Bloomfield, CT - Kaman Corp. (NYSE:KAMN) today reported financial results for the first quarter ended March 30, 2012.
Neal Keating, President and Chief Executive Officer stated, "While below last year, our first quarter results were in line with our expectations and provide us confidence to reaffirm our outlook for the full year. This performance was led by another solid quarter for our Industrial Distribution business, which achieved record quarterly sales and operating profit. Our Aerospace results were lower than the prior year; however, we continue to experience strong order in-take, particularly for our bearing products.
"Industrial Distribution sales rose 7.9% versus prior year and 9.6% when measured on a sales per sales day basis. Growth from our acquisitions outpaced organic growth which grew 3.3% on sales per sales day basis. We continue to focus on key initiatives aimed at increasing gross margin rates for this business, which resulted in record gross margin for the quarter, and our seventh consecutive quarter of year over year improvement.
"Aerospace sales declined 5.7% primarily due to lower customer requirements on our BLACK HAWK programs, the lower volume of work under our Unmanned K-MAX(R) Program and the timing and mix of various other programs across the segment. During the quarter we encountered JPF test failures that required us to suspend lot acceptance testing and fuze deliveries. Although this resulted in fewer than expected JPF shipments, we delivered more fuzes to the U.S. Government in this quarter than we did in the first quarter of the prior year. As we have indicated in the past, we anticipate JPF production interruptions will occur from time to time due to the difficulties associated with the extreme parameters of the acceptance tests and the sensitive nature of the production materials. We are working closely with our customer to review our findings and anticipate that we will receive approval to return to lot acceptance testing, on this important sole source program in early May. Despite these failures, we have been able continue production of fuze subassemblies, which will allow us to implement any required changes and return to acceptance testing quickly. In addition, we have more than adequate production and test capacity over the next several quarters to meet our plan for the year.
"The performance of the two K-MAX aircraft deployed in Afghanistan has been outstanding. We are proud of the performance of the aircraft, which have maintained 95% flight availability and have now delivered over one million pounds of supplies to forward operating bases and combat outposts. As we look ahead, we remain focused on a variety of growth opportunities and expect our performance to improve significantly through the balance of the year. We believe that our Industrial Distribution business will be a steady performer throughout the year and that we have built a platform for long-term growth. In our Aerospace business, start-up costs on our new programs will continue to provide some downside pressure on our near-term margins; however, we are confident that these new programs will provide significant contributions in the future. This year, we expect an acceleration of JPF shipments as we fulfill a strong backlog of orders, while continuing to benefit from increasing build rates for commercial aircraft and our participation on key military retrofit programs. Longer-term, we have opportunities to benefit from sales of SH-2G and K-MAX helicopters."
Industrial Distribution segment
Sales increased 7.9% in the 2012 first quarter to $257.6 million compared to $238.9 million a year ago. Acquisitions contributed $14.6 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, sales increased 9.6% over last year's first quarter, with organic sales representing 3.3% of the increase. (See Table 3 for additional details regarding the Segment's sales per sales day performance.) Sales growth was driven by increases in machinery manufacturing, durable goods, mining, and primary metal manufacturing, offset by declines in sales volume in the food, beverage and paper manufacturing industries. Segment operating income for the first quarter of 2012 was $12.8 million compared to operating income of $12.1 million in the first quarter of 2011. The operating profit margin for the first quarter of 2012 was 5.0%. In comparison, the operating profit margin was 4.8% in the fourth quarter of 2011 and 5.1% in the first quarter of 2011.
Operating profit was higher year over year as a result of higher sales volume and increased gross profit, which reached a record level in the quarter. Operating margin for 2012 was impacted by significantly higher pension and employee medical expenses.
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