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KIT To Consolidate Facilities, Reduce Headcount

Wed, 02/27/2013 - 9:24am
Jack Keough, Contributing Editor, Industrial Distribution

Kaman Industrial Technologies (KIT), the distribution arm of the Kaman Corp, reported yesterday an 8.8 percent increase in sales for 2012 but a slowing in sales at the end of the year means facility consolidations and headcount reduction.

Neal J. Keating, chairman, CEO and president of the Kaman Corp., said KIT recorded sales of more than $1 billion for the first time in its history. He added that full year growth was provided by acquisitions while organic growth was essentially flat.

He told analysts during a conference call that sales weakened for the Kaman Corp. in the second half of the year and the company experienced “a very weak December.” Keating said the timing of the holidays and extended plant closings led to a drop off in orders. He noted that Kaman has seen a sequential uptick in January but the company’s organic sales were 6 percent lower than January, 2012 levels.

“Given these lower sales levels, we are taking a number of management actions, including facility consolidations and headcount reductions, which will better match our cost base to current revenues, “ Keating said. “These actions will enable us to improve profitability for the balance of 2013, and to deliver improved operating leverage as organic growth returns,” he added, according to a transcript of the call provided by www.seekingalpha.com .

KIT is one of the largest bearings/ power transmission/fluid power distributors in the country and through acquisitions has become more prominent in the electrical and automation markets.

During a question and answer session, Keating said that Kaman was not planning to exit any of the geographic markets that it now participates in.

“There might be a small branch where that would be the case. But that's not really what we're looking at here. As you know, we've done a number of acquisitions in recent years in areas where we have other locations. So we're looking to consolidate offices, “he said. “My preference would be not to name those locations right now, but it's really going to be in a geographic area where we have a number of branches. And we're able to consolidate those; that's really where we're going to focus. And I am going to stay away from quantifying the people side of the equation.”

Kaman said its national reseller relationship with Parker Hannifin is progressing, and during 2012, it successfully converted much of its existing fluid power business over to Parker. As expected, this resulted in flat year-over-year fluid power sales and has positioned the company for growth in 2013.

In December 2012, Kaman announced another significant step in repositioning distribution through a national agreement with Schneider Electric. This agreement provides Kaman with a broad line of electrical components and automation products that it will now be able to offer to both its MRO and OEM customer base.

Schneider is a global leader in automation, control and energy management.

The Kaman distribution sales from continuing operations should grow by 7% to 10% to a range of $1.08 billion to $1.12 billion, he said.

In December, Kaman sold its 7 Canadian Distribution branches to Wajax Industrial Components, a Canadian national distributor with 65 branches. The two companies then entered into a strategic alliance called Sourcepoint Industrial, under which each organization will support the other in its home market.

With the breadth of Wajax footprint in Canada, Kaman says it can offer its U.S.-based customers service across all of Canada. Likewise, Kaman will be able to offer Wajax customers in Canada who have operations in the U.S. its services at more than 220 locations.

The Kaman Corp’s major other segment, Kaman Aerospace, is a manufacturer and subcontractor in the global commercial and military aerospace and defense market.

Each of Kaman’s segments –distribution and aerospace-increased its full year profit contribution, with Aerospace delivering a $6.9 million or 7.9% increase in operating profit dollars, while distribution operating profit dollars increased $4 million or 8.3%.

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