Kaman Reports 2015 Third Quarter Results

Neal J. Keating , Chairman, President and Chief Executive Officer, said, “Third quarter performance was led by a 20.2% operating margin at Aerospace and continued expense control across the company resulting in diluted earnings per share of $0.62 for the third quarter. Aerospace continues to be driven by improved operating performance from our bearing products and direct sales of the JPF to foreign militaries. Looking ahead, increased interest in the JPF from our customers has prompted us to take steps to increase production capacity in 2016 and beyond. We are also planning an expansion of our domestic production capacity for our bearings products to meet increased demand.

 

At Distribution, we achieved an operating margin of 4.9% for the quarter despite continued weakness in industrial markets which put pressure on our top line for the period. Operating income dollars were flat for the quarter as compared to the third quarter of the prior year on a decline in sales of 5.2%, when measured on a sales-per-sales day basis. This demonstrates our disciplined cost control which mitigated the negative impact of lower sales levels.

 

Finally, last week we acquired Timken Alcor Aerospace Technologies, Inc., which has been renamed EXTEX Engineered Products, Inc. This is the first acquisition in our Aerospace segment since 2011 and expands our offerings of engineered products in the Aerospace MRO market. We have begun integrating this acquisition into our Aerospace segment and expect it to be accretive in 2016.”

 

Chief Financial Officer, Robert D. Starr , stated, “We had another quarter of strong free cash flow*, generating $26.7 million and bringing our year-to-date free cash flow* to $61.7 million, or 119% of our net earnings. This allowed us to execute our share repurchase program and pay down debt, reducing our debt to capital ratio by 370 bps to 31.5% at the end of the quarter. The strength of our balance sheet supports our ongoing effort to pursue strategic acquisitions to grow our business.

 

As we look ahead to the fourth quarter, we are revising our outlook for the full year. At Distribution, a number of the end markets we serve continue to show reduced demand which resulted in weaker than expected revenues in the quarter. We are projecting continued weakness for the remainder of the year and are reducing Distribution's forecasted sales range to $1,175 million - $1,200 million and we are modestly reducing our operating margin range for the year to 4.6% - 4.7%. We believe these margin rates can be achieved as we continue to strive to match our cost structure with current revenues.

 

At Aerospace, improved operational performance and a favorable sales mix continue to deliver strong operating margins. Based on our anticipated sales mix and program timing for the fourth quarter we are lowering our forecasted sales range to $600 million - $610 million; however, we now expect the improved operating margin performance seen through the first nine months of the year to continue so we are raising our operating margin outlook for the year to 19.3% - 19.5% from our previously reported range of 18.1% - 18.4%.

 

We now expect Corporate expense to be $54.0 million to $55.0 million, primarily related to higher acquisition expenses.

 

We are very pleased with the results for the third quarter which were achieved in the face of challenging market conditions, demonstrating the underlying strength of our Company and the dedication and talent of our employees who make it possible.”

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