Distributors

Kaman Posts 4Q Profit

Kaman Posts 4Q Profit

BLOOMFIELD, Conn. — Kaman Corp. reported financial results for the three and twelve months ended December 31, 2015.

Neal J. Keating, Chairman, President and Chief Executive Officer, stated, “In 2015 we achieved GAAP diluted earnings per share from continuing operations of $0.32 for the fourth quarter and $2.17 for the full year, or adjusted diluted earnings per share from continuing operations of $0.69 and $2.42, respectively. Sales declined modestly in 2015 when compared to the prior year; however, we maintained strong adjusted operating profit performance due to continued strong demand for the JPF and our bearing product lines.

“Organic sales per sales day at Distribution declined 8.1% during the fourth quarter, leading to an adjusted operating profit margin of 3.1%. Weakness in the industrial economy, most notably in commodities, largely drove the decrease in organic sales volumes putting pressure on operating margins for the quarter and full year. In the fourth quarter we took action at Distribution to adjust the cost structure to reflect our expectation for continued market challenges. These actions resulted in $1.5 million of expense during the quarter but will generate approximately $7.0 million in annual expense savings.

“Aerospace results for the fourth quarter were very strong, with top line growth of 6.5% and adjusted operating margin of 19.4%. Sales for the full year were impacted by foreign currency exchange rates and the ramp down of certain legacy defense programs. During the quarter, we completed the largest acquisition in the company’s history, buying GRW Bearings headquartered in Rimpar, Germany. This acquisition, coupled with the acquisition of EXTEX, significantly expands our market presence and product capabilities in our specialty bearings and engineered product lines.”

Chief Financial Officer, Robert D. Starr, commented, “As we move into 2016, we expect Aerospace to experience continued strong demand for its bearing products and the joint programmable fuze. This demand, coupled with growth in our other Aerospace programs and the additions of GRW and EXTEX, is expected to result in Aerospace sales of $700 million to $720 million for 2016.

“At Distribution, we expect a modest decrease in the top line for 2016, as we believe market conditions will remain weak in the first half of the year and improve on a relative basis over the second half of the year. The actions taken in the fourth quarter to adjust our cost structure and the opportunities to drive improved performance support projected operating margins in the range of 4.4% to 4.6% on sales of $1,125 million to $1,165 million.

“The operating profit outlook reflects strong underlying core performance and the benefit of the recent acquisitions, offset partially by higher levels of non-cash amortization expense on intangible assets from these acquisitions. As a result we are issuing Adjusted EBITDA guidance for 2016 to report the performance of the underlying business. We anticipate Adjusted EBITDA margins for 2016 in the range of 5.8% to 6.0% at Distribution and 21.8% to 22.0% at Aerospace.

“Free cash flow generation for the full year was $80 million or 132% of net earnings from continuing operations, our second straight year with free cash flow in excess of net earnings and an average of 100% free cash flow generation as a percentage of net earnings over the past three years. In 2016 we anticipate free cash flows* between $50 million and $60 million. This reduced level of free cash flow* generation is largely due to working capital requirements for our K-MAX® program, facility expansion to meet increased demand for our bearing products and the wind down of the SH-2G(I) program.

“Finally, the midpoint of our 2016 outlook calls for an approximate 9% increase in adjusted net earnings for the full year. We expect first half adjusted net earnings to be largely in line with the first half of 2015, however, first quarter adjusted net earnings are projected to be considerably lower than the first quarter of last year. Contributing to the earnings cadence are our expectations for timing of acquisition related expenses, the ramp of our K-MAX and Peru programs as well as improved bearings and Distribution performance as we move through the year.”

2016 Outlook

Our 2016 outlook is as follows:

  • Distribution:
    • Sales of $1,125.0 million to $1,165.0 million
    • Operating margin of 4.4% to 4.6%
    • Adjusted EBITDA margin 5.8% to 6.0%
  • Aerospace:
    • Sales of $700.0 million to $720.0 million
    • Operating margin of 17.5% to 17.8%, or 18.3% to 18.6% when adjusted for $5.5 million of integration costs in 2016 associated with the 2015 acquisitions
    • Adjusted EBITDA margin 21.8% to 22.0%
  • Interest expense of approximately $16.0 million
  • Corporate expenses of approximately $55.0 million
  • Estimated annualized tax rate of approximately 34.5%
  • Depreciation and amortization expense of approximately $45.0 million
  • Capital expenditures of $30.0 million to $40.0 million
  • Free cash flow in the range of $50.0 million to $60.0 million

 

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