Kaman Reports Fourth Quarter, Year 2001 Earnings
BLOOMFIELD, Conn., Jan. 30 /PRNewswire-FirstCall/ -- Kaman Corp. (Nasdaq: KAMNA) today reported financial results for its fourth quarter and year ended December 31, 2001.
Full-year results were adversely impacted by a second quarter sales and pre-tax earnings adjustment of $31.2 million and the phase-down of large contracts in the Aerospace segment; as well as a yearlong national economic decline that affected all segments, but particularly the Industrial Distribution segment.
Substantially all of the Aerospace adjustment is associated with a change in estimated costs to complete the SH-2G(A) helicopter program for Australia. This adjustment has had the effect of lowering the profit rate on the Australian program. 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 has replaced Litton with two subcontractors for the balance of the ITAS software development work.
The company reported 2001 net earnings of $11.7 million, or $0.52 per diluted share, compared to $36.9 million, or $1.57 per diluted share the previous year. Revenues for 2001 were $876.9 million compared to $1.0 billion in 2000. Results for 2001 include pre-tax gains of $2.7 million from the sale of two facilities in the first half of the year. The company's 2001 effective tax rate was approximately 25 percent, which includes reduced tax considerations related to the Australian SH-2G program.
Excluding the $31.2 million sales and pre-tax earnings adjustment described above, along with the reduced tax considerations, net earnings for 2001 were $31.5 million, or $1.33 per share diluted.
Net earnings for fourth quarter 2001 were $6.9 million, or $0.31 cents per share diluted, compared to $9.6 million or $0.42 cents per share diluted the previous year. Revenues for the fourth quarter were $218.2 million compared to $253.5 million in the 2000 quarter.
Paul R. Kuhn, president and chief executive officer, said, "While our results are not where we wanted them to be, steps taken to reduce costs, strengthen management, and increase Kaman's presence in the marketplace have generated tangible benefits and helped the company maintain respectable profit levels in the face of a very difficult operating environment."
SEGMENT PERFORMANCE
Aerospace Segment
Year 2001 operating profits for the Aerospace segment were $6.5 million, a decrease from $44.2 million the prior year, primarily due to the adjustment described above, but also due to lower revenues from the SH-2G helicopter programs for Australia and New Zealand, which are in their later phases. Net sales for 2001 were $301.6 million, compared to $381.9 million reported in the previous year.
The Aerospace segment's operating profits for fourth quarter 2001 were $9.2 million, compared to $11.2 million a year ago. Fourth quarter net sales were $77.8 million, compared to $101.0 million in 2000.
Helicopter Programs
SH-2G Super Seasprite business for the international naval helicopter market and the K-MAX(R) medium-to-heavy external lift helicopter, along with spare parts and sales support, represented approximately 40 percent of Aerospace sales for the year compared to approximately 60 percent a year ago. For 2001, most of the helicopter sales came from the SH-2G programs. The lower percentage is largely due to a tapering off in revenues from the SH-2G program as the Australia and New Zealand programs mature, and also due to lower K-MAX sales. While the company continues efforts to refocus K-MAX sales development on global market opportunities in industry and government, there were no sales of the aircraft during 2001 other than three aircraft that were part of the five aircraft order received from the U.S. State Department in late 2000.
To date, the company has delivered three SH-2G(NZ) helicopters in connection with its contract with the government of New Zealand. Shipment of a fourth aircraft will occur pending completion of testing in Bloomfield, CT, with final acceptance of all four aircraft to follow thereafter. These aircraft, and a fifth one ordered on option under the original contract and currently scheduled for delivery before the end of 2002, will enter service with the Royal New Zealand Navy.
Three SH-2G(A) helicopters were shipped to Australia during 2001, the first of 11 aircraft ordered by the Royal Australian Navy. These aircraft were shipped without the full ITAS software. Because the company needed to select new subcontractors to complete the ITAS software development, delivery of full ITAS-equipped aircraft will take longer than previously anticipated. The company is working with the Royal Australian Navy to develop a process that will allow for phased acceptance and delivery of the aircraft without the full ITAS, and subsequent installation of the full software.
"The company is actively pursuing opportunities for the SH-2G helicopter in the international defense market," Kuhn said. "We are confident that this highly advanced and capable aircraft remains in a good competitive position to meet the specialized needs of navies around the world that operate smaller ships for which the SH-2G is ideally sized."
The company is in discussions with the government of Egypt concerning a requirement for six search and rescue helicopters. Discussions also are continuing with the United States government regarding the refurbishment of four existing SH-2G helicopters for the Polish Navy along with future training and support.
Aircraft Structures and Components
The aircraft structures and components business contributed approximately 40 percent of the Aerospace segment's sales in 2001, compared to approximately 30 percent a year ago.
The company is a subcontractor on a number of commercial and defense aviation programs, including production of wing structures and various components for virtually all Boeing commercial aircraft as well as components for the Boeing C-17 military transport and F-22 fighter.
In December 2001, the company acquired Plastic Fabricating Company, Inc., a Wichita, Kansas manufacturer of composite parts and assemblies for aerospace applications. "This acquisition brings us into one of the largest aerospace manufacturing areas in the United States, and complements our existing composites and metal bonding operations. It fits well with our overall strategy to grow the aerospace business by building on its core manufacturing competencies and by taking advantage of acquisition opportunities," Kuhn said.
The company's Kamatics specialty bearing business had a solid year despite declining new commercial aircraft orders. Kamatics manufactures self-lubricating bearings for use principally in aircraft flight controls, turbine engines and landing gear, as well as driveline couplings for helicopters.
Kuhn said, "We continue to be concerned by the drop off in commercial aircraft orders and the impact that will have on production in 2002 and 2003. With Boeing as our largest customer for aircraft structures and components, we will continue to monitor the situation closely and make adjustments as appropriate."
Advanced Technology Products
The company's advanced technology products accounted for approximately 20 percent of Aerospace segment sales, compared to slightly more than 10 percent a year ago.
This area performed well during the year with a mix of military and commercial products. These include missile safe, arm and fuzing devices for a number of major missile programs; and precision measuring systems, mass memory systems, electromagnetic motors, microwave cabling and electro-optic systems.
Industrial Distribution
Industrial Distribution operating profits were $13.2 million in 2001, compared to $22.9 million in the previous year. 2000 operating profits included the addition of $1.7 million in the fourth quarter, which was the unused portion of a $12.4 million pre-tax charge taken in 1999 for reorganization of operations, including closures of certain facilities and the write-off of excess inventory.
Industrial Distribution net sales for the full year were $453.7 million, compared to 2000 net sales of $520.8 million, consistent with the effect of the manufacturing recession on the total distribution industry.
Fourth quarter operating profits were $1.9 million, compared to $6.1 million in the 2000 period. Net sales for the 2001 fourth quarter, including an acquisition mentioned below, were $108.0 million, compared to $117.8 million in the period last year. The reduction in earnings for the quarter reflects lower sales due to recession, the $1.7 million addition to 2000 results described above, and lower buyer incentives as the company cut back on inventory purchases to reflect conditions in the market. Buyer incentives were also booked earlier in 2001, based on buying patterns.
"A weakened manufacturing sector brought the industrial production index, the key economic indicator for this business, down to levels not seen since the early 1980s," Kuhn said. "In addition, specific events affecting particular industries, such as the effect the energy crisis in the West had on the aluminum industry, worsened the situation. The company took steps in the fourth quarter of 2000 to implement manpower adjustments and cost savings, and as conditions for our customers deteriorated throughout 2001, we stayed ahead of the curve with further reductions, efficiencies and savings. These actions, good results with business retention efforts, and new national account wins helped the segment remain profitable despite lower sales."
Late in the year, the company acquired the industrial distribution business of A-C Supply of Milwaukee, Wisconsin. "This acquisition provides Kaman Industrial Technologies with increased penetration in key industrial markets in the upper Midwest, where we have had a limited presence," Kuhn said. "This purchase is in keeping with our intention to build the value of our businesses through both acquisitions and internal growth." The company also continued to develop its e-business infrastructure for expanded market presence.
Music Distribution
Music Distribution operating profits were $6.6 million in 2001, compared to $7.4 million the previous year. Net sales were $120.6 million, compared to $128.5 million in 2000.
Fourth quarter operating profits for 2001 were $2.4 million, compared to $2.9 million a year ago. Net sales for the quarter were $32.1 million, compared to $34.5 million a year ago.
"Music Distribution performed well despite weakened consumer markets both domestically and abroad," Kuhn said. "The better than expected 2001 Christmas season helped mitigate some of the year's sales shortfall, and with its continued focus on 'Lean-Thinking' strategies, the company was able to enhance operating efficiencies and improve customer service."
During the year, the company completed the consolidation of two warehouses in Texas and California into a state-of-the art facility in Ontario, California. The company also implemented an industry-leading electronic data exchange program that allows the sharing of data and information directly with customers, and completed the first full year of its exclusive distribution and sales license with Fred Gretsch Enterprises, successfully launching its high quality Gretsch(R) drum kit lines in domestic and foreign markets.
Kaman Corp., headquartered in Bloomfield, CT, conducts business in the aerospace, industrial distribution 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, 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) timing
of satisfactory completion of the Australian SH-2G(A) program; 6) timing,
degree and scope of market acceptance for products such as a repetitive lift
helicopter; 7) U.S. industrial production levels; 8) changes in supplier sales
policies; 9) the effect of price increases or decreases; 10) currency exchange
rates, taxes, laws and regulations, inflation rates, general business
conditions and other factors; and 11) effects of the September 11, 2001
attacks on the World Trade Center in New York and the Pentagon in Washington,
D.C. 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 Twelve Months
Ended December 31, Ended December 31,
2001 2000 2001 2000
Revenues $218,193 $253,516 $876,945 $1,032,326
Costs and expenses:
Cost of sales 158,982 187,844 673,782 774,264
Selling, general and
administrative expense 49,081 52,414 188,752 202,319
Restructuring costs --- (1,680) --- (1,680)
Interest (income) /
expense, net 416 (280) 623 (1,660)
Other (income) /
expense, net 447 260 (1,876) 1,363
208,926 238,558 861,281 974,606
Earnings before
income taxes 9,267 14,958 15,664 57,720
Income taxes 2,325 5,400 3,950 20,800
Net earnings $6,942 $9,558 $11,714 $36,920
Net earnings per share:
Basic $.31 $.43 $.52 $1.61
Diluted * $.31 $.42 $.52 $1.57
Average shares outstanding:
Basic 22,339 22,236 22,364 22,936
Diluted 23,536 23,528 23,649 24,168
Dividends declared per share .11 .11 .44 .44
* The calculated diluted per share amount for the twelve months ended
December 31, 2001 is anti-dilutive, therefore, amount shown is equal
to the basic per share calculation.
KAMAN CORPORATION AND SUBSIDIARIES
Condensed Consolidated Balance Sheets
(In thousands)
Dec. 31, 2001 Dec. 31, 2000
Assets
Current assets:
Cash and cash equivalents $30,834 $48,157
Accounts receivable, net 186,798 212,374
Inventories 197,400 196,148
Other current assets 27,619 25,321
Total current assets 442,651 482,000
Property, plant and equipment, net 60,769 63,705
Other assets 18,526 8,125
$521,946 $553,830
Liabilities and shareholders' equity
Current liabilities:
Notes payable $4,038 $3,720
Accounts payable 52,044 58,057
Accrued liabilities 25,332 30,300
Advances on contracts 30,781 41,905
Other current liabilities 29,065 35,244
Income taxes payable --- 4,116
Total current liabilities 141,260 173,342
Deferred credits 23,879 23,556
Long-term debt, excluding current portion 23,226 24,886
Shareholders' equity 333,581 332,046
$521,946 $553,830
KAMAN CORPORATION AND SUBSIDIARIES
Condensed Consolidated Statements of Cash Flows
(In thousands)
For the Twelve Months
Ended December 31,
2001 2000
Cash flows from operating activities:
Net earnings $11,714 $36,920
Depreciation and amortization 11,441 11,630
Net gain on sale of assets (2,637) ---
Restructuring costs --- (1,680)
Accounts receivable 32,411 (56,201)
Inventory 5,407 3,583
Accounts payable (9,284) 9,297
Advances on contracts (11,124) (8,338)
Income taxes payable (4,081) 179
Changes in other current
assets and liabilities (15,493) 6,487
Other, net 1,777 6,476
Cash provided by (used in) operating activities 20,131 8,353
Cash flows from investing activities:
Proceeds from sale of assets 4,047 56
Expenditures for property, plant & equipment (8,033) (11,044)
Acquisition of businesses, less cash acquired (20,845) ---
Other, net (253) (963)
Cash provided by (used in)
investing activities (25,084) (11,951)
Cash flows from financing activities:
Changes to notes payable 318 (794)
Reductions to long-term debt (1,660) (1,660)
Purchase of treasury stock (2,760) (13,660)
Dividends paid (9,834) (10,193)
Proceeds from sale of stock 1,566 1,813
Cash provided by (used in)
financing activities (12,370) (24,494)
Net increase (decrease) in cash
and cash equivalents (17,323) (28,092)
Cash and cash equivalents at beginning of period 48,157 76,249
Cash and cash equivalents at end of period $30,834 $48,157
SOURCE Kaman Corp.
Web site: http: //www.kaman.com
Company News On-Call: http: //www.prnewswire.com/comp/480450.html
CONTACT: Russell H. Jones of Kaman Corp., +1-860-243-6307
