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Fourth Quarter 2011 Highlights:
• Diluted earnings per share of $0.38 (GAAP), $0.53 (Adjusted*)
• Net sales $379 million
• Industrial Distribution operating margin: 4.8%
• Aerospace operating margin: 12.0% (GAAP), 16.3% (Adjusted*)
Full Year 2011 Highlights:
• Diluted earnings per share of $1.93 (GAAP); $2.01 (Adjusted*), a record
• EPS growth: +42% (GAAP), +36% (Adjusted*)
• Record net sales of $1.5 billion
• Industrial Distribution operating income up 59.1% on a 14.3% sales increase
• Aerospace operating income up $13.3 million or 19.8%
BLOOMFIELD, Conn.--(BUSINESS WIRE)--Feb. 27, 2012-- Kaman Corp. (NYSE:KAMN) today reported financial results for the fourth quarter and full year ended December 31, 2011.
Neal J. Keating, Chairman, President and Chief Executive Officer, stated, "We delivered great operational performance across the company in 2011 compared to 2010. Our team executed well and demonstrated significant improvement by virtually any measure. Sales reached a record $1.5 billion fueled by both organic growth and the contributions of the twelve acquisitions we have completed over the last four years. Industrial Distribution sales reached a record $951 million compared to $646 million just two years ago. Aerospace sales were up 12.5% as a result of higher sales of our bearing product lines and the contributions from acquisitions. Operating profit was higher in each business including an impressive 59% increase at Industrial Distribution on a 14% sales increase. Aerospace operating profit rose on the elevated sales volume and increased sales of higher margin bearing product lines. This strong operational performance resulted in robust year over year earnings per share growth of 36% (diluted per share, adjusted*).
The strength of our results has been offset somewhat by lower than expected deliveries of Joint Programmable Fuzes (JPF), due to acceptance testing issues. However, strong demand across the rest of the Aerospace Segment made up for most of the JPF shortfall. The operational performance of the JPF in the field remains extremely high, above Air Force requirements; we continue to book additional orders, are negotiating a new four-year sole source contract with the USAF and have returned to acceptance testing.
Acquisitions remain a key component of our growth strategy and we are pleased that we completed five acquisitions during 2011. At the forefront, in Industrial Distribution, the acquisition of Catching Fluidpower and our national reseller agreement with Parker Hannifin will form the cornerstone of our strategy to increase our mix of higher margin fluid power product sales. In Aerospace, the acquisition of Vermont Composites expands our customer base and our platform exposure adding further diversity to this segment. All in all 2011 was a great year for Kaman, but most importantly it demonstrates solid progress toward our 2014 goals for sales and profit in both businesses."
Segment reports follow:
Industrial Distribution segment sales increased 6.7% in the 2011 fourth quarter to $233.4 million compared to $218.7 million a year ago. Acquisitions contributed $4.9 million in sales in the quarter (sales from acquisitions are classified as organic beginning with the thirteenth month following the acquisition). On a sales per sales day* basis, organic sales were up 2.8% over last year's fourth quarter (see Table 3 for additional details regarding the Segment's sales per sales day performance). Segment operating income for the fourth quarter of 2011 was $11.1 million, a 20.7% increase from operating income of $9.2 million in the fourth quarter of 2010. The operating profit margin for the fourth quarter of 2011 was 4.8%. In comparison, the operating profit margin was 5.1% in the third quarter of 2011 and 4.2% in the fourth quarter of 2010.
Industrial Distribution segment sales for the fourth quarter of 2011 reflect continued positive market conditions. Market strength was broad based across most geographies, customers and end markets. Operating margin was higher on a year-over-year basis as a result of the higher sales volume, improved productivity resulting from IT investments and our organizational realignment, continued gross margin improvement, and lower pension expense.
Segment sales for the full year 2011 were a record $950.8 million compared to $832.0 million in 2010, an increase of 14.3%. Operating income for the full year 2011 was $48.1 million, an increase of 59.1% over $30.3 million in 2010. The increase in full year sales was a result of the contributions from acquisitions completed in 2011 and 2010 and sustained organic growth. The significant increase in operating income was a result of the higher sales volume, improved gross margin, higher absorption of SG&A expenses, and lower pension expense.
Aerospace segment sales were $145.3 million, a decrease of $1.1 million from sales of $146.4 million in the fourth quarter of 2010. Operating income for the fourth quarter of 2011 was $17.5 million, compared to operating income of $26.4 million in the 2010 fourth quarter. The operating margin in this year's fourth quarter was 12.0% (16.3% adjusted*) as compared to 18.0% (22.4% adjusted*) in the comparable period in the prior year. Fourth quarter 2011 results were impacted by lower deliveries under the company's Joint Programmable Fuze program. During the fourth quarter of 2011 the Company delivered slightly more than 3,700 JPFs as compared to over 9,000 in the fourth quarter of 2010. The lower deliveries were a result of acceptance testing interruptions encountered late in the quarter. Also, during the quarter the Company recorded charges of $6.2 million related to the settlement of litigation regarding a contractual issue with the U.S. Government. This resulted in lower net income of $0.15 per diluted share. These items were offset by contributions from the Egyptian SH-2(G) maintenance and upgrade program, and strong performance from bearing product lines.
For the full year 2011 segment sales were $547.4 million, an increase of 12.5% from $486.5 million in 2010. Full year operating profit rose $13.3 million or 19.8% to $80.4 million from $67.2 million in the prior year. The sales increase was primarily attributable to acquisitions, higher sales related to the unmanned K-MAX program, and stronger performance from bearing product lines. These increases were offset by lower deliveries of JPF fuzes. Operating profit was higher as a result of contributions from the stronger performance from bearing product lines, the unmanned K-MAX, the Egyptian maintenance and upgrade program, acquisitions, lower pension expense and the absence of the goodwill impairment charge recorded in 2010. These contributions were offset by lower profit from the JPF program and the litigation settlement with the U.S. Government.
The fourth quarter and full year 2010 results include the recording of a non-cash goodwill impairment charge, resulting in lower net income of $6.4 million or $0.24 per diluted share. Full year 2010 results also include the recording of a contract pricing settlement that reduced pre-tax income by $2.0 million and net income by $0.05 per diluted share.
Accounting Change - Pension Recast
In the fourth quarter of 2011 the Company elected to change its method of recognizing pension expense. This change has been reported through the retrospective application of the new policy to prior periods. In addition to the retrospective impact, the election of the change resulted in a benefit to Q4 2011 earnings of $0.02 per diluted share. For the full year 2011 this change resulted in an increase to earnings of $0.09 per diluted share. See Table 2 in this release, the Company's 2011 Form 10-K, and the Form 8-K filed February 13, 2012 regarding this topic for additional detail.
Other
Full year 2011 results include a non-recurring benefit of $2.4 million or $0.07 per diluted share related to the death of a former executive. During the third quarter of 2010 the Company received a look-back interest payment of $6.6 million from the IRS, which was recorded as interest income, related to the Australian helicopter program. This equated to net income of $0.17 per diluted share.
Outlook
The Company's expectations for 2012 are as follows:
• Aerospace segment sales of $605 million to $625 million, up 11% to 14% over 2011
• Aerospace segment operating margins of 15.7% to 16.0%
• Ind. Distribution segment sales of $1,025 million to $1,055 million, up 8% to 11% over 2011
• Ind. Distribution segment operating margins of 5.4% to 5.6%
• Interest expense of approximately $13.5 million
• Corporate expenses of approximately $44 million to $46 million
• Tax rate of approximately 35%
• Free cash flow* of $30 million to $35 million
Chief Financial Officer, William C. Denninger, commented, "2011 demonstrated progress toward our 2014 sales and operating profit margin goals. Our free cash flow* was within our expected range and reflects some one-time items and increased capital expenditures. Free cash flow in the fourth quarter of 2011 was $19.9 million and $16.0 million for the full year. We are expecting further top line growth and margin expansion in each of our businesses in 2012. Aerospace sales should benefit from growth in commercial build rates and the ramp up of defense programs such as A-10, AH-1Z, and F-35. Higher sales of our bearing product lines, contributions from the acquisition of Vermont Composites and normalized JPF deliveries should lead sales higher with relatively stable operating margins. At Industrial Distribution, we expect completed acquisitions to supplement organic growth and result in another year of solid top and bottom line growth. We are focused on cash flow and expect year over year improvement in this measurement."
| Product Model | Inside Diameter | Outside Diameter | Thickness |
| H-LM104949 /H-JLM104910 NACHI | 50.8 | 82 | 22.225 |
| H-JLM104948/H-JLM104910 NACHI | 50 | 82 | 21.5 |