41 $.35 $1.18 $1.00
Diluted $.40 $.34 $1.15 $.97
Average shares outstanding:
Basic 23,217 23,455 23,169 23,549
Diluted 24,461 24,795 24,382 24,910
Dividends declared
per share .11 .11 .33 .33
KAMAN CORPORATION AND SUBSIDIARIES
Condensed Consolidated Balance Sheets
(In thousands)
September 30 December 31
2000 1999
Assets
Current assets:
Cash and cash equivalents $63,156 $76,249
Accounts receivable, net 198,991 156,173
Inventories 195,054 199,731
Other current assets 29,854 27,958
Total current assets 487,055 460,111
Property, plant and equipment, net 62,670 64,332
Other assets 7,940 9,760
$557,665 $534,203
Liabilities and shareholders' equity
Current liabilities:
Notes payable $4,066 $4,514
Accounts payable 53,556 48,760
Accrued liabilities 29,802 31,421
Advances on contracts 44,652 50,243
Other current liabilities 33,812 29,499
Income taxes payable 6,116 3,937
Total current liabilities 172,004 168,374
Deferred credits 23,792 22,906
Long-term debt, excluding current portion 24,886 26,546
Shareholders' equity 336,983 316,377
$557,665 $534,203
KAMAN CORPORATION AND SUBSIDIARIES
Condensed Consolidated Statements of Cash Flows
(In thousands)
For the Nine Months
Ended September 30,
2000 1999
Cash flows from operating activities:
Net earnings $27,362 $23,501
Depreciation and amortization 8,657 9,042
Accounts receivable (42,818) 50,334
Inventory 4,677 (3,502)
Accounts payable 4,796 1,195
Advances on contracts (5,591) (37,427)
Income taxes payable 2,179 1,531
Changes in other current assets and liabilities 787 (794)
Other, net 3,949 1,525
Cash provided by (used in) operating activities 3,998 45,405
Cash flows from investing activities:
Proceeds from sale of businesses and other assets -- 442
Expenditures for property, plant & equipment (7,081) (6,938)
Other, net (623) 54
Cash provided by (used in)
investing activities (7,704) (6,442)
Cash flows from financing activities:
Reductions to notes payable (448) (205)
Reductions to long-term debt (1,660) (1,660)
Purchase of treasury stock (1,116) (8,146)
Dividends paid (7,640) (7,790)
Other, net 1,477 1,323
Cash provided by (used in)
financing activities (9,387) (16,478)
Net increase (decrease) in cash
and cash equivalents (13,093) 22,485
Cash and cash equivalents at
beginning of period 76,249 65,130
Cash and cash equivalents at end of period $63,156 $87,615
Source: Kaman Corp.
Contact: David M. Long of Kaman Corp, 860-243-6319, or e-mail
dml-corp@kaman.com
Website: http://www.kaman.com/
Company News On-Call: http://www.prnewswire.com/comp/.html or fax, 800-
758-5804, ext. 480450
